“The 300 Room Proposal thus included a ‘bolt on’ Annex pulled away at ground level from the proposed Hotel to allow a through access to the GLIH [i.e. ‘General Lying-In Hospital’] service yard. The first and second floors of the Annex would sit over that access way and be identical in height and similar in appearance to the adjacent GLIH. The Annex would have its own entrance from the street and would, in appearance, be a separate building from the main Hotel and, while the Annex and the Hotel abutted each other at the level of the first and second floor, there was no internal access between the two buildings at either such level. Even at the first and second floors where the Annex and Hotel abutted each other, the floor levels and ceiling levels were different …. The Annex was envisaged to have a separate postal address and would have sewerage connections separate from those of the Hotel. That said, the basement of the Hotel would extend under the Annex with the result that, if a freehold interest in the Annex was ever disposed of separately from the Hotel, it would be, in the jargon of property lawyers, a ‘flying freehold’.”
“Promotion of this investment to Investors started in 2004. At that time, it was recognised that Investors had a legitimate interest in knowing that, when they signed their Room Contract, there was a binding contract in place for the future transfer of the freehold interest. To that end, on24 February 2004 , Galliard Hotels entered into a freehold sale contract (the ‘FSC’) with [South Bank] providing for the freehold in the Site to be transferred to [South Bank] for a consideration of£1 . At the time of the FSC, [South Bank] was a member of the Galliard group and therefore the FSC was an entirely intra-group arrangement. However, … the FSC was entered into in contemplation of arrangements which would culminate in [South Bank] leaving the Galliard group and being wholly owned by Investors.”
“Later in this judgment I explain why, at the time of the Annex Lease Scheme, on a true construction of the FSC, [South Bank] had a contractual right to a transfer of the entire freehold interest in the Site, including the Annex. Accordingly, the effect of the Lease was to deprive [South Bank] of its economic interest in the Annex for no valuable consideration. By the Underlease, [South Bank] retained the right to use the Annex, but it had to pay Lodgeshine a market rent in order to do so. The overall result was a transfer of value out of [South Bank] and into Lodgeshine.”
“When we sold the hotel rooms at Addington Street the side access building was always staying out of the equation and was a building worth several hundred thousand pounds for us either to occupy as office or let …. It transpired that Park Plaza due to the success of the hotel required additional conferencing and meeting facilities and we utilise the adjoining building without any charge whatsoever to the people who had already purchased flats. The hotel now looks as if it will be trading in excess of the rental guarantee payment of the five year period and I wonder whether it is too late to contemplate actually rentalising the annex building back into the Park Plaza lease. Please advise.”
“166. In my judgment, Mr Conway concluded that, if the Annex passed to [South Bank], something would have gone wrong at a general level. He had a general conception of the transaction as involving the sale of individual rooms in the Hotel and giving Investors a share in the freehold of the Hotel by virtue of their shared ownership of [South Bank]. That general conception of the transaction did not involve the Annex at all …. 167. It was reasonable, in 2008, for Mr Conway to believe that there had been a ‘mistake’ (in the sense he used the word) if the deal that his lawyers had documented in 2004 resulted in [South Bank] obtaining ownership of the Annex. For that view to be reasonable, Mr Conway did not have to go back and perform a careful audit of everything that had been said in 2004 as if he were a lawyer considering a possible claim for rectification of the FSC. Mr Conway’s view was reasonable because the deal that had been done in 2004 could be understood, at a high level of generality, as a transaction involving a hotel and a freehold interest in a hotel. In 2004, the Annex, when constructed could not lawfully be used as part of the Hotel and indeed was a separate building from the Hotel. In those circumstances, it was not unreasonable for Mr Conway to conclude that, even if the legal documents resulted in the Annex being treated as part of the deal, they ought not to have done.”
