University of East London Higher Education Corporation v London Borough of Barking & Dagenham & Ors [2004] EWHC 2710 (Ch)

[2004] EWHC 2710 (Ch)Case No HC03CO3796
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 09/12/2004
Before
THE HONOURABLE MR JUSTICE LIGHTMAN
Between
UNIVERSITY OF EAST LONDONClaimantHIGHER EDUCATION CORPORATIONClaimantLONDON BOROUGH OF BARKING AND DAGENHAMDefendantsLONDON BOROUGH OF REDBRIDGEDefendantPERSONS UNKNOWN OWNING OR OCCUPYING PROPERTY FORMING PART OF THE BECONTREE ESTATE, EAST LONDONDefendant
Mr David Ainger (instructed by Finers Stephens Innocent, 179 Great Portland Street, London W1W 5LS) for ClaimantMr Christopher Cant (instructed by Barlow Lyde & Gilbert, Beaufort House, 15 St Botolph Street, London EC3A 7NJ) for First DefendantMs Karen Walden-Smith (instructed by Legal Services Department, London Borough of Redbridge, Town Hall, High Road, Ilford, Essex IG1 1DD) for Second Defendant for None of the Third Defendants attended and were not representedHearing Hearing dates: 14th-20th July 2004
Judgment

I. INTRODUCTION

[1]The London County Council (“the LCC”) acquired as public housing authority for housing for the working classes the Becontree Estate, an estate of some 3,000 acres. By four conveyances (“the Conveyances”) dated the 8th June 1931 (“the 1931 Conveyance”) the 9th February 1932 (“the 1932 Conveyance”) the 31st December 1935 (“the 1935 Conveyance”) and the 14th February 1946 (“the 1946 Conveyance”) the LCC conveyed on sale in four tranches some 24 acres on the western edge of the Becontree Estate to Essex County Council (“Essex”) as education authority for secondary educational purposes. The four tranches are now known as the Barking Campus. By each of the Conveyances Essex “for themselves their successors and assigns” entered into restrictive covenants with the LCC “their successors and assigns”. The relevant covenants (“the Covenants”) contain three restrictions. The first covenant (“the User Covenant”) prohibits use of the Barking Campus except with the consent of the LCC for purposes other than for public educational purposes. The second covenant (“the Approval Covenant”) prohibits the erection of any building on the Barking Campus except in accordance with plans and elevations approved by the LCC. The third covenant (“the Pre-emption Covenant”) prohibits the sale or (save for educational purposes) the parting with possession of the Barking Campus without first offering to sell the Barking Campus to the LCC. I shall refer to the User Covenant and the Approval Covenant together as “the Restrictive Covenants”.[2]The claimant, the University of East London Higher Education Authority (“UEL”), as successor of Essex is the freehold registered proprietor of the Barking Campus and occupies the Barking Campus as one of its three campuses for educational purposes. As long ago as the 8th November 1973 the then Department of Education and Science indicated that the existence of three campuses was not acceptable. In 1997 UEL acquired land for a campus in Docklands with a view to concentrating the bulk (if not all) of its activities on that campus, and the Barking Campus is now surplus to its requirements. UEL accordingly wishes to sell the Barking Campus free from the Covenants for the purposes of housing. The issue has however arisen whether the Covenants prevent UEL from doing so, and in particular whether the benefit of the Covenants is vested in any and if so which of the successors in title of the LCC as owners of the remainder of the Becontree Estate and whether the burden of the covenants binds the successors in title of Essex to the Barking Campus.[3]The first defendant, the London Borough of Barking and Dagenham (“LBBD”), and the second defendant, the London Borough of Redbridge (“LBR”) are the statutory successors to the LCC as public housing authority responsible for the public sector housing within the Becontree Estate and between them are the registered proprietors of the residential housing units on the Becontree Estate which are not in private ownership. By far the greater number of such units is vested in LBBD. Only some 45 housing units are vested in LBR. LBBD and LBR are at one in contending that they are entitled to the benefit of, and to enforce, the Covenants and that the Covenants preclude the proposed use of the Barking Campus. They do so most particularly because they are concerned at the additional cost which will be occasioned to them in respect of the provision of education if the use of the Barking Campus is changed to that of the provision of housing and they claim to be entitled, as the price of giving their consent to what UEL proposes, to the payment of substantial consideration.[4]The question also arises whether, if the Covenants are enforceable, they are enforceable, not merely by LBBD and LBR as housing authorities owning residential housing on the Becontree Estate, but also by LBBD’s and LBR’s tenants and the owners and tenants of properties on the Becontree Estate which are in private ownership. To enable any and all such persons to maintain a claim to the benefit of, and entitlement to enforce, the Covenants, in accordance with an order made by Chief Master Winegarten on the 6th January 2004 the third defendants were joined and given notice of the proceedings by advertisements and the placing of notices in prominent positions near to the Barking Campus on the Becontree Estate. None of the third defendants attended, or were represented at, the hearing. II.

