England and Wales Court of Appeal (Civil Division) Decisions

Chancery Division

		25 June 1991

1. Giving judgment, SIR NICOLAS BROWNE-WILKINSON V-C said: These are two preliminary issues in an action brought by the plaintiffs, who were the leaseholders and freeholders of the property 23 St James's Square, SW1 ('no 23'). The action is brought against the defendant, Mrs Clark, who is the sublessee of a flat no 35 in the adjoining premises, 22 St James's Square. The action relates to an agreement made or contained in a deed dated March 28 1969, which provided for a fire-escape route from the fourth floor of no 23, through the party wall into the area on the fifth floor of no 22 now occupied by flat 35.
2. At the time of the deed dated March 28 1969, the ownership of the respective properties was as follows. As to no 23, the freehold was registered at the Land Registry in the names of the Friends' Provident Life Office. The headleaseholder of no 23 was a firm, Herring Son & Daw ('Herring'). On the other side of the party wall, that is to say no 22, the freehold, again registered with the Land Registry, was vested in a number of people who were the trustees of the Junior Carlton Club. The headleaseholders, under a lease of 150 years from December 25 1963, were Pall Mall Developments Ltd.
3. The deed was made between the trustees of the Junior Carlton Club of the first part, Pall Mall Developments, the headleaseholders, of the second part, Friends' Provident of the third part and the partners in Herring of the fourth part. It recites the title of the respective parties. Then the sixth recital reads as follows:

Herring has requested Pall Mall to make an opening in the party wall between Nos 30 to 35 and No 23 at the level of the fifth floor of Nos 30 to 35, so as to provide No 23 with the fire escape routes hereinafter mentioned, and with the approval and consent of the trustees and the Friends' Provident, Pall Mall have carried out such works as the parties hereto acknowledge.

Then I must read the larger part of the operative part of the deed:

(1) The trustees hereby grant their licence and consent to Pall Mall, having made the opening in the wall dividing Nos 30 to 35 and No 23 at the position indicated in red on the attached plan numbered 531/1 and to the erection of the doorway now erected in the said opening.

(2) The trustees and Pall Mall do hereby each of them grant licence to Friends' Provident and to Herring and other of the occupiers for the time being of No 23, (a) to pass through the said opening and doorway in case of fire only and in such case to enter into Nos 30 to 35 by such means and to pass along its passages, corridors and stairways and through its entrance doorway to the public street and (b) in case of fire only to use the fire escape routes from the seventh floor parapet of No 23 to the roof and balconies of Nos 30 to 35 on the St James's Square frontage and a similar fire escape route on the same level on the Pall Mall frontage, and to pass along its passages, corridors and stairways and through its entrance doorway to the public street, which said fire escape routes are more particularly shown on the attached plans numbered 1508/23, 1508/10 and 1508/11.

(3) Each of the parties hereto covenant with the other that they will use their best endeavours to ensure that no obstruction is made so as to prevent free access to the said fire escape routes.

(4) The expressions 'the trustees', 'Pall Mall', 'Friends' Provident' and 'Herring' shall include their respective successors in the title and assigns.

4. The opening referred to in clause 2(a) was the opening from no 23 into what is now the defendant's flat no 35. Someone - it is not yet established who - has at some stage blocked up the doorway. As a result, the route provided for by the 1969 deed as a fire escape has proved incapable of use.
5. The plaintiffs, who are those now entitled to the freehold and head-leasehold interests in no 23, therefore brought these proceedings against Mrs Clark, seeking mandatory injunctions to open up the doorway or, alternatively, damages in lieu. The plaintiffs now claim, at least primarily, damages, since during the currency of the action the plaintiffs have provided alternative fire-escape routes at substantial expense to themselves.
6. Before dealing with the issues that are directed to be heard by me, I must first deal with the subsequent devolution of the title to nos 22 and 23 since the 1969 deed.
7. I will deal first with no 22. The freehold, which is registered under title no NG1337311, was transferred first to a company, Corix Properties Ltd, which I will call Corix. It was then later transferred by Corix to Chattanooga Shipping & Investment Corporation SA. Chattanooga is the present registered proprietor. The 1969 deed is noted against the freehold title.
8. As to the headleasehold interest in no 22, Pall Mall Developments assigned their term to the Friends' Provident who in due course surrendered that term to Corix on October 27 1978. There was then a fresh headlease granted by Corix to a company, Blissfield Corporation NV. That new headlease is dated July 13 1979. It grants a headlease of the fourth to 10th floors only of no 22. It contains a covenant to comply with the provisions of the 1969 deed. The headlease is itself registered at the Land Registry under title number NGL 357395. Again, the deed of 1969 is noted against the head-leasehold title in the charges register.
9. Finally, I come to the underleasehold interest in no 22. On October 2 1981 Blissfield granted to a Mr Hughes a long underlease of flat no 35. That underlease expires in the year 2051. The underlease is expressed to be granted subject to:

the matters specified in Part II of the Fourth Schedule hereto.

