The Court of Appeal has delivered its eagerly awaited judgment in The Port of London Authority v Ashmore [2010] EWCA Civ 30.  The facts are, briefly, as follows:

Mr Ashmore owns a boat, “Atrato”, which he has moored at Albion Wharf, Battersea, for twenty five years or more. The Port of London Authority (“the Authority”) sought to register title to the bed and foreshore of the river, to include that part of the river on which the Atrato was moored. Mr Ashmore objected to the Authority’s application for first registration on the ground that he had acquired title to, at least, that part of the bed and foreshore of the river on which the Atrato rests at low tide by virtue of his adverse possession of the same. Following his objection to registration the Authority commenced proceedings against Mr Ashmore seeking, amongst other things, an order requiring the removal of the Atrato and an injunction preventing its return without the Authority’s licence. Mr Ashmore responded to the issue of proceedings by saying that, in his view, the outcome of the case would depend upon the answer to the following question: whether it is possible to acquire land by adverse possession of the foreshore and / or the sea or river bed by reason of mooring. The Authority seemed to have agreed that this issue was central to the eventual determination of the dispute and so it was ordered, by consent, that the following should be tried as a preliminary issue:

Whether it is possible for the owner of a vessel that is moored in a particular place on a tidal river or other area of tidal water to acquire title by adverse possession to the sea or river bed or the foreshore for the footprint of that vessel where:

(a) the title to the sea or river bed or the foreshore has not been registered; and

(b) the vessel rests on the bed or the foreshore at low tide.

For the purposes of determining the preliminary issue the Authority was required to prepare and serve on Mr Ashmore a statement of assumed facts. It was on the basis of those assumed facts that the Deputy Judge of the High Court in the Chancery Division, Mr Stephen Smith QC, was to make his determination on the preliminary issue of law. During the course of the proceedings counsel for the Authority made what the Deputy Judge described as “two important concessions of law”: (i) that, in principle, title to the bed of a tidal river can be acquired by adverse possession; and (ii) that the fact that the River Thames where Atrato is moored is subject to the public right of navigation would not, of itself, prevent title to the bed or foreshore being acquired by adverse possession. This point will be returned to later.

Stephen Smith QC, in his judgment, reviewed some of the well known authorities such as Roberts v Swangrove Estates Ltd [2007] EWHC 513 (Ch), J A Pye (Oxford) Ltd and another v Graham and another [2003] UKHL 30, Powell v McFarlane and another (1977) 38 P & CR 452, Buckinghamshire County Council v Moran [1990] Ch 623 and Red House Farms (Thorndon) Ltd v Catchpole [1977] 2 EGLR 125, all of which dealt with the acquisition of title to unregistered land by adverse possession.  It was acknowledged that in order to succeed in a claim of adverse possession it is necessary to establish both factual possession and the intention to possess (the animus possidendi). At the risk of oversimplifying the decision of the lower court (by my omitting to set out in any detail the analysis which was undertaken by the judge), Stephen Smith QC determined that:

… it is possible for the owner of a vessel that is moored in a particular place on a tidal river to acquire title by adverse possession to a part of the river bed where the title to the river bed has not yet been registered and the vessel rests on the bed at low tide. Indeed, since I have heard full argument on the point, I would go further and find that in this case Mr Ashmore has established the necessary fact of possession and the intention to possess, to have acquired title to the relevant part of the bed of the Thames adjacent to Albion Riverside.

The problem in this case is that what was to be determined in the original proceedings was based upon the assumed facts which had been prepared purely for the purpose of adjudicating upon the preliminary issue. Sir John Chadwick, giving the judgment of the Court of Appeal, stated:

The task of the courts, as it seems to me, is to decide cases on their facts in accordance with principle. The principles applicable to the acquisition of title to unregistered land by adverse possession are well established. The proper course, in the present case, is to determine what the facts are – a task which should not be unduly difficult – and then to apply those principles to the facts as determined (para [21]).

The statement of assumed facts does not have the status of a pleaded case … it was produced only for the purposes of the trial of the preliminary issue “and without prejudice to the parties’ respective pleaded cases”. It cannot be treated as a definitive or exhaustive statement of facts which either party would wish to advance at a trial … A decision on assumed facts which are neither definitive or exhaustive could not be determinative of the outcome at a trial (para [24]).

The upshot being that the parties have now found themselves, to all intents and purposes, back at square one in respect of this issue. Stephen Smith QC’s declaration in response to the question whether it is possible to acquire title by adverse possession to the sea or river bed in the circumstances posed by the parties was set aside by the Court of Appeal. This was because he had made a declaration in response to the hypothetical question  (hypothetical because it was predicated upon assumed facts) but had, in his judgment, said that he found that Mr Ashmore had, in fact, established the necessary fact of possession and intention to possess to have acquired title to the relevant part of the bed of the Thames. Therefore, the Court of Appeal concluded that “the declaration … is in terms which do not properly reflect the judge’s conclusion”.

Given that the judge recorded in his judgment  that counsel for the Authority had made two important concessions of law, the first being that, in principle, title to the bed of a tidal river can be acquired by adverse possession, it is highly questionable whether it was ever actually necessary to then adjudicate upon the preliminary question. The Court of Appeal’s judgment concluded:

…The issue raised in general terms [by Mr Ashmore] … is no longer contentious (if it ever was). It is accepted by the Authority that it is possible, in appropriate circumstances, to acquire title by adverse possession of the foreshore and river bed by reason of mooring. The question in this case has been, and remains, whether – on the facts as established (not on assumed facts) – Mr Ashmore has done so. That question needs to be tried. If I may say so, delay and expense would have been saved if it had been appreciated that (given the Authority’s decision to accept, in principle, that the title to the foreshore and river bed could be acquired by reason of mooring) this was not a suitable case for a preliminary issue.

