City Inn (Jersey) Ltd v Ten Trinity Square Ltd [2007] EWHC 1829 (Ch)

Case No HC/04/CO/24952007] EWHC 1829 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of JusticeDate Friday, 15 June 2007
Strand
London WC2A 2LL
Before
MR STEINFELD QC
Between
CITY INN (JERSEY) LIMITEDClaimantTEN TRINITY SQUARE LIMITEDDefendant
Digital Transcript of Wordwave International, a Merrill Communications CompanyPO Box 1336 Kingston-Upon-Thames Surrey KT1 1QTTel No: 020 8974 7300 Fax No: 020 8974 7301(Official Shorthand Writers to the Court)
Mr G Fetherstonhaugh QC (instructed by Herbert Smith LLP) appeared for ClaimantMs K Holland (instructed by Denton Wilde Sapte) appeared for Defendant
Judgment

MR STEINFELD QC:

[1]The Claimant in this part 8 application which comes before me for determination is a company called City Inn (Jersey) Limited, represented before me by Mr Guy Fetherstonhaugh QC. It is the owner of a property in the City of London known as Mariner House. The Defendant is a company called Ten Trinity Square Limited, represented before me by Ms Katherine Holland, which is the owner of a neighbouring property, formerly the headquarters of the Port of London Authority, now known as Ten Trinity Square.[2]The Claimant derives title from a transfer (“the Transfer”) of Mariner House which was made on 8 May 1962 by the Port of London Authority to a company called the London County Freehold and Leasehold Properties Limited. The Transfer defined the Port of London Authority as “the Transferor” and the London County Freehold and Leasehold Properties Limited as “the Transferee”. In neither case were those words of definition succeeded by the time-hallowed expression: “... which expression shall, where the context permits, include its successors in title”.[3]The Transfer contained a restrictive covenant by the Transferee in the following terms:
“The Transferee for itself and its successors in title hereby covenants with the Transferor and its successors in title for the benefit of the Transferor’s neighbouring properties known as Port of London Authority Head Office Building Trinity Square E.C.3 [I interpose to say that that is now the Defendant’s property, known as Ten Trinity Square] and Walsingham House Seething Lane E.C.3 and every part thereof respectively to the intent that the burden of the covenant may run with and bind the land hereby transferred and every part thereof to observe and perform the covenants and stipulations set forth in the Third Schedule hereto.”
[4]The third schedule contained a series of three covenants, which were expressed as follows:
“(1) Not to erect or make any external alteration or additions to or permit any other person to erect or to make any external alteration or addition to any building or other erection of any sort upon the land hereby transferred or any part thereof except in accordance with detailed plans and elevations which have been previously approved in writing by the Estate Officer for the time being of the Transferor at the expense of the person seeking such approval. (2) Not without the previous written consent of the Transferor such consent not to be unreasonably withheld to use or permit the use of any building or erection now or hereafter upon the land hereby transferred for any purpose other than as commercial and professional offices and basement car park (3) Not to do or permit any other person to do anything upon the land hereby transferred or any part thereof which may be or become a nuisance annoyance obstruction or inconvenience to the Transferor or other the occupiers of the Transferor’s said neighbouring properties or either of them or any part thereof respectively.”
[5]The Claimant now desires to carry out extensive redevelopment of its property. It has, for that purpose, applied to the Port of London Authority both for the approval of its plans and for consent to change of use and has received a reply from the Port of London Authority giving its approval and its consent for the purposes of the covenants. However, the Port of London Authority no longer owns either of the properties for which the benefit of the covenants was expressed to be taken. It sold Walsingham House some time ago to, it seems, a bank. The bank has not been joined as a party to these proceedings, but I am told by Mr Fetherstonhaugh, and I accept, that arrangements have been made with the bank such as not to require it to be joined as a defendant to these proceedings.[6]The Defendant, however, is, as I have said, now the owner of Ten Trinity Square, that property having been sold off by the Port of London Authority, and takes the point that under the terms of the covenants, it is not sufficient for consent to be given by the Port of London Authority but that its approval and consent is required under both the first and the second of the two covenants to which I have referred.[7]Accordingly, these proceedings were issued by part 8 claim form, seeking a declaration that upon the true interpretation of the Transfer, and in the events which have happened:
“… the Defendant has no right to insist that the external alterations or additions and subsequent change of use proposed by the Claimant to the premises known as Mariner House, Pepys Street, London EC3 should be subject to the Defendant’s consent.”
