Archive for the ‘licences’ Category

Adverse possession: death of licensor terminates a licence

June 26, 2017

The facts of Hsieh Haw Shane Gary v Chang Ho Ying ([2017] HKEC 1246) illustrate that a licensor’s death terminates a licence to occupy land.

Madam Chang was registered as the owner of a flat (‘the flat’). She died intestate in 1966. Letters of Administration were granted to Mr. Chang, her husband, in 1967. He was solely beneficially entitled to the flat but the legal title was never assigned into his name.

Mr. Chang married Madam Lee in 1970. He died intestate in 1984. Madam Lee did not seek Letters of Administration de bonis non in respect of Madam Chang’s estate. Madam Lee took possession of the flat on her husband’s death and rented it out.

Madam Lee moved to Malaysia in 1998. She gave the keys to the flat to her son, Gary. Gary paid all of the expenses in respect of the flat and collected the rents from then on. Madam Lee died in 2002.

The question was whether Gary had acquired title by adverse possession by 2013 when the flat (and the whole building of which it formed part) was acquired by a developer pursuant to the Land (Compulsory Sale for Redevelopment) Ordinance (Cap. 545).

Mr. Chang’s death in 1984 brought an end to any licence that he may have granted to Madam Lee. Gary began a new period of possession in his own name when he was given the keys and managed the property from 1998. He had therefore been in adverse possession for more than twelve years by 2013.

Gary had defeated Madam Chang’s title and he was entitled to the proceeds of sale of the flat.

Michael Lower

No tenancy where there is no intention to create legal relations or where the landlord is not excluded

November 17, 2014

In Heslop v Burns ([1974] 1 WLR 1241, CA) T allowed a family (Mr and Mrs Burns) to live rent-free in a house he owned for many years. He covered all of the outgoings. This action was inspired by sympathy and affection for them. When T died, his executors argued that they were licensees and sought to evict them. Mr and Mrs Burns argued that they had been tenants at will. If this succeeded, they would be able to rely on the Limitation Act 1939 to resist eviction.

The Court of Appeal found that they were licensees and not tenants. There was no intention to create legal relations; the arrangement was an instance of ‘generosity on a very large scale’ (Roskill LJ at 1249). Roskill LJ observed:

‘a licence will be more readily inferred than a tenancy at will first where the advantage given to the suggested “tenant” is obviously intended to be personal to him, and secondly, following what Denning L.J. subsequently pointed out in Facchini v. Bryson [1952] 1 T.L.R. 1386 , 1389, where there has been something in the circumstances, such as a family arrangement, an act of friendship or generosity, or such like, to negative any intention to create a tenancy.’ (at 1248 – 9)

Further, the evidence showed that T felt entitled to come and go to the property as he pleased; there was no intention that his right to possess should be excluded by the arrangement.

Michael Lower

‘Licence’ pending completion of agreement for lease: A Street v Mountford exceptional case?

May 27, 2013

In Cameron Limited v Rolls-Royce plc ([2007] EWHC 546 (Ch)) RR was C’s tenant (with the benefit of two leases contracted out of Part II of the Landlord and Tenant Act 1954). The parties exchanged agreements for the grant of two further leases of the same properties, also to be contracted out of the 1954 Act security of tenure provisions). The agreements were conditional on the obtaining of the necessary court order sanctioning the contracting out and on obtaining the superior landlord’s consent to the proposed leases. In the meantime, RR was to remain in possession pursuant to licences contained in the agreements for lease.

It was accepted that these licences gave RR exclusive possession for a term at a rent. Did the licence agreements actually give rise to leases?

The court held that they did not. They fell within one of the exceptions identified by Lord Templeman in Street v Mountford. The licences were not ‘stand-alone’ arrangements but formed part of a bigger picture. Mann J. said:

‘As I have said, Mr. Small accepted that if the licence did not fall to be treated as a stand-alone document, then the vendor/purchaser exception to the prima facie Street v. Mountford position would obtain. He is right to accept that. I have come to the conclusion that this is plainly a case of a licence being granted in the context of the acquisition of the larger interest and, as such, the nature of the interest granted by Cameron and obtained by Rolls-Royce under the agreement itself and pending the grant of the lease is that of a licence only.’ ([26])

Michael Lower

Exclusive occupation: licence granted as part of a ‘bigger picture. Lease or licence?

