Lease Requirements
UK Cases
Rye v Rye
(House of Lords)
[1962] A.C. 496; [1962] 1 All E.R. 146; [1962]2 W.L.R. 361
Lord Denning: Is it possible for a person to grant a tenancy to himself? or for two persons to granta tenancy to themselves? At common law it was clearly impossible. Nemo potest esse tenens et dominus. A person cannot be, at the same time, both landlord and tenant of the same premi$es: for as soon as the tenancy and the reversion are in the same hands the tenarn;:y is merged, that is, sunk or drowned, in the reversion; see Blackstone’s Commentqries (1766 edition), vol. 11, p. 177. Neither coulda person at common law covenant with himself, nor could two persons with themselves. Neither could one person covenant with himself and others jointly. Such
a covenant, said Pollock C.B., is “senseless,” see Faulkner v. Lowe.
Has the Law of Property Act, 1925, changed all this? It has certainly changed it where two persons granta tenancy by writing to one of themselves, as whereA andB granta yearly tenancy to B; and B enters into covenants withA andB to repair, and so forth. Sucha tenancy is valid under section 72 (4) because it isa “conveyance”; and the covenants are enforceable under section 82 (1) just as ifB had covenanted withA alone. Notice to quit can be given by A to B or B to A. So no difficulty arises.
But what is the position when a person grants a tenancy by writing to himself (A lets to A), or two persons grant it to themselves (A andB let toA and 8): and there are the usual express or implied covenants (A covenants with A: or,A andB jointly covenant withA andB jointly)? Such a tenancy does not come within section 72 (4): nor do the covenants come within section 82 (1): because both those subsections, asI read them, only apply where one of the persons, at any rate, is not on both sides. But in the tenancy we are now considering, the persons are the same on both sides. Sucha tenancy, if it is to be valid at all, must be validated by section 72 (3): but the trouble is that there is nothing there to validate the covenants: because by no possi bility can section 82 (1) be made to cover them.
My Lords,I have come to the clear opinion that even under the 1925 Acta person cannot granta tenancy to himself: for the simple reason that every tenancy is based upon an agreement between two persons and contains covenants expressed or implied by the one person with the other. Now, if a man cannot agree with himself and cannot covenant with himself, I do not see how he can granta tenancy to him self. Is the tenancy to be good and the covenants bad? I do not think so. The one transaction cannot be split up in that way. The tenancy must stand or fall with the agreement on which it is founded and with the covenants contained in it: and as they fall, so does the tenancy.
Milmo v Carreras
[1946] K.B. 306; [1946] 1 All E.R. 288; 115 L.J.K.B. 278; 174 L.T. 223
Lord Greene M.A.: For the purposes of this case, I think it is sufficient to say that, in accordance witha very ancient and established rule, wherea lessee, bya docu ment in the form ofa sub-lease, divests himself of everything that he has got (which he must necessarily do if he is transferring to his so-called sub-lessee an estate as great as, or purporting to be greater than, his own) he from that moment isa stranger to the land, in the sense that the relationship of landlord and tenant, in respect of tenure, cannot any longer exist between him and the so-called sub-lessee. That relationship must depend on privity of estate. I myself find it impossible to conceive ofa relationship of landlord and tenant which has not got that essential element of tenure in it, and that implies that the tenant holds of his landlord, and he can only do that if the landlord hasa reversion. You, cannot have a purely contractual tenure.
Tenure exists by reason of privity of estate. That seems to me to be the effect of all the decisions, and that position is recognized by all the decisions.
We have, therefore, this position arising in the present case. After the execution of this document, subject to a point I will mention later, the plaintiff becamea stranger to the land. He had no estate in the land, the whole_ estate which he had held under the head lease passed to the defendant, and from that moment onwards, although some contractual relationship might still remain between him and the defendant, in the sense that perhaps he’ could have sued for the so-called rent, he no longer had any connexion with the flat in the capacity of landlord. His case is this: he says “Under this document I had power to bring the so-called term to an end.” That seems to me to be quite unarguable, because there never wasa term. All that the document did, and could do, was to transfer to the defendant the whole of the plaintiff’s then existing term under the head lease.
Lace v Chantler
(Court of Appeal)
[1944] KB. 368; [1944]1 All E.R. 305; 113 L.J.K.B. 282; 170 L.T. 185; 60 T.L.R. 244
Lord Greene M.R.: Normally there could be no question that this was an ordinary weekly tenancy, duly determinable by a week’s notice, but the parties in the rent book agreed to a term which appears there expressed by the words “furnished for duration,” which must mean the duration of the war. The question immediately arises whether a tenancy for the duration of the war creates a good leasehold interest. In my opinion, it does not. A term created by a leasehold tenancy agreement must be expressed either with certainty and specifically or by reference to something which can, at the time when the lease takes effect, be look d to as a certain ascertainment of what the term is meant to be. In the present case, when this tenancy agreement took effect, the term was completely uncertain. It was impossible to say how long the tenancy would last. Mr Sturge in his argument has maintained that such a lease would be valid, and that, even if the term is uncertain at its beginning when the lease takes effect, the fact that at some future time it will be rendered certain is sufficient to make it a good lease. In my opinion, that argument is not to be sustained.
I do not propose to go into the authorities on the matter, but in Foa’s Landlord and
Tenant, 6th edn, p. 115, the law is stated in this way, and, in my view, correctly:
The habendum in a lease must point out the period during which the enjoyment of the premises is to be had; so that the duration, as well as the commencement of the term, must be stated. The certainty of a lease as to its continuance must be ascertainable either by the express limitation of the parties at the time the lease is made, or by reference to some collateral act which may, with equal certainty, measure the continuance of it, otherwise it is void. If the term be fixed by reference to some collateral matter, such matter must either be itself certain (e.g., a demise to hold for “as many years as A. has in the manor of B.”) or capable before the lease takes effect of being rendered so, (e.g., for “as many years as C. shall name.”)
The important words to observe in that last phrase are the words “before the lease takes effect”. Then it goes on:
Consequently, a lease to endure for “as many years as A. shall live”, or “as the coverture between B. and C. shall continue”, would not be good as a lease for years, although the same results may be achieved in another way by making the demise for a fixed number (ninety-nine for instance) of years determinable upon A.’s death, or the dissolution of the coverture between B. and C.
In the present case, in my opinion, this agreement cannot take effect as a good tenancy for the duration of the war.
The question then arises whether it can take effect in any other way. It was sug gested that the difficulty would be got over by construing the tenancy as a lease for a long period, e.g., ninety-nine years, determinable on the cessation of the war. In my opinion, it is impossible to construe this tenancy in that way. It is true that, in Great Northern Railway Co. v. Arnold, Rowlatt J. found it possible to treat a tenancy for the duration of the last war, the rent being payable weekly, as though a lease for nine hundred and ninety-nine years terminable on the cessation of the war had been created. He had some assistance in arriving at that conclusion in the fact that there was a definite undertaking by the landlords not to serve a notice to quit during the period. The actual words, as stated in the head-note, were: ”The landlords said that they did not intend that he should be subject to a week’s notice.” That case can, in my opinion, only be supported because of the presence of that term of the agreement.
Prudential Assurance Co Ltd v London Residuary Body
(House of Lords) [1992] 3 W.L.R. 279
Lord Templeman: When the agreement in the present case was made, it failed to grant an estate in the land. The tenant however entered into possession and paid the yearly rent of £30 reserved by the agreement. The tenant entering under a void lease became by virtue of possession and the payment of a yearly rent, a yearly tenant holding on the terms of the agreement so far as those terms were consistent with the yearly tenancy. A yearly tenancy is determinable by the landlord or the tenant at the end of the first or any subsequent year of the tenancy by six months’ notice unless the agreement between the parties provides otherwise. Thus in Doe d. Rigge v. Bell (1793) 5 Durn. & E. 471 a parol agreement for a seven-year lease did not comply with the Statute of Frauds 1677 but the tenant entered and paid a yearly rent and it was held that he was tenant from year to year on the terms of the agreement. Lord Kenyon C.J. said, at p. 472:
Though the agreement be void by the Statute of Frauds as to the duration of the lease, it must regulate the terms on which the tenancy subsists in other respects, as to the rent, the time of year when the tenant is to quit. etc Now, in this case, it was agreed, that the
defendant should quit at Candlemas; and though the agreement is void as to the number of years for which the defendant was to hold, if the lessor chooses to determine the tenancy before the expiration of the seven years, he can only put an end to it at Candlemas.
Now it is said that when in the present case the tenant entered pursuant to the agreement and paid a yearly rent he became a tenant from year to year on the terms of the agreement including clause 6 which prevents the landlord from giving notice to quit until the land is required for road widening. This submission would make a nonsense of the rule that a grant for an uncertain term does not create a lease and would make nonsense of the concept of a tenancy from year to year because it is of the essence of a tenancy from year to year that both the landlord and the tenant shall be entitled to give notice determining the tenancy.
In Doe d. Warner v. Browne (1807) 8 East 165 there was an agreement to lease at a rent of £40 per annum and it was agreed that the landlord, W. Warner, should not raise the rent nor turn out the tenant “so long as the rent is duly paid quarterly, and he does not expose to sale or sell any article that may be injurious to W. Warner in his business.” The tenant duly paid his rent and did not commit any breach of covenant. The landlord gave six months’ notice and it was held that the notice was good. These were the days when it was possible to have a lease for life. Lord Ellenborough C.J. asked, at p. 166:
what estate the defendant was contended to have? And whether he were not in this dilemma; that either his estate might enure for life, at his option; and then according to Lord Coke such an estate would, in legal contemplation, be an estate for life; which could not be created by parol: or if not for life, being for no assignable period, it must operate as a tenancy from year to year; in which case it would be inconsistent with, and repugnant to the nature of such an estate, that it should not be determinable at the pleasure of either party giving the regular notice.
Lawrence J. said, at p. 167:
If this interest be not determinable so long as the tenant complies with the terms of the agreement, it would operate as an estate for life; which can only be created by deed … The notion of a tenancy from year to year, the lessor binding himself not to give notice to quit, which was once thrown out by Lord Mansfield, has been long exploded.
In Cheshire Lines Committee v. Lewis & Co. (1880) 50 L.J.Q.B. 121 an agreement for a weekly tenancy contained an undertaking by the landlord not to give notice to quit until the landlord required to pull down the demised buildings. Lush J., after citing Doe d. Warner v. Browne, 8 East 165 said of that case, 50 L.J.Q.B. 121, 124:
This reasoning applies with at least equal force to the present case. This is not a mere con structive tenancy as that was. It is as explicit as words can make it that the defendants are to hold “upon a weekly tenancy at a weekly rental, and that the tenancy is to be determined by either of the parties on giving a week’s notice to the other.” There is this difference between the two cases, that in Doe d. Warner v. Browne the lessor engaged not to turn out the tenant so long as he observed the conditions, and in this case [the company’s agent] engages that the tenant shall hold until the company require to pull down the buildings. But, as that is an event which may never happen, the distinction is merely between the contin gency of the tenant breaking the conditions and the contingency of the company wanting the premises in order to pull them down. The restriction is as repugnant to the nature of the tenancy in the one case as in the other. It is therefore no legal answer to the ejectment to say that the contingency provided for has not happened.
These authorities indicate plainly enough that the agreement in the present case did not create a lease and that the tenancy from year to year enjoyed by the tenant as a result of entering into possession and paying a yearly rent can be determined by six months’ notice by either landlord or tenant. The landlord has admittedly served such a notice. The Court of Appeal have however concluded that the notice was ineffective and that the landlord cannot give a valid notice until the land is required “for the purposes of the widening of Walworth Road” in conformity with clause 6 of the agreement.
The notion of a tenancy from year to year, the landlord binding himself not to give notice to quit, which was once rejected l>y Lord Mansfield and exploded long before 1807 according to Lawrence J. in Doe d. Warner v. Browne, 8 East 165, 167, was however revived and applied by the Court of Appeal in In re Midland Railway Co.’s Agreement [1971] Ch. 725. In that ca e a lease for a period of six months from 10 June 1920 was expressed to continue from half year to half year until determined. The agreement provided for the determination of the agreement by three months’ written notice given by either party to the other subject to a proviso that the landlords should not exercise that right unless they required the premises for their undertaking. The successors to the landlords served a six months’ written notice to quit under section 25 of the Landlord and Tenant Act 1954 although they did not require the premises for their undertaking. The Court of Appeal, upholding Foster J., declared that the notice to quit was invalid and of no effect because the landlords did not require the premises for their undertaking. The Court of Appeal held that the decision in Lace v. Chantler [1944] K.B. 368 did not apply to a periodic tenancy and declined to follow Doe d. Warner v. Browne, 8 East 165 or Cheshire Lines Committee v. Lewis & Co., 50 L.J.Q.B. 121. Russell L.J. delivering the judgment of the court held that the decision in Lace v. Chantler [1944] K.B. 368 did not apply to a tenancy from year to year and said [1971] Ch. 725, 733:
we are persuaded that, there being no authority to prevent us, it is preferable as a matter of justice to hold parties to their clearly expressed bargain rather than to introduce for the first time in 1971 an extension of a doctrine of land law so as to deny the efficacy of that bargain.