(a) General

[5]The LCC was established by the Local Government Act 1888. The Housing of the Working Classes Act 1890 (as amended by the Housing, Town Planning, &c. Act 1919) conferred on the LCC power to acquire land outside its area for the provision of housing for the working classes living within its area. On the 14th May 1919 the LCC published a report proposing the purchase of some 3,000 acres which now constitute the Becontree Estate for the purpose of the municipal provision of housing for the working classes. The London County Council (Compulsory Acquisition of Land) Order (“the 1919 Order”) was made on the 21st October 1919 and confirmed on the 26th February 1920. Pursuant to the 1919 Order (and possibly certain voluntary purchases outside the 1919 Order) between 1919 and 1921 the LCC acquired the Becontree Estate. The greater part of the Becontree Estate was allocated to housing, but parts were allocated to other uses such as open space, commercial use, schools and other public services. The erection of about 20,000 houses for some 120,000 working class inhabitants from the LCC area began in 1921 and was officially completed in 1935. The architecture of the Becontree Estate is distinctive. The houses are mostly small two storied terraces houses constructed at twelve to the acre.[6]The LCC wanted to extend its eastern boundary to include the Becontree Estate and made representations to the Royal Commission on Local Government in 1922 to this effect. The proposal however met with almost unanimous objection from other local authorities who wanted to retain their separate identities. The Royal Commission in its Report of the 27th February 1923 recommended retaining the status quo, but it recognised that there might be changes in the future at the level of local authorities and the changes might include local authorities acquiring parts of the housing functions of the LCC relating to the Becontree Estate. Accordingly there can have been no realistic expectation on the part of the LCC at the date of the Conveyances that the Becontree Estate would fall within the boundaries of the LCC. But there was a real possibility that bodies other than the LCC might assume the responsibility for housing of the LCC.[7]By the 1930s it was recognised that the provision of education for families on the Becontree Estate was inadequate and that there was an urgent need for schools and institutions of further education. The responsibility of the LCC was limited to housing and did not extend to provision for education or other services on the Becontree Estate which were the responsibility of the local authorities. Most particularly Essex was responsible for the provision of elementary and higher education in areas of rural district councils and higher education in all other areas.[8]Under a succession of statutory provisions power was conferred upon the LCC to deal with land acquired for the purpose of providing accommodation and in particular “to sell or lease all or part of the land for the purpose and under a condition providing for the erection and maintenance of housing for the working classes or for the use of the land for purposes necessary or desirable for or incidental to the development of the land as a building estate in accordance with plans approved by the Local Authority”: see section 15(1)(b) of the Housing, Town Planning, &c. Act 1919; section 59(1)(b) of the Housing Act 1925; section 79 of the Housing Act 1936; and section 105(1)(a) and (b) of the Housing Act 1957. To enable Essex and the other local authorities to fulfil their responsibilities the LCC reserved sites on the Becontree Estate for schools and other public services to be provided by them, and in particular the LCC reserved the Barking Campus for the provision of education. By the Conveyances pursuant to the statutory provisions to which I have referred the LCC conveyed to Essex as education authority the Barking Campus, and Essex as education authority built and opened thereon a technical college and a secondary (technical) school. This secondary school moved to its own premises elsewhere in 1960. The technical college was renamed in 1965 Barking Regional College of Technology.

(b) Devolution of the Barking Campus

[9]Section 1 of the London Government Act 1963 (“the 1963 Act”) reorganised London’s administrative bodies and created London Borough Councils. One such council was the LBBD. Section 30(1)(a) of the 1963 Act made LBBD the local education authority for its area and on the 1st April 1965 ownership of the Barking Campus vested in LBBD as local education authority.[10]In the early part of 1967, the Department for Education invited the LBBD and the London Boroughs of Newham (“Newham”) and of Waltham Forest (“Waltham”) as the local education authorities for their respective areas to apply for the establishment of the North-East London Polytechnic (“NELP”). NELP would use three locations (or campuses) of which the Barking Campus would become one. A joint standing committee produced a scheme of establishment between April and June 1967 which was then subject to consultation. The scheme (the only extant copies of which are in draft form) was prepared and an application was sent to the Department of Education on the 28th March 1968 under section 42 of the 1944 Act. The scheme was approved on the 27th May 1968. There were a number of outstanding issues after the scheme was approved which were dealt with by an agreement between the three local authorities dated the 15th July 1969 (“the 1969 Agreement”).[11]The 1969 Agreement formally established NELP and the manner of its governance by a governing body (“the Governing Body”) with certain functions reserved for the three local authorities through the medium of a Joint Education Committee (“JEC”). The JEC, comprising of representatives from the three local authorities, was established pursuant to paragraph 3, Part II of the First Schedule to the Education Act 1944. This required the approval of the Secretary of State for Education which was obtained on 22nd July 1969.[12]The role of the JEC is described in clause 3(iii) of the 1969 Agreement which states that:
“subject to the provisions of this Agreement the Constituent Authorities [i.e. the three local authorities] hereby agree that all of their functions and powers with respect to the provision of facilities of further education by [NELP] shall be exercised on their behalf by the [JEC] save and except the powers to borrow money or to raise a rate.”
Certain powers and functions specified in the First Schedule were not to be exercised by the JEC without prior approval of the three local authorities. Clause 6(i) of the 1969 Agreement provided that the Barking Campus would continue to vest in the LBBD “for the use of the NELP” under the control of the Governing Body in accordance with its Instrument and Articles of Government which were approved by the Secretary of State for Education on the 24th October 1969 pursuant to section 1(2) of the Education (No.2 Act) 1968. The formula of words “for the use of NELP” in the 1969 Agreement and the similar wording in what I later refer to as the 1986 Agreement no doubt were used because the fact that NELP was not a legal entity precluded the grant to it of a tenancy or the creation of a trust in its favour. Clause 6(v) provided that the LBBD was to be responsible for the maintenance and repair of the Barking Campus as agents of the JEC. The Governing Body comprised of 37 individuals of whom three were from LBBD.[13]By a letter (which has subsequently been lost) dated the 5th January 1970, the Department of Education confirmed that NELP would be designated by the Secretary of State on the 1st September 1970. The first director of NELP, Dr G Brown, took up his office on the 1st February 1970.[14]The 1969 Agreement was binding on all three local authorities. None of them possessed the authority to make unilateral changes. Therefore, when Waltham subsequently wished to withdraw from the 1969 Agreement, approval from the Secretary of State for Education was needed to an agreement dated the 26th March 1986 providing for such withdrawal. On the same day LBBD and Newham entered into a fresh agreement (“the 1986 Agreement”) which was not identical, but which was to like effect, to the 1969 Agreement. Clause 6(1)(a) of the 1986 Agreement provided that the Barking Campus shall be held by LBBD “for the purposes of the Polytechnic”. Clause 6(i)(b) provided that the LBBD should grant any lease or licence of the Barking Campus and clause 10(a) provided that the consent of the LBBD should be obtained before any licence was granted for use of the Barking Campus to be occupied otherwise than by the JEC or the Governing Body. Clause 7(1) provided that the two authorities should employ all staff engaged for the purposes of the Polytechnic.[15]On the 20th November 1988 NELP became a Higher Education Corporation and ceased to be funded by the LBBD and was renamed the Polytechnic of East London (“the PEL”). On the 1st April 1989 the Barking Campus was vested in PEL. This vesting was confirmed by a transfer dated the 30th October 1990. On the 16th June 1992, the PEL was renamed the UEL.

