Archive for the ‘contractual licences’ Category

Relief from forfeiture of a contractual licence

March 10, 2020

In The Manchester Ship Canal Company Limited v Vauxhall Motors Limited  ([2019] UKSC 46) the UK Supreme Court considered whether contractual licensees were entitled to apply for relief from forfeiture of a contractual licence. Lord Briggs gave the judgment with which the other members of the Supreme Court agreed. Lady Arden gave a separate judgment reflecting on whether the judgment introduced unacceptable uncertainty into the law.

Facts

In 1962 The Manchester Ship Canal Company Limited (‘MSCC’) granted Vauxhall Motors Limited (‘Vauxhall’) a perpetual licence (‘the licence’) relating to land owned by MSCC next to the Manchester Ship Canal (‘the Canal’).

The licence entitled Vauxhall to install pipes between Vauxhall’s land and the Canal under land owned by MSCC and to discharge surface water and treated effluent through the pipes into the Canal.

Vauxhall had to pay a ‘rent or annual sum’ of GBP 50. If it failed to make this payment on the due date then MSCC had a right to serve a notice requiring payment within 28 days. If payment was not made within this 28 day period then MSCC had the right to serve notice on MSCC to terminate the licence.

Vauxhall failed to pay the sum due in 2013. MSCC gave 28 days notice but Vauxhall did not pay the sum due within the notice period. MSCC served notice to terminate the licence. Vauxhall claimed relief from forfeiture.

When is relief from forfeiture available?

MSCC argued that relief from forfeiture was only available in respect of proprietary interests. The UK Supreme Court rejected this and held that the court could grant relief from forfeiture where:

  •  the primary object is the securing of a stated result for which the forfeiture provision is added by way of security ([18]); and
  •  ‘where what is in question is forfeiture of proprietary or possessory rights as opposed to merely contractual rights, regardless of the type of property concerned’ ([94])

Lady Arden may be expressing the first requirement in other words where, in her judgment, she says that there will be no relief where:

‘it was inconsistent with the terms of the parties’ bargain that there should be any relief from strict performance of the contract if the other party chose to enforce his rights’ ([87]).

The Supreme Court did not accept Vauxhall’s contention that the right to relief applies to all forms of right to use property ([49]). The Supreme Court did not commit itself to the idea that the right to possession had to be of indefinite duration ([51]).

‘Possessory rights in relation to land’

In the Court of Appeal, Lewison LJ explained possessory rights as involving factual possession and an intention to possess:

‘There are two elements to the concept of possession: (1) a sufficient degree of physical custody and control (‘factual possession’); (2) an intention to exercise such custody and control on one’s own behalf and for one’s own benefit (‘intention to possess’). What amounts to a sufficient degree of physical custody and control will depend on the nature of the relevant subject matter and the manner in which that subject matter is commonly enjoyed. The existence of the intention to possess is to be objectively ascertained and will usually be deduced from the acts carried out by the putative possessor ..’ ([2018] EWCA Civ 1100 at [59])

and the Supreme Court accepted this understanding ([42]).

Outcome

The rights in this case were possessory ([55] – [58]). There was no reason to disturb the decision of HHJ Behrens to grant relief from forfeiture.

Michael Lower

 

 

 

 

 

Common intention constructive trust: the family context confirms equality in a joint names case. Severance: contractual licence granted by tenant in common binding on a subsequent owner of the licensor’s share

June 3, 2015

In Chen Tek Yee v Chan Moon Shing ([2015] HKEC 735, CFI) Ms Chen and Chan Senior (a co-habiting couple) lived with Ms Chen’s daughters. The couple were in a stable, unmarried co-habitation relationship for several decades. Chan Senior was older than Ms Chen and lived in an old people’s home for the last few years of his life. He died in 2009.

