Suggested Answer to Exercise 3.3 (Part 3)
A Detailed Answer Plan
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English law distinguishes personal rights from rights that are interests in land (proprietary rights). The distinction is important. Property rights attach irrevocably to the land and will bind a purchaser, provided that they have been protected in the appropriate way. The burden of personal rights cannot normally be passed to a third party, including a purchaser of land.
There has been some dispute about whether a purely contractual licence will bind third parties, such as the purchaser of the land. Historically, a contractual licence was understood to be a personal right giving a remedy in damages against the grantor in cases of breach. However, in a series of cases ranging from the 1950s (Errington v Errington & Woods  1 KB 290, for example) to the 1970s (see, Binions v Evans  Ch 359),Lord Denning attempted to develop an equitable doctrine making contractual licences binding on third parties. The existence of a discrete equitable doctrine to this effect was effectively discredited in Ashburn Anstalt v Arnold  Ch 1. However, it remains possible for the court to impose a constructive trust or provide a remedy by way of estoppel when such remedies are available on the facts of the case.
The main types of property right that are characterized by a right to occupy land are leases and beneficial interests under an express or implied trust of land (s.12 TLATA 1996). If Hannah and Joshua cannot establish such interests in the house, they may be able to establish an interest by way of proprietary estoppel, although this does not guarantee them a proprietary remedy against Damien.
A number of the essential characteristics of a lease are missing. In particular, there is no term certain – no definable limit seems to have been placed on the period during which Hannah and Joshua are to occupy the house (Prudential Assurance Co Ltd v London Residuary Body  AC 386). Neither is there any suggestion that Hannah and Joshua enjoy exclusive possession of any definable part of the house (see, for example, A. G. Securities v Vaughan; Antoniades v Villiers  1 AC 417). Hannah and Joshua do not have a lease.
Beneficial Interest under a Trust
Any express trust in favour of Hannah and Joshua would have to be evidenced in writing signed by John and Linda to satisfy the formalities of s.53(1)(b) LPA 1925.
However, the court is prepared to impose a constructive trust in cases of this type, provided that, according to Fox LJ in the court of appeal decision in Ashburn Anstalt v Arnold, ‘the conscience of the estate owner is affected.’
To establish that they have a common intention constructive trust, Hannah and Joshua must satisfy the criteria set out in Lloyds Bank Plc v Rosset  1 AC 107:
- an agreement between the parties that the claimant should have a beneficial interest (this agreement can be express or inferred); combined with
- detrimental reliance upon this agreement by the claimant.
Express common intention
An agreement that Hannah and Joshua could occupy the house is not the same as an agreement that they will have an interest in the land. There must be evidence of a shared understanding that they were to have a beneficial interest in the house (see, for example, Nourse LJ’s judgment in Grant v Edwards  Ch 638). The agreement seems to have all the characteristics of an informal family arrangement: although the facts will need to be closely examined, the circumstances are very different from cases where the respective parties are in a close emotional relationship.
Inferred common intention
In Lloyds Bank Plc v Rosset, Lord Bridge was of the opinion that the only act that would be sufficient to justify inferring an agreement as to beneficial ownership would be a direct contribution to the purchase price, or the repayment of a mortgage. Although both the earlier case of Gissing v Gissing  AC 886 and the more recent speech by Baroness Hale in Stack v Dowden  2 AC 432 at  (see also, Abbott v Abbott  1 FLR 1451) suggest that the hurdle should be set somewhat lower, there is not, as yet, any binding authority from the Court of Appeal or the Supreme Court authorising a more holistic approach (but see the High Court case of Hapeshi v Allnatt  EWHC 392 (ch)). There is no evidence that either Hannah or Joshua made a major contribution at any time in expectation of an interest in the land. The £15,000 was expressly provided as a loan – not in expectation of beneficial entitlement. It has long been established that looking after the family will not itself be sufficient to establish an agreement. Even if this is no longer the case, there remains the question of whether Joshua was acting to his detriment: he was, after all, receiving free accommodation. This issue will be discussed further when considering the possibility of an estoppel.
In the unlikely event that Hannah and Joshua can establish a beneficial interest in the land by way of a constructive trust, it will almost certainly have been overreached by the sale of the land to Damien, provided that the transfer of the house to Damien was made for value (City of London Building Society v Flegg  AC 54).
Estoppel differs from the constructive trust discussed above because it does not require a meeting of minds between the parties. The requirements for proprietary estoppel were most recently considered by the House of Lords in Thorner v Major  1 WLR 776. [It would be appropriate to include a quotation from this or others cases.] John and Linda will be estopped from denying that Hannah and Joshua have an interest in the house if they have allowed Hannah and Joshua to act to their detriment on the mistaken expectation that they are acquiring an interest in the land itself.
The extent of Hannah and Joshua’s expectation is not clear. Although they were told that they could make their home in the house, this does not necessarily mean that they expected to acquire a proprietary interest in the house. This appears, at least at the outset, to be an informal family arrangement. The words used fall short of those giving rise to an estoppel in a number of cases, such as Greasley v Cooke  1 WLR 1306, where the claimant was expressly assured that she could live in the house for the rest of her life. The loan of £15,000 is not itself evidence of any expectation of an interest in the land: indeed, the fact that a loan would have to be repaid may suggest the opposite. It is possible that Hannah and Joshua’s expectations had changed by the time John gave up work to look after the children, but this is not immediately clear from the stated facts.
If Hannah and Joshua can establish an expectation, they must also show that they have relied upon their expectation to their detriment – that is, their actions went beyond what would normally be expected given the relationship between the parties (Greasley v Cooke). Hannah and Joshua were, it seems, receiving accommodation in return for their work on the house. It is not clear from the stated facts how else Hannah might have acted to her detriment. Joshua may have acted to his detriment by giving up his job. If so, Joshua should be able to establish an estoppel in his favour – but Hannah cannot automatically rely on Joshua’s actions.
Satisfying the equity
The court will satisfy the estoppel by awarding the minimum remedy necessary to do so: Gillet v Holt  Ch 210. In some cases the courts have satisfied the estoppel by awarding the claimant an estate in the land (freehold: Pascoe v Turner  1 WLR 431, Re Basham (dec’d)  1 WLR 1498; leasehold: Yaxley v Gotts  Ch 162). However, the court will frequently award the claimant something less such as a licence to occupy (Greasley v Cooke), or monetary compensation (as in Campbell v Griffin  EWCA Civ 990).
Is the estoppel binding on Damien?
The land in this case is registered. Section 116 LRA 2002 provides that an equity by estoppel is capable of binding purchasers of the registered title, provided that the claimant is in actual occupation of the land within para.2, Sched. 3 LRA 2002 (s.29(2) LRA 2002). An equity by estoppel is not capable of being overreached as it does not fall within s.2 LPA 1925.
If Hannah and Joshua have been occupying a distinct part of the house, to the exclusion on the other occupants, it is just possible that they could have acquired title by adverse possession. To do so they must demonstrate
- actual occupation;
- with intention to possess;
- without the consent of the paper-owner;
- for the requisite period.
As the arrangement between the parties appears to be consensual until very recently, it seems highly unlikely that any title has been acquired by adverse possession, even if Hannah and Joshua had effectively excluded John and Linda from possession of any part of the house.
If Hannah and Joshua are unable to establish that they have any of the interests considered above, they almost certainly occupy the house under a contractual licence (or some other form of permissive licence). Unless combined with one of the interests discussed above, such a licence will not be binding on Damien for the reasons set out in Ashburn Anstalt v Arnold.