Law of Property Analysis - Essay Example

In order to deal with the first issue it is necessary to examine the law on restrictive covenants1. In deciding whether the covenant is enforceable it is necessary to look at the creation of restrictive covenants and the circumstances under which these can become binding when the property is conveyed to another. It is important to note that when dealing with the burden of a covenant such a burden is never assignable and generally does not run with the land2. Where the property is a leasehold property the burden can run with the land3. If the covenant is a restrictive covenant then in equity the burden may run with the land irrespective of whether it is freehold or leasehold land4. Restrictive covenants only exist where there is a negative duty on the owner of the covenanted land5. In this instance the duty is a negative duty6 as the restrictions applied by the covenant state that no work can be carried out on the pigs cannot be kept on the land and not to use the land for any form of business In order for a restrictive covenant to be binding on successive owners of the land the covenant must be recorded on the register as a minor interest. If the covenant is not recorded in this way then the new purchasers take the property free of all the agreed covenants7. Baroness Whinge could assert that the benefit of the restrictive covenant has passed to her land and that she intends to enforce this covenant. It is important to note that covenants are only binding between the parties to the contract and cannot bind third parties8. This would mean that the covenant between Baroness Whinge and Lord Stubborn. If the wording of the covenant includes their successors-in-title9 the implication of this is that the original parties have promised that all future owners will observe the covenants. When Lord Stubborn started using the land in this way Michael would effectively be held to be in breach of the covenant10. Michael could ensure that the covenants are kept by successive owners by getting a covenant from them to indemnify him against any liability he might incur if the covenants are breached. Section 78 of the Law of Property Act 1925 entitles the new owners to claim for breaches against any successors-in-title if it can be established that the benefit of the covenant has become part of the land. The claims would not be against the new owners but the original parties to the covenant unless a covenant had been made between the original parties and the new owners11. As Lord Stubborn was not made aware of the covenants it may well be that he the court will not be able to hold him liable for the breach of the covenants. Where the covenants have not been entered on the register the new buyer would hold the property free of any covenants and Baroness Whinge would be unable to prevent Lord Stubborn using the land in this way. The doctrine established by Tulk v Moxhay12 based the decision on whether should a burden could be passed on the doctrine of notice and on the principle that a purchaser who had notice of obligations undertaken by his vendor should be bound by those obligations. This would mean that under common law Lord Stubborn would not be given the burden of the restrictive covenant but in equity such a burden would pass to him. It could be argued that Lord Stubborn did not know of this covenant when he purchased the land and therefore did not have notice of this covenant. If the covenant has not been correctly entered on the register, than Lord Stubborn may well be successful in arguing that he should not be bound by the restrictive covenant as he had no knowledge of its existence when he bought the land13. If the covenant was properly registered and Baroness Whinge can show that the benefit of the covenant has passed to her and the burden has passed to Lord Stubborn in equity then she can apply for an injunction to prevent Lord Stubborn from breaching the covenant14. The covenant to contribute towards the repair of the fence could cause difficulties for Baroness Whinge to enforce as the covenant to maintain this is a positive covenant and as mentioned above the burden of a positive covenant cannot be passed to a successor in title either under common law or under equity15. It was decided in Halsall v Brizell [1957]16 that a positive covenant does not run with the land and therefore the successors in title could not be bound by the burden of the covenant to contribute to the road repairs. There would also be further difficulties if the fence did not benefit Baroness Whinge as the courts would be likely to infer that the covenant did not touch and concern her land17. If the covenant had been worded in the form of not letting the fence fall into a state of disrepair it might have been construed as a negative covenant and could have passed with the