(c) Devolution of Becontree Estate

[16]The 1963 Act abolished the LCC as from the 1st April 1965 replacing it by the Greater London Council (“the GLC”) and (by Section 23(1)) vested all the land owned by the LCC for the purposes of its housing functions (including those parts of the Becontree Estate which had not been sold off before the 1st April 1965) in the GLC.[17]Section 23(5) expressly provided that housing accommodation for this purpose included “any property held in connection therewith and any rights attaching thereto”. The rights under the Covenants were transferred to the GLC under paragraph 5(2)(ii) of the London Authorities (Property etc) Order 1964 (“1964 Order”):
“all contracts, deeds, bonds, arrangements and other instruments subsisting in favour of, or against, and all notices in force which were given by, or to, the first-mentioned authority [i.e. LCC] in respect of such property, or in respect of liabilities transferred by the Act [i.e. 1963 Act] or by this article, shall be of full force and effect in favour of, or against, the authority to whom such property and liabilities are transferred”
[18]Section 23(3) of the 1963 Act also provided for the making of orders for the transfer of public housing from the GLC to the newly created London Borough Councils. Under the provisions of sections 23 and 84 of the 1963 Act by seven transfer orders (“the Transfer Orders”) made between 1971 and 1982 the GLC transferred the Becontree Estate (as to the greater part) to the LBBD and (as to a small part) to the LBR. The Transfer Orders were: i) the London Authorities (Transfer of Housing Estates etc) Order 1971 (No 231); ii) the London Authorities (Transfer of Housing Estates etc) (No 1) Order 1972 (No 171); iii) the London Authorities (Transfer of Housing Estates etc) No 3) Order 1972 (No 173); iv) the London Authorities (Transfer of Housing Estates etc) Order 1973 (No 417); v) the Greater London Council (Transfer of Land and Housing Accommodation) Order 1980 (No 320) and the deposited schedule; vi) the Greater London Council (Transfer of Land and Housing Accommodation) Order 1981 (No 289); vii) the Greater London Council (Transfer of Land and Housing Accommodation) Order 1982 (No 301).[19]By 1980, LBBD held just under 20,500 houses which comprised over 90% of houses on the Becontree Estate. Most of the remaining 1,600 houses were held by LBR. Pursuant to the recommendation of Report No. 660 of the Local Government Boundary Commission for England, on the 1st April 1994 the East London Boroughs (London Borough Boundaries) Order 1993 transferred the bulk of the houses held by the LBR to LBBD. As I have already said the LBR currently holds 45 properties.[20]Since 1980, Part I of the Housing Act (“HA”) 1980 and Part V of the HA 1985 have introduced right-to-buy schemes for tenants of local authorities and pursuant to these schemes some of the houses on the Becontree Estate are now privately owned. Those purchasers are included amongst the third defendants.

III. CONVEYANCES

[21]The full terms of the Conveyances need to be considered, but it is sufficient for this purpose to set out the full terms of the 1931 Conveyance and the variations in the subsequent Conveyances.[22]The 1931 Conveyance reads as follows:
“This Conveyance is made the eighth day of June One thousand nine hundred and thirty-one Between THE LONDON COUNTY COUNCIL (hereinafter called ‘ the Vendors’) of the one part and THE COUNTY COUNCIL OF THE ADMINISTRATIVE COUNTY OF ESSEX (hereinafter called ‘the Purchasers’) of the other part. Whereas:- (1) The Vendors are seised in fee simple in possession free from incumbrances of the property hereinafter described and intended to be hereby conveyed. (2) The Vendors have agreed with the Purchasers for the sale to them of the said property in fee simple in possession free from incumbrances at the price of Three Thousand Six Hundred and Fifty Pounds. Now in pursuance of the said agreement and in consideration of the sum of Three Thousand Six Hundred and Fifty Pounds paid by the Purchasers to the Vendors (the receipt of which sum the Vendors hereby acknowledge) this Deed Witnesseth as follows:- 1. THE Vendors hereby convey unto the Purchasers All that piece or parcel of land situate in the Parish of Barking in the County of Essex having a frontage of six hundred and ten feet or thereabouts to a certain road called Longbridge Road and a depth therefrom along the east and west boundaries of four hundred and twenty feet or thereabouts and forming part of an area of land known as the Becontree Estate acquired and in course of development by the Vendors under the Housing Act 1925 and the Acts thereby consolidated. Which said piece or parcel of land hereby conveyed with the boundaries thereof is more particularly delineated and described in the plan annexed to these presents and thereon-edged pink To Hold unto the Purchasers in fee simple but subject to all rights and easements (if any) existing in over or under the same. 2. THE Purchasers for themselves their successors and assigns hereby covenant with the Vendors their successors and assigns to erect and for ever afterwards maintain to the satisfaction of the Vendors an unclimbable iron fence not less than six feet in height along all the boundaries of the property (except the frontage to Longbridge Road aforesaid) And also that they the Purchasers their successors and assigns will henceforth at all times hereafter observe and perform all the restrictions and stipulations contained in the Schedule hereto. 3. PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED that the Conveyance hereby made shall not be deemed to include and shall not operate to convey any ways water courses sewers drains lights liberties privileges easements rights or advantages whatsoever in through over or upon any land or property of the Vendors adjoining or near to the property hereby conveyed. 4. PROVIDED ALSO AND IT IS FURTHER AGREED AND DECLARED that the Purchasers their successors and assigns shall not at any time be entitled to the delivery over or production to them or any of them of any title deeds or evidence of title in the possession or control of the Vendors relating (whether solely or not) to the property hereby conveyed or any part thereof or to any copies or abstracts from any of such title deeds or evidence of title. 5. THE Vendors hereby covenant with the Purchasers that they the Vendors have not done or knowingly suffered or been party or privy to any act or thing whereby they are prevented from conveying the said property in manner aforesaid. IN WITNESS whereof the parties hereto have caused their respective Common Seals to be hereunto affixed the day and year first before written The Schedule. (a) Not without the consent in writing of the Vendors to use or allow to be used the said property hereby conveyed or any part or parts thereof for any purposes other than as a site for a building or buildings to be used for educational purposes under the Education Act 1921 or any statutory amendment or re-enactment thereof for the time being in force. (b) Not to erect on the said property hereby conveyed or any part of parts thereof any building or buildings except in accordance with plans and elevations first submitted to and approved by the Vendors it being the intention that such building or buildings shall be in reasonable harmony with the development of the Vendors’ said Becontree Estate. (c) Not during the lives or life of any issue now living of His Majesty King George V or within twenty-one years next after the death of the last survivor of such issue to sell or(except for the purpose aforesaid) part with the possession of the said property hereby conveyed or any part thereof without first offering it for sale to the Vendors and if the Vendors decide to purchase within three months from the date of the offer the purchase money shall in default of agreement between the parties be determined by an arbitrator either agreed on between the parties or in default of agreement nominated on the request of either party by the President for the time being of the Chartered Surveyors’ Institution.”

