Licence Paradox: Revocable vs. Irrevocable Impact on Contracts & Property Rights, Slides of Law

Download Licence Paradox: Revocable vs. Irrevocable Impact on Contracts & Property Rights and more Slides Law in PDF only on Docsity! Licence, Interest and Contract SAMUEL STOLJAR* Canberra, Australia Our present picture of the law of licence is one of great ugliness and incoherence. The picture is clouded by an obscurantism yielding neither general sense nor basic principles, though the licence is to- day the most fertile, and certainly the most discussed, single field of legal activity.' In the end, things may perhaps sort themselves out more clearly; buttheprocess also needssome speeding-up iflegal de- velopments are not to be measured geologically . For the existing confusion there are, broadly speaking, twoprimary reasons. The lic- ence occupies the uncharted borderland between contract and real property and is thus caught by conflicting terminologies and dif- ferent ways of thinking . Again, the licence suffers from the chronic legal affliction of overloading concepts with (what we hope are) deducible associations. In this paper T wish to concentrate on some of the central isssues, for my main object is to eliminate some famous difficulties and to propound a more rational explanation. Turn which way we may, Wood v. LeadbitterI always comes up for *LL.B ., LL.M., Ph.D ., of Gray's Inn, Barrister-at-law ; Senior Fellow in Lawin the Australian National University. 1 For the recent discussions, see Walford, The Nature and Effect o£ Li- cences (1947), 11 Conv . (N.S .) 165 ; Wade, What is a Licence? (1948), 64 L . Q . Rev. 57 ; Wade, Licences and Third Parties (1952), 68 L. Q . Rev. 337 ; Me- garry, The Deserted Wife's Right to Occupy the Matrimonial Home (1952), 68 L . Q. Rev . 379 ; Hargreaves, Licensed Possessors (1953), 69 L . Q. Rev. 466 ; Crane, Licensees and Successors in Title of the Licensor (1952), 16 Conv. (N.S .) 323 ; G . L. Williams, Interests and Clogs (1952), 30 Can . Bar Rev. 1004 ; Cheshire, A New Equitable Interest in Land (1953), 16 Mod. L . Rev . 1 ; D. Pollock, Possession and the Licence to Occupy Land (1952), 16 Conv. (N.S .) 436 ; Sheridan, Licences to Live in Houses (1953), 17 Conv . (N.S .) 440 ; Marshall and Scamell, Digesting the Licence (1953), 31 Can . Bar Rev . 847 ; Mitchell, Learner's Licence (1954), 17 Mod. L. Rev . 211 . And see also Hohfeld, Fundamental Legal Conceptions (1923) p . 160 . 2 (1845), 13 M. &W. 838 . 1955] Licence, Interest and Contract 563 reconsideration.' For that decision is the congener of the modern idea of a licence and poses one of the major questions . Wood sued Leadbitter in trespass to his person, because the latter (acting on behalf . of his employers) had forcibly ejected .him from the Don- caster race meeting. Wood had bought a ticket of admission, and the whole argument revolved around the problem whether this ticket was a revocable or an irrevocable licence. The decision, with Baron Alderson speaking for the court, was that the licence was freely revocable; since it was what he called a "mere licence", that is, a licence unaccompanied by a grant.' A-priori this must rank as a very odd decision, doing "manifest injustice"' to an invitee hold- ing -a ticket he has paid for. Moreover, everything in the decision seemed to depend on the doctrine of revocable licence, so that sub- sequent discussion has mainly fastened on this doctrine and its limit- ations . But, in doing this, the discussions perhaps missed the most re- levant problem. .For what, let us ask.again, was the precise trouble between Wood and Leadbitter's employers? Wood, we find, had been warned off because of "malpractices of his on a former oc- casion, connected with the turf" ; s he was, we can assume, not the kind of person to be allowed entrance on a respectable racecourse. And, once .this important fact is taken into consideration, Wood's eviction becomes, far from being arbitrary, a perfectly justifiable action . Wood would never have gained admissionfrom the stewards directly, and it will therefore be remembered that he had bought his ticket from an agent : the contract of admission between Wood and the stewards was thus really a contract between the latter and an undisclosed principal. Thus seen, these facts closely resemble those in Said v. Butt,' where Said, wanting to attend a theatrical première and knowing that the managerwouldnot sell him a ticket; got his friend to buy one forhim. When Said turned up at the thea- tre, he was refused entry. McCardie J. upheld this refusal on the ground that there was no contract for admission because of the mistake of identity.' Obviously, even if Said had slipped inside un- noticed, the manager would, on the same ground, have been entitled. to evict him. This principle meets, entirely and exactly, Wood's unsuccessful a Cf. the remarks by Evershed M. R., Equity after Fusion (1948), Jour- nal of the Soc . of Public Teachers of Law, p . 