Noddys Remedies against Toy Town Motors - Coursework Example

?Land Law Essay Introduction In order to determine Noddy’s remedies against Toy Town Motors Ltd. and Bigears it is necessary to first define the typeof interest that the arrangement with Bigear created. In other words, the main question is whether or not permission or the licence to use Redcap created a personal interest or a proprietary interest in the land. If permission to use Redcap is personal, Noddy’s remedies will exist under the law of contract. However, if the permission/licence to use Redcap created a proprietary interest in the land, Noddy’s remedies are founded on principles applicable land law. These principles are found in the law of licences and the doctrine of proprietary estoppel. I. Remedies Prior to 1990 Prior to 1990 the law appeared to take two opposing positions relative to the extent to which licences created interests in land. The original position was stated in the early case of Thomas v Sorrell. In this case Lord Vaughan ruled that with respect to a licence, it neither passed nor modified “or transfers property in anything.”1 In other words, a licence merely functions to create a personal interest relative to the parties to the licence and as such does not operate to create an interest in land. The effect therefore is that the licence cannot be enforced against a third party. This principle of law prevailed and was indorsed by the House of Lords in King v David Allen and Sons, Billposting. In this case the House of Lords pointed held that a licence did not create a proprietary interest in land and as such could not function to be enforceable against a third party.2 Dixon explains however, that this unequivocal approach to licences was incapable of application across a board spectrum of circumstances. The fact is, licences could be put to use for any number of circumstances and could in some circumstances create interest in the land to which it applied.3 For instance, academics and legal scholars alike questioned whether or not it was unfair to oust an occupant under a licence from the property to which the licence applied, when the property changed hands.4 Lord Denning MR considered the circumstances in which it was inappropriate to classify an arrangement as a licence in the case of Errington v Errington. In this case Lord Denning MR departed from the orthodox position that a licence did not create a proprietary interest in land and could not bind third parties. In this case, the licence conferred on the plaintiff was determined to be binding on a wife how had inherited the property under a will. Her husband had granted the licence to the plaintiff. Lord Denning reasoned that the licensee was at liberty to enforce the licence against the licensor for the period of the licence and there was no reason why that right could not be continued against third parties in “appropriate circumstances”.5 Appropriate circumstances would be situations in which the licensee, pursuant to the licence acted in ways that were “supported by an equity” as this would confer upon the licence a degree of proprietary interest. Moreover, an equity would be sustainable in circumstances where it would be unconscionable to ignore the rights created by the licence.6 Lord Dennings ruling and reasoning can be found in subsequent cases. For example in Crabb v Arun DC [1976] if was held if the court finds that an equity exists, it will ensure that the parties abide by the licence to the extent that it reflects the relevant facts and circumstances of the case.7 Lord Denning explained that: Short of an actual promise, if he by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights – knowing or intending that the other will act on that belief – and he does so act, that again will raise an equity in favour of the other, and it is for a court of equity to say in what way the equity may be satisfied.8 The acquisition of an equity under a licence was further explained in Taylor Fashions v Liverpool Trustees. I this case it was held that proprietary estoppel arises for the benefit of the plaintiff who can demonstrate to the court’s satisfaction that he acted to his detriment pursuant to the terms of the agreement.9 The House of Lords broached the subject in Street v Mountford. The primary question was whether or not the agreement for occupancy was properly a lease or a licence. The agreement in question permitted exclusive occupation but was characterized under the terms of the agreement as a personal licence. Lord Templeman explained that in situations where a residential occupation was the issue, “there is no difficulty in deciding whether the grant confers exclusive possession.”10 The fact is, whenever an individual occupied residential premises in exchange for rent for a specific period, that occupier is either a tenant or a lodger. The occupant would be characterized as a lodger if the landowner or property manager and his/her servants or agents had liberal access to the property for the provision of certain services. In other words, the lodger is merely permitted to occupy the premises but not on an exclusive basis. However, when the occupant has exclusive possession, he/she is properly speaking, a tenant with exclusive possession.11 The court therefore determined that it is necessary to examine the arrangement and to determine the “nature and quality of the occupancy” with a view to ascertaining whether or not the occupier’s had a “stake” in the property or merely “permission for himself personally to occupy” the property.12 Essentially the court was required to: