Ipsofactoj.com: International Cases [2003] Part 1 Case 5 [CAEW]


COURT OF APPEAL, ENGLAND & WALES

Coram

Lloyd

- vs -

Dugdale

LORD JUSTICE KENNEDY
LORD JUSTICE MUMMERY

SIR CHRISTOPHER SLADE

21 NOVEMBER 2001


Judgment

Sir Christopher Slade

  1. This appeal raises a number of inter-related questions concerning the law of proprietary estoppel and constructive trusts and the construction and effect of section 70(1)(g) of the Land Registration Act 1925 ("the 1925 Act").

    THE FACTS

  2. The claimants, who are the trustees of the John Lloyd Heywood Pension Scheme, appeal with the leave of the Judge from a judgment of His Honour Judge Howarth, sitting as a judge of the High Court, given on 15th August 2000.

  3. The history of the matter begins in 1987, when James Ingham ("Mr. Ingham") acquired a long leasehold interest (999 years from 24.03.1835) at a yearly rent of 37.14s.9p in a property known as Moorcroft Mill, Hall Street, Heywood, Greater Manchester ("Moorcroft Mill"). This property included an area, ("the Unit"), comprising an office/warehouse, a fire-damaged former weaving shed, and an access and landscaped area. Mr. Ingham's title to this property was registered at HM Land Registry.

  4. At this time in 1987, the respondent to this appeal, Mr. Joseph Anthony Dugdale ("Mr. Dugdale"), was the major shareholder (75%) and managing director of a company known as JAD Flooring Company Limited ("JAD"). His wife was the company secretary and the other director. She held the remaining 25% of the shares. His son Ian worked for JAD. Mr. Dugdale owned shop premises at 91/93 York Street, Heywood, at which JAD carried on its business, which was that of supplying flooring such as carpets and linoleum. It also rented adjacent storage premises, but the owner of these had required it to vacate them by the end of August 1987. JAD was therefore in urgent need of new accommodation.

  5. Against this background, in June 1987 a meeting took place between Mr. Dugdale, his son Ian and Mr. Ingham. The Judge made the following findings of fact in regard to what took place at this meeting:

    1. Mr. Ingham orally accepted an offer by Mr. Dugdale to purchase the Unit for 20,000.

    2. "Mr. Dugdale told Mr. Ingham that he [emphasis added] wished to move into the Unit urgently and that he was concerned about the inevitable delay whilst the conveyancing process was completed."

    3. "Mr. Ingham said he would tell his solicitors to treat the matter as being urgent, and that in the meantime Mr. Dugdale and his company, JAD could move in."

    4. "Mr. Ingham even offered to allow Mr. Dugdale's contractors to use the water and electricity supply to the other half of Moorcroft Mill, which was not affected by the fire damage, so as to carry out the work which was going to be needed to be done to the Unit in order to render it fit for use once again."

    5. "Mr. Ingham said that he and his employees could do the building work at competitive prices. Mr. Dugdale said to Mr. Ingham that he was concerned about spending large sums of money on the Unit before he had become the owner of it. Mr. Ingham .... replied by saying that he was a man of his word and that Mr. Dugdale had no need to worry."

  6. Four or five weeks after this conversation, JAD, with the permission of Mr. Ingham, moved its stock into the office part of the Unit which was not damaged by fire. Mr. Ingham gave Ian Dugdale the key to the padlock on the office door, so that JAD could gain access to the Unit for the purpose of putting its stock in there to store it.

  7. Building work proceeded at the Unit for the rest of 1987 and part of 1988. The business of JAD was moved to the Unit in about September 1987. The building work was paid for by JAD. The precise sums spent are immaterial, but the Judge found that the total sum expended on the Unit exceeded 15,000. He had no doubt that Mr. Ingham knew that money was being expended.

  8. Meanwhile, correspondence regarding the conveyancing aspects of the transaction had been passing between the parties' respective solicitors, Chadwick & Co for Mr. Dugdale and JAD, and Russell & Russell for Mr. Ingham. The Judge summarised the course of this correspondence in some detail. It is not necessary to repeat that summary. At present it will suffice to say that at the time when Chadwick & Co wrote their first letter relating to the transaction to Russell & Russell, on 3rd August 1987, they plainly envisaged that JAD rather than Mr. Dugdale personally would be the purchaser of the Unit, and all the subsequent solicitors' correspondence was headed "Ingham to JAD Flooring Co Ltd Property in Hall Street, Heywood".

  9. Nevertheless, by 19th August 1988 the terms of a lease of the Unit in favour of Mr. Dugdale personally had been agreed between the parties' solicitors. On that date Russell & Russell, on behalf of Mr. Ingham, wrote to Chadwick & Co saying: "We now enclose the engrossment counterpart for execution by your client. We are arranging for our client to execute the original". The parties to that engrossment were expressed to be Mr. Ingham as lessor and Mr. Dugdale personally as lessee. The proposed lease provided for the grant of a long sub-lease of the Unit to Mr. Dugdale for a term of 799 years from 24th March 1835 in consideration of a premium of 20,000 and a ground rent of 25 per annum.

  10. This sub-lease was never executed. Shortly afterwards Chadwick & Co were informed that Mr. Ingham had decided not to proceed with the transaction. It would appear that he had received a better offer. On 20th October 1988 Russell & Russell responded, asserting that counsel advised them that the circumstances of the case gave rise to "a classic case of estoppel".

  11. On 15th May 1989 Mr. Ingham's solicitors wrote a letter purporting to terminate the licence of JAD and/or Mr. Dugdale to occupy the Unit.