Part II of the fourth schedule contains the following words:

The entries on the Property and Charges Register of title number NGL 357395 excluding any charges to secure money.

There is therefore in the underlease itself an express subjection of the demised premises to the matters referred to in the register of the headlease and the register of the headlease in turn refers to the 1969 deed.

10. In addition, the plan annexed to the underlease shows on it a door in the party wall in flat 35 against which are written the words 'Existing fire escape to adjoining premises'.
11. On March 21 1985 Mr Hughes entered into an agreement with the defendant, Mrs Clark, to assign to Mrs Clark the underlease of flat 35, 22 St James's Square. The agreement provided that:

the property is sold together with the rights, but subject to the rights exceptions, reservations, covenants, stipulations and conditions, whereof a copy has been already supplied to the purchaser or her solicitors contained or referred to in the said lease and the purchaser shall be deemed to purchase with full knowledge thereof and shall not raise any objection or requisition in respect thereof.

The contract also contains an admission by Mrs Clark that she had inspected the property. The property was transferred to Mrs Clark by a registered transfer dated March 29 1985.

12. The underleasehold title is itself registered with absolute title under title number NGL 409118. At no stage has the underleasehold register referred in any way to the 1969 deed.
13. There were directed to come before me three issues. It has been agreed that in principle I should be dealing with two only of them. The issues as directed read as follows:

(1) Whether the deed dated March 28 1969 referred to in paragraph 3 of the amended statement of claim created any rights capable in law of binding the defendant.

(2) Whether any rights created by the said deed are binding on the defendant as registered proprietor at HM Land Registry of the underlease dated October 2 1981 referred to in paragraph 4(2) of the amended statement of claim in view of the contents of the register relating thereto at HM Land Registry.

