‘Newcomer’ injunctions and the UK Supreme Court

Introduction

The recent UK Supreme Court (ÚKSC’) judgment in Wolverhampton City Council v London Gypsies explores the courts’ ability to grant ‘newcomer’ injunctions and the conditions to be satisfied before they can be granted.

The case concerned applications for injunctions by local authorities to prevent unauthorized encampments by Gypsies and Travellers.

The local authorities relied on a range of statutory provisions as well as common law causes of action such as trespass to land.

The claims were either brought against ‘persons unknown’ or against unnamed defendants identified by reference to future activities which the claimants sought to prevent.

Service of the claim was usually effected by fixing a copy of the claim in a prominent location at the relevant site.

The appeal by London Gypsies and Travellers was ‘concerned with matters of legal principle, rather than with whether it was or was not appropriate for injunctions to be granted in particular circumstances’ ([5]).

The idea of a ‘newcomer’ injunction?

A newcomer injunction ‘purports to restrain the conduct of persons against whom there is no existing cause of action at the time when the order is granted; it is addressed to persons who may not at the time have formed any intention to act in a manner prohibited, let alone threatened to take or taken any step towards doing so’ ([43]).

The judgment includes a list of the distinguishing features of the newcomer injunction ([143]).

Why newcomer injunctions?

The UKSC pointed out that newcomer injunctions could be the only practical solution in certain circumstances:

‘where claimants face the prospect of continuing unlawful disruption of their activities by groups of individuals whose composition changes from time to time, then it seems that the only practical means of obtaining the relief required to vindicate their legal rights would be for them to adopt a rolling programme of applications for interim orders resulting in litigation without end.’ ([138])

But, ‘there is no overriding reason why the courts cannot devise procedures which enable injunctions to be granted which prohibit unidentified persons from behaving unlawfully, and which enable such persons subsequently to become parties to the proceedings and to seek to have the injunctions varied or discharged’ ([138]).

What kind of injunction is it?

The newcomer injunction is ‘neither interim nor final’ ([139]).

It is ‘sought for the medium to long-term effect even if time-limited’ ([143]).

The newcomer injunction ‘is a wholly new type of injunction with no very closely related ancestors from which it might be described as evolutionary offspring’ ([144]).

The equitable basis for the newcomer injunction

Equity’s ability to grant this type of injunction is based on ‘the deep-rooted trigger for the intervention of equity where it perceives the available common-law remedies are inadequate to protect or enforce the claimant’s rights’ ([150]).

Its availability ‘critically depends on damages being an inadequate remedy for the breach’ ([150]).

When can they be awarded?

They can only be awarded where:

‘(i) There is a compelling need, sufficiently demonstrated by the evidence, for the protection of civil rights (or, as the case may be, the enforcement of planning control, the prevention of anti-social behaviour, or such other statutory objective as may be relied upon) in the locality which is not adequately met by any other measures available to the applicant local authorities (including the making of byelaws).

(ii) There is procedural protection for the rights (including Convention rights) of the affected newcomers, sufficient to overcome the strong prima facie objection of subjecting them to a without notice injunction otherwise than as an emergency measure to hold the ring. This will need to include an obligation to take all reasonable steps to draw the application and any order made to the attention of all those likely to be affected by it …. ; and the most generous provision for liberty (ie permission) to apply to have the injunction varied or set aside, and on terms that the grant of the injunction in the meantime does not foreclose any objection of law, practice, justice or convenience which the newcomer so applying might wish to raise.

(iii) Applicant local authorities can be seen and trusted to comply with the most stringent form of disclosure duty on making an application, so as both to research for and then present to the court everything that might have been said by the targeted newcomers against the grant of injunctive relief.

(iv) The injunctions are constrained by both territorial and temporal limitations so as to ensure, as far as practicable, that they neither outflank nor outlast the compelling circumstances relied upon.

(v) It is, on the particular facts, just and convenient that such an injunction be granted ….’

([167] and [186]).

Michael Lower

Determining whether external walls are common parts

Donora Company Limited v Tsuen Kam Centre (IO) ([2024] HKCFA 3 ) considered whether the external walls of a building were common parts of the building or were intended for the exclusive use of the developer.

If they were common parts, the costs of repair would be a shared cost of the building owners collectively. If the walls were reserved for ‘exclusive use’ then the costs of repair would have to be met by the party entitled to that exclusive use.

The Court of Final Appeal (Mr Justice Lam PJ giving the main judgment) agreed with the developer that the external walls were common parts of the building.

As is usual in Hong Kong the developer entered into a Deed of Mutual Covenant (‘DMC’) with the purchaser under the first assignment of a unit in the building.  

The first assignment provided that the exclusive use of the external walls was reserved for the vendor / developer. This was not the end of the story, however.

The CFA explained that the common intention of the developer and the first purchaser was to be determined by looking at the first assignment and the DMC together. They were parts of one and the same transaction ([37]).