May 22, 2013

In Street v Mountford ([1985] A.C. 809, HL) Lord Templeman said:

”To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments.’ (818)

In two passages, however, Lord Templeman points out that there are exceptional cases where these factors are present but there is no tenancy. In the second of these, he says:

‘The intention to create a tenancy was negatived if the parties did not intend to enter into legal relationships at all, or where the relationship between the parties was that of vendor and purchaser, master and service occupier, or where the owner, a requisitioning authority, had no power to grant a tenancy.’ (821)

The ‘vendor and purchaser’ exception was explored in Essex Plan Ltd v Broadminster ((1988) 56 P & C.R. 353). In that case, the relevant agreement granted the occupier the right to call for the grant of a lease. During the option period, and until the option was exercised (if it was), the occupier had the benefit of a licence. The option was never exercised, but the occupier contended that the licence satisfied the Street criteria and was, in fact, a lease.

This argument failed. Although the Street factors were present, the licence fell within the vendor and purchaser exception. Hoffmann J. took the opportunity to explain the underlying rationale:

‘The option gave Essex Plan the right to call for the grant of the lease and therefore gave it in equity an immediate interest in the land. Its entry into occupation pending the exercise or expiry of the option was ancillary and referable to that interest. There is therefore no need to infer the creation of a tenancy which would give Essex Plan a different interest in the same land.’ (Hoffmann J, 356)

The occupation was primarily attributable to the equitable interest created by the option.

The same approach was taken by the English Court of Appeal in Cameron Limited v Rolls-Royce plc ([2007] EWHC 546 (Ch)). This time, the licence was contained in a conditional agreement for the grant of a lease. Here again, the occupier’s contention that the licence was actually a tenancy was unsuccessful.

Mann J. said:

‘As I have said, Mr. Small accepted that if the licence did not fall to be treated as a stand-alone document, then the vendor/purchaser exception to the prima facie Street v. Mountford position would obtain. He is right to accept that. I have come to the conclusion that this is plainly a case of a licence being granted in the context of the acquisition of the larger interest and, as such, the nature of the interest granted by Cameron and obtained by Rolls-Royce under the agreement itself and pending the grant of the lease is that of a licence only.’ ([26])

Michael Lower

Lease or licence? Licence coupled with option to call for the grant of a lease

May 21, 2013

In Essex Plan Ltd v Broadminster ((1988) 56 P & C.R. 353) D gave E a licence to occupy premises. It also gave E an option to call for the grant of a lease. The licence and option periods expired but E remained in possession. Negotiations for the grant of a further licence did not come to fruition. D conveyed the property to B. B gave notice to terminate the licence. E argued that it was a tenant, not a licensee, with the benefit of the security of tenure conferred by part II of the Landlord and Tenant Act 1954. They argued that they had exclusive possession for a term at a rent and therefore the Street v Mountford criteria for the grant of a lease were present. 

E failed. The case belonged to one of the exceptions identified by Lord Templeman in Street (occupation by a purchaser pending completion):

‘The option gave Essex Plan the right to call for the grant of the lease and therefore gave it in equity an immediate interest in the land. Its entry into occupation pending the exercise or expiry of the option was ancillary and referable to that interest. There is therefore no need to infer the creation of a tenancy which would give Essex Plan a different interest in the same land.’ (Hoffmann J, 356)

Hoffmann J. addressed the separate question as to whether E had exclusive possession. Had it been necessary, he would have held that E did not have exclusive possession. The licence expressly provided that D retained possession and there was no evidence to show that this was a sham. Had D entered during the licence period E could not have brought an action in trespass. The absence of any express right for D to enter was an interesting indicator that it did not need to be given a right to enter since it retained possession (356 – 357).

Michael Lower

Street v Mountford

March 21, 2013

Introduction

Lord Templeman’s judgment in Street v Mountford ([1985] A.C. 809) was an authoritative restatement of the defining characteristics of a lease. It provided clarity as to the factors that distinguish the lease from the contractual licence. In Street itself, this mattered because of the protection afforded to tenants (but not to licensees) by the Rent Acts. That such a restatement was necessary was due to the fact that certain Court of Appeal decisions (for example, Marchant v Charters [1977] 1 W.L.R. 1181, 1185 (per Lord Denning M.R.)) had muddied the waters by denying that the presence or absence of exclusive possession was the central issue.

