The Cases of Midland Bank v Cooke and Drake v Whipp: the Parties and the Interest - Case Study Example

 In the first case, where M is concerned, since he has paid a sum of £50,000 to N towards the purchase of the property, this may substantiate his claim for some interest in it. There is no formal tenancy agreement between M and N for the possession of the flat upstairs, therefore M’s rights to any claim for continuation of his possession of the flat may be restricted. The mere fact that he has not handed over vacant possession may not constitute adequate grounds to protect him under the security of tenure offered under a tenancy1 because M and N have not entered into a tenancy agreement at all. M could argue that (a) there was an understanding between him and N about the occupation of the flat (b) he has not given back vacant possession of the flat to N and (c) he has contributed the furniture in the flat and on this basis, he could seek to retain possession. But this may not be grounds strong enough to protect him, because the agreement between M and N was that the tenancy would continue only until M found another place to live. M has not only found another place, N has also entered into a tenancy agreement with R, thereby indicating that from N’s perspective, the tenancy of M had come to an end. In the absence of a formal tenancy agreement, M’s options in this area may be limited. But the Courts may still hold that he has some interest in the property because of the investment that he has made into it. A beneficial interest may be established through a contribution to the purchase price or indirectly, by adding to the resources for acquisition of the property. Lord Bridge2 has clarified that neither fairness nor a common intent can be the basis for acquisition of beneficial interest, but any indirect contributions can earn a beneficial interest if based upon an agreement between the parties. For instance, the problem that was presented to the courts in the cases of Oxley v Hiscock3 and Stack v Dowden4 was the question of quantifying the beneficial interests of various parties in cases where there was no clear evidence based upon the founding of an agreement, arrangement or understanding. This may also apply to the case of M. In the case of Oxley, the Court examined the precedents established in the cases of Midland Bank v Cooke5 and Drake v Whipp6 and held that the beneficial share to which each party would be entitled would depend upon “the whole course of dealing between them in relation to the property.”7 This was also the basis upon which beneficial interest was quantified in the case of Stack; as a result, the cumulative effect of both these cases is that the determination will be made taking fairness into account but examining the entire course of dealing between the parties in order to quantify the interest. In the case of Oxley, one party had made a direct contribution to the purchase price, i.e, £60,700, while the other party’s contribution was £36,300. The Court made an allocation in the ratio of 60:40, giving due weightage to unequal contributions, so that the allocation of beneficial interest was directly in proportion to their direct contributions. Similarly, in Stack v Dowden, the Court made an allocation of beneficial share of 65:35. It appears very likely that in this case also, after a thorough examination of the whole course of dealing between the parties, the Court may give weightage to M’s contribution to purchase price of the property in allowing him a quantified beneficial interest in it. While the title of No: 45 now rests entirely with N, M can still claim a share of any income he receives from the sale or lease of the property in proportion to his original investment in No: 45, because this investment has gone into the purchase of the property. The case of R: Where R is concerned, there is an actual lease agreement in place for a one year term, which is to commence in December 2008. It could be argued that N, as the new buyer of No: 45, had the obligation to find out if there were any claims and interests on the land and object to them before purchase, failing which his rights are affected. But as the new registered owner of No: 45, N will be bound only by those overriding interests that are still subsisting on the date that the property has been registered and those interests which are subsisting on the date that the title is transferred8, i.e., October 2008. Since the Land Registration Act of 2002 has come into force on 13 October, 2003, any existing easements and leases need to be registered before they can be effective.9 When a lease has been granted out of the land, there is a requirement set out under Schedule 2 of the Land Registration Act that “a notice in respect of the lease must be entered in the register.”10 But in R’s case, no such entry has been made in the register although it could be argued that his interest subsists because the date of commencement of the lease, i.e, December 2008. But P could contest R’s tenancy on the grounds that no notice in respect of the lease was entered in the register at the time he became the sole registered owner of No: 45. On this basis, he can also contest the possession that R is claiming. Since R has not been using the flat for