One of the recitals to the DMC (recital 5) explained that the parties had entered into the DMC ‘for the purpose of defining and regulating the rights, interests and obligations of the Owners in respect of the Lot and the Building’.

This indicated that, as regards the question as to whether the external wall was a common part, the DMC was the primary document to be considered ([37]).

The court’s task, then, was to interpret the DMC using the usual principles of contractual interpretation. Thus, the DMC was to be ‘read as a whole in light of the factual and legal context of its making and the practical objects which it was intended to achieve’ ([55]).

The first assignment was merely ‘part of the context in the construction of the DMC’ ([41]).

The CFA concluded that the external walls of the building were common parts despite what was said in the first assignment.

The considerations leading to this conclusion were that:

• The DMC did not designate the external walls as being for anyone’s exclusive use (though it did give the developer the ‘exclusive’ right to use the external walls for limited purposes such as advertising) ([57]);
• The DMC allowed other owners to use the external walls for certain purposes with the prior written approval of the manager of the building ([58]) this indicated that the developer’s right to use the external wall was not exclusive ([59]) – [61]);
• The external walls of the residential part of the building (there were three residential blocks above a commercial use podium) were largely made up of windows and window bays; this meant that they were more adapted for the limited uses of the unit owners rather than the limited uses allowed to the developer ([62]);
• All owners benefited from the function of the external walls in ‘(i) holding and supporting the building; (ii) preventing damage to the building’s interior; and (iii) enabling the co-owners to have peaceful enjoyment of their respective units’ ([64]);
• The DMC made the building manager responsible for the maintenance and repair of the external walls ([68]) which would be the duty of the developer if the developer had the right to the exclusive use of the walls ([69]);
• The DMC tied exclusive use of an area to the ownership of an undivided share in the building, but the DMC did not attach any shares to the external walls ([71]).

For all these reasons, the CFA concluded that the external walls were common parts and the cost of maintenance and repair was the shared responsibility of the owners under the terms of the DMC.

Michael Lower

Registrability of agreements for the sale of shares in a property-owning company

Registrability of agreement for the purchase of shares of a company whose only main asset is land

Hundred Gain International Holding Limited v Cheng Mei Holdings Limited ([2023] HKCFI 2705) concerned an agreement for the sale and purchase of the shares of Smart Edge Limited, a company whose main asset was a commercial building.

Hundred Gain International Holding Limited (‘Hundred Gain’), the purchaser, paid deposits under the agreement but was unable to complete the purchase. The vendors exercised their right to terminate the agreement. Smart Edge sold the building to a third party (Goldstone).

Hundred Gain registered the agreement to acquire the Smart Edge Shares and the proceedings to enforce it at the Land Registry. Were they registrable? Did the agreement and proceedings relate to the Smart Edge building (and not merely the Smart Edge shares).

When is an agreement registrable?

Section 2 of the Land Registration Ordinance provides for the registration of all ‘deeds, conveyances and other instruments in writing’ by which ‘any parcels of ground, tenements or premises in Hong Kong may be affected’ (emphasis added).

It is not enough for the agreement to be with a landowner; it must relate to land.

Lord Lane said in Anstalt Nybro v Hong Kong Resort Co Ltd that: ‘it is only where the agreement may create some interest legal or equitable in the parcel of ground that the instrument can be the subject of registration under the Ordinance.’

Registration warns potential buyers of claims against land and might make it unsellable. This makes it important that only agreements that truly relate to the land are registered. Otherwise, the system of registration would be open to abuse; it would allow land to be held hostage in non-land disputes.

Are agreements to buy shares registrable on the basis that the company’s only asset is land?

Was the agreement for the sale of the shares in Smart Edge Limited registrable?

The question is particularly important in Hong Kong with its long history of holding land through the medium of a limited company.

The obvious arguments for saying that the agreement was registrable were that the building was Smart Edge’s only asset and that any buyer of Smart Edge was, in effect, buying the building.

The fact remained, however, that the agreement was for the sale of shares in Smart Edge, not of the land owned by Smart Edge.

Hundred Gain pointed to clauses in the agreement in which the vendors promised that: the building would be delivered with vacant possession on completion; the title deeds would be delivered to Hundred Gain on completion; and that the risk of the building passed to Hundred Gain at the time of the agreement.

Surely these terms meant that the agreement affected land? Does not a promise to deliver vacant possession amount to an assignment?

The judge (Mr. Recorder Stewart Wong SC) disagreed with this proposition. Smart Edge (the owner of the building) was not a party to the agreement. How could the vendors of the shares in Smart Edge confer an interest in the building on Hundred Gain when they themselves had no proprietary interest?

Was the writ in the proceedings against Smart Edge registrable as a lis pendens?

Judgments that may affect land in Hong Kong are registrable under section 2 of the Land Registration Ordinance and section 14 of the Ordinance extends this to lites pendentes.