Back to the High Court for the Authority and Mr Ashmore then. Watch this space…

Posted by: RM | December 30, 2009

2010: The Year of the New Town or Village Green?

It looks as though 2010 could well be another very significant year for the development of the law on the registration of new town and village greens (now governed by the Commons Act 2006, previously the Commons Registration Act 1965). In January the Supreme Court of the United Kingdom will hear the appeal in R (on the application of Kevin Lewis) v Redcar & Cleveland Borough Council & Persimmon Homes (Teeside) Limited [2009] EWCA Civ 3. This will be the fourth appeal in the context of the law on the registration of new town and village greens to come before the UK’s highest court in a little over a decade, the forerunners being Oxfordshire County Council v Oxford City Council [2006] UKHL 25,  R (Beresford) v Sunderland City Council [2003] UKHL 60 and R v Oxfordshire County Council Ex parte Sunningwell Parish Council [1999] UKHL 28. The decision will hopefully provide some welcome clarity on the question of the relevance of deference by the qualifying user to the landowner’s use of his own land and the relationship between such deference and the user as of right test which test is central to any prescriptive claim. Update: the decision in Redcar was handed down on 3 March 2010 – for a post on that decision see here.

The following month the High Court will judicially review the correctness of a registration authority’s decision to register land as a new green. One of the issues likely to be determined in that case is what constitutes a “neighbourhood” for the purposes of the statutory test. Section 15 of the Commons Act 2006 provides that any person may apply to the registration authority to have land registered as a new green where it can be demonstrated that a significant number of the inhabitants of any locality, or a neighbourhood within a locality, have indulged as of right in lawful sports and pastimes on the land for a period of at least 20 years.

The question what constitutes a neighbourhood has caused considerable confusion, particularly in the context of new green registration applications concerning land within a densely populated environment (usually a city or very large town). Unlike in rural settings where one might normally rely upon a parish as being the relevant locality, within large towns and cities, unless one can point to a specific administrative area as being the relevant neighbourhood, it can be quite difficult to coherently define one’s neighbourhood within a locality. There has been a limited amount of judicial guidance on what constitutes a neighbourhood for these purposes. In R (Cheltenham Builders) v South Gloucestershire Council [2003] EWHC 2803 (Admin) Sullivan J said that a neighbourhood cannot be any area drawn on a map, it must have some degree of cohesiveness. In Oxfordshire County Council v Oxford City Council [2006] UKHL 25, however, Lord Hoffmann said the phrase “any neighbourhood within a locality” (the wording of the relevant provision in the Commons Registration Act 1965 which is replicated in the 2006 Act) was obviously drafted with deliberate imprecision.

These cases promise to provide an interesting start to 2010 as far as the development of the law of new town and village greens is concerned.

The Court of Appeal delivered its judgment in Wild v (1) Secretary of State for Environment, Food and Rural Affairs & (2) Dorset County Council [2009] EWCA Civ 1406 just before Christmas. The case concerned a claimed public right of way over land in Dorset. The ownership of the land was never determined in the proceedings although the Appellant, Mr Wild, claimed that he owned the land over which the right was claimed as manorial waste.  There had been previous unsuccessful applications in respect of the claimed way but in 2003 Dorset County Council, the surveying authority, made an order under section 53(2)(b) of the Wildlife and Countryside Act 1981 that the path the subject of this litigation be added to the Definitive Map and Statement. This decision was confirmed by an inspector who held a public inquiry into the same. The decision was the subject of judicial review proceedings in the High Court where Keith J refused to quash the order. However, the Court of Appeal reversed the decision of Keith J.

There are two methods by which a new public right of way can come into existence. First, section 31 of the Highways Act 1980 provides for the presumption of dedication of a highway after 20 years use. That provision was held not to apply in this case. In the alternative the common law rules still apply, the statutory rules having been introduced to supplement rather than replace the common law. The main difference being that at common law it is not necessary to prove 20 years use which is a pre-requisite for the operation of the statute. This case was concerned with the application of the common law rules.

Ultimately the Court of Appeal determined that the order for the modification of the Definitive Map and Statement be quashed, the requisite test having not been met. Crucial to this decision was the fact that at a previous public inquiry in 1978 there had been objections to the registration of a bridleway along the same route as the claimed footpath. It is not clear whether either of the parties who made the objections were the owners of the land over which the way passed. However, Scott Baker LJ, giving the judgment of the Court of Appeal in this case, concluded that it was possible they could have been the landowner. If that was the case then the objections would have been sufficient to demonstrate that the landowner had no intention to dedicate the way as a public right of way. Unlike in other contexts in which the rules of prescription operate, in the context of public rights of way (as distinct from say easements or new town or village greens) if the landowner does something which amounts to evidence that he did not intend to dedicate a right of way, that will prove fatal to the claim, even where use is otherwise use ‘as of right’.

The end result is that whilst the possibility that one of the 1978 objections was made by the landowner remains alive, there can be no prospect of a public right of way being established. Of course, if the ownership of the land is determined and it becomes apparent that none of the objections came from the then landowner, the door will be open for modification of the Definitive Map and Statement at some later date.