Whereas:-

[23]The relevant terms of the 1932 Conveyance are precisely the same as those of the 1931 Conveyance save that in the Schedule there is an additional clause:
“(d) Not to interfere with or build over the five feet barrel surface water outfall sewer constructed in or under the property hereby conveyed the course of which sewer is shewn by a broken black line on the said plan.”
[24]The 1935 Conveyance has not been located, but it appears from the Land Registry entries for titles EGL 378510 and EGL 381956 that the covenants are in similar wording to the 1931 and 1932 Conveyances.[25]Clause 2 of the 1946 Conveyance is in the following words: “The Purchasers for themselves their successors and assigns hereby covenant with the Vendors their successors and assigns at all times hereafter to observe and perform all the restrictions and stipulations contained in the Schedule hereto.” 29. The Schedule provides as follows: “(a) Not without the consent in writing of the Vendors to use or allow to be used the said property hereby conveyed or any part or parts thereof for any purposes other than as a site for a building or buildings to be used for educational purposes under the Education Act 1944 or any statutory amendment or re-amendment thereof for the time being in force. ” (b) and (c) of the Schedule are worded the same as the 1931 Conveyance.

IV. PRELIMINARY COMMENTS ON CONVEYANCES

[26]There are a number of preliminary comments to be made on the terms of the Conveyances.

(a) Right of Pre-emption

[27]Rights of pre-emption, if reserved in a conveyance, are commonly framed as restrictive covenants. The Pre-emption Covenant is so framed. The question arises whether a pre-emption covenant creates an interest in land either as a form of estate contract or as a restrictive covenant.[28]The general rule at the date of the Conveyances was that a contractual (as opposed to a statutory) right of pre-emption does not create an interest in land unless and until the right of pre-emption is triggered and the right to purchase becomes exercisable: see Pritchard v. Briggs [1980] Ch 338. (The reversal of this rule by section 115 of the Land Registration Act 2002 is not retrospective.). There can be no suggestion that the right of pre-emption in the Pre-emption Covenant has been triggered. The Right of Pre-emption as a form of estate contract accordingly has not created an interest in land. In the alternative it has been suggested that a right of pre-emption (in particular if framed as a restrictive covenant) operates in law as a restrictive covenant. The argument proceeds that, since the grant of the right of pre-emption impliedly imposes on the grantor a negative obligation not to part with the land so as to frustrate the right, a right of pre-emption may be capable of binding successors in title as a restrictive covenant, if it obeys the rules for such covenants, including the rule that the covenant must be for the protection of adjacent land of the covenantee: see e.g. Barnsley’s Land Options 3rd ed (1988) pp. 165 and 184-6 and Megarry & Wade, 6th ed p.685. This suggestion appears dubious, for a restrictive covenant is concerned with restricting the use of land, and not with restraints on alienation. Certainly the Pre-emption Covenant in this case is not a restrictive covenant though it forms an integral part of a single scheme together with the User and Approval Covenants. The Pre-emption Covenant accordingly can only bind successors in title of the LCC if and so far as the statutory vesting provisions relating to the Becontree Estate or the Barking Campus provide.

(b) “Vendors” and “Purchasers”

[29]The Conveyances define the LCC as “the Vendors” and Essex as “the Purchasers”. The Conveyances clearly distinguish between covenants and agreements entered into between:(1) the Vendors and Purchasers alone (e.g. see recital(2) and clause 5); (2) the Purchasers their successors and assigns and the Vendors alone (see clause 4); and(3) the Vendors their successors and assigns and the Purchasers their successors and assigns (see clause 2). The distinction would appear to be deliberate.

(c) “Successors and Assigns”

[30]The issue arises as to the meaning and significance of the use of the terms “successors and assigns” in clause 2 and the Schedule. I have been referred to a large number of authorities on the meaning of these words at various times and in various contexts. I do not think that it is necessary or useful to go through them. It is sufficient to say that in conveyances executed prior to August 1881 (the commencement date of the Conveyancing Act 1881) the term “assigns” was used to denote successors in title to the land both of the original restrictive covenantor and of the original covenantee: see e.g. Tulk v. Moxhey (1848) 2 PL 774; Renals v. Cowlishaw (1878) 9 Ch D 125 at 130 and (on appeal) (1879) 11 Ch D 866 at 868; Rogers v. Hosegood [1900] 2 Ch 388 at 407. For the like purpose the term “successors and assigns” was used in case of covenants given by limited companies; see e.g. Formby v. Baker [1903] 2 Ch 539. The purpose (or at least a purpose) of the use of the formulae appear to have been to make plain the intention that the benefit or burden of the restrictive covenant was not intended to be personal to the covenantor or covenantee.