14. I will deal first with the issue as to whether the 1969 deed created any rights capable in law of binding Mrs Clark.
15. Broadly the case for the plaintiffs is put in two different ways. First, on the true construction of the deed it operated to create a legal easement over flat 35 in 22 St James's Square. Second, and alternatively, Mrs Clark in the circumstances is subject to a constructive trust to give effect to the rights of the owners and occupiers of no 23 conferred by the 1969 deed. I will deal first with the question of whether there is a legal easement. In my judgment, that is a pure question of construction of the deed set against the factual background, so far as it is known, in which it was executed.
16. Mr Boggis has appeared for Mrs Clark; in addition, Mr Crampin has appeared for a firm of solicitors against whom Mrs Clark has taken third-party proceedings. Both Mr Boggis and Mr Crampin accept that the nature of the rights granted is capable of constituting a legal easement, ie rights of entry in case of fire and escape in case of fire can exist as legal easements. The question is not whether they are capable of constituting an easement but whether on the true construction of the deed that is the effect of the words used by the parties.
17. Mr Boggis' and Mr Crampin's case is in essence the simplest possible. Clause 2 of the deed purports to do nothing more than to grant a licence to do certain acts. It is a professionally drawn document, drawn with some care. If a professional draftsman uses the word 'licence', he usually means the word 'licence'. If he means to grant a right of way, being a right in the land as opposed to a personal liberty, a professional draftsman is well able to do that. Therefore, clause 2 takes effect according to its strict language and confers only personal rights. Since Mrs Clark was not a party to that deed, she cannot be liable in contract on it. Since it does not confer a property interest in the property or over the property, it is not enforceable against her.
18. Mr Lindsay, on the other hand, for the plaintiffs says that that is too simplistic a view. This is a deed executed for the benefit of a valuable central London property which needed a fire certificate. This fire-escape door was needed not only to ensure the safety of the individuals but also in order to get the necessary fire certificate to sanction the continued use of the premises for the business of the plaintiffs. A mere personal licence capable of being defeated by any assignment of flat 35 or any other part of no 22 would be quite inadequate to meet the full requirements of the plaintiffs. Mr Lindsay then points out that the transaction was carried through by way of deed not by way of mere consensual agreement. It is not called a licence, it is called a deed. The words used are 'to grant a licence', the word 'grant' being, as he submits, a word much more appropriate to the grant of property rights than to a mere agreement as to a personal non-property liberty. He relies on the fact that the rights, whatever they are, are granted not only to Friends' Provident and to Herring but also to the occupiers for the time being of no 23. He relies in particular on clause 4 whereby the trustees and Pall Mall are defined so as to include their respective successors in title and assigns. Mr Lindsay argues with great force that, if the document was not to create property rights, what purpose could there be in defining those on whom the burden of the deed lay as including their respective successors in title and assigns? Merely personal rights as opposed to property rights could not be enforced against such successors in title and assigns.
19. Finally, Mr Lindsay relies on the line of cases dealing with the difference between licences and tenancies; for example, Addiscombe Garden Estates Ltd v Crabbe [1958] 1 QB 513, Street v Mountford [1985] AC 809* and Ashburn Anstalt v Arnold [1989] Ch 1† . Those cases illustrate that, in drawing the distinction between a licence of premises on the one hand and a tenancy of those premises on the other, it is in no sense decisive if the parties label what they are doing as the grant of a licence. One has to look at the substance of the matter and see what has been granted: was it a tenancy or was it strictly a personal contractual licence?
20. Despite those submissions, I am not persuaded that this agreement has to be construed otherwise than strictly in accordance with the words used. True it is that those interested in no 23 urgently needed as permanent as possible a fire-escape route in order to utilise no 23 properly. But by the same token the adjoining premises, the Junior Carlton Club, was already subject to a long development lease in favour of Pall Mall Development. Therefore, the question of redevelopment was very much on the agenda. To grant an indefinite freehold easement such as is alleged in this case would have been a very dangerous step for a developer to take, since it would have conferred rights on the owners of no 23 which it might have been very expensive to get rid of. The position is, to my mind, made even clearer on this aspect when one recollects that, although in this case I am concerned only with clause (2)(a) of the deed, clause (2)(b) confers other escape routes over the parapets of no 23 on to the balconies of the adjoining premises of no 22. Therefore, this document was envisaging very extensive rights not only over flat 35 but also over other parts of the building. The surrounding circumstances suggest, to my mind, that, so far as one can draw an inference, although the owners of no 23 wanted as much as they could get by way of fire escape, the owners of no 22 would be concerned not to tie up future development of their property. There is therefore nothing a priori pointing one way or the other as to what was the likely intention of both parties.
21. I do not find it surprising that the transaction was carried through by way of deed. It was a unilateral transaction. No consideration moved from the owners of no 23 to those granting the rights, whatever they were, over no 22. Therefore, a deed was necessary.
22. I do not find the use of the word 'grant' very significant. In clause (1) the trustees as freeholders were giving their consent in writing to alterations carried out by the leaseholders without consent: 'The trustees hereby grant their licence.' That is not granting a legal interest in the land. Similarly, in clause (2) the use of the words 'grant licence' is simply a phrase commonly used in connection with licences and carries the matter no further.
23. Again, I do not attach much importance to the fact that the licence is granted not only to Friends' Provident and to Herring but also to 'other of the occupiers for the time being of No 23'. I read clause (2) as including those words to show the people who were entitled to exercise the fire-escape rights, not those who were the grantees of those rights.
24. Much the strongest point, I think, is raised by clause (4), since there is great force in Mr Lindsay's submission that, if the rights conferred were purely personal rights, it is hard to see how the successors and assigns of the trustees of the Junior Carlton Club and Pall Mall could be affected by the matter in any event. That is undoubtedly a point pointing the other way, although there is some force in Mr Crampin's submission that the parties may have had in mind that clause (3) of the deed contains a negative covenant which might be enforceable against successors in title as being a restrictive covenant.
25. The indications being far from clear as to what the parties intended, I think that one has to take this as being a professionally drawn deed in which the draftsman has deliberately chosen to use the word 'licence' and not the ordinary words associated with the grant of an easement. Therefore, since there is nothing sufficiently clearly pointing in any other direction, I reach the conclusion that the deed did create only a personal licence.
26. Mr Lindsay had an alternative argument whereby he sought to reach the same result by utilising section 60 of the Law of Property Act 1925. He said that this should be taken as being a conveyance of freehold land without words of limitation and, therefore, under section 60 it passed to the grantees the fee simple in the rights granted, ie a permanent easement. The basis of that submission is that under section 205(ix) 'land' is defined to include:

an easement, right, privilege or benefit in, over, or derived from land

He said that this escape route was a right, privilege or benefit in or over no 22. Therefore section 60 operated to transfer a freehold interest in it.