One interesting aspect of the judgment concerned Scott Baker LJ’s criticism of the reasoning of Keith J at first instance. Keith J had concluded that whilst there had been objections in 1978, one of which may have been an objection by the landowner, any failure thereafter to continue to object to the public’s use of the way “neutralised” the effect of the objection made at the 1978 inquiry as far as any inference of dedication was concerned. Such failure to take active steps to prevent continuing user might well be insufficient to render user vi and, therefore, no longer use as of right, which would be insufficient to prevent a prescriptive claim succeeding in the context of a private right of way or new green claim. However, it is the need to infer dedication of the public right of way which enables any expression of contrary intention to have such a dramatic effect on the potential success of a prescriptive claim where public rights of way are concerned.

Posted by: RM | November 25, 2009

Mortgage Lenders Still Exercise Insufficient Caution

The recent decision of the High Court in HSBC Bank plc v Dyche & Collelldevall [2009] EWHC 2954 (Ch) illustrates that mortgage lenders are, despite cases such as Williams & Glyn’s Bank Ltd v Boland [1981] AC 487 in which it was established that a failure by lenders to make proper enquiries of those in actual occupation rendered those lenders exposed to interests which might potentially override their own interests, still not always sufficiently careful so as to avoid the ramifications of overriding interests and issues of priority which arise out of such interests being established.

In HSBC v Dyche property was conveyed to Mr and Mrs Dyche in 1994. The property had belonged to Mrs Dyche’s parents, Mr and Mrs Collelldevall, who had lived there since 1976. In 1988 Mr Collelldevall was made bankrupt. At that time he and his wife owned the property as beneficial joint tenants. The bankruptcy had the effect of severing that beneficial joint tenancy. Following Mr Collelldevall’s bankruptcy his Trustee in Bankruptcy obtained, in 1992, an order for sale of the property which order was not enforced. The then mortgagee subsequently obtained a possession order in 1993. That order was also not enforced. Mr Collelldevall was discharged from his bankruptcy at some time in early 1994.

In January 1994 the property was transferred by Mr and Mrs Collelldevall to Mr and Mrs Dyche with the agreement of Mr Collelldevall’s Trustee in Bankruptcy (“the 1994 Transfer”). The mortgage outstanding at the time was discharged upon completion of the transfer. A sum was also paid the Mr Collelldevall’s Trustee in Bankruptcy, thereby increasing the dividend in the bankruptcy. The purchase price was set to meet the Collelldevall’s immediate financial needs and commitments and bore no relation to the actual value of the property which was, at that time, much more than the £25,000 apparently paid by Mr and Mrs Dyche.

At the time of the transaction Mr and Mrs Collelldevall were unable to secure a mortgage against the property in their own names as a result of his bankruptcy. Hence, it was argued, and accepted, that the Dyche’s acquired the property on their behalf. The Dyche’s obtained a mortgage of £17,000 from Lloyds Bank and Mr Dyche was said to have borrowed the balance of £8,000 from a friend. However, the judge accepted Mr Collelldevall’s evidence that it was he who had borrowed the £8,000 from a friend. There was an agreement that Mr and Mrs Collelldevall would pay Mr and Mrs Dyche in monthly installments amounts which corresponded with the amounts due under the Lloyds mortgage. The judge accepted that following the 1994 Transfer the property was held on constructive trust for the Collelldevalls.

Later in 1994 Mrs Collelldeval died and the judge accepted that her interest in the property passed to Mr Collelldeval under the right of survivorship. Whilst the bankruptcy had had the effect of severing the joint tenancy the judge concluded that the effect of the 1994 Transfer was to put the Collelldevalls, as far as possible, back into their pre-bankruptcy position. Thus it was concluded that the Dyches held the property on trust for the Collelldevalls as beneficial joint tenants.

In 1995 Lloyds Bank advanced more monies to the Dyches which sum was repaid with later borrowings from HSBC. Lloyds did not take a further charge against the property in respect of this advance. In 2002 the property was transferred into the sole name of Mrs Dyche by herself and her husband in connection with divorce proceedings (“the 2002 Transfer”). This was said to be pursuant to a court order under which Mrs Dyche had paid to her husband the sum of £5,000 (the only consideration which passed in relation to the 2002 Transfer). On the same date as the 2002 Transfer Mrs Dyche gave HSBC a first legal charge over the property in order to secure an advance against that property. In order to obtain the mortgage Mrs Dyche had provided HSBC with what purported to be an assured shorthold tenancy agreement naming herself as landlord and Mr Collelldevall as tenant. The judge accepted that Mr Collelldevall’s signature was a forgery. Mr Collelldevall knew nothing of this mortgage and had not authorised it. A further advance was acquired by Mrs Dyche under a second mortgage from HSBC in 2003.

Mr Collelldevall gave evidence that he knew the property was going to be transferred into Mrs Dyche’s sole name but that she had promised to transfer the property to him thereafter. The judge found that Mrs Dyche had clearly perpetrated a deception upon her father; she was unable to transfer the property so long as monies remained outstanding in respect of the HSBC mortgages. Mrs Dyche had, it was concluded, acted in breach of trust. Whilst it was not established that Mr Dyche had anything to do with the forgery of Mr Collelldevall’s signature on the tenancy agreement the judge concluded that he must have known that he too was acting in breach of trust in transferring the property to his wife in return for £5,000 given that the property was beneficially owned by Mr Collelldevall, pursuant to the agreement at the time of the 1994 transfer.

The question for the court, therefore, was whether Mr Collelldevall’s beneficial interest in the property was overreached by HSBC’s interest under the terms of the mortgage(s). The judge reviewed the relevant provisions of the Law of Property Act 1925 (section 2(1)(ii) regarding the effect of a conveyance of land by trustees; section 205(1)(xxi) regarding the definition of a purchaser in good faith; and sections 2(1)(ii), 2(2) and 27, which require the conveyance to be made by at least two trustees) and, applying the law to the facts of the case, determined that the doctrine of overreaching did not here apply (for detailed analysis and reasoning see the judgment, paras [37] – [46]). It was held that Mr Collelldevall had a beneficial interest which overrode the registration of the HSBC mortgages pursuant to Paragraph 2, Schedule 3 to the Land Registration Act 2002.

