89 Holland Park (Management) Ltd & Ors v Hicks [2013] EWHC 391 (Ch)

Claim No. HC12CO4553[2013] EWHC 391 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Rolls Building, Fetter Lane, London EC4A 1NLDate 27 February 2013
Before
Mr Robert Miles QC(sitting as a Deputy Judge of the Chancery Division)
Between
89 HOLLAND PARK (MANAGEMENT) LIMITEDClaimant89 HOLLAND PARK (FLAT 1) LIMITEDClaimantMARC NICHOLAS JONASClaimantDR MICHAEL BEVERLEY MCKIEClaimantMARIA PALOMA LETEMENDIAClaimantANDREW LAWSON DELLClaimantJENNIFER SIMONE DELLClaimantMS SOPHIE LOUISE HICKSDefendant
Mr Martin Rodger QC (instructed by Pinsent Masons LLP) for ClaimantsMr Jonathan Small QC (instructed by Mishcon de Reya) for DefendantHearing Hearing dates: 19 and 20 February 2013
JUDGMENTMr Robert Miles QC (sitting as a Deputy High Court Judge):Introduction
[1]The First Claimant is the freehold owner of 89, Holland Park, London, W.11 ("No. 89"), a substantial Victorian house built in the 1870s and now divided into six flats. The Second to Seventh Claimants are long lessees of five of the flats. The Defendant is the owner of land adjoining No. 89 ("the Property").[2]The Claimants seek declarations that they are entitled to the benefit of certain covenants relating to the development and use of the Property contained in a deed entered into in 1968 by predecessors in title of the First Claimant and the Defendant respectively.[3]The Defendant acquired the Property in 2012 and wishes to build a house there. The Claimants contend that the covenants require the Defendant to obtain, first, the consent of the First Claimant to proposed plans, drawings and specifications before she may make any application for planning permission to develop the Property; and, second, the First Claimant’s consent to her definitive plans, drawings and specifications before she may commence building. The Defendant's case is that she does not require the Claimants' consent because the covenants are not enforceable by the Claimants or, in the case of the covenant concerning planning permission, is not a covenant which binds the Defendant. Alternatively, she says that if the Claimants' consent is required, the Claimants may not withhold it unreasonably. She also disputes the standing of the Second to Seventh Defendants to enforce the covenants.