“From the above, I have reached the following factual conclusions as to Mr Conway’s knowledge of, or belief in, the existence of a conflict of interest between [South Bank] and Lodgeshine and between [South Bank] and Mr Conway himself: i) Mr Conway accepted in cross-examination that he realised that he needed to take care to avoid a conflict of interest between [South Bank] and his own personal interests, or between [South Bank] and other companies, such as Lodgeshine, of which he was a director. ii) Mr Conway was an astute businessman. He would have realised that, if one took as a starting point the proposition that [South Bank] was entitled to own a freehold interest in the Annex, the Annex Lease Scheme would have the economic consequences set out in paragraphs 160 and 161 above. iii) However, Mr Conway considered that was not the correct starting point. His view was that to the extent [South Bank] had a contractual entitlement to the Annex, that was a ‘mistake’ in the sense I have explained. Viewed from that perspective, he did not consider that there was any benefit to Lodgeshine (or himself), or any disbenefit to [South Bank], in implementing the Annex Lease Scheme. That was because he considered that the Annex Lease Scheme simply put [South Bank] and the rest of the Galliard group in the position they should have been in from the beginning. iv) It was reasonable for Mr Conway to approach matters as set out in paragraph 175.iii) since, having instructed Howard Kennedy in connection with the Annex Lease Scheme, they could be expected to tell him if there was something wrong with that scheme. v) Mr Conway was fortified in his conclusion that there was no disbenefit to [South Bank] (by reference to what he considered to be the correct starting position) by his perception that Mr Ivesha’s suggestions to increase conferencing facilities would increase [South Bank’s] revenue from Rooms ….”
“in the context of company property, directors are to be treated as being in possession of the trust property from the outset. It is precisely because, under the typical constitution of an English company, the directors are the fiduciary stewards of the company's property, that they are trustees within the meaning of section 21 at all. Of course, if they have misappropriated the property before action is brought by the company (the beneficiary for this purpose) to recover it they may or may not by that time still be in possession of it. But if their misappropriation of the company’s property amounts to a conversion of it to their own use, they will still necessarily have previously received it, by virtue of being the fiduciary stewards of it as directors.”
“i) [South Bank’s] equitable interest in the freehold (acquired on execution of the FSC) was treated as held by Mr Conway in his capacity as director of [South Bank] and was therefore ‘trust property’ that was previously held by Mr Conway …. ii) Mr Conway converted that trust property to his use by granting a Lease to Lodgeshine from which Mr Conway would derive an economic benefit given his shareholding interest in Lodgeshine.”
“349. … In his oral submissions on behalf of Galliard, Mr Trompeter KC answered [the argument] by saying that there can have been no ‘conversion’ of the equitable interest in the freehold to Mr Conway’s use in circumstances where [South Bank] has, since 2014, held that very freehold interest. I see the force of that argument. [South Bank’s] complaint is not that it no longer has a freehold interest in the Site but rather that, since that interest is encumbered by the Lease, its interest is less valuable than it would otherwise have been. Moreover, even recognising the extended concept of a claim for ‘recovery’ of trust property set out in paragraph 338.iii) above, I see a real difficulty with the argument that [South Bank] is seeking to ‘recover’ an interest in the freehold when it has held the freehold interest legally and beneficially since 2014. 350. In his reply on behalf of [South Bank], [counsel then appearing for South Bank] did not contradict Mr Trompeter KC’s analysis. He did not, for example, explain how the freehold interest could have been ‘converted’ by virtue of being rendered less valuable. Indeed, beyond the general submission that dealing with an asset in a way inconsistent with the rights of an owner amounted to ‘conversion to own use’, [South Bank] made few submissions on the breadth of the concept …. Overall, I do not consider that [South Bank] has succeeded in displacing the analysis advanced by Galliard which I have summarised in paragraph 349.”
“When a specifically enforceable contract for sale has been made, the effect in equity is to divide the beneficial interest in the land between the vendor and the purchaser. The vendor retains the legal estate until the transaction is completed but he holds it until then as a trustee for the purchaser. The trust arises on the provisional assumption that specific performance of the contract is available and that the contract will in due course be completed. The incidents of the trust are determined by the parties’ contractual rights since the trust only exists to give effect to the transaction contemplated in the contract …. The trust has two main functions. First, as against the vendor, it serves to impose certain duties on him pending completion of the transaction. These duties are imposed by law rather than specified in the contract. Their purpose, nonetheless, is to protect the purchaser’s contractual right to have the specific property conveyed to him. The second is its effect as against a third party to the contract. By treating the purchaser’s contractual right as an equitable interest in the legal estate, the priority of the purchaser’s right to a conveyance of the estate is preserved against the third party. The justification for giving the purchaser these additional rights is that the contract is specifically enforceable. He has a present right to a conveyance of the specific land owned by the vendor.”