Section 1A defines a lis pendens as ‘any action or proceeding pending in a court or tribunal that relates to land or any interest in or charge on land’; it also covers bankruptcy petitions.

It is not enough that the defendant owns land, the action must ‘relate to’ land.  If the litigation concerns a claim to an interest in land, then it clearly relates to land. So litigation to enforce a contract to sell land would be registrable.

The litigation might still be a lis pendens but the condition is that the thing that is required to be done, or the relief claimed in the action, ‘must be something which would otherwise bind or affect a subsequent purchaser or mortgagee, so that registration or otherwise may affect whether the latter takes free therefrom’ ([49]).

The attempt to enforce the agreement through litigation did not relate to land since the owner of the land was not a party to the agreement ([50] – [51]). Again, the proceedings concerned an agreement to purchase shares, not land ([62]).

Did Hundred Gain have a registrable purchaser’s lien?

Hundred Gain argued that having paid deposits under the share purchase agreement, it had a purchaser’s lien over Smart Edge’s property and that this lien was registrable.

It was accepted that the purchaser’s lien is a proprietary interest and that an action based on it is a lis pendens ([75]). There was, however, no purchaser’s lien over the land in this case ([84]). The deposits were paid under a contract for the purchase of shares not the land ([86]). Further, when deposits are forfeited in accordance with the terms of an agreement, equitable liens associated with them are extinguished ([89]).

Was Hundred Gain’s action to have Smart Edge’s sale of the property set aside as a transaction intended to defraud creditors a lis pendens?

Section 60 of the Conveyancing and Property Ordinance provides that dispositions of property made with intent to defraud creditors are voidable.

An action to destroy an interest in land (such as forfeiture proceedings) is a lis pendens (Selim Ltd v Bickenhall Engineering Ltd). Couldn’t it be said then that an action to have set aside Smart Edge’s sale of its property to a third party (Goldstone) was a lis pendens?

The court thought it could be. It did not matter that Hundred Gain would not get an interest in the land if the CPO s. 60 claim succeeded. It was enough that the title to land would be affected ([105]).

The problem in this case, however, was that the purchaser (Goldstone) was not a party to the proceedings. Its interest in the property would not, therefore, be affected by them ([106]). The CPO s. 60 claim was not a lis pendens ([108]).

Michael Lower

Can legal tenants in common create an equitable joint tenancy?

Introduction

Is it possible for legal tenants in common to create an equitable joint tenancy?

If a couple own a flat as legal tenants in common, can they declare that they hold the title to the flat on trust for themselves as joint tenants?

Each tenant in common has a share which is legally distinct from the share of the other tenant in common. How can tenant in common A declare a trust over the share of tenant in common B?

If tenants in common want to create a joint tenancy, do they need to assign the property to themselves as joint tenants?

These were the questions facing the Court of Appeal in Tam Lan Chi Lorche v Chan Siu Mui ([2023] HKCA 1326).

Facts

Mr. and Mrs. Tan were tenants in common of a flat. They executed a declaration that they held the property on trust for themselves as joint tenants.

Mr. Tan died. Mrs. Tan claimed to be the sole beneficial owner by virtue of the right of survivorship.

This was met with the argument that the deed of trust was ineffective.

The analysis in the judgment

Hon. G Lam JA held that the declaration of trust was effective.

While it is true that each tenant in common has a separate share ([18]), the effect of the declaration of trust was that each tenant in common created a trust in respect of their share.

While the form was a single declaration of trust, there were, in substance, two declarations: ‘Strictly speaking there are two trusts, each set up by a different settlor and with a different trustee, but with the same two beneficiaries’ ([19]).

Under the trusts declared, each tenant in common declared that they held their share on trust for both legal tenants in common – Mr. and Mrs. Tan – as equitable joint tenants ([19]).

The declaration was an effective way of creating an equitable joint tenancy.

‘Should one predecease the other, by the right of survivorship which is a characteristic of joint tenancy, the survivor would become solely beneficially entitled under both trusts, in that under one trust the deceased’s estate (or rather, his or her personal representative) would hold the deceased’s half share at law for the survivor in equity, and the other trust would come to an end as the survivor would hold his or her half share for himself or herself absolutely’ ([19]).

An assignment to themselves as joint tenants would be an effective, but not the only, route to beneficial joint tenancy ([21] – [22]).

Wasn’t the declaration of a legal tenancy in common conclusive?

The Court of Appeal also considered the argument that an assignment to the couple as tenants in common was conclusive (relying on Whitlock v Moree [2017] UKPC 44).

Express declarations concerning ownership are conclusive (as between the parties to the deed) as at the date of the deed.

This does not mean, however, that the parties cannot subsequently agree to change the ownership arrangement ([15]); here the declaration of trust changed the ownership arrangements.