Factual narrative

[4]There is no material dispute about the facts. The freehold of No. 89 was formerly owned by Brigadier Walter Radford who, in the 1960s, let the six flats in the house on leases for terms between four and six years. In 1981 Brigadier Radford began to grant long leases of the flats and by June 1989 each of the six flats had been let for terms of 125 years. Each lease required the formation of a management company to which No. 89 was to be transferred once all the flats had been demised. The First Claimant is that company.[5]On 3August 1990 No. 89 was transferred by Brigadier Radford's wife to the First Claimant and the leases have subsequently been extended to terms of 999 years.[6]Until 10December 1965 the Property, which is immediately adjacent to No. 89, was owned by Brigadier Radford. There was at that time no wall dividing No. 89 from the Property. There is a minor dispute about whether it was part of the garden of No. 89 or even part of the plot on which No. 89 stood. On the basis of the drawings contained in the transfer dated 10 December 1965 (referred to further below) and the terms of the transfer, I find that the Property was part of the garden of No. 89. In that regard, clause 3(ii) of that instrument required a wall to be built “to divide the [Property] from the remainder of the garden of [No. 89]”.[7]The Property comprises a narrow strip about 23 feet wide where it adjoins Holland Park and about 140 feet deep and it widens a little towards the rear of the site. It is bounded on the north by No. 89, from which it is now separated by a brick wall, on the south by Abbotsbury House (a 1960s apartment building), on the west by the gardens of houses on Woodford Square, and on the east by the public highway, Holland Park.[8]The Property was conveyed by Brigadier Radford to Mrs France de Froberville by a transfer dated 10 December 1965 ("the 1965 Transfer"). It is now separately registered at HM Land Registry, described as "land on the west side of Holland Park, Kensington". Restrictive covenants are noted in the Charges Register as having been contained in the 1965 Transfer and as being varied by a subsequent deed between Brigadier Radford and Mrs de Froberville dated 10 July 1968 (to which I shall refer further below).[9]Though planning consent for a single dwelling was granted on six separate occasions between 1961 and 1971, the Property has never been built on. Before the 1965 Transfer planning permission had twice been granted (on 17 March 1961 and again on 18 March 1965) for the erection on the Property of a single dwelling with a built-in garage.[10]In the 1965 Transfer Mrs de Froberville covenanted to build the building for which Brigadier Radford had obtained consent within two years. She also covenanted to build a wall dividing the Property from No. 89. The 1965 Transfer included a right of pre-emption in favour of Brigadier Radford which had restricted Mrs de Froberville’s ability to sell the Property without developing it.[11]After the 1965 Transfer and before the 10 July 1968 deed a further three applications for planning permission were made by Mrs de Froberville, two of which were successful.[12]Mrs de Froberville did not however build the building within two years of the 1965 Transfer. A supplementary deed was entered into on 10 January 1968, by which fresh drawings for a proposed building were agreed, and Mrs de Froberville covenanted forthwith to erect it. No copy of that deed has survived but it is mentioned in the further deed of 1968 to which I refer below. It is not known whether it included a time limit for the work, the original period of two years provided by the 1965 Transfer having run out on 10 December 1967.[13]On 10 July 1968 a second supplemental deed was executed by the same parties, Mrs de Froberville now being referred to as "the Building Owner" and Brigadier Radford as the "Adjoining Owner". It was expressed to be supplemental to the 1965 Transfer and the deed of 10 January 1968. It is the covenants in this second deed ("the l968 Deed") which give rise to the current dispute. The 1968 Deed recorded the Adjoining Owner’s approval of specified drawings of a different dwelling and included a covenant by Mrs de Froberville to complete it within 18 months. That dwelling was to be to a design which had already been prepared by her architects but for which planning permission had not yet been obtained. Planning permission for that design was granted on 16 September 1968 but Mrs de Froberville then sold the Property, without undertaking any building, to a Miss Lange.[14]The Defendant acquired the Property at auction from the estate of Miss Lange, and became the registered proprietor on 14February 2012.