“the moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser, the vendor having a right to the purchase-money, a charge or lien on the estate for the security of that purchase-money, and a right to retain possession of the estate until the purchase-money is paid, in the absence of express contract as to the time of delivering possession”
“It would therefore be wrong to treat an uncompleted contract for the sale of land as equivalent to an immediate, irrevocable declaration of trust (or assignment of beneficial interest) in the land. Neither the seller nor the buyer has unqualified beneficial ownership. Beneficial ownership of the land is in a sense split between the seller and buyer on the provisional assumptions that specific performance is available and that the contract will in due course be completed, if necessary by the court ordering specific performance. In the meantime, the seller is entitled to enjoyment of the land or its rental income. The provisional assumptions may be falsified by events, such as rescission of the contract (either under a contractual term or on breach). If the contract proceeds to completion the equitable interest can be viewed as passing to the buyer in stages, as title is made and accepted and as the purchase price is paid in full.”
“The preservation may be in a physical sense, so that a vendor may have to keep property in a proper state of cultivation (Earl of Egmont v Smith 6 Ch D 469); or prevent trespassers from removing soil (Clarke v Ramuz[1891] 2 QB 456 ); or prevent trespassers from damaging the floors: Davron Estates Ltd v Turnshire Ltd 133 NLJ 937. The vendor of a leasehold interest may not take steps which will lead to forfeiture: Dowson v Solomon 1 Dr & Sm 1 and Palmer v Goren (1856) 25 LJ Ch 841. The vendor of a business may not cease to carry it on without consulting the purchaser (Golden Bread Co Ltd v Hemmings[1922] 1 Ch 162 ), since to do so would destroy the subject-matter of the sale. So also the vendor should not relet the premises without consulting the purchaser (Earl of Egmont v Smith 6 Ch D 469 and Abdulla v Shah[1959] AC 124 ), since to do so would present the purchaser on completion with property in a legal state different from that which he contracted to buy.”
“The seller must take care not to damage the property or to prejudice the buyer’s interest in the property of which, on completion, he will become the legal owner.”
“It is true that the purchaser is given statutory rights to enforce the interests against third parties under a contract of sale by registration: [LRA 2002], sections 15(1)(b), 32, 34(1);Land Charges Act 1972, section 2(1)(4) . But it does not follow that the purchaser has proprietary rights for all purposes. Thus in Inland Revenue Comrs v G Angus & Co(1889) 23 QBD 579 , 595, Lindley LJ quoted Lord Cottenham LC in Tasker v Small (1837) 3 My & Cr 63, 70, who said that the rule by which a purchaser becomes in equity the owner of the property sold ‘applies only as between the parties to the contract, and cannot be extended so as to affect the interests of others.’”
“Further: 33.2.1 Both the Lease and the Underlease preferred the interests of Lodgeshine and the failure to take action against [Hotels] preferred the interests of [Hotels]. Further, Mr Conway so acted while hopelessly conflicted and / or interested and failed even to declare the same. In each case, Mr Conway also preferred his own interests as an ultimate beneficial owner of Lodgeshine and [Hotels] and in each case, acted contrary to the best interests of [South Bank]; … 33.2.3 In respect of all of the foregoing, Mr Conway … failed to act in the best interests (and to promote the success) of [South Bank] and to exercise independent judgment, acted for an improper purpose and permitted situations to arise in which he had conflicting interests and owed conflicting duties.”
“Each company in the group is a separate legal entity and the directors of a particular company are not entitled to sacrifice the interest of that company. This becomes apparent when one considers the case where the particular company has separate creditors. The proper test, I think, in the absence of actual separate consideration, must be whether an intelligent and honest man in the position of a director of the company concerned, could, in the whole of the existing circumstances, have reasonably believed that the transactions were for the benefit of the company.”
“Mr Koshy’s personal liability to account to GVDC for profits made by him from his fiduciary position as a director is not dependent on establishing that he has received any money or other property belonging to GVDC as a result of the misapplication of GVDC’s assets, whether in the form of payments made by GVDC directly to him, or in the form of payments made, via Lasco, indirectly to him. GVDC’s causes of action against Mr Koshy were based on the equitable disabilities or the fiduciary duties to which he was subject as a director of GVDC. As such, he was under a personal liability in equity to account to GVDC for unauthorised profits: either because he was disabled in equity from making an unauthorised personal profit out of the position occupied by him and/or because he acted in dishonest breach of fiduciary duty by deliberately and secretly doing so. The profits made by him are treated as taken for and on behalf of GVDC, as the person to whom he owed the duty to account. As between him and GVDC, equity prevents Mr Koshy from asserting, in answer to the claim for an account, that he is entitled to retain the profits (if any) made by him for his own benefit.”