My Lords, I consider that the principle in Lace v. Chantler [1944] K.B. 368 re- affirming 500 years of judicial acceptance of the requirement that a term must be certain applies to all leases and tenancy agreements. A tenancy from year to year is saved from being uncertain because each party has power by notice to determine at the end of any year. The term continues until determined as if both parties made a new agreement at the end of each year for a new term for the ensuing year. A power for nobody to determine or for one party only to be able to determine is inconsistent with the concept of a term from year to year: see Warner v. Browne, 8 East 165 and Cheshire Lines Committee v. Lewis & Co., 50 L.J.Q.B. 121. In In re Midland Railway Co.’s Agreement [1971] Ch. 725 there was no “clearly expressed bargain” that the term should continue until the crack of doom if the demised land was not required for the landlord’s undertaking or if the undertaking ceased to exist. In the present case there was no “clearly expressed bargain” that the tenant shall be entitled to enjoy his temporary structures” in perpetuity if Walworth Road is never widened. In any event prlnclple and precedent dictate that it is beyond the power of the landlord and the ttnant to create a term which is uncertain.
A lease can be made for five years subject to the tenant’s right to determine if the war ends before the expiry of five years. A lease can be made from year to year subject toa fetter on the right of the landlord to determine the lease before the expiry of five years unless the war ends. Both leases are valid because they createa determinable certain term of five years. A lease might purport to be made for the duration of the war subject to the tenant’s right to determine before the end of the war.A lease might be made from year to year subject toa fetter on the right of the landlord to determine the lease before the war ends. Both leases would be invalid because each purported to create an uncertain term. A term must either be certain or uncertain. It cannot be partly certain because the tenant can determine it at any time and partly uncertain because the landlord cannot determine it for an uncertain period. If the landlord does not grant and the tenant does not takea certain term the grant does not create a lease.
The decision of the Court of Appeal In re Midland Railway Co.’s Agreement [1971]
Ch. 725 was takena little further in Ashburn Anstalt v. Arnold [1989] Ch. 1. That case, If It was correct, would make it unnecessary for a lease to be ofa certain duration. In an agreement for the sale of land the vendor reserved the right to remain at the property after completion as licensee and to trade therefrom without payment of rent
save that it can be required by Matlodge [the purchaser] to give possession on not less than one quarter’s notice in writing upon Matlodge certifying that it is ready at the expiration of such notice forthwith to proceed with the development of the property and the neighbouring
property involving, inter alia, the demolition of the property.
The Court of Appeal held that this reservation created a tenancy. The tenancy was not from year to year but for a term which would continue unfll Matlodge certified that it was ready to proceed with the development of the property. The Court of Appeal held that the term was not uncertain because the vendor could either givea quarter’s notice or vacate the property without giving notice. But of course the same could be said of the situation in Lace v. Chantler [1944] K.B. 368. The cumulative result of the two Court of Appeal authorities In re Midland Railway Co.’s Agreement [1971] Ch. 725 and Ashburn’s case [1989] Ch. 1 would therefore destroy the need for any
terImn tthoebperecseertnatinc.ase the Court of Appeal were bound by the decisions In re Midland Railway Co.’s Agreement and Ashburn’s case. In my opinion both these cases were wrongly decided.A grant for an uncertain term does not createa lease.A grant for an uncertain term which takes the form of a yearly tenancy which cannot be deter-
mined by the landlord does not createa lease.
Lord Browne-Wilkinson: My Lords, I agree with the speech of my noble and learned friend, Lord Templeman, that this appeal must be allowed for the reason he gives. However, I reach that conclusion with no satisfaction.
It is difficult to think of a more unsatisfactory outcome or one further away from
what the parties to the 1930 agreement can ever have contemplated. Certainly it was nota result of [sic] their contract, if given effect to, could ever have produced. If the 1930 agreement had taken effect fully, there could never have comea time when the freehold to the remainder of No. 263-265 would be left withouta road frontage.
This bizarre outcome results from the application of an ancient and technical rule
of law which requires the maximum duration of a term of years to be ascertainable from the outset. No one has produced any satisfactory rationale for the genesis of this rule. No one has been able to point to any useful purpose that it serves at the present day. If, by overruling the existing authorities, this House were able to change the law for the future only I would have urged your Lordships to do so. But for this House to depart from a rule relating to land law which has been established for many centuries might upset long established titles. I must therefore confine myself to expressing the hope that the Law Commission might look at the subject to see whether there is in fact any good reason now for maintaining a rule which operates to defeat contractually agreed arrangements between the parties (of which all suc cessors in title are aware) and which is capable of producing such an extraordinary result as that in the present case.
Centaploy Ltd v Matlodge Limited
CENTAPLOY LTD V. MATLODGE LTD
(Whitford J.)
In In re Midland Railway Co.’s Agreement, counsel for the defendants submitted thata periodic tenancy is only an exception to the uncertainty rule, because if both sides are going to be able to determine there is no relevant uncertainty: see [1971) Ch. 725, 730. In the present casea stronger case can be made out on the defendants’ side than was made out in In re Midland Railway Co.’s Agreement. It can be urged that as the landlord cannot ever be certain when the agreement is going to be brought to an end there must bea relevant uncertainty. As
I understand the judgment in the Court of Appeal, what has been held in relation to
the issue of uncertainty is that it is better to enforce a clearly expressed bargain than to attempt to introduce yet further refinements intoa field where the lines have perhaps already been rather over-finely drawn. On this basis I have reached the conclusion, having regard to what was said in the Court of Appeal in In re Midland Railway Co.’s Agreement, that I must reject the defendants’ argument on the basis of uncertainty which, but for In re Midland Railway Co.’s Agreement, I would have been prepared to accept.laintiffs was able to say, and to say quite rightly, that great inroads have been made on the application of this idea of repugnancy since 1807, as the passage I have just read shows, and there is no need for me to go into the cases between Doe d. Warner v. Browne and In re Midland Railway Co.’s Agree ment, for it is now plain thata fetter for a period, even a period of uncertain duration, cannot necessarily be considered as repugnant to the grant ofa periodic tenancy. It nevertheless appears to me that it must be basic toa tenancy that at some stage the person granting the tenancy shall have the right to determine anda tenancy in which the landlord is never going to have the right to determine at all is, asI see it, a complete contradiction in terms. Unless, therefore, some greater estate thana weekly tenancy was created by the agreements, the determination provisions must,
in my view, be regarded as repugnant and on this aspect the defendants are entitled to succeed.
Distinction between lease’s and licences
King v David Allen & Sons
KING V. DAVID ALLEN & SONS, BILLPOSTING LTD
(House of Lords)
[1916]2 AC. 54; [1916-1917] All E,.R. Rep. 268; 114 L.T. 762
Lord Buckmaster LC.: The matter then is left in this way. There isa contract between the appellant and the respondents which creates nothing buta personal obllgatlon. It is a licence given for good and valuable consideration and to endure for a certain time. But I fail to see – although I have done my best to follow the many authorities which the learned Solicitor-General has thought it right to place before our consideration – that there is any authority for saying that any such document creates rights other than those I have described.
Earl Loreburn: I have very little to add to what has been said, but I look at the case In this way. The plaintiffs say that Mr King promised them for four years the use of a certain wall for advertising purposes by the agreement of July 1, 1913, and they say that after that Mr King demised that land, and that Mr King’s lessees refused to make good the promise in regard to advertisement. Well, if the agreement of July 1, which purports to be on the face of it a licence, was equivalent to creating an incorporeal hereditament or a sufficient interest in land, Mr King did not break his contract in making the lease, and would not be responsible for any trespasses that were committed by his licensees. But we must look at the document itself, and it seems to me that it does not create any interest in land at all; it merely amounts to a promise on the part of Mr King that he would allow the other party to the contract to use the wall for advertising purposes, and there was an implied undertaking that he would not disable himself from carrying out his contract. Now Mr King has altered his legal position in respect of his control of this land. Those to whom he granted the lease have disregarded his wishes and refused to allow his bargain to be carried out, and they have been practically enabled to do so by reason of the demise that he executed. In these circumstances it seems to me that there has been a breach in law of the contract of July 1, and Mr King has disabled himself from giving effect to it as intended by parting with his right to present possession. That is enough to establish a case for damages against Mr King.
Ashburn Anstalt v Arnold
ASHBURN ANSTALT V. ARNOLD
(Court of Appeal) (1989] Ch. 1
Fox L.J.: It is Arnold & Co.’s case that even if the 1973 agreement created no tenancy after 28 February 1973, so that its occupancy thereafter is that ofa con tractual licensee only, its rights are nevertheless binding upona purchaser for value with notve off the licence. Lord Templeman in Street v. Mountford [1985] A.C. 809,
A licence in connection with land while entitling the licensee to use the land for the purposes authorised by the licence does not create an estate in the land.
That was not challenged on behalf of Arnold & Co., but it was said thata contractual licence does give rise to an interest (as opposed to an estate) in the land; we must assume for this purpose that the rights are of sufficiently certain duration to be capable of subsisting as an interest in .land. If they are not, the point does not arise. The question then is whether Arnold&. Co.’s proposition is correct in law. Until com paratively recently it would, we think, have been rejected. As long ago as 1674, in
Thomas v. Sorre/1(1674) Vaug. 330,351, Vaughan C.J. said:
A dispensation or licence properly pass’i!th no interest, nor alters or transfers property in any thing, but only makes an action lawful, which without it had been unlawful.
A number of cases in this century support that view.
Daly v. Edwardes (1900) 83 LT. 548 was concerned with “front of house” rights ina theatre. In 1894 Edwardes granted to Daly a licence of two theatres fora term
of years. The lease contained a covenant by the lessee not, inter alia, to part with any estate or interest in the premises. Daly granted to Warr:
the free and exclusive licence or right to the use of the refreshment rooms and bars in the theatre together with the free right of access thereto.
The lessor claimed that this was a breach of the covenant against disposing of any estate or interest in the premises. That claim failed. Rigby L.J. said, at p. 551:
On the whole, I think that the proper conclusion is that Frank Warr and Co. took no estate or interest in land, but that they were entitled for all reasonable purposes, to consider
themselves as having an exclusive licence to provide refreshments and all that follows from that privilege, and nothing else.
Vaughan Williams L.J. said, at p. 551, that the agreement was “reallya grant ofa privilege and licence merely masquerading as a lease.” The case went to the House
of Lords as Edwardes v. Barrington (1901) 85 L.T. 650, and the decision of the Court of Appeal was affirmed.
In Frank Warr& Co. Ltd v. London County Council [1904] 1 K.B. 713, the London County Council compulsorily acquired the Globe Theatre. At the time of the acqui sition Warr had front of house rights at the theatre undera subsisting agreement with
the lessee. Compensation was only payable to persons having an interest in the land acquired. The claim failed. Collins M.A. said, at p. 722:
Do those parts of the agreement amount merely to a licence properly so called, or toa grant
of an interest in, or something arising out of, the land? To my mind it is clear that they create nothing more than a licence properly so called.
These cases, it seems to us, clearly proceed on the basis that a contractual
llotnce creates no interest in land.
The next case is King v. David Allen and Sons (Bil/posting) Ltd [1916] 2 A.C. 54. King owned premises in Dublin. David Allen had for many years under an agreement between the predecessors of King and David Allen, enjoyed the right to exhibit posters on the wall of the premises. King wished to let the premises to a third party. David Allen had no objection provided its rights were preserved. In July 1913 King and David Allen agreed that David Allen should have exclusive permission to fix posters to the flank wall of a cinema which it was proposed to build on the site. In August 1913 King agreed with F., a trustee for a company to be formed, that a lease 1hould be granted to the company. King was to assign to F., as a trustee for the company, his interest in the 1913 agreement, and F. agreed that the company would accept the lease and ratify the 1913 agreement. The company, when formed, duly did so. The cinema was built. The July agreement was not referred to in the lease and King did not assign his interest under that agreement to the company. David Allen attempted to post advertisements on the flank wall but the company, despite opposition from King (a director), prevented it. David Allen then sued King alleging that he was in breach of the July agreement by putting it out of his power to perform It. The claim succeeded. The company was not a party to the action but the effect of the licence vis-a-vis the company was in issue because King would not have been liable to David Allen in damages had the licence which he agreed to grant been binding on the company, which had notice of it. The House of Lords regarded the contract as creating nothing but a personal obligation. Earl Loreburn said, at p. 62:
Well, if the agreement of 1 July, which purports to be on the face of it a licence, was equiv alent to creating an incorporeal hereditament or a sufficient interest in land, Mr King did not break his contract in making the lease, and would not be responsible for any trespasses that were committed by his licensees. But we must look at the document itself, and it seems to me that it does not create any interest in the land at all; it merely amounts to a promise on the part of Mr King that he would allow the other party to the contract to use the wall for advertising purposes, and there was an implied undertaking that he would not disable himself from carrying out his contract.
Lord Buckmaster LC. said, at pp. 59-60:
There are two circumstances to which attention has been quite properly called by the appellant’s counsel, which are no doubt important in considering what the agreement effected. The first is the fact of the rent reserved, and the next that there is a term of years granted and that arrangements are introduced into the agreement to prevent other people having competing rights with Messrs David Allen and Sons upon this wall. Those considera tions do not, in my opinion, necessarily conflict with the view that this is nothing but a licence
– a licence for a fixed term of years, but a licence which creates no estate or interest in the land …
We are unable to reconcile the approach of the House of Lords in King v. David Allen with the submission, on behalf of Arnold & Co., that a mere contractual licence is an interest in land binding on a purchaser with notice. The two front of house rights cases to which we have referred are to the same effect.