The judge concluded that “HSBC could have avoided the present position by making inquiries of Mr Collelldevall, but, though a Letter of Consent was considered, they chose not to proceed down that route, as the documents appeared to be in order … By not making inquiries of Mr Collelldevall direct, they assumed the risk of the tenancy agreement turning out to be a forgery. The risk may have seemed remote, but has now come to pass, and HSBC misses out because of it”.

Once again, this is a clear reminder of the consequences of mortgage companies not making sufficient inquiries of propsective mortgagors where there is evidence that there is someone else occupying the property concerned. However, there is nothing in the facts to suggest that HSBC was or could have been aware that Mr Collelldevall and Mrs Dyche were related. On the face of it he was no more than a tenant with the benefit of an assured shorthold tenancy. It would have been plain from the nature of the tenancy agreement what rights Mr Collelldevall would or would not have had as a consequence of his shorthold tenancy. Without any reason to suspect that there was a familial relationship between Mrs Dyche and Mr Collelldevall this decision seems to suggest that any potential lender should make inquiries of shorthold tenants in order for their lending to be secure. This does, on the face of it, seem to be a particularly onerous obligation to impose upon all lenders, particularly given the recent increase in the acquisition of  ‘buy to let’ properties together with a tendency for property owners to switch their mortgages much more frequently, reflecting an inclination to always be in pursuit of the best deals on offer.

Postscript: For another view on this decision see here.

Posted by: RM | November 24, 2009

Intestacy & Family Provision Claims on Death

The Law Commission has recently published its Consultation Paper on this topic: Consultation Paper 191. It can be viewed here. It runs to 190 pages so any kind of comment upon or assessment of its contents is beyond the scope of this blog. However, it is perhaps worth reiterating the importance of the issues which this consultation paper addresses. It considers the intestacy rules which are currently governed predominantly by the Administration of Estates Act 1925. It also addresses provision (or alleged lack thereof) for family members and dependants and the court’s jurisdiction to modify the distribution of a deceased’s estate under the Inheritance (Provision for Family and Dependants) Act 1975. The Consultation Paper invites views on possible reform of the law governing these issues.

The Court of Appeal has recently delivered its judgment in Thompson v Bee & Anor [2009] EWCA Civ 1212. The case concerns a right of way which is annexed to a property devised by the will of Mrs Edith Thompson, which was executed in September 1974 (the testatrix died in 1975). By her will Mrs Thompson left her house, Pear Tree House, to her grand-daughter (who became Mrs Bee), the respondent, “subject … to a right of way as existing at the date of [her] death to the Garth at the rear thereof…”. Mrs Thompson left the Garth (about an acre of “back land”, situated to the rear of Pear Tree House, on which stood a rather dilapidated old slaughterhouse – unused – and piggery – occasionally used, primarily for storage), which she also owned, to her son, Mr George Thompson, which he later transferred in 1989 by Deed of Gift to Mr Stephen Thompson, the appellant. The Garth is accessed by way of a rough hard core track which is situated on the land of Pear Tree House and which also gives access to the garage of that property. At the end of the track there is a steep drop over rough land with a gate leading into the Garth.

At the time Mrs Thompson wrote her will Pear Tree House and the Garth were in her common ownership. Whilst the track was clearly visible on the ground it cannot be said that an easement (right of way) existed over the track because it is trite law that “an easement is some right which a person has over land which is not his own … you cannot have an easement over your own land…” (per Lord Esher MR, Metropolitan Railway Co v Fowler [1982] 1 QB 165, 171). In her will she gave Pear Tree House to her grand-daughter subject to the right of way detailed above. She also bequeathed the Garth to Mr George Thompson “… together with the right of way … across the rear of Pear Tree House at all times and for all purposes connected with the said garth …” (ie over the track).

Of course, the will simply passed the title of the properties to the executors. There were two assents made by the executors in 1977 which gave effect to the terms of the will. Hence, it is the assents and not the will which had the effect of passing title to the respondent and the appellant’s predecessor in title. The trial judge held that the clauses referred to in the will which granted / reserved the right of way across the track for the benefit of the Garth were to be read into the later assents, thereby recognising that this was all part of one transaction. In contrast, the respondent’s contention, which was, according to Mummery LJ, a “contention  … rooted in the remorseless logic of conveyancing law and practice”, was that the will caused the title of the properties to pass to the executors; this was one transaction. The assents, which vested the title of the properties in the beneficiaries, were, according to the respondent, a second and separate transcation. The assent of Pear Tree House took place a few days before the assent of the Garth. The significance of this distinction is concerned with the fact that no express right of way for the benefit of the Garth as retained land (by the executors, at the time the assent of the title to Pear Tree House was made) was reserved in the assent of Pear Tree House to the respondent. The absence of an express reservation was, it was argued, fatal to the claim that an easement of the character referred to in the will of Mrs Thompson had been created for the benefit of the Garth over the track. Thus, the only right of way which could have been impliedly reserved by law was one of necessity (which would be interpreted very narrowly).