“Mr Koshy’s liability to account for undisclosed profits, and any constructive trust imposed on those profits, do not depend on any pre-existing responsibility for any property of the company. They arose directly out of the transaction which gave rise to those profits, and the circumstances in which it was made. The fact that Mr Koshy was in a pre-existing fiduciary relationship with the company was not enough, by itself, to bring the case within class 1 [i.e. the other category of constructive trust] ….”
“The provisions of section 21(1)(b) in respect of the property of the company have no application to cases like the Gwembe case where there is no misappropriation or receipt of pre-existing company property but only a breach of duty which gives rise to a constructive trust over (for example) the secret profit. This is because in such cases the director is not a trustee virtute officii in respect of the profit. He has no proprietary relationship with what he acquires other than as the recipient of the proceeds of his breach of duty. He is not therefore in the terms of section 21(1)(b) in possession of trust property. But he is at all times a class 1 fiduciary and trustee in respect of the company and its assets so that a breach of his duty towards the company remains a breach of trust within the meaning of section 21 even if it does not involve the misappropriation of company property. He is not in the same position as a stranger to the company or the trust (as in the Paragon case) who only becomes a trustee in the limited sense of being required to account for the profits of his fraud on a proprietary basis through the medium of a class 2 constructive trust.”
“The significance of control of a company is that it enables the controller to obtain, in a number of ways, the benefit of the assets of the company, or indeed the assets themselves or their proceeds of sale, provided that all statutory and other legal restrictions are observed. If section 21(1)(b) were construed to apply only to those cases where the trustee directly and personally acquires the trust property, its evident purpose would be much constrained and easily avoided. In my judgment, a construction which includes within its terms a transfer to a company directly or indirectly controlled by the trustee is within the meaning of this provision.”
“where it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in a general meeting would be.”
“The essence of the Duomatic principle, as I see it, is that, where the articles of a company require a course to be approved by a group of shareholders at a general meeting, that requirement can be avoided if all members of the group, being aware of the relevant facts, either give their approval to that course, or so conduct themselves as to make it inequitable for them to deny that they have given their approval. Whether the approval is given in advance or after the event, whether it is characterised as agreement, ratification, waiver, or estoppel, and whether members of the group give their consent in different ways at different times, does not matter.”
“… I do not accept that a shareholder’s mere internal decision can of itself constitute assent for Duomatic purposes. I was not referred to any authority in which it had been decided that a mere internal decision would suffice. Further, for a mere internal decision, unaccompanied by outward manifestation or acquiescence, to be enough would, as it seems to me, give rise to unacceptable uncertainty and, potentially, provide opportunities for abuse. A company may change hands or enter into an insolvency procedure; in either event, it is desirable that past decisions should be objectively verifiable. In my judgment, there must be material from which an observer could discern or (as in the case of acquiescence) infer assent. The law applies an objective test in other contexts: for example, when determining whether a contract has been formed. An objective approach must, I think, also have a role with the Duomatic principle.”
“I consider that on the particular facts of this case all the corporators ought to be treated as having assented on December 9, 1965, to the company being wound up on that day …. Admittedly three of the five corporators did not vote in favour of the resolution, but they undoubtedly suffered it to be passed with knowledge of their power to stop it. The true quality of the acts of such corporators on December 9 is not to be judged exclusively by reference to what they did or did not do on that day, but is also to be judged in the light of what they did and did not do thereafter. What these corporators did and did not do after December 9, 1965 down to December 10, 1969, when they swore their affidavits disclosing this defence, points, in my view, to one conclusion only. The conclusion is that they outwardly accepted the resolution to wind up as decisively as if they had positively voted in favour of it. If corporators attend a meeting without protest, stand by without protest while their fellow-members purport to pass a resolution, permit all persons concerned to act for years on the basis that that resolution was duly passed and rule their own conduct on the basis that the resolution is an established fact, I think it is idle for them to contend that they did not assent to the purported resolution”
“The question therefore becomes whether one can apply the Duomatic principle of informal unanimous shareholder consent to ostensible authority. As a matter of principle, there seems no reason why not. If actual authority can be conferred informally by unanimous shareholder consent the same should apply to ostensible authority. So here Mr Byington’s informal consent to the representation by conduct, that Mr Costa had authority to instruct TCCL (and Citco BVI) in relation to the fifth POA, binds Spectacular.”