[8]The part 8 proceedings thus raise a short question of the construction of the Transfer which can be expressed in the following terms: is the reference in paragraphs 1 and 2 of the third schedule to the Transfer to “the Transferor” a reference to the Port of London Authority as the original named transferor, or can that term be construed, as the Defendant contends, as implicitly a reference to whoever, for the time being, is the owner of the properties or either of them (or any part of either of them) for the benefit of which the covenants were taken?[9]On the face of it, and as a matter of the literal construction of the Transfer, the reference to “the Transferor” is a reference only to the Port of London Authority, because in the terms of the Transfer itself, only the Port of London Authority comes within the definition as expressed in the Transfer. However, Ms Holland submits that because such a construction would, to a very large extent, deprive the restrictive covenants of any value to successors in title of the Port of London Authority (once the Port of London Authority no longer holds any of the properties, for the benefit of which the covenant was taken), such a construction would lead to a commercial absurdity. Accordingly, the term “the Transferor” as used in those covenants should be regarded as implicitly a reference to the person or persons for the time being entitled to the benefit of the covenants.[10]The foundation of her submissions leading to that consequence is the decision of the late Mr Justice Hart in Mehon & Anr v Simms & Anr [2005] 39 Estate Gazette Law Reports at page 67. In that case, to which I will come back later, the learned judge adopted part of the judgment and reasoning of the County Court judge, the case itself being an appeal to the High Court from the County Court’s determination. In particular, the learned judge adopted the following passage from the judgment of the learned County Court judge:
“The court should try to ascertain the true intention of the parties. By taking an objective approach, the court must ascertain the meaning which the covenant would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties to the original deed, in the situation they were in at the time the covenant was given.”
[11]That passage, which of course mirrors the modern approach of the court to the construction of contracts and other instruments (see Investors Compensation Scheme v West Bromich Building Society [1998] 1 WLR at page 896) is not in contest before me, and provides, as it seems to me, the correct approach. Looking at the Transfer itself, as I have said, the starting point must be that the term “the Transferor” is simply the label which has been used in the Transfer to describe, for shorthand, the Port of London Authority. Looking through the Transfer, it is, on the face of it, fairly clear that the draftsman was well aware of the need, when occasion required it, to make express reference to successors in title and was not content to rely on implication.[12]One thus sees in the Transfer some three occasions where reference is made to “the Transferee” and the draftsman has added the words “and its successors in title” and one occasion (the important one, for present purposes) where the draftsman has added those words after the expression “the Transferor”. Thus, in the covenant itself, as I have already mentioned, the clause is drafted in terms that the Transferee “for itself and its successors in title” covenants with the Transferor “and its successors in title”. In one sense, the words “and its successors in title” there did not need to be included, because they would have been implied anyway. Section 78 of the Law of Property Act 1925 provides:
“A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them, and shall have effect as if such successors and other persons were expressed.”
But here, the draftsman does not rely on that section, but has expressly inserted the words “and its successors in title”. By contrast, in the third schedule, when reference is made to the “Transferor” in paragraphs 1 and 2, there is no reference in express terms to successors in title.[13]The matter does not stop there. Paragraph 1 of the third schedule requires the plans to have been approved by:
“... the Estate Officer for the time being of the Transferor ...”