It seems reasonable to think that a subsequent enforceable contract could do the same. Presumably, a common intention constructive trust could also bring about a change of ownership.

Michael Lower

Marr v Collie: The interaction between presumed resulting and common intention constructive trusts

Introduction

How should the court proceed where the facts of a case are such that the presumed resulting trust (‘PRT’) and the common intention constructive trust (‘CICT’) might each be applicable?

This is an important question and one that arises frequently, especially in disputes concerning the ownership of the family home.

While the two trusts overlap, they can generate radically different outcomes. This is because the CICT has regard to a range of evidence that is broader than the factors relevant to a PRT analysis.

The CICT can, for example, consider mortgage or other payments that are made after the time of acquisition. The CICT, alone, has a rebuttable presumption of equality where there is a legal joint tenancy of a family home.

The PRT and the CICT answer the same questions but use different analytical frameworks and can generate different answers.

It is tempting to think of a binary choice between the PRT and the CICT and the presumptions built into them.

The Privy Council decision in Marr v Collie, however, points to a different approach that integrates the PRT and the CICT, rather than sharply distinguishing them.

I explain my reading of Marr v Collie and its integrated approach and one possible implication for the interaction between the PRT and CICT analytical frameworks.

The facts

The parties to this dispute were in a personal relationship with each other. They acquired several properties in their joint names. Some were acquired as investments, at least one was intended as a home.

Mr. Marr provided all the finance through a combination of direct investment and secured loans.

Mr. Collie was a builder and he claimed that the parties’ common intention was that his contribution to the properties would be in the form of building works improving their rental value.

The relationship broke down. Mr. Marr claimed the entire beneficial ownership under a PRT given that he provided the entire purchase price.

Mr. Collie, on the other hand, claimed that there was a CICT under which they would be equal beneficial owners.

The arguments

The parties in Marr v Collie saw their dispute as being about whether the PRT or the CICT provided the appropriate framework for determining their beneficial interests.

Mr. Marr was understandably keen to argue for a PRT approach since this would reward him with sole beneficial ownership.

Mr. Collie favoured a CICT approach since this would allow him to rely on additional evidence to establish his claim to a beneficial interest.

There was, for example, an email from Mr. Marr to his bankers implying an intention that he and Mr. Collie were to have equal shares.

This additional evidence would, he hoped, support his claim to a 50% interest in the properties.

The parties, then, saw the PRT and the CICT as being distinct, alternative possibilities. They, and the Bahamas Court of Appeal, thought that the PRT would apply if the relationship was predominantly ‘commercial’ and the CICT would apply if the case fell into the ‘domestic consumer’ category.

The problem seemed to be that the relationship, so far as the properties were concerned, belonged both to the domestic consumer and the commercial contexts.

Lord Kerr’s approach to the PRT / CICT relationship

The ownership arrangement recorded in the conveyance to the parties provides the starting point ([40]) but this can be displaced by evidence of the parties’ shared intentions ([41]).

The party seeking to show that there is a trust, that equitable ownership intentions differ from legal ownership, has the burden of proof.

If the only evidence of shared intentions is that there were differential financial contributions to the initial purchase price, then the PRT can be applied ([45]).

If the whole course of conduct in relation to the property includes additional evidence which might rebut the PRT, ‘there should be a direct focus on what the intentions of the parties were’ ([46]).

Regardless of context, ‘the answer is not to be provided by the presumption of one trust over another’ ([54]).

Lord Kerr thought that the only room for resort to a choice of presumptions was, perhaps, ‘where there is no evidence from which the parties’ intentions can be identified’ ([54]).

Applying this to Marr v Collie

The parties had contributed unequally to the purchase price. This raises the presumption of a resulting trust and is evidence from which a common intention constructive trust might be inferred.

The legal joint tenancy and the personal relationship between the parties might be thought to give rise to a presumption of equality after Stack v Dowden.

There was, however, additional evidence of the parties’ intentions, Mr. Marr’s email to his bankers for example, which had not been explored and evaluated.

The case was remitted to the Supreme Court of the Bahamas for this gathering and evaluation of relevant additional evidence to take place.

What does this mean for the future role of the PRT?

The PRT hands over to the CICT when the range of evidence, or the ability to give proper effect to it, goes beyond what the PRT can achieve.

Up to that point, the PRT and the CICT are interchangeable. Beyond that, the rigidity of the PRT is a barrier to determining the parties’ intentions.

Is there any need for the PRT, then, since the CICT provides a complete and more flexible alternative?

Marr v Collie illustrates the problems that arise where parallel PRT and CICT analyses are conducted.

In a later post, I will briefly outline the academic reception of Marr v Collie, not all of it is uncritical.

Michael Lower

Oral land contracts and proprietary estoppel: Thandi v Saggu

The problem of oral land contracts and proprietary estoppel

England’s Law of Property (Miscellaneous Provisions) Act 1989 (‘LPMPA’) requires land contracts to be in writing and signed by both parties. Failure to comply results in the invalidity of the contract (LPMPA, s. 2(1)).