“In the present case, it might be suggested that the single shareholder (Mr Byington) was not aware of, and therefore could not have consented to, Mr Costa’s giving instructions for the fifth POA. However, Mr Byington had set up a mode of operation on which Citco BVI and TCCL reasonably relied. The very concept of ostensible authority means that Mr Byington should not be allowed to deny that he consented to the giving of authority to Mr Costa. By operating as he did, so as to keep his connection with Spectacular out of the picture, he was taking the risk that Mr Costa might betray him.”
“The Landlord hereby grants to the Company the right to utilise the Common Parts in conjunction with its appointment by the Tenant in clause 8 hereof for the purpose for which they are properly appointed.”
“(iv) the communal facilities within the Building and the Estate (v) all other parts of the Building and the Estate as are for the time being not comprised or intended in due course to be comprised in any lease granted or to be granted by the Landlord”. “Building” is stated to refer to “the hotel apartment block to be known as The Addington Street Apart Hotel London SE1 registered with the title number TGL221719” and “Estate” is said to mean “the Building is situated and all amenity areas forming part thereof”
“Right at the heart of the Room Lease Claim is the proposition that Galliard Hotels’ grant of the Lease was a breach of Clause 9 because it meant that Galliard Hotels could no longer give the use of the Annex that it had promised. However, if that assertion is correct, Galliard Hotels did nothing further to aggravate the situation after granting the Lease. Nor, after the Lease was granted was the situation more acute. On [South Bank’s] formulation, two years after the Lease was granted, and without any additional action on its part, Galliard Hotels was just as incapable of giving [South Bank] the use of the Annex as it was on the day the Lease was granted. I regard that as inconsistent with an assertion of a ‘continuing breach’ of Clause 9.”
“If a tenant who has agreed to a repairing covenant allows a property to fall into disrepair it can quite sensibly be said that each day that passes (i) involves a new breach consisting of the tenant’s failure to take the action required and (ii) which breach makes the problem more acute. As I have explained, neither statement is true of the breach of Clause 9 said to consist of Galliard Hotels’ grant of the Lease.”
“The grant of the Lease was not of itself injurious to [South Bank’s] interests: conceptually even after granting the Lease, Galliard Hotels could have requested Lodgeshine not to complain of [South Bank’s] continuing use of the Annex or to grant [South Bank] a licence. The real substance of [South Bank’s] complaint is that, following grant of the Underlease, it had to pay to use the Annex. That injury, if it was one, was crystallised once and for all when the Underlease was granted since the obligation to pay was constituted by the Underlease.”
“Non-repair for six years does not result in the repairing obligation becoming statute-barred while the tenancy still subsists. The obligation of the tenant or the landlord to keep the property in repair is broken afresh every day the property is out of repair, as Bramwell B. observed in Spoor v. Green (1874) L.R. 9 Ex. 99, 111.”
“In the case of a covenant to repair, the breach is continuing, because the covenant is broken afresh every day the premises are out of repair, and when an action is brought for breach of such a covenant, the plaintiff does not recover the value of the repairs, because he may recover again if the want of repair still continues.”
“In principle, and in general terms, a continuing nuisance is one where, outside the claimant’s land and usually on the defendant’s land, there is repeated activity by the defendant or an ongoing state of affairs for which the defendant is responsible which causes continuing undue interference with the use and enjoyment of the claimant’s land. For a continuing nuisance, the interference may be similar on each occasion but the important point is that it is continuing day after day or on another regular basis. So, for example, smoke, noise, smells, vibrations and, as in Fearn[2024] AC 1 , overlooking are continuing nuisances where those interferences are continuing on a regular basis. The cause of action therefore accrues afresh on a continuing basis.”