title18. From the above it is likely that Baroness Whinge would not be able to enforce the covenant against Lord Stubborn as only the burden of restrictive covenants can be passed to successors in title19. When considering undue influence it is necessary to understand what is defined as undue influence. The doctrine of undue influence is where one person takes advantage of a position of power over another person. Undue influence can be presumed or actual. “Equity gives relief on the ground of undue influence where an agreement has been obtained by certain kinds of improper pressure which were thought not to amount to duress at common law because no element of violence to the person was involved20” (GH Treitel, The Law of Contract p378). Undue influence was described by Lindley LJ in Allcard v Skinner (1887) 36 Ch D 145, as "… some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating and generally, though not always, some personal advantage gained." There is no need for any threats to be made for the doctrine of undue influence to be exercised21. The person asserting actual undue influence must show that undue influence existed and had been exercised22. If the party claiming the relief can prove that undue influence was exerted upon them they are entitled to have the transaction set aside. The effect of being able to prove undue influence is that the contract becomes voidable. In CIBC Mortgages v Pitt [1993] 4 All ER 433, the House of Lords held that there is no requirement in cases of this kind that the transaction must be shown to be to the manifest disadvantage of the party seeking to set it aside. Claims for undue influence require the courts to examine the relationship of the parties. Under UK law the courts will recognise certain relationships were a presumption of undue influence might be raised23. These special relationships do not require the party claiming the relief to prove that undue influence existed and had been exercised. The general principle behind the application of presumed undue influence appears to be one of public policy even if the transaction was not disadvantageous to the person claiming the relief24. Lord Scarman made the point in National Westminster Bank Plc v Morgan [1985] AC 686 that the basis of the rule is “not a vague public policy but specifically the victimisation of one party by the other”. He went on to say that the party claiming the relief would have to show that the transaction was to their manifest disadvantage25. There are 2 categories where the presumption of undue influence might apply26. Certain relationships as a matter of law give rise to a presumption of undue influence these are between parent and child27, guardian and ward28, religious advisor and disciple29, doctor and patient30, solicitor and client31 and trustee and cestui que trust32. This rule does not apply or husband and wife33 or between employer and employee34. Undue influence can also be presumed in relationships of actual confidence. When proving this the party claiming has to show that the relationship between the person exerting the undue influence and themselves was one of confidence. A wife may well find it easy to prove that she has reposed trust and confidence in her husband or that her husband had domination over her35 and be able to rely on this rule for a presumption of undue influence to be inferred by the courts. The relationship between a customer and a banker does not normally give rise to a presumption of undue influence, but can do in exceptional circumstances where the customer has not been given an opportunity to seek independent advice and has trusted the bank to act in his best interests36. In order for a bank to be able to enforce payment they must be able to rebut the presumption of undue influence. Undue influence can be rebutted if the party who benefited from the transaction can show that the party claiming the relief was exercising independent will when they agreed to the transaction. This can apply even if no external advice was given to the party claiming the relief or where advice was offered but not taken37. The usual method of rebuttal is to show that the party claiming the relief had received independent advice before agreeing to the transaction38. Even if the mortgagee had received independent advice the transaction might still not be saved. The courts would have to be satisfied that the advice given was competent and based on knowledge of all the relevant facts39. Relief for undue influence can be barred if restitution is impossible, if the transaction has been affirmed, if the person seeking to claim undue influence has delayed in making the application or if the rights of a third party would be affected if undue influence was allowed to be asserted. In some instances it might be impossible to put the parties in the position they would have