177. 4 13 M. &W. at pp . 852, 854 . 5See Lord Simon in Winter Garden Theatre (London), Ltd. v. Millenium Productions, Ltd ., [1948] A.C. 173, at p . 191- 1 13 M. & W. at p . 838 . ' [192013 K.B . 497, 8 See ibid. at pp . 500-503 . 566 THE CANADIAN BAR REVIEW [VOL . XXXIII sition merely meant that a licensor could revoke a mere permission (unaccompanied by deed or valuable consideration), this was not news ; but this innocuous principle would of course have been of no assistance in the decision against Wood. There was, in the third place, a further difficulty with which Alderson B. had to grapple. For the licence to Wood could be con- ceived of as a licence coupled with a grant, since it "granted" a right of way over the racecourse as well as "something more" ." This was actually an easement in gross which, at that time, was a valid in- terest in land capable of forming the subject of a grant21 Neverthe- less Alderson B. held that the grant of this easement was invalid since it had not.been made by deed on the assumption that all "in- terests in land" had to be conveyed by deed." But, again, was this particular assumption really correct? Was it the case that this ease- ment in gross was an interest of the kind strictly requiring formal conveyance? It will be remembered that Wood's ticket only meant to give a "right of way" for a very few days ; in other words, it was not an estate in fee, or for life, or a leasehold interest for more than three years, for the conveying of which a deed was admittedly re- quired24 Be this as it may, the legal effect of Woodv. Leadbitter was dras- tic : it made it impossible to acquire by a simple contract a large number of "incorporeal" rights however short the duration ofthose rights . And this, it must again be stressed, was a novel and curious doctrine without previous authority at common law." Indeed, there was even greater complication when later it became established that easements in gross could not even be created by deed.21 The upshot was that the law was left with an unworkable situation that which is further substantiated by the fact that Wood could not even recover from the owners the price he had paid for the ticket . 21 13 M. &W. at p . 843 . 22 The notion that only easements between adjoining (dominant and servient) tenements could constitute valid interests in land seems to be a later discovery, the first expressions of which are Hill v. Tupper (1863), 2 H. & C. 121 ; Mounsey v. Ismay (1865), 3 H. & C . 486 ; Rangeley v. Midland Ry (1868), L.R . 3 Ch. App . 306, at pp . 310-311 . See on this point, Wade, 64 L. Q . Rev. at p. 67 ; Crane, op . cit ., at p . 335. 23 Crane, op . cit., at p. 335 n. (u) . 24 See Hewfins v. Shippam (1826), 5 B . & C . 221, for (apparently) the first intimation that an easement must be created by deed ; in this case, how- ever, the easement was for a freehold interest. 25 There was a further difficulty which Baron Alderson did not deal with . At common law, an executed (as distinct from an executory) licence was regarded as irrevocable, although this doctrine seems to have been limited in the nineteenth century to permanent acts done on the licensee's own land : Liggins v. Inge (1831), 7 Bing . 682. In equity this doctrine was not so limited : see Crane, op . cit ., pp . 328-330. 16 See footnote 22 supra. 1955] Licence, Interest and Contract 5670 made a whole range of rights of user not creatable at all . Such, then, was the paradox of Wood v. Leadbitter : though it reached a most justifiable result, it did so by enunciating principles so faulty that they led to a legal cul-de-sac . So matters stood until Kerrison v . Smith." Here the defendant orally agreed to let his wall to plaintiff for bill-posting for a year. The defendant arbitrarily repudiated the agreement and the plain tiff sued him for breach of contract in the county court. On the au- thority of Wood v. Leadbitter," he was held to have no cause ofac- tion and was therefore nonsuited. But, on appeal, the plaintiff's action was upheld and it was clearly decided that damages will lie for the revoçation of a licence even if unaccompanied by a grant. This decision was an important reassertion of the enforceability of valid contracts, and perhaps for the first time really met the chal- lenge presented by the stultifying principles of Baron Alderson's creation ." Indeed, in Hurst v. Picture Theatres" the enforceability of such contracts was carried a considerable stage further. Hurst, as is well known, had purchased a ticket for a cinema, and was turned out from the show under the mistaken belief that he had not paid for his seat ; he sued for