any sustained long period, it would only qualify as a minor interest and being a legal lease, it can be overridden.11 R’s agreement with N does not constitute a registered minor interest12 and has not been entered on the register. Only an equitable lease cannot be overridden13 and if R has a written agreement with N, this may apply in his case. But despite this, the fact that it has not been registered on the title and that it constitutes a minor interest, are both factors that could impede his rights to possession. It must also be noted that as per the Landlord and Tenant Act of 1954, there are some grounds available to a landlord to contest a lease. In this instance, P is now the new landlord for the potential tenant R, who has been assigned the lease that once belonged to M. A landlord can refuse to consent to a lease, hence N does have the option to refuse to consent to the lease. His refusal will be assessed by the Courts on whether or not it is unreasonable, based upon the principles that were established in the case of Ashworth Frazer Limited v Gloucester City Council14 where it was held that the Courts must assess the extent to which such a decision by the landlord to refuse consent to a lease is reasonable. For example, a landlord will not be entitled to refuse consent to a lease on grounds that have nothing to do with the relationship of the landlord and tenant in regard to the subject matter of the lease, as set out in the case of International Drilling Fluids Ltd v Louisville Investments (Uxbridge Ltd).15 The Court is required not to rely upon any earlier case precedent as a rule of law, but rather to assess each case individually.16 Hence, the Court will assess R’s lease and P’s treatment of it based upon the circumstances associated with this individual case. If P chooses to refuse to consent to the assignment of M’s lease to R, which N – the former landlord, has consented to, he will have an obligation to show that his conduct in refusing to consent to the lease is reasonable, not necessarily that it is either right or justifiable, as also stated in the case of Pimms Ltd v Tallow Chandlers Company.17 For instance, applying the principles set out in the case of Ashworth Frazer, it could be considered reasonable for a landlord to refuse to consent to the assignment of a lease if such a refusal is necessary in order to prevent the tenant from acting in a manner that would prejudice the landlord’s rights. In this instance, it must be noted that there are other competing interests being claimed on the property. S is claiming a lease interest on the front yard which will cut off P’s parking space and U has a prior claim on the rear storage yard. This leaves P with little else but the two storey building and the rear garden in his possession, despite being the owner of the freehold title. On this basis, it may not be considered unreasonable for him to refuse to allow R’s interest in the property, since it is only a minor legal interest and cannot be claimed as an equitable interest. On this basis, P may be able to refuse to consent to the lease and the Courts may hold thta it is reasonable to withhold consent in this manner. The case of S: In the case of S, it must be noted at the outset that S’s interest in the lease of the front yard, as set out in the letter of agreement between N and S, has also been entered in the title. Therefore, on this basis, it would be difficult for N to claim that he had no knowledge of S’s interest because a notice in respect of the lease has been entered in the register in accordance with Section 3(2) (b) of the Land registration Act of 2002. Since this interest is also in the form of a written agreement between N and S, which was entered into in 2006 and N has not taken any steps to withdraw the interest that he has allowed, it would be considered to be a valid interest. It is also likely that the Courts may consider this to be an interest that is not purely a legal one, but is also an equitable one, because S is putting down a payment of £40,000 in order to acquire this interest. Since S had requested this interest way back in 2006 and is also putting down a large sum of money, the natural assumption in this case would be that S has worked hard and may have also gone through some hardship to collect this large amount of money in the space of two years, it may not be equitable to refuse S the interest which is being claimed. It may be possible for P to negotiate with S for the use of some portion of the yard as parking space for his car. This is likely to be the best option available to P, because there is a high likelihood of the Court honouring S’s interest in the property and making a declaration that S be allowed to lease the front yard if the required deposit amount is provided. It may be possible for P to claim that he is being put to hardship through the loss of parking space, but since, as the new registered owner of No: 45, he will be receiving the sum of £40,000 for the lease of the front yard, this argument may be difficult to sustain. Hence P’s best option in this instance would be to arrive at some kind of negotiated settlement with S. The case of U: Where U’s claim to the rear storage yard is concerned, P could argue that this interest has not been