National Provincial Bank v Ainsworth [1965] AC 1175 (see pp 59-64)

National Provincial Bank v Ainsworth

[1965] AC 1175

(see pp 59-64)

The Structure of Property Law: B:11

NPB v Ainsworth: Initial position

A

B

- A (Mr Ainsworth) is an owner of land

- B (Mrs Ainsworth) shares occupation of the land with A

- A then leaves and B acquires a right against A: a “deserted wife’s Equity”

NPB v Ainsworth: Charge to C Bank

A

B

- In return for a loan from C Bank (National Provincial Bank) A then grants a Charge to C Bank

C BankCharge

- C Bank thus has a prima facie power, if A fails to pay back the loan as agreed, to sell A’s land and use the proceeds towards paying off A’s debt

NPB v Ainsworth: Question 1

A

B

- Does B have a direct right against C?

C BankCharge

- No: C has not acted in such a way as to give B a direct right


A’s land

B

- Does B have a pre-existing property right?

C BankCharge

- No: B’s “deserted wife’s Equity” does not count as a property right


A’s right

B

- Does B have a pre-existing persistent right?

C BankCharge

- No: B’s “deserted wife’s Equity” does not impose a duty on A in relation to a specific right held by A

Power to impose a duty on C Bank?

NPB v Ainsworth : Question 4

- What remedy will the court give to protect C Bank’s Charge?

- C Bank’s right is specifically protected: C Bank is allowed to:

i) remove B;

ii) sell A’s right to the land; and

iii) use the proceeds to meet A’s debt (see G4:5)

1. Does B have a direct right against C?- No = go to 2

NPB v Ainsworth: Applying the Basic Structure

Does B have a right against C Bank?

2. Did B have a property right or persistent right when C acquired C’s right? - No = C wins, go to 4

4. What remedy will a court give to protect C’s right? - C is entitled to remove B from the land and to sell A’s right to the land

A

B

C Bank Charge

Ashburn Anstalt v Arnold

[1989] Ch 1


Ashburn Anstalt v Arnold: Initial position

A

B

- A (Cavendish Land Co Ltd) is an owner of land

- A is under a contractual duty to B (Arnold & Co) to allow B to occupy that land until it is needed for development

Ashburn Anstalt v Arnold : Sale to C

A

B

- A then sells its land to C

CSale

- B, by continuing to occupy the land, therefore breaches its prima facie duty to C

Ashburn Anstalt v Arnold : Question 1

A

B


C



- B argued that C’s promise meant that C had acted in such a way as to give B a direct right against C

- In deciding whether or not B had a direct right against C, the Court of Appeal had to consider the fact that, when acquiring A’s land, C had made a promise to A to take the land “subject to any rights of B [under A’s initial agreement with B]”

- but B’s argument is based on the “receipt after a promise” principle and the Court of Appeal found that C had not promised to give B a new right (for the effect of a “subject to” promise see pp 273-4)


A’s land

B


C

- Yes: according to the Court of Appeal, B’s agreement with A gave B a Lease: a recognised property right in land


A’s land

B

- Does C have a defence to B’s pre-existing property right?

C

- No: eg C cannot rely on the lack of registration defence as B was in actual occupation of A’s land when C committed to acquiring its right. B’s right is therefore an overriding interest and immune from the lack of registration defence (see eg p 89, 407-416).

Defence for C?


A’s land

B

- What remedy will the court give to protect B’s property right?

C

- B’s right is specifically protected: C is prevented from removing B from the land until the end of B’s Lease

Ashburn Anstalt v Arnold : Problems with the decision

- An agreement between A and B can only give B a Lease if it gives B a right to exclusive control of A’s land for a limited period (see pp 677-8)

- Question 2: Did B have a pre-existing property right?

-And the agreement was that B could occupy A’s land until it was developed: such an agreement cannot give B a Lease (as confirmed by the House of Lords in Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386: see G1B:Example 10a)

Ashburn Anstalt v Arnold : Problems with the decision- However, as a result of his payment of rent to A, B still had a Lease: an implied periodic tenancy (see pp 688-90)

- but whilst such a property right can bind C, it will give B only very limited protection: C can end the implied periodic tenancy by giving the relevant notice that C does not intend to renew it. And once the implied periodic tenancy ends, C is free to remove B from the land (see pp 678-9)

- so contrary to the decision of the Court of Appeal, C should not be under a duty to allow B to remain in occupation until the land is developed

Lloyds Bank plc v Rosset

[1991] 1 AC 107


Lloyds Bank plc v Rosset: Initial position

A

B

- A (Mr Rosset) is an owner of land

- The land is derelict and building work is carried out - B (Mrs Rosset) carries out decorating work on the land, buys materials and supervises the builders

Lloyds Bank v Rosset: Charge to C Bank

A

B

- In return for a loan from C Bank (Lloyds Bank) A then grants a Charge to C Bank

C BankCharge

- C Bank thus has a prima facie power, if A fails to pay back the loan as agreed, to sell A’s land and use the proceeds towards paying off A’s debt

Lloyds Bank v Rosset: Question 1

A

B

- Does B have a direct right against C Bank?