The next case of consequence is Clore v. Theatrical Properties Ltd [1936] 3 All
E.R. 483, which was again concerned with front of house rights. The agreement provided:
the lessor does hereby demise and grant unto the lessee the free and exclusive use of all the refreshment rooms … of the theatre … for the purpose only of the supply to and accommodation of the visitors to the theatre and for no other purpose …
The definition clause provided that the terms “lessor” and “lessee” should include their executors, administrators and assigns. The assignee of the lessor sought to prevent an assignee of the lessee from exercising any of the rights under the agree ment. It was held that the agreement was not a lease but a licence, and was not binding upona third party. The court, as we read the judgments, regarded the case as falling within the examples of Daly v. Edwards, 83 LT. 548 and Frank Warr& Co. Ltd v. London County Council [1904J 1 K.8. 713. The licensee had sought to rely
upon De Mattos v. Gibson (1859) 4 De G. & J. 276 and Lord Strathcona Steamship Co. Ltd v. Dominion Coat Co. Ltd [19261 AC. 108. That was not accepted. Lord
Wright M.A. regarded these authorities as confined to charterparties and said, at opn.a491th:ir”dI dpoanrtoytWthiitnhkntohtaictae .p..”ersonal covenant as in the present case can be binding
Down to this point we do not think that there is any serious doubt as to the law.A
mere contractual licence to occupy land is not binding ona purchaser of the land even though he has notice of the licence.
We come now toa case Which is of central importance on the present issue. That is Errington v. Errington and Woods (1952J 1 K.8. 290.A father, wishing to provide a home for his son who had recently married, boughta house with the help ofa build ing society mortgage. He paid a lump sum towards the purchase price, the remain der of which was provided by the building society’s loan. The Joan was repayable by instalments. He retained the conveyance in his own name and paid the rates, but he promised that if the son and daughter-in-law continued in occupation and duly paid all the instalments, he would then transfer the property to them. The father died and
by his will left the house to his widow. Up to that time the son and his wife had lived
in the house and paid the instalments. The son then separated from his wife and left the house. The daughter-in-law continued to pay the mortgage instalments. The widow then sought possession of the house from the daughter-in-law. The county court judge dismissed the action. He held that the daughter-in-law wasa tenant at will and that the claim against her was statute-barred.
it seems to me that, although the couple had exclusive possession of the house, there was clearly no relationship of landlord and tenant. They were not tenants at will but licensees. They hada mere personal privilege to remain the.re, with no right to assign or sub-let. They were, however, not bare licensees. They were licensees witha contractual right to remain. As such they have no right at law to remai
n, but only in equity, and equitable rights now prevail.I confess, however, that it has taken the courts some time to reach this position. At common lawa licence was always revocable at will, notwithstandinga contract to the contrary: Wood v. Leadbitter (1845) 13 M. & W. 838. The remedy tora breach of the con tract was only in damages. That was the view generally held untila few years ago: see, for
instance, what was said in Booker v. Palmer [1942]2 All E.A. 674, 677 and Thompson v.
Park [1944] K.B. 408, 410. The rule has, however, been altered owing to the interposition of equity. Law and equity have been fused for nearly 80 years, and since 1948 it has been clear that, asa result of the fusion, a licensor will not be permitted to ejecta licensee in breach ofa contract to allow him to remain: see Winter Garden Theatre (London) Ltd v. Millennium Productions Ltd[1946J 1 All E.R. 678, 680, per Lord Greene, and in the House of Lords per Lord Simon; nor in breach of a promise on which the licensee has acted, even though he gave no value for it: see Foster v. Robinson [1951]1 K.B. 149, 156, where Sir Raymond Evershed M.A. said that as a result of the oral arrangement to let the man stay, he was entitled as licensee to occupy the premises without any payment of rent for the rest of his days. The infusion of equity means that contractual licences now havea force and validity of their own and cannot be revoked in breach of the contract. Neither the licensor nwoitrhaonuyt onnoeticweh. o claims through him can disregard the contract excepta purchaser for value
It is not in doubt that the actual decision was correct. It could be justified on one of three grounds. (i) There was a contract to convey the house on completion of the payments giving rise to an equitable interest in the form of an estate contract which would be binding on the widow: see Megarry and Wade, The Law of Real Property, 5th edn (1984), p. 806. The widow was not a purchaser for value. (ii) The daughter in law had changed her position in reliance upon a representation binding on the
widow as a privy of the representor: see Spencer Bower and Turner, Estoppel by R•presentation, 3rd edn (1977), p. 123. (iii) The payment of the instalments by the ton or the daughter-in-law gave rise to direct proprietary interests by way of con atructive trust, though it is true that, until Gissing v. Gissing (1971] A.C. 886, the law rtlatlng to constructive trusts in this field was not much considered.
Accordingly, it does not appear to have been necessary, in order to produce a Just result, to have accepted the broad principle stated, at p. 299, in the passage which we have quoted, that “Neither the licensor nor anyone who claims through him can disregard the contract except a purchaser for value without notice.” That 1tatement itself is not supported by any citation of authority, and indeed we do not think it could have been supported on the authorities. None of the cases prior to Errington v. Errington and Woods to which we have referred, except Thomas v. Sorrell, Vaugh. 330, is mentioned in the judgments and it does not appear that any was cited.
The decision of the House of Lords in Winter Gardens Theatre (London) Ltd v. Millennium Productions Ltd[1948] A.C. 173 does not advance the matter. It was the first occasion on which a licensee was held entitled to an injunction restraining the licensor from revoking a licence in breach of contract. The case was concerned with contract only. In our view it is not an authority for the proposition that a contractual licence creates an interest in land capable of binding third parties.
National Provincial Bank Ltd v. Hastings Car Mart Ltd (1965] A.C. 1175 was the case in which the House of Lords, reversing the majority decision of the Court of Appeal (1964] Ch. 665, rejected the deserted wife’s equity. Russell L.J., who dissented in the Court of Appeal, stated, at pp. 696-697:
It is therefore necessary to consider what is the law in connection with title to unregistered land relating to rights such as those now in question. For this purpose, I consider that the deserted wife’s right cannot be greater than that of a person in occupation under a con tractual licence from the owner to occupy, which licence is by its terms not revocable for a period, and breach of which would be restrained by injunction against the licensor. What is
the position of such a licensee in the case of unregistered land? Has he a right capable of enforcement not only against the licensor but also against a purchaser or mortgagee from the licensor?
On authority it seems to me that the answer is that he has not such a right against a purchaser for value even with actual notice of the licence. I do not propose to discuss the question exhaustively. I am content to refer generally to the article on this question in “Licences and Third Parties” by Professor H.W.A. Wade (68 LO.A. 337), and the cases there discussed of King v. David Allen and Sons (Biffposting) Ltd [1916] 2 A.C. 54 in the House of Lords, and Clore v. Theatrical Properties Ltd[1936] 3 All E.R. 483 in the Court of Appeal, and to add some comments.
I am regretfully aware that this view runs counter to much that has been said, particularly by the present Master of the Rolls, especially in Bendall v. McWhirter[1952) 2 0.8. 466 and is, in conflict with an instructive article on ‘Licences to Live in Houses’ by Mr L.A. Sheridan (The Conveyancing and Property Lawyer, N.S., vol. 17, p. 440). But the decision of the House of Lords in King’s case necessarily involved a decision that a contractual licence to post advertisements on a wall for a period of years was not binding upon a purchaser from the licensor with actual notice of the licence, because it created a mere personal obligation on the licensor and not an estate or interest in the land. I cannot accept that that decision depends for its validity on the fact that the licence had not yet been acted upon. In this connection, I venture to repeat that the actual occupation is not the right; it is a form of notice of a right; the right must be sought elsewhere. Since in King’s case there was actual notice of the licence which conferred the right, the question of occupation would not seem to affect the matter. The licence rights would (or would not) affect the purchaser with actual notice of them whether or not they had been partly exercised. The Clore case seems plainly a case in which this court held that a personal licence to occupy, which had been acted upon for many years, was not enforceable against a purchaser with actual notice, expressly for the same reason that it created no interest in the land. I do not think that its binding authority can be properly undermined by saying that this court mistakenly assumed that as between the contracting parties revocation in breach of contract would not be restrained by injunction in accordance with what Lord Uthwatt in Winter Garden Theatre (London) v. Millennium Productions Ltd [1948] A.C. 173, 202 described as ”the settled practice of the courts of Equity … to do what they can by an injunction to preserve the ‘sanctity of a bargain’.” I do not, with respect, think that the Clore case can be described as one in which the licensee was not in actual occupation. The grant was of the free and exclusive use of substantial and defined parts of the premises for the purpose of exercising front of the house rights. Surely the licensee was in actual occupation of, for example, the wine cellars. And the judgment appealed from in terms declared that the defendant had ‘no right to the use and occupation’ of those parts referred to in the licence.
In In re Webb’s Lease [1951] Ch. 808, in this court, the question whether the lessee could refuse to recognise the licence by the lessor to fix advertisements was not in issue for determination; counsel for the lessee conceded that he could not; but the lessee did not want to; he simply wanted as against the lessor to be entitled to receive the licence payments from the licensee. In that context the remarks of Lord Evershed M.A. [1951] Ch. 808, 821 and of Jenkins L.J. [1951] Ch. 808, 830, 831 cannot be taken as binding authority.
I desire to add on Errington v. Errington and Woods [1952] 1 K.B. 290, in this court, nothing to the comments in Professor Wade’s article, save that I find it not easy to see, on authority, how that which has a purely contractual basis between A and B is, though on all hands it is agreed that it is not to be regarded as conferring any estate or interest in property on B, nevertheless to be treated as producing the equivalent result against a purchaser C, simply because an injunction would be granted to restrain A from breaking his contract while he is still in a position to carry it out.
When the case reached the House of Lords the observations of Russell L.J. were not expressly accepted, but nor were they rejected. Lord Hodson said, at pp. 1223- 1224:
To describe a wife as a licensee, unless that overworked word is merely used to describe a person lawfully on land and not a trespasser, is not only uncomplimentary but inaccurate. She is not a person who needs any licence from her husband to be where she has a right to be as a wife. Thomas v. Sorrell (1674) Vaugh. 330, 351 contains the classic definition of a licence propounded by Vaughan C.J.: ‘A dispensation or licence properly passeth no interest, nor alters or transfers property in any thing, but only makes an action lawful, which without it had been unlawful’. This shows the fallacy of the analogy for the wife would not be a trespasser in her husband’s house in the absence of a licence from her husband.
Lord Upjohn also considered the position of a licence, at p. 1239:
Your Lordships heard much interesting discussion as to the rights of contractual licensees to remain in occupation as against third parties. As I emphatically decline to equate the deserted wife with a contractual licensee or to draw any analogy between the two I shall be very brief on this subject. The cases of Foster v. Robinson [1951] 1 K.B. 149 and Errington
v. Errington and Woods [1952) 1 K.B. 290 were much canvassed before your Lordships. In the latter case the licensees were in exclusive occupation upon the terms of paying off the mortgage instalments and after the matrimonial rupture the wife continued to do so. This, I would have thought, would have given the spouses an interest in the land, in accordance with a well-known line of authority starting with Webb v. Paternoster(1619) Pop. 151, valid against all except a purchaser for value without notice.
The more interesting and really text-book case is Foster v. Robinson. Whether the right (undoubted contractually against the owner of the property) of Robinson the retired servant to remain in exclusive occupation of his cottage rent-free for the rest of his life will by judicial decision one day be held to create an equitable estate or interest binding all except purchasers for value without notice, or whether, as Russell L.J. thinks, statutory legislation is required to bring about that result is a matter upon which I propose to express no opinion. On the other hand, Roxburgh J. in Thompson v. Earthy [1951) 2 K.B. 596, 599, may have taken the view that an exclusive licensee may thereby have an interest in the land, and Professor Cheshire supports this view in a very interesting article on this matter in The Modern Law Review, vol. 16, p. 1. He does, I think, in that article, underestimate the diffi culties created by King v. David Allen and Sons (Bil/posting) Ltd and Clore v. Theatrical Pro perties Ltd. But if it is later decided that a licensee having an irrevocable licence to remain In occupation of the land fora defined period creates an interest in land and is valid against aubsequent purchasers with notice that would not affect my view that the purely personal, evanescent and changeable rights exerciseable against her husband by the deserted wife
cannot affect a purchaser from the husband.
