This problem question achieved a 90 in the second year of the author’s degree.
Frank’s purchase of ‘The Willows’ would have triggered compulsory first registration as the freehold was sold (Land Registration (NI) Act 1970, s24 and Part 1 of Schedule 2). Both pieces of land are registered.
Stephanie
The first issue is whether Stephanie holds a lease or a licence. This matters because if Stephanie is a licensee, she holds a purely personal right which would (generally) not be binding on Trevor’s successor.
The determining feature is exclusive possession (Street v Mountford (1985)). Stephanie must have been granted exclusive possession of the cottage as a lessee/tenant. The written agreement contains a clause stating that Trevor reserves the right to introduce an additional occupant into the cottage at any time. In Car Park Services Ltd v Bywater Capital (Winetavern) Ltd (2018), the court states that the purported tenant, in this case, Stephanie, must be able to exclude everyone from the premises, including the purported landlord, in this case, Trevor. As Trevor can introduce an additional occupier to the cottage, Stephanie does not have exclusive possession of the premises. Stephanie has a licence, not a lease.
The second issue is whether a valid contract was made. Consideration is present as £30,000 was exchanged for occupying the cottage. There may be an issue with the intention to create legal relations as Stephanie is Trevor’s cousin, and as such, there is no presumption of an intention to create legal relations., The court may imply an intention. Tanner v Tanner (1975) suggests that the court may find an implied contractual licence in the familial context (Bevan, 2022). The facts show an intention to create legal relations as they are merely cousins. A formal written agreement was used, which, combined with consideration, will allow the court to find an intention to create legal relations. As such, Stephanie holds a contractual licence because Trevor granted it in return for consideration from Stephanie.
The third issue is whether Stephanie’s contractual licence would be binding on Trevor’s successor. Contractual licences are not interests in land and are personal rights only (Ashburn Anstalt v Arnold (1989)). Therefore, the licence cannot bind Trevor’s successor. Stephanie will have to leave the premises if the land is sold. However, if Trevor sells at a reduced purchase price to a third party because the land is subject to a contractual licence, this will give rise to an equitable interest which will bind a third-party purchaser (Ashburn). As Stephanie is also in actual occupation of the property, this would bind a successor.
Trevor has two options: Wait until Stephanie’s contractual licence expires. Or revoke the contractual licence; As Stephanie is entitled to a four-year contract, ending this early is a breach and will be actionable by Stephanie (Winter Garden Theatre (London) Ltd v Millennium Productions Ltd (1948)).
The right of way
The issue is whether Frank can refuse to allow Trevor to use the laneway. Re Ellenborough Park (1956) lays out four characteristics that aid the analysis of whether a right can be an easement.
First, there must be a dominant and servient tenement. The right must be linked to two parcels of land (Alfred F. Beckett Ltd v Lyons (1967)). Trevor holds ‘The Manor’, and Frank holds ‘The Willows.’ Secondly, there must be separate ownership or occupation of the dominant and servient tenements. This is already established. Thirdly, the purported easement must ‘accommodate’ the dominant tenement. In other words, the right must benefit the dominant land itself and not the landowner (Hill v Tupper (1863)). The right in question allows the dominant landowner to cross Frank’s property to access the main road. The right, therefore, increases the utility and the use of the land and, thus, ‘accommodates’ the dominant tenement because a right of way makes the dominant tenement more accessible (Regency Villas v Diamond Resorts (Europe) (2018) [39]).
Lastly, the purported easement must be capable of forming the subject matter of a grant. There is a capable grantor and grantee. The right claimed must not be vague (Harris v De Pinna (1886)). The right claimed has definitional clarity because it is simply a right of way between the dominant and servient tenement. The right claimed is within the general categories of established easements – rights of way (Borman v Griffith (1930)) – and does not impose a positive burden on the servient owner. The right must not exclude the use or enjoyment of the servient land. It is simply a right of way that would not exclude Frank’s land’s use or enjoyment.