27. I am quite unable to accept that argument. It is dependent on saying that the rights created by the 1969 deed are 'rights, privileges or benefits in or over land'. The definitions in section 205 of the Law of Property Act 1925 apply only 'unless the context otherwise requires'. Section 60 is subject to the proviso that it applies only 'unless a contrary intention appears in the conveyance'.
28. In my judgment, if on the true construction of the document it creates personal interests only and not rights of the nature of property rights, then a contrary intention does appear. The Law of Property Act 1925, section 60, does not convert what would under the general law be a personal right into a freehold-property right. I therefore hold that the 1969 deed did not confer an easement on the owners and occupiers for the time being of no 23.
29. I turn, then, to the alternative way in which Mr Lindsay puts his case, constructive trust. As appears from what I have said in reciting the facts of the case, Mrs Clark, by the agreement to purchase, took the property subject to the rights, exceptions, reservations, covenants, stipulations and conditions contained or referred to in the underlease and purchased with full knowledge thereof. The provisions in the underlease themselves refer to the 1969 deed and its contents. Therefore, it is said that Mrs Clark has acquired the underlease subject to and with knowledge of the rights conferred by the 1969 deed and, even though they would not otherwise be enforceable against her, in the circumstances she holds subject to a constructive trust to give effect to the terms of the 1969 deed.
30. The law on constructive trusts in this area is not as yet entirely clear. It has, however, been clarified recently by a Court of Appeal decision. Before coming to that case, I must mention a decision of Dillon J, as he then was, in Lyus v Prowsa Developments Ltd [1982] 1 WLR 1044. In that case the plaintiffs had entered into a contract to buy a plot of registered land from a company. That company went into liquidation. Prior to the contract between the company and the plaintiffs, the company's bank had obtained a legal charge on the land. The bank as mortgagee sold the property to a purchaser, subject to and with the benefit of the contract between the plaintiffs and the company. That purchaser from the bank in turn sold on, taking a covenant to perform the contract in favour of the plaintiffs. If and to the extent that the plaintiffs' contract was enforceable against the company, it was said that the first purchaser was subject to a constructive trust to give effect to the original sale by the company in liquidation to the plaintiffs. Dillon J upheld that submission.
31. Having considered Binions v Evans [1972] Ch 359, Dillon J reached the conclusion that there were cases in which the purchase of property expressly subject to an obligation in favour of the third party could give rise to a constructive trust to give effect to that obligation to the third party. However, he distinguished expressly other types of case and said at p 1051H:

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 if a third party establishes an overriding right to the benefit of the incumbrances against 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.

32. Dillon J then pointed out that the bank, whose charge was prior in time, was under no risk vis-a-vis the plaintiffs and could safely have sold free of the contract in favour of the plaintiffs. But the bank had elected to sell expressly subject to the plaintiffs' contract and with the benefit of it. He also referred to a letter to the bank's agents from the first purchasers giving an assurance that the first purchaser from the bank would take all reasonable steps in its power to make sure that the interests of contractual purchasers were dealt with quickly and to their satisfaction.
33. On the basis of that evidence, namely no reason for the bank to protect its position by disclosing an incumbrance which was not a fetter on its title and the express assurance that effect would be given to the contract in favour of the plaintiffs, Dillon J held that there was a constructive trust in that case.
34. That decision was approved by the Court of Appeal in Ashburn Anstalt v Arnold [1989] Ch 1. The Court of Appeal put what I hope is the quietus to the heresy that a mere licence creates an interest in land. They also put the quietus to the heresy that parties to a contractual licence necessarily become constructive trustees. They also held (at p 25 D-E) that the mere fact that property is sold subject to a contractual licence is not sufficient to create a constructive trust. They held (at p 26A) that the mere fact that somebody has purchased with notice of a claim does not give rise to a constructive trust.
    However, the Court of Appeal plainly considered that Lyus v Prowsa was rightly decided.
35. The result, as it seems to me, is that in the normal case a conveyance of land subject to or with notice of prior incumbrances or prior interests will not operate so as to make enforceable under a constructive trust such prior incumbrances or interests which would otherwise be unenforceable. However, in certain circumstances equity raises a constructive trust because it is unconscionable for the person having received such property not to give effect to the terms on which he received it. As the Court of Appeal said, and with respect I would agree, at p 26E:

In matters relating to the title to land certainty is of prime importance. We do not think it desirable that constructive trusts of land should be imposed in reliance on inferences from slender materials.

