Small v Oliver & Saunders (Developments) Ltd. [2006] EWHC 1293 (Ch)

Case No HC 05 C00129

Neutral Citation Number:[2006] EWCH 1293 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date Thursday 25 May 2006

Before : MR MARK HERBERT QC

SITTING AS A DEPUTY JUDGE OF THE CHANCERY DIVISION

Between

HUGH SMALLClaimant

OLIVER & SAUNDERS (DEVELOPMENTS) LIMITEDDefendant

The Claimant appeared in person for in person

Mr Edward Denehan (instructed by Derrick Bridges & Co) for Defendant

Hearing Hearing dates : 23 to 27, 30 and 31 January 2006

JUDGMENT

Mark Herbert QC

Introduction and conclusions

[1]This action concerns restrictive covenants. The claimant Mr Hugh Small appeared before me in person. He lives at No 12 Beech Hill, Hadley Wood in Hertfordshire. The defendant Oliver & Saunders (Developments) Limited owns No 8 Beech Hill, separated only by No 10 in between. They form part of an area known as the Beech Hill Park Estate.

[2]I shall need to go into the physical detail and conveyancing history of these properties in some detail, but in general the cause of the dispute is a development consisting in the building of an additional house (which is now almost complete) on land behind the original house at No 8. Mr Small claims that by using part of the original land at No 8 for access to the new development Oliver & Saunders are in breach of a restrictive covenant imposed by a transfer made on 4 March 1925. In the broadest terms the relevant part of the covenant restricts the land to use as private residences, and the decision of the Court of Appeal in Jarvis Homes Limited v Marshall

[2004] 3 EGLR 81

gives strength to the claim that the use of the original land for access to the new development is a breach of that covenant.

[3]The issues between the parties are :(1) whether, and by what legal process, Mr Small has the benefit of the relevant covenant;

(2) if so, whether Oliver & Saunders are in breach of the covenant;

(3) if so, whether a permanent injunction should be granted to prevent access to the new development;

(4) if not, whether damages in lieu of an injunction should be ordered and, if so, how much. My reasons will follow, but in short my determination of those issues is as follows : (1) Mr Small does have the benefit of the restrictive covenant by annexation, though not by virtue of his claim that the two properties form part of a building scheme; (2) access to the development does amount to a breach of the covenant; (3) it is not appropriate to grant a permanent injunction; (4) damages in lieu of an injunction shall be paid in the sum of £3,270.

The properties and their conveyancing history

[4]Part of Mr Small’s claim is that he has the benefit of the relevant covenant by annexation. He also claims that the two properties form part of a building scheme. He puts this in two alternative ways, namely(i) that the building scheme encompassed the whole of the Beech Hill Park Estate (or the residential properties forming part of it), or

(ii) that the scheme encompasses only the properties contained in what is described below as plot No 9. I shall begin by describing the estate and the series of transfers affecting properties on the estate, not all of which related to the two properties themselves.

[5]The Beech Hill Park Estate was already identified as an area of about 260 acres known by that name by the year 1900, as is shown in some sale particulars which are in evidence (page 709 in Bundle C before me). It was bounded on the north by a road called Camlet Way (this part of which is now renamed Beech Hill), on the east by Cockfosters Road, on the south by part of Hadley Common, and on the west by a line now marked by a road called Beech Hill Avenue. The land slopes downhill roughly from north-east to south-west. The estate is crossed by a stream or brook, known as Monken Mead Brook (in some title plans written as ‘Monkey Mead Brook’), running from near the north-eastern corner down to feed a chain of small lakes. In 1920 the whole estate was bought by The Economic Insurance Company Limited (‘Economic’) under Title No 14052. That transfer was subject to three fairly short restrictive covenants, one against building any house within 200 feet of Camlet Way of a value less than £2,000, the second against building a public house, tavern or shop within the same distance, and the third against using the property for brickmaking or any noxious or offensive purpose within the same distance.

[6]Economic evidently formed the idea of establishing most of the estate as a golf course, and to have high-cost residential properties built around some of the perimeter, together with a club house and other buildings in connection with the golf course. First, in November 1921 much of the golf course itself was transferred to a company called the Beech Hill Park Development Company Limited subject to a lease in favour of the golf club. That transfer comprised a somewhat irregular four-sided area. The club house is in the middle of the northern border. Over the next several years between 1922 and 1950 plots around the north, east and west sides of the perimeter were sold. On 6 July 1934, after most of the major transfers had been made, Economic sold what remained in its ownership to Arcade Property Company Limited (‘Arcade’), and Arcade continued and completed the programme of transfers after that, interrupted somewhat by the war.

[7]I have been given a diagram of the whole estate, with 66 numbered plots round the edges of the blank golf course in the middle. The north and east sides of the perimeter are interrupted a little by two areas which appear to have been sold separately before the purchase by Economic, one just to the west of the club house on the north side and the other comprising Nos 363 to 367 Cockfosters Road in the south-east. The sequence of numbered plots starts with No 1 to the east of the club house. It then goes east along Beech Hill (Camlet Way) to No 9, which was a large plot on the corner of Beech Hill and Cockfosters Road. This plot No 9 includes both Nos 8 and 12 Beech Hill and is therefore crucial to the action. Plots 10 to 12 are garden extensions added later to Nos 12, 10 and 8 Beech Hill, carved out of plot 13 which is a larger area to the south of plot 9. The balance of plot 13 came to be used in a similar way eventually. I shall return to deal with plots 9 to 13 in more detail later. Plots 14 to 49 continue southwards down the east side of the estate (the west side of Cockfosters Road), including plots 18 to 26 which are further garden extensions. The southern and south-western edges of the estate border on Hadley Common and are not developed. The series of plot numbers then picks up at 50, about half-way up the west side of the estate, continuing northwards and finally turning eastwards to plot 66 just west of the clubhouse. Plots 50 to 66 (but not 64) are no more than garden extensions for properties outside the estate itself.

[8]The serial numbers of the plots do not reflect the order in which they were sold. In fact Nos 66, 42 and 65 were the first to be sold, and No 1 was almost the last, disregarding garden extensions. But each of those can be regarded as a special case. Nos 65 and 66 were transferred as garden extensions to properties just outside the boundaries of the estate. No 42 is a larger area in the southeast, between the golf course and the block forming Nos 363 to 267 Cockfosters Road (one of the interruptions to the perimeter mentioned above). No 1 is an electricity sub-station. With those exceptions, and the further exceptions of other garden extensions, the plots were sold off and developed approximately in the order of the serial numbers between 1922 and 1935. By the beginning of March 1925 plots 2 to 8 had all been sold, as had no 64, in addition to plots 42, 65 and 66. Plot 9 was sold on 4 March 1925. From the middle of 1924 properties on the eastern side of the estate began to be sold as well, beginning in the south with No 47 and moving gradually north to No 16 in March 1935. Between 1935 and 1947 plots were sold as garden extensions. The first of these were the important ones which I have already mentioned briefly, namely Nos 10 to 12. No 13 (which is larger) followed in 1937. The other extensions were further south on the eastern side of the estate (Nos 18 to 26) and on the western side (Nos 50 to 63).

[9]All of these transfers contained restrictive covenants. Not all were identical. But most of them followed the pattern of plot 9, and I shall cite those. The transfer of plot 9 was made on 4 March 1925 between Economic as vendors and Edmondsons Limited as purchasers. The plot was described as having a frontage of 629 feet on the south side of Beech Hill, and the plan attached to the transfer showed a slightly irregular rhombus with a depth of 350 feet. Monken Mead Brook is shown on the plan, running approximately southwards about 70 feet from the eastern edge of the plot.

[10]The transfer referred to three groups of covenants. In the first place it was expressed to be ‘subject to the restrictive covenants set out in the first schedule hereto’. That first schedule set out covenants identical to those mentioned in the earlier transfers of plots 42, 65 and 66, and I infer that they had been imposed by some earlier transfer or conveyance. The 1925 transfer continued : — ‘. . . and the Purchasers for themselves and their assigns covenant with the Vendors that the Purchasers will erect on the property under the inspection and to the reasonable satisfaction of the Architect for the time being of the Vendors and in accordance with plans elevations sections and specifications to be approved by such Architect and signed by him in token of such approbal (sic) but so that such approval shall not be unreasonably withheld not more than seven detached private dwellinghouses with offices and outbuildings thereto at a cost in labour and materials only of not less than Two thousand pounds each exclusive of fences and to complete the same fit for habitation in accordance with the said plans sections elevations and specifications copies of which have been deposited with the Vendors Architect and that no house shall be erected on the property unless the plot of land belonging to or occupied with such house and on part of which such house shall be erected shall have a frontage to Beech Hill aforesaid of at least Eighty feet . . .’. That was a positive covenant to build up to seven houses on plot 9, but the plot was not explicitly divided into sub-plots on the plan. The covenant had negative features, including(i) the maximum number of seven houses,

(ii) the minimum cost and

(iii) the minimum frontage. But the covenants were expressed as personal covenants with the vendors, and there was no language expressing those covenants to run with the land or to be made for the benefit of any identified land belonging to the vendors. Nor have there been express assignments of the benefit of those covenants. They were made before section 78 of the Law of Property Act 1925 came into force.