The right is capable of being an easement. The issue is whether an easement has been created, in fact, and how. The conveyance does not mention an express grant or express reservation. As Frank previously owned both pieces of land and transferred part of his land to Trevor, he may have impliedly granted an easement over ‘The Willows.’
An easement of necessity over ‘The Willows’ could have been granted as that is the only means of access to ‘The Manor.’ Previously before Frank owned both estates, he only owned ‘The Manor’, and it does not mention he enjoyed a right of way over ‘The Willows’, perhaps indicating that ‘The Manor’ is not landlocked, meaning this right is not one of necessity as the requirement is that it needs to be one of physical necessity (Frank Towley Ltd and another v County Council of the County of South Dublin (2005)).
The rule in Wheeldon v Burrows (1879) provides that rights (quasi-easements) exercised by Frank in respect of the land granted, while it was in his common ownership, have the potential to become full easements on selling that part of the land to another person (Wylie, 1997). There is confusion in case law and academia regarding the connection of the subsequent tests – ‘continuous and apparent’ and ‘reasonably necessary’ for the land’s enjoyment. Harpum (1997) argues that the subsequent tests should be followed one after the other. In contrast, Douglas (2015) claims an ‘either or’ approach. Following Douglas’ theory, the laneway is clearly ‘continuous and apparent’ because it can be seen on reasonable inspection of the land. As such, an implied easement exists. However, problems occur when using Harpum’s approach as Wheeler v JJ Saunders (1995) suggests that a second means of access is not necessary for the reasonable enjoyment of the land unless it offers an additional advantage (Borman v Griffith (1930)), thus not fulfilling the requirement of ‘reasonably necessary’ for the land’s enjoyment. As such, the rule in Wheeldon would not create an implied easement.
Nonetheless, section six of the Conveyancing Act 1881 can also provide for an implied grant. Section six is not subject to any of Wheeldon’s requirement of necessary for the reasonable enjoyment of the land and implies that in a conveyance of land, all ‘privileges, easements, rights and advantages’ are included within the conveyance. Wright v Macadam (1949) held that a quasi-easement would pass, on severance of land in common ownership, if the right were known to law – a right of way is known to law. Therefore, section six operates to pass the easement of the right of way impliedly. Trevor enjoys a right of way over Frank’s land.
The implied easement is legal, assuming Frank used a deed to convey the land to Trevor.
Trevor may take legal action against Frank for interfering with his right of way. Frank could approach Trevor and buy out the easement via deed if he wants his servient land to no longer be bound.
The right to park
Prima facie, the right looks like a licence, i.e. a personal right. The first issue is whether the right can be an easement. Re Ellenborough Park (1956) provides the four attributes. First, there must be a dominant and servient tenement. The dominant tenement is Jim’s leasehold estate in land. The servient tenement is Trevor’s land. There are two parcels of land (Alfred F. Beckett v Lyons (1967)). Secondly, the easement must ‘accommodate’ the dominant tenement. Accommodation means that the right granted over the servient land enhances the enjoyment of, and is for the benefit of, the dominant land itself (Regency Villas). The purported easement accommodates the dominant tenement because it allows the land to be used for more than just parking, increasing its utility. Thirdly, different persons must own or occupy the dominant and servient tenement. Although Trevor holds the freehold, Jim is a tenant under a lease, meaning he occupies the dominant tenement, fulfilling the diversity of occupation requirements.
The right must be capable of forming the subject-matter of a grant. It must be similar to already existing easements. The easement of a right to park is an already existing easement (Knox v Sweeney (2020); Batchelor v Marlow (2003); Moncrieff v Jamieson (2007)). It must not impose a positive burden on the servient owner – which it does not. The purported easement must not exclude the use/enjoyment of the servient land.
