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Licences And Proprietary Estoppel Notes

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LICENCES AND PROPRIETARY ESTOPPEL A.

BARE LICENCES

A bare license is a simple permission to enter land which can be terminated by telling the licensee to leave. Granting a license by deed makes no difference. The licensor must allow reasonable time to leave, which may vary from a matter of seconds to even months where a dwelling home is concerned; generally a 'packing up' period will suffice. They may subsequently be protected by estoppel or constructive trust. This will not be the effect of the bare license itself, but rather of other circumstances

B.

LICENCES COUPLED WITH AN INTEREST

Proprietary interests frequently require access to land in order to be effective e.g. right to take things from the land of another. It is plain that in order to take a profit from the land of another, then access to that land will be required. The law has always regarded this license of having the same enforceability as the profit or other right to which it is attached. The interest may be in a chattel on the land rather than the land itself, although in most cases the chattel has been something which was originally part of the land e.g timber or crops.

C.

CONTRACTUAL LICENCES

The effect of licenses created by contract has given rise to much debate and difficulty. The availability of equitable remedies for breach of contract has fuelled the argument that contractual licenses mat have greater effect than the mere revocable personal permission recognised by the common law. A significant analogy lies in the history of restrictive covenants: it was the willingness of the courts to give equitable remedies that lay at the heart of their recognition as proprietary interests in Tulk v Moxhay. The orthodox 19th Century position was that a licensor could terminate a license even if doing so was in breach of contract; the licensee might have a remedy for breach of contract but that was all. Recently mechanisms of protecting the interest have been developed, but the right still technically remains personal; strength of protection depends on the mechanism used.

1. Establishment

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Tanner v Tanner [1975] 1 WLR 1346: D bought a house (on mortgage) for P & his children to live in; P left her old flat and moved in. P later offered D money to move out but she refused claiming a right to live there until the children had left school. P purported to terminate the license and brought possession proceedings. Denning MR: o Where there is good consideration then it may be implied that there is a contractual license; seems to think that the consideration here is giving up flat where she had protection of the Rent Acts. o If licence had been granted without consideration at all then could have been revoked at short notice. o Note that implied licence was not actually pleaded but the court thought fit to decide that there was one; would have been terminated in the event that she remarried; if not, then until the children left school. o Damages may be awarded to reflect expectation or estimated payment for surrender of licence.

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Chandler v Kerley [1978] 1 WLR 693: P (new partner) but matrimonial home from H (D's former partner). Relationship between P & D ended, and so P purported to terminate D's licence. Lord Scarman: o D had given up her part of her share in the profits of the sale of the home as consideration that she could live there; the licence was therefore a contractual one. o Where the parties have contracted for a license, that will be protected by an equitable remedy. o In absence of an express stipulation thought that it was unfair to impose the burden of D and her children upon P for life; decided that the contractual licence was terminable on reasonable notice (12 months).

2. Effect on licensor If a license is to have any chance of being a proprietary interest binding purchasers it must first be irrevocable by the licensor. The position as between licensor and licensee is both significant and disputed. Equity may intervene in such cases in one of two ways:

1. There may be specific performance of the contract, and;

2. Equity will prevent the licensor from revoking the license in breach of contract.

1 *

Winter Garden Theatre v Millenium Productions [1946] 1 All ER 678 (CA) and (HL): A granted M licence to use theatre for 6 months with option to continue foe further 6 months upon payment of increased rent. There was no express provision as to A's right to terminate, but there was in relation to M. A tried to terminate. o Lord Greene (CA):?

o

Question of whether or not a licence is revocable will depend upon the terms of the contract. General rule is that before equity will grant an injunction there must be, on the construction of the contract (according to ordinary principles) , a negative clause express or implied; seems that giving option to continue implies a negative obligation not to revoke the licence. Viscount Simon (HL):A licence granted may fall into a number of classes:

* Purely gratuitous: Revocable, subject to allowance of reasonable period for leave.

*

Licences for value: Can have payment once and for all, periodic payment, or value which constantly occurs (e.g. sale of a ticket to view particular event).

o Lord Porter (HL):
? Implicated agreement with idea that licences given for consideration should not be revocable

o

once the performance of the act has begun.
? However, thinks there is an important difference between saying that a limited and temporal licence may remain in force until fulfilled and admitting in general terms that once a licence is given it can never be terminated; the latter is against all historical accounts of licences. Lord Uthwatt (HL):?

o

Settled practice is that equity will do all it can by way of injunction to protect a bargain. Propositions of law made by Lord Greene are unanswerable. NB: House of Lords thought that on proper construction of the contract was a revocable licence.