[11]The 1925 transfer continued : — ‘. . . AND the Purchasers for themselves and their assigns covenant (to the intent that such covenant shall so far as the law permits be binding on the property into whosesoever hands the same may come but not so as to render the Purchasers or their assigns personally liable in damages for any breach thereof after they shall have parted with all interest in the property or the portion affected and to the intent that such covenant shall enure for the benefit of and be annexed to the remainder of the Beech Hill Park Estate aforesaid) to observe and perform the stipulations and conditions set out in the First and Second Schedules hereto so far as they relate to the property or any part thereof.’

[12]I have already summarised the first schedule : paragraph 5 above. The second schedule contained 10 paragraphs : paragraph 1 dealt with fencing; paragraph 5 with making bricks and tiles, 6 with the excavation of gravel, and 7 with temporary buildings and hoardings. Nothing turns on any of those. But paragraphs 2 and 3 have been relied on directly, and the final words of paragraphs 4, 9 and 10 may affect the question for whose benefit the covenants were imposed. I shall set out these five paragraphs in full : — ‘2. No building or erection of any kind except boundary walls or fences shall be erected on the land within sixty feet of Camlet Way otherwise Beech Hill. ‘3. The property or any building thereon shall not at any time be used for the purpose of or in connection with any trade manufacture or business of any description or anything in the nature thereof or as or in connection with an asylum institution for mental defectives hospital or other charitable institution or by any public body or society or as a Church Capel (sic) School or Mission Hall or as tea gardens or a hotel public house or tavern or for the sale of beer wine spirits or as a place of Public amusement entertainment or resort or otherwise than as private dwellinghouses with or without coachhouse stables garage and other outbuildings in connection therewith Excepting always the profession of a Solicitor Surgeon Physcian (sic) Architect or Surveyor may be carried on thereon. ‘4. The property or any building thereon shall not be used for any noxious or offensive purpose or for any purpose which shall or may be or grow to be a nuisance disturbance or annoyance to the Vendors or their assigns or their tenants or to the owners or tenants of any neighbouring property. ‘9. No laundry clothes or other articles of a like nature shall be suspended or placed in any position which may make them an eyesore to the owners or tenants of adjacent property. ‘10. Not to discharge or suffer to be discharged into the stream or brook running through the Eastern portion of the property and coloured blue on the said plan attached hereto any impure water or any substance or matter (fluid or solid) nor to do or omit or suffer to be done or omitted any act or thing whereby the water of the said stream or brook or of the lake or other water or waters into or from which the same flows may be raised lowered drawn off polluted or otherwise prejudicially affected or which shall be or cause a nuisance or annoyance to the Vendors or their assigns or lessees or other the owners or occupiers of land and premises in the neighbourhood or through which the said stream or brook flows.’

[13]The majority of the transfers effected between 1922 and 1938 included covenants in substantially the same form, except that those not adjoining Monken Mead Brook included no covenant relating to that. In particular the introductory words ‘to the intent that such covenant shall enure for the benefit of and be annexed to the remainder of the Beech Hill Park Estate . . .’ were common to some 25 transfers. I may say at this stage that these are words of express annexation, but they are also not inconsistent with the establishment of a building scheme : Eagling v Gardner

[1970] 2 All ER 838

[14]There were some exceptions. The covenants for plot 3 dated 25 January 1924 (30 Beech Hill), though themselves identical, were introduced by the words ‘so as to enure for the benefit of and be annexed to that portion of the Beech Hill Park Estate remaining unsold’. Those for plots 5 and 6 used the same language as the transfer of plot 9 but, earlier in those deeds, the same covenants in the second schedule were described as ‘imposed for the benefit and protection of the Vendors and their assigns the owners and occupiers of the portion of the Beech Hill Park Estate remaining unsold’. In two instances (plots 39 and 40) the covenants were not expressed to be for the benefit of or annexed to any particular land. In two or three other cases the introductory words are not in evidence, because the relevant transfer is not available and the charges register does not record the introductory words. But subject to those exceptions, and disregarding garden extensions for this purpose, the same introductory words appeared in 25 transfers out of a total of 30.

[15]I should also mention plot 1, the electricity sub-station, which was almost the last of the series of substantial transfers, dated 19 October 1938. That transfer gave the covenants ‘so as to enure for the benefit of the remainder of such part of the Transferors Beech Hill Park Estate as might be affected by any breach thereof’. And the transfer of plot 14, just south of plot 13, was transferred on 19 October 1950, and gave similar covenants ‘so as to benefit and protect the remainder of the Beech Hill Park Estate now or formerly belonging to the Vendors’.

[16]Looking now in detail at plot 9 and the extensions to Nos 8 to 12 Beech Hill, I have mentioned that the plot was sold by Economic to Edmondsons Limited on 4 March 1925. Edmondsons Limited duly erected seven houses west of Monken Mead Brook. These were built on nearly identical parallel rectangular strips 80 feet wide and 350 feet deep, and they are Nos 2 to 14 Beech Hill. This land has been described in the action as the pink land. No 8 was transferred to a predecessor of Oliver & Saunders, and No 12 was transferred to a predecessor of Mr Small. At some stage two further houses were built east of the brook, making a total of nine houses on plot 9.

[17]Part of the estate remaining unsold at that stage was plot 13, an irregular area in the north-eastern corner of the estate, just south of plot 9. Originally it seems to have been envisaged as including an access route from Cockfosters Road, but by 1935 the then owner Arcade made other dispositions. On 29 November 1935 Arcade carved two small rectangles out of plot 13, immediately south of the gardens of 10 and 12 Beech Hill and sold those two rectangles to the then owners of those two properties. A little later, on 30 March 1936, Arcade sold the equivalent small rectangle to the then owner of No 8. These plots were coloured blue on the conveyancing plans and have been called the blue land.

[18]The covenants given on these purchases were not identical to those given in regard to plot 9 itself. There was no positive covenant for building, and there were no covenants in the same terms as the first schedules to the transfers of building land. But there was a covenant in identical terms to observe and perform the restrictions and stipulations set out in a schedule. These were expressed to be given ‘so as to enure for the benefit of and be annexed to the remainder of the Beech Hill Park Estate of the Vendors’. The schedule itself bears a strong family resemblance to the second schedules to the other transfers, but with references to there being buildings on the property removed. Thus paragraph 2 provided that no building or erection of any kind except boundary walls or fences shall be erected on the land or any part thereof. Paragraph 3 begins :

‘The property shall not at any time be used . . .’ (instead of ‘the property or any building thereon shall not at any time be used’). And the words from ‘or otherwise’ to the end were replaced with ‘or otherwise than as a garden or grounds of a dwellinghouse’

. The final words of paragraph 4, ‘or to the owners or tenants of any adjoining property’, were supplemented with the words ‘. . . belonging or formerly belonging to the Vendors’. Paragraph 8 was shortened. Paragraph 10 was omitted (since Monken Mead Brook does not flow through these parcels of land).

[19]On 9 April 1937 Arcade sold the balance of plot 13. The covenants given in the schedule to this transfer were somewhat different, though again there are similarities with the others. The prohibition on building in paragraph 2 was against building within 60 feet of Cockfosters Road. Two new paragraphs 3 and 4 contained a restriction on the use of the land close to the golf course and a limit of not more than two dwellinghouses per acre. Paragraph 5 was essentially identical to paragraph 3 of the second schedule to the 1925 transfer, without the typographical errors but including the words ‘or otherwise than as private dwellinghouses’ in the plural. There were then paragraphs essentially the same as paragraphs 4 to 9 of the 1925 version, but nothing equivalent to paragraph 10 (even though Monken Mead Brook does flow through one part of this land and forms one boundary of another part).

[20]Plot 13 was later subdivided, and two parts were sold to the then owners of Nos 8 and 10 Beech Hill, but not to No 12. The registered title to No 10 has this land in a separate title with a file plan dated 23 September 1939, which suggests the date when this sub-division occurred.

[21]The properties at Nos 8 to 12 Beech Hill could then be described as follows. No 8 had its original land (pink), on part of which the house stood, a small rectangular garden extension (blue), and a further irregular extension (yellow) extending to the edge of the golf course. Next was No 10 comprising its original strip (pink) with the house on it, an identical rectangular extension (blue) and a further extension (yellow), not as large as the yellow land of No 8. No 12 had its pink and blue land like the others, but no part of the yellow land. At some stage No 12 acquired a small triangular area by adverse possession, but nothing turns on that.

The development at No 8

[22]Planning permission for some development at 8 Beech Hill had already been obtained before Oliver & Saunders purchased it. Permission had been obtained to build a new house on the yellow land behind No 8, and separate permission had been obtained to demolish and replace the existing house at No 8. This involved building a driveway across the pink and blue land to the yellow land. Exchange of contracts for the purchase of No 8 was on 3 October 2003, and completion followed on 2 December 2003. Mr John Bottrill acted as solicitor to Oliver & Saunders, as he had done on numerous occasions before. Mr Bottrill became aware of the covenants affecting No 8 but concluded that they did not prevent the proposed development. There was to be no building on the blue land, and at that stage it was not suggested or appreciated that the use of the pink land for access to the yellow land might infringe those covenants.

[23]It is broadly in accordance with that planning permission (which I shall call Plan A, as it was sometimes called during the hearing) that the building has progressed, though Oliver & Saunders themselves made a number of successful applications to alter the details. They were also ambitious to build further houses on the blue and yellow land behind Nos 10 and 8. Plan B would have involved two further houses, one on the yellow land at No 8 (somewhat differently sited than under Plan A) and the other mainly on the blue land of No 10, but with extremities extending one way to the yellow land of Nos 8 and 10 and the other way even to the pink land of No 10. Plan C would have been similar to Plan B but would have involved land at No 12 as well and would have made for a better layout.