(d) The Conveyancing Act 1881 (“the 1881 Act”)

[31]The 1881 Act (which received the Royal Assent in August 1881) so far as material provided as follows:
“(1) A covenant relating to land of inheritance shall be deemed to be made with the covenantee, his heirs and assigns, and shall have effect as if heirs and assigns were expressed.”
[32]As stated in the commentary on the section in the 10th edition (1913) of Wolstenholme & Cherry, the section rendered use of the words “his heirs and assigns” unnecessary. But the words “heirs and assigns (see e.g. Chambers v. Randell [1923] 1 Ch 149) and “successors” (see Re Ecclesiastical Commissioners [1936] Ch 430) continued to be used. In Newton Abbot Cooperative Society Ltd v. Williamson [1952] Ch 286 Upjohn J stated that in this context the word “assign” was apposite to an assign of the land and not the benefit of the covenant. As Mr Ainger (Counsel for UEL) submitted to me, conveyancers and judges continued to use the terms “successors” and “assigns” to show that the burden or benefit of the covenant was not intended to be personal to the covenantor or covenantee. It was not used to give any indication that the covenant was intended to be annexed to the covenantee’s land. It is to be noted that by a conveyance dated the 25th October 1923 the LCC conveyed part of the Becontree Estate, the future site of a primary school, to Essex subject to restrictive covenants in the same terms as the Covenants save that there was no grant of a right of pre-emption.

(e) Section 78 of the Law of Property Act 1925 (“Section 78”)

[33]Section 78(1) provides that a restrictive covenant relating to the land of the covenantee shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them and shall have effect as if such successors and other persons were expressed, and the term “successors in title” shall be deemed to include the owners and occupiers for the time being of the land of the covenantee intended to be benefited.[34]This section was the subject of authoritative consideration by the Court of Appeal in Crest Nicholson Residential (South) Limited v. McAllister [2004] EWCA Civ 410, [2004] 1 WLR 2409 (CA) (“Crest Nicholson”). The Court there held that section 78(1) deems the Covenants to be made with the owners and occupiers of the protected land for the time being and effects a statutory annexation of the benefit of a restrictive covenant to the land intended to be protected unless the instrument manifests the contrary intention. The relevant passages read as follows:
“41.  it is impossible to identify any reason of policy why a covenantor should not by express words be entitled to limit the scope of the obligation which he is undertaking: nor why a covenantee should not be able to accept a covenant for his benefit on the basis that the benefit does not pass to all to whom he sells on parts of his retained land a developer who is selling off land in lots might well want to retain the benefit of a building restriction under his control. Where development land is sold off in plots without imposing a building scheme, it seems to me very likely that the developer will wish to retain exclusive power to give or withhold consent to a modification or relaxation of a restriction on building which he imposes on each purchaser unfettered by the need to obtain the consent of every subsequent purchaser to whom (after imposing the covenant) he has sold off other plots on the development land. 42 … [S]ection 78 of the 1925 Act defines “successors in title” as the owners and occupiers of the land for the time being of the land of the covenantee intended to be benefited. In a case where the parties to the instrument make clear their intention that land retained by the covenantee at the time of the conveyance effected by the transfer is to have the benefit of the covenant only for so long as it continues to be in the ownership of the original covenantee, and not after it has been sold by the original covenantee – unless the benefit of the covenant is expressly assigned to the new owner – the land of the covenantee intended to be benefited is identified by the instrument as (i) so much of the retained land as from time to time has not been sold off by the original covenantee and (ii) so much of the retained land as has been sold off with the benefit of an express assignment, but not as including (iii) so much of the land as has been sold off without the benefit of an express assignment.”

V. THE ISSUES

[35]By these proceedings the parties seek the determination of a whole series of questions. In the course of the hearing the parties have made a number of additions and have agreed to defer a number of questions. I shall accordingly set out to answer those which require determination today.

(a) Single or Separate Covenants

[36]The first issue is whether the Covenants in each of the Conveyances form one single covenant or are separate and distinct. In my judgment in each of the Conveyances there is a single scheme of covenants designed as a package to protect the Becontree Estate and in particular the LCC as owner of the Becontree Estate. Two covenants protect against use of the Barking Campus otherwise than for the purpose of public education and against the erection of any building out of harmony with the Becontree Estate. The third covenant protects against any sale of the Barking Campus and against any parting with possession except for the purposes for provision of public education without first offering to sell to the LCC. In a word, the three covenants are aimed in the furthering of the same single purpose and complement each other, but they are of themselves separate and freestanding.