The LPMPA abolishes the doctrine of part performance since the doctrine presupposes the validity, but unenforceability, of oral land contracts. The LPMPA, s. 2(8) repeals section 40 of the Law of Property Act 1925 (‘LPA’) which rendered oral land contracts unenforceable but did not deny their existence as contracts. Also repealed then is section 40(2) of the LPA which provided for the continuing operation of part performance.

The LPMPA does, however, say that section 2 does not affect the creation or operation of resulting, implied or constructive trusts. This leaves some space for equity to give effect to oral land contracts (LPMPA, s. 2(5)). But where does this leave proprietary estoppel?

The courts worry that invoking proprietary estoppel in relation to oral land contracts undermines the LPMPA’s formalities requirements. So too, it might be said, does the use of the common intention constructive trust in relation to oral agreements relating to land. This, however, is expressly permitted by LPMPA s. 2(8). The lack of a similar saving provision for proprietary estoppel deepens the suspicion that its use in the land contract context should not be allowed.

Potential responses to the problem

The possible approaches to the use of proprietary estoppel in relation to land contracts seem to be:

Approach 1

To refuse to allow proprietary estoppel claims arising out of promises given in oral land contracts which ought to satisfy the LPMPA formalities rules. This would be the fullest recognition of a conflict between the formalities rules and the equitable doctrine. It would leave the common intention constructive trust as the principal ‘equitable safety valve’ to deal with cases where insistence on the LPMPA rules would be unconscionable.

Approach 2

To give free rein to proprietary estoppel claims even in the oral land contract context. The conflict between this and the formalities rules would be seen as an illusion: proprietary estoppel is seen as satisfying an equity that has arisen, rather than enforcing a contract.

Approach 3

To allow proprietary estoppel claims in relation to oral land contracts provided that the same facts could also give rise to a common intention constructive trust claim (which would seem to cover all, or the vast majority, of active encouragement cases) (Yaxley v Gotts).

The only problem with this is that it seems rather pointless. If a common intention constructive trust claim can succeed, what is the point of the proprietary estoppel claim? The answer to this may lie in the remedial discretion of the courts in proprietary estoppel.

Approach 4

To allow proprietary estoppel claims to succeed only where there is a ‘double assurance’ or ‘something more’ which estops promissor’s from pleading the formalities rules (Actionstrength; Cobbe; Kinane).

One problem here is that it is difficult to know what would amount to such a double assurance. Is the requirement satisfied by an oral assurance that is clearly intended to be immediately binding? But how is this different from the normal understanding of an assurance?

Approach 5

To allow proprietary estoppel claims to succeed where the claimant does not seek enforcement of the contract but is satisfied, for example, with a licence (Howe v Gossop).

This might, in effect, be a recognition of approach 2 above (that proprietary estoppel is not an enforcement of the contract).

If approach 5 is a version of approach 2, why not enforce the contract if that is what is needed to prevent unconscionability? If it is not a version of approach 2, it is not easy to understand the principle that justifies approach 5.

Thandi v Saggu

Thandi v Saggu ([2023] EWHC 2631) concerned a proprietary estoppel claim arising out of an oral agreement for the sale and purchase of land. The LPMPA formalities requirement was not satisfied.

The claimant relied on proprietary estoppel not to enforce the contract but to recover financial losses arising from the failure to enter into the contract. The oral contract, and the price payable under it, arose from an attempt to settle a separate commercial dispute.

The seller’s failure to go ahead with the transaction meant that her indebtedness arising from that dispute continued and that the buyer incurred wasted legal fees.

The proprietary estoppel claim succeeded. The judge, Hugh Sims KC sitting as a Deputy Judge of the High Court, took approach (2): proprietary estoppel was not being used to enforce a contract but to prevent unconscionability ([137]).

It seems, however, that he thought that this would have been a problem if the claimant had sought enforcement of the contract ([139]). As hinted above (point 5 in the previous section) I doubt the logic of this.

The relief granted was:

1. Recovery of the deposits paid to the seller; and
2. Reimbursement of the legal costs related to the aborted transaction (but not those incurred in relation to the broader commercial dispute).

The purchaser’s claim for relief in respect of the difference between the purchase price and the market value of the property failed because, on the facts of the case, it would have given the claimant more than he bargained for ([144]).

Michael Lower

Beneficial interest in land arising from contributions to purchase price – Presumed resulting trust or common intention constructive trust?

A presumed resulting trust can arise where title to land is in A’s name but B contributed to the purchase price. The same facts would readily give rise to an inference that B has a beneficial interest under a common intention constructive trust.

This overlap between the presumed resulting trust and the common intention constructive trust matters because of the potential for different outcomes when it comes to valuing beneficial interests.