C BankCharge

- No: C Bank has not acted in such a way as to give B a direct right


A’s land

B

- Does B have a pre-existing property right in A’s land?

C BankCharge

- No: eg the land is registered in A’s sole name


A’s right

B


C BankCharge

- No: A is not under a duty to B in relation to A’s ownership of the land


Lloyds Bank v Rosset : Question 2

- B claimed that she had a persistent right under a common intention Constructive Trust (see pp 767-81) as: i) A and B had a common intention that A would be under a duty to use his ownership of the land, to some extent, for B’s benefit and

ii) by assisting with the renovation of the land, B had relied to her detriment on that intention

- but the House of Lords found that A and B had no such common intention – none had been expressed and, as B had made no direct financial contribution to the acquisition of A’s land, none could be inferred

Lloyds Bank v Rosset : A problem?

- In finding that A and B had no common intention that A would be under a duty to use his ownership of the land, to a certain extent, for B’s benefit, the House of Lords adopted a narrow test to inferring such a common intention:

Lord Bridge stated that “direct contributions to the purchase price [by B] whether initially or by payment of mortgage instalments, will readily justify the inference [of common intention]. But, as I read the authorities, it is at least extremely unlikely that anything less will do” ([1991] 1 AC 107 at 133).

Lloyds Bank v Rosset : A problem?

- However, in Stack v Dowden [2007] 2 AC 432, the House of Lords advocated a different approach to finding a common intention:

i) a court can look at a wide list of factors to see what A and B intended (see discussion in G3:2.4 at p 770) and

ii) a court may even be able to impute that A and B had such a common intention (see pp 772-3)

Lloyds Bank v Rosset : A different result?

- So, applying the new Stack v Dowden approach, would Mrs Rosset (B) now be able to show she has a right under a common intention Constructive Trust?

- Probably not: although A and B were married, and planned to live together on the land when renovated, B’s lack of a direct or indirect financial contribution may well still be decisive: compare eg James v Thomas [2007] EWCA Civ 1212 (see G3:2.4 at p 774)


- If Mrs Rosset (B) were able to show she had acquired a right under a Constructive Trust, we would then have to consider Question 3: the defences question

- The Court of Appeal in Rosset considered that question as it held that B had acquired a right under a Constructive Trust ([1989] Ch 350)


- The Court of Appeal held that C Bank could not rely on the lack of registration defence – B’s right was an overriding interest and so immune from that defence as B was in actual occupation of the land either because:

(i) the builders occupied the land as B’s agents; or

(ii) given the derelict nature of the land, B’s use of it meant that B was personally in actual occupation of the land (see E2:3.6 at p 411)

City of London Building Society v Flegg

[1988] AC 54


City of London BS v Flegg: Initial position

A1 & A2

A1, A2, B1 & B2

- A1 and A2 (Mr and Mrs Maxwell-Brown) are owners of land

- B1 and B2 (Mr and Mrs Flegg: parents of Mrs Maxwell-Brown) pay part of the purchase price of the land- As a result, A1 & A2 hold their right to the land on Trust for A1, A2, B1 & B2

City of London BS v Flegg : Charge to C Bank

A1 & A2

A1, A2, B1 & B2

- In return for a loan from C (City of London Building Society) A1 & A2 then grant a Charge to C

CCharge

- C thus has a prima facie power, if A1 & A2 fail to pay back the loan as agreed, to sell A1 & A2’s right to the land and use the proceeds towards paying off A’s debt

City of London BS v Flegg : Question 1

A1 & A2

B1 & B2

- Do B1 & B2 have a direct right against C?

CCharge



A1 & A2’s land

B1 & B2

- Do B1 & B2 have a pre-existing property right in the land?