The couple had no children together but they lived together with Ms Chen’s children from the early 1970s onwards. In 1980 they bought a flat (‘the Property’) as joint tenants. Ms Chen provided most of the purchase price and she and her daughters covered the mortgage installments and other outgoings in respect of the property. Mr Chan made a minor contribution to the purchase price and was able to provide the opportunity to buy the Property at a favourable price. On several occasions, Chan Senior assured Ms Chen and the daughters that they would be able to live in the property for the rest of their lives (‘the Contractual Licence’). Unknown to Ms Chen, Chan Senior executed an assignment severing the joint tenancy and assigning to his son, Chan, his 50% share in the property. Chan sold his share at auction to Ng at a substantial discount to the market value. By then, Ms Chen had learned of the severance and she began proceedings against Chan seeking a declaration that she and her daughters were entitled to sole and exclusive occupation of the property to the exclusion of Chan for the rest of their lives. The auction particulars made it clear that the sale was subject to these proceedings. Ng had visited the property and spoken to Ms Chen. Ms Chen and the daughters now sought declarations that: Chan Senior, Chan and Ng (in turn) held Chan’s 50% share on trust for Ms Chen; the Property was subject to the Contractual Licence; and that Ms Chen and her daughters were entitled to sole and exclusive occupation of the Property to the exclusion of Chan, Ng or their successors in title.

The first issue concerned the question as to whether the rebuttable presumption of equal beneficial interests (this being a joint names case) had been rebutted. This required a survey of the whole course of conduct ([73]). There had clearly been great inequality in terms of financial contributions. This fact was not enough to rebut the presumption of equality. A review of the overall context was enough to confirm that the presumption of equality reflected the parties’ intentions ([80]). The ‘domestic / familial’ context was relevant. The parties were in a stable, unmarried relationship and the parties had lived together as a family unit for some time before the acquisition of the Property ([74]). The acquisition of the Property was a ‘joint / common enterprise’ between Ms Chen and Chan Senior ‘following their express discussions with the common goal of providing a family residence and permanent home for the Family’ ([75]).  The purchase of the Property ‘reflected a joint or shared commitment by both Ms Chen and [Chan Senior] notwithstanding their unequal financial contributions’ ([77]). Ms Chen and Chan Senior were jointly and severally liable on the mortgage of the Property ([79]). It was true that in other respects there was no pooling of their financial resources but, ‘that is not to say they never acted for the common good or kept their affairs in relation to the Property strictly or rigidly separate’. There were ‘strong indications of their joint economic commitment in respect of acquisition of the Property’ ([80]).

Chan Senior had entered into the Contractual Licence with Ms Chen and the daughters and they had acted on this to their detriment. They met all of the financial outgoings in respect of the Property acting in reliance on the Contractual Licence. Chan Senior’s conscience was affected and the Contractual Licence gave rise to a constructive trust ([86] and [87]). Chan’s conscience was also affected: the circumstances showed that he ‘had undertaken a new obligation to give effect to the relevant encumbrance being the Contractual Licence that gave rise to the imposition of a trust’ ([92]). Ng had agreed to take subject to the proceedings brought by Ms Chen. This would often not be enough to affect his conscience. In this case, however, he was not only clearly on notice of the rights of Ms Chen and the daughters, he had also bought the share in the Property at a substantial discount to the market value (presumably because of those rights). His conscience was also affected and the Contractual Licence was binding on him ([113]). Ms Chen and the daughters obtained the declaration that they sought that they were entitled to sole and exclusive occupation of the Property during their lifetimes ([115]).

Michael Lower

Implied terms as to termination of contractual licences

January 25, 2013

In Australia Blue Metal Ltd v Hughes ([1963] A.C. 74, PC) ABM granted H a licence to mine certain minerals on a specified portion of ABM’s land. There was no licence term nor any express provision as to how the licence could be brought to an end. ABM gave H notice requiring H to leave the land immediately.

The Privy Council held that this was not a licence coupled with an interest as Hughes had no right to extract any specified quantity of the minerals. This was either a case in which the licence could be terminated at any time on reasonable notice or it could be terminated with immediate effect but Hughes would then have a reasonable period of grace in which to leave. It was unnecessary to decide between these alternatives since either would lead to the same practical conclusion since Hughes had not been required to leave the land immediately and a reasonable period had since elapsed.

The Privy Council rejected the argument that the implied term was that ABM had to specify the notice period in the notice (and that this must be reasonable). There would need to be clear evidence to justify the implication of such a term.