assault and recovered substantial damages. Thus, the decision not merely recognized the existence of a valid contract, it also declared equitable remedies (in this case, the in- junction) available for the prevention of a breach of contract ." The most remarkable thing about Hurst's case, however, is this_: because the action was framed in trespass, the'plaintiff, if he was to be successful, had to be given a right going beyond a mere right to damages for an ordinary breach of contract : his contract had to be made specifically enforceable. Andwe have thus the strange pheno- menon that this extension of the specific enforceability of contract was made possible, not through an action in contract, but by an action in tort." 27 [189712 Q.B . 445 . 2' (1845), 13 M. & W. 838 . 20 See footnote 20 supra . It needs to be pointed out that Kerrison v . Smith was preceded by two decisions which reached a similar result : Wells v. Kingston-upon-Hull Corp . (1875), L . R. 10 C.P. 402 ; Butler v . Manches- ter, Sheffield and Lincolnshire Ry (1888), 21 Q B.D . 207 . In both - decisions- Baron _Alderson's principles were simply held "inapplicable" and their difficulty evaded. This was perhaps good enough in Butler (a contract of carriage), but bad in Wells, where Lord Coleridge C . J .'s reasoning (see es- pecially L.R . 10 C.P . at p. 409) leaves much to be desired. 10 [1915] 1 K.B . 1 .si See especially Buckley L. J., ibid., at pp . 8-9. 32 This explains the usual objection that Hurst could not actually have specifically enforced the contract in any practical way . Although it is diffi- cult to accept Sir Frederick Pollock's "fanciful suggestion [31 L . Q . Rev . 568 THE CANADIAN BAR REVIEW [VOL . XXXIII Much has been said about this decision," and it certainly is true that the reasoning of the majority in the Court of Appeal is basi- cally in utter disaccord with the reasoning of Baron Alderson . In this respect, therefore, Woodv. Leadbitter 34 cannowonly be regarded as an obsolete and superseded, even if not an expressly overruled, decision ." At the same time, however, Hurst and Wood are not mu- tually incompatible, if we consider their actual results alone : for whereas in Wood the eviction was justifiable, in Hurst it was im- proper. Moreover, in Winter Garden Theatre (London) Ltd. v. Mil- lenium Productions, Ltd." the principles enunciated in Hurst were given full approval, the House of Lords expressly recognizing that such contracts could be made specifically performable by way of an injunction . In short, contracts concerning rights of user in or over land can now be made specifically enforceable quite independently ofany proprietary notions ; we no longer need "grant" or "interest" to make even amere licence irrevocable. III Having dealt with the legal problems as between the contracting 9] that a judge on the spot, e.g ., race stand or theatre, might have granted an ex parte injunction" (see Wade, 64 L . Q . Rev . at p . 62, n . 32), it seems on the other hand perfectly sensible to say that in this sort of situation an action in trespass is simply a substitute for the injunction that would be otherwise, but is not here, available to the plaintiff. Furthermore, the sub- stantial damages which a plaintiff can thus recover in tort not only reflects the special loss occasioned by the breach of a specifically enforceable con- tract but, inversely, also expresses the rule that equitable remedies are only then available where ordinary contract damages (e.g., price for a cinema ticket) would be most inadequate . For a somewhat similar point, see Hut- ton, The Remedy ofan Ejected Licensee (1954), 17 Mod. L . Rev. 448 . 33 Cf. Keeton, Introduction to Equity (3rd ed ., 1952) pp . 74 ff. ; Wade, 64 L. Q . Rev. 57, and literature there cited. For a brilliant judicial dis- cussion of the inconsistencies, see Cowell v . Rosehill Racecourse Co . Ltd. (1937), 56 C.L.R. 605 . 34 (1845), 13 M. &W. 838 . 35 See, however, Wade's argument, 68 L . Q . Rev. at pp . 345-6. 36 [1948] A.C. 173 . Some difficulty arises in connection with Thompson v . Park, [1944] K.B . 408 . T and P had agreed to amalgamate their prepara- tory schools for the duration of the war and to use T's buildings . Owing to differences between them, T gave notice terminating the agreement . P refused to accept this and later physically forced his way back into T's building. T applied for an interim injunction, which was granted by the Court of Appeal . It is submitted that, although P was not entitled to the self-help of forcible re-entry, his rights as a contractual licensee were not so slender as the court deemed them . It is true that the law will not speci- fically enforce an agreement "for two people to live peaceably under the same roof" ([1944] K.B . at p . 