  12. On 18th August 1989 Mr. Ingham issued proceedings 1989 I No.323 ("the first action") against Mr. Dugdale and JAD seeking possession of the Unit. It was alleged that in late July and early August 1987 there were discussions between Mr. Ingham and Mr. Dugdale with a view to Mr. Dugdale [emphasis added] purchasing the office part of the Unit from Mr. Ingham and that it was agreed that JAD might take up temporary possession of that part and use it in conjunction with its business. It was alleged that keys were handed over on 16th August 1987; that a gratuitous licence arose for Mr. Dugdale's and JAD's [emphasis added] occupation of the office part; that from 3rd August 1987 to 15th May 1989 negotiations took place for the grant by Mr. Ingham to Mr. Dugdale [emphasis added] of a lease of the whole Unit, but were subject to exchange of lease parts; that on 15th May 1989 28 days notice was given to Mr. Dugdale requiring him to vacate the Unit. Possession was claimed against both defendants alleging that they remained in wrongful occupation of it.

  13. On 30th August 1989 a defence and counterclaim was served in the first action alleging that at the end of July or the beginning of August 1987, Mr. Ingham orally agreed to sell to Mr. Dugdale [emphasis added] the whole Unit for the whole term which Mr. Ingham had therein or substantially the whole of such term at a price of 20,000 and on the occasion of such agreement declared that Mr. Dugdale could consider the premises as his and could rest assured that Mr. Ingham's word was his bond. It was pleaded: "The plaintiff made this declaration knowing that the First Defendant intended to take possession of the said premises through the Defendant company.... and knowing also that the Defendant intended to restore the premises by making good the fire damage and knowing also that the Defendants would not be willing to incur the costs of the necessary work unless they believed that the First Defendant was assured of becoming the owner of the premises". It was alleged that early in August 1987 Mr. Ingham gave JAD [emphasis added] possession of the Unit because Mr. Dugdale was its purchaser. It was admitted that JAD remained in possession of the Unit and it was alleged that Mr. Ingham was estopped from acquiring possession of it. Mr. Dugdale and JAD counterclaimed:

    1. A declaration that in equity Mr. Ingham was bound to grant a lease to Mr. Dugdale in the terms of the engrossment;

    2. An order that Mr. Ingham do execute a lease upon payment to him by Mr. Dugdale of the 20,000 together with arrears of rent calculated from 19th August 1987.

    On 5th June 1990 a reply and defence to the counterclaim was served in the first action.

  14. On 25th August 1992 Mr. Ingham died. After his death, on 24th March 1993, his executors purchased the freehold title to the whole of Moorcroft Mill, including the Unit. Up to about June 1993, JAD had paid rent to Mr. Ingham for its occupation of the Unit, but this payment then ceased, when on the advice of his accountant Mr. Dugdale began instead to take increased directors' fees.

  15. On 23rd August 1994, Mr. Ingham's executors entered into a contract with the claimants ("the 1994 Agreement") by which the claimants agreed to purchase the freehold of Moorcroft Mill and adjoining property for 155,000. Clause 4(b) provided:

    Vacant possession of the lands coloured blue on the plan annexed hereto (the Unit) shall not be given on completion and such parcels of land are sold subject to such rights of use and occupation thereof as may exist.

    Clause 14 provided:

    The Property is sold subject to the Proceedings ("the Proceedings") intitled 1989-1-523 in the High Court of Justice Chancery Division Manchester District Registry between the said James Ingham Deceased as Plaintiff, Joseph Anthony Dugdale as First Defendant and JAD Flooring Co Limited as Second Defendant and it is hereby agreed and declared that:-

    (a)

    Unless otherwise agreed in writing by the Vendors then upon the expiry of three months from the date of completion.

    (i)

    the Vendors will execute in favour of the Purchasers a Deed of Assignment of the Proceedings in the form annexed hereto.

    (ii)

    immediately thereafter the Purchasers shall apply to the Court for an Order of the Court that they the purchasers be substituted as Plaintiff in the Proceedings in place of the Vendors and

    (b)

    With the intention of placing the parties hereto in the same position as if the Purchasers had been substituted in the Proceedings as Plaintiff from the date of completion the Purchasers shall be responsible for and in so far as necessary hereby indemnify the Vendors in respect of:-

    (i)

    any legal costs properly incurred by the Vendors in defending any further action taken against the Vendors by the Defendants in the Proceedings after the date of completion but prior to the Proceedings being formally Assigned to the Purchaser save for any legal costs incurred by the Vendors in respect of the execution and completion of the aforementioned Deed of Assignment of the Proceedings and of any proceedings to facilitate the substitution of the Purchasers for the Vendors in the Proceedings.

    (ii)

    any legal costs incurred by the Defendants in the Proceedings after the date of completion which are subsequently ordered against the Vendors.

    (iii)

    any damages or remedies whatsoever ordered against the Vendors in the Proceedings after the date of completion.

    (c)

    the Vendors shall be entitled to discontinue the Proceedings in the event that the Purchasers have not been substituted in the Proceedings as Plaintiff with Six (6) months of the date of completion.

    (d)

    the Vendors hereby indemnify the Purchasers in respect of any legal costs incurred by the Defendants prior to the date of completion insofar as the Court Orders that those costs shall be paid by the Purchasers.

    (e)

    this clause shall not merge upon completion notwithstanding the execution of the Deeds of Assurance to give effect hereto.

  16. On 6th September 1994 the executors transferred Moorcroft Mill to the claimants who, on 4th November 1994, were registered as proprietors of the freehold. As at that date JAD continued to occupy the Unit for the purposes of its business. This had been the position throughout the period since the institution of the first action. The first action had not been registered as a pending action and no caution or other notice relating to any rights of Mr. Dugdale appeared on the Register.

  17. On 3rd March 1995 JAD entered into creditors' voluntary liquidation. On 11th August 1985 the liquidator of JAD wrote to the claimants' solicitors saying:

    No rent for the premises has been discharged since June 1993 and indeed no invoices have been raised by the landlord, Mr. J.A. Dugdale. For your records, prior to June 1993 the Company was charged a rent of 1,000 per month. The Company has, however, paid the annual business rates and usual utility services.