been in before the contract was signed and therefore it would not be possible to rescind the agreement40. The law requires those seeking to adduce undue influence to ‘seek relief within a reasonable time after the removal of the influence under which the gift was made41’. Where the party fails to assert this within a reasonable time it is assumed that the party as affirmed the transaction and no relief can be sought in this manner. If a third party acting in good required an interest as a result of the transaction then equity would not allow the presumption of undue influence to affect their rights to that interest. This was demonstrated in Bainbridge v Brown (1881) 18 Ch D 188 where children who were of full age but not yet emancipated charged their property as security for their father’s debts. It was held in this case that they could not set this transaction aside against the father’s creditors who did not know that they were not emancipated and gave value by forbearing to sue the father. Similarly in Coldunell Ltd v Gallon [1986] 1 All ER 1184 a son had by undue influence induced his elderly parents to mortgage their house to enable his father to borrow £20,000 for the purpose of providing financial help to his son’s business. The lender was unaware of the son’s undue influence over the parents and had done his best to warn them to seek independent advice. In this case it was held that the parents were not entitled to have the transaction set aside against the lender. In general terms damages cannot be claimed for undue influence unless the bank has breached its duty of care to the mortgagee, in which case the mortgagee would be able to bring a claim against the bank in negligence42, or likewise against a solicitor who acts negligently in the giving of advice43. From the above it would seem fair to conclude that a mortgagee would be able to bring a claim for undue influence if they could establish that they did not receive independent advice before entering into the agreement. Bibliography Ashburner, W, Principles of Equity, 2nd Ed, 1933, Butterworths Beale, HD, Bishop, WD, Furmston, MP, Contract Cases and Materials, 3rd Ed, 1995, Butterworths Bryn Perrins, Understanding Land Law, 3rd Ed, 200, Cavendish Publishing Ltd Civil Procedure, The White Book, Volumes 1 & 2, 2002, Sweet & Maxwell Cockburn, T & Shirley, M Equity in a Nutshell, 2005, Lawbook Co Dixon, M. Modern Land Law, 5th Ed, 2005, Cavendish  Gravells, N P, Land Law Text and Materials, 2nd Ed, 1999, Sweet and Maxwell Gray, K & Gray, S, Elements of Land Law, 4th Ed, 2005, Oxford University Press Harris, P, An introduction to Law, 4th Ed, 1995, Butterworths Hayton, Commentary and Cases on The Law of Trusts and Equitable Remedies, 11th Ed, 2001, Sweet & Maxwell Jill Poole, Casebook on Contract Law, 6th Ed, 2003, Oxford University Press Pearce & Stevens, The Law of Trusts & Equitable Obligations, 2nd Ed, 1998, Butterworths Rose, FD, Statutes on Contract, Tort & Restitution, 10th Ed, 2000, Blackstone’s Thomas, M, Statutes on Property Law, 8th Ed. 2001, Blackstone’s Transfer of land: The Law of Positive and Restrictive Covenants (1984) Law Commission No 127 Treitel, G H, The Law of Contract, 10th Ed, 1999, Sweet and Maxwell http://www.landregistry.gov.uk http://www.propertylawuk.net www.opsi.gov.uk Table of Cases Allcard v Skinner (1887) 36 Ch D 145 Archer v Hudson (1846) 15 LJ Ch 211 Austerberry v Oldham Corp (1885) 29 Ch D 750 BCCI v Aboody [1989] 1 QB 923 Broughton v Bower [2006] EWCA Civ 632 (2006) 150 S.J.L.B. 707 CIBC Mortgages v Pitt [1994] AC 200 Cocking v Pratt (1749) 1 Ves Sen 400 Dunbar Bank Plc v Nadeem [1998] 3 All ER 876 Ellis v Barker (1871) LR 7 Ch App 104 Goldsworthy v Brickell [1987] Ch 378 Halsall v Brizell [1957] Ch 169 Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403 Hedley Byrne v Heller (1964).AC 45 Howes v Bishop [1909] 2 KB 390 Hylton v Hylton (1754) 2 Ves Sen 547 Inche Noriah v Shaik Allie bin Omar [1928] All ER 189 Lloyds Bank v Bundy [1974] 3 All ER 757 Matthew v Bobbins (1980) 256 EG 603 Morland v Cook (1868) LR 6 Eq 252 National Westminster Bank v Morgan [1985] 1 All ER 821 Osborne v Bradley [1903] 2 Ch 446 OSullivan v Management Agency & Music Ltd [1985] 3 All ER 351 Powell v Powell [1900] 1 Ch 243 Radcliffe v Price (1902) 18 TLR 466 Re Brocklehurst [1978] 1 All ER 767 Re T [1993] Fam 95 Rhone v Stephens [1994] 2 AC 310 Royal Bank of Scotland v Etridge (No 2) [1998] 4 All ER 705 Thamesmead Town Ltd v Allotey (1998) 76 P & CR D20 Tulk v Moxhay (1848) 2 Ph 774 Turnbull & Co v Duvall [1902] AC 429 Wakeham v Wood (1982) 43 P & CR 40 White v Bijou Mansions Ltd [1937] Ch 610 Winter v Traditional & Contemporary Contracts Ltd [2006] EWCA Civ 1740 Wright v Carter [1903] 1 Ch 27 Table of Statutes Land Registration Act 1925 Landlord and Tenants (Covenants) Act 1995 Law of Property Act 1925 Read More