409) . This however does not mean that the agreement cannot be specifically enforced to protect P from premature eviction . The distinction between the remedies of specific performance and injunction closely corresponds to that between executory and executed licences, which latter have (at least in equity) usually been held to be ir- revocable . For a different interpretation of Thompson v. Park, see Wade, 64 L. Q . Rev. at pp . 61-2 andpassim . 1955) , Licence, Interest and Contract 571 of the agreed period by way of an injunction, it must also follow that X's rights cannot merely cease because of A's premature demise . For the legal policy making the injunction applicable against A alive must also apply as against A's successor . Suppose then that A, instead of dying, sells the theatre to C, who (let us assume) takes with notice of B's licence. Clearly this variation cannot be treated differently from the former (B-X) situation . For to allow C to ac- quire the theatre unincumbered would mean to allow A to derogate from his contract when it has already been decided that A's licence to Xis irrevocable because of the injunction . To say then that the original A-Xcontract is specifically enforceable amounts, in effect, to saying that A acquires an interest in land not only against A but also against his successors, although this is an interest which is limi- ted by the agreed duration of the contract . This, indeed, was the whole point of the reasoning in Tulk v. Moxhay," and it is unfor- tunate that this point seems to have been lost sight of in the course of latex developments, which severely limited the operation of re- strictive covenants, contemplating perpetual duration,- by convert- ing them into quasi-easements." But in depicting X's rights againstA and his successors,,I cover- ed only, half the picture . We must now ask what rights Ahas against X; more precisely, does Xby his contract also acquire a much wider interest which will, on his (X's) side, be both transferable and in- heritable. It can be seen that this poses a very different problem and that it by no means follows that X has an assignable interest only because his right of user is protected . For, returning to my previous example, it 'will be obvious that A, the, theatre-owner, may have special reasons for wanting X, and not X's successors, to use his premises . In this, A is like many another lessor who is vitally con- cerned in the character and credit of his lessee ." Moreover, on this basis even Clore v . Theatrical Properties, Ltd." is perfectly supportable. Here a "lessor" by deed granted to a "lessee" the free and exclusive use of the refreshment rooms of a theatre for the purpose of supplying refreshments to the theatre's 4a (1848), 2 Phil . 774 . See also Denning L. J. in Bendall v. McWhirter, [195212 Q.B . 466, at pp. 480-1 . 4' Formby v. Barker, [1903] 2 Ch . 539 ; Millbourn v . Lyons, [1914] 2 Ch. 231 ; L . C.C. v . Allen, [191413 K.B . 642: These developments are very simi- lar to those described in footnotes 22 and . 42 supra. 48 See, for example, SOwler v . Potter, [1940] 1 K.B . 271, and compare also Tolhurst v. Associated Portland Cement Manufacturers (1903), Ltd., [1902] 2 K.B . 660, esp. at p . 668, per Collins M. R . ; and Kemp v. Baersel- man, [1906] 2 K.B . 604 . 49 [193613 All E.R.483 . 572 THE CANADIAN BAR REVIEW [VOL . XXXIII patrons ; both the theatre and the licence were assigned to other persons, and the "lessor's" assignee brought an action to prevent the assignee of the "lessee" from exercising the licence. In this the plaintiff succeeded, and perhaps nothing can be said against this particular aspect of the decision . But Lord Wright M.R . again re- verted to the theory that this was "a personal contract", which was "only enforceable between parties between whom there is privity of contract".`° The assumption was that the plaintiff could not main- tain his action unless the "lessee" was denied every tittle of a title. This, as we have seen, meant to confuse two separate issues, that is, a licensee's (protected) interest by way of lien, or clog, or fetter," and his (unprotected) interest by way of possessing an asset assign- able to other parties. Thus, even a licence can confer an interest, just as a lease containing a covenant not to assign or underlease 52 is a recognized interest ." IV In Errington v. Errington 54 the implications of the Hurst 85 and Win- ter Garden cases 56 were finally given full expression . In Errington, a father, wishing to provide a home for his son and daughter-in-law, bought ahouse for them for £750. He borrowed £500 from a build- ing society and paid £250 ofhis own money in cash . The father then allowed the couple to go into possession, and further orally prom- ised them complete legal ownership, provided they regularly paid 50 Ibid. a t p . 