indicated in the title through a notice. He could claim that he is responsible only for those interests subsisting on his title on the date of transfer of title and no such indication existed on the title when he purchased it. While this is a valid argument, it may not be adequate to negate U’s claim. In the first instance, U has made an investment into acquisition of the rights over the rear storage yard. Secondly, U’s title also contains a clear indication to this effect, which confirms his right over the yard and its inclusion within the boundaries of his property after his purchase. Although there has been a mistake made in that a similar notification has not been entered into P’s title register, it might be inequitable for the Courts to refuse to honour this transaction purely on the basis of a clerical mistake of failing to enter the note into the title register. The only possible exception that could apply in this case would be if P is able to demonstrate that the transfer of the rear storage yard to U was not valid in the first place, because the yard is part and parcel of the land itself. This was the criterion set out in the case of Elitestone Ltd v Morris18, the House of Lords further refined the principle of annexation to land and stated that the question of determining whether a piece of property is a fixture to the land that cannot be removed or separated from it, or whether it constitutes chattel that can be separated, depends upon the extent to which it may be considered to be a part and parcel of the land.19 It may be possible for P to argue that the rear storage yard was an integral part of the property and thereby contest its separation. This does not however offer P any strong grounds to challenge the transfer of the rear storage yard to U, despite its non appearance on his title. While the Courts are likely to take into consideration the fact that P did not have the requisite notice of this interest that was subsisting on his land at the time of purchase of the property, it is not likely to deny U’s interest and rights over the land. It must also be noted that when purchasing a property, the onus is on the buyer to carry out a detailed inspection of the property and also to ensure that his solicitor/surveyor does a comprehensive job in terms of examining title and boundaries on the property. In this case, T working on behalf of N has not taken the time to properly inspect the title deeds and to make himself aware of all the intricacies of it as well as the various claims existing on the property. However, P as the buyer, should have hired his own representative to carefully and thoroughly examine the title. If steps had been taken to do this, all of the competing interests subsisting on the land would have been evident and P could have modified his decisions accordingly in respect to the purchase of the property. But in this instance, since P has failed to carry out the necessary inspections and examinations into the title prior to the purchase, he now has no option but to accept and allow these competing interests. If he had been aware that S had a claim on the front yard, U on the rear storage yard and M a beneficial interest in the property, he could have chosen not to buy the property. It is now too late to contest these interests successfully, therefore it appears likely that P will have to accept them. In conclusion therefore, in respect of the various claims being made on the property, P’s options are as follows: In the case of M, P may have to allow for M’s beneficial interest in the property and M’s share of this beneficial interest may need to be determined by the Courts in proportion to his investment into the purchase price of the property. Where S is concerned, P may have to honor the lease interest that was provided by N and recorded on the title. However, P does have the option to negotiate with S to allow him the use of some of the land to park his car. In the case of U’s interest, there is little that P can do and he may need to accept that the boundary of the property he purchased has changed and U is the legal owner of the rear storage yard. It is only where R is concerned that P has strong grounds to successfully contest R’s claim for possession of the flat on a lease that was given to him by N. P may be able to prove that such an assignment of lease would impact adversely upon his own interests as the new owner of a property which allows him a considerably lower level of freehold interest than what he had originally envisaged at the time of purchase of the property. Bibliography Kirtlan, Yvonne, 1997. “Land, fixture or chattel?” Estates Gazette, 14 July at pp 121 The Landlord and Tenant Act of 1954 Land Registration Act of 2002 Cases cited: Abbey National Building Society v Cann (1991) AC 56 Ashworth Frazer Limited v Gloucester City Council [2001] 1 WLR 2180 Bickel v Duke of Westminster [1977] QB 517 Drake v Whipp [1996] 1 FLR 826 Elitestone Ltd v Morris (1997) 1 WLR 687, HL Lloyds Bank v Rosset (1991) 1 AC 107 HL International Drilling Fluids Ltd v Louisville Investments (Uxbridge Ltd) (1986) Ch 513 Midland Bank v Cooke [1995] 4 AER 562 Oxley v Hiscock (2004) EWCA Civ 546 Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547 Stack v Dowden (2007) UKHL 17 Read More