It is important always to bear in mind that it is of the greatest importance that the title to land should be capable of being ascertained in accordance with well-known procedures. To raise constructive trusts which do not fit into the conveyancing machinery currently operating, thereby giving rise to liabilities of which purchasers might otherwise not be aware, is a dangerous course to pursue.

36. In my judgment, the decision in Ashburn Anstalt does not warrant the creation of a constructive trust unless there are very special circumstances showing that the transferee of the property undertook a new liability to give effect to provisions for the benefit of third parties. It is the conscience of the transferee which has to be affected and it has to be affected in a way which gives rise to an obligation to meet the legitimate expectations of the third party.
37. In the present case the position stands strangely. The pleadings do not in terms allege a constructive trust. I have asked Mr Lindsay what are the factors upon which he would seek to rely if he were to have leave to amend the pleadings to raise a constructive trust against Mrs Clark. He says that he would wish to rely on the fact that Mrs Clark purchased under an agreement which made the flat subject to the rights and, in addition on the following matters: that Mrs Clark inspected the premises, saw the door in the premises, saw the plan attached to the lease, which showed the door there and the caption saying 'Fire Escape', and that she knew that she was taking subject to the fire escape rights.
38. In my judgment, even if all those facts were alleged in the pleadings and proved, they would not be sufficient to raise a constructive trust in this case. There is no indication in those facts that there was any form of bargain between Mr Hughes and Mrs Clark that she was undertaking de novo to honour obligations relating to the fire escape. Short of that, it seems to me that the claim in constructive trust must fail.
39. Mr Lindsay puts his case finally by analogy with the decision of Upjohn J, as he then was, in Halsall v Brizell [1957] Ch 169. In that case inhabitants of a building estate laid out in the middle of the 19th century enjoyed under a deed rights of access over a road on the estate but by the same deed were required to pay their proportion of the cost of providing the road. Upjohn J expressed the view (although it was not his eventual decision for other reasons) that the defendants were not entitled to take advantage of the provisions concerning the user of the road and the other benefits created by the deed without undertaking the obligations which the deed itself imposed, ie payment for the services. He held that, although there was no privity of contract or estate, the defendants were bound by the positive obligation to pay for the services.
40. Because the matter went off on another basis, he never indicated how that obligation would be enforced. But my understanding is that his judgment was based on the old doctrine that a man cannot take a benefit under a deed without also performing the obligations it imposes. It was therefore of the essence of the decision in that case that the right to use the road and the obligation to pay for it arose under one and the same deed. Moreover, as I understand the principle, the obligation to pay could not be enforced by action as such. The only way in which it could be enforced would be by withholding from the defendants the right to use the road unless and until they paid the charges due under the deed.
41. In my judgment, that case has no application to the present case. Mr Lindsay seeks to say that Mrs Clark cannot enjoy her occupation of the flat without reliance on the underlease. The underlease refers to the 1969 deed. Therefore, Mrs Clark cannot be allowed to live in the flat without giving effect to the 1969 deed. In my judgment, that is fallacious. There is no single deed which confers on Mrs Clark the right to live in the flat and imposes on her the duty to permit the fire escape. The underlease confers the right to live in the flat: it does not impose the duty to permit the fire escape. That is not the principle in Halsall v Brizell. Moreover, I can see no way in which the plaintiffs in this case could seek to enforce the obligation. The only means of enforcement in a Halsall v Brizell type of case is to prevent the person from enjoying the rights which they seek to enjoy under the document, save upon the terms that they give effect to the positive obligations imposed on them. In the present case the owners of no 23 have no means of saying that Mrs Clark is not entitled to occupy her flat 35. I therefore also hold against the plaintiffs on that ground.
42. As I have held that the plaintiffs are not entitled to an easement and it is common ground that, if there were a constructive trust, which I have ruled against, it would in any event not be binding on the defendant, it is, in my judgment, unnecessary for me to decide the second issue referred to me because the defendants are entitled to judgment in the action in any event.

Judgment was given for the defendant with costs: plaintiffs to pay also the third party's costs. Leave to appeal was given if leave was necessary.

The electronic text of this judgment was provided by Estates Gazette, whose assistance is gratefully acknowledged.