Analysis of Land Law - Case Study Example

Land Law Part A: The facts of this case relates as to whether clauses restraining the behaviour of mortgagors, in terms of re-lease of the mortgagedproperty under restrictive clauses relating to time and mode of further lease could be enforceable under the provisions of the relevant laws, especially in the event of a collateral contract specifying the terms of re-leasing. In the event of such cases, the leaned judges would take cognisance of the circumstances surrounding the cases and the question of carrying of equity, justice and fair judgement. The decisions would be bedrocked on the fact that the aggrieved party needs to be put back into a situation had the event not occurred, or the undue benefit derived by the other party set right according to provisions of existing laws. In this case study, the facts to be observed is with regard to provisions of Land Registration 2002 which was operationalised from 2003. Section 29 (1) of the Land Registration Act 2002 states, interalia, "if a registrable disposition of a registered charge is made for valuable consideration, completion of the disposition by registration has the effect of postponing to the interest under the disposition any interest affecting the charge immediately before the disposition whose priority is not protected at the time of registration." (Disposition of Registered Land. 2002). The aspects of restrictions, as is evident in this case study are found under Sections 40 and 41 of Land Registration Act 2002. Section 40 circumscribes the circumstances under which certain restrictions could be imposed with regard to mortgage and they seek to place restrictions on the making of any entries, either for a specified or unspecified period of time or depending upon the happening of any event. The law under Section 40 (2) states that "A restriction may, in particular (a) Prohibit the making of an entry in respect of any disposition, or a disposition of a kind specified in the restriction; (b) prohibit the making of an entry- (i) indefinitely, (ii) For a period specified in the restriction, or (iii) until the occurrence of an event so specified. (3) Without prejudice to generality of subsection (2)(b)(iii), the events which may be specified include- (a) the giving of notice,(b) the obtaining of consent, and (c) the making of an order by the court or registrar. (Notices and restrictions. 2002). In this case of Nicole and Silky Smooth Limited, it is seen that the following restrictions were placed by the mortgagee (lender) Silky Smooth Limited while negotiating a Registered 1st Charge on the property of Nicole, the mortgagor as pre-conditions for giving of the loans: 1. She would be the sole supplier for the Nicole's beauty product Company until year 2034. 2. There would be no repayment of the loan amount of 100,000 from the loanee, or demands from loaner for a period of 25 years. 3. The interest rate would be at 3% more than the prevailing bank rate. The effect of these registered charges now binds both the mortgagee and the mortgagor as per Section 40 of the Registration of Property Act. The aspect of "restrictive covenant "that was seen in the case of Tulk v. Moxhay 1848 and it is said that this established that the burden of a covenant which was restrictive in nature could run with the land', despite privity of contract. (Tulk v Moxhay (1848). 2006). The aspect of higher interest rate that is seen in this case study cannot be termed as unconscionable since as per the legal framework, there are no restrictions on the rate of interest that may be charged on mortgages, and in the absence of disagreement or protest on the party of the mortgagor regarding higher interest rates, there is a valid agreement. (Are there limits on the interest rate that can be charged: (How to know your rights and obligations as mortgagee (lender) 2006). Thus it could be seen that as per Section 40 of the Registration of Property Act, once the restrictions have been registered as charge, as is evident in this case, it should be enforceable on the parties and except, upon the specific application of a person who has "sufficient interest in the restriction" it cannot be withdrawn or amended with appropriate modifications. (Notices and Restrictions. 2002). In this case it is also seen that, by way of another covenant, Nicole had agreed that the Silky Smooth Company was also vested with a right for option to purchase in the event of Nicole's decision to sell the shop during the currency of the mortgage. It was decided in the case of Ferrishurst v. Wallcite (1988) in which the Court of Appeal granted the option to purchase the entire unit instead of the part in which it was presently occupying. (Ferrishurst v. Wallcite (1988). 2006). The process of registration vests legal continuity to the concept of land ownership. In the event of a forged or defective title of the seller, the fact that the land has been registered inculcates it with a cloak of legality and ownership in the eyes of law. Unconscionable bargain: It is a case when the contract could be set aside and it has the similar characterizes of undue influenced. But it is discrete from it. It refers to a case in which someone who is in a weaker position is taken advantage of by imposing cruel, oppressive or unethical laws. In the earlier days it involved transactions occasioned due to lack of funds in the hands of people, making them prey to the machinations of unscrupulous persons who wished to take advantage of their positions for self aggrandisement. In the leading case of City Land & Property (Holdings) Ltd v. Dabrah the fact that arouse was that after the cessation of the lease, the landlord sold to the tenant the freehold after a sum of 2900 was still outstanding on the land. The landlord claimed 4533 with an annual interest of 19% for the balance amount but the court felt that this amount was unconscionable under the circumstances of the case and awarded a