  18. In July 1996 the claimants issued new possession proceedings 1996 S No. 0316 ("the second action") against Mr. Dugdale and JAD seeking possession of the Unit. Their claim was met by a defence and counterclaim based on proprietary estoppel and the expenditure incurred by JAD at and in relation to the Unit in 1987 and 1988. Mr. Dugdale asserted that any rights which he might be found to enjoy in relation to the Unit on proprietary estoppel principles were binding on the claimants because of notice (actual or constructive) or by virtue of Section 70(1)(g) of the 1925 Act, because "the defendants were in actual occupation of the said property and as the plaintiffs made no inquiry of the defendants the rights of the latter under the estoppel became binding on the plaintiffs as overriding interests". Mr. Dugdale counterclaimed for a declaration that in equity the claimants were bound to grant a lease to him in the terms of the engrossment and an order that they execute such a lease upon payment to them by him of the sum of 20,000 together with arrears of rent calculated from 19th August 1987.

  19. JAD did not serve a defence in the second action. On 29th August 1996 its liquidators confirmed in writing to the claimants' solicitors that it had no claims against the claimants or their predecessors in title in respect of the Unit.

  20. On 14th July 1997 a deed of assignment ("the 1997 Assignment") was executed by Mr. Ingham's personal representatives in favour of the claimants, in pursuance of the obligation imposed by the 1994 Agreement. So far as material, this provided as follows:-

    1.

    THE Assignors as Personal Representatives of the said James Ingham deceased Assign unto the Assignee:-

    (a)

    the said Proceedings

    (b)

    the benefit of the alleged agreement between the said James Ingham and the said Joseph Anthony Dugdale referred to in the Defence of the Proceedings and of all rights which may arise thereunder in favour of the Plaintiff or his successors in title

    (c)

    all and every right or interest of the Plaintiff and his executors to and in the cause or causes of action giving rise to the Proceedings or in any way thereto appertaining

    2.

    THE Assignee hereby indemnify the Assignors and Assignors estates against all actions proceedings costs claims and demands in respect of:-

    (a)

    Any legal costs incurred by the Assignors in pursuant of the Proceedings or in Defence of the Counterclaim thereunder after the 6th September 1994

    (b)

    Any legal costs incurred by the Defendants in the Proceedings after 6th September 1994 which are subsequently ordered against the Assignors.

    (c)

    Any damages or remedies whatsoever ordered against the Assignors after the 6th September 1994.

    3.

    THE Assignors hereby indemnify the Assignee in respect of any legal costs incurred by the Defendants in the Proceedings prior to 6th September 1994 in so far as the Court orders that those costs should be paid by the Assignee.

  21. On 11th November 1997 an order was made in the first action for the substitution of the claimants for Mr. Ingham's executors as plaintiffs and for its consolidation with the second action. On 5th May 1999 an order was made in the consolidated action discontinuing the claim against JAD.

    THE ISSUES BEFORE THE JUDGE

  22. In his skeleton argument Mr. Ian Foster, junior counsel for the claimants, set out the agreed issues which had been before the Judge as follows:

    (a)

    Representation:

    Did (as the Defendant claimed) Mr. Ingham orally represent in or about June or July 1987 that he would "sell" (by long lease) (the Premises to the Defendant at a price of 20,000?

    (b)

    Detrimental Reliance:

    Did the Defendant act to his own personal detriment in reliance upon Mr. Ingham's alleged representation, and, if he did, was such detriment sufficient to found an estoppel?

    (c)

    Actual Occupation:

    Was the Defendant in actual occupation of the Premises at the time of the transfer to Claimants and their subsequent registration as proprietors of the Mill at HM Land Registry so as to be able to claim that any right (an equitable interest) which he might enjoy in relation to the Premises and founded upon proprietary estoppel constituted an overriding interest binding on Claimants?

    (d)

    Overreaching:

    In any event, was any equitable interest which the Defendant might enjoy in relation to the Premises overreached by the transfer between Mr. Ingham's executors and the claimants on 23rd August 1994?

    (e)

    Constructive Trust:

    Should (as the Defendant claimed) a constructive trust be imposed on the Claimants (presumably to give effect to any equitable interest the Defendant might have had in relation to the Premises immediately prior to the transfer dated 23rd August 1994 and in circumvention of the policy underlying the registration of title) because the circumstances in which Claimants acquired the Mill made it inequitable for them to deny the Defendant's equitable interest?

    (f)

    Satisfaction:

    How should any equity which might arise in favour of the Defendant and be binding on Claimants be satisfied?"

  23. In his skeleton argument, counsel for Mr. Dugdale, Mr. Cawson QC, agreed that the issues before the Judge were as set out in Mr. Foster's skeleton argument, save that

    (a)

    in relation to detrimental reliance, in the alternative to D's contention that he had himself suffered detriment, there was an issue as to whether D could rely upon a collective estoppel concerning D and JAD;

    (b)

    Again in relation to actual occupation, there was an issue as to whether D might in the alternative rely upon a collective estoppel;

    (c)

    D does not accept that the constructive trust referred to in paragraph [22(e)] does circumvent "the policy underlying the registration of title".

     

    THE JUDGMENT

  24. The Judge, in the course of a long and careful judgment, in effect determined each of the issues referred to in subparagraphs (a) to (c) and (e) of paragraph 22 above in favour of Mr. Dugdale. In relation to the question of satisfaction he made the order which is now appealed. He declared that Mr. Ingham prior to his death and subsequently his personal representatives were bound in equity to grant Mr. Dugdale a lease of the Unit in the terms of the draft lease, and that the claimants are now bound in equity to grant a lease of the Unit to Mr. Dugdale in such terms. He dismissed the claimants' claims in both the first and second action. He ordered that the claimants should execute in favour of Mr. Dugdale a lease of the Unit substantially upon the terms of the draft lease upon payment by him to the claimants of the sum of 20,000, together with arrears of rent at the rate reserved by the draft lease calculated from 19th August 1987 together with interest. He granted the claimants permission to appeal his order subject to the proviso that the grounds of appeal should be limited to grounds based upon inferences drawn from primary facts and issues of law and/or equity.

