"We are at the moment witnessing the gradual evolution of both contractual licences and licences by estoppel from personal to proprietary rights - There are strong policy reasons against any further development in this direction" Discuss.

Amelia Guilfoyle

Land Law; Joseph Jaconelli

Non Assessed Essay Question

“ We are at the moment witnessing the gradual evolution of both contractual licences and licences by estoppel from personal to proprietary rights. There are strong policy reasons against any further development in this direction” Discuss.

When framed in the most basic of ways it is apparent that the function of a licence is to make lawful what would otherwise be a trespass. That is to say a licence will confer in general a mere personal permission to occupy another person’s land for an agreed purpose. It is evident in this way that a licence is not an interest that will run with the land it is an agreement, which in theory applies exclusively to the two parties; the licensor and the licensee that is to say that it is a personal interest. As the above question suggests, however, the situation surrounding this area of land law is no longer as easily defined, in order to assess the stated opinion it becomes necessary therefore to consider how far, and in what ways, the law has moved away from this initial purpose of licences.

Over the years the law has changed quite dramatically and licensees have begun to enjoy a higher level of protection against their licensor, and in some cases in relation to third parties. If one first begins to examine contractual licences it is evident that such modification has brought about some significant and clearly quite radical changes. This becomes evident if we look at the position of contractual licences within the common law.

A contractual licence is described as “a licence supported by consideration” that is to say a mere permission which is granted for value as in situation of paying to enter a cinema or usage of the facilities at a leisure centre. At common law the rights of the licensee in such an instance are limited. The licensor was able to revoke the licence at any time this rule was applicable regardless of the fact that in some cases the licences were subject to a fixed term agreement that had not yet expired. Thus, even if the revocation of the licence was in breach of contract the only remedy available to the licensee was to sue in damages for breach of contract. Accordingly, the interest created by a licence was held to be strictly personal in the sense that it could not create a claim over the land, and would not be capable of binding successors to the licensor’s title. As Megarry states “each of these propositions has now been substantially modified” This is due in part to the availability of equitable remedies as a result of the passage of the Supreme Court of Judicature Act 1875. In the house of Lords case Winter Garden Theatre ( London) Ltd v Millennium Productions Ltd it was made clear that a contractual licence was no longer to be considered as distinct from the contract creating the licence in the first place. Instead it was decided by their Lordships that a revocation of the licence, which would be in breach of contract, would be for the most part prevented by injunction. In this way “equity does what it can to preserve the sanctity of bargain”

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It is important to note, however that the position in terms of altering the power of licences so that they can be interpreted so as to run with the land has not been altered in such an unequivocal manner. As a matter of principle despite the development of equity the common law position has been well supported by authority form the courts. Thus, in King v David Allen & Sons Billposting, Ltd. it was held that the effect of a new lease to a third party was to discontinue the licensee’s previous right to “affix advertisements to the walls of a ...

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In 1952,however it appeared that the courts were substantially altering their position with the decision in Errington v Errington. In this instance the Court of Appeal bound the licensor’s widow to allow the licensees to remain in occupation. The court reasoned that the licensee had a right to restrain the revocation of the licence because it was contrary to the implied contract and in this way they had an equitable interest capable of “binding the whole world except a bona fide purchaser for value without notice.” This apparent departure from the established principle, however has since received strong criticism. It is argued that the widow should have been bound but not with reference to the contractual licence. Indeed the proposition in Errington that a contractual licence can be interpreted as an interest in land is now widely accepted to be bad law. Accordingly, in National Provincial Bank Ltd v Ainsworth Lord Upjohn and Lord Wilberforce expressed their disquiet at considering the contractual license to be anything more than a personal right. In Ashburn Anstalt v Arnold Fox J argued that the same decision could have been reached without the need to infer a proprietary interest into a contractual licence. It was felt that a more reasoned approach would be to bind the third party by way of classification of the interest as an estoppel licence.

It is evident then that the idea of a contractual licence creating an interest in land has asserted in Errington with apparent disregard for previous authority is now regarded as a “heresy that has received its quietus” In this way it seems that the an opinion that there has been a gradual change within the area of contractual licences towards a situation which allows for proprietary rights is without foundation, particularly when we look at the strong judge made assertions to the contrary. On closer examination however, it becomes apparent that the argument is not entirely lacking in justification although a contractual licence by itself may not create an interest in the land it is evident that in some circumstances the effect of binding a successor might be brought about because for example a constructive trust arises, in this way the successor will be bound in much the same way as they would be by a trust. It is not the case however, that this added support will be widely applied in order to strengthen the position of a contractual licence. Indeed, it is clear that at all times the courts will seek to find a strong case in support of imposing a constructive trust as in Binions v Edwards. In this way the court will seek to test whether the conscience of the successor is so affected that to allow him to deny the claimant’s interest in the property would be inequitable. Hence, we can see how the adoption of a constructive trust may allow the courts to manipulate the law in order to strengthen the position of a contractual licence. The courts, however have been mindful to limit the application of this device within this area because of the need for due consideration to be paid to policy and practical issues, it is regarded as being of particular importance to preserve certainty in relation to transfer of title to land in order to prevent unnecessary difficulties within the conveyancing system being created as a result of too many undocumented proprietary interests.

The situation in terms of estoppel licences differs somewhat. The doctrine of estoppel in relation to licences has enjoyed a remarkable development over the past fifty years. Put simply proprietary estoppel can be classed as “encouragement and acquiescence” This was explained by Lord Kingsdown in the case Ramsden v Dyson and Thornton who felt it was necessary for the licensee to have an expectation encouraged by the landlord who then acts on that expectation to improve the property with the knowledge o consent of the landlord. In such circumstances the court will compel the landlord to give effect to such a promise or expectation. Fry J elaborated upon this in Wilmott v Barber where he set out the requirements in more detail known as the five probanda.