[24]In the event those ambitions came to nothing, principally because Mr Small objected even more strongly to the idea of two houses at the rear of the existing properties than he did for one such new property. (I shall return to the detail of correspondence between the parties later.) Building under Plan A began in February 2004 with the demolition of the existing house at No 8. That took three weeks and was completed by March 2004. Next a rough driveway was built, and according to the evidence of Mr Paul Saunders, the managing director of Oliver & Saunders, a discernible way had been constructed by June 2004. As for the new house on the yellow land, work began on 21 June 2004. By 10 December 2004 all conventional construction stages up to brickwork at the first floor level had been completed, and the first floor had been laid. On 11 January 2005 brickwork to the level of the roof began, and on 21 January 2005 the second floor was complete to joist level, and the driveway was complete to base course tarmac.

The benefit of the covenants

[25]Mr Small has three ways in which he claims to be entitled to the benefit of the covenants affecting the pink land of plot 9 and specifically the pink land of 8 Beech Hill. In his original particulars of claim, settled by counsel, he relied solely on the annexation of that benefit to the blue land transferred to his predecessor as plot 10. By the 1925 transfer of plot 9 the vendors reserved the benefit of the covenants to the rest of the estate and, if that meant the part of the estate belonging to the vendors and remaining unsold, that included plot 13. On 29 November 1935 plot 10 was carved out of plot 13 and transferred to Mr Small’s predecessor in title as an extension to the garden of 12 Beech Hill. Then on 16 January 2006 Mr Small served amended particulars of claim, settled by different counsel, in which he relied on the existence of a building scheme. He puts this in two ways : first, that the transfer of plot 9, by itself, established a free-standing building scheme independent of the rest; second, that the whole of the Beech Hill Park Estate is a building scheme, and that plot 9, including 8 and 12 Beech Hill, forms part of it.

[26]Oliver & Saunders admit that the pink land at 8 Beech Hill is burdened by the covenants contained in the second schedule to the 1925 transfer, but they do not admit that Mr Small has the benefit of those covenants. Nor do they admit that the development infringes any of them.

[27]Looking at restrictive covenants generally, where a vendor makes a series of sales out of an estate, taking covenants from each purchaser, there are broadly four possible analyses. First, a building scheme may be established, in which case each purchaser (and his successors in title) may enforce the covenants against each other purchaser (and his successors), regardless of the chronological order in which the properties were originally sold by the common vendor. Second, the benefit of the covenants on each sale becomes annexed to the portion of the estate then retained by the vendor and to every part of that retained land, a portion which dwindles in extent as each sale is effected. Here those making their purchases later in time (and their successors) may enforce the covenants against those (and their successors) who made their purchases earlier. But earlier purchasers cannot enforce the covenants against later purchasers. Third, the covenants are annexed to the land retained unsold by the vendor, but not to parts of that land. Here none of the purchasers of parts can enforce the covenants against any of the others. The vendor continues to be able to enforce them against all the purchasers, and if he disposes of the retained land he may expressly assign the benefit of the covenants to his transferee. Fourth, the covenants may be personal to the vendor, are not annexed to any land, and are transferred only by express assignment.

[28]In the present case it is clear that the covenants contained in the second schedule to the 1925 transfer were not merely personal to Economic. The words ‘to the intent that such covenant shall enure for the benefit of and be annexed to the remainder of the Beech Hill Park Estate aforesaid’ are words of express annexation. (They are also consistent with a building scheme.)

[29]As between the second and third choices, the second has been described as ‘Gilbertian’ : In re Jeffs’ Transfer (No 2), Rogers v Astley

[1966] 1 WLR 841

, 848. In that case the establishment of a building scheme had been expressly ruled out by the conveyance. Covenants made ‘for the benefit of the remainder of the Chorleywood Estate (Loudwater) belonging to the vendor’ were held not to be annexed to each part later sold off. But as a result of the decision of the Court of Appeal in Federated Homes Limited v Mill Lodge Properties Limited

[1980] 1 WLR 594

, the second choice is normally preferred to the third. That case decided that section 78(1) of the Law of Property Act 1925 provides for statutory annexation of any covenant which touches and concerns the land, and decided also that the covenant is annexed to every part of the land, in the absence of a clear contrary indication. It has been suggested that the second point may depend to some extent on the first, so that the authority is of less force in a case like the present where the covenants were given before the Law of Property Act 1925 came into force. But the ratio was more general than that. After citing a passage from Megarry & Wade, The Law of Real Property, 4th edition, Brightman LJ (with whom Browne LJ agreed) said at page 606 : — ‘I find the idea of the annexation of a covenant to the whole of the land but not to a part of it a difficult conception fully to grasp. I can understand that a covenantee may expressly or by necessary implication retain the benefit of a covenant wholly under his own control, so that the benefit will not pass unless the covenantee chooses to assign; but I would have thought, if the benefit of a covenant is, on a proper construction of a document, annexed to the land, prima facie it is annexed to every part thereof, unless the contrary clearly appears.’ Similarly Megaw LJ said at page 608 : — ‘For myself, I would regard the observations made in the passage which Brightman LJ read from Megarry and Wade, The Law of Real Property, 4th edition, page 763, as being powerful reasons, and I find great difficulty in understanding how, either as a matter of principle, or as a matter of practical good sense in relation to a legal relationship of this sort, it can be said that a covenant, which ex hypothesi has been annexed to the land as a whole, is somehow or other not annexed to the individual parts of that land.’

[30]I read those as statements of principle that, in the absence of a clear contrary indication, annexation to identified land of the vendor, whether statutory or express, enures for the benefit of every part of that land. In the present case I see no clear contrary indication, and Mr Denehan (who appeared before me for Oliver & Saunders) did not suggest that there was one. The two possible analyses are therefore(i) a building scheme or

(ii) that there is a Gilbertian type of annexation for the benefit of later purchasers and their successors in title only. I shall deal first with the claim for a building scheme.

Building schemes

[31]The criteria for determining whether a building scheme has been established have been discussed many times by the courts. A classic formulation was provided in Elliston v Reacher

[1908] 2 Ch 374

(approved on appeal at

[1908] 2 Ch 665

) where Parker J said at pages 384–385 : — ‘In my judgment, in order to bring the principles of Renals v Cowlishaw

(1879) 11 Ch D 866

and Spicer v Martin

(1888) 14 App Cas 12

into operation it must be proved(1) that both the plaintiffs and defendants derive title under a common vendor;

(2) that previously to selling the lands to which the plaintiffs and defendants are respectively entitled the vendor laid out his estate, or a defined portion thereof (including the lands purchased by the plaintiffs and defendants respectively), for sale in lots subject to restrictions intended to be imposed on all the lots, and which, though varying in details as to particular lots, are consistent and consistent only with some general scheme of development;

(3) that these restrictions were intended by the common vendor to be and were for the benefit of all the lots intended to be sold, whether or not they were also intended to be and were for the benefit of other land retained by the vendor; and

(4) that both the plaintiffs and the defendants, or their predecessors in title, purchased their lots from the common vendor upon the footing that the restrictions subject to which the purchases were made were to enure for the benefit of the other lots included in the general scheme whether or not they were also to enure for the benefit of other lands retained by the vendors. If these four points be established, I think that the plaintiffs would in equity be entitled to enforce the restrictive covenants entered into by the defendants or their predecessors with the common vendor irrespective of the dates of the respective purchases. I may observe, with reference to the third point, that the vendor’s object in imposing the restrictions must in general be gathered from all the circumstances of the case, including in particular the nature of the restrictions. If a general observance of the restrictions is in fact calculated to enhance the values of the several lots offered for sale, it is an easy inference that the vendor intended the restrictions to be for the benefit of all the lots, even though he might retain other land the value of which might be similarly enhanced, for a vendor may naturally be expected to aim at obtaining the highest possible price for his land. Further, if the first three points be established, the fourth point may readily be inferred, provided the purchasers have notice of the facts involved in the three first points; but if the purchaser purchases in ignorance of any material part of those facts, it would be difficult, if not impossible, to establish the fourth point. These requirements can be labelled (i) common owner, (ii) sale in lots, (iii) common benefit and (iv) reciprocity.

[32]In Elliston v Reacher (above) a building scheme was held to exist. But in Reid v Bickerstaff

[1909] 2 Ch 305

there was none, and the decision therefore provides a useful contrast. In that case Cozens Hardy MR said at page 319 : — ‘What are some of the essentials of a building scheme? In my opinion there must be a defined area within which the scheme is operative. Reciprocity is the foundation of the idea of a scheme. A purchaser of one parcel cannot be subject to an implied obligation to purchasers of an undefined and unknown area. He must know both the extent of his burden and the extent of his benefit. Not only must the area be defined, but the obligations to be imposed within that area must be defined. Those obligations need not be identical. For example, there may be houses of a certain value in one part and houses of a different value in another part. A building scheme is not created by the mere fact that the owner of an estate sells it in lots and takes varying covenants from various purchasers. There must be notice to the various purchasers of what I may venture to call the local law imposed by the vendors upon a definite area.’ And Buckley LJ said at page 323 : — ‘For the application of the principle of that case it is, I think, essential to establish as matter of fact the following state of things : that the vendor expressly or by implication contracted with the defendant in the action or his predecessor in title (whom I will call the purchaser) upon the footing that at the date of that contract the vendor told the purchaser that he was proposing to deal with a defined estate in a defined way, and that he offered to sell to the purchaser a plot forming a part of that defined estate on the terms that the purchaser should enter into such restrictive covenants relating to his plot as the scheme contemplated upon the footing that the purchaser should reciprocally have the benefit of such restrictive covenants relating to the other plots on the estate as were indicated by the scheme. There can be no building scheme unless two conditions are satisfied, namely, first, that defined lands constituting the estate to which the scheme relates shall be identified, and, secondly, that the nature and particulars of the scheme shall be sufficiently disclosed for the purchaser to have been informed that his restrictive covenants are imposed upon him for the benefit of other purchasers of plots within that defined estate with the reciprocal advantage that he shall as against such other purchasers be entitled to the benefit of such restrictive covenants as are in turn to be imposed upon them. Compliance with the first condition identifies the class of persons as between whom reciprocity of obligation is to exist. Compliance with the second discloses the nature of the obligations which are to be mutually enforceable. There must be as between the several purchasers community of interest and reciprocity of obligation.’