    GROUNDS OF APPEAL

  25. There are ten grounds of appeal. It is common ground in the respective skeleton arguments that they may be looked at under the following six headings:-

    (A)

    Material representation ("Issue A")

    (B)

    Detrimental reliance ("Issue B")

    (C)

    Actual occupation ("Issue C")

    (D)

    Constructive trust ("Issue D")

    (E)

    Satisfaction ("Issue E")

    (F)

    Corporate personality ("Issue F")

    I shall follow these six headings in this judgment, though leading counsel for the claimants, Mr. Anthony Elleray QC, found it convenient to follow a rather different course in his argument.

    ISSUE (A): Material representation

  26. The essential features of proprietary estoppel are in my judgment accurately summarised in Megarry and Wade's Law of Real Property (6th edition 2000) para 13-00 as follows:

    (1)

    An equity arises where

    (a)

    the owner of land (O) induces, encourages or allows the claimant (C) to believe that he has or will enjoy some right or benefit over O's property;

    (b)

    in reliance upon this belief, C acts to his detriment to the knowledge of O; and

    (c)

    O then seeks to take unconscionable advantage of C by denying him the rightful benefit which he expected to receive

    It follows that where an alleged estoppel is founded upon an express representation by O that C will enjoy some right over O's property, it can only be material if it precedes the detriment in time; otherwise the detriment is not incurred in reliance on the representation.

  27. The appeal under this head is substantially based on the contention that, while the Judge made no finding of any detriment suffered by Mr Dugdale or JAD after early 1988, there was no evidence before him that Mr Ingham had at any time before August 1988 represented that Mr Dugdale, as opposed to JAD, was to acquire an interest in the Unit. Mr Dugdale's case, on the other hand, was founded upon representations allegedly made to him in mid-1987 that he personally would acquire an interest in the Unit.

  28. In support of the submission that any relevant representations which were made before August 1988 were made to JAD rather than to Mr Dugdale, a number of facts were relied on by the claimants in their written and oral submissions. They included the following facts, most of which were specifically found by the Judge. At the time of Ian Dugdale's initial discussions with Mr Ingham, Ian Dugdale thought the Unit would be suitable for JAD to occupy. On 11th June 1987 a valuation of the Unit was made by Adamsons, Estate Agents and Insurance Brokers, which was addressed to JAD, (though for the attention of Mr Dugdale). JAD engaged a structural engineer to advise what work at the Unit would be needed. JAD started storing stock at the Unit in late June or early July 1987. The solicitors' correspondence dealing with the conveyancing aspects of the transaction began with a letter dated 3rd August 1987 which opened with the following words:- "Mr JA Dugdale of the above mentioned limited company [JAD] spoke to us this morning on the telephone and instructed us to act in respect of the proposed purchase by the Company....." Thereafter the ensuing solicitors' correspondence on both sides bore the heading "Re Ingham to JAD Flooring Co Ltd. Property in Hall Street, Heywood". The business of JAD was moved to the Unit in about September 1987 and the expenditure at the Unit was incurred by JAD.

  29. At first sight these various facts would seem to suggest that the relevant representations would have been made by Mr Ingham to JAD, rather than to Mr Dugdale personally. However the Judge found that they were in truth made to Mr Dugdale personally. It was submitted on behalf of the claimants that this finding was contrary to or against the weight of the primary facts found by the Judge and the documentation before him. Mr. Dugdale, however, gave clear oral evidence that throughout the negotiations with Mr Ingham it was always contemplated that he, rather than JAD, would be the purchaser of the Unit. He said he did not know why the reference to JAD had, as he put it, "crept in" the title to the solicitors' correspondence, and he did not know that this had happened until it was too late. In regard to the proposed sale, he said, "It was always me..... It was never going to be the company". The claimants' statement of claim in the first action itself alleged throughout that Mr Dugdale was the intended purchaser.

  30. The Judge specifically found that the representations which Mr Ingham made "were made to Mr Dugdale and, so far as is relevant, through him to JAD, and not the other way round". He concluded that at a relatively early stage Mr Ingham must have known that he was dealing with Mr Dugdale and not with JAD. While he recognised the importance of the title to the correspondence between the solicitors, we have been referred to nothing in that correspondence, apart from the initial letter of 3rd August 1987 which suggests that JAD rather than Mr Dugdale was intended to be the purchaser of the Unit. The Judge was in my judgment fully entitled to accept Mr Dugdales's clear oral evidence on this point and to reach the conclusion which he did under this head.

    ISSUE (B): Detrimental reliance

  31. A recent authoritative exposition of the law relating to detrimental reliance in the context of proprietary estoppel has been given by Robert Walker LJ (with whose judgment Waller LJ and Beldam LJ agreed) in Gillett v Holt [2001] Ch 210 at p 232:

    The overwhelming weight of authority shows that detriment is required. But the authorities also show that it is not a narrow or technical concept. The detriment need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial. The requirement must be approached as part of a broad enquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances.

    See also Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] 1 QB 133 at p 151A-152A and 155C-D, per Oliver J.

  32. In the present case there can be no doubt that JAD itself by incurring substantial expenditure on the Unit, acted to its detriment in reliance on the representations made by Mr Ingham. But, as has been stressed on behalf of the claimants, JAD has disclaimed any interest in the Unit. Can Mr Dugdale show that he personally acted to his detriment in reliance on Mr Ingham's representations?

  33. While accepting in terms that the "vast majority" of the detriment had been suffered by JAD, the Judge found that Mr Dugdale had incurred sufficient detriment to allow him to rely on proprietary estoppel. He did so by two alternative routes. The first route was one which the Judge termed "collective estoppel". In reliance on the dicta of Oliver J referred to above, he considered that, because Mr Dugdale and JAD had a common intention, "any detrimental actions taken by either of them in reliance of the representations made by Mr Ingham can be relied upon not just by the person suffering the detriment, but by the other as well".

