Property wars

In the second of its round-ups of the changing legal landscape, Lawyer 2B looks at the world of property law. Abigail Culank gives the lowdown on new laws, ranging from land law to equitees and trusts


It has been a busy Michaelmas term in the appeal courts, producing a number of interesting cases for property lawyers, ranging from a reconsideration of the nature of leases and licences to the consequences of the disposal of company property by its directors in breach of their fiduciary duties. The House of Lords has also revisited the Barclays Bank v O’Brien-type scenario to provide further guidelines.

The House of Lords has also revisited the Barclays Bank v O’Brien-type scenario to provide further guidelines for when a wife signs over her interest in the matrimonial home as surety for her husband’s debts without receiving independent legal advice or advice from the creditor. Legislation enacted to reform the powers and duties of trustees came into force earlier this year.

Leases and licences

R v Trinity Development Co (Banbury) Ltd, ex parte National Car Parks Ltd

(2001), CA, LTL 18/10/2001 extempore

National Car Parks (NCP) appealed a decision that an agreement between the parties did not create a tenancy. The subject of the agreement was a car park that NCP was required to operate and maintain without impeding the respondent’s exercise of its rights of possession. The agreement stated that it was not a tenancy, but a licence for parking vehicles in the car park. NCP argued that the agreement actually created a tenancy.

The Court of Appeal ruled that the nature of the agreement was determined with reference to the substance of the agreement, rather than its form. The court considered whether NCP had exclusive possession of the car park (the ability to exclude everyone save for the landlord’s right of re-entry). It balanced NCP’s obligations to maintain, insure and secure the premises against its absence of a right to quiet enjoyment and the lack of an express right of re-entry for the respondent in the event that NCP failed to fulfil its obligations. The court concluded that the agreement gave NCP no express right of exclusive possession, so created a licence and not a lease.

John Furber QC of Wilberforce Chambers instructed by Hamlins for NCP. Nigel Thomas of Maitland Chambers instructed by Field Cunningham & Co for Trinity Development (Banbury) Co.

Uratemp Ventures Ltd

v

(1) John Collins

(2) Mary Carrell

(2001), HL, LTL 11/10/2001

In this case, the first defendant was a long-term occupant of a room in the claimant’s hotel and the issue was whether the first defendant occupied the room pursuant to a lease or a licence. The judge at first instance held that the room possessed cooking facilities because the first defendant had brought cooking equipment into it. Accordingly, he held that the room constituted a dwelling house under Section 1(1) of the Housing Act 1988 and that the first defendant was an assured tenant.

The Court of Appeal reversed that decision on the basis that the provision of hotel services to the occupants deprived them of exclusive possession so that occupation of the rooms was by way of a licence. Further, the court held that the possession of cooking equipment did not change the fact that cooking was prohibited in the rooms, and the absence of cooking facilities meant that a room could not be a dwelling house within Section 1(1) of the act.

The House of Lords held that the presence or absence of cooking facilities was irrelevant to the issue of exclusive possession. If the first defendant had exclusive possession of part of a house and that was their home, it was also their dwelling. A single room was capable of constituting a separate dwelling for the purposes of the act and the first defendant’s occupation was pursuant to a lease and not a licence.

Andrew Arden QC of Arden Chambers and Richard Vain of 3 Dr Johnson’s Buildings instructed by Alan Edwards & Co for the first defendant. Michael Barnes QC of Wilberforce Chambers as amicus curiae. The claimant did not appear and was not represented.

BHP Petroleum Great Britain Ltd v (1) Chesterfield Properties Ltd (2) Chesterfield (Neathouse) Ltd (2001), CA, LTL 30/11/2001

This case raised an issue of construction, focusing on whether a landlord’s personal covenant in a lease was a ‘landlord’s covenant’, as defined in Section 28 of the Landlord and Tenant (Covenants) Act 1995, and could therefore be released by notice being served under Section 8 of the act.

The first defendant (Chesterfield) agreed to refurbish a property and to grant BHP a lease of part of the property. The agreement contained a personal covenant by Chesterfield to remedy building works defects. The works were completed, the lease was executed and Chesterfield transferred the reversion to the second defendant. It then served a Section 8 notice in the prescribed form.

At first instance it was held that a personal covenant could not qualify as a landlord’s covenant, as it did not fall to be complied with by the person who might from time to time be entitled to the reversion and was not transmissible. That decision was upheld by the Court of Appeal.

