Principle of Equitable Interest in Land - Essay Example

Introduction Land rights are important rights that en s entities to various powers that enable them to enjoy and transfer land. Lord Wilberforce stated that “before a right or an 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”1. The implication of Lord Wilberforces view is that an owner of a land must be able to say exactly, what his rights are and what his rights are not2. Secondly, it must be a right that is capable of being transferred under the force of law and in this case, a right that comes with conditions could be limited where the conditions are not met3. Finally, the right to a given piece of land must last over a reasonable number of time and must not be one that changes frequently4. In the case of National Provincial Bank Ltd V Ainsworth, it was held that a deserted wifes rights to property she was occupying was not enough be recognised in English Law. Although she fulfilled some conditions, her right to land was not granted in the case. However, in other instances, equity generated by proprietary estoppel is recognised as a property right capable of binding third parties. This paper will critically discuss the case of the “deserted wifes equity” in the case above and the position of proprietary estoppel. They will all be examined and evaluated on the basis of their components and their merits in relation to UK land law. This will provide the basis for the explanation and justification of the legal worth and power of the two concepts in UK land law. National Provincial Bank Ltd V Ainsworth: Case Description In the case at hand, Mr. and Mrs. Ainsworth lived in Sussex. The land was registered in the name of Mr. Ainsworth. Mr. Ainsworth however moved out in 1957. Mrs. Ainsworth occupied the property and remained in charge whilst Mr. Ainsworth was living away from the house. In 1958, Mr. Ainsworth borrowed £1,000 from the National Provincial Bank and used their Sussex house as the charge or collateral for the loan. In 1962, Mr. Ainsworth fell back in the repayment of the loan to the bank. The bank moved to take possession of the house. Mrs. Ainsworth refused to leave the house. The bank sought a possession order. This is because Mrs. Ainsworths right to the property was based on the equitable right to control the bank. The banks claim was to seek an order for specific performance meant to equitably dispossess Mrs. Ainsworth of the property. On the other hand, Mrs. Ainsworth argued on the premise that she had an equitable right to remain in the property since she was still the wife to Mr. Ainsworth. Principle of Equitable Interest in Land “Equitable interests are interests in English law that are derived from the law of equity”5. In English law, rights to land are derrived from Cannon Law – Statute, Common Law and Equity. Statute involves laws that are made and authorised by parliament. Statute is made up of rules and regulations that are made and granted royal assent. This involves law that has parliamentary authority and based on national sovereignty which specify how people can own and transfer land rights. Common Law involves accepted rules and principles that date back to ancient times that go back several centuries past. This include accepted and recognised rules and regulations on how land is vested in people. Equitable interests are those interests in land that are not defined as legal estate in land in Common Law or statute6. Equitable interests are due to other reasons and circumstances that put authority in the hands of an identifiable individual. The Law of Property Act (1925) defined two statutory legal estates in land: freehold and leasehold. All other interests are equitable interests. The Law of Property Act (1925) stated that “a disposition of an equitable interest... subsisting at the time of disposition must be in writing"7. This implies that in the normal sense, the transfer of equitable interest in land ought to be documented in the conventional sense. Trusts also create equitable interests for others. There are three main types of equitable interests: express trusts, resulting trusts and constructive trusts8. An express trust is the transfer of land from one party to the other in a way and manner that involves either a direct transfer or express writing of a transfer of an equitable interest from one party to another (beneficiary). This will be clearly identified and stated in the arrangement. Resulting trusts are forms of trusts that are implied by the operation of the law9. This is because it involves a system where land rights are transferred from one entity or the other due to a number of actions that create a legal situation that effectively mandates the transfer. Constructive trusts on the other hand comes about due to the intention of a person to share rights to a given land with another person10. Interests in Land Capable of Overriding Interests in land could be exercised as an equitable right to land if there is actual occupation. This is known as the concept of overriding interest11. Where a person has an interest in a land and is actually occupying the land, there is an overriding interest and this could be used to create proprietary rights over the land. However, land occupation is not itself enough to give someone an overriding interest This is because an interest in land will need to exist and must be convincing in order to give an occupier a proprietary right to a given land. Analysis of the National Provincial Bank Ltd V Ainsworth Case The point in law that was discussed in the case was the issue of whether the deserted wife had a right to an equitable claim over the land or not. This is because Mrs. Ainsworth had some rights to the land because she was legally married to Mr. Ainsworth. And there was absolutely no role played by Mrs Ainsworth in the bank loan that was taken when Mr. Ainsworth had deserted her. Therefore her lawyers argued that she had an equitable right to the land and could exercise it in order to attain some degree of control over the property. Lord Denning held on appeal that the deserted wifes equity was intact and could bind third parties like the banks. However, the bank argued that the interest of Mrs. Ainsworth to the land was not strong enough to create overriding interest in the land. This is because they argued on the premise that she had been deserted and effectively divorced. Hence, Mr. Ainsworth could technically dispose of all his properties as he wished. And on the other hand, the National Provincial Bank acquired some equitable interest in the property because Mr. Ainsworth did not dispose of the property directly. It was used as a collateral and hence, the property became a constructive trust and the bank got an right to the property by law. Thus, the case was referred to the House of Lords who had to decide on the effect and authority of the equitable interests that both parties were claiming. Lord Upjohn stated that the land was vested in Mr. Ainsworth and until he returned, the right of Mrs. Ainsworth was just limited to her ability to take action against trespassers. However, she had no right to take up discussions relating to the sale and disposal of the rights to the property. Lord Wilberforce identified that the right of Mrs. Ainsworth to occupy the property was