  34. The basis of this conclusion was apparently that in the circumstances postulated, it would be unconscionable for Mr Ingham vis vis Mr. Dugdale to resile from his representations, even if Mr Dugdale had suffered no personal detriment. As the Judge put it:

    In any event, I am satisfied that the doctrine of proprietary estoppel is sufficiently flexible so as to bind Mr Ingham's conscience to grant the underlease to Mr Dugdale. The detriment suffered by Mr Dugdale's company, JAD, is quite sufficient by itself to enable Mr Dugdale to rely on the doctrine. This does not involve lifting the corporate veil.

  35. The Judge regarded this conclusion as supported by two recent Court of Appeal decisions namely Yaxley v Gotts [1999] 3 WLR 1217 and Banner Holmes Group v Luff Developments [2000] 2 WLR 272. But, as Mr Elleray QC, pointed out these were both cases which involved a joint enterprise of one kind or another. In the present case, there is no evidence that the acquisition of the Unit was ever regarded by Mr Dugdale and JAD as a joint enterprise. It was always intended that he alone would be the purchaser and would do so for his own benefit, even though he would allow JAD to occupy the Unit. Accordingly, notwithstanding the broad limits of the doctrine of proprietary estoppel, in my judgment it remained necessary for Mr. Dugdale to show some detriment incurred by him personally as a result of Mr Ingham's representations. In my judgment Mr Elleray QC was right in submitting that Mr Dugdale cannot rely on a form of derivative estoppel, derived through the company; it is not open to a party to rely on the doctrine in a case where he personally has suffered no detriment as a result of the relevant representations, save perhaps in a case where a joint enterprise has been involved.

  36. In the absence of sufficient supporting evidence, the Judge rightly rejected a contention that Mr Dugdale had suffered sufficient personal detriment by virtue of an alleged reduction in the value of his shareholding in JAD, incurred by reason of JAD's expenditure on the Unit. As the alternative route to his conclusion in regard to detriment, however, he found:

    Mr Dugdale certainly lost the opportunity to attempt to purchase alternative business premises for the Unit which could have been occupied by JAD. This seems to me a relevant detriment suffered by Mr Dugdale personally. Its value is not at all clear, but it is plainly, I think, substantial.

  37. Mr. Elleray QC pointed out that the allegation of personal detriment of this nature had only been introduced by an amendment to Mr Dugdale's defence, permitted at the trial. He submitted that no substantial detriment had been established on the evidence. Mr Dugdale, he pointed out, retained his own York Street premises, he retained his 20,000, and his own assets were left undisturbed.

  38. Though it is fair to say that the Judge did not develop this point in any detailed analysis, Mr Cawson QC submitted that his conclusion was justified on the evidence. Mr Dugdale's evidence had been that matters had been arranged in the way they were, that is to say for him personally to be the purchaser, so as to provide him personally with security through the ownership of the Unit, which he would be able to offer as security for finance to JAD so far as this might prove necessary in the future. His evidence was that, but for Mr Ingham's representations, he would have bought alternative premises and would thus have acquired a property of his own with all the contemplated advantages of ownership. Instead, he was left solely with his 20,000 and his interest in the York Street premises and, once substantial money had been expended on the property, he was "effectively locked in". In these circumstances, it would have been unconscionable for Mr Ingham to seek to resile from his assurances vis--vis Mr Dugdale, who had suffered sufficient detriment to found a plea of proprietary estoppel. I consider that this argument is well founded, and accordingly that, immediately before the transfer of the Unit to the claimants took place, Mr Dugdale could have asserted the rights claimed by him in respect of the Unit as against Mr Ingham's executors by virtue of proprietary estoppel.

  39. On 4th November 1994, however, the claimants had been registered as proprietors of the freehold of the Unit. By virtue of section 20(1) of the 1925 Act, the effect of the disposition in their favour, coupled with its registration, was to confer on them "an estate in fee simple or the term of years absolute or other legal estate expressed to be created in the land dealt with" free from any rights which Mr Dugdale might previously have had against Mr Ingham, unless either

    1. Mr Dugdale could claim to be a "person in actual occupation of the land or in receipt of the rents and profits thereof", so that his rights constituted an "overriding interest within section 70(1)(g) of the 1925 Act or

    2. the 1994 Agreement gave rise to a constructive trust relating to the Unit in Mr Dugdale's favour.

    It follows that Mr Dugdale has to succeed on either Issue C or Issue D, as well as Issues A and B, if he is successfully to resist the claim made against him.

    ISSUE (C): Actual occupation

  40. By the time when the claimants acquired the Unit, Mr Dugdale had ceased to receive any rents and profits from JAD. But was he in "actual occupation" of the Unit at that time? This phrase is not defined in the 1925 Act, but the speech of Lord Wilberforce in Williams & Glyns Bank Ltd v Boland [1981] AC 417 gives some guidance as to its interpretation. He pointed out (at p. 504F) that "these words are ordinary words of plain English, and should, in my opinion, be interpreted as such" and (at p. 505B) that "the word "actual" merely emphasises that what is required is physical presence, not some entitlement in law". He recognised (at p. 505E) the possibility that occupation might be shared.

  41. In Abbey National Building Society v Cann [1991] AC 56 at p. 93, however, Lord Oliver of Aylmerton pointed out that even plain English may contain a variety of shades of meaning. He observed:

    It is, perhaps, dangerous to suggest any test for what is essentially a question of fact, for "occupation" is a concept which may have different connotations according to the nature and purpose of the property which is claimed to be occupied. It does not necessarily, I think, involve the personal presence of the person claiming to occupy. A caretaker or the representative of a company can occupy, I should have thought, on behalf of his employer. On the other hand, it does, in my judgment, involve some degree of permanence and continuity which would rule out mere fleeting presence.