(b) Identity of Beneficiary

[37]The second issue is the identity of the persons intended to be benefited by and to be entitled to enforce the Covenants. The alternatives include:(a) the LCC alone;(b) any local authority which succeeded to the Housing Act functions in relation to the Becontree Estate; and(c) any successor in title claiming title under or through the LCC. The Covenants given by Essex related to the remainder of the Becontree Estate in the course of development by the LCC under the Housing Act 1925 (referred to in clause 1 of the Conveyance) and is accordingly to be deemed under Section 78 to be made with the LCC and its successors in title and persons claiming title under the LCC unless a contrary intention is expressed. The question raised is whether a contrary intention is expressed.[38]It has been argued before me that the Conveyances do manifest such intention for the following reasons: i) each of the Conveyances refers to the LCC’s acquisition and development of the Becontree Estate under the Housing Act 1925 and accordingly to the status of the Becontree Estate as a municipal housing estate and to the capacity of the LCC as housing authority; ii) the Conveyances were executed under statutory powers conferred upon the LCC as housing authority; iii) the terms “successor” and “assigns” are apposite for a successor in whole or in part to the housing responsibilities of the LCC in relation to the Becontree Estate; iv) the terms of the Covenants are apposite for the protection of public housing on the Becontree Estate; and v) the provisions of the Covenants themselves reserve to the LCC the exclusive power to give consent to any change of user and to plans and elevations for new buildings and (in case of any sale or parting with possession) the right of pre-emption. In a word the key to the Covenants is the position of the LCC which alone has the right to say “Yes” or “No” and to decide whether the Covenants should be enforced.[39]After anxious consideration I have concluded on a fair reading of the Conveyances in their historical context that the intention is expressed that the benefit of the Covenants is to be confined to the LCC and to any other body to which by statute the LCC’s statutory housing functions and the Becontree Estate are transferred and to which incidental to that transfer the contractual rights are also transferred. The purpose of imposing the Covenants was to impose on Essex (and its statutory successors) the obligation to fulfil the purpose for which the LCC conveyed to it the Barking Campus and to confer on the LCC (and its statutory successors) the right to require Essex and its statutory successors to fulfil that obligation. The formula of words “successors and assigns” is deliberately and appropriately adopted as apposite for the situation where (as was the situation) it was recognised that the statutory housing functions of the LCC (together with the benefit of the Covenants) might at any time be statutorily transferred elsewhere. This construction is confirmed by (c) below. As a consequence of this holding:(1) neither tenants of LBBD or LBR nor purchasers of properties on the Becontree Estate from the LCC, GLC, LBBD or LBR (whether or not having exercised statutory or other rights to buy) are entitled to the benefit of or to enforce the Restrictive Covenants; and(2) the area of the Becontree Estate protected by the Restrictive Covenants has at all times been subject to reduction by the disposal by way of sale of properties on the Becontree Estate by the LCC, the GLC, LBBD and LBR in exercise of their statutory powers and pursuant to their statutory duties.

(c) Identity of parties subjected to the Covenants

[40]The third question relates to the identity of the owners of Barking Campus who hold subject to the Covenants, and in particular whether the Covenants are intended to bind purchasers from Essex.[41]In clause 2 of the Conveyances Essex covenanted for themselves, their successors and assigns to observe and perform the Covenants. The formula “successors and assigns” is the same formula used to identify the beneficiaries of the Covenants and accordingly those words prima facie have the same meaning, i.e. those to whom are statutorily transferred or assigned together with the Barking Campus Essex’s statutory functions in respect of the provision of public education. That this is the case and that the Covenants are not intended to bind anyone else (e.g. a purchaser from, or tenant or licensee of, Essex) is made plain by the terms of the Pre-emption Covenant. The terms of the Pre-emption Covenant make plain that Essex (and its statutory successors and assigns) are free consistently with the User and Approval Covenants to sell and to part with possession for use for non-educational purposes, for the Pre-emption Covenant expressly provides for that eventuality. As the method of protecting the interests of the LCC and its statutory successors and assigns in this eventuality, the Pre-emption Covenant confers on them the right of pre-emption.

(d) Purchase price payable under Pre-emption Covenant

[42]The fourth question raised relates to the purchase price payable under the Pre-emption Covenant. The Conveyances provide that on exercise of the right of pre-emption, in default of agreement between the parties, the price shall be determined by an arbitrator. The issue between the parties is whether for this purpose the arbitrator is to value the Barking Campus subject to or free from the User and Approval Covenants. There can be no doubt that the Restrictive Covenants should be ignored if no longer valid or subsisting at the date of exercise of the right of pre-emption. It is likewise clear that they should be taken into account if they are valid and subsisting and will bind the purchaser of the Barking Campus. The critical issue is whether they are to be taken into account if at the date of exercise they are binding on the seller (Essex) but will not bind a purchaser including a successor to the LCC exercising the right of pre-emption.[43]The answer must be found in the language of the Conveyances. This is not a case where the Restrictive Covenants will be extinguished by merger on completion of the sale of the servient land to the owner of the dominant land, in which case an intention might readily be implied that the “marriage value” arising from the extinguishment of the burden of the restrictive covenant shall be shared. This is a case where (as I have held) upon the true construction of the Conveyances Essex and its successors and assigns have at all times been entitled to sell the Barking Campus free of any restriction, but subject only to first offering to sell to the LCC and its statutory successors and assigns. Viewed in this way (which I think is the correct way) the market value of the Barking Campus must be determined free from the User and Approval Covenants. There is no indication in the Conveyances that the purchase price payable should be artificially limited, as it often is in cases of statutory grants of rights of pre-emption, e.g. to the price originally paid by the grantor or below the full market value.