The Court of Appeal rejected the approach advocated by the respondent because “without any legal justification, it requires the court to ignore totally the relevant intentions expressed by the testatrix in her will on the very matter of a right of way over the track for the benefit of the Garth. The fact that the assent is the document of title to Pear Tree House does not consign the will to the scrap heap when ascertaining the intentions of [the testatrix]”. By reference to both statute (section 36(2) of the Administration of Estates Act 1925) and common law (Phillips v Low [1892] 1 Ch 47; George Attenborough & Son v Solomon [1913] AC 76) the Court of Appeal held that the will and the subsequent assents, giving effect to the terms of the will, were to be treated as a single transaction. Thus, the respondent’s highly technical approach to this question was rejected.

Having determined that the right of way over the track for the benefit of the Garth was to be treated as having been created by the will and the subsequent assent, it was then necessary to determine the nature and extent of that easement. At the time of the transfer of the Garth to the appellant’s predecessor in title, the property was little used except for occasional grazing and for storage in the dilapidated buildings. At the time of this litigation the appellant had secured planning permission to develop part of the Garth by erecting one detached dwelling and two semi-detached dwellings. At first instance the judge had held that the right of way along the track was limited to use connected to agricultural purposes (and he granted an injunction forbidding use of the right of way for purposes other than agricultural purposes). The judge had made this finding because reference to the right of way being “for all purposes connected with the said Garth” he had interpreted as meaning circumstances existing at the time of the death of the testatrix. At the time of her death the Garth was identified as being subject to agricultural use which would have necessitated access by the odd car, van, tractor or agricultural vehicle. The track was also used, of course, for access to the garage of Pear Tree House. The judge concluded that recognising the right of way as permitting access to and from a residential development of the sort proposed by the appellant would seem to be excessive and more than likely to cause a nuisance to the owners of Pear Tree House and other owners and occupiers of the houses on the Garth trying to exit or enter their properties.

In the appeal, whilst the court thought that the judge was not justified in interpreting “all purposes connected with the said Garth” as being restricted to agricultural purposes, it was held that a right of way for the purposes intended was too excessive. In conclusion, the Court of Appeal substituted the judge’s declaration for a declaration to the effect that the appellant’s right of way does not permit user for the three residences proposed to be erected on the Garth. The injunction was varied to reflect the substituted declaration.

This case presents an interesting illustration of the difficulties which can arise where relatively aged and imprecisely determined rights are relied upon to facilitate new uses of land; in particular uses which reflect the current trend for developing pockets of unused agricultural land (where planning permission can be obtained) with a tendency for relatively high density schemes. Mummery LJ concluded by saying that “in light of the judgments … the parties will have to reconsider their positions. They should seriously consider settling any further differences about the right of way without yet more litigation. As this case shows litigation of the neighbour kind is sometimes uncertain in outcome, often punishing in costs and, win or lose, is always, for those who are still neighbours (in this case relatives), far from the Swiftean ideal of “sweetness and light”.” Sobering stuff.

From a purely legal perspective, this decision confirms that the terms contained in the will and the assents which facilitate the testamentary bequests should be read together, as one transaction, rejecting the idea that the testamentary provision and the subsequent assent should be viewed as two distinct transactions, each being independent of the other.

Posted by: RM | October 20, 2009

Trespass, Adverse Possession & Section 62 LPA 1925

I recently came across a case on my Lawtel updates which is unreported and, to date, I have been unable to obtain a copy of the full transcript (if anyone can assist, I’d be grateful!). The case concerned is Stadium Capital Holdings (No 2) Ltd v St Marylebone Property Company Plc (2009) which was heard before Sir Donald Rattee in the Chancery Division on 15 October 2009. From the little information available it appears to raise a couple of interesting issues. The limited background facts follow.

The claimant (“C”) claimed damages for trespass against the first defendant (“D1”) in relation to a hoarding which had been erected on a shared boundary wall between C and D1’s properties (D1 was a long leaseholder who subsequently appears to have acquired the reversionary interest in the freehold). The C’s land had originally been owned by the Railway Executive which had granted D1’s predecessors in title consent to erect such a hoarding. The second defendant third party (D2) had obtained planning permission to erect the hoarding (which permission had previously been refused by the planning authority) and D1 had granted D2 an exclusive licence for D2 to do so. D2 removed the hoarding when requested to do so by the C’s predecessor in title and played no part in the proceedings.

D1 defended the claim on the basis that (1) the Railway Executive’s original consent had lapsed and D1 had, by operation of the doctrine of adverse possession, acquired possession of what was otherwise C’s airspace; and (2) in the alternative, D1’s right to maintain a hoarding on the boundary wall had passed to D1 by operation of section 62 of the Law of Property Act 1925 upon conveyance of the reversionary interest in the freehold to D1.

Both defences were rejected by the court. In response to (1) it was held that the consent originally granted by the Railway Executive (a previous owner of C’s land) was not limited in its terms and subsisted until such time as it was expressly revoked by C’s immediate predecessor in title (who had assigned any right to damages arising from an action in trespass to C). Therefore, even if possession of airspace was theoretically possible, in this case such possession was by consent and, therefore, not adverse to the owner. The limited analysis which I have been able to find (Lawtel and Westlaw) says that there was obiter to the effect that it was doubtful whether title to an area of airspace not contiguous to land under it could exist at law; the right to airspace was contingent on the right to own the land under it. These responses by the court raise a couple of interesting questions (the absence of a full transcript of the judgment makes it impossible to determine whether these issues were fully explored by the court). Firstly, can the consent which was given by the Railway Executive really be said to have endured (at least) two subsequent changes in ownership, unless expressly renewed? And secondly, why would there be doubt that is it theoretically possible to be in possession of airspace?

