City Inn (Jersey) Ltd v Ten Trinity Square Ltd [2008] EWCA Civ 156

[2008] EWCA Civ 156Case No A3/2007/1480
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Alan Steinfeld QC (sitting as a Deputy Judge of the High Court)
HC 04 C02495
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 06/03/2008
Before
LORD JUSTICE JACOBLORD JUSTICE WALLLORD JUSTICE WILSON
Between
City Inn (Jersey) LimitedClaimant/Ten Trinity Square LimitedDefendant/Appellant
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Between
Guy Fetherstonhaugh QC (instructed by Herbert Smith LLP) for theRespondentJohn Male QC and Katharine Holland (instructed by Messrs Denton Wilde Sapte LLP) for theAppellantHearing Hearing date: 18 February 2008
Judgment
[1]This is an appeal from a decision dated 15 June 2007of Mr Alan Steinfeld QC, sitting as a deputy judge of the High Court. The claimant sought and obtained a declaration to the effect that its proposed external alterations or additions to and subsequent change of use of, its property, known as Mariner House, did not require the defendant’s consent.[2]The question turns upon the true construction of a transfer (“the Transfer”) of Mariner House made on 8 May 1962 by the Port of London Authority (“PLA”) to London County Freehold and Leasehold Properties Limited (the “Transferee”).[3]John Male QC for the defendant/appellant showed us a map of the relevant properties which need to be considered as part of the factual matrix against which the Transfer needs to be read. The largest is 10 Trinity Square, the large classic 1920s then HQ building of the PLA close to the Tower of London. Just across the road, in Pepys Street, stood two other properties then owned by the PLA, Mariner House and Walsingham House. The Transfer was of Mariner House only, leaving Walsingham House and 10 Trinity Square in the hands of the PLA. Part of the factual background known to both parties was that Mariner House was to be redeveloped – there are passages in the Transfer which refer to the Building Contract for this.[4]The Third Schedule of the Transfer reads as follows:
“THE THIRD SCHEDULE before referred to (Covenants and stipulations to be entered into by Transferee) (1) Not to erect or make any external alteration or addition to or permit any other person to erect or to make any external alteration or addition to any building or other erection of any sort upon the land hereby transferred or any part thereof except in accordance with detailed plans and elevations which have been previously approved in writing by the Estate Officer for the time being of the Transferor at the expense of the person seeking such approval. (2) Not without the previous written consent of the Transferor such consent not to be unreasonably withheld to use or permit the use of any building or erection now or hereafter upon the land hereby transferred for any purpose other than as commercial and professional offices and basement car park. (3) Not to do or permit any other person to do anything upon the land hereby transferred or any part thereof which may be or become a nuisance annoyance obstruction or inconvenience to the Transferor or other the occupiers of the Transferor’s said neighbouring properties or either of them or any part thereof respectively.”
[5]The covenants refer solely to “the Transferor”. It is “the Transferor” which is given control. Does that word in the context of the Schedule mean the PLA or does it mean the PLA or its successors in title as the case may be?[6]The claimants, the current owners of Mariner House, have obtained planning permission to knock it down and build a hotel. They have obtained the consent of the PLA (who have now moved away from the area completely and are in Gravesend) to do so, but the defendants, as current owners of 10 Trinity Square, say it is their permission which is needed. They are the successors in title to the PLA. If the Schedule means the PLA or its successor in title, they have control over whether the hotel can be built.[7]The Transfer opens in a manner which is not helpful to Mr Male. For it specifically defines “the Transferor” as the PLA without any inclusion of its successors in title:
“IN CONSIDERATION of [sum specified] WE, The Port of London Authority [address given] (hereinafter called “the Transferor”) as beneficial owners pursuant to the powers in that behalf conferred upon us [details given] hereby transfer to: THE LONDON COUNTY FREEHOLD & LEASEHOLD PROPERTIES LIMITED [address given] (hereinafter called “the Transferee”) the land [details of title to Mariner House] TOGETHER WITH the rights mentioned in the First Schedule hereto EXCEPT and RESERVING unto the Transferor in fee simple and absolutely the rights and objects mentioned in the Second Schedule hereto.”