490 . 51 See the language used by Denning L. J . in Bendall v . Me Whirter, [195212 Q.B . 466, at pp . 478, 483. 52 At one time, indeed, convenants against assignment were regarded as "usual" ones : see Folkingham v. Croft (1796), 3 Anst . 700 ; Bell v . Barch- ard (1852), 16 Beav. 8. However the law later hardened against making them usual covenants : Bishop v. Taylor (1891), 64 L.T . 529 ; Re Lander & Bagley's Contract, [1892] 3 Ch. 41 ; De Soysa v . De Pless Pol, [19121 A.C. 194. 53 Another result seems obvious : the old conception of a "lease" needs considerable redefinition, especially as regards the doctrine of "exclusive possession" . For since the Winter Garden case even a tenant without ex- clusive possession will be protected, whether he be called "lessee" or "licen- see" . See also footnote 57 infra . But the law has also changed in further respects, i.e ., in the requirement of "notice" and the doctrine of "letting into possession". As regards the former, it is clear that in certain situations even "lessees" with full possession may not be entitled to the usual notice to quit ; as in the Winter Garden case the length of notice will be dependent on the terms of each contract : see Minister of Health v . Bellotti, [1944] K.B. 298 ; Ministry ofAgriculture v. Matthews, [1950] 1 K.B. 148 . As regards "letting into possession", the doctrine seems to have been killed by Booker v . Palmer, [1942] 2 All E.R. 674, for which see also footnote 62 infra . It would be better frankly to recognize these important changes than to main- tain the artificial dichotomy oflease and licence . 54 [1952] 1 K.B . 290 . 55 [191511 K.B . 1 . 11 [19481 A.C . 173 . 1955] Licence, Interest and Contract 573 off the loan . The daughter-in-law regularly paid the instalments, but when the father died he left all his property, including the house, to his widow, who now claimed possession . The Court of Appeal held that the couple were licensees with "an equitable right to re- main so long as they paid the instalments, which would grow into a good equitable title to the,house itself as soon as the mortgage was paid"-" The licensees, moreover, had "acted on the promise, and neither the father nor his widow, his successor in title, can eject them in disregard of it".5s In short, not only was the relationship between the father and the couple held to be an irrevocable licence, but the daughter-in-law also acquired an interest against third parties. But there is another and even more interesting aspect of this decision . For though the facts, as Lord Justice Som6rvell said, were not "unnatural", they were "so far as the researches of counsel and ourselves have gone, legally novel"." Nor was this at all surprising : the novelty was that the arrangement between the Erringtons was in the nature of a gift, though a gift_ subject to certain conditions ." It was not a tenancy or an ordinary contract (or bargain) since the couple had neither to pay a rent nor give any other price to the father ." So far equity hadintervened only to prevent the premature revocation of a licence, provided there was a "valuable" contract to begin with ; furthermore, this equitable intervention had always been based upon the supposition that damages alone would be an inadequate remedy for the breach of this type of contract. In Er- rington v . Errington there really was no such original contract ; and the enormous significance of the decision therefore lies here, that it has extended the scope of the. equitable licence to protect even gratuitous family arrangements ." s' [195211 K.B. 290, at p. 296 . To be able to say this, Denning L. J. had also to establish that the couple were not merely tenants at will, though having exclusive possession. On this the previous cases were most con- fusing ; the confusion was to think that although a person could be a "ten- ant" for one purpose (e.g., acquiring a right under a- limitation act : see Lynes v . Snaith, 11899] 1 Q.B. 486) he was also a "tenant' with regard to "notice" . This shows again that our whole conception of "lease" and "ten- ancy" requires considerable recasting . 5s Ibid. at p . 300 . 11 Ibid. a t pp . 293-4 . 11 See Hargreaves, Licensed Possessors (1953), 69 L . Q . Rev. 466, at pp . 476-7 . 1,1 If this situation was a gift, it follows that the arrangement could not have been an "estate contract", which has been advanced as an alternative, and less unsettling, ground for the decision : see Wade, 68 L . Q. Rev. a t p . .350 . 1s "Family arrangement" seems an appropriate expression to describe these new gratuitous, but enforceable, relations . The expression is also gaining increasing currency : see, e .g., Cobb v . Lane, [195211 All E.R . 1199, at p . 1201, and Crane, op. cit ., at p . 324 ; but see also its earlier usage as in