personal in nature and was dependent on Mr. Ainsworths ownership of the property. Once that ownership was lost, the veil of equity was torn down and there was the need for the deserted wife to be dispossessed of the property. This means that the right to land was personal and not capable of binding third parties. It was contingent on her relationship with her husband but not strong enough to bind third parties. Thus, the point was that the interest in the property was meant to protect and hold on to the property, however it was not permanent in nature. Thus, the fundamental point of decision was whether Mrs. Ainsworth could be granted protection based on the circumstances without causing injustice to a third party. It was clear that denying the bank the right to the property would be woefully unfair. Therefore, the “deserted wifes equity” could not be invoked and the House of Lords disqualified her and granted the property to the bank. Proprietary Estoppel Proprietary estoppel provides another form of proprietary rights that prevent a party from denying the right that another person had on a first partys property. It is an equitable doctrine that is invoked where there is a dispute in the transfer of ownership. It occurs if one party claims that the transfer of land to another person has no legal effect due to some previous promises in the past that creates a recognisable right to the land. Also, it must be apparent that the claimant had spent or acted to his detriment to hold on to the property. In the case of Dillwyn V Llwelyn12 a father promised a house to his son who took possession of the house and spent a large amount of money improving it. The father never actually transferred the property but the son claimed to be the equitable owner and won the claim. The Two-Stage Test In order to grant an equitable right under the doctrine of proprietary estoppel there is the need for a two-staged test to be conducted to establish that such a right has arisen13. The first stage is the equity stage which will establish that an estoppel could be claimed legally. This means there is the need to establish that there is grounds to make claims on the basis of some promise that estops the other party from claiming the rights to the property in question. The second stage is that there must be elements that satisfies the requirements of the estoppel. In other words, the court must check the circumstances and grant that truly, an estoppel existed. Until this is done, the claim for a promissory estoppel is inchoate14. The court must check the circumstances and grant the promissory estoppel or reject it based on the circumstances. Establishing the Propriatory Estoppel In the case of Taylor Fashion V Liverpool Victoria Tuskers15 it was held that there are three things that exists to establish the proprietary estoppel. First of all, there must be a proof that the legal owner made some assurances to the person claiming the right under promissory estoppel. Secondly, the claimant must have relied on the promise and finally, the claimant must have made some allotment that was to his detriment. In other words, assurance, reliance and detriment gives rise to rights under proprietary estoppel. In the case of Inwards V Baker16 Mr. Baker wanted to build a bungalow on his fathers land. However, the father told the son to build a bigger property on the land. The father insisted on the building of a larger house on the land to make use of the space of the land. The son, Mr. Baker spent a considerable sum of money to build the bigger house. However, the fathers will gave the land to Inwards. Mr. Baker therefore sued for a property estoppel to estop Inwards from taking over the property. The court of appeal went through the two stages and stated that the insistence of the father that Baker builds a larger house was assurance and representation. Bakers quest to spend more money to build a larger house on the land showed that there was reliance. And finally, the fact that he spent money represented detriment. Once this was proven, the courts granted the proprietary rights to the land to Mr. Baker. However, it must be stated that the proprietary estoppel principle is discretional. In the case of Pascoe V Turner17 it was held that although proprietary estoppel existed and a case existed to prove it, it could not be accepted and Turner got nothing18. Deserted Wifes Equity V Proprietary Estoppel The deserted wifes equity is a right that is invoked on the grounds of seeking a premise for the refusal to grant a transfer of property due to an inherent right claimed by the deserted wife. The right can sometimes be compromised if it is not definite and there is no clear basis to support it. Where a wife has limited contributions to the property and there is no promise of the husband to transfer the property to the wife, there is no equitable basis for the claim. Hence, such a claim cannot be recognized in equity. Secondly, there is a general maxim in equity that says equity acts as a shield, not a sword. In the case of the National Provincial Bank V Ainsworth, the wife had no express promise from the husband that the property rights were vested in her. Secondly, it is clear the wife did not make contributions to the capital value of the property. Hence, there could be no basis to grant proprietary estoppel. On the other hand, granting the estoppel to the deserted wife would have caused severe hardships for the bank. This is clearly not a system that equity must encourage. Hence, they had to qualify the rights of the deserted wife. Proprietary estoppel on the other hand ensures that certain basic elements of UK law are present before the right is granted. There must be an express promise which was missing in the case of Mrs. Ainsworth. Mr. Ainsworth said nothing about transferring the land to her. It can be assumed there might have been some degree of tension which led to his movement from the house. So there was no promise of a transfer. Secondly, Mr. Ainsworth did not expressly state that he was selling the house. Rather, he entered an arrangement that turned out to create a situation in which his rights to the house he owned fully was ceded to the bank. There was no promise that Mrs. Ainsworth relied upon. So there is some degree of logic behind the fact that Mrs. Ainsworth could not exercise any rights to prevent the sale. Finally, there is no evidence that Mrs. Ainsworth contributed to the capital development of the property. In that case, there is no evidence or grounds to grant her the rights to the property. This means that the property could be rightly transferred and held by the bank since invocation of the Deserted Wife Principle had no strong basis in Common Law or Equity. Books Ciparisse Gerard. Multilingual Thesaurus on Land Tenure (London: FAO Publications. 2010) Clarke Sandra and Greer Sarah. Land Law Directions (Oxford: Oxford University Press. 2010). Ramjohn Mohammed. Q and A in Equity and Trust 2013. 2014 (London: Routledge. 2013). Cases Dillwyn V Llwelyn [1862] 4 De GF J 517 Inwards V Baker [1965] 1 A II ER 446 National Provincial Bank Ltd V Ainsworth [1965] AC 1175 Pascoe V Turner [1979] 1 WLR 431 Sledmore V Dalby [1996] 72 E CR 196 Taylor Fashion V Liverpool Victoria Tuskers C [1982] QB 133 Statutes Land Registration Act 1925 Read More