THE LONDON COUNTY FREEHOLD & LEASEHOLD PROPERTIES LIMITED [address given] (hereinafter called “the Transferee”)[8]It is obviously a strong thing to say that where a draftsman has actually defined a term for the purposes of his document that in some places (but not others) where he uses his chosen term he must have intended some other meaning. It is not impossible, however. If, approaching the document through the eyes of the intended sort of reader (here a conveyancer), the court concludes that notwithstanding his chosen definition the draftsman just must have meant something else by the use of the term, it will so construe the document. Such a conclusion will only be reached where, if the term is given its defined meaning the result would be absurd, given the factual background, known to both parties, in which the document was prepared. Nothing less than absurdity will do – it is not enough that one conclusion makes better commercial sense than another.[9]The Transfer uses “the Transferor” twenty eight times. Mr Male took us through each use. In most places he accepted it could only mean the PLA but in others he submitted it should be read as “the PLA or its successor in title as the case may be” – what was called in argument PLA+.[10]Mr Guy Fetherstonhaugh QC for the claimant says that throughout the whole document “the Transferor” means just the PLA and no-one else. There is no absurdity in so doing – one is not driven to conclude that the draftsman must have intended to mean PLA+ anywhere in the document. At one point he had been disposed to concede it so meant in the 2nd Schedule, but on consideration he withdrew that concession.[11]I turn to set out some further parts of the Transfer. Following the words I have quoted it goes on:
“AND in consideration of [specified sum and acknowledgement of receipt] the Transferor as beneficial owners pursuant to the said powers hereby transfer to the Transferee [Mariner House] EXCEPT AND RESERVING unto the Transferor in fee simple and absolutely the rights and objects mentioned in the Second Schedule hereto.”
Mr Male accepted that the first reference in this clause to “the Transferor” must mean just the PLA – it could only be the PLA which acknowledged receipt and it could only be the PLA which was transferring the property. However, submits Mr Male, the second use of “Transferor” in this same paragraph must mean PLA+. Why, he asked forensically, would the PLA need the reserved rights once it has sold up and gone away?[12]The 2nd Schedule says this: THE SECOND SCHEDULE before referred to (Rights and objects reserved to the Transferor)(1) The rights at any time to rebuild or alter any of the Transferor’s adjoining or neighbouring buildings and to erect any new buildings or erections on any of their adjoining or neighbouring land in such manner as the Transferor may think fit notwithstanding any interference which may be occasioned thereby to the access of light or air to the land hereby transferred or to any window openings or lights from time to time existing in any buildings or other erections now or hereafter standing hereon(2) All objects of historical or archaeological interest which may at the date hereof be upon in or under the land hereby transferred.

THE SECOND SCHEDULE before referred to

[13]Does it make sense for the Second Schedule reservations to be limited to the PLA? Or more precisely would it be absurd to read the Schedule as so limited in the context of the whole agreement? I do not see why it would be absurd.[14]Turning first to clause (2) of the Schedule there is no obvious reason why the deal should not have been that any historic or archaeological objects on the site should not belong to the PLA rather than any successor in title of the PLA. The PLA may well have wanted to retain ownership of such artefacts whatever happened to the land. So there is no need to read clause (2) of the Schedule as PLA+.[15]As for clause (1) – the reservation of the right to rebuild or alter the Transferor’s adjoining buildings (10 Trinity Square and Walsingham House at the time) it is not commercially absurd for that right to remain solely in the PLA rather than to any successor in title of the PLA. Whilst the PLA owned the nearby buildings it was stipulating for such a freedom, but it is not self-evident that the freedom should enure to its successors. Obviously it would be commercially better from the PLA’s point of view if it wished to sell its other properties that it could pass on the benefit of the freedom to its successor in title. But it is possible that the commercial deal was that the PLA should have the freedom personally, but if it sold the property, the Transferee would be free from the fetter. Moreover it is entirely possible to read the Transfer as being drafted without any contemplation of the PLA moving – see below. Either way it is not commercially absurd to read “Transferor” in this clause as PLA. There is no absurdity compelling a reading of PLA+.[16]There is a second clause reserving the Second Schedule rights to the “Transferor.” I do not quote it because there is no separate point that can be or was made on it.[17]Thus I do not think Schedule 2 assists Mr Male.[18]The Transfer then contains a series of clauses in which Mr Male accepts that “the Transferor” can only mean the PLA. One then comes to the clause which imposes the Third Schedule covenants on the Transferee:
“The Transferee for itself and its successor in title hereby covenants with the Transferor and its successors in title for the benefit of the Transferor’s neighbouring properties known as Port of London Authority Head Office Building [i.e. 10 Trinity Square] and Walsingham House [address given] and every part thereof respectively to the intent that the burden of the covenant may run with and bind the land hereby transferred and every part thereof to observe and perform the covenants and stipulations set forth in the Third Schedule hereto.”