Kim Lewison QC of Falcon Chambers and Andrew Walker of 9 Old Square instructed by Dechert for Chesterfield. Michael Barnes QC of Wilberforce Chambers instructed by Herbert Smith for BHP.

Social housing

McLellan

v

Bracknell Forest Borough Council & Secretary of State for Transport, Local Government & the Regions (Interested Party):

Reigate and Banstead Borough Council

v

(1) Benfield

(2) Forrest & Secretary of State for Transport, Local Government & the Regions (Interested Party)

(2001), CA, LTL 16/10/2001

This case called into question the compatibility of Part V of the Housing Act 1996 with the European Convention on Human Rights. The act introduced a new scheme of introductory tenancies for council tenants, under which a council tenant could be evicted without scrutiny by the court.

The Court of Appeal held that Article 8 of the convention, the right to respect for private and family life, was engaged by the act, but that the review procedure in the act and the remedy of judicial review provided adequate protection against any breach of Article 8. The Court of Appeal also held that Article 6 of the convention, the right to a fair trial, was engaged because the review procedure involved a determination of an introductory tenant’s civil rights. However, there was no reason to think that the procedure would not be operated fairly. Therefore, the introductory tenancy scheme was compatible with the convention.

Nigel Pleming QC of 39 Essex Street and Robert Latham of Doughty Street Chambers instructed by Dexter Montague & Partners for McLellan. Timothy Straker QC and Sarah-Jane Davies of 4-5 Gray’s Inn Square instructed by and for Bracknell Forest Borough Council. Philip Sales and Daniel Stilitz of 11 King’s Bench Walk instructed by the Treasury Solicitor for the Secretary of State. Andrew Arden QC and Christopher Baker of Arden Chambers instructed by and for Reigate & Banstead Borough Council. Benfield did not appear and was not represented. David Watkinson and Beatrice Prevatt of Two Garden Court instructed by Shelter for Forrest.

Security

Royal Bank of Scotland plc v Etridge (No.2):

Barclays Bank plc v Harris:

Midland Bank plc v Wallace:

National Westminster Bank plc v Gill:

Barclays Bank plc v Coleman:

UCB Home Loans Corporation Ltd v Moore:

Bank of Scotland v Bennett:

Kenyon-Brown v Desmond Bankes & Co (2001), HL, LTL 11/10/2001

This case involved eight appeals arising out of circumstances where a wife had charged her interest in her home in favour of a bank as security for her husband’s indebtedness. The House of Lords took the opportunity to set out guidelines that will have lasting implications, both for banks and solicitors dealing with undue influence cases.

In Barclays Bank v O’Brien (1993), the House of Lords held that a bank was put on inquiry of undue influence whenever a wife offered to stand security for her husband’s debts. The House of Lords has now extended this to regard a bank as put on inquiry in every case where the relationship between the surety and the debtor is non-commercial. Once the bank is on notice, it has to alert the wife to the risk of the proposed transaction by asking her to a private meeting to warn her of the risk she was taking and to urge her to take independent legal advice. In exceptional cases, the bank would have to insist that the wife was separately advised.

Lord Nicholls set out the minimum requirements for that legal advice in a face-to-face meeting, in the absence of the husband and in non-technical language. The points to be covered include: the amount and terms of the loan; the amount of the husband’s indebtedness; the wife’s financial means; letting the wife know she has a choice; and confirming that the solicitor can give confirmation of the conversation to the bank. The bank should not proceed with the transaction until it has received confirmation from the wife. It would be difficult to show undue influence where the above steps were taken, because the bank could show that it had taken reasonable steps to avoid it.

