Archive for the ‘non derogation from grant’ Category

Right of way: interference by co-owner and derogation from grant by erecting a gate

October 1, 2016

In Chin Ling Investment Ltd v General of Salvation Army ([2016] HKEC 1876) Chin Ling Investment (‘CL’) and the Salvation Army (‘SA’) owned neighbouring lots, created by a 1958 division of the land. The original combined lot had the benefit of a right of way from the land to Castle Peak Road (‘RoW1). When the lot was divided, the owner of the SA land granted the owner of the CL land a further right of way  (‘RoW2′) over the SA land to access RoW1.

SA erected a gate on the land over which it enjoyed RoW1 at the boundary with the SA land. This was found to be a substantial interference by SA with its co-owners’ rights over RoW1.

SA had already moved the gate so that it was now on its own land. It had taken to locking the gate but had given a key to the owners of the CL land. This was a derogation from the grant of a ‘free and uninterrupted’ right over RoW2. Providing the key did not alter this ([79], Deputy Judge ST Poon). The owners of the SA land were ordered to demolish the gate.

Michael Lower

Implied grant of easements

July 6, 2016

In Collins v Collins (No 2) ([2015] EWHC 2652; [2016] 2 P & C.R. 6) a mother and father executed a deed of trust of agricultural land. The beneficiaries were themselves and their three sons. At the time that the trust was created, it was contemplated that the land would be converted to commercial use. This contemplated change of use subsequently happened. The timing of the deed of trust was partly motivated by tax planning considerations which meant that the value of the land needed to be transferred to the beneficiaries. To the extent that any value was retained by the parents, the tax planning purpose would be frustrated.

The deed of trust was extremely simple. The subject matter of the trust was a parcel of land. There was no express grant of a right of way over a private road on the parents’ retained land yet the land subject to the trust was landlocked without the necessary easements over the roadways owned by the parents. It was now intended that the trust land should be sold to a third party but the potential buyer would only proceed if it could be shown that the trust land had the benefit of the necessary rights of way. Because there was a family dispute, the parents did not now want to grant such rights of way. Thus, the question was whether the necessary easements could be implied into the deed of trust.

In his judgment, Mr Edward Bartley Jones QC thought that an easement could be implied into the deed of trust by any of several routes. Whatever the chosen route, the starting point was to identify the subject matter of the grant, applying the general law on contractual interpretation as recently re-stated in Arnold v Britton ([65]). On the facts of this case, the parents intended to make a gift of the whole equitable interest in land which was intended for commercial purposes ([69]). The principle of non-derogation from grant could be relied upon as the basis for implying the necessary easements. It extends even to the grant of non-proprietary, contractual rights and so the fact that the parents were owners of both the dominant and servient tenements was no obstacle to the application of the principle here ([73]).

Equally, the easement could be one of common intention applying the principles in Pwllbach Colliery. The common intention was that the land should be developed for commercial purposes and a full vehicular right of way was necessary to give effect to the common intention ([74] – [78]. Even though the beneficiaries had only an equitable interest, whether the right of way was legal or equitable depended on the intention of the parties ([79] – [80]). It did not matter that the parents were owners of both the dominant and servient tenements. The right of way would subsist as a quasi-easement until the sale took place and the necessary diversity of ownership was in place. At that time section 62 of the Law of Property Act (equivalent to section 16 of the Conveyancing and Property Ordinance) would pass on the benefit of the already existing easement. In the process, the quasi-easement would become an enforceable easement ([83] – [85]).

Could it be argued that the easement was intended to be a right for vehicular access for agricultural purposes only. To answer this question involves answering the two questions posed by Neuberger LJ in McAdams Homes Ltd v Robinson: would the use for commercial purposes be a radical change in character of the contemplated use rather than a mere intensification; and would this use impose a substantial increase or alteration over the intended burden imposed on the servient tenement? ([61]). Here the parties had intended that the land would be converted to commercial use at the time of the deed of trust. The fact that the commercial development had been (perhaps unexpectedly) very successful only intensified the intended use. The McAdams questions could be answered in the negative.

Any buyer from the trustees would have an easement conferring the right to use the road for vehicular access to and from the commercial development.

Michael Lower

 

Non-derogation from grant: relevance of the circumstances at the time of the transaction

October 4, 2012

In Harmer v Jumbil (Nigeria) Tin Areas Ltd ([1921] 1 Ch 200, CA (Eng)) L granted T a lease of certain land for the purpose of storing explosives. L owned nearby land which had been used for tin mining but it was assumed that the mines had been worked out. T needed a Government licence to store explosives and it was a condition of the licence that there would be no buildings within prescribed distances. L’s successor granted a lease of the nearby land and the tenant of that land started to work the mines and proposed to erect buildings so close to the explosives store as to breach the terms of the explosives licence. T sought and was granted an injunction to prevent the building work during the term of the current licence on the basis that this would be a breach of the covenant not to derogate from grant.