On whether there was an implied term that notice should be reasonable, Lord Devlin said:

‘The question whether a requirement of reasonable notice is to be implied in a contract is to be answered in the light of the circumstances existing when the contract is made. The length of the notice, if any, is the time that is deemed to be reasonable in the light of the circumstances in which the notice is given.’ (p. 99)

On the construction of terms as to notice generally, he said:

‘An express provision about notice can be in any form which the parties care to adopt. If the term is that a contract is to terminate six months (or a reasonable time) after notice given, the notice need amount to no more than an election to terminate. It will automatically take effect after the expiry of six months (or of such period as the court subsequently determines to be reasonable). On the other hand, an express term can prescribe the form and content of any notice to be given and then a notice in the wrong form or with insufficient content will be bad. If the contract is, as here, entirely silent about notice and a term has to be implied, the nature and requirements of the term to be implied must be settled according to the ordinary rules governing the implication of a term. The question then will be whether the necessary implication extends beyond that of a simple notice to embrace a notice in a particular form or with a particular content.’ (pp. 100 – 101)

Contractual licences: implied notice period

January 23, 2013

In Minister of Health v Bellotti ([1944] KB 298, CA) the Minister of Health granted licences of flats to war-time evacuees from Gibraltar. B was one such contractual licensee of the Minister. The Minister purported to terminate the licence on one week’s notice (because of discipline problems). There was no express term specifying a notice period. When B refused to leave the Minister sought an injunction to restrain B from coming to, or remaining on, the premises.

The Court of Appeal held that the implied term as to notice must take into account ‘the whole of the circumstances in which the license came into existence.’ (304). In this case:

‘[I]t must surely be the implied intention of the parties that, if they were turned out by the ministry, they should be given such an opportunity as strangers in the land might require, to enable them to find other accommodation.’ (305 per Lord Greene MR).

One week was not enough. It did not give B a reasonable time to move out (305 -6).

On the other hand, the notice was valid despite the insufficiency of the notice period. A reasonable time to arrange to move out had, in fact, elapsed between the date of the notice and the date of the hearing.

Failure to reinstate at the end of a lease and associated licence

July 20, 2012

In China Resources Property Management Ltd v Max Merit Ltd ([2012] HKEC 1010 (District Court)) C had granted M a lease of some shop premises for use as a sandwich shop and a licence of an Outside Seating Area. M had taken over the business of a previous owner of the shop and H was a director both of M and of the previous tenant. She had undertaken day to day management of the business both before and after the takeover.

At the end of the lease / licence term, C alleged that M had failed to reinstate ceiling panels to their ‘bare shell’ state as required by the agreement between them. One  question was whether this required the panels to be in the state they were in at the time of the takeover or at the time of the original lease to the previous tenant. The close involvement of H in both businesses persuaded the court that the ‘bare shell’ clause created an obligation to reinstate as at the date of the original lease to the previous tenant ([41] – [42]). The tenant was in breach and the agreement required it to indemnify C in respect of any costs associated with the breach.

The agreement prohibited the installation of fixtures of a permanent nature. The ceiling fans and spotlights were not fixtures since they were temporary and easy to remove. There was no breach of this prohibition.

The court had not allowed the landlord to rely on photographs and project documents as part of its evidence. They had been in existence for quite a long time but disclosed very late. The person who took the photos had not been called as a witness and so the photos would have been hearsay evidence.

The landlord’s claim to be able to forfeit the deposit because of non-payment of sums due under the agreement failed. The terms of the agreements did not allow forfeiture of the deposit in the circumstances of this case.

Implied licence

June 28, 2012

In Canadian Pacific Railway Company v The King ([1931] A.C. 414, PC) CPR had erected telegraph lines and poles on Government land next to a railway. This had largely been without any express licence but a licence was implied since the lines and poles had been present for many years and well-known to the Crown. In the case of some minor sections of line CPR had been given express licence to erect the lines and poles pending the exchange of formal agreements.

The implied licences were revocable but the notice period had to be long enough to allow the lines and poles to be removed and erected elsewhere. This was because CPR had obligations to third parties in respect of the system and because of the public interest in the existence of the system.

CPR failed to persuade the Privy Council that it had a permanent right to keep its system in place. It sought to invoke Plimmer v Mayor of Wellington and Ramsden v Dyson but failed since there had been neither active nor passive encouragement by the Crown that would encourage CPR to believe that it had or would obtain some permanent interest in the land. Nor was CPR mistaken as to its true legal position.