Street v Mountford

Mr. Street entered into an agreement under which Mrs. Mountford would, as Mr. Street conceded, have exclusive possession of two rooms in a property owned by Mr. Street. The agreement described itself as a licence. It ended with a clause declaring that the parties did not intend to create a lease. Mrs. Mountford applied for the registration of a fair rent under the Rent Acts. Mr. Street sought a declaration that Mrs. Mountford was a licensee. The House of Lords (Lord Templeman giving the main judgment) held that Mrs. Mountford was a tenant since the agreement provided for her to have exclusive possession for a term and at a rent.

The essential elements of a lease

Lord Templeman explained the essential elements of a lease:

‘To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments.’ (Street v Mountford [1985] A.C. 809, 818).

Lord Templeman also said that ‘the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for a term at a rent.’ (Street v Mountford [1985] A.C. 809, 826). The Court of Appeal later explained that Lord Templeman had not intended to suggest that the payment of a rent was an essential characteristic of a lease (Ashburn Anstalt v Arnold [1989] Ch.1, 9 -10, Fox L.J.). Thus, one is left with the statement that the essential elements of a lease are exclusive possession and certainty of term. This is consistent with nearly all previous authority in England and in other jurisdictions (see, for example, Radaich v Smith (101) CLR 209).

Exclusive possession

To say that occupation by a tenant is exclusive possession, while that of a licensee is not, is to invite the accusation of circular reasoning or of simply replacing one term with another without explaining either. The court has ‘to ascertain the nature and quality of the occupancy’ (Street v Mountford [1985] A.C. 809, 825). Thus, Lord Templeman went further and sought to offer guidance as to how exclusive possession differs from the right to occupy enjoyed by a licensee:

‘The tenant possessing exclusive possession is able to exercise the rights of an owner of land, which is in the real sense his land albeit temporarily and subject to certain restrictions. A tenant armed with exclusive possession can keep out strangers and keep out the landlord unless the landlord is exercising limited rights reserved to him by the tenancy agreement to enter and view and repair.’ (Street v Mountford [1985] A.C. 809, 816).

The guidance offered here is that a tenant is one who (under the terms of the lease) has the control rights associated with ownership. In particular, the tenant has the right to exclude others (including the landlord).

This right to exclude others is compatible with (and may even be reinforced by) the fact that there are limited exceptions (such as the reservation of easements or a landlord’s right to enter for certain limited purposes) (Street v Mountford [1985] A.C. 809, 818). If, however, the landlord’s obligations require unrestricted access on his part then there is no exclusive possession and the agreement is a contractual licence (Westminster City Council v Clarke [1992] 2 A.C. 288). The result is that the licensee (a lodger perhaps), ‘is entitled to live in the premises but cannot call the place his own.’ (Street v Mountford [1985] A.C. 809 818).

Importance of a proper understanding of the agreement: labels and shams

The agreement in Street described itself as a licence. At the foot of the agreement was the following declaration made by Mrs. Mountford:

‘I understand and accept that a licence in the above form does not and is not intended to give me a tenancy protected under the Rent Acts.’

Lord Templeman had to consider whether these facts should carry any weight in the analysis. He leaves no room for misunderstanding on this point: it is entirely a question of whether, properly construed, the agreement offered exclusive possession for a certain term (Street v Mountford [1985] A.C. 809, 823 and 826). The parties ‘cannot turn a tenancy into a licence merely by calling it one.’ (Street v Mountford [1985] A.C. 809, 821). The court should, ‘be astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy.’ (Street v Mountford [1985] A.C. 809, 825. See also A.G. Securities v Vaughan and Antoniades v Villiers [1990] 1 A.C. 417). There is a slightly troubling statement in National Car Parks Ltd v Trinity Development Co (Banbury) Ltd ([2001] EWCA Civ. 1686) to the effect that, when making the lease / licence distinction, some weight might be given to the label employed by two professionally advised parties with equal bargaining power.

The lease as an estate in land

Lord Templeman takes it for granted that a lease is always an estate in land. At the very beginning of his judgment he explains that if the agreement created a tenancy then Mrs. Mountford had acquired a legal estate in land (Street v Mountford [1985] A.C. 809, 814).When the court ascertains the nature and quality of the occupancy with a view to seeing whether or not exclusive possession has been granted, the ultimate question is ‘to see whether the occupier has or has not a stake in the room’ (Street v Mountford [1985] A.C. 809, 823). Is the degree of control that the occupier can exercise in accordance with the terms of the agreement so extensive as to amount to ownership for the time being? Is the land ‘his land albeit temporarily and subject to certain restrictions’? Or, by contrast, is the occupier a mere licensee with the result that he ‘cannot be said to own any estate in the land’? (Street v Mountford [1985] A.C. 809, 816).