[33]The four-part test of Elliston v Reacher has in a broad sense stood the test of time, but more modern authorities have tended rather to emphasize the criteria mentioned in Reid v Bickerstaff, namely the identification of the area of the scheme and the reciprocity of the obligations undertaken and accepted by the purchasers or at least notified to them. Thus in Baxter v Four Oaks Properties Limited

[1965] Ch 816

Cross J explained the pre-history of building schemes, involving vendors obtaining deeds of mutual covenants from purchasers, and said at page 826 (before citing and relying on the passage from Elliston v Reacher cited above) : — ‘The view taken by the courts has been rather that the common vendor imposed a common law on a defined area of land and that whenever he sold a piece of it to a purchaser who knew of the common law, that piece of land automatically became entitled to the benefit of, and subject to the burden of, the common law. With the passage in time it became apparent that there was no particular virtue in the execution of a deed of mutual covenant — save as evidence of the intention of the parties — and what came to be called “building schemes” were enforced by the courts if satisfied that it was the intention of the parties that the various purchasers should have rights inter se, even though no attempt was made to bring them into direct contractual relations.’

[34]As to the identification of the area of the scheme, it is not necessary for the transfers to contain a plan showing the extent of the estate. It is enough if the estate can be shown with reasonable certainty by other means. Thus in In re Dolphin’s Conveyance

[1970] Ch 654

Stamp J relied on evidence from the town clerk of Birmingham Corporation (the plaintiff in the action, unsuccessfully seeking to establish that there was no building scheme) showing the limits of the Selly Hill Estate mentioned in the conveyances. He referred also to Marten v Flight Refuelling Limited

[1962] Ch 115

, in which Wilberforce J had taken the same view. That can be contrasted with Emile Elias & Co Limited v Pine Groves Limited

[1993] 1 WLR 305

, a decision of the Privy Council, in which no such external evidence was available and the parties were relying solely on the conveyances themselves. In that case a building scheme was held not to be established over a piece of land comprising five plots because (amongst other reasons) it was not shown that the purchasers of plots 1 and 3 (or their predecessors) knew that plot 5 was included. Their conveyances had a general plan showing plots 1 to 4, but not plot 5.

[35]As to reciprocity Mr Small urged on me that this is not an evidential requirement for him to show that the purchasers (or their predecessors) knew that the benefit and burden of the covenants were to be reciprocally enforceable. Instead that is the result of the finding that there is a building scheme by applying the other criteria. By contrast Mr Denehan maintained that reciprocity is a matter which Mr Small has to demonstrate. In principle Mr Denehan is undoubtedly correct, as is clear from the passages which I have cited from Reid v Bickerstaff (above). Thus in Jamaica Mutual Life Assurance Society v Hillsborough Limited

[1989] 1 WLR 1101

(also a decision of the Privy Council) it was said at page 1106 : — ‘It is now well established that there are two prerequisites of a building scheme namely(1) the identification of the land to which the scheme relates, and

(2) an acceptance by each purchaser of part of the lands from the common vendor that the benefit of the covenants into which he has entered will enure to the vendor and to others deriving title from him and that he correspondingly will enjoy the benefit of covenants entered into by other purchasers of part of the land. Reciprocity of obligations between purchasers of different plots is essential.’

[36]In applying these criteria and principles to the present case some conclusions are relatively easy. First, there were literally two successive transferors, not one, namely Economic and Arcade. And yet I have no doubt that this does not detract from the existence of a common vendor. Most of the transfers of building land were indeed made by Economic, and then the rest (largely garden extensions) were made by its own transferee Arcade.

[37]As to the requirement that the land should be sold in lots, I have not seen a plan dating from the 1920s showing the estate marked out in plots. But the systematic sale and development of the Beech Hill Park Estate are themselves an indication that Economic laid out the estate in plots. I have seen only two of the early deeds of transfer of housing plots, namely those for plots 6 and 9. The plan for plot 6 (22 Beech Hill, in fact then described as plot 3) shows other identical plots near to it, including the registered title number for plot 8. The plan for plot 9 also shows the adjacent plot 8 (and its title number), plus the northern and western boundaries of what became plot 14 at the northern end of Cockfosters Road (including its depth of 350 feet), and the area which later became plot 13. Plots 13 and 14 did not come to be sold and developed until the mid 1930s, and the fact that they were identified ten years earlier is, to my mind, a sufficient indication that Economic already had a detailed plan for the whole estate.

[38]As for the defined area, the transfers which I have seen, including the one for plot 9, did not define the extent of what was described in those transfers as the Beech Hill Park Estate. But in practice I have no doubt that the extent of the estate was known in the 1920s as well as it was in 1900 (as revealed by the sale particulars found from that date) and as it evidently is today. Indeed at the time of the 1925 transfer of plot 9 the filed plan of Economic’s registered title No 14052 must have shown the extent of the estate precisely, and that plan would have been available to each purchaser at that time. Even later, after title 14052 was split into four (a point to which I shall return), I think it is reasonably clear that the extent of the estate was ascertainable from Economic at all relevant times.

[39]The requirement of common benefit is shown principally by the nature of the covenants themselves. No doubt those covenants also provided a material benefit to Economic itself (and to a lesser extent Arcade in due course) in maintaining the sale prices for later plots. The express words of annexation to the remainder of the estate confirms that. But the words of the covenants, ‘so as to enure for the benefit of and be annexed to the remainder of the estate . . .’, have been held in other cases to comprise a phrase appropriate to create a building scheme : see for example Eagling v Gardner

[1970] 2 All ER 838

. And covenants for boundaries, building lines and user of the kind contained in the second schedule are plainly enough of a character to benefit all the sold plots. Indeed the final words of paragraphs 4, 9 and 10 explicitly provide benefits to neighbouring plots. The final transfer of plot 14 in 1950 demonstrates also that, by the end of the programme of disposals at any rate, Arcade recognised the universal benefits of the covenants given by that transfer. In fact the language of that transfer is consistent only with an understanding at that time by Arcade, and presumably its purchaser, that the estate had been developed as a building scheme. The earlier transfers are less clear.

[40]As for reciprocity, Mr Small relies on an inference from the substantial uniformity of the covenants given by the several purchasers of the estate and the uniformity of their language.

[41]Mr Denehan says that there is not a complete picture of the transfers out of the estate, but that such material as exists supports the position of Oliver & Saunders, namely that there was no building scheme. In particular he says that the language of the covenants is more appropriate for annexation only to those parts of the estate remaining unsold at the date of each transfer. He says that the transfers expressly annex the covenants to ‘the remainder’ of the estate, and that the natural meaning of that is the part of the estate remaining unsold, and that this is inconsistent with the establishment of a building scheme. He also points to individual transfers not uniform with the others.

[42]It is correct that the picture is not complete, in that I have seen only a few of the transfers. But it is nearly complete. Mr Small has obtained printouts of the charges register in nearly every case, and only three of those (for plots 2, 42 and 64) fail to show the terms in which the covenants were given. As for the available material, Mr Denehan refers particularly to the transfer of plots 5 and 6 (26 and 22 Beech Hill), which refer at first to the covenants contained in the second schedule as ‘imposed for the benefit and protection of the Vendors their Successors and Assigns the Owners and Occupiers of the portion of the Beech Hill Park Estate remaining unsold’ (his emphasis). But in each of these transfers the later clause actually giving the covenants uses the more general phrase ‘so as to enure with (sic) the benefit of and to be annexed to the remainder of the Beech Hill Park Estate to (or ‘or’) (sic) the Vendors’. Those two examples are therefore not as unequivocal as Mr Denehan might hope.

[43]Mr Denehan could, I may say, have referred to three other transfers, namely those for plots 3, 39 and 40. The covenant for plot 3 (given on 25 January 1924) was expressly annexed to the portion of the estate ‘remaining unsold’. And those for plots 39 and 40, both given on 16 December 1926, are expressed simply as personal covenants with Economic. Since they were contained in post-1925 transfers they would not actually take effect as personal covenants only, but they are exceptions to the general run of the transfers, which were expressly made for the benefit of the remainder of the estate, without the word ‘unsold’. And yet these are only three transfers (to be added to the equivocal two in the previous paragraph). The other 25 uniformly state that the benefit of the covenants is annexed to ‘the remainder of the estate’ without the added word ‘unsold’. Indeed the overwhelming impression is of uniformity, not diversity. That goes for the substance and language of the covenants themselves as much as the words introducing them.

