PROPERTY LAW

LICENCES
PROBLEM QUESTION

Question-1
In 2013, Zoe acquired registered title to a small cottage on Dartmoor, formerly
part of a large farm and quite close to the old farmhouse. Being fond of animals,
she acquires several horses and asks Farmer Roger whether she can keep them
on his land. He agrees, but only if he may use the horses to hire to tourists who
stay on his farm. Farmer Roger also provides riding holidays for tourists, using
his own horses, and Zoe agreed that, if there were insufficient space in the
farmhouse, she would accommodate any extra tourists and provide them with
breakfast and an evening meal if desired. Zoe also pays Farmer Roger £100 per
month to park her car in an old barn on the farm. She also regularly collects
firewood from Farmer Roger’s land, as her only source of heating is an old
woodburning stove. In 2014, Farmer Roger proposes marriage to Zoe but she
refuses. Farmer Roger takes great offence and immediately threatens to turn
Zoe’s horses out, although he does continue to use them for his riding business.
In anger, Zoe refuses to accommodate any of Farmer Roger’s tourists and asks
those currently staying there to leave. The tourists subsequently sue Roger for a
ruined holiday. Roger’s response is to sell the barn and fields to Fenland
Holidays plc, which immediately refuses Zoe the right to park her car or gather
wood. Zoe comes to you for advice as her car has broken down due to standing in
the cold and she cannot live in the cottage without her source of fuel. She hopes
to be able to sell the cottage to her friend, Beverley, who would also like to keep
horses. It also emerges that Fenland Holidays plc knew of Zoe’s activities and
paid Farmer Roger a much-reduced price for the land it has purchased.
You discover subsequently that Farmer Roger is the major shareholder in
Fenland Holidays plc.

Ans: This problem concerns the creation of rights over land, the identification of the
nature of those rights and the consequences that flow from subsequent dealings with
the land.

(a) The Horses

Zoe and Farmer Roger have entered into a contract whereby Zoe agrees to allow the
horses to be used for Roger’s business in return for which Roger allows Zoe to keep the
horses on his land. The contract is purely oral and this makes it difficult for Zoe to
establish a proprietary interest – s 2 of the Law of Property (Miscellaneous
Provisions) Act 1989. The only possibility of a proprietary right is if Zoe has a periodic
lease of the land (cf. University of Reading v Johnson-Houghton (1985)) which would be
binding on Roger according to its terms and could be assigned to Beverley by deed
(Julian v Crago (1992)). However, the lack of exclusive possession and the lack of
formality suggest rather that Zoe has a contractual licence over Farmer Roger’s land.
Presumptively, this is revocable during its term by the licensor, although the licensee
(Zoe) would have a claim in damages. However, it is clear from Wintergarden Theatres
v Millennium Productions (1948) that if, on construction of the contract, a contractual
licence was intended to be irrevocable during its term, and equity will intervene to
restrain breach by the licensor by way of injunction or specific performance as
appropriate. Whether the remedy is available to Zoe will depend on many factors, not
least her own conduct. Her willingness to continue to allow her horses to be used (that
is, that she kept her side of the contract) will be important, although her apparent refusal
to cater for the very tourists who would ride will count against. As far as Beverley is
concerned, it has always been true that the benefit of a contract can be expressly
assigned and Zoe can transfer to Beverley such rights as she has against Roger.

(b) The Tourists

The precise nature of Zoe’s liabilities here will depend on the exact terms of the contract
she made with Farmer Roger. She could be in breach of contract in evicting the tourists
before the end of their holiday and in refusing to accommodate future arrivals. In such a
case, Farmer Roger may sue Zoe in contract and recover damages. It is clear that the
tourists have no short-term lease over their rooms in Zoe’s cottage. Under Street v
Mountford (1985), these occupiers are lodgers and, therefore, not tenants (see e.g.
Markou v Da Silvaesa (1986)). The tourists may, of course, have a contractual licence
to occupy the cottage (see Royal Bank of Scotland v Mehta (1999)), although it is
difficult to see on the facts how they could be in direct contract with Zoe.