“a continuing nuisance is in principle no different from any other continuing tort or civil wrong. So, for example, in Coventry v Apsley (1691) 2 Salk 420 the tort of false imprisonment (trespass to the person), which is actionable per se, was continuing so that there was a continuing cause of action for as long as the false imprisonment carried on (i e for as long as there was the repetition of the imprisoning conduct).”
“However, Mr Conway did not know precisely what steps needed to be taken validly to execute documents as deeds at the relevant time. That conclusion follows from (i) Mr Conway’s lack of knowledge of legal matters, (ii) his oral evidence to the effect that he had not been given advice by Howard Kennedy as to how precisely he needed to go about executing the documents they sent to him and (iii) his general aversion to getting to the bottom of points of detail associated with his many property transactions. He did not, therefore, realise that by asking Ms Akers to sign documents in his name he, or companies of which he was a director, might not validly be executing those documents. At no point while he was a director of Galliard Hotels or Lodgeshine has either company sought to disavow their respective obligations under the Lease and Underlease in reliance on the proposition that either document had been invalidly executed. I infer that Mr Conway genuinely thought the Lease and Underlease were validly executed.”
“(1) Under the law of England and Wales or Northern Ireland a document is executed by a company— (a) by the affixing of its common seal, or (b) by signature in accordance with the following provisions. (2) A document is validly executed by a company if it is signed on behalf of the company— (a) by two authorised signatories, or (b) by a director of the company in the presence of a witness who attests the signature. (3) The following are ‘authorised signatories’ for the purposes of subsection (2)— (a) every director of the company, and (b) in the case of a private company with a secretary or a public company, the secretary (or any joint secretary) of the company. (4) A document signed in accordance with subsection (2) and expressed, in whatever words, to be executed by the company has the same effect as if executed under the common seal of the company. (5) In favour of a purchaser a document is deemed to have been duly executed by a company if it purports to be signed in accordance with subsection (2). A ‘purchaser’ means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property.” (a) by the affixing of its common seal, or (b) by signature in accordance with the following provisions. (a) by two authorised signatories, or (b) by a director of the company in the presence of a witness who attests the signature. (a) every director of the company, and (b) in the case of a private company with a secretary or a public company, the secretary (or any joint secretary) of the company. A ‘purchaser’ means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property.”
“(1) Under the law of England and Wales or Northern Ireland a company may, by instrument executed as a deed, empower a person, either generally or in respect of specified matters, as its attorney to execute deeds or other documents on its behalf. (2) A deed or other document so executed, whether in the United Kingdom or elsewhere, has effect as if executed by the company.”
“In favour of a purchaser a document shall be deemed to have been duly executed by a company if it purports to be signed by a director and the secretary of the company, or by two directors of the company, and, where it makes it clear on its face that it is intended by the person or persons making it to be a deed, to have been delivered upon its being executed. A ‘purchaser’ means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property.”
“A corporation aggregate may execute a deed by having their seal affixed thereto in the presence of and attested by their clerk, secretary or other permanent officer or his deputy, and a member of the board of directors, council or other governing body of the corporation; and where the seal of the corporation is affixed to a deed, then, if the requirements of this subsection have been complied with, the deed shall be deemed to have been executed in the presence of the proper persons, and to have taken effect accordingly.”
“In its written closing submissions, [South Bank] made a separate point to the effect that s44(5) is expressed to apply ‘in favour’ of a ‘purchaser’. It argued that due execution of the Underlease did [South Bank] no ‘favour’ at all since [South Bank] would prefer to be released from the obligations contained in the Underlease. However, nothing was said on this point in oral closings and … I proceed on the basis that this point is not strenuously being pursued. In any event, in my judgment s44(5) is capable of applying ‘in favour of’ [South Bank]. Clearly, there has been a change in the management of [South Bank] since the date of the Underlease with the present management wanting the Underlease to be set aside. However, at the time of the Underlease, [South Bank] was under different management which positively sought registration of the Underlease as a legal interest in land in reliance on the proposition that it had been validly executed as a deed.”
“Where a tenant makes a claim to acquire the freehold or an extended lease of any property, then during the currency of the claim no proceedings to enforce any right of re-entry or forfeiture terminating the tenancy shall be brought in any court without the leave of that court, and leave shall not be granted unless the court is satisfied that the claim was not made in good faith ….”
