Archive for the ‘notice’ Category

Landlord’s repairing covenant: tenant must give the landlord notice of a defect in the property in the tenant’s possession

September 14, 2016

In Edwards v Kumarasamy ([2016] UKSC 40) the UK Supreme Court had to consider the landlord’s liability in respect of physical injury caused to his tenant. The lease was of the interior of a flat in a block of flats. The landlord (K) was himself a tenant of the flat and had the benefit of the right to use the entrance hall to the flats, the car park and the paved area between the front door and the car park. K sub-let the flat together with these ancillary rights to E. E injured himself when he tripped over an uneven paving stone in the paved area.

The primary question was whether the paved area was part of the exterior of the building of which the flat formed part. If it was, then K would be liable to T under the covenant imposed on landlords by section 11 of the Landlord and Tenant Act 1985. Lord Neuberger held that the paved area was not part of the exterior of the building. The natural meaning of the words of a statute should be applied unless they produced a nonsensical result or one which was inconsistent with the intention of the legislation. Here the natural meaning of the ‘exterior’ did not extend to the paved area ([17]).

That effectively meant that the case was decided in K’s favour. Lord Neuberger went on, however, to look at another, more general issue. He referred to the rule that, ‘a landlord is not liable under a covenant with his tenant to repair premises which are in the possession of the tenant and not of the landlord unless and until the landlord has notice of the repair’ ([30]). This is an implied term. It does not normally apply where the premises to be repaired are not in the tenant’s possession ([42]). If the landlord had been subject to a covenant to repair the paved area, did the tenant have to serve notice of disrepair on him before the landlord was under any liability to repair?

The distinguishing feature of this case was that the premises to be repaired were in the possession neither of the landlord nor the tenant but was property over which they both had a right of way. The premises were the paved area over which the landlord had been granted a right of way which he had effectively passed on to the tenant. The landlord had effectively disposed of his right to use the paved area to the tenant ([50]). Lord Neuberger held that the rule requiring the tenant to give notice of the disrepair applied to this case (49]).

Michael Lower

 

 

Making time of the essence for completion

September 9, 2015

In Many Gain Investment Ltd v Chan Fai Ho ([[2015] HKEC 1553, CFI) P, a property developer agreed to buy a property from D. P raised a requisition about D’s title and there was a dispute as to whether or not it had been properly answered. This dispute continued up to the contractual completion date of 31st May 2011. The parties agreed to extend the completion date to 14th June 2011. The next day, 15th June, D’s solicitors wrote to P’s solicitors requiring completion by 20th June. Despite this, on 16th June, D entered into an agreement to sell the property to another buyer. P now withdrew the requisition and sought specific performance. The question was whether P’s delay in completing amounted to a repudiatory breach entitling D to rescind.

Time was not expressly of the essence for completion and Anthony To J found that time was not impliedly of the essence in this case ([23]). The question then was whether the letter of 15th June made time of the essence (see United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904). As a matter of construction it did not. Anthony To J preferred P’s interpretation which was that the letter was no more than a demand that P should withdraw the requisition within 5 days ([24] – [27]).

For the sake of completeness, Anthony To J considered whether, if the letter were to be construed as a notice making time of the essence, the 5 day period it specified constituted reasonable notice. He held that it could have amounted to reasonable notice had D taken the necessary steps to make completion possible (including notifying P of the amounts of the split cheques that would be required on completion). The only other step to be taken within that time was that P had to decide whether or not it would insist on the requisition. As D had not taken the steps to make completion possible within 5 days, the 5 day period would not amount to reasonable notice ([33]).

P was granted the order of specific performance that it sought.

Michael Lower

Obligations to repair and reinstate on the expiry of the term: written notice needed?

May 31, 2014

In L Batley Pet Products Ltd v North Lanarkshire Council ([2014] UKSC 27) L was the intermediate landlord and T was sub-tenant. The head-lease and sub-lease contained full repairing covenants and the terms of the head lease were incorporated in the sub-lease. Both leases required all notices to be in writing. L and T had entered into a Minute of Agreement authorising T to make alterations. The Minute required T to reinstate the property at the end of the term at the request of L and did not expressly require such notice to be in writing. The Minute stated that its terms should be deemed to be incorporated into the sub-lease.

L argued that oral notice that it required the alterations to be removed and the property to be reinstated at the end of the term was sufficient. T argued that it had no obligation to deal with dilapidations (breaches of the repairing covenant) nor to remove the alterations and reinstate the property because it had not received written notice before the end of the term.

Lord Hodge (with whom the rest of the Supreme Court agreed) dealt first with the dilapidations point. A repairing covenant in the form used here ‘imposes a continuing obligation on the tenant which does not require any notice for the landlord to activate it.’ ([14])

L should also be allowed to proceed with its claim concerning the removal / reinstatement. It was a question of the construction of the Minute of Agreement and he referred to the accepted approach to contractual interpretation ([18] – [19]). Looking at the clause in question in the context of the document as a whole and of the factual matrix he preferred the straightforward approach to the construction of the clause which did not expressly require notice to be in writing.

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.