It appears likely that at the time that the Transfer was executed, there was an officer or employee of the Port of London Authority who answered that description (see the reference to such an officer in John Miller Shipping Limited v Port of London Authority [1959] 1 WLR 910). Furthermore, in giving its consent to the matters in question, the Head of Property, as he is now called, of the Port of London Authority expressly states that that was a post:
“... formerly known as Estates Officer as referred to in the Transfer.”
[14]Ms Holland submits that the requirement for the plans to be approved by the Estates Officer of the Transferor amounts to no more than a requirement that the plans should be approved by the Transferor. I accept that submission, because, as it seems to me, the Estates Officer of the Transferor is no more than an employee of the Transferor, who could be instructed by the Transferor (assuming the Transferor for this purpose is restricted to the Port of London Authority) to give the consent that was requested. However, it does seem to me that the reference to “the Estates Officer for the time being of the Transferor” is a significant indication that consent, in every case, was to be given by the Port of London Authority, which was the named Transferor, and which had (and was expected to continue to have) a person answering the description of “Estates Officer”.[15]The fact that consent for the doing of acts which would otherwise be prohibited by restrictive covenant, or the approval, as here, of plans to carry out certain acts which would otherwise be prohibited by a restrictive covenant, is to be given by a person who no longer has the benefit of the covenant is not a wholly unknown phenomenon. In Howard Pryor v Christopher Wren Limited, which was a decision of Mr Justice Knox, unreported, but delivered on 24 October 1995, an analogous sort of question arose in the context of whether there was a serious question to be tried as to whether an interlocutory injunction to enforce a restrictive covenant should be granted. The restrictive covenant provided that the land conveyed was not to be used for any purpose other than that of a private dwellinghouse: “… without the previous consent in writing of the Vendor”.[16]The covenant had been taken for the benefit of the vendor’s retained land and it was contended by the plaintiffs that they, as successors in title to part of that land, were persons whose consent was required under the terms of that covenant. Mr Justice Knox did not agree. He said as follows:
“Finally, it seems to me that the need for the consent of the vendor or vendors for various matters such as south facing windows and, even more, the requirement for the vendor’s surveyor’s agreement with regard to the value of any property that was built, points towards there being only one vendor or, in the case of trustees, one set of vendors. Otherwise it seems to me that the multiplicity of persons involved as the vendors, if they were to include all successors in title of sold land to whoever it was sold, would lead both to contradiction and to disorder because there would be several people from whom on that view consent could be obtained or not. For all those reasons it seems to me clear that there was an intention to limit the benefit of the covenant to the unsold part of the vendor’s estate because that is, putting it perhaps rather crudely, exactly what the conveyances say.”
[17]The precise point arose for consideration by the court in Crest Nicholson Residential (South) Limited v McAllister [2004] 1 WLR 2409, a decision at first instance of Mr Justice Neuberger (as he then was). In that case, there had been various conveyances of land by a company and by a Mr. and Mrs Mitchell who were closely connected with it. The conveyances in each case contained covenants in similar form, prohibiting the premises to be used other than for the purposes of a dwellinghouse, and also providing that no dwellinghouse was to be erected on the land: “... unless the plans drawings and elevations thereof shall have been previously submitted to and approved of in writing by….” [in some cases, the Company, and in the other cases, the Mitchells.][18]The Mitchells had, it seemed, long since disappeared from the face of the earth and could not be traced and the company had ceased to exist. The issue before the learned judge was whether in that situation the covenant had become absolute or whether it had ceased to have any effect? The effect of the covenant was described by Mr Justice Neuberger at paragraph 45 in the following terms:
“In these circumstances, it seems to me that when the covenants were entered into between the company and the Mitchells, as vendors, and the Claimants’ predecessors, as purchasers, the parties would have envisaged the following. So long as the company (or the Mitchells) retained any part of the estate, the second covenant would, or at least could, be enforced for the benefit of that retained land. However, although it is true that after the company ceased to have any beneficial interest in the estate, the owners of plots with the benefit of the second covenant annexed would have the benefit of the second covenant, it would be of little value to them, unless the company chose to take their interest into account when its approval was sought. 46. The company’s grounds for refusing approval to plans, after it parted with any beneficial interest in the estate, could only have been aesthetic, financial or altruistic. Aesthetic because, at least in the landlord and tenant context, consent to alterations can reasonably be withheld on reasonable “aesthetic artistic or sentimental grounds (per MacKinnon LJ in Lambert v FW Woolworth & Co Ltd [1938] Ch 883 at 911), although it is fair to say that, on the facts of this case, and bearing in mind that the approval would be that of a company, this looks an unlikely ground. The company might have had a financial ground, in the sense that it might have been able to demand money for giving its consent, at least in a case where it might have had reasonable grounds for refusing the approval. An altruistic ground might have been raised if the company had thought it right to take into account the interests of those owning land to which the benefit of the covenant is annexed. I think it questionable whether that could have been a properly relevant factor; even if it could have been, the passage I have cited from Preston & Newsom suggests that the plot owners such as the Defendant could not have required the company to take such a factor into account.”