In answer to the first point, clearly it would be necessary to know the full facts but it seems unlikely that a permission which is personal and revocable could survive a change of ownership without something more (say, the operation of section 62 which I will come to shortly). Regarding the second point, if real property is capable of ownership, it is surely capable of being adversely possessed, subject to the test for actual possession which is adverse to the paper owner and the requisite animus possidendi being met. Whilst they are rare in practice, flying freeholds demonstrate that it is not necessary, in order to own property, to own the actual soil over which the property concerned is situated.

In respect of (2) the court held that section 62 could not be established to have applied because the conveyance concerned (ie the conveyance of the reversionary interest in the freehold) had not been put in evidence and it was, therefore, impossible to determine whether there was anything in the conveyance to expressly exclude the operation of section 62 as required by section 62(4). It was also said that, in any event, even if the section did apply (which it had been held not to), the enjoyment of the right would not have afforded itself to D1 as lessee (which it was prior to acquiring the reversionary interest in the freehold) but would have been for the benefit of the freehold owner.

It is very difficult to make any further comment on this case given the woeful lack of information available. However, it does appear that it may well raise some extremely interesting points which might warrant further consideration if the transcript of the judgment ever becomes widely available. If anyone out there finds it before I do, please pass it on!

Posted by: RM | October 12, 2009

Proprietary Estoppel Revisited

Fairly hot on the heels of the House of Lords’ decision in Thorner v Majors [2009] UKHL 18 (for earlier discussions of this case see here and here) the High Court has, in MacDonald & Anor v Frost [2009] EWHC 2276 (Ch), revisited the topic of proprietary estoppel. Geraldine Andrews QC, sitting as a High Court Judge, acknowledged that Thorner v Majors is now to be regarded as the leading modern authority on proprietary estoppel.

The facts of this case, although a little convoluted, can be relatively briefly stated. The claimants were sisters who brought a claim against their step mother as executrix of the estate of their father. They claimed that they were entitled to his estate because he (and their mother, when she was alive) had given assurances that they [the claimants] would inherit their parents’ estate in equal shares upon the death of the last surviving parent. Their mother pre-deceased their father by a number of years (she died in 1995) and he remarried in 2002. Shortly after his marriage their father changed his will leaving his entire estate to his new wife with substitutionary gifts in the event that she pre-deceased him in favour of the grandchildren then living.

Wills are, of course, ambulatory. In the absence of some agreement which prevented the claimants’ father from changing his will, he was clearly entitled to do so. The claimants claimed that in 1986 an agreement was made whereby each of them would pay their parents (and, latterly, their father following their mother’s death) £100 per month, which they each did until their father died in 2006. They claimed that in reliance upon a representation that they would inherit their parents’ estate in equal shares they acted to their detriment in making these monthly payments without reference to their parents’ need to receive the money or their ability to pay.

The court found, as a matter of fact, that the monthly payments were connected to a property transaction which was completed at the time the payments began (in 1986) and were referable to that transaction rather than being some form of detrimental reliance based upon any assurance of future inheritance. The court did not dispute that there were conversations when it was undoubtedly true that future testamentary intentions were spoken of. However, the court found that those discussions were not linked to the payments made by the claimants.

The interesting point discussed (very briefly) in this case concerned the continuing sustainability of Re Basham as an authority in this area of the law (or, more accurately, equity). In Thorner v Majors the House of Lords was invited to determine that Re Basham had been wrongly decided on the basis that the subject matter of the proprietary estoppel claim in that case (the residuary estate of the representee) was not “identifiable property” (in contrast to the farm in Thorner v Majors). Their Lordships, however, declined that invitation. In the present case Geraldine Andrews QC did state that “in light of the decision in Thorner … I consider that Re Basham is a decision that now has to be treated with the utmost caution”. It was unnecessary for her to say more than that because, on the facts, the argument that the claimed detrimental reliance, represented by the monthly payments, was connected to a representation about their future inheritance was rejected which meant that no close analysis of whether or not their father’s estate could constitute the subject matter of a properietary estoppel claim was engaged in. However, Geraldine Andrews QC did then go on to say that whilst “the reasoning in Re Basham is difficult to reconcile with the requirement reiterated in Thorner that the property should be sufficiently identified, it is important to bear in mind Lord Neuberger’s warnings about approaching cases of this nature practically and sensibly”.

A recent decision of the High Court, on appeal from the County Court, has revisited the proper application of the principles expounded in Stack v Dowden [2007] UKHL 17 and Oxley v Hiscock [2004] EWCA Civ 546. The case is Jones v Kernott [2009] EWHC 1713 (Ch). The facts are as follows:

Ms Jones and Mr Kernott bought a property, 39 Badger Hall Avenue, in 1985 and the property was conveyed into their joint names. The purchase price was £30,000 of which £6,000 was contributed by Ms Jones. The remainder was financed by an interest only mortgage, supported by an endowment policy. The mortgage and endowment policy payments were shared between the couple. The following year a further loan of £2,000 was taken out against the property for the purpose of building an extension and this was built and paid for largely by Mr Kernott. This is estimated to have enhanced the value of the property by almost 50%, from £30,000 to £44,000. Ms Jones and Mr Kernott shared the household expenditure (including bills and mortgage repayments) until the couple split up and Mr Kernott moved out of the property in 1993 (some 8 years later). Thereafter, Ms Jones made all of the interest only mortgage payments together with the payments against the endowment policy and met all expenditure in relation to the upkeep of the property. There were two children of the relationship who remained with Ms Jones. Mr Kernott made little or no contribution to their maintenance and none had been sought by Ms Jones.