(e) Vesting of benefit of the Covenants

[44]The fifth question raised is whether the benefit of the Covenants reserved by the LCC and statutorily transferred to the GLC is now vested in LBBD and LBR. For this purpose it is necessary to distinguish between the Restrictive Covenants and the Pre-emption Covenant. The benefit of the Restrictive Covenants can in the ordinary way pass to a purchaser of the dominant land by assignment or annexation. There can be no annexation in respect of the Pre-emption Covenant.[45]I begin with assignment. It is clear (even as it is common ground) that the benefit of the Covenants was statutorily transferred by section 23(5) of the 1963 Act and paragraph 5(2)(ii) of the 1964 Order from the LCC to the GLC, and there vested in the GLC in place of the LCC the right to give consent under the User Covenants and to grant approval under the Approval Covenant and to exercise the right of pre-emption. The question raised is whether the benefit of the Covenants was transferred from the GLC to LBBD and LBR between 1971 and 1982 by the Transfer Orders.[46]The critical article (“the Article”) in the case of each of the Transfer Orders was to the effect that “all contracts, deeds agreements and other instruments subsisting in favour of” the GLC in respect of the parts of the Becontree Estate thereby transferred “shall be of full force and effect in favour of” the transferee authority.[47]I have in mind that the need for Essex and its statutory successors and assigns to obtain consent and approval from two bodies rather than one may be more onerous. Nonetheless in my judgment the language of the Article is clearly amply sufficient to effect a statutory assignment of the benefit of the Restrictive Covenants so far as they affect each transferred parcel of the Becontree Estate and (in respect of each such parcel of the Becontree Estate) the right to give consent to changes of user and approval of plans. The position is more difficult in respect of the benefit of the Pre-emption Covenant. The Conveyances, as it seems to me, set out to create a single and indivisible right of pre-emption in favour of the LCC and statute later substituted the GLC when it became (in place of the LCC) the statutory housing authority in respect of the Becontree Estate. The GLC is no more. I cannot read the Article as vesting in LBBD or LBR as housing authorities owning the greater or lesser part of the Becontree Estate the right to require an offer of sale to be made to either of them.[48]The question arises whether, upon the true construction of the Article, whilst accordingly the statutory transferee of part or parts of the Becontree Estate (i.e. LBBD and LBR individually) are individually not qualified to exercise the Pre-emption Covenant, nonetheless they are so qualified acting together owning as they do between them the entirety of the Becontree Estate and constituting the housing authority for that entirety. If they are qualified, there should be no obstacle to the two public authorities adopting arrangements to effect such cooperation (see e.g. section 101(5) of the Local Government Act 1972).[49]After long and anxious consideration I have reached the conclusion that the Article does admit of this construction. It is to be borne in mind that the replacement in whole or in part of the LCC as public housing authority for the Becontree Estate by one or more other authorities was a real possibility when the Conveyances were executed and provision for transfer orders to the London Borough Councils was provided for in the 1963 Act. It cannot sensibly have been the intention of the draftsman of the Conveyances or of the Article that the Right of Pre-emption should be extinguished or cease to be exercisable in this eventuality. A purposive and common-sense construction in my view can and should be adopted to the effect that upon the statutory division of the Becontree Estate between LBBD and LBR the Pre-emption Covenant continued to be enforceable by LBBD and LBR acting together in right of that ownership and of that statutory function.[50]Since I have found that the benefit of the Covenants was assigned, it is unnecessary to decide whether (in the alternative) the benefit of the Restrictive Covenants was annexed. I should however briefly express my view. I think that the benefit of the Restrictive Covenants was annexed to each and every part of the Becontree Estate. Such annexation is in no way incompatible with the limitation of entitlement to the benefit of the Restrictive Covenants to the LCC and the successors to its statutory functions in respect of the Becontree Estate. As held in Crest Nicholson, Section 78 effects a statutory annexation to each and every part of the Becontree Estate for the benefit of the LCC’s statutory successors and assigns of the benefit of the Restrictive Covenants unless the instrument manifests a contrary intention. I can see no such contrary intention, let alone sufficient to exclude the operation of the section. The annexation is to each and every part of the Becontree Estate and accordingly annexation is not precluded by the fact that the Becontree Estate is now vested in two local authorities rather than one as was the position when the Becontree Estate was vested in the LCC (and GLC). This accords with the presumed intention of the parties, for the future division of housing functions between local authorities was, as I have already said, a real possibility when the Conveyances were executed. (f). Effect of loss of right to consent or approve or exercise right of pre-emption[51]The provisions of the Covenants for “the Vendor” to give consent to a change of user and approval to plans and prohibiting sale or parting with possession without first offering for sale to “the Vendor” can still operate because the right to give consent and to exercise the right of pre-emption is vested in LBBD and LBR. I have been addressed at some length on the legal effect of a finding to the contrary effect and in particular of a finding that the right to give consent and approval and to exercise the right to pre-emption have ceased to be exercisable. The issue would then arise whether the Covenants became absolute or whether the Covenants as a matter of construction or by reason of implication of a term should be held to be discharged. Guidance on this issue is provided in the judgment of Neuberger J (approved on appeal by Chadwick LJ) in Crest Nicholson. That guidance is to the effect that, if the person designated to exercise the right to give consent or approval ceases to exist, the court must determine as a matter of construction of, or of implication of terms into, the Conveyances whether the provisions for consent to the change of user and approval of plans are so bound together with the provisions imposing the restrictions that, if one goes, so does the other, or in other words whether the provisions for consent or approval are so fundamental as exceptions to the restrictions and are such an essential part of the restrictions that the restrictions are likewise discharged. On this basis, if I had found that the power to give approval was no longer exercisable because there no longer existed any person competent to give approval, I would have held that the provisions of the Approval Covenant as a whole (a covenant for practical purposes the same as that held discharged in Crest Nicholson) were discharged. Likewise I would have held that the prohibition on selling or (except for the stipulated educational purposes) parting with possession in the Pre-emption Covenant (if otherwise enforceable) would be discharged, for there would be no one to whom the offer to sell could be made: (consider paragraph 59 of the judgment of Neuberger J). But the User Covenant would survive challenge on this ground and become absolute.