Younger L.J. explained that the principle ‘merely embodies in a legal maxim a rule of common honesty.’ (p. 225). He continued:

‘The obligation … must in every case be construed fairly, even strictly, if not narrowly. It must be such as, in view of the surrounding circumstances, was within the reasonable contemplation of the parties at the time when the transaction was entered into, and was at that time within the grantor’s power to fulfil.’ (p. 226).

The act complained of did not need to involve any physical interference with the demised property.

Here both parties knew that the lease was of property to be used to store explosives. T knew the precise terms of the licence while L could at least be taken to have known that a licence was needed and that it would impose some restriction on proximity to other buildings. In these circumstances, the scope of the implied covenant was such as to prevent the use of L’s retained land for building works during the term of the current licence.

Derogation from grant: relevant factors

October 3, 2012

In Platt v London Underground Ltd ([2001] WL 172012) LUL granted a lease of a kiosk to P. The kiosk was in the exit from an underground station. Only people leaving the station through that exit (there was another) would use the kiosk. P claimed that LUL only allowed passengers to use the relevant exit during the morning rush hour and at no other times. Thus, the kiosk was starved of trade. P succeeded in his claim that LUL had acted in derogation from grant.

The surrounding circumstances at the time of the grant were a strong indicator as to what the parties must have had in their mutual contemplation. The kiosk relied on passengers going through the exit as its only source of customers. At the time of the lease, the exit was open for much of the time. This was plainly important to the tenant. There was nothing in the circumstances at the time of the grant or in the communications between the parties, or in the express terms of the lease to indicate that P had accepted a risk that the exit might be closed most of the time. The parties had contemplated that the exit would be part of the station operation during the opening hours of the station. Closure of the exit for much of the time during the lease did amount to a derogation from grant.

Neuberger J. provided some commentary on the law concerning derogation from grant. There is  a ”very substantial degree of overlap, between the obligation not to derogate from grant, the covenant for quiet enjoyment, and a normal implied term in a contract.’ (p. 5)

He endorsed the approach of Bowen L.J. in Myers v. Catteson ((1889) 42 ChD 470 at 481) who said that the aim of the covenant is to give effect to,  ‘the obvious intention of the parties, so as to give the transaction between them a minimum of efficacy and value which upon any view of the case it must have been their common intention that it should have.’

The judgment contains a set of principles concerning non-derogation from grant (pp. 4 – 8). The express terms of the lease and the surrounding circumstances at the date of the lease will be highly relevant in determining whether an act amounts to a derogation from grant. Where the action complained of is the use of the landlord’s retained land, the tenant cannot complain of uses to which the retained land could reasonably be put after the grant of the lease.

‘When assessing what the parties to a contract actually or must have contemplated, one should focus on facts known to both parties and statements and communications between them. A fact which could only have been known to one party could not, save in very unusual circumstances, be a legitimate part of the factual matrix. A thought locked away in the mind of the parties, or even perhaps of both parties, cannot normally be a relevant factor when assessing the parties’ understanding. In English law at any rate, contract is concerned with communication as well as mutuality’.

Changing the character of a shopping mall: derogation from grant?

October 2, 2012

In Petra Investments Ltd v Jeffrey Rogers plc ((2001) 81 P & C.R. 21) L granted T a lease of a unit in a shopping mall. L originally intended that it would be aimed principally at a particular market segment (which T sought to serve). Trade at the mall was not as good as had been hoped but there were a number of reasons for this. In an attempt to improve matters, L created extra retail space within the mall and let a large part of the mall for use as a Virgin Megastore. This did not improve trade for T, in fact matters got worse. It had complained about the effect on its business of the works done to create the extra space. L granted it a service charge reduction in full and final settlement of any claim it might have arising out of the creation of the Virgin Megastore. Ultimately, T argued that the creation of the Virgin Megastore was in breach of the covenant not to derogate from grant since it gave the impression that the mall was no more than the Virgin Megastore. It argued that the breach was repudiatory and it purported to accept the breach.

Hart J. said:

‘I am inclined, however, to think that the circumstances of the grant in this case did impose an obligation on the landlord not so to alter or use the common parts of the centre in such a manner as to cause it to lose its character as a retail shopping mall.’ ([53]).

He doubted whether there was any more specific implied obligation (as to the nature or mix of tenants). The decision to let a large part of the retail space to a single retailer ran the risk of breaking this covenant. The defendant’s agreement not to make a claim in respect of the creation of the Virgin Megastore meant that it was unable to pursue this claim. The judge seemed to doubt whether there was a breach in any event since a shopping mall, however small, still remained ([55]).

The judge also said that a construction of the lease terms that would oust the operation of non-derogation in its entirety should be rejected.