Lastly, we refer to the observations of Lord Wilberforce, at pp. 1250-1251:
.1 The licence theory. One main line of argument, for conferring upon the deserted wife an Interest binding her husband’s successors in title, has been to this effect: the wife isa licensee in the house under, so it is sometimes said, an irrevocable licence, or at leasta licence which is only revocable by the court: some licences which are irrevocable are bind Ing on purchasers with notice: ergo the wife’s rights are binding on purchasers with notice. I hope thatI do justice to the argument by this brief summary.I confess thatI find it far from helpful. In the first place,I doubt the utility of describing the wife asa licensee. If all that is done by this is to place some descriptive label on the capacity in which the wife remains in the house,I suppose that the word “licensee” is as good as any other, thoughI would think
that most wives would consider this description a strange one. But what is achieved by the description? After she has been so described, the incidents of the description have to be ascertained, and the only correct process is surely to analyse what the nature of the wife’s rights are, the answer being that they are rights of co-habitation and support and the right to resist dispossession by her husband if that would interfere with marital rights. What is not surely legitimate is to start by describing the wife as a licensee, and then to ascribe to her rights which are defined by reference to other kinds of licences: that is an argument per saltum. The second comment which must be made on the argument is that even if one accepts the leap from the wife as licensee to other (e.g., contractual) licensees, one has not reacheda solution, for the legal position of contractual licensees, as regards “purchasers”, is very far from clear. The Court of Appeal has attempted to reacha generalisation by which licences, or at least licences coupled with occupation, are binding upon “purchasers” butI note that the members of that court are not wholly agreed as to this doctrine. No doubt the
time will come when this whole subject will have to be reviewed; this is not the occasion for it and I think that it would be undesirable now to say anything which might impede the development of this branch of the law. Neither contractual licences nor those licences where money has been expended by the licensee in my view afford any useful analogy or basis
upon which to determine the character of the wife’s rights.
I would only add, with reference to the authorities (1) that I must not be taken as accepting
the arguments placed before the Court of Appeal whereby such cases as King v. David Allen and Sons (Bil/posting) Ltd and Clore v. Theatrical Properties Ltd are put on one side as not, or no longer, relevant authorities; (2) that, while accepting the actual decision I do not find that the case of Errington v. Errington and Woods, even if reconcilable with the two cases I have mentioned, is of assistance as to the transmissibility of contractual licences. The Court of Appeal in that case seem to have treated it simply as one of contract and not to have focused their argument on the precise legal position of the plaintiff, i.e., whether she was the legal personal representative or the successor in title of the licensor.
These cases were the subject of consideration by Goff J. in In re Solomon, A Bankrupt, Ex parte Trustees of the Property of the Bankrupt v. Solomon [1967] Ch. 573. Goff J. concluded that the wife in that case was nota contractual licensee,
and accordingly he did not have to decide which authority he should follow. But he expresseda preference for the reasoning of Russell L.J. in the Hastings Car Mart case [1964] Ch. 665 and was hesitant to recognise the existence ofa new species
of Ietqisuitcaobnlevernigiehnt.t to pause at this point because, although there are later cases in what may be regarded as this series, there is none in whicha contractual licence is held to binda third party in the absence of a finding that the third party took the land asa constructive trustee. It is therefore appropriate to review how the law stands, or
ought to stand, in the absence of such a finding.
Young v. Bristol Aeroplane Co. Ltd [1944] K.B. 718 establishes the familiar rule that this court is bound to follow its own decisions save that (relevantly to this case) it is entitled and bound to decide which of two conflicting decisions of its own it will follow, and it is bound to refuse to follow a decision of its own which, though not ex pressly overruled, cannot in its opinion stand with a decision of the House of Lords. It must, we think, be very doubtful whether this court’s decision in Errington v.
Errington and Woods f1952] 1 K.B. 290 is consistent with its earlier decisions in Daly
v. Edwardes, 83 L.T. 548; Frank Warr & Co. v. London County Council [1904]1 K.B. 713 and Clore v. Theatrical Properties Ltd [1936] 3 All E.R. 483. That decision cannot be said to be in conflict with any later decision of the House of Lords, because the House expressly left the effect of a contractual licence open in the Hastings Car Mart case. But there must be very real doubts whether Errington can be reconciled with the earlier decisions of the House of Lords in Edwardes v. Barrington, 85 L.T. 650, and King v. David Allen and Sons (Bil/posting) Ltd [1916]2 A.C. 54. It would seem that we must follow those cases or choose between the two lines of authority. It is not, however, necessary to consider those alternative courses in detail, since in our judgment the House of Lords cases, whether or not asa matter of strict pre fcoelldoewn.t they conclude this question, state the correct principle which we should
Our reasons for reaching this conclusion are based upon essentially the same reasons as those given by Russell L.J. in the Hastings Car Mart case [1964} Ch. 665, 697 and by Professor Wade in the article, “Licences and Third Parties” (1952) 68
L.0.R. 337, to which Russell L.J. refers. Before Errington the law appears to have
been clear and well understood. It rested on an important and intelligible distinction between contractual obligations which gave rise to no estate or interest in the land and proprietary rights which, by definition, did. The far-reaching statement of principle in Errington was not supported by authority, not necessary for the decision of the case and per incuriam in the sense that it was made without reference to authorities which, if they would not have compelled, would surely have persuaded the court to adopta different ratio. Of course, the law must be free to develop. But asa response to problems which had arisen, the Errington rule (without more) was neither practically necessary nor theoretically convincing. By contrast, the finding on
appropriate facts of a constructive trust may well be regarded asa beneficial adaptation of old rules to new situations.
The constructive trust principle, to which we now turn, has been long established and has proved to be highly flexible in practice. It coversa wide variety of cases from that ofa trustee who makes a profit out of his trust or a stranger who knowingly deals with trust properties, to the many cases where the courts have held thata person who directly or indirectly contributes to the acquisition ofa dwelling house purchased in the name of and conveyed to another has some beneficial interest in the property. The test, for the present purposes, is whether the owner of the property has so con ducted himself that it would be inequitable to allow him to deny the claimant an
Dinitpelroecskt. in the property: see Gissing v. Gissing [1971J A.C. 886, 905, per Lord
In Bannister v. Bannister [1948] 2 All E.R. 133, on the plaintiff’s oral undertaking that the defendant continue to live in a cottage rent free for as long as she wished, the defendant agreed to sell to him that and an adjacent cottage. The conveyance contained no reference to the undertaking. The plaintiff thereafter occupied the whole cottage save for one room which was occupied by the defendant. The plaintiff after a time sought to expel the defendant. The Court of Appeal (Scott and Asquith L.JJ. caonudrtJ,esnakidin,saJt.p) .h1e3ld6:that he was not entitled to. Scott L.J., giving the judgment of the
It is, we think, clearlya mistake to suppose that the equitable principle on whicha construc tive trust is raised againsta person who insists on the absolute character ofa conveyance
to himself for the purpose of defeating a beneficial interest, which, according to the true bargain, was to belong to another, is confined to cases in which the conveyance itself was fraudulently obtained. The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial Interest … Nor is it, in our opinion, necessary that the bargain on which the absolute con veyance is made should include any express stipulation that the grantee is in so many words to hold as trustee. It is enough that the bargain should have included a stipulation under which some sufficiently defined beneficial interest in the property was to be taken by another.
In In re Schebsman, deed. [1944] Ch. 83, 89, Lord Greene M.A. said:
It is not legitimate to import into the contract the idea of a trust when the parties have given no indication that such was their intention.
Du Parcq L.J. said, at p. 104, that ”the court ought not to be astute to discover indica tions of such an intention.” We do not, however, regard either of these observations as differing from what Scott L.J. said in Bannister v. Bannister. It is, we think, in every case a question of what is the reasonable inference from the known facts.
We come then to four cases in which the application of the principle to particular facts has been considered.
In Binions v. Evans [1972] Ch. 359, the defendant’s husband was employed by an estate and lived rent free in a cottage owned by the estate. The husband died when the defendant was 73. The trustees of the estate then entered into an agreement with the defendant that she could continue to live in the cottage during her lifetime as tenant at will rent free; she undertook to keep the cottage in good condition and repair. Subsequently the estate sold the cottage to the plaintiffs. The contract pro vided that the property was sold subject to the tenancy. In consequence of that pro vision the plaintiffs paid a reduced price for the cottage. The plaintiffs sought to eject the defendant, claiming that she was tenant at will. That claim failed. In the Court of Appeal Megaw and Stephenson L.JJ. decided the case on the ground that the defendant was a tenant for life under the Settled Land Act 1925. Lord Denning M.A. did not agree with that. He held that the plaintiffs took the property subject to a constructive trust for the defendant’s benefit. In our view that is a legitimate applica tion of the doctrine of constructive trusts. The estate would certainly have allowed the defendant to live in the house during her life in accordance with their agreement with her. They provided the plaintiffs with a copy of the agreement they made. The agree ment for sale was subject to the agreement, and they accepted a lower purchase price in consequence. In the circumstances it was a proper inference that on the sale to the plaintiffs, the intention of the estate and the plaintiffs was that the plaintiffs should give effect to the tenancy agreement. If they had failed to do so, the estate would have been liable in damages to the defendant.
In D.H.N. Food Distributors Ltd v. Tower Hamlets Borough Council [1976] 1W.L.R. 852, premises were owned by Bronze Investments Ltd but occupied by an associated company (D.H.N.) under an informal agreement between them – they were part of a group. The premises were subsequently purchased by the council and the issue was compensation for disturbance. It was said that Bronze was not dis turbed and that D.H.N. had no interest in the property. The Court of Appeal held that D.H.N. had an irrevocable licence to occupy the land. Lord Denning M.A. said, at p. 859:
It was equivalent to a contract between the two companies whereby Bronze granted an irrevocable licence to D.H.N. to carry on their business on the premises. In this situation Mr Dobry cited to us Binions v. Evans [1972] Ch. 359 to which I would add Bannister v. Bannister[1948J 2 All E.R. 133 and Siew Soon Wah v. Young Tong Hong[1973] A.C. 836. Those cases show that a contractual licence (under which a person has a right to occupy premises indefinitely) gives rise to a constructive trust, under which the legal owner is now allowed to turn out the licensee. So, here. This irrevocable licence gave to D.H.N. a suffi cient interest in the land to qualify them for compensation for disturbance.
Goff L.J. made this a ground for his decision also.
On that authority, Browne-Wilkinson J. in In re Sharpe (A Bankrupt), Ex parte Trustee of the Bankrupt’s Property v. The Bankrupt (1980] 1 W.L.R. 219 felt bound to conclude that, without more, an irrevocable licence to occupy gave rise to a pro perty interest. He evidently did so with hesitation. For the reasons which we have already indicated, we prefer the line of authorities which determine that a contractual licence does not create a property interest. We do not think that the argument is assisted by the bare assertion that the interest arises under a constructive trust.
In Lyus v. Prowsa Developments Ltd [1982] 1 W.L.R. 1044, the plaintiffs con tracted to buy a plot of registered land which was part of an estate being developed by the vendor company. A house was to be built which would then be occupied by the plaintiffs. The plaintiffs paid a deposit to the company, which afterwards became insolvent before the house was built. The company’s bank held a legal charge, granted before the plaintiffs’ contract, over the whole estate. The bank was under no liability to complete the plaintiffs’ contract. The bank, as mortgagee, sold the land to the first defendant. By the contract of sale it was provided that the land was sold subject to and with the benefit of the plaintiffs’ contract. Subsequently, the first defendant contracted to sell the plot to the second defendant. The contract provided that the land was sold subject to the plaintiffs’ contract so far, if at all, as it might be enforceable against the first defendant.•The contract was duly completed. In the action the plaintiffs sought a declaration that their contract was binding on the defendants and an order for specific performance. The action succeeded. This again seems to us to be a case where a constructive trust could justifiably be imposed. The bank were selling as mortgagees under a charge prior in date to the contract. They were therefore not bound by the contract and on any view could give a title which was free from it. There was, therefore, no point in making the conveyance subject to the contract unless the parties intended, the purchaser to give effect to the contract. Further, on the sale by the bank a letter had been written to the bank’s agents, Messrs Strutt & Parker, by the first defendant’s solicitors, giving an assurance that their client would take reasonable steps to make sure the interests of contractual purchasers were dealt with quickly and to their satisfaction. How far any constructive trust so arising was on the facts of that case enforceable by the plaintiffs against owners for the time being of the land we do riot need to consider.
In re Sharpe [1980] 1 W.L.R. 219 seems to us a much more difficult case in which
to imply a constructive trust against the trustee in bankruptcy and his successors, and we do not think it could be done. Browne-Wilkinson J. did not, in fact, do so. He felt (understandably, we think) bound by authority to hold that an irrevocable licence to occupy was a property interest. In In re Sharpe although the aunt provided money for the purchase of the house, she did not thereby acquire any property interest in the ordinary sense, since the judge held that it was advanced by way of a loan, no doubt, she may have had some rights of occupation as against the debtor. And when the trustee in bankruptcy, before entering into the contract of sale, wrote to the aunt to find out what rights, if any, she claimed in consequence of the provision of funds by her, she did not reply. The trustee in bankruptcy then sold with vacant possession. These facts do not suggest a need in equity to impose constructive trust obligations on the trustee or his successors.
We come to the present case. It is said that when a person sells land and stipu lates that the sale should be “subject to” a contractual licence, the court will impose a constructive trust upon the purchaser to give effect to the licence: see Binions v. Evans [ 1972] Ch. 359, 368, per Lord Denning M.A. We do not feel able to accept that as a general proposition. We agree with the observations of Dillon J. in Lyus v. Prowsa Developments Ltd[1982] 1 W.L.R. 1044, 1051:
By contrast, there are many cases in which land is expressly conveyed subject to possible incumbrances when there is no thought at all of conferring any fresh rights on third parties who may be entitled to the benefit of the incumbrances. The land is expressed to be sold 1ubject to incumbrances to satisfy the vendor’s duty to disclose all possible incumbrances known to him, and to protect the vendor against any possible claim by the purchaser … So, for instance, land may be contracted to be sold and may be expressed to be conveyed sub ject to the restrictive covenants contained in a conveyance some 60 or 90 years old. No one would suggest that by accepting such a form of contract or conveyancea purchaser is assuminga new liability in favour of third parties to observe the covenants if there was for any reason before the contract or conveyance no one who could make outa title as against
the purchaser to the benefit of the covenants.