[19]So this clause imposes restrictive covenants to run with the land transferred and for the benefit of 10 Trinity Square and Walsingham House. At this point alone in the Transfer is the phrase “the Transferor and its successors in title” used. Mr Fetherstonhaugh relies upon that. He submits that the draftsman clearly did have in mind the possibility of a successor in title to either side of the transaction.[20]More generally to reinforce his submission he also points out that there is here (and in two other places in the Transfer) reference to the “Transferee and its successors in title”. The point is an obvious one – when the draftsman wants to refer to successors in title of either side, he does so. I agree but it can only take Mr Fetherstonhaugh so far. If in the end in the Third Schedule only PLA+ can make sense for the term “Transferor” then despite the express use of “successors in title” elsewhere, it must mean PLA+ in the Third Schedule.[21]Before coming to the Third Schedule I should first consider Mr Male’s submission that there are other clauses in the body of the Transfer where a PLA+ meaning is called for. Following the imposition of the Third Schedule covenants the Transfer goes on to say:
“The Transferee hereby covenants with the Transferor (1) That if any part of the Eastern walls of Walsingham House Seething Lane E.C.3. shall remain exposed at the expiration of three years from the date hereof then (subject to any necessary permission of the lessee or occupier of Walsingham House aforesaid) the Transferee and its successors in title shall immediately thereafter provide and fix thereto to the satisfaction of the Transferor facing materials of a type to be approved by the Transferor (2) That if any of the objects referred to in paragraphs (2) of the Second Schedule are discovered the Transferee will forthwith notify the Transferor and if requested by the Transferor so to do prior to the grant of the Lease pursuant to the before mentioned Building Agreement the Transferee will at its own expense promptly deliver the same to the Transferor.”
[22]The first of these covenants, he submitted, would make no sense if meanwhile the PLA had sold up completely. Why should it then have any care about the Eastern walls of Walsingham House if that was so? So “Transferor” here must mean PLA+. But his submission pre-supposes that the parties contemplated the PLA might move away in the next three years. I see no reason why they should have done. The PLA was well established in its HQ with no evidence of any thought of moving.[23]Mr Male made the same submission about the second of these covenants, the covenant about any Second Schedule objects which might be found during the contemplated building works on the transferred property site. I see no reason to hold that there is a PLA+ meaning here. If anything valuable was found on the site, why should the parties not have agreed that it belonged to the PLA, even supposing (which I do not accept) a move away was contemplated?[24]Mr Male submitted that a PLA+ meaning should be given to the word “Transferor” in the next clause:
“PROVIDED ALWAYS and IT IS HEREBY AGREED AND DECLARED that the access of light and air to any window openings or lights from time to time existing in any buildings or other erections now or hereafter standing on the land hereby transferred shall be deemed to be enjoyed by the consent of the Transferor and not as of right.”