[44]To my mind therefore the available material tends to support Mr Small’s position, not Mr Denehan’s. Of the 30 building plots sold off between March 1923 and April 1937, 27 contained covenants in the form of the 1925 transfer of plot 9 (including plots 5 and 6 mentioned above). I regard 90 per cent as sufficient uniformity for the purpose.

[45]But even that degree of uniformity is not enough by itself. The weakness in this aspect of Mr Small’s case, and to my mind its only weakness, is that he has not been able to adduce any direct evidence that the several purchasers of properties on the estate were aware of the reciprocal nature of the obligations contained in the relevant covenants. In some of the authorities which I have been shown, advertising material had been unearthed, showing that the covenants were a selling point for the scheme : Jamaica Mutual Life Assurance Society v Hillsborough Limited

[1989] 1 WLR 1101

. Mr Small has produced nothing to that effect here. In some the plaintiff was himself a purchaser from the common vendor and could describe the availability of an estate plan on general display. That is not quite the case here, although I do accept that all the early purchasers would have seen the vendor’s title plan of the estate, and later purchasers could all have asked for one. And it would have been a natural thing for them to have asked for it, seeing that the estate is named in all the transfers. Instead Mr Small relies essentially on the uniformity and ubiquity of the covenants, and invites me to infer that purchasers must have known not only of the existence of the covenants and of their application to the area of the scheme (which I accept) but also of their reciprocal nature.

[46]I am tempted by that invitation. I accept that there is a strong suspicion, based on the near uniformity of the covenants and the near total coverage of the estate with those nearly uniform covenants, that the several purchasers over a period of more than ten years must in some instances have questioned the need for the covenants which they were invited to give and, in such instances, that they are likely to have been informed of the intended reciprocity of the covenants and to have entered into those covenants accordingly. But to make that move from suspicion to inference seems ultimately to be a step too far. I would be disregarding the principle enunciated in the Jamaica Mutual case (above) that a building scheme will not be implied merely from a common vendor and the existence of common covenants. It seems to me that I would also be contradicting part of the judgment of Buckley LJ in Reid v Bickerstaff

[1909] 2 Ch 305

, 323 which I have already cited at greater length in paragraph 32 above : — ‘There can be no building scheme unless . . . the nature and particulars of the scheme shall be sufficiently disclosed for the purchaser to have been informed that his restrictive covenants are imposed upon him for the benefit of other purchasers of plots within that defined estate with the reciprocal advantage that he shall as against such other purchasers be entitled to the benefit of such restrictive covenants as are in turn to be imposed upon them.’

[47]Mr Small submitted strongly that reciprocity is the effect of a building scheme, not a pre-requisite, but in my view it is a fact which needs to be proved, and in this case has not been so proved. For this reason I reject Mr Small’s claim for a building scheme comprising the whole of the residential development of the estate.

Mini building scheme

[48]Mr Small relies in the alternative on what came to be called a mini-scheme during the hearing, namely one consisting of plot 9 alone. Here, if the maxi-scheme (if I can call it that) had been established, I would have had no doubt that the sub-purchasers of individual properties on plot 9 (including the purchasers of 8 and 12 Beech Hill) would be entitled to enforce against each other the covenants given by their common predecessor in title, Edmondsons Limited. That is clear from Brunner v Greenslade

[1971] Ch 993

. But if the maxi-scheme is not established, can the mini-scheme stand alone? There is certainly a well-defined area, known to all the sub-purchasers, and the nature of the covenants themselves, and their presence in a transfer which would be apparent to all sub-purchasers, would enable me to infer a knowledge of reciprocal obligations. It would not then be material that plot 9 was not literally divided into plots at the date of the 1925 transfer, given the building covenants for not less than seven houses with uniform minimum frontages.

[49]But in regard to the mini-scheme, there is a mis-match between the common vendor and the vendor extracting the covenants. Edmondsons Limited was the common vendor for the purchasers of individual properties on plot 9, but it was Economic not Edmondsons Limited which imposed the covenants. In this context it seems more significant, as Mr Denehan reminded me, that the covenants are expressly annexed to the remainder of the estate (that is, the estate other than plot 9). So, in the absence of a maxi-scheme, the basic requirements for a mini-scheme are not satisfied.

Annexation

[50]In the absence of a building scheme I turn to the alternative of annexation. Here Mr Small’s case is that the language of the 1925 transfer of plot 9 was effective to secure that the benefit of the covenants contained in the second schedule was annexed to the land retained by Economic following that transfer. The transfer took place before the 1925 property legislation came into force, but the benefit of the covenants enured for the benefit of the land then retained, and that means every part of it. That retained land included plot 13, and therefore included the three rectangular garden extensions which were later carved out as the blue land for Nos 8 to 12 Beech Hill in 1935 and 1936.

[51]The exigencies of registered conveyancing have made the chain of title uncertain. On 4 March 1925 when plot 9 was transferred the vendor’s title was No 14052. But by 29 November 1935, when Arcade transferred the blue land at No 12 to Mr Small’s predecessor, the vendor’s title (for the whole of the yellow land) was P 11229. Doubtless given encouragement by the different title numbers, Oliver & Saunders have in their pleadings not admitted that the blue land formed part of the land retained by Economic at the time of the 1925 transfer. However, Mr Small has recently obtained a letter from the Land Registry dated 16 March 2005 explaining that in 1925 the original title 14052 was split into four titles, one of which was P 11229. The filed plans of all these titles are in evidence. The file plan for P 11229 was originally dated 8 July 1925 and showed a large pennant-shaped area comprising the north-eastern part of the estate as it stood after the disposal of plot 9. That area includes what became plots 10 to 13. The plan now records several later part-sales, including the three rectangular blue-land garden extensions and also the yellow land (though not in those colours), with the new title numbers given to those parcels on sale.

[52]It is clear therefore that title 14052 included the whole of title P 11229 on 8 July 1925, and that the latter title included what later became the blue land. It is also reasonably clear that what later became identified as the blue land was in the ownership of Economic in 1921. In the 1921 transfer of the golf course to the development company Economic reserved certain rights to dig up the adjoining property for the purpose of laying down drains and other pipes and such like. That transfer does not identify ‘the adjoining property’, but it must have meant the part of the estate remaining unsold by Economic at that date. The registered title of No 8 Beech Hill refers to this reservation in the property register, describing it as affecting the land tinted blue and yellow on the filed plan, and that is indeed the blue and yellow land attached to No 8. Whoever made that entry evidently concluded that the blue and yellow land were part of the land retained by Economic in 1921.

[53]It remains conceivable that the blue land did not form part of title 14052 on 4 March 1925 when plot 9 was transferred. But for this to have been the case the blue land would have to have been in separate ownership from the rest of title 14052 on 4 March 1925, then acquired by Economic and added to that title before 8 July 1925 about four months later. That seems inherently improbable. It would imply(i) a transfer of the blue land (perhaps with other land) to an unknown transferee probably after November 1921 and in any case before 4 March 1925,

(ii) the sale of plot 9 on that date and

(iii) the retransfer of the blue land and its addition to title 14052 before 8 July 1925, without events (i) and (iii) being anywhere recorded.

[54]I notice also that the 1925 transfer itself made provision for the purchaser to fence the southern boundary of plot 9. This would have been curious if the vendor was no longer the proprietor of the adjacent land to the south. Indeed if the blue land had been transferred earlier to someone else, I would have expected any fencing obligation to have been imposed on that earlier transferee.

[55]In short there is no evidence to suggest that any such improbable course of events occurred. In the circumstances I am prepared to infer that it did not. I therefore find as a fact that what later became identified as the blue land was part of the land retained by Economic at the date of the 1925 transfer of plot 9. If that is right, and I am entitled to make that finding on the basis of that inference, then Mr Small is indeed the owner of land to which the covenants contained in the 1925 transfer were annexed.

[56]Mr Denehan rightly reminds me that for the owner of land to enjoy the benefit of a covenant the land must reasonably be regarded as capable of being affected by the performance or breach of the covenant, and he claims that the small rectangular garden extension at No 12 cannot reasonably be so regarded. He referred me to Cryer v Scott Brothers (Sunbury) Limited

(1986) 55 P&CR 183

. But in my view the correct question is not whether the blue land alone is affected by the covenant but whether the land retained by Economic at the date of the 1925 transfer, including what became the blue and yellow land, was so affected. It is clear from the Cryer case that the onus on this point lies on Oliver & Saunders, and in my judgment they have not succeeded in discharging that burden. My view is that the covenants were given for the benefit of land which included what later became the blue and yellow land, and to each part of it, and that the blue land at No 12 (being separated from No 8 only by a single garden) can reasonably be regarded as taking the benefit of the covenant. That view is not significantly affected by the report and evidence of Mr Roger Arnold, who gave expert evidence on behalf of Oliver & Saunders, to the effect that neither the development nor the use of the driveway had any effect on the market value of Mr Small’s blue land.

[57]I therefore find that Mr Small does have the benefit of the covenants contained in the second schedule to the 1925 transfer, not because there was a building scheme but by reason of the annexation of the benefit of those covenants to (amongst other land) the blue land at No 12.