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Hounslow LBC v Twickenham Garden Developments [1971] Ch 233 at 242F-255A: C entered into building contract with D, who commenced work. C was unhappy with the work and so sought to terminate. Megarry: o Licence is a contractual licence if it is conferred by contract, irrespective of whether the right of entry was a primary or secondary purpose of that contract; it is not distinct from the contract which created it; o Willingness of a court to grant equitable remedies to enforce such a licence will depend on whether or not it is specifically enforceable; although may be protected by doctrine of licence acted upon.
? This latter point comes from Lord Porter in Winter Gardens (above). o Even if not specifically enforceable, the court will not grant equitable remedies in order to aid or procure a breach of contractual licence.

*

Verrall v Great Yarmouth BC [1981] QB 202: Change of political power resulted in Labour trying to revoke previously granted licence to National Front to hold political conference at the pier; no current possession. o Lord Denning: Winter Gardens decided that once a man has entered under his contract of licence he cannot be turned out; injunction can prevent that. Thought that no difference in principle even where possession had not yet taken place; if he has a right to enter, will be protected by injunction/sp. o Roskill LJ: Thought duty of the court to appropriately protect deserving interests in equity. o Held that council had to allow performance; Denning also noting importance of fundamental freedoms.

See also Bruton v London & Quadrant Housing (below). Also note that court will not enforce an agreement for two persons to live peaceably together (Thompson v Park), or where co-operation is required for performance and that building contracts are not usually specifically enforceable. English analysis is that equity will enforce an agreement for short term interests rather than long.

3. Effect on third parties

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King v David Allen [1916] 2 AC 54: D gave P permission to affix posters to a wall to be constructed by him. Control of the company was passed to another without reference to the agreement; new owner refused to execute. o A licence creates no estate or interest in the land, nor an easement to which the land will be thereafter subject; a contract creates a personal obligation only, which may sound in damages (did here).

*

Clore v Theatrical Properties [1938] 3 All ER 483: Lease of front of house rights to sell refreshments at a theatre was given to P. Assignee then took over such matters and refused the licence to continue. Lord Wright:

2 o

Affirms that a licence creates no estate and is personal only; means that can only be enforced as against those who are privy to the contract.

NB: These early cases stand as high authority that contractual licences do not bind subsequent purchasers. However there are two noticeable weaknesses in relation to them which must be noted:

1. Neither of the cases involved full or exclusive possession of land. One may argue that where a person does have full or exclusive possession then their rights are more deserving of proprietary status;

2. Both cases pre-date the discussion in Winter Gardens.

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Errington v Errington [1952] 1 KB 290: L bought house for S & Daughter-in-law and told them that he would transfer the property to them when they had paid off the mortgage (2/3 price). L died, and the widow later sought possession when S deserted the Daughter-in-law whom continued making payments as directed. o Hodgson LJ: Saw the agreement in terms of a unilateral offer which could not be revoked when the consideration was executory; would only be terminable when she stopped paying. o Somervell &Denning LJ:?

*

First asserts that licensor's are no longer permitted to eject licensee in breach of a contract which allows him to remain, or one which has been acted upon by a licensee; Claims that infusion of law and equity has given contractual licence a new force and validity of theory own with the result that licensor and third parties, except purchaser for value without notice, will now be bound by the agreement made.

Binions v Evans [1972] Ch 359: In return for working on the estate D's husband was provided with place to live rent free. Trustee agreed with D that she could continue living in the cottage after H's death. Trustees then sold to P, who was given a copy of the agreement and thereupon paid a reduced price. Attempted to evict D. o Denning MR:o o

Thought that an agreement to provide a right to occupy for life gives rise to an equitable interest in the land, just as it does when it arises under a settlement.
? Court of equity will not allow a purchaser with knowledge of the right to deny it.
? Whenever a purchase takes the land impliedly subject to the rights of a contractual licensee, a court of equity will impose a constructive trust for the beneficiary; done in this case.
? NB: Cited and reapproved this approach in DHN v Tower Hamlets LBC. Megaw LJ: Thought that the taking with express notice of the agreement gave rise to a trust. Stephenson LJ: Preferred not to express an opinion on the operation of trusts in this respect but agreed with the outcome of the case.

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Re Sharpe [1980] 1 WLR 219: Husband and wife lived in house with J who provided some of the purchase price on the promise that she could stay as long as she liked, to be looked after by H&W. J also furnished the house and tried to help out H when in financial difficult. Trustee in bankruptcy tried to sell house with vacant possession. Browne-Wilkinson J: o The principles lying recent decisions have not yet been fully explored and on occasion it seems that rights are found to exist simply on the ground that to hold otherwise would be a hardship to P. It appears that the principle is one akin to or an extension of a proprietary estoppel. o If the parties proceed on a common assumption that P is to enjoy a right in a particular property and in reliance on that P has acted to his detriment, D will not be allowed to go back on that common assumption and the court will imply an irrevocable licence or trust which will give effect to it. o The rights under such an irrevocable licence bind the property itself in the hands of the trustee in bankruptcy. It follows that a trustee in bankruptcy takes subject to the rights.

