Practice and Procedure


PUBLISHED March 3, 2003

Where the claimants had granted the respondent a licence to occupy a flat until her purchase of it was complete, and where the transaction was never in fact completed, the term to be implied into the licence was that it would determine when it was no longer justified by the circumstances the parties had contemplated, namely when they were each aware that they were no longer proceeding to the completion of the transaction.Claimants' appeal from the decision of HH Judge Cooke on 15 October 2002 to allow the defendant's counterclaim for adverse possession. The claimants ('S') were the registered proprietors of a property comprising two flats. In May 1988 S agreed to sell the first floor flat to the defendant ('F'), who agreed to take the transfer of the freehold of the whole property subject to the lease of the ground floor flat. S was to act for F in the purchase of the property. F applied for a mortgage, and was allowed into possession of the first floor flat on 19 July 1988, at which point F paid ?5000 to S by way of deposit. Completion of the transaction was expected to occur by August 1988, and S received the mortgage advance in September 1988. Thereafter, F continued to occupy the first floor flat in the belief that the transaction had been completed. However, the sale of the first floor flat had not been completed as it should have been, and S had been engaged in mortgage fraud. In May 1989, when F tried to sell the first floor flat, she became aware that S had not made an application to register the title to the property in her name. F and the lender were subsequently reimbursed by the Solicitors' Compensation Fund, and F was released from liability under the mortgage. F continued to occupy the flat, and S took no steps to assert ownership until 2000. On 9 June 2000 S sent a letter purporting to give notice to quit. F applied to the Land Registry for possessory title of the freehold, and S commenced proceedings on 31 January 2001 claiming possession on the grounds that: (i) in 1989 S let F into occupation of the first floor flat pursuant to a licence granted in anticipation of the sale of the property by S to F; (ii) no purchase had taken place, and no lease had been granted, and there was therefore no binding agreement to grant a lease; and (iii) the licence to occupy the premises was terminated by notice on 9 June 2000. F defended the claim on the basis that the licence to remain in the flat had been revoked by January 1989 because S had no genuine intention to complete the transaction. F counterclaimed for specific performance of the contract to grant a lease and/or title by way of adverse possession. The judge rejected the claim for specific performance but held that F's claim to title by adverse possession would succeed on the grounds that: (a) F had entered into possession of the flat with S's consent on the basis that she had agreed to purchase the property; (b) by the end of 1988 there was no prospect that S would ever grant the lease for which he had received payment; (c) implicit in the permission to occupy the flat was that the permission did not need to endure beyond completion; and (d) from the end of 1988, F had occupied the premises without permission and adverse possession had been established. S appealed against the order for adverse possession. F argued that the court should imply a term into the licence that it would determine automatically as soon as there was no longer a real prospect of the transaction proceeding to completion.HELD: (1) The law could not imply the term contended for by F. The term to be implied was plainly that the licence would determine automatically as soon as there is no real prospect of the transaction proceeding to completion. However, such a term should require that the intention not to proceed be communicated. Mutual communication was essential, from which the objective observer could deduce that each party would appreciate that the transaction was not to be proceeded with. That element was wholly missing in the present case. The judge was wrong to hold that the licence granted in July 1988 had come to an end before 30 January 1989. (2) The matter of whether the letter of June 2000 determined the licence was remitted.Appeal allowed.