The court will not imposea constructive trust unless it is satisfied that the conscience of the estate owner is affected. The mere fact that that land is expressed to be con veyed “subject to”a contract does not necessarily imply that the grantee is to be under an obligation, not otherwise existing, to give effect to the provisions of the con tract. The fact that the conveyance is expressed to be subject to the contract may often, for the reasons indicated by Dillon J., be at least as consistent with an intention merely to protect the grantor against claims by the grantee as an intention to impose an obligation on the grantee. The words “subject to” will, of course, impose notice. But notice is not enough to impose on somebody an obligation to give effect toa con tract into which he did not enter. Thus, mere notice ofa restrictive covenant is not enough to impose upon the estate owner an obligation or equity to give effect to it: London County Council v. Allen [1914)3 K.B. 642.
Ashburn Anstalt v Arnold
ASHBURN ANSTALT V. ARNOLD
(Court of Appeal) [1989] Ch. 1
For the facts of this case, see p. 13 above.
Fox L.J.: In Street v. Mountford [1985] A.C. 809 Lord Templeman, who gave the leading speech, regarded three hallmarks as decisive in favour of a tenancy of residential accommodation, namely exclusive possession, for a term, at a rent: see pp. 826E, 825c and 826G. In the present case it is common ground that Arnold & Co. was always in exclusive occupation of the premises from 28 February 1973, as it was before that date. As regards rent, Arnold & Co. was not required to pay a rent under the provisions of clause 5, nor did it do so. It may be that the sum paid to Arnold & Co. for its leasehold interest took account of the freedom from rent under clause 5. There is, however, no evidence of that We treat the case as one where no rent was payable. Did that prevent the provisioris of clause 5 from creating a tenancy? We do not think so. We are unable to read Lord Templeman’s speech in Street v. Mountford as laying down a principle of “no ent, no lease.” In the first place, that would be inconsistent with section 205(1) (xxvii) of the Law of Property Act 1925, which defines “Term of years absolute” as “a term of years (taking effect either in possession or in reversion whether or not at a rent) … ” Secondly, it would be incon sistent with the judgment of Windeyer J. in Radaich v. Smith (1959) 101 C.L.R. 209, 222, which was expressly approved by Lord Templeman in Street v. Mountford, at p. 827:
What then is the fundamental right which a tenant has which distinguishes his position from that of a licensee? It is an interest in land as distinct from a personal permission to enter the land and use it for some stipulated purpose or purposes. And how is it to be ascertained whether such an interest in land has been given? By seeing whether the grantee was given a legal right of exclusive possession of the land for a term or from year to year or for a life or lives. If he was, he is a tenant.
Windeyer J. in this passage makes no reference to a rent.
In the circumstances I conclude that the reservation of a rent is not necessary for the creation of a tenancy. That conclusion involves no departure from Lord Temple man’s proposition in Street v. Mountford, at p. 825:
If exclusive possession at a rent for a term does not constitute a tenancy then the distinc tion between a contractual tenancy and a contractual licence of land becomes wholly unidentifiable.
We are saying only that we do not think that Lord Templeman was stating the quite different proposition that you cannot have a tenancy without a rent.
The Formalities of a Lease
Steadman v Steadman
STEADMAN V. STEADMAN
(House of Lords)
[1976] AC. 536; [1974] 3 W.L.R. 56; [1974] 2 All E.R. 977; 29 P.& C.R. 46
Lord Simon of Glaisdale: But what was in origin a rule of substantive law designed to vindicate conscientious dealing seems to have come in time sometimes to have been considered somewhat as a rule of evidence. It is easy to appreciate how this happened. Part performance could be viewed as a way of proving an agreement falling within section 4 notwithstanding the absence of writing. Seen as such, it was no doubt considered necessary to frame stringent requirements to prevent the doctrine from carting a sedan chair through the provisions of the statute. If part performance was to be evidence of a contract which could not otherwise and directly be proved, the acts of part performance should themselves intrinsically be capable of proving some such contract as that alleged. Oral evidence was not admissible to connect them with the alleged contract: otherwise, it was held, the statutory object would be defeated by allowing an interest in land to pass on mere oral testimony. As the Earl of Selbourne L.C. put it in Maddison v. Alderson, 8 App.Gas. 467, 478, 479 (in a passage I label “(A)” for ease of reference later):
(A) The doctrine … has been confined … within limits intended to prevent a recurrence of the mischief which the statute was passed to suppress … All the authorities show that the acts relied upon as part performance must be unequivocally, and in their own nature, referable to some such agreement as that alleged.
It may be questionable whether it was direct respect for the statute which led to such confinement of the doctrine, or whether it was not rather because part perfor mance seems sometimes to have been regarded as an alternative way of proving an oral agreement; for Equity allowed a person to prove by parol evidence that land conveyed to another was so conveyed on trust for himself, notwithstanding section 7 of the Statute of Frauds: Rochefoucauld v. Boustead [1897] 1 Ch. 196, 206; Bannister v. Bannister[1948] 2 All E.R. 133, 136-the passages show that here, too, the guiding rule was that the court would not allow the statute to be used as a cloak for fraud. However that may be, the speech of the Earl of Selborne L.C. has always been regarded as authoritative, notwithstanding that what he said about part performance was, strictly, obiter.
But Lord Selborne went on to effect a complete reconciliation between the pro visions of the statute and the doctrine of part performance ina passage (pp. 475- “4(786))”:which is of crucial importance to the instant appeal, and whichI have labelled
(8) Ina suit founded on such part performance, the defendant is really ‘charged’ upon the equities resulting from the acts done in execution of the contract, and not (within the meaning of the statute) upon the contract itself. If such equities were excluded, injustice of a kind which the statute cannot be thought to have had in contemplation would follow … All the acts done must be referred to the actual contract, which is the measure and test of their legal and equitable character and consequences … The matter has advanced beyond the stage of contract; and the equities which arise out of the stage which it has reached cannot be administered unless the contract is regarded. The choice is between undoing what has been done (which is not always possible, or, if possible, just) and completing what has been left undone… it is not arbitrary or unreasonable to hold that when the statute says that no action is to be brought to charge any person upon a contract concerning land, it has in view the simple case in which he is charged upon the contract only, and not that in which there are equities resulting from res gestae subsequent to and arising out of the contract. So long as the connection of those res gestae with the alleged contract does not depend upon mere
parol testimony, but is reasonably to be inferred from the res gestae themselves, justice seems to require some such limitation of the scope of the statute …
The following questions arise for determination in relation to the facts of the instant case: (1) What is meant by res gestae in passage (B)? Are they different from acts of part performance of the alleged contract? If so, do they impose some limitation- e.g. contemporaneity? Or are they words of extension – permitting, for example, evidence of explanatory acts antecedent to the alleged contract (such as the correspondence between the solicitors in the instant case)? (2) In passage (A) Lord Selborne says “referable to some such agreement as that alleged”: in passage (B), “referred to the actual contract.” Is there a discre’pancy here? What must be the relationship between the acts of part performance and/or the res gestae (if there isa distinction), on the one hand, and the alleged contract, on the other, in order to raise an equity precluding the other party from relying on the statute? (3) Must the alleged act(s) of part performance indicate specifically the term of the alleged contract to which the statute is pleaded asa defence (e.g. the term relating to the disposition of an interest in land), or is it sufficient that the alleged act(s) indicate some contract? (4) What does “unequivocally” in passage (A) mean in this connection? What is the standard of proof required? (5) What does “of their own nature” in passage (A) mean? Must each act of alleged part performance “of its own nature” be separately referable to the alleged, or “some such”, contract, or can they be regarded cumulatively- reinforcing each other, so to speak? (6) For what purpose, if at all, is oral evidence admissible? (7) Can payment of a sum of money ever bea relevant act of part performance? (8) What issues arise at the trial and how are they to be resolved?
These questions to some extent overlap. I do not think that it is possible to reconcile all the authorities and dicta. There seems to be an uneasy oscillation between regarding the doctrine as a principle vindicating conscientious dealing and asa rule of evidence. Concurrently with this and reinforcing the latter view, there seems to have beena hardening of Equity’s arteries, an increasing technicality until quite recent times. The Chancellor’s foot evolves into the Vice-Chancellor’s footrule.
(1) Res gestae (i.e. things done). The concept is more familiar in the law of evidence, where it relates to the admissibility of acts, declarations and incidents
· which either are constituents of, or accompany and explain, the fact or transaction in question: see Phipson on Evidence, 11th edn (1970), para. 171. Lord Selborne probably had two reasons for using the words in preference to “acts of part performance of the alleged contract”: (i) they are sometimes used in the law of evidence to mark the distinction between the principal fact or transaction in question, on the one hand (as to which evidence is always admissible), and ancillary facts, on the other (as to which evidence is only admissible if they are so closely connected with the principal fact as either to form one continuous transaction with it or to be necessary to give meaning to it): Lord Selborne was emphasising that what gave rise to the equity was, not the contract itself, but what was done ancillary to it; (ii) one rationale for the res gestae rule of evidence is that the probability of an occurrence may often be tested by considering its attendant circumstances (Dysart Peerage Case (1881) 6 App.Gas. 489,502): so here, once it was considered incumbent to do equity without undermining the statute, it was reasonable to look for attendant circumstances which inherently rendered it probable that there had been an antecedent contract the obligations of which it would be inequitable to allow a party to escape. But I do not think that Lord Selborne intended to import generally the rules of the law of evidence relating to res gestae. Those rules often extend to admitting acts and declarations antecedent to the principal fact where they either form one continuous transaction with it or are necessary to explain it. But an act or declaration antecedent to a contract cannot be part performance of it; and it was the doctrine part of part performance which Lord Selborne was concerned with. He speaks of “res gestae subsequent to and arising out of the contract.” I do not think, therefore, that the correspondence between the solicitors before March 2, 1972, can avail the husband in obviating the plea of section 40(1); though it is available to aid him in establishing the alleged agreement of March 2, 1972, once the plea of the statute is obviated. Then there is authority that acts preparatory, not merely to the contract, but to the performance of a term of the contract (such as compiling an abstract of title or making a valuation) are not sufficient acts of part performance: but these certainly would seem to be res gestae pursuant to the contract involving detriment to the plaintiff. Did the preparation of the conveyance on behalf of the husband in the instant case stand alone, it might be necessary to give consideration to this line of authority: however, on the view I take of other matters it is not called for. Again, I do not think that Lord Selborne’s description of acts of part performance as res gestae under the contract imports from the law of evidence into this branch of the law the requirement of substantial contemporaneity: Equity’s doctrine of !aches and the requirement of referability provide superior and less technical safeguards against injustice. On the other hand, the fact that Lord Selborne used the term res gestae throws some light on the admissibility of oral testimony in this branch of the law, since in the law of evidence the doctrine of res gestae is very largely concerned with the question of admissibility of oral declarations.
(2) “Some such agreemenf’l”the actual agreement.” I think that the discrepancy in expression foreshadows Upjohn L.J.’s formulation of the rule – the acts must be such as “prove the existence of some contract, and are consistent with the contract alleged.” (Kingswood Estate Co. Ltd v. Anderson [1963] 2 Q.B. 169, 189, citing Fry on Specific Performance, 6th edn (1921), p. 278; see also Wakeham v. Mackenzie [1968] 1 W.L.R. 1175, 1180). Alternatively, Lord Selborne might have been drawing a distinction between the stage of part performance giving rise to equities in favour of the plaintiff which preclude the defendant from pleading the statute, and the next stage where the plaintiff may lead evidence of the oral contract with sufficient particularity that Equity will enforce it. Both must now be accepted as valid ways of considering the rule.
The law here is not logical: it represents the compromise of the two principles to which I have referred near the outset of this speech. If the contract alleged is such that it ought not to depend on oral testimony, it is this contract, not merely some contract, that the acts should prove. If the plaintiff has so performed his obligations under the contract that it would be uncornscionable for the defendant to plead the statute, it is immaterial whether or not the plaintiff’s acts prove the contract – let alone some other contract. But it is the sort of illogical compromise, doing some deference to each of two competing and inconsistent principles, in which English law abounds.
There is no reason to disturb it so long as it does substantial justice, as it seems to have done in all the recent reported cases. However, I have already ventured to point out that Equity did not find it necessary to create the same difficulties as regards section 7 of the statute – unembarrassed by a long line of authority, it took the direct route to oral evidence.
But the law as stated by Upjohn L.J. is juridically justifiable. If the plaintiff proves that he carried out acts in part performance of some contract to which the defendant was a party while the latter stood by, it becomes inequitable that the latter should be allowed to plead, in exoneration of reciprocal obligations, that any such contract was unenforceable by reason of the statute – particularly when it is borne in mind that few acts of performance point exclusively to a particular contract, least of all a particular multi-term contract.
But “some such contract” must be a contract with the defendant – otherwise no equity arises against him to preclude his pleading the statute.