  42. In the present case it is common ground that, at all material times, JAD itself was in actual occupation of the Unit. In their defence in the first action, the two defendants had pleaded that Mr Ingham had given possession of the Unit to JAD. JAD carried on its business on the Unit. It paid the annual rates on the premises as occupier. Nevertheless, the Judge found that Mr Dugdale also was in actual occupation of the Unit at the material time and the question is whether he was right to do so.

  43. There can be no doubt that "actual occupation" is capable of being shared for present purposes. As Lord Denning MR put it in Hills (Patent) Ltd v University College Hospital [1956] 1 QB at p. 99: "..... possession in law is, of course, single and exclusive; but occupation may be shared with others or had on behalf of others". See also Wallace v Barratt & Son Ltd and Lock (1997) 74 P&CR 408 at p. 417 per Sir Richard Scott V-C.

  44. As the first limb of his argument in this context, Mr Cawson QC contended that, just as Mr Dugdale could rely on a form of collective estoppel, so he could rely on a form of collective occupation enjoyed by Mr Dugdale and JAD. I would reject this submission for reasons similar to those previously stated, namely that this is not a case where these two parties can be regarded as having jointly occupied the Unit under some form of joint venture. On a true analysis of the position, JAD was in my judgment at the material time occupying the Unit simply as Mr Dugdale's licensee.

  45. While the Judge regarded this as a decision on its special facts, the decision of this court in Strand Securities Ltd v Caswell [1965] Ch 958 is in my judgment clear authority for the proposition that where A permits B to occupy land on B's own behalf by way of gratuitous licence, A's capacity as licensor will not by itself entitle him to claim to be in actual occupation of the land, though the position will be different if B occupies as the representative of A: (see at pp 980D-981C per Lord Denning MR and at pp 983G-985A per Russell LJ). Unless B occupies as the representative of A, circumstances going beyond A's mere capacity as licensor will be required if he is to claim to be in actual occupation.

  46. In Pegler v Craven [1952] Ch 685 it was held that as the company concerned was conducting on the relevant premises a business which belonged to it, and not conducting as the agent of the tenant a business which belonged to him, the company was the occupier of the premises within the meaning of section 10(1)_ of the Leasehold Property (Temporary Provisions) Act 1951. Sir Raymond Evershed MR (at p. 690F) left open the question whether in some circumstances, where the tenant was a major shareholder in the company, "it could be said that a company in actual occupation was but the alter ego of the company". This suggestion, however, was not followed in Tunstall v Steigmann [1952]2 AER 417, where this court held that the landlord had not established an intention "to occupy the holding for the purposes of a business to be carried on by" her therein, within the meaning of section 30(1)(g) of the Landlord and Tenant Act 1954, because the business was to be carried on by a company, which, albeit virtually owned and controlled by her, was legally a separate entity. As Willmer LJ put it (at p. 423D):

    There is no escape from the fact that a company is a legal entity entirely separate from its corporators see Salomon v Salomon & Co [1897 AC 22.

  47. Those two decisions are far from helpful to Mr Dugdale's case, but Mr Cawson QC sought to distinguish them on the grounds that the relevant statutory provisions there concerned referred to occupation and user for the purposes of a business, while Section 70(1)(g) of the 1925 Act contains no such words. He submitted that the requirement of actual occupation will be satisfied if there is physical presence coupled with enjoyment in one's own capacity and the right to exclude others, excepting anyone else in joint occupation. He drew our attention to Mr. Dugdale's evidence that JAD had never used the fire-damaged former weaving shed, which formed part of the Unit. He suggested that Mr Dugdale was in actual occupation of at least that area. ("The occupier need not in order to rely on Section 70(1)(g) be in actual occupation of the whole of the land comprised in a registered disposition": Ferrishurst v Wallcote Ltd [1999] Ch 355 at p. 372D per Robert Walker LJ). As between Mr Dugdale and JAD, Mr Dugdale was the owner of the entire Unit, of which he was to be the purchaser, and any right of JAD to be there was subject to his will. His evidence was that if, while JAD had been trading, anyone had asked him who was in occupation of the Unit, he would have answered that he himself was in occupation. He was present at the Unit on a daily basis. On the particular facts of this case, it was submitted, it would be wholly artificial to draw any distinction between Mr Dugdale and his creature company.

  48. While these submissions were forcefully presented by Mr Cawson QC and are not unattractive, there are in my judgment two fundamental objections to them. First, however artificial this may appear to be, authority obliges us to draw a clear distinction in fact and law between Mr Dugdale and JAD and their respective activities. Secondly, while Mr Cawson sought to argue that Mr Dugdale attended the Unit partly in his capacity as its putative purchaser and owner, all the evidence suggest that he did so simply in his capacity as managing director of the company carrying on business on the premises and in no other capacity. While the Judge at one point in his judgment described JAD as Mr Dugdale's agent in regard to its occupation, (Transcript p. 79), this description was not in my judgment justified by the evidence. The Judge (ibid) more accurately described Mr Dugdale as the agent of JAD as its Managing Director. Throughout, he was present at the Unit in this capacity, not on his own account.

  49. In the circumstances I am driven to the conclusion that at the relevant time Mr Dugdale was not in actual occupation of the Unit within the meaning of Section 70(1)(g) of the 1925 Act.

    ISSUE (D): Constructive Trust

  50. Even if Mr Dugdale did not enjoy an overriding interest in the Unit, the claimants acquired the Unit with notice of his claim and, by virtue of clause 14 of the 1994 Agreement, expressly subject thereto. There is no general principle which renders it unconscionable for a purchaser of land to rely on a want of registration of a claim against registered land, even though he took with express notice of it. A decision to the contrary would defeat the purpose of the legislature in introducing the system of registration embodied in the 1925 Act. Nevertheless, the authorities show that, in certain special circumstances the court will impose on a purchaser, who has taken a disposition expressed to be subject to specified incumbrances or prior interests, a constructive trust obliging him to give effect to them, if it considers it unconscionable for him to do otherwise, in the particular circumstances of the case.