VI. UNITY OF SEISIN

[52]The legal title to the Barking Campus and part of the Becontree Estate was vested in the LBBD between the 22nd February 1971 (when the first tranche of the Becontree Estate was divested from GLC) and the 1st April 1989 when NELP became a Higher Education Corporation. UEL contends that, if LBBD was entitled (whether solely or together with LBR) to the benefit of the Covenants, the Covenants ceased to be enforceable by LBBD by reason of unity of seisin.[53]The legal principle is briefly stated in Texaco Antilles Ltd V. Kernochan [1972] AC 609 at 626 A-B that:
“if the restrictions in question exist simply for the benefit of two adjoining premises [and not as part of a building scheme] and both those properties are bought by one man, the restrictions will automatically come to an end and will not revive on a subsequent severance unless the common owner then recreates them.”
[54]There is however a qualification upon this general principle which is ordinarily applicable, namely that there must be complete unity not merely of ownership, but also of possession. As stated by Powell J in Post Investments Pty Ltd v. Wilson (1990) 26 NSWR 598 at 631, the law in this regard has developed by analogy with the law relating to easements, and the benefit of a restrictive covenant is destroyed “upon the ownership and possession of both dominant and servient tenements coming into the same hands”. The basis for the qualification, as it appears to me, is that a restrictive covenant is not to be extinguished if there continues to exist a person (whether or not the successor in title to the estate held by the original covenantor or the original covenantee) entitled to the benefit or subject to the burden of the restrictive covenant.[55]The authorities do not directly address the question whether restrictive covenants are extinguished where both tenements are in the same ownership and possession, but one tenement is occupied or subject to a right of occupation vested in a third party. On principle (as it seems to me) this must depend on whether the third party occupier is bound by or entitled to enforce the restrictive covenant. It is established that a restrictive covenant is enforceable against an occupier (Mander v. Falcke [1891] 2 Ch 554). It is likewise established that an occupier (most particularly of a residential home) may be entitled to sue in nuisance and for disturbance of an easement: (see Gale on Easements 17th ed. 14-17 and 14-18 and cases cited). Occupation may be exclusive or it may be joint either with the legal owner or possessor or with someone else. I am of the view that any of these forms of occupation is sufficient to save a restrictive covenant from being extinguished. But whether or not this is so, in my judgment the Governing Body in this case was in exclusive occupation (if not possession) of the Barking Campus and LBBD merely retained rights of access for specific purposes. Moreover, even if the Governing Body’s occupation was not exclusive, its occupation was protected from interference by LBBD successively by the 1969 and the 1986 Agreements. Both this occupation by the Governing Body and the possession of the Becontree Estate by tenants of LBBD would each independently in the ordinary case preclude extinguishment by unity of seisin, for ordinarily occupiers in the position of the Governing Body would be bound by the Restrictive Covenants and occupiers in the position of LBBD’s tenants would be entitled to enforce them. But this is not the ordinary case, for (as I have already held) upon their true construction the Restrictive Covenants did not bind the Governing Body and were not enforceable by the tenants.[56]Since only the LBBD were accordingly entitled to enforce and were subject to the Restrictive Covenants in respect of the part of the Becontree Estate vested in LBBD, the Restrictive Covenants in respect of that part of the Becontree Estate are extinguished by unity of seisin unless LBBD and LBR succeed in their submission that there is a further qualification upon the general principle. That further qualification is that the unity of ownership of the dominant and servient properties necessary to extinguish restrictive covenants must be in the same right and that this requirement is not satisfied in this case. There are three stages in this argument:(1) when a trustee holds the dominant and servient properties on different trusts or for different trust purposes, there is no extinguishment of the covenant;(2) the ownership of LBBD of the Becontree Estate and of the Barking Campus was for different statutory purposes (namely for housing and education);(3) for this purpose the holding for different statutory purposes is analogous to, and the equivalent of, holding on different trusts (citing Prescott v. Birmingham Corp [1955] 1 Ch 910).[57]The general principle is that there is no merger of interests where the interests are not held in the same right. In Chambers v. Kingham (1878) 10 Ch D 743 the issue arose whether a lease vested in an administrator in his own right merged in the reversion held by him as administrator. Fry J said (at p.745) citing a passage from Williams J’s work on Executors:
“mergers are odious in equity and never allowed unless for special reason”
. He held that there was no merger because the interests were held in different rights. I have no doubt that there is no extinguishment of restrictive covenants when the dominant and servient properties are held by the same trustee on distinct trusts. The trustee in such a situation remains under a duty as trustee of the dominant land to require that the use of the servient land complies with the covenant. The critical question is whether this same principle applies when both properties are held by a public authority for different statutory purposes.[58]No authority has been cited which directly considers this question, and I must approach it as a matter of principle. There is high authority that:(1) the powers of local authorities conferred upon them for public purposes are conferred upon them “as it were upon trust and not absolutely” and that they can only be lawfully used in the right and proper way which Parliament when conferring them may be presumed to have intended: see R v. Tower Hamlets LBC [1988] 1 AC 858 at 872; and(2) the duties of local authorities in respect of their various powers are owed, not just to ratepayers, but to other classes of persons who are affected: see Bromley LBC v. GLC [1983] 1 AC 768 at 814H/5A. Where a local authority holds for one purpose the dominant land and for another the servient, a blanket rule requiring such common ownership to operate to extinguish all restrictive covenants would prejudice the performance by the local authority of its statutory duties and fulfil no useful purpose. The analogy with joint ownership by a private person subject to no public or private law duties is inapplicable.[59]For restrictive covenants to be extinguished merely because fortuitously the same public body held for different statutory purposes the dominant and servient properties would be calculated to defeat the objects of the restrictive covenants for no good or sufficient reason. In the words of Fry J the merger and extinguishment of the restrictive covenants would be “odious” and there is no reason for it.[60]I therefore hold that, because the dominant and servient properties were held for different statutory purposes, the Restrictive Covenants are not extinguished by unity of seisin.

CONCLUSION

[61]I accordingly hold that:(1) the Covenants are valid and subsisting;(2) the benefit is vested in LBBD and LBR and the burden falls on UEL;(3) UEL is free to sell the Barking Campus for its full market value free of the Restrictive Covenants, but by doing so will trigger the Pre-emption Clause; and(4) if UEL triggers that clause and LBBD and LBR exercise the right of pre-emption, they will be required to pay the full market price for the Barking Campus free from the Restrictive Covenants.[62]On the basis of my judgment the only persons interested in any outstanding issue in this litigation are public bodies namely UEL, LBBD and LBR and the only issue is monetary, namely what (if anything) UEL should pay to obtain a release from the Covenants. This litigation has no doubt been extremely expensive and has been necessary until a judicial determination had been obtained whether the third defendants had an interest. That determination has now been obtained. In these circumstances UEL, LBBD and LBR as public bodies must be bound to use every effort to settle by agreement any outstanding issues without further expenditure of public funds by negotiations, mediation or some other form of alternative dispute resolution and they should (with goodwill) be able to do so.[63]I conclude by acknowledging my debt to Counsel for their valuable assistance at the hearing and in the skeleton arguments subsequently lodged during August, September and October 2004.

Cited in 1 later judgment