Lord Templeman’s express understanding, then, is that the lease is always an estate in land. In Bruton v London & Quadrant Housing Trust ([2000] 1 A.C. 406), however, the House of Lords decided that the lease need not be an estate in land. Once there is an agreement that offers exclusive possession for a term then a lease has been created. This is true even though the ‘landlord’ has no estate in land (is himself a licensee for example). Paradoxically, a literal reading of Street has resulted, in the eyes of some commentators at least,  in a blurring of the distinction between the lease and the contractual licence. The paradox is that Lord Templeman had insisted that the grant of exclusive possession for a term would be what distinguished the lease (an estate in land) from the contractual licence (a non-proprietary arrangement).

Exceptional cases

Lord Templeman states that while exclusive possession is an essential element of a lease, an occupier with exclusive possession is not necessarily a tenant (Street v Mountford [1985] A.C. 809, 818). In discussing these special cases, Lord Templeman draws a distinction between ‘conduct which negatives an intention to create legal relations’ and ‘special circumstances which prevent exclusive possession from creating a tenancy’ (Street v Mountford [1985] A.C. 809, 822). The former category catches informal arrangements where a landowner allows someone else (perhaps a family member or friend) to occupy property but where there is no contractual intent (as in Marcroft Wagons Ltd v Smith [1952] 2 K.B. 496).

As for the latter category, Lord Templeman says:

 ‘Sometimes it may appear from the surrounding circumstances that the right to exclusive possession is referable to a legal relationship other than a tenancy. Legal relationships to which the right of exclusive possession might be referable and which would or might negative the grant of an estate include occupancy under a contract for the sale of land, occupancy pursuant to a contract of employment or occupancy referable to the holding of an office.’ (Street v Mountford [1985] A.C. 809, 826 – 7)

It would have been better to say that while the occupier in such cases might appear to have exclusive possession, the reality is that he does not. One reason for saying so is that it would have avoided any blunting of the message that a person enjoying exclusive possession as a result of an agreement with a landowner is a tenant. Another reason is that the occupiers in these exceptional cases do not have exclusive possession at all. One who occupies property between contract and completion will do so either as licensee or as tenant; either is possible and whether a lease or licence has been created will depend on the terms agreed between the parties. In the other two cases mentioned, it would be appropriate to say that the occupier is there on behalf of the employer or the organisation in which he holds an office. It is the employer or organisation which is in exclusive possession through its employee or office-holder.  In fact, this is the explanation given by Lord Templeman himself earlier in the judgment (Street v Mountford [1985] A.C. 809, 818).

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.

Notice to terminate a licence of land used for a public purpose

January 17, 2013

In The Governing Body of the Henrietta Barnett School v The Hampstead Garden Suburb Institute (93 LRG 470) HGSI had (for many decades) allowed the School to use its land. HGSI then purported to terminate the licence on 9 months’ notice (having been advised that the licence could be terminated at will). It was held that although HGSI was entitled to terminate the licence the notice given was inadequate. Just as in Canadian Pacific Railway Company v The King the fact that peremptory termination of the licence would have an adverse impact on the public was a relevant consideration. In the absence of express provision as to notice, there must be implied into the notice a requirement to give sufficient time to allow the school to make alternative arrangements and to safeguard the public service.

Licence coupled with a grant: injunction available

January 16, 2013

In James Jones & Sons Ltd v Earl of Tankerville ([1909] 2 Ch. 440) D entered into a contract with P under which P had the right to cut trees on D’s land and remove the timber. D repudiated the contract and took back possession. P sought an injunction restraining D from preventing due execution of the contract. The question was whether this was possible or whether P was restricted to damages only. The injunction was granted:

‘A licence to enter a man’s property is prima facie revocable, but is irrevocable  even at law if coupled with or granted in aid of a legal interest conferred on the purchaser, and the interest so conferred may be a purely chattel interest or an interest in realty.’ (Parker J. at 442)

The same applies even where the interest was not created under seal so that the interest is purely equitable (443). In any event, it was arguable that P had a legal interest in the timber (444).