[19]He went on to hold that the fact that the company was no longer in existence and the Mitchells could no longer be traced meant that there was no longer any requirement for any approval of plans to be obtained. What that case shows, it seems to me, is that it is quite possible to envisage circumstances in which the consent for the doing of acts which would otherwise constitute a breach of a restrictive covenant can still be vested in the original covenantee notwithstanding that he has parted with all the land for the benefit of which the covenant was taken. The logic of the judgement is that, had the company or the Mitchells still been around, their approval to the plans would still have been both required and sufficient.[20]There can be a commercial purpose in a vendor of land obtaining for itself, and not for its successors in title, for the benefit of his retained land the exclusive right to give consent under the terms of a restrictive covenant. In the first place, the vendor, as Mr Fetherstonhaugh points out, may well have it in mind that it will wish to sell off part of its land and does not wish the purchaser of that part to be able to obstruct its giving its consent under the terms of the covenant. An important factual matrix point here is that the benefited land consisted of two quite separate pieces of land: first the Port of London Authority’s own headquarters building, of which it may have contemplated remaining in occupation for a significant further period of time; secondly, the other property, Walsingham House. That property is adjacent to the property which was being transferred and is separated from the other property by the highway. One can well see that the Port of London Authority might have had it in mind that it would be selling off only that piece of land and would not have wished the purchaser of that land to be able to obstruct its ability to consider, and if so advised, give its consent to redevelopment on the land being transferred. Secondly, it would most probably have been concerned that it should have the benefit of the covenant, and therefore, the ability to consent, or as the case may be, withhold consent to matters which would otherwise be a breach of the covenant for so long as it remained in occupation of its headquarters building, which it contemplated doing for perhaps a lengthy further period of time.[21]As Mr Fetherstonhaugh points out, even if it decided to sell the land with the benefit of the covenant, if a purchaser from it was to take the point that the covenants were of little benefit to it (as the Port of London Authority was in a position to give consent, even after it had parted with the benefited land altogether) it would have been open to the purchaser to have bargained with the Port of London of Authority to require it to covenant not to give its consent under the terms of the Transfer unless it, the purchaser from the Port of London Authority, had also given its consent.[22]Accordingly, there is seemingly, as I see it, no particular need or imperative to depart from the literal wording of the Transfer in this case. I would perhaps just add as a further factual matrix matter, the covenantee in this case was a public authority; it was originally established by the Port of London Act 1908, and it had the statutory function of managing the Port of London. It had thus been in existence for some 50 years when the Transfer was executed, and was no doubt reasonably expected by the parties to continue in existence as a responsible public authority for the foreseeable future.[23]I turn back now to the Mehon v Simms case, upon which Ms Holland, for the Defendant, places so much reliance. That was a rather different sort of case than this one. In that case, there had been a transfer of a single residential property with a piece of garden land. In the transfer, the vendors were described as “the Transferors”, and the purchasers were described as “the Transferees”, and the following covenant was entered into by the Transferees with the Transferors:
“The Transferees hereby jointly and severally covenant with the Transferors to the intent so as to bind the land hereby transferred and each and every part thereof into whosever hands the same may come and to benefit and protect the Transferors property known as number 1 Wharf House Barton Turns aforesaid and lands held therewith not to use the property hereby transferred for any purpose except that of a private garden and to erect thereon any building other than a greenhouse garden shed or domestic garage in accordance with plans which have been approved previously by the Transferors in writing.”