“How then are we to decide whether the tenant’s claim to buy the freehold is made in good faith, or not? The words ‘in good faith’ are often used in statutes but rarely defined. A good instance is theLarceny Act 1916 , which speaks of ‘a claim of right made in good faith,’ but does not tell us what ‘good faith’ means. Other instances come readily to mind.The Limitation Act 1939, section 26 , speaks of cases when a right of action is concealed by ‘fraud,’ but does not define what is meant by ‘fraud’ in this context. It is left to the courts to work it out from case to case: see Applegate v. Moss [1971] 1 Q.B. 406. In all such cases, when a word or phrase goes undefined, the judges have to work out for themselves the meaning of it, doing the best they can to interpret the will of the legislature in regard to it. That is the principle I stated in Seaford Court Estates v. Asher [1949] 2 K.B. 481, 499. To my mind, under this statute a claim is made ‘in good faith’ when it is made honestly and with no ulterior motive. It must be made by the tenant honestly in the belief that he has a lawful right to acquire the freehold or an extended lease, and it must be made without any ulterior motive, such as to avoid the just consequences of his own misdeeds or failures. If the landlord asserts that the tenant’s claim is not made in good faith, the burden is on the landlord to satisfy the court that the tenant, in making the claim, was acting dishonestly or with an ulterior motive.”
“My Lords, the character in the law known as the bona fide (good faith) purchaser for value without notice was the creation of equity. In order to affect a purchaser for value of a legal estate with some equity or equitable interest, equity fastened upon his conscience and the composite expression was used to epitomise the circumstances in which equity would or rather would not do so. I think that it would generally be true to say that the words ‘in good faith’ related to the existence of notice. Equity, in other words, required not only absence of notice, but genuine and honest absence of notice. As the law developed, this requirement became crystallised in the doctrine of constructive notice which assumed a statutory form in theConveyancing Act 1882, section 3 . But … it would be a mistake to suppose that the requirement of good faith extended only to the matter of notice, or that when notice came to be regulated by statute, the requirement of good faith became obsolete. Equity still retained its interest in and power over the purchaser’s conscience. The classic judgment of James L.J. in Pilcher v. Rawlins (1872) L.R. 7 Ch. App. 259, 269 is clear authority that it did: good faith there is stated as a separate test which may have to be passed even though absence of notice is proved. And there are references in cases subsequent to 1882 which confirm the proposition that honesty or bona fides remained something which might be inquired into (see Berwick & Co. v. Price[1905] 1 Ch. 632 , 639; Taylor v. London and County Banking Co.[1901] 2 Ch. 231 , 256; Oliver v. Hinton[1899] 2 Ch. 264 , 273).”
“In such a case the landlord will be estopped only from denying that he had no title at all. It appears that if he had some title (but title insufficient to support the lease purported to be granted) this kind of estoppel will not apply, and the tenant will acquire a legal estate but one which does not exceed that of the landlord.”
“The common rule that a mortgagor cannot dispute the title of his mortgagee was recognised in Right d. Jefferys v. Bucknell (1831) 2 B. & Ad. 278, and the similar rule that a lessor cannot dispute the title of his own lessee has an equally long history. Neither depends on what has sometimes been called ‘the technical doctrine of estoppel,’ that is to say, estoppel by representation, but on the refusal of the common law to permit the grantor of a legal estate to deny that he had the legal title.”
“Had the estoppel been based on some implied representation by conduct, one would have expected the grantor to be estopped from denying that he had a title sufficient to support the grant. But this was not the case. No title by estoppel could arise if the grantor had any present legal estate in the property, even if it was insufficient to support the grant. In such a case the grantee obtained an estate in interest and not by estoppel but it could not exceed the estate of his grantor.”
“Then the question comes, whether the assignee of the lease may be allowed to controvert the title of the lessor, when the lessee, under whom he derives, could not controvert the title of the lessor; so that the assignee should have a better right than he from whom he derives it. Exclusive of all the dicta, it would be a very odd thing in the law of any country, if A. could take, by any form of conveyance, a greater or better right than he had who conveys it to him; it would be contrary to all principle. But it does not rest merely on the general principle; for if you look into all the books upon estoppel, you find it laid down, that parties and privies are estopped, and he who takes an estate under a deed, is privy in estate, and therefore never can be in a better situation than he from whom he takes it.”