Conscience-Based Liability of a Disponee Flashcards
3 ways X, a registered disponee of A’s land, can bring himself under a new direct right to B?
- By deed.
- X has made a contractual promise to A to allow B to enjoy the benefit of the prior right, enforceable via the 1999 RTPA.
- X has made a non-contractual promise to allow X to enjoy the benefit of the prior right and thereby acquires some sort of advantage (receipt of a promise principle); the court then imposes upon X a constructive trust obliging X to give effect to the benefit.
If X executes a deed with A, how can this deed be used to confer a new direct right on B, against X?
An inter partes deed can be used to give B a new direct right provided B is named as a party to the deed, or alternatively, under S.56(1) (if the deed confers on B a right relating to a thing) where X purports to deal directly with B despite not including X in the inter partes deed.
What are the three components of the “receipt after a promise” principle identified by McFarlane? What is its basis?
a. X makes a promise to A to give B a right in relation to the land
b. As a result of the promise X acquires some sort of advantage in relation to the acquisition of the land from A
c. X will be under a duty to B to perform that promise
The underlying principle is one of equity; it is unjust for B to retain both the advantage stemming from his promise and the freedom to renege on the promise.
Ashburn Anstalt (receipt of a promise)
It is NOT sufficient for B to promise in his contract of sale with A that he will take subject to any 3rd party rights over the land, as this sort of standard term is not enough to “prick B’s conscience”.
This sort of term merely means that the buyer is agreeing to take the land subject to protected rights and its purpose is to protect the vendor, not the right-holder.
Binons and Evans (ratio + significance)
A agreed to let X stay in a cottage for the rest of her life and sold the cottage to B “subject to” X’s right at a reduced price; B could not evict X as, considering the reduced price, “it would be utterly inequitable for B to turn A out contrary to the stipulation subject to which they took the premises”.
Extended Bannister to 3-party scenarios, where the person invoking the receipt of a promise principle was not party to the sale.
Lloyd v Dugdale
The court will only impose a constructive trust if X has undertaken an ENTIRELY NEW OBLIGATION to give effect to the incumbrance or prior interest, such that X’s conscience is affected and it would be inequitable to allow him to deny B’s interest. Proof that X has obtained a reduced price on the footing that he would give effect to B’s interest may be proof of such a new obligation.
Yavuz (2 points)
- Where B’s rights are capable of protection by registration, and the reference to B’s rights is general rather than specific, the court will more likely conclude that the reference to B’s rights was designed to protect A and not benefit B, for X is in such cases entitled to expect that 3rd parties with registrable rights in the land will protect themselves by registering their interests.
- X’s mere notice of B’s right does not provide the requisite unconscionability (Peffer disapplied as regards LRA 2002)
Groveholt v Hughes (2 points on receipt of a promise)
The doctrine cannot be used to put B in a better position against X than he would have been against A (e.g. by giving him a property right against X when he would only have had a personal right against A).
“The most that a constructive trust will do is to impose on the defendant X a duty to perform obligations which could have been enforced by the claimant B against A.”
When has this “new direct right” approach generally been applied, and why?
Where B is in bad faith but nevertheless seeks the protection of the LRA priority rules, the new trend has been to recognise B’s bad faith as creating new direct rights between B and X. The Law Comm preferred this to the approach under Peffer v Rigg (1925 Act) which equated notice with bad faith and undermined the LRA’s specific provision that notice was to be irrelevant.
Lyus
Where there is an express reference to B’s right in the contract which is not referable to any need of A to protect himself as a vendor of land (cf Ashburn Anstalt, where this was the only purpose of the “relevant incumbrances” term), it is likely that by accepting these terms X has placed himself under a constructive trust as regards B’s right.
Yavuz (general implication)
In the absence of any express reference in the contract to B’s rights and an express provision requiring X to take the property subject to those rights, the court is unlikely to apply Lyus to find that X is under a constructive trust to give effect to B’s rights.
