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9.2.2 Licences and Proprietary Estoppel Lecture

LICENCES

Licences are certainly the lowest-ranking category of property rights. There are four kinds of licences which exist in English law.

Bare licences

A bare licence is simply the giving of personal permission by the landowner for the licensee to enter and remain on the land. A licensee may not transfer what few rights they have to another party.

Creation

A bare licence may be created orally and be express or implied. Given their somewhat informal nature, they often arise by circumstances or conduct (R (Beresford) v Sunderland CC [2003] UKHL 60). It is by this means that a trespass may shift into a bare licence, where the landowner has knowledge of the trespass and gives no objection to it (Canadian Railway Co v The King [1931] UKPC 18).


Bare licences and trespass

The threshold between a licence and trespass is small and easily transgressed. Thus, the licensor retains the right of arbitrary exclusion, meaning they can choose to exclude the licensee at any time for any duration.

Contractual licence

A contractual licence is similar to a bare licence insofar as it grants the licensee permission to access the land. Where the two kinds of licences differ is that the contractual licence includes the giving of consideration by the licensee for the benefit of the licence (Horrocks v Forray [1976] 1 WLR 230). The underlying contract may be either express or implied.

A contractual licence is terminable upon the end of a fixed term, without any requirement of notice (Sandhu v Farooqi [2003] EWCA Civ 531).

Licences coupled with an equity

A licence coupled with an equity may not be terminated simply upon the wish of the licensor. These sorts of licences are found in situations where the landowner ‘grants a licence to another [person] to go upon land and occupy it for a specific period or a prescribed purpose, and on the faith of that authority the licensee enters into occupation and does work, or in some other way alters his position to his detriment’ (National Provincial Bank Ltd v Hastings Car Mart Ltd [1965] UKHL 1).

Licences and proprietary estoppel

As you will see, this concept of a licence coupled with an equity is very similar to the framework of rights granted in proprietary estoppel. Those latter rights have come to accommodate a binding effect on third parties (Land Registration Act 2002, s.116(a)). We can see the overlap between the two doctrines in the case below:

Case in focus: Tanner v Tanner [1975] 1 WLR 1346

Licences coupled with the grant of an interest

This type of licence confers upon the licensee the right to go on another person’s land for the sole purpose of removing something from the land. This license therefore includes the rights granted under profits à prendre to access an interest, coupled with the right to enter land in order to exploit the interest.

Licences and third parties

For licenses, the real dilemma lies with contractual licences given their close similarity to proprietary estoppel.

Broadly, the case law says that ‘a contractual licence does not create a property interest’, meaning it is not binding against third parties (Ashburn Anstalt v Arnold [1988] EWCA Civ 14; Lloyd v Dugdale [2001] EWCA Civ 1754).

This view was not universally held, however. It is highly unlikely that, in registered land, a contractual licence will be deemed capable of so affecting a third party purchase that the third party is bound by the licence (Habermann v Koehler and another [2000] All ER (D) 1739).

Licences and constructive trusts: overlap?

For contractual licences and unregistered land, there may be instances in which they are enforceable by means of a constructive trust. Usually, a contractual licence is not necessarily capable of binding a third party purchaser. Although it had once been said to be possible as such (Binion v Evans [1972] EWCA Civ 6), subsequent case law has determined that a third party purchaser will only be bound by a contractual licence where the circumstances amount to a constructive trust. Such a trust would arise where:

  1. A third party has of their own volition ‘burdened their own title’ upon making their own obligation to the contractual licensee (Bahr v Nicolay (No. 2) [1988] HCA 16); and/or
  1. The transfer of the property to the third party was based in part on the sale of the property at a lower than market value, with such sale given on the understanding that the terms of the contractual licence would be upheld (Ashburn Anstalt v Arnold [1988]).

With all that said, there is an exception in contractual licences, according to which the licence may be binding against third parties where the licence is protected by way of a register entry.

Further, it appears that some licensees may actually be acquiring some proprietary interests against third parties by way of possession: a contractual licensee may sue in trespass if he has exclusive possession (Hounslow LBC v Twickenham Garden Developments Ltd [1971]), and where there is a licence coupled with an interest (meaning to enter land and remove certain products such as timber from the land), the licensee has rights against parties that trespass on the land and prevent the licensee from carrying on their activity (Manchester Airport v Dutton [1999] EWCA Civ 844).

PROPRIETARY ESTOPPEL

The doctrine of proprietary estoppel is based on ‘the first principle upon which all courts of equity proceed… [which is] to prevent a person from insisting on his strict legal rights – whether arising under a contract, or on his title deeds, or by statute – when it would be inequitable for him to do so having regard to the dealings which take place between the parties’ (Crabb v Arun DC [1975] EWCA Civ 7 per Lord Denning MR).

The purpose of proprietary estoppel is to refrain, or ‘estop’, any attempt by a legal owner to inequitably go back on guarantees made by them in the course of dealing with another party regarding the owner’s land.

The advantage of proprietary estoppel is that it can help to make sense of, and thereby enforce, the sorts of arrangements that are entered into by laypersons, particularly licences.