  51. Counsel have helpfully taken us through a number of authorities in which the court has been invited to find a constructive trust on this basis. The leading case is perhaps the decision of this court in Ashburn Anstalt v Arnold [1989] Ch 1. Examples of cases where such an invitation has been accepted are Binions v Evans [1972] Ch 359 per Lord Denning MR at pp 367B-E and 369C-D, and Lyus v Prowsa [1982] 1 WLR 1044. On the other side of the line, examples of cases where on the facts no such constructive trust has been found to exist are Ashburn & Anstalt v Arnold (supra), IDC Group Ltd v Clark (1992) 1 EGLR 187 (on appeal (1992) 65 PP and (CR 79)) and Melbury Road Properties 1995 Ltd v Kreidi (1999) 3 EGLR 10.

  52. I do not find it necessary to traverse the authorities at any length in this judgment, because I consider the relevant principles and their application to the particular facts of this case fairly clear. The relevant principles to be extracted from the authorities may for present purposes be summarised as follows:

    (1)

    Even in a case where, on a sale of land, the vendor has stipulated that the sale shall be subject to stated possible incumbrances or prior interests, there is no general rule that the court will impose a constructive trust on the purchaser to give effect to them. In Ashburn & Anstalt v Arnold (supra) at p. 25E, Fox LJ, delivering the judgment of the court, expressed agreement with the following observations of Dillon J in Lyus v Prowsa Development Ltd (supra) at p 1051:

    By contrast, there are many cases in which land is expressly conveyed subject to possible incumbrances when there is no thought at all of conferring any fresh rights on third parties who may be entitled to the benefit of the incumbrances. The land is expressed to be sold subject to incumbrances to satisfy the vendor's duty to disclose all possible incumbrances known to him, and to protect the vendor against any possible claim by the purchaser..... So, for instance, land may be contracted to be sold and may be expressed to be conveyed subject to the restrictive covenants contained in a conveyance some 60 or 90 years old. No one would suggest that by accepting such a form of contract or conveyance a purchaser is assuming a new liability in favour of third parties to observe the covenants if there was for any reason before the contract or conveyance no one who could make out a title as against the purchaser to the benefit of the covenants.

    (2)

    The court will not impose a constructive trust in such circumstances unless it is satisfied that the conscience of the estate owner is affected so that it would be inequitable to allow him to deny the claimant an interest in the property: (see Ashburn Anstalt v Arnold at pp 22E-F and 25H).

    (3)

    In deciding whether or not the conscience of the new estate owner is affected in such circumstances, the crucially important question is whether he has undertaken a new obligation, not otherwise existing, to give effect to the relevant incumbrance or prior interest. If, but only if, he has undertaken such a new obligation will a constructive trust be imposed. The importance of this point was repeatedly stressed in Ashburn Anstalt v Arnold (supra): see for example at pp 23G, 25A-26A, and 27B. See also Lyus v Prowsa Development Ltd (supra) at p. 1051; IDC Group Ltd v Clark (1992) 1 EGLR at p. 190B-C; Melbury Road Properties 1995 Ltd v Kreidi (supra) at p. 110G.

    (4)

    Notwithstanding some previous authority suggesting the contrary, a contractual licence is not to be treated as creating a proprietary interest in land so as to bind third parties who acquire the land with notice of it, on this account alone: see Ashburn Anstalt v Arnold (supra) at pp 15H and 24D.

    (5)

    Proof that the purchase price by a transferee has been reduced upon the footing that he would give effect to the relevant incumbrance or prior interest may provide some indication that the transferee has undertaken a new obligation to give effect to it: see Ashburn Anstalt v Arnold (supra) at p. 23F-G. However, since in matters relating to the title to land certainty is of prime importance, it is not desirable that constructive trusts of land should be imposed in reliance on inferences from "slender materials"; ibid at p. 26E.

  53. In the present case, Mr Cawson QC submitted, under the terms of the 1994 Agreement and the 1997 Assignment which was executed pursuant thereto, the claimants in essence agreed to take the Unit on the terms that they stepped into the shoes of the claimants in relation to the first action and agreed to be substituted as plaintiffs. This, it was submitted, necessarily involved their taking not only the benefits of the first action, but also the burden of the claimants' counterclaim; the clear intention was to relieve the claimants from liability under the counterclaims being advanced by Mr Dugdale and JAD in the first action. Thus, it was submitted, it would be unconscionable for the claimants not to give effect to the terms on which they acquired the Unit and a constructive trust should be imposed on them accordingly.

  54. A further ground which appears to have been heavily relied on by the Judge in deciding this issue in favour of Mr Dugdale was that, in the second action, Mr Dugdale could have counterclaimed for a declaration that the claimants held part of the purchase price on trust for Mr Dugdale and/or JAD in the event that the 1994 transfer overreached any interest which Mr Dugdale had in the Unit. Thus, he considered, Mr Dugdale would have had a financial claim against the claimants if Mr Dugdale's equitable claim did not bind them in the second action. This potential liability of the claimants was, in the Judge's view, a potent reason for holding that, by virtue of the 1994 Agreement and 1997 Assignment, the claimants undertook a new liability to give effect to whatever rights Mr Dugdale might have against them.