(3) Must the act of part performance indicate that term of the contract which con cerns the disposition of an interest in land? This question has often been answered in the affirmative. Snell’s Principles of Equity, 27th edn (1973), p. 587, for example, states: “the acts must indicate the land concerned.” But where, as so often, the only term to be performed by the defendant is the transfer of the interest in land, the fulfilment of the other conditions stipu(ated by Equity will generally involve that the effective act of part performance indicates the land concerned. The Earl of Selborne’s “referable to some such agreement as that alleged” is not so specific; and it has now, in any event, received Upjohn L.J.’s gloss. In Wakeham v. Mackenzie [1968] 1
W.L.R. 1175 a woman agreed to surrender her rent-restricted flat and keep house for an elderly widower in consideration of his oral promise to leave her his house by will: her action was held to be sufficient part performance to make the widower’s oral promise binding on his personal representative. The case must be compared with Maddison v. Alderson, 8 App.Gas. 467, where the only material distinction was that the woman had no house of her own to give up. This distinction might be sufficient to justify the inference in the later case that the housekeeper’s actions implied a quid pro quo, a bargain, which had not been a justifiable inference in the earlier case (see Lord Blackburn in Maddison v. Alderson at p: 487); but they could hardly be said to have indicated a bargain a term of which related to the widower’s house.
It is unnecessary to determine the point in the instant case. The husband’s acts of part performance included two which specifically indicated the land in question: (i) procuring his solicitor to inform the justices of the entire bargain and to invite them to implement such of its terms as concerned them; (ii) procuring his solicitor to carry out the obligation which, under the bargain, the husband had assumed of drafting the conveyance and sending it to the wife (see Williams on Title, 3rd edn (1966), p. 709)
– this was the performance of an obligation arising from the contract, not preparation for performance.
Other acts of part performance by the husband proved that there had been some contract with the wife, though without specifically indicating those terms which concerned the house. The consent to the justices’ orders and the payment of £100 are, in my view, only reasonably intelligible on the hypothesis that the issues raised by the cross-summonses in the magistrates’ court had been settled by agreement. As for the other limb of Upjohn L.J.’s formulation of the rule, the husband’s acts were consistent with the contract alleged by him.
(4) “Unequivocally.” This could bear three meanings: (i) referable to the alleged
contract and no other; (ii) clearly, on more than a mere balance of probabilities; (iii) not equally referable to the hypothesis of a contract or some other hypothesis, i.e. on the preponderance of probability.
The first view was apparently held at one time – in logical consistency with the principle that the doctrine of part performance should not be allowed to undermine the statutory insistence that the contract must not be proved by oral testimony. It would seem, indeed, to bea reflection of the tendency to regard the doctrine of part performance asa rule of evidence. But it must often have led toa failure of justice, to Equity helplessly standing by while the statute was used as an engine of fraud; since, as Snell puts it (p. 587): “Few acts of part performance are so eloquent as to point to one particular contract alone.” This ·1dea is therefore now to be regarded as “long exploded,” to use Upjohn L.J.’s expression in Kingswood Estate Co. Ltd v.
[1963] 2 Q.B. 169, 189.
As for the second view, there would be nothing unique in Equity requiring that the
act of part performance should indicate beyond doubt that it was in pursuance ofa contractual obligation. For example, for rectification, there must be “strong irrefragable evidence” of the mistake (Countess of Shelburne v. Earl of lnchiquin (1784) 1 Bro.C.C. 338, 341); it must “leave no fair and reasonable doubt upon the mind” (Fowler v. Fowler (1859) 4 De G. & J. 250, 265); there must be “convincing proof” (Joscelyne v. Nissen [1970] 2 Q.B. 86, 98). A similar standard is probably re quired to establisha secret trust (Ottaway v. Norman [1972] Ch. 698, 712). Or that persons who have lived together purporting to be husband and wife were not married, especially if there had been some ceremony (Morris v. Davies (1837)5 Cl.& Fin. 163; Piers v. Piers (1849)2 H.L.Cas. 331 and Hill v. Hill [1959]1 W.L.R. 127). Or to prove abandonment ofa domicile of origin (Winans v. Attorney-Genera/[1904] A.C. 287).
Nevertheless, the general standard of proof in civil proceedings is proof ona balance of probabilities. In some of the situations referred to in the preceding para graph justice may call fora higher standard of proof; butI can see no reason why it should here- though no doubt, here as elsewhere, the evidence (and the nexus) will be more jealously scrutinised where the other party to the alleged contract is deceased. In passage (B) the Earl of Selborne used the words “reasonably to be inferred.” In Wakeham v. Mackenzie [1968] 1 W.L.R. 1175 the alleged acts of part performance can only ona balance of probability have been more likely to have been in pursuance of some contract than otherwise. I am therefore of opinion not only that the facts relied on to prove acts of part performance must be established merely ona balance of probability, but that it is sufficient if it be shown that it was more likely than not that those acts were in performance of some contract to which the defendant wasa party.
(5) “Of their own nature.” This means merely that oral testimony is not admissible
to show that the acts relied on were in part performance ofa contract: the acts must themselves ona balance of probability indicate this. But it does not mean that each act must be considered seriatim by itself. The acts may throw light on each other; and there is no reason to exclude light. In the instant case, for example, the payment of £100 would, standing by itself, have been equivocal: it would not even marginally have been more suggestive of performance of a contractual term than otherwise. But taken together with the other acts and forbearances of the husband in relation to the summary matrimonial proceedings it becomes strongly indicative ofa bargain. So, too, the preparation of the draft conveyance when taken together with the statements made to the justices- provided that the latter were admissible in evidence.
(6) Oral evidence. The extent of the exclusionary rule is to preclude oral evidence
to establish that the acts relied on were in part performance ofa contract; in other words, the nexus between the acts and the alleged contract, or some such, cannot be established by oral testimony at the trial. But the acts themselves may be, and generally are, proved orally. Moreover, spoken words may themselves be part per-
formance of a contract.
Words spoken are facts just as much as any other action bya human being. If the speaking
of words isa relevant fact, a witness may give evidence that they were spoken.
(Lord Wilberforce in Ratten v. The Queen [1972] A.C. 378, 387, in relation to the evidentiary rule of res gestae.) As such they are to be considered as of the nature of real evidence: see Lord Normand in Teper v. The Queen [1952] A.C. 480,487. So, in the instant case, the bargain between the parties necessitated the justices being informed of what had been agreed, as a preliminary to the invitation to them to implement part of the agreement. The statement to the justices was part perfor mance of the bargain, including those terms adverse to the husband; and oral evi dence is admissible as to what was said to them. But “human utterance is botha fact anda means of communication”: Lord Normand in Teper v. The Queen, at p. 486. When it comes to determining whether acts of part performance of their own nature indicate the contract alleged, or some such, words inevitably speak more specifically than deeds; but that is no reason for excluding them either as facts or as means of communication. The statement to the justices as an act of part performance indicated in terms that there had been an agreement between the parties and what were its provisions. Moreover, the ensuing actions of the husband (in inviting the order of the justices, instructing his solicitor to prepare the conveyance, and paying
the £100) must be viewed in the light of the statement to the justices- they were integral res gestae in every sense of that expression.
(7) Payment of money. It has sometimes been said that payment of money can never bea sufficient act of part performance to raise the required equity in favour of the plaintiff- or, more narrowly, that payment of part or even the whole of the purchase price for an interest in land is not a sufficient act of part performance. But neither of the reasons put forward for the rule justifies it as framed so absolutely. The first was thata plaintiff seeking to enforce an oral agreement to which the statute relates needs the aid of Equity; an,;I Equity would not lend its aid if there was an adequate remedy at law. It was argued that a payment could be recovered at law, so there was no call for the interventioh of Equity. But the payee might not be able to repay the money (he might have gone bankrupt), or the land might havea particular significance for the plaintiff (cf. the equitable order for specific delivery ofa chattel of particular value to the owner: Duke.of Somerset v. Cookson (1735) 3 P.Wms. 390), or it might have greatly risen in value since the payment, or money may have lost some of its value. So it was sought to justify the rule, alternatively, on the ground that payment of money is always an equivocal act: it need not implya pre-existing contract, but is equally consistent with many other hypotheses. This may be so in many cases, but it is not so in all cases. Oral testimony may not be given to connect the payment witha contract; but circumstances established by admissible evidence (other acts of part performance, for example) may makea nexus witha contract the probable hypothesis. In the instant case, for example, what was said (i.e. done) in the magistrates’ court in part performance of the agreement makes it plain that the payment of the £100 was also in part performance of the agreement and nota ospthoenrtahnyepothseascist.of generosity or discharge of a legal obligation or attributable to any
(8) The issues at the trial.A plaintiff alleges an oral agreement. If the defendant does not plead the statute, the plaintiff may prove the agreement by any relevant evidence, including oral testimony. But if the defendant does plead the statute, the plaintiff is barred unless he can establish that the defendant’s plea of the statute should not be admitted because its maintenance would be unconscionable. To do this the plaintiff has to prove that: (i) on balance of probability he acted to his detriment; (ii) it was more probable than not that he so acted because he was contractually obliged to the defendant to do so; (iii) such actions were consistent with the oral agreement which he alleges. As regards (i}, the plaintiff’s detrimental actions can include words; and he can prove them by any relevant evidence, including oral testimony. But he cannot lead oral or any testimony (other thana written confession by the defendant which satisfies the requirements of the statute) as to (ii) and (iii); the facts proved under (i} must themselves answer (ii) and (iii) in his favour. But if all three requirements are satisfied, an equity arises in his favour which precludes the defendant from relying on the statute; and the plaintiff can then lead evidence (including oral evidence) to establish the oral agreement on which he based his claim for relief, as if the statute had never been pleaded. He still, of course, has to prove such oral agreement on the balance of probability; and if the other party is dead the evidence will be rigorously scrutinised.
In the instant case the husband proved to the satisfaction of the registrar the following acts which were to his detriment: (i) procuring his solicitor to consent to an order by the justices which placed him under a continuing legal obligation; (ii) pro curing his solicitor to forbear from seeking from the justices orders which might have been more advantageous to himself; (iii) paying £100 to the wife before March 30, 1972; (iv) procuring his solicitor to draft a conveyance for execution by the wife. Even if, contrary to my view, these matters could be considered in isolation from the state ments inviting the justices to play their part in implementing them, they still, in my opinion, make it more probable than not that the husband acted as he did because he had contracted with the wife to do so; and they are consistent with the agreement which the husband alleges. This makes it inequitable for the wife to allege that the agreement was unenforceable because the formalities required by section 40(1) were not complied with. The registrar, therefore, rightly admitted oral and affidavit evidence to establish the agreement alleged by the husband, which he found proved.
Walsh v Lonsdale
WALSH v. LONSDALE
(Court of Appeal)
(1882) 21 Ch. D. 9; 52 L.J. Ch. 2; 46 L.T. 858; 31 W.R. 109
Jessel M.R.: The question is one of some nicety. There is an agreement fora lease under which possession has been given. Now since the Judicature Act the possession is held under the agreement. There are not two estates as there were formerly, one estate at common law by reason of the payment of the rent from year to year, and an estate in equity under the agreement. There is only one Court, and the equity rules prevail in it. The tenant holds under an agreement fora lease. He holds, therefore, under the same terms in equity as if a lease had been granted, it being a case in which both parties admit that relief is capable of being given by specific performance.
Note
The court will not, in the exercise of its discretion, grant specific performance where to do so would result in the defendant breaking his contract with a third party: Warmington v. Miller [1973] Q.B. 877, where the Court of Appeal refused to grant 11pccific performance of an agreement to grant a sub-lease since to do so would have resulted in the landlord being in breach of a covenant contained in the headlease. An order for specific performance will also be refused if the plaintiff is himself in default by being in breach of covenant: Coatsworth v. Johnson (1886) 55 L.J.Q.B. 220 (C.A.).
The assignment of any tenancy at law will be invalid unless made by deed.
Crago v Julian
CRAGO V. JULIAN
(Court of Appeal)
[1992] 1 W.L.R. 372; [1922] 1 All E.R. 744; [1992] 17 E.G. 108
Sir Donald Nicholls V.-C.: I turn first to the question of law: could this tenancy be assigned effectively only by deed? I can start with the summary of the law set out in Megarry & Wade on the Law of Real Property, 5th edn (1984), p. 665:
A legal lease, once created, can be transferred inter vivos only by deed, in accordance with the general rule. This applies to all legal leases, even those created orally, e.g. a yearly tenancy. However, on principles similar to those applicable to the creation of leases, an oral or written assignment will be effective in equity as between the assignor and the assignee as a contract to assign, if sufficiently evidenced by writing or part performance.
In the present case nothing less than an assignment at law will assist Mrs Julian. The view stated in Megarry & Wade is also expressed in all the other leading textbooks on this subject. Undaunted, Mr Phillips contended that these views are erroneous. The general rule mentioned by Megarry & Wade is a reference to certain provisions in the Law of Property Act 1925. Mr Phillips submitted that, properly interpreted, these provisions do not preclude a valid assignment otherwise than by deed of a lease which has been created orally.
I consider section 53 first. The grant of a tenancy is the creation of an interest in land. An assignment of a tenancy of land is the disposal of an interest in land. Thus, both the grant of a tenancy, and the assignment of a tenancy, fall four-square within section 53(1)(a). A tenancy of land cannot be created or assigned save by writing, or by will, or by operation of law. Paragraph (a), however, is expressed to be “subject to the provisions hereinafter contained with respect to the creation of interests in land by parol.” (Emphasis added). Section 54(2) is such a provision. Section 54(2) pro vides that the statutory requirements of Part II of the Act do not affect “the creation” by parol of leases taking effect in possession for a term not exceeding three years at a full market rent.