The purpose of this clause is to prevent any prescriptive rights to light etc. from accruing. Why, asked Mr Male, should that be so only if the neighbouring buildings belonged to the PLA? He submitted that it would make no sense for there to be a possibility of prescriptive rights arising if the PLA ceased to own the neighbouring buildings. But I do not see that is so. It would make more commercial sense for the clause to run with the dominant buildings, but that is not the test. Again the PLA may have imposed the covenant for itself but not for any successor in title.[25]So I see no imperative in the body of the Transfer or the Second Schedule for any reading of Transferor as PLA+. I turn now to consider the crucial Third Schedule. Disarmingly, Mr Male accepted that the first clause here was “not helpful” to his case. It is worse than that; it is a very strong pointer against him. The reference to “the Estate Officer of the Transferor” at the time of the Transfer can only sensibly be read as referring to the man (I expect it was a man in those days) who was in charge of the PLA’s estate – a very large one at the time extending to the Port of London, not just the two neighbouring properties. He is referred to with capital letters.[26]Mr Male submitted that this clause should be read as meaning “person who deals with the estate of the PLA or its successor in title.” There was no definition of “Estate Officer” so that as matter of commercial sense must mean “person who deals with estate matters” (a meaning rather accepted by Mr Fetherstonhaugh – no-one has such a title in the modern PLA). Given that expanded meaning, Mr Male submitted that one is simply left with the word “Transferor.” Moreover, he added, attaching much importance to the actual wording as to identify of the person whose consent was required was “letting the tail wag the dog” – what really mattered was the meaning of “Transferor”. He also had a rather despairing last submission: that even if in clause (1) Transferor meant the PLA, the same word meant PLA+ in the remainder of the clause.[27]Mr Male’s big point, standing out above all others was this: that it made no commercial sense for the PLA to be the beneficiary of any of these covenants once it had completely moved away. Why would it want to control any change of use or what was done to Walsingham House once that had happened? Or why would it want a covenant against a nuisance? On the other hand a successor in title to the PLA would indeed want or be glad to have the benefit of these covenants. So in this clause, above all others, “Transferor” must mean PLA+. That is what a reasonable conveyancer, reading this as a document of another reasonable conveyancer in all the circumstances, would have taken the writer to mean.[28]He sought to reinforce this submission in a somewhat inconsistent way. He submitted on the one hand that the Transfer was rather sloppily written and secondly that the draftsman should be taken to be a sufficiently skilled conveyancer as to be familiar with the effect of a particular authority, Marquess of Zetland v Driver [1929] Ch 1.[29]The restrictive covenant in the conveyance of that case was expressed to be to “benefit and protect such parts of [specified land of the vendor which could benefit from the covenant](a) as shall for the time being remain unsold or(b) [irrelevant]”. It was held that it was a covenant which could and did run with the land but only so long as the vendor retained some part of the specified land. So it continued to bind the land conveyed unless and until the vendor had parted with all the identified land. Mr Male submitted that similarly here the benefit of the Third Schedule covenants is expressed to be for the Transferor’s identified neighbouring properties and the intention must be that it ran only whilst any part of them belonged to the PLA. The draftsman would have had the Zetland principle in mind. I do not think that will do. If he really had Zetland in mind he would have drafted a Zetland clause, i.e. one which had a reference to the benefit running only so long as the PLA’s neighbouring property was unsold.[30]Moreover Mr Male’s appeal (as it is in effect) to general conveyancing practice bumps into the fact that conveyancers, when they want to include a successor in title use what the Deputy Judge described as “the time hallowed” phrase “which expression shall, where the context permits, include its successors in title.” The 6th Edition of Megarry and Wade The Law of Real Property similarly describes as a “classic formula” a clause imposing a restrictive covenant which reads “with the intent that the covenant my enure to the benefit of the vendors their successors and assigns and others claiming under to all or any of their lands adjoining.” Mr Male clung to the last part of this (as part of his Zetland argument) but the real sting against him is in the reference to “others claiming under them”. If the draftsman of the Transfer was aware of this type of classic formula (and it is not unreasonable to assume he was) then its-non user in the Transfer is to be taken as deliberate by a reasonable addressee (i.e. a reasonable conveyancer) of the document.[31]I put aside these secondary considerations, however to address Mr Male’s big point – there is no commercial sense in the covenant being personal to the PLA once it has upped sticks and gone away. It is this point which has caused me to pause long and hard. But in the end I reject it. I do so because I do not think the parties to the Transfer ever contemplated that situation. They simply did not cater for it. At the time the PLA were well ensconced in their grand HQ in Trinity Square. Things seemed as permanent as the nearby Tower of London. The word “Transferor” in the Agreement meant the PLA alone. No successor was contemplated. It is not always the case that in construing a document the court must assume that the parties had thought of every “what if?” This is such a case.[32]In so holding I do not overlook the single reference to a successor in title to the PlA, but in the context as a whole, I do not regard that as showing a real contemplation of a successor in title to all the PLA’s lands. Besides, if there had really been contemplation of such a person then for all the reasons I have identified, he would have been referred to.[33]I add one final point. Mr Male’s argument also has the difficulty that if a successor in title was contemplated, what happens if the PLA sell off their land in different parcels. Do the owners of each get the benefit of the covenant? That seems unworkable and so improbable.[34]Accordingly I would dismiss this appeal.[35]I agree.[36]I agree and cannot usefully add anything.

Cited in 9 later judgments