payment of 2900 with 7% interest. In yet another case, the Credit Lyonais Bank Netherlands NV v. Birch it was found that prima facie, the terms were unconscionable, and thus could be enforced. However, it is not enough to say that the terms of the agreement are unconscionable. It has to be proved that it so under the application of the said unconscionable terms in the contest of the case and that the vulnerability actually existed during the currency of the case. In yet another case, Multi-service (Book Binding) a very small Company was looking for loan for expansion purposes and private individuals processed loan for interest at 2 % above the bank rate. The terms and conditions surrounding the loan was such that it was index linked to Swiss Francs .The Swiss franc being stronger against the moving from 12 Swiss francs to a to 4 Swiss francs to a . Thus, it is seen that the contract favoured the buyer since he had to pay less Swiss francs. However, the Courts held that the transaction could not be termed as unconscionable since the parties were benefited by legal advice and the terms of the contract being valid, could not be turned down, claiming it to be unreasonable. Thus it could be seen that the second part of the contract specifically restricting Nicole's right to sell the shop to outside parties may be viewed as a collateral contract and not a part of the main contract of mortgage. Therefore, she is at liberty to appeal for the revocation of the second part. The options left to Nicole could be as follows: 1. She may seek modification of the terms of the mortgage with regard to extinguishment of the mortgage of 100,000 under the provisions of the relevant Act. After the mortagage has been fully settled with interest, she may be choose to sell off the shop property to the person of her choice, but it would be left to the discretion of the Courts whether relief would be available under the relevant law. 2. In case her appeal is not successfully and the mortagage has to continue, she may appeal for revocation of the restriction of sale, or transfer of the shop to 3rd parties. If this is successful, she could create a second charge on the property provided that the valuation of the property would be more than the mortgaged amount of 100,000. In the event of finding out the mortgagor's right to sale, the relevant provisions of Section 101 - Law of Property Act 1925 would become enforceable. It states that the powers of sale only surfaces after the repayment are completed. 3. According to registered charge in this case, the lease is completed only in 2034, and therefore, question of sale in this case would be exercisable only after that time. Nicole could contest agreement on strength of above facts. End of Part A Part B: The important facts of this case study could be summarised as follows: 1. The Coronation Cottage was purchased from the combined savings of the married couple, Mr. Ken and Mrs. Deirdre. 2. The title has been registered in the sole name of Mr. Ken 3. The registered owner, Ken decided to sell off the cottage to Peter, without the knowledge and permission of his wife, Deirdre. 4. Peter, the purchaser, acted in good faith when he purchased the flat, since he was not aware of the aspect of joint possession of the property between Ken and Deirde. His queries to clarify the ownership matter was also falsely reported by Ken, giving Peter an impression than he (Ken) was the sole owner of the property and there was no other persons having coparcenaries' ownership interests in the said cottage. 5. The registration was duly completed and Peter became the new registered owner of Coronation Cottage, subjugating Deidre's rights as joint owner. 6. Deirde was unaware of Ken's designs and came to know about the deal only after it was finalized and executed between Ken and Peter. The situation that has arisen in this case is that Deirdre has claimed an equitable interest in the property registered by her husband, Ken, in his own name. Since Deirdre has also invested her own savings in the joint property, she could rightfully be said to be a joint legal claimant. It is quite possible that one person could have a beneficial interest in certain property and this could be either, in terms of express or implied trusts. It was a decided case law of Lloyds Bank v. Rossett, 1991 which laid bare the distinction between substantial and beneficial contribution: (Lloyds Bank v. Rossett. 1997). It was seen that a woman shared the joint property along with her husband who was the registered sole proprietor of the property. Her claim against the mortgagee did not succeed in the Court of Law since she did not make substantial or beneficial contribution towards the property. In this case, Lord Bridge observed that the obligations of "shared occupancy "was different from that of "share proprietorship (Acquisition of Beneficial interest in land. 2006). In order to enforce share proprietorship it is necessary to prove two things: 1. That at any one point of time there was an agreement to create an express agreement that the other co-owner of the house property would get a share in the property, whether expressly or by implication. 