I pause to observe that, thus far, there can be no doubt as to the meaning of the statutory provisions: interests in land cannot be created or disposed of except in writing, but a lease in possession at a market rent for up to three years can be validly created orally. Hence, and this is to be noted, the effect of these statutory provisions is indubitably to draw a distinction between the manner in which a short lease may be created and the manner in which it may be assigned.
The point is not wholly free from authority. Section 53(1)(a) derives from section 3 of the Statute of Frauds, and section 54 derives from sections 1 and 2. In Botting v. Martin (1808) 1 Camp. 317 Serjeant Best argued that by the leases mentioned in section 3, as requiring to be assigned in writing, must be intended such leases as are required by sections 1 and 2 to be created in writing, viz., leases conveying a larger interest to the party than a term for three years. He submitted:
As a lease from year to year could be originally made by parol, there was no reason why it might not be assigned by parol, arid the words of the statute would bear this interpretation, which was clearly consistent with its general import.
McDonald C.B. rejected the submission.
In my view section 53 provides an insuperable obstacle for Mrs Julian in the present case. Like McDonald C.B., I consider the statutory language really leaves no room for reaching a different conclusion, even though the result is the curious distinction I have mentioned. Even if there were room for doubt I would be slow to upset an interpretation of statutory provisions which has been accepted by con veyancers for a very long time.
Types of Leases and Tenancies
Caerphilly Concrete Prodcuts v Owen
(Court of Appeal)
[1972]1 W.L.R. 372; [1972J 1 All E.R. 248; 23P & C.R. 15
Lord Russell: This appeal from Foster J. raises the question whether the terms of a lease are such as to createa perpetually renewable lease, and consequently by force of the Law of Property Act 1922 confers upon the tenanta 2,000 year term.
The lease in question is dated May 6, 1963. One John Kenneth Hopkins was the lessor and the defendant, Frederick William Owen, the lessee. It was fora term of five years from January 1, 1963, at a rent of £1O yearly payable in advance in one sum of £50. The premises were an area of 4,800 square feet in an industrial area in Caerphilly. The tenant had been previously lessee of the property from Hopkins undera succession of leases in similar terms, and in 1957 had sublet the premises to the plaintiff landlords, Caerphilly Concrete Products Ltd, ata weekly rental of 30s. In 1966 the landlords bought the freehold of the premises; and the landlords contend that on the expiration of the five year term they are no longer since January 1968 liable to pay the 30s. weekly rental to the tenant. The tenant admittedly had at least an option for another five years from January 1968, but had failed to give due notice exercising that option; but the tenant contends that the lease of 1963 was perpetually renewable, in which case notice was not necessary because of the 2,000 year term.
I add that there isa secondary point that arises if there was no perpetually renew able lease and therefore no 2,000 year term, because ofa payment of £50 by way of rent fora period after January 1968 apparently accepted as such by the landlords. This may prevent the landlords in any event from contending that they ceased to be ethveenlet snsoetensowof ftohredetecnisaionnt .at 30s. weekly in January 1968: but that point is in any
The 1963 lease containeda number of covenants, provisos and conditions which do notI think call for special notice. I am not sure at what stage in the history of the Hopkins to Owen leasesa shed was erected on the premises by the tenant, but spurebsleutmtinagblbyyitthweatsenbaenfotrteo 1th9e57la, nthdulosrdjuss. tifying a weekly rent of 30s. charged in the
The approach to the question whether a lease is perpetually renewable is not in doubt. The language used must plainly lead to that result: though the fact that an argument is capable of being sustained at some length against that result does not of course suffice. As a matter of history, when a covenant by a lessor conferred a right to renewal of the lease, the new grant to contain the same or the like covenants and provisos as were contained in the lease, the courts refused to give literal effect to that language, which if taken literally would mean that the second lease would contain the same covenant (or option) to renew, totidem verbis, and so on perpetually. The reference to the same covenants was construed as not including the option covenant itself. This limited the tenant’s right to one renewal. In order therefore to make it plain that the covenants to be contained in the second lease (to be granted under the exercise of the option to renew) were to include also the covenant to renew, draftsmen were accustomed to insert phrases such as “including this covenant,” so as to achieve a perpetually renewable lease. As I have indicated, if they did not do this, the second lease would not contain any option clause.
The operation of the words of inclusion was not limited to requiring the second lease to contain a covenant to renew once more only, which would have been the
outcome if the words of inclusion had been omitted in the second lease. This was because the words of inclusion could not properly be construed as requiring the second lease to contain the same covenants other than the covenant to renew but additionally to include an option to renew once more only – a total of three terms. The words of inclusion defined or explained what was meant by ”the same covenants,” that is to say, as including the covenant to renew. Consequently in the second lease, in order to comply with the words of definition or explanation, the covenants referred to therein to be contained in the second lease must contain the same wording including the inclusion.
In the present case the brackets make it abundantly plain that the parties are explaining that “containing the like covenants and provisos” is a phrase intended to embrace an option. That is to say that the covenants and provisos contained in the first lease, which the first lease requires the second lease to contain, are not to be construed as a reference to those covenants and provisos other than an option to renew, but as a reference to all those covenants including an option to renew. But what covenant in the first lease (to be repeated in the second) can be regarded as such except clause 4(3)? The second lease must contain the clause 4(3) covenant. When the clause 4(3) covenant speaks of “the like covenants and provisos” it defines them as including an option to renew. If the words of clause 4(3) are repeated in the second lease without the words in parenthesis the second lease will not be carrying out the requirement of the first lease: it will not be granting an option for a further lease containing “the like covenants” as defined.
–
Aler v Blackman
[1953] 1QB 146
Somervell L.J.: I think that when, as here, a term comes to an end one has, of course, to consider what inferences are properly to be drawn from the payment and acceptance of rent. That is the basis of the presumption. In the cases in the books the rent is expressed to be so much per year and if one takes the extreme case in which the rent being so expressed is to be payable weekly, when the landlord accepts a weekly sum, what he is accepting is an instalment of the agreed figure for a yearly rent. One, therefore, sees from that the force of the line of argument which has led the courts in those cases to presume a tenancy for a further year. But in a case like the present, where the rent is expressed to be per week, I think when the fixed period has come to an end one should not presume anything but a weekly tenancy, namely, a tenancy for the period in respect of which the rent is expressed. It is one of those cases (and there are many) when the law has to do its best to fill up a gap which has been left by the parties. The parties are obviously in some relationship of landlord and tenant but they have not taken the trouble to write down in black and white what the relationship is. That, I think, is the proper conclusion.
There was a further point to which the trial judge referred, and though he did not regard it as necessary to his decision I will say a word about it. In July, 1950, this notice to quit was given on the basis that the tenant was a weekly tenant. On receipt of that notice the tenant then proceeded to apply under the Landlord and Tenant Act of 1927 for a new lease and compensation on the basis that that was a good notice bringing his tenancy to an end, whereas, of course, if it had been yearly tenancy there would have been admittedly a six months’ notice required expiring at the end of the year. The judge regarded that as evidence of the intention of the parties as at the time when the year terminated and, therefore, relevant to support the conclusion that the holding over was on the basis of a weekly tenancy. I find it unnecessary to rely on that though it would have been relevant in considering whether the presumption is rebutted if, contrary to the view I held, there had been a prima facie
presumption that the tenant had held on a yearly tenancy. I do not, however, base my decision on what happened in July, 1950, and just afterwards, though it is perhaps comforting to realize that at any rate at that time neither side took the view that this was a yearly and not a weekly relationship. For these reasons I would dismiss the
Youngmin v Heath
YOUNGMIN V. HEATH
(Court of Appeal)
Lord Denning: Mr Youngmin, the plaintiff, is the owner of a house- no. 31 Hartham Road, London, N.7. Some years ago his predecessor let two rooms furnished to Miss Reni at £3a week. She shared the bath and w.c. with other tenants. Mr Youngmin bought the house. Her tenancy continued. She paid rent to Mr Youngmin regularly until October 3, 1970. Then she was taken ill and died on October 29, 1970. She had made no will and died intestate. Mr Youngmin did not take possession of the two rooms. He left them as they were. His furniture remained there. Her clothing remained there. The rooms were left unoccupied. Miss Reni had no relatives living in this country. Her only relation was a sister who lived in Russia. This sister instructeda lawyer, a Mr Heath, in London to take out administration of Miss Reni’s estate. He took it out as attorney for the sister. The letters of administration were granted on May 24, 1972. The administrator claimed the clothing of Miss Reni. He also terminated the tenancy of the two rooms. On September 26, 1972, he gave to Mr Youngmin a notice to terminate the tenancy on October 28, 1972.
Now Mr Youngmin claims the rent of £3 a week from the last time it was paid by
Miss Reni on October 3, 1970, up to the time of the expiry of the notice to quit on October 28, 1972. He claims the rent from Mr Heath, the defendant, as the attorney administrator of the estate of Miss Reni. Mr Youngmin admits that there are the clothes in the rooms and that Mr Heath can take them. But the question is whether he is entitled to sue Mr Heath for the rent. Mr Heath says that the liability for rent ceased when Miss Reni died, and that he, as administrator, is not liable thereafter
because he never entered into possession.
Some points are clear. On Miss Reni’s death intestate, the tenancy did not
determine. Her estate, including this tenancy, vested in the Probate judge: see section9 of the Administration of Estates Act 1925. When Mr Heath in 1972 became the attorney administrator for the sister, he became entitled to the tenancy as administrator, and his title related back to the time when Miss Reni died in October 1970: see In The Goods of Pryse [1940] P. 301. So Mr Heath was as administrator entitled to this tenancy from the very moment that Miss Reni died.
If Mr Heath had entered into the premises himself and had used them or taken the benefit of them, he would be liable personally for the rent from the time from which he took possession. Even if there were no assets, he would be liable for the rent up to the annual value of the premises: see Rendall v. Andreae (1892) 61 L.J.Q.B 630. But Mr Heath did not enter or take possession himself or have any benefit from the premises. His counsel, Mr Cowell, submits that in these circumstances Mr Heath is not liable at all – not even as administrator – not even to the extent of the assets in his hands. Mr Cowell admits that if Miss Reni had expressly agreed to pay the rent during the currency of the tenancy, Mr Heath would be liable on her contractual obligation. He would be liable on this contract because a personal representative is liable on all the contractual obligations of the deceased to the extent that he has assets in his hands to meet them. But Mr Cowell submits that in the absence of an express agreement Mr Heath was not liable at all, not even as administrator.
To my mind there is a short answer to this contention. When there is an ordinary letting of premises furnished or unfurnis ed at a weekly rent the tenancy does not determine on the tenant’s death. It is an implied term that the obligation to pay rent continues during the currency of the tenancy. This is a contractual obligation which binds the tenant and his personal representative to pay rent so long as the tenancy continues – that is, until it is determined by proper notice to terminate it. If the tenant dies and the executor does not take possession, the personal representative must fulfil the obligation to pay the rent, but only to the extent of the assets in his hands: see Williams on Executors and Administrators, 14th edn (1960), vol. 2, p. 1032; and Megarry and Wade, The Law of Real Property, 3rd edn (1966), p. 733. The administrator is liable for the rent to the extent of the deceased’s assets until the tenancy is properly determined by notice to quit.
Manfield & Sons Limited v Botchin
MANFIELD & SONS LTD V. BOTCHIN
[1970] 2 Q.B. 612; [1970] 3 All E.R. 143; 21 P. & C.R. 587
Cooke J.:A tenancy at will arises when one person lets land to another to hold at the will of the lessor. Such a tenancy is determinable at any time either by the lessor or the lessee. Tenancies at will commonly arise by implication from the acts of the parties as, for example, where a tenant whose lease has expired is permitted to continue in possession pending the conclusion of negotiations fora further lease; or where a prospective purchaser of land is admitted into possession before completion. It is, however, entirely clear that a tenancy at will may be created by express agreement, even though such cases may be rare: see, for example, Morgan
v. William Harrison Ltd[1907] 2 Ch. 137.
The first question may, therefore, be resolved into two elements. First, was the
effect of the agreement of December 21, 1964, to create a tenancy at will? Secondly, if the answer to that is in the affirmative, has anything subsequently occurred to alter the nature of the tenancy and convert it into a periodic or some other kind of tenancy? I deal first with the agreement of December 21, 1964.I entirely accept that in considering the effect of that agreement, particularly in the context of remedial legislation designed to give protection to tenants, I am free and, indeed, obliged to look at the true nature of the agreement and am not bound to accept without question the legal label which the parties have chosen to attach to the relationship which the agreement creates. I think, however, that I must at any rate start from the fact that the agreement by its terms purports to create a tenancy at will. Nor is thisa case where the parties have combined to set up a sham form of agreement in order to disguise the true nature of the agreement between them, for there is not the slightest doubt that the intention of the landlords at any rate was to createa tenancy at will and no other kind of tenancy; and in describing the tenancy asa tenancy at will the lessors at least were in earnest. Nevertheless, if on a true analysis of the agreement it creates nota tenancy at will but some other kind of tenancy, the description used by the parties must give way to the reality. If authority is required for the proposition that in the context of legislation designed for the protection of tenants the courts look at the substance of the relationship between the parties to a transaction, it will be found in judgments in the Court of Appeal in Facchini v. Bryson (1952) 1 T.L.R. 1386 and in the observations of Lord Evershed M.A. in Samrose Properties Ltd v. Gibbard[1958] 1 W.L.R. 235,238,239.