CCharge

- No: eg the land is registered in the names of A1 & A2 alone


A1 & A2’s right

B1 & B2


CCharge

- Yes: Due to B1 & B2’s contribution to the purchase price, B1 & B2 have a right under a Trust: A1 & A2 are under a duty to use their right to the land, in part, for the benefit of B1 & B2

Power to impose a duty on C?


A1 & A2’s right

B1 & B2

C

- Yes: C can rely on the overreaching defence (see E2:3.4; esp E2:Example 17b)

Does C have a defence to B1 & B2’s persistent right?


- What remedy will the court give to protect C’s Charge?

- C’s right is specifically protected: C is allowed to:

i) remove B1 & B2;

ii) sell A1 and A2’s right to the land; and

iii) use A1 and A2’s share of the proceeds to meet A1 and A2’s debt (see G2:4 and G3:4)

Port Line Ltd v Ben Line Steamers Ltd

[1958] 2 QB 146


Port Line v Ben Line: Initial position

A

B

- A (Silver Line Ltd) is an owner of a ship

- A makes a contractual agreement with B (Port Line Ltd) allowing B to use that ship for a fixed period

Port Line v Ben Line : Sale to C

A

B

- A then sells its ship to C (Ben Line Ltd)

CSale

- The ship was then requisitioned by the Ministry of Transport – C was paid compensation as a result

- B claimed to be entitled to the compensation payments received by C – that claim depended on B showing that it had a right, binding on C, to use the ship

Port Line v Ben Line : Question 1

A

B


C



- B argued that, as C ought to have been aware of the terms of A’s initial contract with B, C was under a duty not to interfere with B’s rights under that contract

- In deciding whether or not B had a direct right against C, Diplock J had to consider the fact that, when acquiring A’s right, C ought to have been aware of the terms of A’s initial contract with B

- but B’s argument is based on the de Mattos v Gibson principle and Diplock J refused to accept the validity of that principle (see D3:2.3.5)

Port Line v Ben Line: Question 2

A’s ship

B


C

- No: B’s right to use the ship does not count as a property right (see D1:1.4.3)

Port Line v Ben Line: Question 2

A’s right

B


C

- No: B’s contract with A does not impose a duty on A in relation to a specific right held by A (see D2:1.1.2)

Power to impose a duty on C?


- What remedy will the court give to protect C’s right to the ship?

- In Port Line, the dispute was about the compensation payments received by C: the ruling of Diplock J meant that C was entitled to keep those payments and had no duty to pay their value to B

Barclays Bank v Quistclose Investments Ltd

[1970] AC 567


Barclays Bank v Quistclose: Initial position

A

B

- B (Quistclose Investments Ltd) gave a sum of money to A (Rolls Razor Ltd) so that A could use that money to pay a dividend to its shareholders

- The money was paid into a special account held by A with C Bank (Barclays Bank)

Barclays Bank v Quistclose : A goes into liquidation

A

B

- A had not yet spent the money given to it by B and deposited in the special account with C Bank

C Bank- A owed C Bank money (it has a large overdraft with C Bank)

Right v A

- When A went into insolvency, C Bank debited the special account and set off the value of that account against A’s debt to C Bank

Barclays Bank v Quistclose : Question 1

A

B

- Does B have a direct right against C Bank?

C Bank

- No: C Bank has not acted in such a way as to give B a direct right

Barclays Bank v Quistclose: Question 2

??

B


C Bank

- No: B cannot identify a specific thing in relation to which it has a right: A does not own a specific set of notes or coins, it simply has a personal right against C Bank


A’s right

B

- Does B have a pre-existing persistent right (ie a right against A’s right against C Bank)?

C Bank

- Yes: A holds its right against C Bank on Trust for B as A is under a duty to B not to use its right for A’s own benefit (although A also has a power against B to use its right for a specific purpose: see F4:2.4.2)


A’s right

B

C Bank

- No: eg C Bank cannot rely on the “bona fide purchaser” defence as it knew that A was not permitted to use the special account for any purpose other than paying dividends (see per Lord Wilberforce at 582)

Does C Bank have a defence to B’s persistent right?


Barclays Bank v Quistclose : Question 4

- B’s right is specifically protected: C Bank holds the right taken from A on Trust for B and so can be made to account to B for the value of that right – as B is the sole beneficiary of the Trust, B can force A to hand over a sum equal to the value of the bank account A held on Trust for B (see eg p 301 and F3:4.1)

- What remedy will the court give to protect B’s persistent right?

Documents

National Provincial Bank v Ainsworth [1965] AC 1175 (see pp 59-64)