  55. Having regard to the course of the argument before the Judge, as it has been described to us by counsel, I do not think he was right to rely on this point. The claimants, by a very late reply and defence to counterclaim, had alleged that Mr Dugdale's proprietary estoppel had been overreached. His stance was that the overreaching provision contained in the property legislation had no application. In the event, during the course of the claimants' closing submissions, the Judge expressed the view that if the overreaching provision were held to apply, their effect would be to transfer any equitable interest which Mr Dugdale might establish in relation to the Unit to the proceeds of sale paid by the claimants to Mr Ingham's personal representatives. In the circumstances, the Judge indicated that he was not prepared to hear submissions on behalf of the claimants in relation to overreaching without the personal representatives being represented before the court. As a result, the claimants abandoned their claim in relation to overreaching. Accordingly the point referred to in the immediately preceding paragraph was not in the event argued before the Judge. It has only been touched on in argument before us. I am for my part by no means convinced that the Judge was necessarily right in assuming that a failure by Mr Dugdale to establish equitable rights in the Unit as against the claimants would leave him with rights in equity against Mr Ingham's executors (subject to any protection which they might enjoy by virtue of the 1994 Agreement). But I would prefer to leave this point open.

  56. The Judge also inferred that the purchase price paid by the claimants for the Unit had been reduced by reason of the potential claims of Mr Dugdale, but there was no evidence whatever to support this inference, which was not in my opinion justified. In all the circumstances I think that Mr Cawson QC was right to found his submissions under this head primarily on the propositions summarised in paragraph 53 above. In my judgment, however, these do not suffice to support the Judge's decision that the provisions of the 1994 Agreement gave rise to very special circumstances showing that, when the claimants acquired the Unit, they undertook a new liability to give effect to any rights which Mr Dugdale might have enjoyed in equity immediately prior to that acquisition. That Agreement certainly demonstrated an intention to protect the claimants against any future claims which might be made by Mr Dugdale. But, as Mr Elleray QC pointed out, so far from imposing on the claimants an obligation to give effect to Mr Dugdale's asserted rights, it plainly contemplated that the claimants would be proceeding with the claim for possession of the Unit against him and JAD on the basis that neither he nor JAD had any rights in equity in relation to the Unit. Mr Dugdale's rights, if they existed at all, were at best uncertain and ill defined. To impose a constructive trust on the claimants would be to do so on the basis of very slender materials. There was in my judgment no thought of conferring any fresh rights on Mr Dugdale himself by the 1994 Agreement. In all the circumstances Mr Dugdale's defence based on constructive trust must in my judgment also fail.

    ISSUE (E): Satisfaction

  57. Since I have concluded that Mr Dugdale has retained no equity in the Unit binding on the claimants, the issue of satisfaction does not arise and I do not think it will be helpful to comment further on it.

    ISSUE (F): Corporate Personality

  58. Corporate personality does not as such give rise to an issue in this case, but in my judgment there is some substance in the claimants' submission that, in the course of his judgment, particularly in relation to Issues (B) and (C), the Judge failed to have adequate regard to the fact that JAD was a separate and distinct legal entity from Mr. Dugdale. Reference was made to paragraph 1.3 of Gore-Browne on Companies from which it is perhaps worth quoting the following sentences by way of reiteration of important principles:

    The principle of the Salomon case, that a company is a legal entity distinct from its members, is strictly applied by the courts whenever it is sought to attribute the rights or liabilities of a company to its shareholder, or regard the property of a company as belonging in law or equity to the shareholders. Thus the fact that one shareholder controls all, or virtually all, the shares in a company is not a sufficient reason for ignoring the legal personality of the company. Further, a company cannot be characterised as an agent of its shareholders unless there is clear evidence to show that the company was in fact acting as an agent in a particular transaction or series of transactions. Likewise the property of a company in no sense belongs to its members, and it carries on its own business, not that of its members.

    CONCLUSION

  59. In the result, for the reasons I have given, I would allow this appeal. I would set aside the Judge's judgment. I would order that:-

    1. Mr Dugdale's counterclaim be dismissed

    2. Mr Dugdale do deliver up to the claimants possession of the Unit within a stated period;

    3. Mr Dugdale do pay to the claimants damages for trespass (in a sum to be determined by the court) in respect of the period from 3rd March 1995 (the date of JAD's liquidation) until possession of the Unit be delivered up.

    I would invite submissions on any further questions relating to damages and interest and the date for delivery of possession.

  60. Finally I have to express some sympathy for Mr Dugdale for two reasons. 

    • First, on the Judge's findings of fact, Mr Ingham, who had described himself as a man of his word, seems to have let Mr Dugdale down badly when it came to the point in August 1988. 

    • Secondly, Mr Dugdale would still have been able to assert his rights against the claimants if either he, rather than JAD, had been in actual occupation of the Unit, or he had continued to receive rent from JAD until the sale to the claimants was completed.

    Lord Justice Mummery

  61. I agree.

    Lord Justice Kennedy

  62. I also


Cases

Gillett v Holt [2001] Ch 210; Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] 1 QB 133; Yaxley v Gotts [1999] 3 WLR 1217; Banner Holmes Group v Luff Developments [2000] 2 WLR 272; Williams & Glyns Bank Ltd v Boland [1981] AC 417; Abbey National Building Society v Cann [1991] AC 56; Hills (Patent) Ltd v University College Hospital [1956] 1 QB 99; Wallace v Barratt & Son Ltd and Lock (1997) 74 P&CR 408; Strand Securities Ltd v Caswell [1965] Ch 958; Pegler v Craven [1952] Ch 685; Tunstall v Steigmann [1952]2 AER 417; Ferrishurst v Wallcote Ltd [1999] Ch 355; Ashburn Anstalt v Arnold [1989] Ch 1; Binions v Evans [1972] Ch 359; Lyus v Prowsa [1982] 1 WLR 1044; IDC Group Ltd v Clark (1992) 1 EGLR 187; Melbury Road Properties 1995 Ltd v Kreidi (1999) 3 EGLR 10

Legislations

Land Registration Act 1925: s.70(1)(g)

Authors and other references

Megarry and Wade's Law of Real Property (6th edition 2000)

Representation

Anthony Elleray QC & Ian Foster for the appellants (instructed by Latimer Lee, Prestwich)

Mark Cawson QC for the respondents (instructed by Temperley Taylor Chadwick, Manchester)


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