Breach

[58]I must begin this passage by clarifying the text of the relevant covenant in paragraph 3 of the second schedule to the 1925 transfer. It contained two typographical errors, namely the mis-spelling of Chapel and Physician, but nothing turns on those. More significant is the phrase ‘otherwise than as private dwellinghouses’. In the copy of the transfer deed in evidence before me the word ‘a’ has been inserted with a caret before ‘private’ (as indeed has the letter ‘h’ in ‘chapel’). Also the word dwellinghouses reads ‘dwellinghouse’, but the typescript text appears to have been amended. The second ‘e’ is written or over-written in manuscript, and an additional space before the next word suggests that the original typescript read ‘dwellinghouses’. None of the manuscript amendments has been initialled, and the inference is that they were made after execution of the transfer. It remains unclear on the face of it whether the text as executed read ‘otherwise than as private dwellinghouses’ or the less grammatical ‘otherwise than as private dwellinghouse’.

[59]The equivalent covenants in other transfers of the period read ‘a dwellinghouse’, as in the transfer of plot 3 (22 Beech Hill) on 1 June 1923, but (like most of the rest) that was indeed a plot for a single house. Unusually plot 9 allowed for many houses, and the draftsman of the 1925 transfer and the parties to it had to consider whether to amend the standard-form draft to read ‘dwellinghouses’. In my view they did make that amendment, and someone else, after execution, amended it back to read ‘a dwellinghouse’. This must have occurred (if at all) almost immediately after execution, because the Land Registry has accepted all the manuscript amendments as effective, including the spelling of chapel and physician, and including also ‘a dwellinghouse’. But in my view the transfer deed was executed in the form in which I have set it out above (with ‘dwellinghouses’ in the plural).

[60]In Jarvis Homes Limited v Marshall

[2004] 3 EGLR 81

the relevant part of the covenant provided that the covenantors and their successors would not ‘use or permit or suffer to be used the land hereby conveyed or any part thereof or any building or erection now or at any time hereafter erected thereon for any trade business or manufacture but will use the same as a private residence only.’ The Court of Appeal, unanimously reversing Judge Howarth, construed the words ‘the same’ as referring not just to any building on the land but to the whole composite noun clause, meaning the land and all parts of it as well as any building on it. They went on to hold that, so construed, the covenant operated to prohibit the use of the land as the access way to another part of the development on adjoining land.

[61]Mr Denehan rightly points out that the facts of the present case are not identical to those in Jarvis Homes. In that case the road was going to be the access way for 12 new houses, not just one; and the intention was that it would in due course be adopted as a highway, which is not so in the present case. I add that the covenant was to use the land ‘as a private residence only’, as opposed to ‘[not] otherwise than as private dwellinghouses’. A dwellinghouse is a narrower concept than residence, as was explained in Jarvis itself. But I do not find those to be effective differences. In my view to use part of the pink land at No 8 as the access way to the new house on the yellow land at the back is to use it ‘otherwise than as private dwellinghouses with or without coachhouse stables garage and other outbuildings in connection therewith or as gardens or grounds in connection therewith’.

[62]Mr Denehan urged on me that, if the covenant refers to dwellinghouses (in the plural), as I now hold that it does, then access to a dwellinghouse or dwellinghouses at the rear does not fall within the prohibition. But I am not persuaded by that. In much the same way that ‘the same’ in Jarvis was construed to refer to the composite noun clause, I think that ‘therewith’ refers generally to ‘the property or any building thereon’. It does not authorise the use of the land as access to dwellinghouses generally, only to dwellinghouses on the pink land of plot 9.

[63]I find therefore that Mr Small is correct in his submission that the use of the pink land of No 8 as access to a house or houses on the yellow land is a breach of the covenant in paragraph 3.

[64]If I am wrong about the text of the covenant as executed, in other words if it should be read ‘otherwise than as a private dwellinghouse’, I still reach the same conclusion on this question of breach. I recognise that in that form the words ‘otherwise than as a private dwellinghouse . . . or as gardens or grounds in connection therewith’ might more easily be construed as referring solely to the use of any building on the land. But it seems to me that the covenant would still provide that ‘the property’ (not just the house) shall not be used otherwise than in the permitted ways, and the use of the property as access to a different dwellinghouse would still be in breach of that prohibition, perhaps even more clearly so. Injunction

[65]Mr Small protests that his primary claim is for a permanent injunction preventing access to the yellow land behind No 8, and that he has not negotiated for financial compensation in connection with the claim. The injunction would have the effect of making the new house land-locked without access to a highway, and it would render the development valueless.

[66]I accept that Mr Small is not primarily interested in financial compensation, and that he has not suggested to Oliver & Saunders that he was. Mr Kevin Lee, an employee of Oliver & Saunders, did give oral evidence to the effect that Mr Small had mentioned a possible financial solution to his own dispute about covenants. This was said to have happened during a meeting at the golf club on 16 November 2004 where Mr Small was, to Mr Lee’s surprise, introduced to him as an expert for the golf club in relation to restrictive covenants in the context of a possible purchase of land from the club. But I am not persuaded that Mr Small did mention money in any way significant to his own claim. Apart from anything else, having seen Mr Small in the witness box also, I am sure that he would have thought it an inappropriate occasion to have done so. I notice that Mr Lee did not mention this part of the conversation in his witness statement or in the letter which he wrote to Mr Bottrill shortly after the meeting. His oral evidence was either a misunderstanding or a trick of memory on the part of Mr Lee. On the other hand in his pleadings Mr Small does claim damages as an alternative to an injunction.

[67]Mr Denehan has referred me to the statement of principle in Shelfer v City of London Electric Lighting Company

[1895] 1 Ch 287

, at pages 322–323 per A L Smith LJ, approved by Millett J in Jaggard v Sawyer

[1995] 1 WLR 269

: — ‘In my opinion, it may be stated as a good working rule that(1) if the injury to the plaintiff’s legal rights is small,

(2) and is one which is capable of being estimated in money,

(3) and is one which can be adequately compensated by a small money payment,

(4) and the case is one in which it would be oppressive to the defendant to grant an injunction, then damages in substitution for an injunction may be given.’

[68]All the first three of those conditions are satisfied. As in many other cases the crucial question is whether the injunction would be oppressive to the defendants, and that involves an analysis of the ways in which both parties have conducted themselves in relation to the claim formulated. In that context a brief summary of the salient facts is that :(1) the parties were in correspondence through solicitors before the building of the driveway began, but at that stage Mr Small made no claim that the driveway would infringe the user covenant on which his claim for relief now depends;

(2) Oliver & Saunders were aware before starting the works of Mr Small’s possible claim in regard to the blue land at No 8, but satisfied themselves, correctly as it has turned out, that the development would not infringe covenants affecting the blue or yellow land there;

(3) Oliver & Saunders were also aware of the facts which might give (and in the event do give) Mr Small an entitlement to enforce the covenants affecting the pink land, but it did not occur to them or to Mr Small at that stage that the development might infringe the covenants affecting the pink land;

(4) the first time Mr Small asserted that the development would infringe the user covenant affecting the pink land was a letter of 10 December 2004. By that time the driveway was complete and the new house was built up to first floor level. At that point it was reasonable for Oliver & Saunders to do what they have done, namely to continue the building so as to make it weatherproof but otherwise to call a halt to the building pending the resolution of the dispute with Mr Small.

[69]The essential question is whether Oliver & Saunders were sufficiently aware of the covenants on which Mr Small has ultimately relied, and his possible entitlement to enforce them, at the time when the development began. There had certainly been correspondence about restrictive covenants, both from Mr Small personally and from his solicitors Royds. But the details are important, and I shall need to look at the correspondence which passed between them. Much of it related to covenants on which Mr Small no longer relies, in the sense that he no longer claims relief on the strength of them, such as the covenant against building more than seven houses on plot 9 and the minimum frontage of 80 feet. In analysing the correspondence I shall concentrate on the covenants contained in the second schedule to the 1925 deed, and those contained in the transfers of 29 November 1935 and 30 March 1936.

[70]On 16 September 2003 Oliver & Saunders agreed to buy No 8 subject to contract, and it is evident from the correspondence before me that they and their solicitor Mr Bottrill then began to investigate the covenants affecting the property. One important covenant was the limit of two houses per acre affecting the yellow land, but Mr Bottrill soon became aware of the others. He made enquiries about an indemnity policy to cover possible liabilities. On 30 September 2003 he received a quotation from Countrywide Legal Indemnities offering cover of £5 million for a single premium of £7,500 plus tax. One condition for the cover was production of a copy of the planning permission together with written confirmation that the local authority received no objections at the planning stage referring to the covenants. In addition Oliver & Saunders were exploring other development possibilities. On 24 October 2003 they wrote to the owners of Nos 10 and 12 (the latter being Mr and Mrs Small) suggesting an additional house behind Nos 10 and 12. This would involve buying parts of the gardens of those properties and a new planning application. Access to both new properties would be through the land at No 8. This proposal depended on the owners of Nos 10 and 12 acting in concert.

[71]I have mentioned that contracts were exchanged for the purchase of No 8 by Oliver & Saunders on 3 October 2003 and that completion followed on 2 December 2003.

[72]On 22 December 2003 Oliver & Saunders approached the owners of several nearby properties, offering terms to buy parts of the gardens for the purpose of possible development. By 24 February 2004 they had reached agreement in principle with the owners of No 10 Beech Hill to buy part of their garden for £700,000 namely the blue and yellow land there.

[73]On 30 March 2004 Mr Small received notification of a planning application to build two new houses, one on the yellow land behind No 8 and the other mainly on the blue land behind No 10 but partly also on the yellow land of Nos 8 and 10 and partly on the pink land of No 10. I have already referred to this as Plan B. Mr Bottrill realised, when the title of No 10 was examined, that there was a covenant against building on the blue land. His solution would be to obtain an indemnity policy, but he knew that he could only obtain such a policy if planning consent had been obtained without any objections made by reference to the covenants. He recommended the contract to be conditional on obtaining both planning consent and an indemnity policy. On 14 April 2004 Mr Small did indeed object to the planning application, but his reasons were based on planning considerations, including the prospect of having his garden overlooked by the new houses, not on any restrictive covenants.