In order for a landowner to be “estopped” from carrying on a certain act, it must be shown that in the ‘particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly or unknowingly, he has allowed or encouraged another to assume to [the denying party’s] detriment’ (Taylors Fashions Ltd v Liverpool Victoria Trustees Ltd [1982] QB 133 per Oliver J). Relief will thus be granted if to do so would be ‘just’ (Sledmore v Dalby(1996) 72 P & CR 196 CA (Eng) per Hobhouse LJ).

Essential Elements

A claim of proprietary estoppel depends on the person claiming the benefit being able to prove three elements (Thorner v Major [2009] UKHL 18 per Lord Walker of Gesingthorpe and Lord Neuberger of Abbotsbury):

  1. Representation

Representation is shown where the representor intended for their assurances to the representee to be relied upon (Matharu v Matharu(1994) 26 H.L.R. 648, CA (Eng)). A representation is essential: a mere expectation of rights is not enough, and a long-standing practice will not suffice (Keelwalk Properties Ltd v Waller [2002] EWCA Civ 1076).

Subject matter

The subject of the representation can take the form of almost any property right, so long as the assurance made was ‘clear and unequivocal’ (Thorner v Major [2009]).

Case in focus: Pascoe v Turner [1979]

Unclear representations

If the representations are not of a ‘sufficiently concrete character’, the claimant is not reasonably entitled to expect the alleged rights flowing from the representation (Orgee v Orgee [1997] EWCA Civ 2650). Even if the representor’s resiling from the representation is unconscionable, the detriment may be so uncertain in nature and extent ‘that even equity may not be able to devise an appropriate remedy for it… There are parts that sometimes even equity cannot reach’ (Willis v Hoare (1999) 77 P & CR D42).

  1. Reliance

Reliance occurs where the representee has changed their position and suffered a detriment because of the assurances received from the representor.

It is not necessary that the representation be the only inducement to cause the representee to change their position, so long as the representation was among the causes (Campbell v Griffin [2001] EWCA Civ 990, CA (Eng)).

Knowledge

The person claiming proprietary estoppel cannot do so unless the representor had knowledge, either actual or constructive, of the representee acting in reliance on the expectation of a benefit following the representor’s representation (Barclays Bank plc v Zaroovabli [1997] Ch 321).

Change of position

There has to be evidence of a “relevant” disadvantage incurred by the claimant when they act upon the representation made by the representor. The usual method by which change of position is demonstrated is where the claimant expends money or resources in improving or maintaining the landowner’s property (Dillwyn v Llewelyn [1862] EWHC Ch J67).

Case in focus: Gillett v Holt [2001]

  1. Detriment

Detriment is shown when the representation, once made and relied upon, has been unconscionably withdrawn. The unconscionable withdrawal is key to this step: no actionable disadvantage is deemed to accrue until the original representation is withdrawn or revoked (Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58). The test for the claimant is to demonstrate that the withdrawal of the representation causes such ‘prejudice… that it would be inequitable to allow the party who made the relevant representation to go back on it’ (Watts and Ready v Storey(1984) NLJ 631 301).

Standard of unconscionability

When the representor insists on enforcing their solely legal right, they must do so in a manner and in such timing that they are ‘taking advantage of [the representee] in a way which is unconscionable, inequitable or unjust’ (Crabb v Arun DC [1975]). The unconscionability is in part measured by the material detriment suffered by the claimant.

Duration of equity

The courts have been willing to keep the doctrine of proprietary estoppel flexible insofar as its timing is concerned. So long as the detriment is not removed or that the claimant’s inequitable loss is not compensated, the claimant retains a claim in proprietary estoppel (Commonwealth of Australia v Verwayen (1990)170 CLR 394).

Case in focus: Sledmore v Dalby (1996)

Proprietary estoppel and third parties

The earliest case law which considered whether a benefit or burden can be transferred to a third party indicated that proprietary estoppel was merely a personal right and therefore incapable of assignment to a third party (Jones (AE) v Jones (FW) [1977]). However, the case law has changed somewhat.

The benefit of a proprietary estoppel is capable of assignment, not just by the original party relying on the assurance, but also by a successor in title to the original party (Cameron v Murdoch (1986) 63 A.L.R. 575).

Transmitting the burden of a proprietary estoppel has also seen a similar evolution. Prior to the enactment of the Land Registration Act (LRA) 2002, the court had seen in estoppel a sufficiently proprietary character that made it possible for the burden of a proprietary estoppel to be assigned from the original representor to successors in title (Lloyd v Dugdale [2001]). Subsequently, the LRA 2002 provides that an ‘equity by estoppel’ takes effect ‘from the time the equity arises an interest capable of binding successors in title’ (LRA 2002, s.116(a)).

Proprietary estoppel and constructive trusts: overlap?

Some have suggested that the overlap between proprietary estoppel and constructive trusts is so strong that the two concepts are effectively interchangeable (Birmingham Midshires Mortgage Services Ltd v Sabherwal [2000] 80 P & CR 256). One distinction between the two concepts is the notion of bargaining, or lack thereof. Constructive trusts require a bargaining between the two parties, whereas proprietary estoppel merely requires that the representor has observed the representee incur disadvantage by relying on the representor’s previous statement(s) (Yaxley v Gotts [2000] Ch 162).


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