The issue is whether the right excludes the use/enjoyment of Trevor’s land. The facts of this scenario are similar to London & Blenheim Estates Ltd v Ladbroke Retail Parks Ltd (1993) in that the servient tenement was large compared to the amount of space a car would take up. It is well established in law that where the easement of a right to park sought over part of the servient land does not prevent the servient owner from the reasonable use of the servient land, this can amount to an easement (Knox v Sweeney (2020) [64]). ‘The Manor’ is a large property with ‘surrounding grounds’. In contrast, the barn is a very small piece of land. Jim parking his car on Trevor’s land would not exclude Trevor from the reasonable enjoyment or use of his land because a car would only take up a small piece of the extensive grounds.
The purported right is capable of being an easement. The issue is whether an easement has been created, in fact, and how.
Trevor allowing Jim to park on his land is a bare licence as it merely grants the right of not being a trespasser (The Calgarth 1927). Assuming the lease was granted in writing/by deed (Deasy’s Act 1860, s4) when the lease was renewed, section six CA 1881 operated to convert the licence that the landlord (Trevor) previously permitted Jim to enjoy into an easement (Wright v Macadam (1949); Golberg v Edwards (1950)) and implied it into the legal conveyance. The personal right has become proprietary right.
The implied easement is legal, assuming the use of a deed. Jim may take action against Trevor because there is a substantial interference with the reasonable enjoyment of the easement, and it is reasonable for the easement holder to insist on the exercise of the easement (B&Q v Liverpool and Lancashire Properties (2001).
London Lending Bank (LLB) is the mortgagee. Philip is the mortgagor of one mortgage. The estate of which is the music shop property. Philip and Karen are mortgagors of the second mortgage. The estate of which is their home.
* In the original problem question this passage was included as a footnote at the bottom of the page.
The creation of a legal mortgage in registered land must be by way of a legal charge granted by the mortgagor in favour of the mortgage (s.23 LRA 2002). A deed must be used (ss 205(1)(ii), 52(1) LPA 1925) because this is a conveyance of land. Philip and Karen used a deed for both mortgages. As the grant of a legal charge comprises a registrable disposition, it must be registered to have effect in law (s 27(1)(2)(f) LPA 1925). Assuming the disposition was registered, the charge will take effect by way of deed by legal mortgage (s51 LRA 2002). Both of the mortgages are legal mortgages.
If LLB wants to sell the properties, it could take physical possession if this can be achieved without the use/threat of force (Ropaigealach v Barclays Bank plc (2000)). In practice, this could open up criminal/civil liability, and LLB will probably wish to avoid this.
LLB does not have to act on the default if they do not want to (Silven Properties Ltd v Royal Bank of Scotland plc (2003)). If LLB does decide to pursue a remedy for Philip and Karen’s default, then duties will apply. As both mortgages are legal, LLB can sell the property without court involvement, which will not infringe ECHR Protocol 1 Art 1 (Horsham Properties v Clark and Beech (2009)). However, LLB would seek possession first as it is common practice, and a vacant property will raise more capital.
The issue is whether a power of sale has arisen. No express power of sale is mentioned in any of the mortgage agreements. As both mortgages were made by deed (s101(1) LPA 1925) and contained no exclusion of a power of sale (s101(4)), a power of sale can be implied in both mortgages because the mortgage money has become due (s101(1)(i)).
As the power of sale has arisen, the issue is whether the power of sale is exercisable by LLB. Assuming LLB served both notices requiring payment of the mortgage money on Philip, and Philip and Karen, on first default, the power of sale has become exercisable as more than three months have passed since the notice (s103(i)).
LLB will wait until possession is ordered before exercising the power as the mortgagors are still in occupation. The issue is whether they can succeed in possession proceedings to ensure vacant property.
LLB has an automatic right to possession (Four Maids v Dudley Marshall (1957)). LLB is subject to duties when acting when seeking possession of both properties. LLB should seek possession in good faith and protect its rights (Quennell v Maltby (1979)). In other words, they seek to ensure their debt has been satisfied.