Some time after the relationship had ended a life insurance policy was cashed and the proceeds split between the parties. In part this was to enable Mr Kernott to purchase a property for himself which he did in 1996, acquiring 114 Stanley Road, which he then financed alone. It is undisputed that Ms Jones never acquired any interest in the Stanley Road property. It is also undisputed that until the couple split up and Mr Kernott moved out of the property in 1993, the beneficial shares in the property were owned equally. The question for the court was whether, following the couple’s separation in 1993, the beneficial shares in the property were altered. At first instance the judge held that they had altered and concluded that Ms Jones was entitled to a 90% beneficial interest in the property on the basis that it was “fair and just”.

On appeal, Nicholas Strauss QC (sitting as a Deputy Judge of the High Court) reviewed the main authorities quite extensively. Unsurprisingly, he undertook a fairly lengthy analysis of the Oxley v Hiscock and Stack v Dowden decisions. On the facts Jones v Kernott was contextually more similar to Stack v Dowden given that the property with which the litigation was concerned had been conveyed into the joint names of the couple and the question for the court was whether the presumption of joint beneficial ownership in circumstances where there was joint legal ownership could be rebutted, as it had been in Stack v Dowden. The relevance of Oxley v Hiscock, despite being factually distinct because the property there had been conveyed into the sole name of one of the parties, was the extent to which the decision in Stack v Dowden had endorsed (to a large extent) the approach of the Court of Appeal in Oxley v Hiscock in respect of the proper approach to quantification of shares in the family home.

The starting point, according to Stack v Dowden, is that where property is conveyed into joint names there is a presumption that the beneficial shares are owned equally (in the absence of any express declaration to the contrary). Establishing that the shares are held other than equally will depend upon identifying a common intention that the shares should be so held; only in very unusual cases is this likely to be established according to the House of Lords in that case. The reality, of course, is that such a common intention is very unlikely to have ever been expressly stated and agreed upon; it will be for the court to look at the evidence and determine whether the facts speak to there having been such an intention. In so doing the courts will look at the whole of the parties’ conduct.

There is a fine distinction between inferring the intention of the parties from the facts and imputing their intention. This is a line which Lord Neuberger (dissenting as to the reasoning but not as to the result in Stack v Dowden, para [125]) thought ought not to be crossed. The former being the product of some objective analysis and the latter being essentially an invention of the court where no such intention could be identified from examining the parties’ actions and statements.

Of course, in Stack v Dowden the parties had never really had a domestic partnership in the financial sense, the finances having been kept separate throughout their relationship, whereas until the time Ms Jones and Mr Kernott separated there appears to have been a clear financial partnership between them. Even after Mr Kernott moved out of the property, until 2008 the Badger Hall Avenue property continued to be held under a beneficial joint tenancy, Mr Kernott serving a notice of severance of the joint tenancy in May of that year.

Given that the financial contributions of the parties to the property were clearly very different once Mr Kernott had left the property it is not at all surprising that Ms Jones should acquire a greater interest in the property, thus rebutting the presumption of beneficial joint ownership. However, the quantification in this case is open to question. On appeal Nicholas Strauss QC said that whilst he is not sure that he would have arrived at exactly the same result (in terms of the proportions apportioned to the parties) as the judge he did not think that the attribution of 90% of the property to Ms Jones was unjustifiable. On the facts it is clear that Mr Kernott had contributed far more than 10% to the purchase and increased value of the property. The fact that Ms Jones had paid all of the mortgage payments and household expenses once Mr Kernott had left the property is only to be expected; she also enjoyed the whole benefit of the property. A point which had been pursued on behalf of Ms Jones in the County Court was a suggestion that once Mr Kernott had acquired his own separate property he did not intend to have a subsisting interest in the Badger Hall Avenue property. This was not pursued on appeal. Also, it was clearly a feature of the case that Mr Kernott had made no payment for the maintenance of the children although Ms Jones had never pursued such contributions from him. It is, however, something which both the trial judge and the judge on appeal thought would be a legitimate consideration.

Nicholas Strauss QC recognised that the trial judge, in coming to the conclusion which he did, had attributed to the parties a common intention which they did not have, or at least did not express to each other. In other words, he had imputed to the parties an intention which was not apparent from their conduct. This, he said, was the right thing to do in this case. This, whilst being consistent with the approach advocated by the majority in Stack v Dowden, really is to be questioned. If the courts are entitled, in the absence of any evidence, and arguably in defiance of the evidence, to invent common intentions and graft those onto the minds of the litigating parties, we are left with a level of discretion which will provide unacceptably high levels of uncertainty when it comes to the quantification of shares in the family home upon the dissolution of relationships. It is precisely this sort of outcome which Lord Neuberger warned against in his dissenting speech in Stack v Dowden and he was right to be concerned; the rot is setting in.

Postscript

For another view on this decision, see here. See also a piece I wrote for the NLJ on this here.

Rather fortuitously a case popped up in my Lawtel updates this week which coincides with my teaching of the sometimes obscure topic of trust powers. The case is Howell & Ors v Lees-Millais & Ors [2009] EWHC 1754 (Ch). The case concerns a family settlement which was established in 1968 (“the 1968 Settlement”) by Major Joicey of Blenkinsopp Hall in Northumberland. A substantial amount of real property which forms part of the Blenkinsopp estate (“the Estate”) was conveyed into the 1968 Settlement. This property had been enjoyed by the settlor and his predecessors for many years. Clause 3 of the 1968 Settlement created a power of appointment in the trustees and Clause 4 made gifts in default of any appointment made under the authority of Clause 3. The gifts in default of appointment under Clause 4 meant that the property the subject of the 1968 Settlement would be likely to become divisible, the result being that the Estate would undoubtedly be broken up.

