Summary

A company had no title to grant leases in respect of two shops because it only had a licence in respect of the land forming the title to the shops and so the owner of the land was entitled to possession of the two shop units and mesne profits.

Facts

The claimant (L), in two actions, sought possession of two shop units and mesne profits against the defendants (N, S and M). The shops were perched over a river, having been constructed on a raft of reinforced joists which rested on the retaining walls of the river. In order to build the structure it was necessary to enter into three agreements. The first concerned a bridge over the river and was made between certain individuals (X), who were referred to as the licensees, and the local authority. Under the agreement licence and consent was given for the erection and maintenance by the licensees of specified works and buildings over the river and in contact with the bridge. The second agreement concerned the retaining walls of the river. It was made between X, the aldermen and the councillors of a local authority and the local mayor. That local authority was described as the owner of the retaining walls. Under the agreement the local authority permitted the erection of premises, which later formed the shops, on the retaining walls. The third agreement related to span of the river itself and was made between X and an earl who had granted X a licence in respect of the land. The agreement was perpetual and contained no express provision for its termination. The licence was subsequently assigned to a company (B). B subsequently granted a purported lease to N in respect of the first shop. S took assignment of a purported lease granted by B to M in respect of the second shop. L later purchased the land from the earl which included the shops. L contended that B had no title to grant the leases to N and M because B itself only had a licence in respect of the land forming the title to the shops and could not grant a greater right than it had itself. N argued that the river agreement and the retaining walls agreement gave exclusive possession to X in respect of the land to which each related and they should be characterised as building leases rather than licences. S argued that the river agreement was not a bare licence but was a licence coupled with an interest in property and, therefore, B had sufficient interest to grant the lease to M which was subsequently assigned.

Held

(1) The river agreement could not be construed as a licence coupled with a separate and distinct interest. It was also difficult to see what that separate interest might be. Having regard to the indicia of a lease, it was artificial to seek to construe either the bridge agreement or the retaining walls agreement as leases, Street v Mountford (1985) AC 809 HL followed. Although in the case of both agreement a rent was reserved, the retaining walls agreement was perpetual and the bridge agreement was terminable on six months' notice and it was difficult to construe either agreement as having been intended to create an interest in land and to grant exclusive possession of it. All three agreements were construed as licences. Accordingly, B did not have an interest in land which entitled them to grant the leases to N and M and in turn the purported leases could not bind L. (2) If that conclusion was wrong and the bridge agreement or the retaining walls agreement should be construed as leases, L was still entitled to possession of the shops. Almost the whole of the property was built on or over the air space above the bed of the river. The only rights in respect of the two shops were vested in B by virtue of the assignment of the river agreement which was not binding on L. Therefore, neither N nor S would be entitled to enter the premises which were the subject of their purported leases. Also B did not purport to grant a demise of the substructure of the shops either to N or M. Therefore, even if the bridge agreement and the retaining walls agreement should be construed as leases, they had no effect in relation to anything forming the subject matter of the purported demise to N and M respectively. (3) Mesne profits could only be claimed from the expiry of the notice on and N and S to vacate the respective premises.

Judgment for claimant