[24]Since the date of the transfer, the Transferors had sold the property, 1 Wharf House, Barton Turns, to the respondents. The question which came on appeal from the County Court to Mr Justice Hart was whether the reference in that covenant to, “plans previously approved by the Transferors in writing” was a reference to the Transferors’ successors in title, who had purchased the property for the benefit of which the transfer had been taken.[25]The first point of difference to note between that case and the present case is that the covenant itself made no mention whatsoever in any of its constituent parts of successors in title. Of course, successors in title were implicitly referred to, but that was only by reason of section 78 of the Law Property Act 1925, to which I have referred. Accordingly, where the covenant referred to “the Transferors” in the opening words thereof, the words, “and their successors in title” were implied by reason of section 78. It was that, as it seems to me, which opened up the way, in the view of the learned judge and the learned County Court judge, to a construction that admitted of the words, “successors in title” being implied after the words “the Transferors” where they later appeared in the same covenant. The learned judge said in that regard the following:
“In respect of the covenant itself it is apt, where it is first used, to include their successors in title for two reasons: first, because that is the effect of section 78 of the Law Property Act 1925, and second, because express words of annexation are used, making it clear (to the legally informed reader) that the benefit is intended to run with the retained land. That fact, in my judgment, makes it possible to read the second (and for present purposes critical) reference as also including successors in title.”
[26]My reading of what the learned judge was there saying is that because, in the opening words of the covenant itself, the words “and their successors in title” were to be implied after the words “the Transferors” where they first occur (by reason of section 78), it is possible to construe the words “the Transferors” where they next occur in the same clause as also referring to “the Transferors and their successors in title”. That gateway to that construction does not appear in the present case, because here the Transfer, as I have already observed, in the words of the covenant itself makes express reference to successors in title.[27]The learned judge then went on to adopt the reasoning of the County Court judge. There are altogether in that reasoning five particular features which weighed with the County Court judge and were accepted by Mr Justice Hart and which led to his conclusion, none of which is present here.[28]The first, in the judgment of the County Court judge, where she says:
“… the parties to the original deed must have intended to use the word Transferors in the same sense throughout the covenant.”
Here, the contrary appears. In the terms of the covenant itself, the words in the Transfer are:
“The Transferee, for itself and its successors in title, hereby covenants with the Transferor and its successors in title.”
But in the words of the covenant set out in the schedule, the words “and its successors in title” nowhere appear. 29. The second point relied was:
“There is no apparent reason why Mr and Mrs Houghton [they being the vendors] would want to maintain control over the land after they themselves had sold the land that witness statement to be benefited.”
But there they were dealing with a single piece of land, a single residential house owned by the vendors. Here, we are dealing with two very large pieces of land in the City of London at a time when one can see, from the terms of the Transfer itself, development was taking place. One can well see that the Port of London Authority would have wanted to have control itself of the land, at least until all its land was sold off, thereby negating any intention that a purchaser of perhaps Walsingham House (or if it is sold off in plots, its own headquarters land) would be able to, in effect, require its consent to be given in circumstances where the Port of London Authority wish to maintain control by reserving the right to give consent to itself.[30]The third reason given is that:
“It must have been in the reasonable contemplation of the original parties that Mr and Mrs Houghton might sell 1 Wharf House and then become untraceable so that their consent could not be obtained; the risk would then be that the covenant might be rendered absolute.”