The beneficiary’s interest under a presumed resulting trust is strictly proportionate to their contribution to the purchase price. This may not be true in the case of the common intention constructive trust.

For example:

• the beneficiary may have made financial contributions that count for common intention constructive trust purposes but that are not relevant to the presumed resulting trust calculation (informal mortgage contributions are the most obvious example);
• or there may be a finding that A and B’s intentions concerning ownership were shaped by a domestic partnership / pooled assets mindset. Equality of shares, irrespective of financial contributions is the outcome in this case (eg Chan Chui Mee v Mak Chi Choi – the first instance judgment is outlined in this earlier blog post).

That being so, which approach should the court apply?

The normal approach is to make use of the common intention constructive trust, at least in the domestic context. This is illustrated by the recent court of first instance decision in Tang Hin Fai Chris v Tang Hin Lung.

Title to a flat was in the name of P1 and P2. D1 and D2 claimed to have contributed to the purchase price. The financial contributions were not, however, the only relevant evidence as there were rival contentions as to the express agreement that explained these contributions.

The claim to a beneficial interest failed. D1 and D2 made payments to P1 and P2 (the legal owners), but these were pursuant to an oral licence agreement. They were not made in accordance with an oral agreement that D1 and D2 should have an ownership interest.

DHCJ Jenkin Suen SC, referring to the Court of Appeal judgment in Primecredit confirmed the primacy of the common intention constructive trust in the domestic context ([99]).

This provides a solution to the question posed at the outset as to which trust should apply when the claim to a beneficial interest is based on a contribution to purchase price. There is a problem, though: is it always possible to distinguish between a domestic and a non-domestic context?

A better solution might be to say that the purchase price resulting trust is now, effectively, a sub-category of common intention constructive trust. I’ll return to this thought in another blog post.

Michael Lower

Implying a term that contractual licence can be terminated on reasonable notice: focus on determining the parties’ common intention

The recent Court of Appeal decision in Hong Kong Polytechnic University v Rehabaid ([2023] HKCA 856) looked at whether a right to terminate by giving reasonable notice could be implied into a contractual licence.

Hong Kong Polytechnic University (‘the University’) granted the licence to Rehabaid at a time when the University’s Rehabilitation Centre and Rehabaid engaged in complementary activities. The collaboration ceased in 1991.

The licence, granted in May 1988, was silent as to duration and as to whether, and if so how, either party could end it.

In 2015, the University served notice to quit on Rehabaid and demanded delivery up of the space.

Chan J. delivered the Court of Appeal’s judgment. Considering whether the University had the right to terminate by giving reasonable notice to Rehabaid,he said:

‘The task is to ascertain the common intention of the parties in respect of the duration of the Licence at the time they entered into [it]’ ([40]).

The possibility of mutually beneficial co-operation was ‘the substratum’ of the relationship between the Plaintiff and the Defendant’ ([42]).

The arrangement imposed a heavy financial burden on the University; it made no sense for the parties to have contemplated that the arrangement would continue when it was no longer mutually beneficial ([49] – [50]).

On its true construction, either party could terminate the licence when the substratum disappeared; this would require reasonable notice ([53] – [55]).

Rehabaid was ordered to give up possession and to pay mesne profits from 1 June 2016 up to the delivery of vacant possession.

The Court of First Instance, went wrong by focusing too narrowly on the question of whether the requirements for implying a term had been satisfied, perhaps not locating this question in the broader context of the search for the parties’ common intention and the question of how the agreement was to be interpreted.

The Court of First Instance should not have rejected the interpretation argued for by the University without ruling on the true interpretation ([39]).

Michael Lower

Nuisance caused by one tenant and harming a neighbouring tenant where there is a common landlord

Introduction

Where a single landlord owns an entire building or estate with multiple tenants, are they responsible to their tenants for a nuisance created by one of their number? Can the other tenants, who suffer harm because of the actions of their anti-social neighbour, sue their common landlord? Are they restricted to bringing proceedings in nuisance against the tenant who caused the harm? This is the question addressed in the House of Lords judgment in Southwark LBC v Tanner ([2001] AC 1).

The facts in Southwark

Southwark LBC converted a house into flats. The work complied with the Building Regulations in force at the time but the sound-proofing between the flats was defective. As a result, the tenants could hear all the noises emanating from their neighbours’ flats (the sound of their televisions, the flushing of toilets and so on).

The tenants sued their landlord, Southwark LBC, in nuisance and for breach of the implied covenant of quiet enjoyment even though the problems were, in a direct sense, caused by the daily activities of their neighbours and co-tenants. Their aim was to get the landlord to carry out remedial works to improve the sound insulation in the block.

Nuisance

Nuisance ‘involves doing something on adjoining or nearby land which constitutes an unreasonable interference with the utility of the plaintiff’s land’ (Southwark, Lord Hoffmann at 15). Here, the claim was that the noises produced by the tenants made life unbearable for their neighbours, given the poor sound insulation between the flats.