Residential Property
For the residential mortgage, The Pre-Action Protocol for Possession Claims based on Mortgage or Home Purchase Plan Arrears in Respect of Residential Property (2011) must be considered by LLB first. The Protocol aims to ensure that LLB acts fairly and reasonably. LLB should comply with the rules and consider an agreement plan before court proceedings.
Assuming LLB has followed these steps - most banks do because the requirements are far from onerous (Bevan, 2022) - as one of the mortgaged properties is a ‘dwelling home’, the court can adjourn possession proceedings if Philip and Karen are likely to be able within a reasonable period of time to pay any sums due under the mortgage (s36 Administration of Justice Act 1970, as amended by s8 Administration of Justice Act 1973). There is conflicting case law on what constitutes a ‘reasonable period of time.’ Cheltenham & Gloucester Building Society v Norgan (1996) suggests the period of time is the remainder of the mortgage term. However, National & Provincial Building Society v Lynd (1996) offers a shorter period of around three to four years. Norgan supports the case for Philip and Karen more and should be followed as Lynd does not deal with English law. The court may decide to exercise its discretion under section 36 and adjourn possession proceedings for the residential mortgage if Philip and Karen can provide evidence of a detailed repayment schedule (Norgan, Waite LJ) that would pay off the mortgage before the end of the mortgage term. If they defaulted again, the court would be less likely to allow another adjournment of possession proceedings (Norgan). Philip’s finances are a ‘disaster’. However, Karen could help create a repayment plan for the residential property with Philip. If not, possession will be ordered.
Commercial Property
Section 36 does not apply to the music shop mortgaged property. The court has an inherent jurisdiction to stay the possession to allow the mortgagor time to pay off the debt (Birmingham Citizens Permanent Building Society v Caunt (1962)). Case law indicates that the period would not amount to anything more than a limited opportunity (Caunt). As Philip’s finances are not the best, he cannot devise a plan for the commercial property, and the court will order possession.
Sale of the properties
LLB can exercise the power of sale for both properties. Legal title will vest in the purchaser when sold (s88(1) LPA 1925), with the mortgagor’s rights being overreached. After the sale proceeds are used to discharge any prior incumbrances, the cost of the sale of the properties and the sums owed to the mortgagee, the remaining proceeds go to Philip and Karen (s105 LPA 1925).
If any sum is left over for either mortgage, LLB could act on the mortgagor’s covenant to repay any deficit left after the sale proceeds are discharged. Philip and Karen should be advised that LLB can enforce personal action for up to six years – Mortgages Conduct of Business Rules 13.6.1 – as the mortgages were entered into after 31 October 2014.
When selling the property, LLB is subject to duties. LLB must act in good faith/fairly (Palk v Mortgage Services Funding plc (1993)) and must act with reasonable care (Cuckmere Brick v Mutual Finance (1971)).
Undue Influence
The issue is whether Philip has unduly influenced Karen to consent to the mortgage. The husband-wife relationship is not a prescribed relationship of trust and confidence (Royal Bank of Scotland v Etridge (No 2) (2001)). The facts are similar to Etridge. Lord Scott stated he would see a husband and wife living together as having a relationship of trust and confidence unless evidence to the contrary (Etridge). The court will then ask is the transaction one that is not explicable by the relationship between the parties (Allcard v Skinner (1887)). The transaction is explicable because there is no evidence of abuse of the relationship of trust and confidence by Philip. Philip did persuade Karen to agree to the mortgage. However, the scenario needs more facts to determine what this amounted to. Not a single mortgage payment has been made for five months, implying Karen may rely on Philip financially. The transaction would benefit Karen if they did not enter financial difficulties. There is no presumption of undue influence as the transaction is explicable because the business appears to be the couple’s sole source of income, and Karen relies on Philip.
Comments