Decide whether on its true construction the agreement confers on the occupier exclusive possession. If exclusive possession at a rent for a term does not constitute a tenancy then the distinction between a contractual tenancy and a contractual licence of land becomes wholly unidentifiable.13 What can be gleaned thus far is that the situation in the middle of the 20th century and onward was such that the courts would not automatically accept that an arrangement referred to or characterized as a licence was indeed a licence. The court would look at the arrangement and ensure that an easement, lease or tenancy was not improperly referred to as a licence. The main question was whether or not the claimant had exclusive occupancy or acquired an equity pursuant to the arrangement. At this point the courts had established a practice and policy that permitted the use of the doctrine of proprietary estoppel as a means of ensuring that justice was achieved regardless of whether or not the arrangement was described as a licence or an interest in the land. With this state of the law in 1987 when Bigear conferred upon Noddy a licence to use Redcap for a period of 10 years as a go-cart track, the question is therefore whether or not the licence gave Noddy exclusive possession and whether or not Noddy acted in such a way and in reliance on this arrangement to acquire an equity in the land. On the facts of the case it is questionable whether or not Noddy had exclusive possession. He only used Redcap in the summer. However, the fact that he hired a paving company to construct a go-cart path suggests that he did have exclusive possession of the land. This act would also create an equity as Noddy acted to his detriment pursuant to the permission granted for use of the land.14 The fact that he constructed the go-cart path also lends some credibility to the presumption that Noddy enjoyed exclusive possession as the go-cart path rendered Redcap merely suitable for use as a go-cart site. It might be argued that since Noddy was not required to pay rent he cannot claim an overriding interest in Redcap. However the In 1989 the Court of Appeal revisited the question of licences and their ability to create equitable or proprietary interest in land. The case was Ashburn Anstalt v Arnold. The plaintiffs had occupied land under arrangements where no rent was payable. The landlord attempted to repossess the property and claimed that the occupants were mere licensees since they did not pay rent. The Court of Appeal ruled that paying rent was not an important question relative to the question of the existence of a tenancy agreement.15 It would therefore follow, that since the licence was created prior to 1990, upon a proper construction of the facts and circumstances of the case, Noddy had a proprietary interest in the land. This means that the interest would operate to bind successive owners.16 As a result, Toy Town Motors is bound by the licence conferred upon Noddy by Bigear. Although Toy Town Motors may claim that they did not have notice of the existence of Noddy’s interest in the land since the property is unlicensed, a proper inspection of the property would have revealed the existence of the go-cart path, and therefore Noddy’s interest in the land. Moreover, a simple inquiry would have alerted Toy Town Motors of the existence of Noddy’s interest in Redcap. It appears that Toy Town Motors made no inquiries nor did they conduct any inspections of Redcap and merely relied on the map. As such they will be deemed to have constructive notice of Noddy’s interest in Redcap.17 The test to be applied is laid out in Taylor and Francis. Ultimately the court will look for three specific factors in order to determine whether or not Noddy has a proprietary interest in Redcap and thus can be accorded the benefit of the doctrine of proprietary estoppel. The three factors are: 1. Noddy believed that by virtue of the agreement with Bigear he had a right relative Redcap. 2. Bigear not only created Noddy’s belief but encouraged it. 3. Noddy acted pursuant to that belief.18 Since Bigear specifically said that Noddy could use Redcap as a go-cart track for 10 years, Noddy was at liberty to believe that he had a right over Redcap. The fact that he constructed a track and was free to use the property in the summer, also demonstrates that Bigear encouraged Noddy’s belief. After all, the property remained open to Noddy even after his absence in the winter. As already established Noddy acted pursuant to that belief by the construction of a go-cart track. As a result of the authorities discussed, since the licence was extended to Noddy prior to 1990 and well after 1952, Noddy’s permission to use and occupy Redcap is deemed a proprietary interest giving rise to the doctrine of proprietary estoppel. Therefore Noddy can enforce the licence against Toy Town Motors as an overriding interest in Redcap. However, if Noddy does not wish to take this course, he is at liberty to pursue a breach of contract claim against Bigear pursuant to the law of contract. II. The Situation in 1990 Despite the ruling in Ashburn Anstalt v Arnold, in which the Court of Appeal ruled that the payment of rent was not an essential element for determining the existence of an equitable or proprietary interest in land, the Court of Appeal did revisit the orthodox view. The Court of Appeal thus held that “as a matter of principle” a license would not create an interests in land and will not bind third parties.19 Mummery LJ confirmed this view in Lloyd v Dugdale when he stated that: Notwithstanding some previous