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Ashburn Anstalt v Arnold [1989] Ch 1 at 13C-27C: L sold shop to developer subject to right to retain the shop rent free until the development took place. P then purchased freehold subject to agreement. Fox LJ: o Expositions in Errington v Errington went too far and were in direct conflict with previous authority; the decision was unnecessary given that the same result could have been achieved on other grounds. o Winter Gardens was concerned with contract only and is not authority for the proposition that a contractual licence creates an interest in land capable of binding third parties; there is a need to protect distinction between contractual rights which give no interest in land, and proprietary ones, which do. o The constructive trust may be a useful and flexible advice to avoid injustice in proper cases:?

o

Binions v Evans was correct use of the principle; Re Sharpe however, is not. Test for imposition of constructive trust is whether the owner has conducted himself such that it would be inequitable to allow him to deny the claimant an interest in the property.

3 o

Court will not impose a constructive trust unless it is satisfied that the conscience of the estate owner is affected; a conveyance 'subject to' contract does not necessarily imply that the grantee is bound.
? Notice alone is not enough to impose the burden of a contract which did not enter into.
? Should not be imposed in reliance on inferences from slender materials.

*

Hill, (1988) 51 MLR 226: Notwithstanding the desire of some to recognise the contractual licence as a new interest in land there are a number of obstacles standing in the path of such a conclusion; o Section 4(1) Law of Property Act 1925 seems to be a clear ban on the recognition of new interests in land after commencement- at which point it was clear that contractual licences were purely personal.
? However, the provision has been largely ignored by the courts, even in Ashburn Anstalt.
? In response to this, s116 LRA 2002 notes that 'mere equities' are capable of binding purchasers; it may be possible to attack Ashburn Anstalt on this ground. Yet, it is questionable whether such a wide interpretation will actually be given to the section. o None of the older authorities support recognition as proprietary rights. o In National Provincial Bank v Ainsworth, although only obiter, the House of Lords was notably hostile to the idea of contractual licences binding third parties. o One difficulty is with regards to the coherence of the decision in that at the same time it denies proprietary status to contractual licences, but approves the outcome of Binions v Evans, thus converting the licence to a proprietary right by a back door method. However, it is important to note that the restrictions made on its use in the future means that the role of the constructive trust will have been greatly diminished. o The concern for the future is that a satisfactory method of distinguishing between estoppel licences and contractual licences will need to be developed for the law to avoid becoming even more complex and arbitrary (that is because it is widely accepted that the former bind third parties).

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IDC v Clark [1992] 1 EGLR 187 at 189G-190E: Agreement made to open up a wall for fire escape. The gap was subsequently blocked up when the property was sub-let. Action brought. Browne-Wilkinson VC: o In a normal case a simple conveyance subject to a right will not result in a constructive trust being imposed; it will be raised where it is unconscionable for the person not to give effect to it. o The decision in Ashburn Anstalt does not warrant the creation of a constructive trust unless there are very special circumstances; the conscience of the transferee must be affect and it must be affected in such a way which gives rise to an obligation to meet the legitimate expectations of the third party.

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Chaudhary v Yavuz [2012] 2 All ER 418 at [37]-[70]: Property was sold 'subject to any incumbrances that are discoverable by inspection of the property before the contract'. A staircase had been in existence, although it had ceased to have been used for a short period of time. C claimed that he still had right of way over the staircase. Lloyd LJ: o There are three differences between this case and Lyus v Prowsa:?o o o

o

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In Lyus the rights in question were specifically identified under the contract for sale; Bank had no need to protect itself because it could not be effective; P could have done nothing by way of registration to ensure that a purchaser was affected. Thought that right not sufficiently defined in this case and was concerned that holding that there was a trust would have wide ramifications with regards to use of such standard form terms. Notes that as far as he is aware there is no authority which has held that there is a constructive trust where it was open for the person concerned to protect his right by entry onto the register. Where rights are identified in general terms which are capable of protection the registration system is a relevant factor to consider for two reasons:
? Absent specific reference in the contract the purchaser may be thought entitled to rely on third parties protecting themselves in the manner provided for by the legislation;
? The contract will be more readily interpreted as intended to protect the vendor against as possible claim by the purchaser than as imposing a new personal obligation on the purchaser towards a third party. Lyus is an exceptional case and it is right that it should be (see above three features). The same conclusion would not be justified in this case.

Chattey v Farndale Holdings (1998) 75 P & CR 298 at 313-317: Money had been paid to developer as a deposit for houses due to be built by company. Company became insolvent; C tried to get money back from new owners of the development site. Potter LJ: o The contractual rights of a purchaser not in actual occupation of the land are not overriding interests; doubts whether contractual rights are covered by the section at all.

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