The 1965 Transfer

[15]I shall now set out the relevant parts of the instruments, starting with the 1965 Deed (omitting immaterial parts).[16]Clause 1 provided:
"In consideration of six thousand five hundred pounds (£6,500.00) the receipt whereof is hereby acknowledged I [Brigadier Radford] ... (hereinafter called "the Vendor") which expression shall include his successors in title owner and owners for the time being of No. 89 Holland Park London W.11) as beneficial owner hereby transfer to [Mrs de Froberville] ... (hereinafter called "the Purchaser") the land shown and coloured red on the plan bound up within and known as Land Adjoining 89 Holland Park London W11."
[17]By clause 2, the Purchaser “so as to bind the land hereby transferred and to benefit the Vendors [sic] property known as No. 89 Holland Park London W11 hereby covenants for herself and her successors in title with the Vendor as follows”. Clause 2 then set out covenants(i) that the land and any buildings to be erected thereon would be used for the purpose of one or two private dwelling-houses and one or two garages only and as to the use of the land, and(ii) when “the Transferee” shall have erected a wall “to divide the said land from the remainder of the garden of No 89 Holland Park”, that she and her successors would thereafter maintain it in good and substantial repair. (I note in passing that the Purchaser is here called “the Transferee” a term not otherwise defined – this is one of a number of drafting infelicities.)[18]Clause 3 started with the words "[t]he Purchaser for herself and her personal representatives hereby covenants with the Vendor as follows". There then followed several separate covenants.[19]The first, sub-clause 3(i), was a covenant that the Purchaser would not sell the land prior to its development subject to a proviso that if she was unable within the period of two years to complete the development from some cause not within her control she could then offer to resell the land to the Vendor for £6,500 plus the value of any works completed by then, with the Vendor to have the option whether to accept or decline such offer, and if he declined the Purchaser to be at liberty to sell the land "to any person approved by the Vendor subject nevertheless to the same conditions and covenants as to development and user of the said land as are contained herein including stipulation for acquiring the approval of the Vendor of any modification in the approved plans and definitive plans and working drawings and specifications of the said Building".[20]By sub-clause 3(ii) the Purchaser covenanted to erect the said buildings in accordance with planning permission already granted or to be granted in respect of plans which had already been approved "provided that subject as aforesaid if the Purchaser shall wish to procure any modification of the approved plans she shall make no application to the Planning Authority in that behalf unless such proposed modification shall have first been submitted to and approved by the Vendor but say that the Vendor shall not unreasonably withhold such approval."[21]By sub-clause 3(iii) the Purchaser covenanted "that the definitive plans of the said buildings together with all working drawings and specifications shall be submitted to and approved by the Vendor before any work is commenced but so that the Vendor shall not unreasonably withhold such approval".[22]By sub-clause 3(iv) the Purchaser covenanted to erect a brick wall "separating the said land from the remainder of the garden at No 89 Holland Park" and agreed to do so in accordance with certain specified dimensions and other requirements.[23]By sub-clause 3(v) the Purchaser covenanted to proceed with all reasonable speed to complete the said buildings in all respects and to do so (subject only to clause 3(i)) within 2 years from the date of the deed.

The 1968 Deed

[24]The 1968 Deed was expressed to be between Brigadier Radford (called "the Adjoining Owner") of the one part and Mrs de Froberville (called "the Building Owner") of the other part.[25]The Deed was stated to be supplemental to the 1965 Transfer, which was said to contain covenants and provisions relating to the development by the Building Owner of the land thereby transferred, now referred to as "the building site"; and to the deed of 10 January 1968, which is said to have contained approval of drawings for the said buildings.[26]The second recital stated that difficulties had been encountered by the Building Owner which had prevented her from completing the said buildings within the period of two years from the date of the 1965 Transfer and that the Adjoining Owner had agreed for the consideration and terms contained in the 1968 Deed to extend the time for completion of such development.[27]By clause 1 the Building Owner covenanted to complete the development of the building site within 18 months.[28]Clause 2 provided: "(a) In lieu of the drawings referred to in the said Transfer and the said Deed the Adjoining Owner hereby approves the general layout drawing No 160/13 dated April One thousand nine hundred and sixty eight prepared by Messrs Holmes & Gill (b) The Building Owner shall make no applications to the appropriate Planning Authority nor apply for any other necessary permissions from the local or any other Body or Authority in respect of any plans drawings and specifications which have not been previously approved by the Adjoining Owner PROVIDED ALWAYS that if the Adjoining Owner shall approve the same but the Building Owner shall be required to modify or amend the same by the Planning Authority or any other Authority or if the Building Owner shall herself desire to amend the same then no further application shall be made by her to any such Authority unless the revised or amended drawings and specifications have been first approved by the Adjoining Owner".[29]Clause 3 provided: "No work shall be commenced upon the building site before the definitive plans drawings and specifications of the said buildings have been first approved by the Adjoining Owner or his surveyor".[30]Clause 4 stated that subclauses 3 (i), (ii) and (iii) of the 1965 Transfer were abrogated but that in all other respects the covenants and provisions contained in the 1965 Transfer relating to the development of the building site remained in force to the extent they were not inconsistent with the provisions of the 1968 Deed.[31]Clause 5 provided for the Building Owner to pay the Adjoining Owner the sum of £100 "in consideration of the indulgence of the Adjoining Owner hereby given to the Building Owner". The clause went on to provide for the Building Owner to meet the fees and expenses incurred by the Adjoining Owner in relation to the approval of revised plans drawings and specifications and otherwise properly incurred during the course of the erection of buildings on the Property.[32]Clause 6 provided "[t]he expressions "Building Owner" and "Adjoining Owner" shall where the context permits include their respective executors administrators and assigns".