(c) Car Parking and Collecting Wood

As to the car parking, it is clear from Moncrieff v Jamieson (2008) and R Square
Property’s v Nissan Motors (2014) that it is perfectly possible to have an easement
giving a right to park on a neighbour’s land. However, it is unclear whether an easement
can exist where the right to park is in a defined space as opposed to park generally
within a larger area –that is, if it gives exclusive or excessive control over the servient
land (see Moncrieff v Jamieson). In any event, even assuming that this could be an
easement, the formality necessary to create a legal or equitable right has not been met
and there is little possibility of an estoppel. All in all, this looks as if Zoe has been
granted a contractual licence to park her car, which, of course, is enforceable against
Roger as the licensor. Further, it is clear from Ashburn Anstalt v Arnold (1989) and
Lloyd v Dugdale (2002) that licences as such are not interests in land and cannot
therefore bind a subsequent purchaser of the land. So, subject to what will be said
below, at first sight it looks as if Zoe’s right to park her car cannot be enforced against
Fenland.

The right to collect wood poses different problems because it is possible for a person to
be granted a profit à prendre to collect wood for the purpose of fuel, otherwise known as
a profit of estovers (AG v Reynolds (1911)). Profits are proprietary rights and any
licences attached to the profit to enter land for the purpose of exercising the profit are
merely incidental to the superior proprietary right (James Jones v Earl of Tankerville
(1909); Polo Woods v Shelton-Agar (2009)). Once again, however, in order for the profit
to exist and be capable of binding a third party such as Fenland, it must be created in
due form. In this case, there is no deed to support a legal profit and no written contract
to support an equitable profit. Zoe’s only hope is to plead the creation of a profit by
estoppel, similar to the creation of an easement by estoppel in Celsteel v Alton (1985)
and Joyce v Epsom & Ewell BC (2012). However, even if that were the case, Zoe would
have to register her interest by means of a notice in order for it to be effective against a
purchaser – s 29 of the Land Registration Act 2002 – for an equitable easement or
profit cannot override under the LRA 2002 (it is not within Sched 3 to the Act and use of
the easement or profit does not amount to ‘actual occupation’ of the burdened land –
Chaudhary v Yavuz (2012)).10 There is no evidence that she has so registered. If, on
the other hand, there is no estoppel, Zoe could claim a licence to collect wood.
Obviously, this cannot bind Fenland as such – not being an interest in land – but she
may gain some remedy via a constructive trust, considered below.

(d) Fenland and Farmer Roger

Although it is clear that any licences could not bind Fenland as a matter of property law,
there is the possibility that they could be affected by a personal constructive trust,
imposed to give effect to such licences as do exist. This occurs because of the
purchaser’s unconscionable conduct – see Ashburn Anstalt v Arnold, Lloyd v Dugdale,
Groveholt v Hughes (2012) – but Chaudhary v Yavuz (2012) makes it clear that this is a
very exceptional rule and not easily established. So, it is not enough that the purchaser
simply promised to give effect to the licences – Ashburn, Yavuz, Groveholt criticising
Binions v Evans (1972). In our case, the fact that the purchaser paid a lower price
because it knew of the existence of the licences is important (Dugdale) and it is
arguable that this makes it unconscionable for Fenland to revoke any licences that Zoe
might have (to park, to collect wood).
Finally, two further points should be noted. First, Zoe may transfer the benefit of any
contract to Beverley irrespective of the nature of the rights created by the contract. That
is a matter of contract law. It is not clear, however, whether the transfer of the benefit of
the contractual rights to a third party will affect the court’s decision to impose a
constructive trust on the purchaser of the land over which those rights exists. Second, it
may be possible to argue that there is no third party purchaser at all on the grounds that
Fenland is just Farmer Roger in another guise. If that were the case, because Roger is
the majority shareholder of Fenland, no question of the enforcement of licences against
third parties arises. It is more likely, however, given the separate legal personality of
companies and their owners, that Roger’s majority shareholding will be relevant to the
question of the imposition of the constructive trust on the ‘third party’ rather than in
deciding that there was no third party at all (Jones v Lipman (1962)).