Derogation from grant: common honesty: giving with one hand and taking away with the other

September 28, 2012

In Johnston & Sons Ltd v Holland ([1988] 1 EGLR 264, CA (Eng)) L granted T a lease of a building but reserved a right to use the flank wall for advertising purposes.  T’s successor in title  later acquired the open land next to the flank wall and erected its own hoarding near the flank wall so as (intentionally) to obscure the flank wall and make it useless for advertising purposes. This was held to be a derogation from the grant made by virtue of the reservation. While the reservation could not prevent T from making use of the open land (including the erection of the blocking hoarding) it could prevent this being done for the purpose of frustrating the purpose underlying the grant:

‘Constructing a building is one thing. Erecting a blocking hoarding for the sole purpose of screening the flank wall or erecting one’s own advertising hoarding for the purpose of effectively taking over the advertising site for oneself is altogether different.’ (Nicholls L.J.)

Quiet enjoyment: landlord’s liability for the actions of other tenants

September 27, 2012

In Hilton v James Smith & Sons (Norwood) Ltd ([1979] 2 EGLR 44, CA (Eng)) L owned a row of shops with a private road (a cul de sac) giving access to the rear of the shops. T was the tenant of the end of the cul de sac. It had an easement to use the road for access and delivery but could never use it because other tenants and people making deliveries to them parked in such a way as to obstruct the road. The leases of all of the shops contained a prohibition on parking cars, obstructing the road or causing a nuisance or annoyance to the landlord or other tenants and to use the road only for delivery purposes. L was liable to T (even though the actions were not lawful under the terms of the other tenants’ leases) in nuisance and for breach of the covenants for quiet enjoyment and non-derogation from grant (Ormrod L.J. thought the label didn’t matter). L was liable because it had the means of bringing the problem to an end (an action for nuisance or breach of the express covenant just mentioned) but had done nothing.

Landlord’s use of adjoining land making demised property less fit for contemplated purpose

September 25, 2012

In Aldin v Latimer Clark, Muirhead & Co ([1894] 2 Ch 437) a landlord granted a lease of property to be used for the purpose of carrying on the business of a timber merchant. The tenant covenanted not to use the property for any other purpose. The landlord later erected buildings on the neighbouring land retained by him which interfered with the flow of air to the sheds and made them less useful for the tenant’s business. The court held that the right to the flow of air could be an easement but no such easement had been acquired here.

The tenant claimed that this amounted to nuisance, derogation from grant and breach of the covenant for quiet enjoyment. The landlord was liable in damages.

‘[W]here a landlord demises part of his property for carrying on a particular business, he is bound to abstain from doing anything on the remaining portion which would  render the demised premises unfit for carrying on such business in the way in which it is ordinarily carried on, but that this obligation does not extend to special branches of the business which call for extraordinary protection.’ (444 per Stirling J).

Non-derogation from grant: what was the common intention of the parties?

April 6, 2012

In Lyttelton Times Ltd v Warners Ltd ([1907] A.C. 476, PC) L ran a printing-house next to W’s hotel. An architect persuaded both of them that the printing house could be rebuilt so that W could have extra rooms for the hotel on the upper floors and L could keep an engine-house and printing machinery on the ground floor. They were persuaded that noise would not be a problem. In fact, it was and W sought an injunction limiting the use of the printing-house so as to reduce disturbance to his customers. W claimed that there was a derogation from grant. The Privy Council rejected this. Each party knew that both businesses were to be carried on. The implied common intention had to be determined in the light of the uses contemplated by the parties.

Lord Loreburn L.C. said:

‘If A. lets a plot to B., he may not act so as to frustrate the purpose for which in the contemplation of both parties the land was hired. So also if B takes a plot from A, he may not act so as to frustrate the purpose for which in the contemplation of both parties the adjoining plot remaining in A’s hands was destined.’ (at 481).

A landlord’s failure to act can be a derogation from grant

January 27, 2011

Where a landlord lets part of his premises to a tenant he can be liable to that tenant for failing to take steps within his power to stop neighbouring tenants of his from causing a nuisance. A landlord can be liable for the actions of tenants who are under his control in the relevant respects.

In Chartered Trust plc v Davies ((1998) 76 P & CR 396, CA (Eng)) the defendant took a lease of a shop in a small, fairly cramped shopping mall. The landlord granted leases of neighbouring units to tenants who blocked the way to the shop and who ran their own business in such a way as to make it difficult for the defendant to run his business. This was a nuisance and amounted to non-derogation from grant: the premises had been let to the defendant for a particular purpose and the conduct of the neighbours made the property unfit for the contemplated purpose. The landlord was liable because he had the power (through the terms of the leases granted) to stop the behaviour complained of, but did nothing. This breach was a repudiatory breach.