Courts give effect to the true bargain

March 19, 2012

Aslan v Murphy (Nos 1 and 2) ([1990] 1 W.L.R. 766, CA (Eng)) followed soon after A.G. Securities v Vaughan ([1990] A.C. 417). In one of the cases, there was an agreement (labelling itself a ‘licence’) for the occupation of a small room. There was a clause to the effect that the licensor could enter at any time or introduce others. The English Court of Appeal found that this was a tenancy. The true intention of the parties was that there would be exclusive possession. The other case concerned a similar agreement but this time in relation to a house with three bedrooms and two reception rooms. Sharing would have been possible but again the court decided that the true bargain was that there would be exclusive possession. The fact that the agreements provided that the landlord would have a key and that the lock would not be changed was ambiguous. Its significance would depend on why the landlord needed a key.

Promissory estoppel and permanent licence to occupy family home

December 15, 2011

In Maharaj v Chand ([1986] 3 W.L.R. 440, PC) M and C were an unmarried co-habiting couple. M applied to the Fiji Housing Authority for a lease of land under a scheme intended to make land available for married couples and built a house on it. M told C that this was to be the family home. In reliance on this she gave up her flat and used her savings to meet household needs. M abandoned C and sought vacant possession of the property. C argued that M had given her a permanent licence of the property and that he was estopped from seeking vacant possession. M argued that such a licence would be illegal since it would be a dealing with the property without the consent required by s.12 of the Native Land Trust Act. The Privy Council found for C. She could rely on promissory estoppel to defend herself from the possession proceedings. While a constructive trust would have contravened section 12, the purely personal licence arrangement did not.

Michael Lower

A lease for an uncertain term granted to an individual is a lease for life

November 15, 2011

A lease for an uncertain term (or a periodic tenancy where the right to serve notice to quit is subject to an indeterminate, invalid fetter) created a lease for life at common law. This was so whether or not the parties intended a lease for life. In England, a lease for life takes effect as a lease for 90 years (Law of Property Act 1925, s. 149(6)). Contractual effect (binding only on the parties) is to be given to a licence agreement that cannot take effect as a lease (because of uncertainty of term). This is so even if the parties thought that they were creating a lease. Similarly, contractual effect (binding only on the parties) can be given to an invalid, indeterminate fetter on the right to serve a notice to determine a periodic tenancy.

In Mexfield Housing Co-operative Ltd v Berrisford ([2011] UKSC 52) M entered into an occupancy agreement with B. B could determine it by serving a month’s notice. M could only terminate it in the event of B’s default or in the event of her ceasing to be a member of M. M purported to terminate it by serving one month’s notice. It argued that the agreement was an ineffective attempt to create a lease. It was ineffective, it was argued, because of the lack of certainty attached to the landlord’s right to determine the agreement. M argued that the result was that B occupied under a periodic tenancy that could be brought to an end by notice to quit.

The Supreme Court reluctantly accepted (and B conceded) that this was a lease for an uncertain term. When granted to an individual, however, common law deemed this to be a lease for life. This seems to have accorded with the parties’ intentions in this case but the result would be the same even if this were not the case. The Law of Property Act 1925, s.149(6) converted a lease for life into a lease for a term of ninety years subject to the parties’ rights to bring it to an end in certain events by notice to quit.

Even if this had not been the case, the agreement could have taken effect as a contractual licence even if the parties had intended to create a lease. Lord Neuberger left open the question as to whether it could have taken effect as a periodic tenancy (had this accorded with the parties’ intentions) with contractual effect being given (as between the contracting parties) to the restrictions on the right to serve a notice to quit found in the agreement between M and B ([69]).

The Supreme Court was highly critical of the certainty of term principle but did not overrule earlier authorities that laid it down as an essential element of a lease.

Michael Lower

Licence for life binding on trustee in bankruptcy

November 10, 2011

In Re Sharpe ([1980] 1 W.L.R. 219) J made a loan to her nephew S. The purpose was to allow him to buy a shop with living accommodation above it.  S had agreed that J would be able to live there with S and his wife as long as she liked. S became bankrupt and the trustee in bankruptcy sought vacant possession of the property so that he could sell it. This was refused. The licence arrangement gave rise to a constructive trust (on a basis akin to proprietary estoppel). The trustee in bankruptcy had notice of this and was subject to it. The trustee in bankruptcy had agreed to sell to a third party and the court was careful to say that it expressed no view as to whether that third party (who had no notice of the licence) was bound by it.

Michael Lower