In Samrose Properties Ltd v. Gibbard (1958) 1 W.L.R. 235 the question was whether the tenancy was one to which the rent restriction legislation applied. That in turn depended upon whether a sum of £35, expressed to be paid as consideration fora promise to grant a lease for one year at a quarterly rent of one guinea, was in truth and in fact no more than an advance payment of rent under the lease. The Court of Appeal held that the reality of the matter was that the £35 wasa payment by way of rent and that the tenant was accordingly entitled to the protection of the rent restriction legislation. In the present case it is true that the agreement reserves a rent, and quite a considerable rent, which is to be calculated on an annual basis. It is, however, clear law that when the agreement between the parties expressly createsa tenancy at will the fact that the agreement reserves a rent ona yearly basis would not, or at any rate not necessarily, override the expressed intention of the parties to create a tenancy at will and no more: see Doe d. Bastow v. Cox (1847) 11 Q.8. 122.
In my view, the fact that rent was reserved at an annual rate is not in the present case sufficient to override the expressed intention of the parties to createa tenancy at will. The agreement does not provide for the payment of rent at fixed times, but only on demand. It is questionable whether the terms of this provision would strictly empower the landlords to demand rent in advance. If, however, the provision does empower the landlords to demand rent in advance, it seems to me that any advance payment made on such a demand would of necessity be a provisional payment only; and if during the period for which an advance payment had been made either the
landlords or the tenant were to exercise his right to determine the tenancy forthwith an appropriate adjustment would have to be made.
Looking at the tenant’s covenants in the agreement, they do not appear to me to be inconsistent with a tenancy at will(…]. As I have already said, there is no express provision for re-entry on breach of any of the covenants [… ] and this is entirely intelligible on the basis that the tenancy is a tenancy at will, because of course in the case of sucha tenancy the landlords are entitled to re-enter at any time without cause assigned. On the other hand, if the tenancy were a periodic tenancy, certainly if it werea tenancy from year to year, I would expect to find an express provision for re-entry on breach of, at any rate, some of the covenants. […]
It may be said that the rent is a large one for a tenant to pay where there is no security of tenure. It is in fact the same amount as the tenant was in November, 1964, prepared to pay for a weekly tenancy. But it is also necessary to bear in mind that at the time when the tenancy was created the landlords were experiencing frustration in their attempts to obtain planning permission for a scheme of development which they regarded as satisfactory, and the tenant may well have thought that it was worth his while to accept a tenancy at will in the expectation that there might be a considerable period of delay before redevelopment took place. Moreover, the tenant’s own venture in opening this shop was a new venture, and for sucha venture he might well have been unwilling to commit himself toa long tenancy. In fact, the tenancy that he was proposing in November, 1964, wasa weekly tenancy only. As I have already said, when the tenant signed the agreement of December 21, I do not think that he can have been in any doubt that the landlords
were unwilling to grant him a periodic tenancy and all he was getting wasa tenancy determinable at any time by either party.
Looking now at the recitals to the agreement, the first recital is entirely in accordance with the facts and is not in any way inconsistent with the creation ofa tenancy at will. The second recital begins by stating: “Mr Botchin has requested the company to grant him a tenancy at will.” There is no evidence of such a request and, indeed, the facts as set out in the agreed statement are inconsistent with the tenant himself having made such a request to the company or to their managing agents or solicitors. On the other hand, it is clear enough that the tenant through his solicitors was agreeing to accept a tenancy at will, and I do not think that any inaccuracy that there might have been in the opening words of the second recital are of any assistance to me in determining the questions I have to decide. The recital goes on to state that the tenant’s request was for a tenancy at will until such time as the company should require possession of the premises for the purposes of demolition or reconstruction. There is plainly a contradiction here because, of course, if the tenancy is to be a tenancy at will the landlords are free to determine it at any time whether or not they require the premises for the purposes of carrying out works. However, it is not suggested by the tenant in this case that the tenancy was to subsist until such time as the company should require the premises for the purposes of carrying out works. What the tenant is contending is that the agreement is a yearly tenancy. I cannot see that the contradiction in the recital is of any assistance to him in that contention. In any event, any contradiction in the recital would be resolved by plain words in the operative provisions of the agreement. In my view it is plain when one looks at the operative provisions of the agreement that the agreement created a tenancy at will, and not a yearly or other periodic tenancy.
Has, then, anything occurred since the date of the agreement which has altered
the relationship of the parties? The tenant relies on the fact that the tenancy subsisted for nearly five years before the landlords purported to determine it. I cannot think that that is a circumstance which indicates that the parties have altered their relationship since the agreement was made. There is nothing in the actual duration of the tenancy which is inconsistent with the agreement which the parties made, for under the agreement the duration of the tenancy is wholly indeterminate.
Then the tenant relies on the fact that in the main rent was regularly demanded
and paid on a monthly basis. I find nothing in this fact which indicates an alteration in the relationship between the parties. Regular demands for and payment of rent are not in themselves inconsistent with a tenancy at will, and indeed in this case they are actually contemplated by the agreement itself, just as they were contemplated in Doe d. Bastow v. Cox (1847) 11 Q.B. 122.
Wheeler v Mercer
WHEELER V. MERCER
(House of Lords)
(1957] A.C. 416; (1956] 3 W.L.R. 841; (1956] 3 All E.R. 631
Viscount Simonds: My Lords, it is common ground that the appellant is entitled to recover possession of the premises unless the respondent can avail herself of the protection given by Part II of the Landlord and Tenant Act, 1954, and that she can only do so if she establishes (a) that the relevant date she was in possession of the premises as tenant at will of the appellant, and (b) that a tenancy at will is protected by the Act. Both these propositions must now be examined.
Upon the first question I do not think it necessary to say much, for I find myself in complete agreement with the county court judge on this point and am content to adopt his careful judgment as my own. Having been in possession as joint or sole lessee under a lease which terminated on September 6, 1943, she thereafter becamea quarterly tenant until the expiration on September 29, 1953, of a notice to quit, which had been validly given. Since that date she has remained and she still remains in possession of the premise&. In the meantime, both before and after the notice to quit, negotiations took placE:l for the grant of a new lease. These were protracted and exhausting and at an early stage of them the respondent gave notice under the Landlord and Tenant Act, 1927, claiming a new lease or compensation. This wasa circumstance which, in my opinion, is of paramount weight in determining in what relation the parties thereafter stood to each other and leads decisively to the conclusion that, pending negotiation, the respondent remained in possession, not as a licensee nor as a tenant at sufferance of the appellant, but with his positive assent.
The learned judge, in my opinion, rightly held that she was a typical tenant at will, conforming to all the classical definitions of such a tenant.
Industrial Properties (Barton Hill) Limited v Associated Electrical Industries Limited
(Court of Appeal)
[1977] Q.B. 580; [1977] 2 All E.R. 293; [1977] 2 W.L.R. 726
Lord Denning: If a landlord lets a tenant into possession under a lease, then, so long as the tenant remains in possession undisturbed by any adverse claim – then the tenant cannot dispute the landlord’s title. Suppose the tenant (not having been disturbed) goes out of possession and the landlord sues the tenant on the covenant for rent or for breach of covenant to repair or to yield up in repair. The tenant cannot say to the landlord: “You are not the true owner of the property.” Likewise, if the landlord, on the tenant’s holding over, sues him for possession or for use and occupation or mesne profits, the tenant cannot defend himself by saying: “The property does not belong to you, but to another.”
But if the tenant is disturbed by being evicted by title paramount or the equivalent of it, then he can dispute the landlord’s title. Suppose the tenant is actually turned out by the third person – or if the tenant, without going out, acknowledges the title of the third person by attorning to him – or the tenant contests the landlord’s claim on an indemnity from the third person – or there is anything else done which is equivalent to an eviction by title paramount – then the tenant is no longer estopped from denying the landlord’s title: see Wilson v. Anderton (1830) 1 B. & Ad. 450,
457, per Littledale J. The tenant, being thus disturbed in his possession, can say to the landlord: “You were not truly the owner at the time when you demanded
and received the rent from me. I am liable to pay mesne profits to this other man. So you must repay me the rent which I overpaid you. Nor am I liable to you on the covenants during the time you were not the owner.” See Newsome v. Graham (1829) 10 B. & C. 234, Mountnoy v. Collier (1853) 1 E. & 8. 630 and Watson v. Lane (1856) 11 Exch. 769. The tenant can also claim damages for the eviction if there is, as here, an express covenant for quiet enjoyment covering interruption by title
paramount.
Short of eviction by title paramount, or its equivalent, however, the tenant is
estopped from denying the title of the landlord. It is no good his saying: “The property does not belong to you but to a third person” unless that third person actually comes forward and successfully makes an adverse claim – by process in the courts or by the tenant’s attornment; or acknowledgement of it as by the tenant defending on an indemnity. If the third person, for some reason or other, makes no adverse claim or is debarred from making it, the tenant remains estopped from denying the landlord’s title. This is manifestly correct: for, without an adverse claim, it would mean that the tenant would be enabled to keep the property without paying any rent to anybody or performing any covenants. That cannot be right. That was the reasoning adopted by the Court of Queen’s Bench in Biddle v. Bond (1865) 6 B. & S. 225, a case ofa bailor and bailee, but the court treated it as the same as landlord v. tenant.
If this principle had been applied in Harrison v. Wells [1967] 1 Q.B. 263, the
decision would have been different. In that case the.trustees (including the widow) were the legal owners: the widow was entitled to the rent for life. The trustees had made no adverse claim on the tenant: I do not see that they could ever have made one- at any rate not with any hope of success – since the widow herself was one of the trustees. So, there being no adverse claim, the tenant was estopped from
denying the lessor’s title.
In the present case the tenants, A.E.I., are not subject to any adverse claim
whatever. The lessor to A.E.I. was the plaintiff company which was the equitable owner. The legal owners were the Parker trustees. They were also the directors and shareholders of the plaintiff company. They acquiesced in the lease being made by the plaintiff company to A.E.I. They could not by any possibility make any adverse claim against A.E.I. on their own account. Not only that. They have actually come in as plaintiffs in these proceedings jointly with the plaintiff company- so as to make sure that the benefit of these proceedings goes to the plaintiff company only.
Seeing that A.E.I. are absolved from any adverse claim by the legal owners, it is
a very proper case for the doctrine of tenancy by estoppel. A.E.I. have had the full benefit of the lease for the stipulated term of years. They should perform the covenants – or pay damages in lieu – to the only persons entitled to sue them, namely, the plaintiff company. Even though A.E.I. have gone out of possession, they cannot avoid their responsibilities by reliance on a technical rule of law- which on
investigation is found to be groundless.
A.E.I. sought to make something out of the innocent misrepresentation made by
the solicitor. He represented that the plaintiff company was the freeholder when it was not. But that misrepresentation did no one any harm. If the truth had been known, all that would have happened would have been that the trustees would have joined in the lease. And all this later trouble avoided. So the misrepresentation
affords no defence to A.E.I.
Thus far I have considered the position at common law. But in equity there isa
much shorter way to a decision. It is quite plain that, if the lease to A.E.I. was defective in point of law, nevertheless it was good in equity, and for this simple reason. There were two agreements of which specific performance would be granted. One was the agreement by the Parker trustees to convey to the plaintiff company. The other was the agreement by the plaintiff company to granta lease to
A.E.I. In respect of each of these agreements, equity looks upon that as done which ought to be done. It follows that, by combining the two agreements, the tenants, A.E.I., hold upon the same terms as if a lease had actually been granted by the Parker trustees to A.E.I. This is, of course, an extension of the doctrine of Walsh v. Lonsdale (1882) 21 Ch.D. 9 where there was only one agreement. But I see no
reason why the doctrine should not be extended to a case like the present, where there were two agreements, each of which was such that specific performance would be granted.
Even at law all the discussion about estoppel may be unnecessary. Throughout this case, I have seen no reason why the plaintiff company should not sue A.E.I. on the covenant to repair and to yield up in repair. It is plain that the plaintiff company had an interest in having the property kept in repair. They were the equitable owners of it. They could stipulate with anyone to repair it. It might be a builder, or a licensee, or anyone else. So why should they not stipulate with A.E.I. that they should keep it in repair? It makes no difference to A.E.I. what the title was. Not in the least whether the plaintiff company were the legal owners or the equitable owners. So why should not A.E.I. be liable on the covenant? It would be different, of course, if A.E.I. had been evicted by title paramount or anything equivalent to it, but nothing of that kind happened. Seeing that A.E.I. have had the whole of the consideration, they are liable in covenant: see Hodson v. Sharp (1808) 10 East 350,364, per Bayley J.; or, in the old phrase, on privity of contract: see Baker v. Gostling (1834) 1 Bing.N.C. 19, 28, and the damages would not be nominal. They would be substantial.
The doctrine of tenancy by estoppel has proved of good service and should not be whittled down. It should apply in all cases as between landlord and tenant – no matter whether the tenant is still in possession or gone out of possession – so long as he is not confronted with an adverse claim by a third person to the property.