The tenants’ nuisance claim failed for a variety of reasons. The tenants in the house were using their flats in a normal way and so could not be said to be committing a nuisance;  a landlord can only be liable for a tenant’s nuisance if the tenant could also be liable (Southwark, Lord Hoffmann at 15).

Even if the tenants’ acts did amount to a nuisance, their landlord could only be liable if it had authorized the nuisance; that is, if the very act of granting the lease made the nuisance ‘close to inevitable’ (Coventry v Lawrence (No. 2) at [10]) or the landlord factually participated in the commission of the nuisance (Southwark, Lord Millett at 22).

Quiet enjoyment

Where the problem-causing tenant and the tenant suffering harm have the same landlord, the covenant for quiet enjoyment comes into play. The covenant for quiet enjoyment, if not express, is implied into all leases; it can be modified but not excluded entirely.

Lord Hoffmann explains that the covenant is ‘a covenant that the tenant’s lawful possession of the land will not be substantially interfered with by the acts of the lessor or those lawfully claiming under him’ (Southwark at 10).

The nuisance-causing tenant ‘lawfully claims under’ his landlord where the anti-social tenant is using his property in accordance with the terms of his lease; the landlord can then be liable on the covenant for quiet enjoyment to its other tenants harmed by the nuisance

The covenant is infringed when the landlord’s acts interfere with the tenant’s ability to use the property in an ordinary lawful way (Southwark at 10, Lord Hoffmann). The covenant for quiet enjoyment is prospective, landlords can be liable only for actions after the grant of the lease (Southwark, Lord Millett at 23).

Excessive noise for which the landlord is responsible might amount to a breach of the covenant (Southwark at 11, Lord Hoffmann). If the noise is produced by a tenant lawfully claiming under the landlord, the landlord can be liable to other tenants.

The tenants failed in Southwark LBC v Mills, however, because they got the property in the condition to which they were contractually entitled. They took their flats in their physical condition as at the date of their leases. They also entered into their leases in the knowledge that they would have neighbours whose occupation of their flats would generate some noise. The noise of their neighbours did not deprive them of their contractual rights under the terms of their leases.

Could a landlord be liable to tenant (A) for the actions of tenant (B)

Even if the acts of the tenants had amounted to a nuisance why should that trigger liability for their landlord?

Landlords can be liable in nuisance for the actions of their tenants where they authorized those actions, as explained above.

As explained above, a similar principle applies to the covenant for quiet enjoyment. Landlords are liable not only for their own actions but also for those who ‘lawfully claim under them’. They are liable for the actions of their tenants, but only where those tenants are using their property lawfully, that is in accordance with the terms of their lease (Southwark, Lord Hoffmann at 12).

What if the landlord knew of the problem being caused by its tenant, had the means to exercise control over the tenant but failed to do so?

A landlord cannot be said to authorize its tenant’s actions merely because it knew of the problem being caused by its tenant and did nothing to prevent it (Southwark, Lord Millett at 22 referring to Malzy v Eicholz [1916] 2 KB 308). This is a reasonable approach since otherwise neighbouring tenants of a common landlord would be free to bring nuisance proceedings against each other at the landlord’s expense.

Reconciling this approach with Chartered Trust plc v Davies

Southwark, and Malzy before it, say that landlords do not authorize the actions of their tenants (nuisance) nor do tenants claim under them (quiet enjoyment) merely because they knew about them, had the means to control them and took no steps to abate the problem.

Yet in Chartered Trust plc v Davies ((1998) 76 P & CR 396), a landlord granted a lease of a shop unit in a small shopping mall. The shop (Miss Davies was the tenant) was at the bottom of a cul-de-sac. One of the neighbouring tenants ran a café with tables and chairs outside and another ran a pawn-broking business. People waiting to access the pawn broker would congregate outside the café. The effect was to deter people from going to Miss Davies’ shop. She informed the landlord of the mall, but the landlord took no action.

The English Court of Appeal found that this failure to act, when it had notice of the problem, and had the power to make and enforce rules concerning the common parts that would deal with the problem, amounted to breach of the implied covenant of non-derogation from grant (essentially identical to the covenant for quiet enjoyment).

This seems to contradict the statement that landlords do not authorize the actions of their tenants (nuisance) nor do tenants claim under them (quiet enjoyment) merely because they knew about them, had the means to control them and took no steps to abate the problem.

There are two ways of approaching this. One is to say that Chartered Trust does indeed amount to a new approach, one placing a greater burden on landlords to police their tenants. Some of Henry LJ’s comments in Chartered Trust seem to endorse this view and to suggest a break with Malzy.

The alternative (the better approach, I suggest) is to argue that there is no clash here.

Rather, the landlord was directly liable because the actions took place on a common part of the mall which remained under the landlord’s control. The liability was for failure to adequately manage / regulate the use of the common parts. This is not the same as imposing liability on the landlord for actions that emanate from property demised to (under the control of) a tenant.