[74]Meanwhile on 6 April 2004 Oliver & Saunders had increased their offer to buy part of Mr and Mrs Small’s garden at No 12 for £507,250 with a view to a new house to be built there (Plan C). They did not accept that offer. In fact on 19 April 2004 they wrote to Oliver & Saunders, referring to the proposal to build houses behind Nos 8 and 10, claiming the benefit of restrictive covenants which prevented any development of the sort proposed in recent applications. They expressed a determination to enforce those covenants, and mentioned the firm of Royds acting as their solicitors. They sent a similar letter to their neighbours at No 10. Neither of these letters identified the particular covenant or covenants relied on or precisely explained how the proposed development would breach them.

[75]Mr Bottrill evidently considered at this stage that the only covenants causing concern were those preventing any building on the blue land. An attendance note records advice given to Mr Paul Saunders of Oliver & Saunders on 19 April 2004 that the covenants were not a problem in respect of No 8 because they were not going to build on the blue land there, but that there may be a problem in respect of No 10. It was not clear whether the owners of No 12 could enforce the covenant against No 10, because the covenants had been given on the same day. This shows, amongst other things, that Mr Bottrill was not contemplating the possibility of a building scheme. He saw the covenants given over the blue land at Nos 10 and 12 as enuring to the benefit of the land retained by the transferor, and that was why the order of the two covenants granted on 29 November 1935 could prove crucial. Only if the covenant on No 10 was given first could the owner of No 12 have the benefit of it.

[76]On 20 April 2004 Oliver & Saunders thanked Mr and Mrs Small for their letter and said that it had been forwarded to their solicitors. At the same time they took the opportunity of repeating and clarifying their offer to purchase some of the garden at No 12. They explained that the new house to be built on that land would be the only additional house over and above the existing planning permission. This was for one new property behind No 8, so that there would be two new properties over all. Mr Small replied briefly on 21 April 2004 declining the offer.

[77]Also on 21 April 2004 Mr Bottrill wrote to Royds in reply to Mr and Mrs Small’s letter of 19 April 2004. In regard to the covenants he wrote briefly that(i) there were no covenants which would prevent development behind No 8 and

(ii) there were covenants affecting a small part of the land at No 10 but it was quite clear that Mr and Mrs Small did not have the right to enforce those covenants. This last point was something of an overstatement, since Mr Bottrill had earlier advised his own client that the priority of the two covenants was not clear. The letter continued by referring to the offer to buy land from Mr and Mrs Small. It said that, if the Smalls did not accept it, then Oliver & Saunders would continue its planning application for a house behind No 10. Either way they proposed to build no more than two houses at the rear, and the acquisition of land from the Smalls would achieve a better layout.

[78]On 29 Aril 2004 Royds wrote to Mr Bottrill insisting that Mr and Mrs Small did have the benefit of several covenants, and requesting Oliver & Saunders to discontinue the proposed development. Two main paragraphs dealt with Nos 8 and No 10 separately. First : — ‘As far as the land at the rear of 8 Beech Hill is concerned, [our clients] note that the covenant of 9th April 1937 limits development and consider that the development proposed by your client is in breach of the limitations given the proposed position of the dwellings and the density of development.’ That refers to the limit of two houses per acre, on which Mr Small has not eventually relied. Royds went on : — ‘They are further aware that the covenants in the transfers of the 4th March 1925 and 30thMarch 1936 preclude development and it is believed your client’s proposed development is likely to encroach on these areas.’ These are indeed references to the pink and blue land at No 8.

[79]In regard to No 10 they wrote : — ‘As far as the land at the rear of 10 Beech Hill is concerned, they assert that there are three covenants, imposed by transfers of 4th March 1925, 29th November 1935, and 9th April 1937. Our client asserts that the development proposed is in breach of all three of these covenants given the proposed position of the buildings. . . . Our clients are also concerned that the proposed means of access to the development may constitute a breach and we would make it clear that they object to this.’ That last sentence therefore did express a claim that the proposed means of access may constitute a breach, but it was not spelt out exactly how.

[80]Mr Bottrill replied on 5 May 2004. His letter addressed each covenant systematically. He claimed that the covenants in the first and second schedules to the transfer of 4 March 1925 (the pink land) would not be breached by the development. He referred also to the covenant to build not more than seven buildings on plot 9, and claimed that the building covenants in that part of the transfer were positive covenants and, even if they were interpreted as restrictive covenants, they were personal to Economic. As to the transfer of 30 March 1936 (the blue land) Mr Bottrill claimed that it was extremely unlikely that anyone other than Arcade had the benefit of it. If there were someone, Oliver & Saunders would apply to the Lands Tribunal to have the covenant modified or discharged, and failing that they would avoid building on the blue land (as indeed they currently proposed to avoid doing). After referring to the land behind No 10, he wrote finally : ‘I can see nothing that would entitle your client to object to the proposed means of access’.

[81]On 20 May 2004 Royds wrote their most complete letter of all to Mr Bottrill, but it has to be said that at this stage they were not relying on any part of the argument now relied on by Mr Small. In regard to the second schedule to the 1925 transfer they referred only to paragraph 2, saying :

‘[Our clients] are also concerned that the proposed access road may constitute a “building or erection” in breach of [that paragraph].’

They also disagreed with Mr Bottrill’s claim that the 4 March 1925 covenant was personal to Economic. That claim had in fact related only to the covenants to build not less than seven houses and to maintain a minimum frontage for each, but Royds may have thought that it had applied to all the covenants given by the 1925 transfer. Be that as it may, they pointed out (rightly) that the transfer predated the Law of Property Act 1925 and then argued (wrongly) that therefore express words of annexation to land are not required for statutory annexation to succeed. Crucially however they went on : — ‘Even if this claim of statutory annexation were invalid our clients maintain that the land transferred subject to the covenant of 4 March 1925 (part of which they also own) is a building scheme in which the purchasers accepted reciprocal obligations and benefits and thereby have the right to enforce the covenants and restrictions. The building scheme claim is substantiated by the facts that the covenant applies to a well-defined area and that purchasers at that time (before planning regulation existed) knew of and valued the benefit of the reciprocal restrictions.’

[82]Mr Bottrill was then able to reply to this part of Royds’ letter fairly shortly and dismissively on 2 June 2004. After reiterating that the covenant for seven houses was personal to Economic and pointing out that it was only the covenants in the first and second schedules which were expressed to be for the benefit of the remainder of the estate, he wrote in response to the annexation claim : — ‘I believe the legal position is the reverse of what you say. Express annexation is required for transfers prior to 1st January 1926. The transfer clearly does not create a building scheme. There is no intention to do so expressed or implied in the transfer. Indeed, the fact that the transfer refers to the covenants being annexed “to the remainder of” the Beech Hill Park Estate makes it clear that a building scheme is not created. In any event there is no breach of the covenants in the first and second schedule of that transfer.’ Mr Bottrill dealt with other points in the correspondence, and this letter put an end to the correspondence between solicitors for some months. Oliver & Saunders decided not to pursue Plan B or Plan C, and started building works at No 8 and behind in accordance with Plan A. By 10 December 2004 the new house had reached first floor level.

[83]Meanwhile on 6 July 2004 the Court of Appeal had decided Jarvis Homes Limited v Jarvis (above), and in due course Mr Small and his advisers became aware of it. Royds wrote to Mr Bottrill on 10 December 2004 drawing attention to the decision, in which the use of land as access to a new development had been held to be in breach of a user covenant for a private residence only. They referred for the first time to paragraph 3 of the second schedule to the 1925 transfer. They repeated the assertion of a building scheme, and alternatively that Mr Small was entitled to the benefit of the covenant by annexation (though they did not use those precise words). I have explained that the reaction to this on the part of Oliver & Saunders was to make the new house weatherproof, and then halt the works.

[84]It is true that Mr Small had objected to the development in a general way before the work on the development began, and he had indeed objected to the planning applications. His solicitors even referred expressly to the access way as a possible breach on 29 April 2004. It would be wrong to say that he had ‘stood by’ while the new house went up. Equally there is in my view no question that Mr Small can be said to have acquiesced in the development, such as to make it inequitable in principle to grant him either an injunction or damages in lieu. On the other hand, although referring to the access way in April as I have mentioned, his solicitors weakened that reference in their next letter by emphasizing the words ‘building or erection’ in paragraph 2 of the schedule, and they did not mention the covenant on which Mr Small has ultimately relied until 10 December 2004. As for Oliver & Saunders, they acted decisively but not to my mind improperly so. They explained to Mr Small’s solicitors why they believed that the planned development would not infringe any relevant covenant, and began the development only when they believed (rightly) that their solicitor had dealt adequately with the objections taken in correspondence by Mr Small and his solicitors. It cannot be said against them that they took a calculated risk of infringing a covenant which had been drawn to their attention. The only criticism that I can lay at their door is that they failed to predict the decision in the Jarvis Homes case, and indeed it appears that Mr Small was as much taken by surprise by the decision as Oliver & Saunders.

[85]Taking all these circumstances into account I have no doubt that it would be oppressive to grant a permanent injunction. I should also mention that Mr Denehan relied on the fact that Mr Small had not applied for an interim injunction when he started the proceedings, but that failure, although relevant, has not weighed heavily in my consideration of his claim for a permanent injunction.