Radford v. de Froberville

[33]Miss Lange was not a party to the 1965 Transfer or the 1968 Deed and she covenanted only with Mrs de Froberville (and not with Brigadier Radford) to comply with the covenants in those instruments in so far as they were still subsisting and capable of taking effect. Neither Mrs de Froberville nor Miss Lange complied with the covenant in the 1965 Transfer to build a wall and this led to litigation which was reported in the well known case of Radford v. de Froberville [1977] 1 WLR 1262 in which Oliver J gave an important judgment on the law of damages for breach of such a covenant. He recorded (at 1266E) that "prolonged negotiations ensued between Brigadier Radford and Miss Lange for the development of the plot in accordance with the revised plans and a fresh planning permission was obtained in February 1971". In fact, as already explained, no development has ever taken place on the Property and it remains a bare plot.

The issues

[34]The issues are in summary as follows:(1) Are the Claimants entitled to enforce the covenants contained in clauses 2(b) and 3 of the 1968 Deed?(2) Is the covenant in clause 2(b) binding on the Defendant?(3) If the covenants in clauses 2(b) and 3 are enforceable, are they subject to an implied proviso that the approval of the Adjoining Owner may not be withheld unreasonably?(4) Are the Second to Seventh Defendants, as lessees of No. 89, able to enforce clauses 2(b) and 3?[35]Mr Small QC, for the Defendant, accepts that if the Claimants succeed on issue (1) and can therefore show that they have the benefit of the disputed covenants, the Defendant is subject to the burden of the covenants (subject always to the argument about clause 2(b) under issue (2)).

