Distinguish between personal licences over land and proprietary interests in land. Show how this definition has been affected by the doctrine of proprietary estoppel. Illustrate your answer with examples from the case law. The potential proprietary status of a contractual licence has been a matter of dispute for a long time, with a case law history dating as far back as the nineteenth century1, and debates of the 1980's bringing a vigorous new lease of life to the subject2.
The original principle that licences cannot be proprietary in nature, but are mere personal rights3 has been toyed with by the courts and academics for a number of decades, but now appears to be returning as orthodoxy. In this paper, we shall look at the development of the law over this period, and the return of the orthodox view. We shall base our discussions on the involvement of proprietary estoppel in the area, and how this may continue to affect the case law. It is also important that we understand the general principles which the pre-1926 common law has given us.
A licence can be defined as the permission which prevents one's act of entering another's land4 being trespass. Put simply, it is a way in which a person may enjoy some right or privilege over the land of another. The range of activities which can be covered by a licence is almost limitless, extending from permission to watch a film in a cinema5, to the running of a school6. A right is said to be a 'proprietary interest' if one crucial factor is evident: the right must bind third parties.
The problem here, however, is the question "what binds third parties? " (the answer being "proprietary interests"! ). The basis for confusion is obvious, and it is easy to see how the interpretation of common law principles has differed. Another essential characteristic to examine, therefore, is whether the interest can be passed on to another person. There is not a lot of authority in English law as to whether licences are transferable, but rights arising under a contract are usually assignable7.
It is crucial, however, that for a licence to be an interest in land, it must bind the licensor's successor. Proprietary estoppel, a method for the creation of certain rights and privileges over land, appears to be the way that the courts have in the past held licences to bind third parties. Also referred to as "estoppel by acquiescence", "estoppel by encouragement"8 and "quasi-estoppel"9, it is "the equitable jurisdiction whereby a court may interfere in cases where the assessment of strict legal rights is found to be unconscionable"10.
The courts are unwilling to define the exact ambit of the doctrine, but with its ancient origins11, considerable development12 and the recent abandonment of its more "archaic" features13, it is a vital principle in the licence/proprietary interests argument. This has been the main area of debate, and it seems appropriate to discuss the cases in chronological order. Despite the orthodox view that licences are personal, and cannot be proprietary in nature, there were four pre-1926 cases holding estoppel licences to be capable of binding third parties.
The first of these, Duke v. Patrick14 is clear authority that estoppel rights are capable of binding purchasers, with actual or constructive notice. The second case, Unity Joint Stock Banking v. King15, is authority that, as well as estoppel rights being able to bind purchasers with notice, the rights crystallise at the time of incurred expenditure, or reliance, rather than when the courts recognise this. And so legal history unfolds, with the third case, Dillwyn v. Llewelyn16, expanding on the principle of reliance as consideration and the fourth, Plimmer v.
City of Wellington Corpn17, confirming this. These four cases are important authority that, pre-1926, rights arising under estoppels relating to land are capable of binding third parties, thereby giving them status as proprietary interests. But, the drafters of the Law of Property Act 1925, in an early draft of the Act, made it quite clear that these estoppels should be seen as a method of creating existing forms of equitable interests, rather than a new separate form18.
Since the 1925 legislation, the Court of Appeal has held successors in title to be bound in two cases19 and a purchaser to be bound in only one case20. It is submitted, however, that the judges in Hopgood v. Brown21 wrongly relied on the authority of Taylor v. Needham22, which based its argument not on estoppel by representation, but on the doctrine of benefit and burden. Furthermore, if we look at the wording of the 1926 legislation, it certainly appears to have prohibited the creation of novel equitable interests in land, this leaves estoppel licences as proprietary interest open to further doubt.
In addition to this doubt, we have clear authority from Ashburn Anstalt v. Arnold23 that a contractual licence creates personal rights only and does not give rise to any estate or interest in land. A third party, it is held, will therefore only be affected in exceptional circumstances where the court is prepared to impose a constructive trust as the third party's conscience has been affected. Moreover, three years later24, it was further suggested that no licence of any kind may bind a third party.
Most recently, we have the case of Lloyd v. Dugdale25 confirming the orthodox view. These developments, as is aptly suggested by Battersby26, are "a welcome and clear return to orthodoxy". However it must be noted that these developments only clarify the contractual licence, not the estoppel licence. Ashburn27 does not tell us what to do when presented with an estoppel situation, such as in Inwards28. Jonathan Hill, in his learned case-note on Ashburn29, suggests the following: "…
it might be concluded that, in view of the basic similarities between contractual and estoppel licences, both in terms of the circumstances in which they occur and the issues of policy to which they give rise, they should have the same effect on purchasers. According to this view… the courts should reconsider the impact of estoppels on third parties. Alternatively, it can be argued that there is nothing objectionable in principle about a system in which estoppel licences are capable of binding third parties and contractual licences are not.
" His concern to maintain 'the general coherence' of the law, it is submitted, is a reasonable concern on which to base one's view on the matter. It is therefore submitted, that the courts need to look at licences and proprietary estoppel as separate issues. Proprietary estoppel has no necessary connection with the law of licences. The fact that the claimant is a licensee should be irrelevant where a court gives effect to an equity arising from an estoppel. There has been a trend of modern decisions to adopt this approach30.