Here, that does not apply, because it could not have been in the contemplation of the parties that the Port of London Authority might sell off all its land and then become untraceable so that its consent could not be obtained.[31]Fourthly:
“In the circumstances of this case - a private treaty sale relating to a single property - it is unlikely that the parties intended that the third party, who had retained no interest in the land benefited, could control development of a site so as to override the interest of a successor in title who does have a proprietary interest to protect. This is not a building or development scheme where a common vendor might wish to retain control. A private sale of a single dwelling is different from the circumstances which obtain in a building or estate scheme. In a private sale, of the sort in this case, it would be unusual for a person who had disposed of his interests in the property to retain the right to give or withhold consent to building.”
None of that applies here. We are not dealing here with, as it is put, a sale of a single dwelling. Here, we are dealing with a sale of a large, in effect, development site in the City of London, and the retention by the vendor of perhaps even larger potential developments sites in the vicinity.[32]The fifth reason given is:
“If the original parties had really intended that this part be treated differently from the earlier parts of the covenant, then they would have made it clear by using different wording, so as to differentiate the word Transferors in its third use in the covenant from the meaning which it bears earlier in the covenant.”
That of course does not apply here, because here the parties have expressly differentiated the meaning to be given to “Transferor” in the covenant itself, by adding the words, “and their successors in title”, from the meaning to be given to “Transferor” when used in paragraphs 1 and 2 of the third schedule, where no such words appear.[33]It thus seems to me that this case is entirely distinguishable from Mehon v Simms, in that the features upon which the learned judge relied in that case, to reach the conclusion that the reference to “the Transferors” in the context of obtaining their approval to plans was a reference to “the Transferors and their successors in title”, are not present here.[34]Ms Holland also relied on the third covenant, but it seems to me that that covenant equally does not assist her case. Her contention was that in that covenant it must be implicit that the reference to “the Transferor” is a reference to “the Transferor and its successors in title”. I do not agree. The covenant is a covenant: “Not to do or permit any other person to do anything upon the land hereby transferred or any part thereof which may be or become a nuisance annoyance obstruction or inconvenience to the Transferor or other the occupiers of the Transferor’s said neighbouring properties or either of them or any part thereof respectively. It is a covenant effectively against committing a nuisance. The reference to: “... the Transferor or other the occupiers of the Transferor’s said neighbouring properties ...” is understandable in the context where the Transferor, that is to say, the Port of London Authority, was in actual occupation of one of the properties for the benefit of which the covenant was taken. The words which I have quoted seem to me can be paraphrased as “the Transferor or whoever else might, for the time being, be the occupiers of” the relevant land. The persons who would suffer from the nuisance would be the occupiers of the land, but the covenant itself is entered into with the Transferor “for itself and its successors in title”.[35]Ms Holland says that that, in effect, to conclude that the consent to do an act otherwise forbidden by a restrictive covenant may be given by a person who no longer holds any of the land intended to be benefited by the covenant is inconsistent with the whole notion of a restrictive covenant. I disagree. Mr Justice Neuberger certainly did not think that the notion of such consent being given (by a person who no longer had the benefit of the covenant) was in any way inconsistent with the covenant. Ms Holland reminds me that the covenant must touch and concern the land and benefit that land. But this covenant does. It is a covenant which benefited the particular land retained by the Port of London Authority and identified in the Transfer. It is that factor that enables the covenant to be enforceable against successors in title of the Transferee.[36]Accordingly, for all the reasons which I have given, perhaps at greater length than I originally intended, I have come to the conclusion that in this case, upon a true construction of the Transfer, the term “the Transferee” means (if I can coin the expression from Mr Justice Knox) precisely what the Transfer says it is to mean: that is to say, the Port of London Authority and it alone. Accordingly, it seems to me that I ought to grant a declaration in the terms sought in the claim form.

Cited in 1 later judgment