2. There needs to be proof that there has been financial contribution from the Co-owner. In this case, it is seen that the fact that Deidre had contributed and had financial interests in the joint property cannot be disputed and therefore she has an equitable interest in the Cottage. In decided case law, Gillet v Holt 2001, the matter of proprietary estoppel was clearly established, in that the applicant was given to believe that after working for around 40 years in the defendants place, he would be benefited at the end, but this was not to be. In this case, it is seen that the principles of proprietary estoppel has been established and the relationship between Ken and Deidre, being one of husband and wife, the aspect of fiduciary relationship is also established .Therefore it was necessary that Ken act as a trustee for the joint property held for the benefit of the other joint trustee, his wife Deidre. But by not seeking Deidre's consent for the sale to Peter, he has acted in bad faith and had reneged on the trust and confidence his wife Deidre had placed on him. As has been mentioned earlier, an implied constructive trust has been operationalised in this context . In this case the defendant, Ken had acted unconscionable when he decided to sell off the joint property during her absence and without her consent. He had further acted fraudulently by not disclosing Deindre's interest in the property to the potential buyer, Peter. Thus, it is quite cogent that Ken is, by default, a constructive trustee. In such a case Ken not only has a personal obligation to the claimant. Deidre, but she is at liberty for seeking the specific restitution in full satisfaction of the breach of contractual obligation to Deidre. In the case of Pettkus v Becker (1980) 2 SCR 834 (1981) a couple started and began operating a business themselves for 19 years. Although the business funds were provided by the man, the woman "used her money to purchase new floorings and helped to lay the floor." (Alison & Felicity 1999, p. 224). Upon appeal from the woman in the event of dissolution of the firm, the Court sought recourse to equity to help the woman get her rightful share. This is because the Court felt that a benefit has been obtained by one person at the expense of another, one party has suffered a detriment which needs to be restituited by the defendant. (Alison & Felicity 1999, p. 224). This decided case of Pettkus v Becker (1980) can be applied in this case also, in terms of Ken getting a financial benefit at the expense of his wife, Deindre, through the use of fraud and misrepresentation. The loss of the cottage being the detriment suffered by his wife and by application of the construction trust laws, Deinddre could proceed against Ken for determination and receipt of her share along with other costs, as deemed necessary for the Court as conscionable in this case. The establishment of the constructive trust in this case has been established in the case of Eves v Eves 1975 in which the wife was awarded a quarter share in the joint property although she had not made any major investments, but had taken care of the children's' needs and their development. However, this could not be re-established in the Gissing v Gissing case in which the claim for beneficial interest could not be sustained since the Court held that the conduct of the parties at the time of making the contributions are more important than the conduct at the subsequent time. Although the wife in this case had made substantial contributions, it was untenable in the Court of law. (Gissing v Gissing 1971: AC 886. 1998). However in the present case, there are certain other factors also to be considered Ken and Deidre both had made substantial contributions to the purchase of Coronation Cottage but Ken had registered it in his name only. Ken is in a position to sell the Cottage to Peter, but Peter must take cognizance of Deindre's interest being co-owner by the operation of constructive trust. Therefore, as constructive trust the following options are open: Peter needs to pay the purchase consideration to both Ken and Deidre, and if this has already been done to Ken, it would become necessary for Ken to share the proceeds with Deidre. If Ken is not agreeable for this, she could bring about action for breach of trust against Ken and seek remedial measures from the Court along with punitive measures under the Family law and other relevant laws in this case. 1. In the event of refusal, the trust would be terminated and another trustee in the place of Ken would have to be instituted. The purchase consideration that is due to Deidre needs to be paid out. 2. In the decided case of Drake v Whipp, 1996, it was seen that the unmarried couple had invested heavily in turning a barn into a house for their occupation. But before the work could be completed, the couple separated. The woman contested that a constructive trust had been established and thus she was entitled to her contribution from the other person. The Court awarded a favourable decision to her on the ground that the circumstantial evidences and the amount of investments made were in line with her argument and she would be needing to get her investments back "The Court of Appeal held that the financial contributions made by the woman were evidence of an intention to create for her an interest in the converted property, and this was sufficient to find a implied intention constructive trust" (Acquisition of Beneficial interest in land. 2006). Conclusion: It is seen that decisions regarding property matters is largely a question of the viewpoints presented by the respective parties to the dispute based upon the circumstantial evidences and other supporting matter to reinforce their claims. Therefore, Deidre is at liberty to proceed against Ken for the rightful claim of the property which belongs to both herself and her husband and for which she has made sizeable investments in the past. End of Part 2 Bibliography Acquisition of Beneficial interest in land. (2006). [online]. The K -Zone. Last accessed 07 February 2008 at: http://www.kevinboone.com/lawglos_AcquisitionOfBeneficialInterestsInLand.html ALISON, Diduck & FELICITY, Kaganas (1999). Alternative1. The remedial constructive trust Family law, Gender and the State. Text, Cases and Materials. 2nd ed. P. 224. Last accessed 07 February 2008 at: http://books.google.com/booksid=pVVOvGN9enAC&pg=PA223&lpg=PA223&dq=case+laws+on+constructive+trusts&source=web&ots=wD6ubnkOHo&sig=7zrIm5-AqZofD_oy7HPT1yuO1TQ#PPR14,M1 Disposition of Registered Land. (2002). Property Registration Act 2002. Part 3: Effects of Registered disposable Charges. [online]. Office of public sector information center. 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