Sandhu & Anor v Farooqui & Anor

A licence granted to an intending purchaser who enters into possession without a completed sale ends when it is no longer required because the parties are no longer proceeding towards completion. That intention must be mutually communicated, expressly or through conduct known to the other party, so that an objective observer would conclude that both appreciated the transaction was no longer proceeding. Until then, occupation remains permissive and cannot found adverse possession. The court left open whether such a licence could later be revoked unilaterally by notice.

Mr and Mrs Sandhu, the registered proprietors of a property, sought possession of its first-floor flat from Miss Farooqui. She had entered into possession as an intending purchaser, paid a deposit and obtained mortgage finance, but the proposed transfer or lease was never completed. She and her brother counterclaimed for specific performance and, alternatively, title by adverse possession.

The Central London County Court rejected specific performance but held that the licence had ended by the end of 1988 and that adverse possession was established. The appeal concerned whether the licence remained in force on 30 January 1989, the critical limitation date, and the effect on the adverse-possession claim.

The Court of Appeal unanimously allowed the appeal. Lord Justice Chadwick delivered the principal judgment, with Lord Justices Mummery and Auld agreeing. The declaration that Miss Farooqui had acquired title by adverse possession was set aside. The issue whether the licence was later determined by notice was remitted to the county court.

1. A licence to occupy may be granted for a fixed term, until an event occurs, or until determination on notice. Here there were no express terms, so the terms had to be implied from the circumstances of the permission (para [20]-[22]).
2. The implied term was that the licence would determine when it was no longer required, namely when the parties were no longer proceeding towards completion. For that term to be workable, the intention not to proceed had to be mutually communicated. Express communication was unnecessary, but conduct known to the other party could suffice if an objective observer would conclude that each appreciated the transaction was no longer proceeding (paras [23]-[24]).
3. No such mutual communication had occurred before 30 January 1989. There was nothing indicating that Mr Sandhu and his wife no longer intended to complete, and nothing from Miss Farooqui or her brother indicating that they had abandoned completion. The licence therefore remained in force. Their possession was permissive and could not establish adverse possession (paras [25]-[26]). Section 15 of the Limitation Act 1980 made that date significant because it was twelve years before the proceedings were issued.
4. The lower court’s conclusion concerning the Law of Property (Miscellaneous Provisions) Act 1989 and specific performance was not appealed. The lower court had referred to the adverse-possession guidance in J A Pye (Oxford) Ltd v Graham [2002] 3 WLR 221, but the appeal was resolved by the prior question whether possession remained permissive.
5. The court did not decide whether the grantor could revoke this type of licence unilaterally by the letter of 9 June 2000, or whether more was required. That question was remitted for further consideration. The application for permission to appeal concerning easements was refused (paras [27]-[31]).

1. Court of Appeal (Civil Division): unanimously allowed the appeal, set aside the adverse-possession declaration and remitted the question whether the licence had been determined by notice.
2. Central London County Court: rejected the claim for specific performance but held that the respondent had acquired title by adverse possession. The appeal was from that order.