Richard Mawrey QC of 2 Harcourt Buildings and Simon Wheatley of 7 Bedford Row instructed by Collins for Etridge. Michael Briggs QC of Serle Court and Amanda Harrington of Trinity Chambers instructed by Fladgate Fisher for Royal Bank of Scotland. Jules Sher QC of Wilberforce Chambers and Stephen Whitaker of 5 Fountain Court instructed by Evans Derry Binnion for Harris. John Jarvis QC of 3 Verulam Buildings and David Wolfson of One Essex Court instructed by Salans Hertzfeld & Heilbronn HRK for Barclays Bank. Jules Sher QC of Wilberforce Chambers and Mark Lyne of 5 Paper Buildings instructed by Keppe Shaw for Wallace. Michael Briggs QC of Serle Court and Clive Jones of New Square Chambers instructed by Tarlo Lyons for Midland Bank. Jules Sher QC of Wilberforce Chambers and Teresa Rosen Peacock of 3 Stone Buildings instructed by Baxter & Co for Gill. Michael Lerego QC of Fountain Court and Nicholas Briggs of Guildhall Chambers instructed by Osborne Clarke for NatWest Bank. Jules Sher QC of Wilberforce Chambers and Helene Pines-Richman of 9 Stone Buildings instructed by Waller & Co for Coleman. John Jarvis QC of 3 Verulam Buildings and David Wolfson of One Essex Court instructed by Nicholas Graham Jones for Barclays Bank. Jules Sher QC of Wilberforce Chambers and Bernard Devlin of 1 Harcourt Buildings instructed by Richard Wilson & Co for Moore. Michael Briggs QC of Serle Court and Christopher Coney of 4 Paper Buildings instructed by Copley Clark & Bennett for UCB Home Loans Corporation. Nicholas Yell of No.1 Serjeants’ Inn instructed by Trevor Jenkin & Co for Bennett. John Jarvis QC of 3 Verulam Buildings instructed by Underwood & Co for Bank of Scotland. Jonathan Sumption QC of Brick Court Chambers and Ben Hubble of Four New Square instructed by Henmans for Desmond Banks & Co. Julia Smith of Gough Square Chambers instructed by Neilson & Co for Kenyon-Brown.

Equity and Trusts

Atley Wright

v

Yvonne Fay Johnson

(2001), CA, LTL 24/10/2001 extempore

A couple bought a property in their joint names but subsequently separated and the defendant moved out. Several years later the claimant moved to the US, but continued to send money to discharge the mortgage until it was fully paid. This dispute arose when the defendant refused to consent to the sale of the property and the court was required to determine each party’s interest in the property and entitlement to the proceeds of sale.

The defendant sought to rely on estoppel or waiver to prevent the claimant from taking a share of the property. However, the Court of Appeal upheld the Court of First Instance decision that the property should be sold. It concluded that it was unlikely that the claimant had intended to sign over his beneficial interest either verbally or in writing. Therefore, he would be entitled to his share in the proceeds of sale, which should be divided between the parties in equal shares, although an adjustment would be made to reflect the fact that the claimant had continued to pay the mortgage.

Colin Wright of Stone Chambers instructed by A Marcou & Co for the claimant. The defendant in person.

JJ Harrison (Properties) Ltd

v

Harrison

(2001), CA, LTL 11/10/2001

The Court of Appeal held that company directors who disposed of the company’s property in breach of their fiduciary duties should be treated as having committed a breach of trust, and so were to be treated as constructive trustees of any property that came into their hands.

The company’s claim was “an action to recover from the trustee property or the proceeds of property previously received by the trustee and converted to his use”. Therefore, pursuant to Section 21(1)(b) Limitation Act 1980, there was no limitation period in respect of that action.

Robin Hollington QC of New Square Chambers instructed by Hammond Suddards Edge for the defendant. Anthony Mann QC of Enterprise Chambers and Mr C Parker instructed by Herbert Smith for the claimant.

The law Jargon-buster

Dwelling house

A self-contained unit in which someone lives

Constructive trust

A trust arising irrespective of the parties’ intentions Covenants Obligations contained in the lease

Exclusive possession

The right to exclude the world from a piece of land, including the landlord

Fiduciary

In a position of trust

Introductory tenancies

A form of probationary tenancy for local authority tenants without security of tenure introduced by the Housing Act 1996

Lease/Tenancy

A legal interest in land conferring the right to exclusive possession

Licence Permission

Permission to be on land without the right to exclude others

Limitation period

Period during which a person with a claim must start court proceedings

Surety

Someone who provides security for another

Reversion

The ownership retained by a landlord after granting a tenancy that confers the right to reclaim the land after the lease expires

Right of re-entry

The landlord’s right to bring a tenancy to an end if the tenant fails to comply with the tenants’ covenants in the lease

Right to quiet enjoyment

Right to enjoy the tenancy of a property without interference by the landlord Trustee Someone who holds trust property for a beneficiary

Undue influence

Improper pressure put on someone