The idea that the landlord was liable because the problem arose from the common parts over which the landlord had rule-making powers is supported by an important passage in Chartered Trust. It involves no break with Malzy which was, in any event, later endorsed by the House of Lords in Southwark (with no mention of Chartered Trust as having altered the law).

Overlap between nuisance and quiet enjoyment

There is a high degree of overlap between the tort of nuisance and the implied covenant for quiet enjoyment. In Hilton v James Smith & Sons (Norwood) Limited ([1979] 2 EGLR 44), Ormrod LJ said that the ‘label’ (nuisance, quiet enjoyment, non-derogation) made little difference (Hilton at 44).

In Southwark, Lord Millett commented that a landlord’s liability to a tenant in nuisance would be sufficient (but not necessary) to establish liability on the covenant for quiet enjoyment (at 23).

The remedies for breach of the covenant for quiet enjoyment are damages on normal contractual principles but not aggravated damages for distress and inconvenience (Branchett v Beaney [1992] 3 All ER 910). It is doubtful whether the court will award exemplary damages (Perera v Vandiyar [1953] 1 WLR 672).

These limitations do not apply to nuisance claims. Injunctions are available in the case of either type of claim.

Only tenants can sue their landlords for breach of the covenant for quiet enjoyment (since it is a covenant implied into a lease).  

Conclusion

Landlords are liable in nuisance for the actions of their tenants when they have authorized the nuisance. Where the ‘victim’ is a co-tenant of the same landlord, the landlord can also be liable for breach of the covenant for quiet enjoyment, but only where the nuisance-causing tenant is acting lawfully (as contemplated by the terms of their lease).

Michael Lower

Landlord’s liability for a tenant’s nuisance

Introduction

Imagine that the resident of a nearby flat regularly plays loud music late at night or, perversely, decides to carry out noisy renovation works during the late evening.

These acts may well amount to a nuisance, a failure by your neighbour to exercise their ownership rights in respect of their home in a way that has proper regard for your rights as the owner of your home.

Lord Millett explained in Southwark LBC v Tanner ([2001 1 A.C. 1) that the law of nuisance requires landowners ‘to show the same consideration for his neighbour as he would expect his neighbour to show for him’.

Intrusive noise-making late at night surely fails to live up to this standard of good neighbourliness, even if you write to apologise in advance for the disturbance and distress you plan to inflict on your neighbours.

The victim of nuisance has the right to bring proceedings against their neighbour to force them to discontinue their unlawful actions.

Landlord’s liability for a tenant’s nuisance

If the person causing a nuisance is a tenant, can their landlord also be liable for the actions of their tenant? The landlord may have deeper pockets than the tenant; and liability would incentivize the landlord to use the rights conferred on it by the lease to bring a rogue tenant under control.

This was one of the questions explored in Southwark LBC v Tanner. The House of Lords decided that landlords are liable for a nuisance committed by their tenant if they can be said to have ‘authorised’ that nuisance.

Lord Millett explained that:

‘It is not enough for them to be aware of the nuisance and take no steps to prevent it. They must either participate directly in the commission of the nuisance, or they must be taken to have authorised it by letting the property’ (Southwark LBC v Tanner at 22 referring also to Malzy v Eichholz [1916] 2 KB 308).

They must in some way have played a part in the nuisance or else the very fact of entering into the lease must have made the nuisance ‘close to inevitable’ (Coventry v Lawrence (No. 2) at [10]).

So landlords will only be liable for a tenant’s nuisance if they can be said, in some sense or other, to have intended it. Knowing about it, even if they could bring legal proceedings to restrain the nuisance-causing tenant, is not enough.

Another way of putting it is that the essence of a lease is that the landlord gives up possession of (control over) the property to the tenant. If the landlord cannot control what is done, it would be unfair to impose liability on the landlord.

It is different in the case of licensees

Where the problem is caused by a licensee of property, it is much easier to argue that the licensor has retained possession and control of the property.

A licensor will be liable for acts of the licensee if it fails to put a stop to a nuisance that it knew of (or could have discovered with reasonable care).

This is on the basis that the licensor retains possession / control and can bring an end to the problem by terminating the license.

In Cocking v Eacott and Waring, a mother allowed her daughter to live in a house owned by the mother; the mother lived elsewhere. The excessive barking of the daughter’s dog over a prolonged period amounted to a nuisance.

The mother was liable because she knew of the problem and failed to deal with it, which she could have done by making her daughter leave the house.

This may not, however, apply to all licences. Vos LJ alludes to the fact that there may be licences which are ‘akin to a tenancy’ (presumably contractual licenses conferring possession on the licensee) (at [29]). In such a case, it may be more difficult to argue that the liability for the licensor depends on the same criteria as for landlords.

Michael Lower