authority suggesting the contrary, a contractual licence is not to be treated as creating a proprietary interest in land so as to bind third parties who acquire the land with notice of it.20 Further guidance is found in the words of Lord Wilberforce in National Provincial Bank v Ainsworth [1965] 2 All ER 42 which states the orthodox view and therefore does not indorse the departure enunciated in Erington. Lord Wilberforce stated that: Before a right or interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties and have some degree of permanence or stability.21 Applying this orthodox view of the nature of and distinction between proprietary interests and licences, it would appear that Noddy’s interest in the property was not identifiable by third parties. His occupation was not permanent of stable enough to function as notice to third parties as he was not occupying the property during the winter months. This is presumably when the sale of the property took place. Therefore even if, Toy Town Motors had conducted an inspection of the property during that time, they would not have had any reason to question whether or not the go-cart track was constructed by anyone other than Bigear. Moreover, the fact that the agreement between Noddy and Bigear was not in writing constitutes a complete bar to the claim that the licence creates a proprietary interest in Redcap. The relevant statutory authority is found in Section 2 of Law of Property (Miscellaneous Provisions) Act 1989. Section 2 specifically provides that: A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed on in one document or, where contracts are exchanged, in each.22 This statutory provision brings to mind the ruling by Lord Wilberforce in National Provincial Bank v Ainsworth in that the Noddy’s interest in the land is not identifiable. Had it been included in a written contract, Toy Town Motors could not have argued that Noddy’s interest was not identifiable. The written contract would have served as notice. Having regard to the reinstatement of the orthodox rule and the implementation of Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, Noddy does not have a proprietary interest in Redcap. As such it is not binding on Toy Town Motors. Therefore, Noddy is not at liberty to enforce the licence against Toy Town Motors. His remedy is against Bigear from breach of contract. Had the property been purchased by Toy Town Motors six months later the ruling in Errington and the authorities discussed in the previous section would have applied, rendering Noddy’s interest in the land a proprietary interest. The statutory requirement of writing under the 1989 Act would not have been in force as yet. Moreover, the criteria set out under Taylor Fashions would have applied. Therefore had the sale to Toy Town Motors occurred six months after the creation of the licence, Toy Town would have been bound by it. As a result, Noddy would have been able to pursue a claim under the doctrine of proprietary estoppel against Toy Town. III. Two Year Licences Pursuant to Land Registration Act 2002 which incorporates previous statutes and principles of land law, any lease or proprietary interest in land for less than seven years will be deemed to serve as notice to a perspective purchaser. The rationale is that such a person is likely to be in active possession of the property.23 Therefore, had the licence extended by Bigear to Noddy been for a period of two years, Toy Town would have been deemed to have had notice of Noddy’s interest in the land. However, as previously discussed, Toy Town would have only been bound by the licence if it was determined to have created an equitable interest in the land. Based on the law as it existed between 1952 and 1990, Noddy would have had an equitable interest in the land since he acted to his detriment and under a belief that he had a right over the land. The fact that he created a go-cart over the land would have served as notice of his occupation of land. This is a fact that could have been discovered by a simple inquiry by Toy Town. Therefore, Toy Town would have had constructive notice of the existence of Noddy’s equitable and overriding interest in Redcap if the licence had only been for a 2 year period. As result, Noddy would still be at liberty to enforce the licence against Toy Town. In the alternative he could sue Bigear for breach of contract. The fact is, Bigear agreed to permit Noddy to use the property for 10 years and sold it only two years later, breaching the terms of the contract. Noddy may have some difficulties pursuing a claim for breach of contract against Redgear as the question of consideration, a significant element of contract law appears to be missing. Noddy’s only chance of success in all three scenarios is under the doctrine of proprietary estoppel. Bibliography Textbooks Bryan, M. Private Law in Theory and Practice, (Routledge 2002). Dixon, M. Modern Land Law, (Taylor and Francis 2011). Articles/Journals O’Faran, C. ‘When Is a Lease Not a Lease?’ (1952) 15(2) The Modern Law Review, 236-239. Table of Cases Ashburn Anstalt v Arnold [1989] 1 Ch. 1. Errington v Errington [1952] 1 KB 290. King v David Allen and Sons, Billposting [1916] 2 AC 54. Lloyd v Dugdale[2001] EWCA Civ 1754. National Provincial Bank v Ainsworth [1965] 2 All ER 42. Street v Mountford [1985] AC 809. Taylor Fashions v Liverpool Trustees [1982] QB 133. Thomas v Sorrell [1673] Vaugh 330. Williams and Glyn’s Bank Ltd. v Boland [1980] 2 All ER 408. Table of Statutes Land Registration Act 2002. Law of Property (Miscellaneous Provisions) Act 1989. Read More