In 1977 an appointment (“the 1977 Appointment”) under Clause 3 was duly exercised by deed. The 1977 Appointment provided, in the absence of any trust expressly created as described therein, for a series of gifts in default, each being to one person only (which would avoid the possibility of the Estate having to be broken up to share it amongst numerous parties) with successive gifts to another one person only. The material provision of the 1977 Appointment is as follows:

2. As from the date hereof the Trust Fund and the income thereof shall be held upon such trusts and with and subject to such powers and provisions (including discretionary trusts or powers vested in any person or persons) in favour of any one or more exclusive of the other or others of the children and remoter issue of the Settlor as the Trustees shall from time to time during the Trust Period (but during the life of the Settlor only with his consent in writing) by deed or deeds revocable or irrevocable appoint…

…In default of and subject to any such appointment the Trust Fund shall be held upon trust for the first or only son of Lucinda who shall attain the age of twenty five years during the Trust Period absolutely or if there is no such son of Lucinda then upon trust for the first or only daughter of Lucinda who shall attain the age of twenty five years during the Trust Period absolutely and if there is no such daughter of Lucinda then upon similar trusts for the first or only son or if there is no son for the first or only daughter of Sabina then for such son or daughter of Fiona or if there are no such sons or daughters then upon trust for such of Lucinda Sabina and Fiona as shall attain the age of twenty five years during the Trust Period absolutely and if more than one in equal shares but if none of them shall attain that age then upon trust for the survivor of the said daughters of the Settlor absolutely

The eldest son of Lucinda, Alexander Newall (the sixth defendant), will attain the age of twenty five in late October of this year. The question for the court was whether a gift in default to Alexander in accordance with the 1977 Appointment would render any overriding power to appoint impotent, thereby making a gift in default to Alexander absolute and indefeasible. In essence, the court was being asked whether a gift to Alexander in default of the trustees exercising their overriding power of appointment could subsequently be undone.

Sir John Lindsay, sitting as a High Court Judge, reviewed what little authority exists, none of which is precisely on point. He went to some lengths to make it clear that in such cases as these, context is vitally important. It was argued by the trustees that upon attaining the age of twenty five and in the absence of any earlier appointment, Alexander would acquire an indefeasible interest in the whole of the 1968 Settlement, the trustees retaining no power thereafter to revoke that default appointment and appoint elsewhere. Relying upon the dictum of Sir John Pennycuick V-C in Re Sharp’s Settlement Trusts [1973] 1 Ch 331, 338, where he stated

The word “absolute” in its ordinary use in legal language denotes complete beneficial ownership and dominion over property, and I should have thought it an entirely unnatural use of the word to apply it to an interest which can be destroyed at any time by the exercise of a power or the fulfilment of a condition with the consequence that the property must be retained by the trustees until the power or the condition is spent…

it was suggested that the use of the word “absolutely” in the default provision of the 1977 Appointment was indicative that the interest which anyone acquired under that default provision was to be indefeasible. However, for some of the defendants it was argued that in Re Sharp’s ST the Vice-Chanellor recognised the possibility of some contexts requiring a meaning other than that which he described as the natural one (see para [20]). Re Sharp’s ST was concerned with the proper interpretation of “absolutely” within section 31(2)(i)(b) of the Trustee Act 1925. The Vice-Chancellor had qualified his acceptance that the word “absolutely” should be given its natural meaning  by saying that it should be so “apart from [in] some larger context”.

In the present case it was noted that there was a possibility that some contexts would require a meaning to be attached to the word “absolutely” other than that which had been described in Re Sharp’s ST as being the natural one. Referring to a passage from Fearne, Contingent Remainders and Executory Devises, 10th ed (1844), vol 2, p30, Sir John Lindsay noted that the word “absolute” was considered there to have varying meanings, one of which when referring to “the quality of interest” means interest which comprises entire ownership and another which, when being used “with reference to the certainty of duration” of an interest, means indefeasible. It was also noted that the V-C’s reference to the word’s use “in ordinary use in legal language” was in the context of construing a statutory provision as to which the presumed intention of Parliament is relevant.

It was not submitted that Re Sharp’s ST was binding upon the court in this case and the court felt free to arrive at a different conclusion as to the proper interpretation of the word “absolute” should a “larger context” so require. It was argued for the defendants that the power contained in Clause 3 of the 1968 settlement was an overriding power, this power having been exercised in 1977 in the execution of the Deed of Appointment. However, the power exercised in 1977 was not expressed to be irrevocable, the power therein having been described as being exercisable “from time to time during the Trust Period…by deed or deeds revocable or irrevocable”. The Trust Period runs from the date of settlement for 80 years, the conventional period for a trust. Hence, at the date of this litigation there is still a considerable proportion of the trust period still left to run. It was further noted that there is no provision that the power shall not, in whole or in part, be thereafter exercisable if an interest under the trusts in default of appointment has become vested.

Most importantly, however, Sir John Lindsay identified that the default trusts of Clause 3 are exactly that – default trusts. They are in default of and subject to any valid appointment made by the trustees during the Trust Period. There is nothing which provides that any further appointment, subsequent to any vesting of trust property in default, should not take effect in relation to that particular property. It was concluded that the appointors should not be taken to have lost the power to make further appointments, even in the context of property which has vested under the exercise of powers authorised by Clause 3, unless the ability of the appointors to do so is excluded by express provision or necessary implication, neither of which was be found in the present case.

The result is that if the trustees do not make any appointment under the 1977 Appointment, in late October of this year Alexander Newall will acquire a vested interest in the property of the 1968 Settlement. Despite this, if the trustees consider it proper at some later date to make some alternative appointment, thereby defeating the interest which Alexander will acquire later this year, they may, apparently, freely do so.

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