Priority as between unregistered instrument and a subsequent registered instrument

March 26, 2011

A registrable but unregistered instrument ranks after the interest of a later bona fide purchaser for value  even if the latter purchaser had notice of the prior instrument. Good faith and notice are not the same.

In Kwok Siu Lau v Kan Yang Che ((1913) 8 HKLR 52) the defendant had taken a lease of property but not registered it. The plaintiff then bought the reversion and registered the agreement for purchase. The plaintiff did not know of the lease at the date of the agreement but did know of it by the time of registration. The Full Court had to consider for the first time fundamental questions about the relationship between sections 3 and 4 of the Land Registration Ordinance and the equitable doctrine of notice. It held that priority in such a case as this depended entirely on whether or not the prior interest was registered. In the absence of bad faith, the equitable doctrine of notice had no part to play. Having notice of the earlier interest did not mean that one lacked good faith for the purposes of section 3(2).

Constructive notice: when is a purchaser or mortgagee put on enquiry?

October 6, 2010

When can a purchaser or mortgagee rely on an owner’s statement that there is no-one other than the owner living at the property? When must a purchaser or mortgagee make a physical inspection of the property to see whether there is anyone living there who might have an equitable interest under a resulting or constructive trust?

This question had to be considered in HKCB Finance v Yuen Yi Wan [2006] HKEC 230 (CA). A wife claimed an equitable interest in a property owned by her husband based on her financial contributions.  Her husband agreed to sell the property to Wong and Wong agreed a sub-sale to the first defendant. The sale to Wong was at a gross undervalue and the sub-sale was at a substantially higher price. The three were conspiring to defeat the wife’s claim to the property. The first defendant granted a mortgage to the plaintiff bank.The husband had replied to an enquiry by Wong’s solicitor saying that only he lived at the property. The sale and sub-sale agreements contained warranties to the effect that no-one else lived at the property with a legal or equitable interest in it. The bank had seen these agreements.

The question was whether the plaintiff bank had constructive notice of the wife’s equitable interest. Tang JA held that the wife had an arguable case that the bank had been put on enquiry as to her interest and should have made a physical inspection to see whether anyone else was living there. This was because her husband had sold the property at a gross undervalue and this is often a sign of a fraudulent transaction. If the bank had made the physical inspection they would have discovered the wife’s presence and she would have explained that she was claiming an equitable interest in the property.

Michael Lower

Constructive notice

October 4, 2010

Equity’s darling is the bona fide (good faith) purchaser for value of a legal estate without notice of the prior equitable interest. Notice can be actual (what you actually knew) or constructive (what you are deemed to know). Gray and Gray explain it like this:

‘Constructive notice relates to matters of which the purchaser would have been consciously aware if he had taken reasonable care to inspect both land and title. Thus the purchaser is fixed with constructive notice of all those matters which a reasonable or prudent purchaser, acting with skilled legal advice, would have investigated.’ (Kevin Gray and Susan Francis Gray, Elements of Land Law, (5th ed), (Oxford, Oxford University Press, 2009), p. 1153).

So, for example, the question might be whether a purchaser or mortgagee has constructive notice of the equitable interest arising under a resulting or constructive trust.

An important judgment in this area is that of Vaughan Williams LJ in Hunt v Luck ([1902] 1 Ch 428). Dr Hunt had transferred ownership of some properties to Gilbert, allegedly by fraud so that Dr Hunt’s estate had an equitable interest in the properties. The question was whether mortgagees who had been given their mortgage by Gilbert had notice of Dr Hunt’s equitable interest in the property. It was held that they did not have notice.

In his judgment, Vaughan Williams LJ said:

‘[I]f a purchaser or mortgagee has notice that the vendor or mortgagor is not in possession of the property, he must make inquiries of the person in possession … and find out from him what his rights are, and, if he does not choose to do that, then whatever title he acquires as purchaser or mortgagee will be subject to the title of the [person] in possession.’ (at 433)

Good faith

October 2, 2010

The concept of ‘good faith’ is relevant to the law of priorities in two ways. First, an equitable interest in land can be defeated by a bona fide (good faith) purchaser for value of a legal estate without notice of the earlier equitable interest. Second, section 3(2) of the Land Registration Ordinance provides that a transaction that should have been registered but has not been is void as against ‘any subsequent bona fide purchaser or mortgagee for valuable consideration’.

What does good faith mean? How is it different (if at all) from the concept of notice? In Midland Bank Trust Co Ltd v Green (No 1) Lord Denning MR said in the Court of Appeal ([[1980] Ch 590) that bad faith is ‘any dishonest dealing done so as to deprive unwary innocents of their rightful dues.’ (at 625).

In the House of Lords ([1981] AC 513), Lord Wilberforce said:

‘I think it would generally be true to say that the words “in good faith” related to the existence of notice. Equity, in other words, required not only absence of notice but genuine and honest absence of notice. As the law developed this became crystallised in the doctrine of constructive notice”. (at 528)

Lord Wilberforce went on to say, however, that ‘good faith’ is not only concerned with the doctrine of notice:

‘Equity still retained its interest in and power over the purchaser’s conscience.’ (at 528)

Michael Lower