Damages in lieu

[86]Mr Denehan adduced expert evidence of valuation from Mr Roger Arnold of the Bowen Partnership to show that the development causes no discernible diminution in the value of Mr Small’s property, still less any loss of value to his blue land considered alone. Mr Small did not call expert evidence of his own, but tried, with limited success, to weaken the effect of Mr Arnold’s expert report in cross-examination. Mr Denehan accepts that, in principle, damages in lieu of an injunction may be assessed as the sum which might reasonably have been demanded as a quid pro quo for a permanent licence permitting the breach : Wrotham Park Estate Company Limited v Parkside Homes Limited

[1974] 1 WLR 798

. But he submits that such a measure of damages would produce an unjustified windfall in the present case, in the context of Mr Small’s delay, coupled with the absence of any direct injury to his property.

[87]Mr Arnold was a determined witness with a clear view of his opinions, and was to my mind more inflexible than is useful in an expert witness. Nevertheless I accept his main thesis that the market value of Mr Small’s blue land was not diminished by the development, still less by the actual use of the driveway.

[88]Even so I am not persuaded by these points of Mr Denehan’s. As to delay, it is true that Mr Small did not originally object to Oliver & Saunders about the building of one house on the yellow land in the sense that it would constitute a breach of covenant. He did object to the planning applications. What galvanised Mr Small into researching the restrictive covenants were what I have called plans B and C, to build two houses there at the back. In the end he has relied on arguments which were theoretically available to him at the outset but which he did not then put forward. But the delay, as seen in retrospect, was essentially a result of both sides failing to predict the Jarvis Homes decision, and in my view it is not enough to oust what has in practice become the standard measure of damages in cases of this kind.

[89]As to direct injury, it seems important to remember that this is not a claim for damages for nuisance, in which the lack of any reduction in value would be decisive, but an action to enforce covenants intended to benefit neighbouring properties generally. The common vendor considered it important to extract those covenants, intending them to provide a discernible benefit for the whole estate, including the land which has now found its way into Mr Small’s ownership, and it seems to me that Mr Small is entitled to take the same view.

[90]My task then is to consider what sum would reasonably have been negotiated between Mr Small and Oliver & Saunders, and the time at which that negotiation should be assumed to be undertaken must be a moment before the building work actually began, say in early June 2004. The approach of the court is to start with the profit derived, or expected to be derived, from the development, and then to assess the proportion of that profit which the claimant might reasonably have negotiated. Whatever figure is reached must then be divided notionally amongst all the persons who have the same claim to enforce the covenant as the actual claimant. The proportion of profit must not be so great that the developer would have abandoned the development instead. Mr Small suggests the percentage should be 75 per cent, while Mr Denehan suggests 1 or 2 per cent, possibly rising to 5 per cent.

[91]Neither of those extremes seems close to providing a reasonable result in this case. I am sure that Mr Small would have insisted on an injunction if only 5 per cent was on offer, and I equally accept that the prospect of giving 75 per cent of the profit to the neighbouring owners would have driven Oliver & Saunders to abandon the project. I have been shown a number of cases in which damages have been awarded under this heading, including the Wrotham Park case itself, Bracewell v Appleby

[1975] Ch 408

, Amec Developments Limited v Jury’s Hotel Management (UK) Limited

[2001] EGLR 81

and O’Brien Homes Limited v Lane

[2004] EWHC 303

[92]In Wrotham Park Estate Company Limited v Parkside Homes Limited

[1974] 1 WLR 798

, after saying that a just substitute for a mandatory injunction would be such sum of money as might reasonably have been demanded by the plaintiffs from Parkside as a quid pro quo for relaxing the covenant, Brightman J referred to evidence that a half or a third of the development value was commonly demanded by a landowner whose property stood in the way of development. He then gave reasons for acting with moderation in the particular case, awarding only 5 per cent. In summary his reasons were that the layout covenant on which the plaintiffs relied could be turned to account only to the detriment of residents whom the estate owner professed to protect, the breach affected only a small part of the estate, and the estate owner had delayed bringing his claim until the development had been complete.

[93]The first of those reasons is not present here. One effect of the covenants is to maintain low-density occupation, and that is an important and valuable asset for neighbouring owners. Equally I do not regard the infringement of the covenant in the present case, from the viewpoint of neighbouring owners, as being minimal. I have mentioned already in several contexts that there was an element of delay, but this is not in my view a reason for supposing a large reduction in the sum which might have been negotiated in June 2004. In fact I doubt if it justifies any particular reduction.

[94]In Amec Developments Limited v Jury’s Hotel Management (UK) Limited

[2001] EGLR 81

the issue was a hotel built so as to encroach across a building line in breach of covenant, allowing the hotel to have 25 more rooms than it would otherwise have enjoyed. There was a considerable difference of view between the two expert witnesses as to the capitalised value of the extra rooms, over £2 million according to Amec, less than £300,000 according to Jury’s. Anthony Mann QC, sitting then as a deputy, spelt out his approach to the hypothetical negotiation in great detail, including a preference for Amec’s method of arriving at the incremental value of the additional rooms. His award was £375,000, nearly 20 per cent of the increased value on that view.

[95]In O’Brien Homes Limited v Lane

[2004] EWHC 303

the judge at Brighton County Court had awarded £150,000 against a development profit which was taken to be £280,000. That implies an award of over 50 per cent of the profit. On appeal David Clarke J thought that the figure of £280,000 might not be correct, but declined to find that the award of £150,000 was erroneous.

[96]In Gafford v Graham [1999]] 3 EGLR 75 Nourse LJ pointed out at page 80L, that the sort of damages questions involved in cases like the present are matters of judgment which are incapable of strictly rational and logical exposition from beginning to end. I accept Mr Small’s submission to me that the cases seem to show something of a trend towards higher percentages, but I also accept that Oliver & Saunders could have walked away from the negotiation at comparatively little loss if Mr Small had become too demanding. Doing my best to take into consideration the factors which I have mentioned I arrive at 35 per cent of the development value in the present case.

[97]Turning to the number of notional claimants amongst whom the negotiated sum should be divided, this depends on the legal basis for upholding Mr Small’s claim. If the mini-scheme had been the only basis for success, the number would have been eight, the number of properties on plot 9 other than 8 Beech Hill itself. If the maxi-scheme had been the basis, then all property owners on the estate would need to be aggregated. As there is no building scheme, then only those owners who (or whose predecessors) took transfers after 4 March 1925 would be counted. I also need to consider whether a garden extension gives an extra share to the owner of the adjoining house, and whether a multi-house plot counts as one or many.

[98]At the risk of a degree of arbitrariness, I choose to start with the original number of plots, sixty-six, then eliminating those transferred before the 1925 transfer, and that transfer itself. That leaves 51. I then disregard garden extensions added to existing properties already having a claim. On this basis nine plots (18 to 26) are removed from the equation, leaving 42. Plots 10, 11, and 13 count as one each, but I disregard plot 12 which belongs to Oliver & Saunders. Plots 50 to 63 also count as one each. Plot 41 contained two properties, plot 16 contained seven plots, and those raise the total to 48. Mr Small submitted that I should disregard plots 50 to 63 as being altogether too distant, but in cross-examination he admitted that those plots, amongst many others, carried the same entitlement as his own to enforce the covenants over the pink land of plot 9.

[99]Oliver & Saunders have put figures in evidence showing a profit for the development of £448,536, and that figure has not been challenged. The negotiated sum would be 35 per cent of that sum, namely £156,987, and that is divided by 48 to produce £3,270 as the figure for damages payable to Mr Small.

Conclusion

[100]It is for those reasons that I have come to the conclusions summarised at the beginning of this judgment. I decline to impose a permanent injunction, but I shall order damages to be paid to Mr Small in the sum mentioned above.

[101]I should add that Mr Small invited me during his closing speech to grant a quia timet injunction to prevent access to future buildings not yet built on the yellow land, even if I decline to grant an injunction preventing access to the existing new house. I shall not make such an order. Mr Small’s pleading contained no claim for any such injunction, and there was no evidence of any threat to effect other developments on this land. In any case it is unnecessary. The refusal of an injunction now, coupled with an award of damages in lieu, operates as a permanent relaxation of the covenant so as to permit access to the new house. But it does nothing to relax the covenant in any other way or in respect of any other future development.

[102]Finally, I have not had occasion to say a great deal about the witnesses who gave evidence in this action, both by written statements and orally. Mr Small gave evidence on his own behalf, and for Oliver & Saunders I heard evidence from Mr Saunders himself, Mr Bottrill (their solicitor), Mr Lee, and Mr Arnold as an expert. I found them all generally to be witnesses of truth, and the reason why I have not had to say more about their evidence than I have done is that they have in the end done little more than explain and to some extent expand on facts which are dealt with adequately in witness statements or are apparent from other documents. Although the oral examination of witnesses occupied two-and-a-half days of court time, I have not found that the evidence of any of the witnesses was significantly altered by the process, with the single exception of the controversy mentioned in paragraph 66 above.

Cited in 1 later judgment

MRS AMANDA CLARKE v THOMAS JEROME PETER MURPHY AND KATHERINE HELEN MURPHY (1) GRANT TELFER AND DIANA TELFER (2) FRANK WILLIAM LOMAX AND ANNE LOMAX (3) RORIE DEVINE (4) KEITH DAVIS (5) 2009