Issue 1: enforceability of the covenants by the Claimants

[36]None of the Claimants is an original party to the 1968 Deed. The Claimants rely on section 78 of the Law of Property Act 1925 (“s.78”) which so far as material is in the following terms:
"78. Benefit of covenants relating to land (1) A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successor in title and the persons deriving title under him or them, and shall have effect as if such successors and other persons were expressed. For the purposes of this subsection in connection with covenants restrictive of the user of land "successors in title" shall be deemed to include the owners and occupiers for the time being of the land of the covenantee intended to be benefited."
[37]Mr Rodger QC for the Claimants submits that the requirements of this section are satisfied because the covenants “relate to land of the covenantee” as that term was explained in the case of Federated Homes Ltd v. Mill Lodge Properties Ltd [1980] 1 WLR 594, and in particular the passage at p.605 where Brightman LJsaid: "In other words, if the condition precedent of s.78 is satisfied – that is to say, there exists a covenant which touches and concerns the land of the covenantee – that covenant runs with the land for the benefit of his successors in title, persons deriving title under him or them and other owners and occupiers".[38]Mr Rodger also submits that the land which is intended to benefit is so defined in the 1968 Deed, particularly when taken together with the 1965 Transfer, that it is easily ascertainable, and therefore satisfies the further requirement of s.78 explained by the Court of Appeal in Crest Nicholson Residential (South) Ltd v. McAllister [2004] 1 WLR 2409. He also submits that there is nothing in those instruments which shows or indicates a mutual contrary intention – i.e. an intention that the benefit of the covenants should not be deemed to be made with successors in title.[39]Mr Small submits that the terms of the 1968 Deed, which contains the relevant covenants, show that the parties did not intend that the benefit of the covenants should pass to successors in title of No. 89, but argues instead that the covenants were personal to Brigadier Radford or his contractual assignees. Mr Small also says that the 1968 Deed does not sufficiently identify the land intended to be benefited.[40]The question whether s.78 has mandatory effect or is subject to being displaced by the contrary intention of the parties arose in the Crest Nicholson case. At paragraph 40, Chadwick LJ set out a passage from a decision of Judge Paul Baker QC, sitting as a Judge of the High Court, in Roake v. Chadha [1984] 1 WLR 40, 46:
"The true position as I see it is that even where a covenant is deemed to be made with successors in title as section 78 requires, one still has to construe the covenant as a whole to see whether the benefit of the covenant is annexed. Where one finds as in the Federated Homes case, the covenant is not qualified in any way, annexation may be readily inferred; but where, as in the present case, it is expressly provided: ‘this covenant shall not enure for the benefit of any owner or subsequent purchaser of any party to the vendor's Sudbury Court Estate at Wembley unless the benefit of this covenant shall be expressly assigned ...’ one cannot just ignore those words. One may not be able to exclude the operation of the section by widening the range of the covenantees, but one has to consider the covenant as a whole to determine its true effect. When one does that, then it seems to me that the answer is plain and in my judgment the benefit is not annexed. That is giving full weight to both statutory force and also what is already there in the covenant."
[41]Chadwick LJ agreed, at paragraph 41, with Judge Baker’s decision that s.78 could be displaced by a contrary intention being shown. He said, "I can see no reason why, if the original covenantor and covenantee make clear their mutual intention in that respect [viz. that the benefit shall not pass to successors in title without an express contractual assignment], the legislature should wish to prevent effect being given to that intention."[42]Mr Small does not contend that the covenants in the present case are purely personal in the sense that they are not assignable at all. Rather, he contends that the parties intend that the benefit of the covenants would not pass to successors in title without an express contractual assignment. He says that the case is therefore analogous to the position in Roake v. Chadha. He also submits that there is no requirement of express words to displace the effect of s.79; all that need be established is that the parties did not intend the benefit to pass without an express assignment.[43]Mr Small relies on four principal points in support of this general submission. First, he emphasises the words appearing at the end of s.78(1): “the land of the covenantee intended to be benefited” and says that the key question is whether, looking at the instruments on their true interpretation, there is an intention to benefit the land of the covenantee. Second, he submits that when the parties meant to annex the covenant to the land, or picking up the words of the section – intended to benefit the land of the covenantee – they expressly did so. Third, he says that the parties expressly identified the class beneficiaries of the covenant and these did not include successors in title to No. 89. Fourth, he says, it makes commercial sense for Brigadier Radford to have wished to retain control of the running of the benefit of the covenants.[44]The first and second of these points are based on the difference in wording between clause 2 of the 1965 Transfer, which was expressly taken “to benefit the Vendors [sic] property known as [No. 89]”, on the one hand, and, on the other hand, the other covenants contained in the 1965 Transfer and the 1968 Deed which were not expressed to be taken for the benefit of No. 89. The Defendant relies particularly on clause 3 of the 1965 Transfer which is not expressed to be taken for the benefit of No. 89 and which is given only by the purchaser and her personal representatives. Mr Small also points out that the 1968 Deed does not contain any expression of the covenants being taken for the benefit of No. 89. He therefore submits that taking the two deeds together there are two classes of covenant: namely, clause 2 of the 1965 Transfer which is expressed to be enforceable by the covenantee's successors in title as owners of No. 89 and the remainder of the covenants which are not so expressed. He says that the draftsman has demonstrated that where he intends land to have the benefit of covenants he says so.[45]The Defendant’s third submission is based on clause 6 of the 1968 Deed. Mr Small argues that the Deed expressly sets out those persons who are to have the benefit of the covenant and that in this context the term "assigns" refers to contractual assignees of the covenant rather than successors in title to the land.[46]The Defendant’s fourth point is that it makes commercial sense to restrict the running of the benefit of the covenants to express assignees as this would have enabled Brigadier Radford to extract more money from a potential purchaser. The suggestion was that he could have charged an extra sum from a purchaser in return for an express assignment of the covenants.[47]I am unable to accept the Defendant's submissions for a number of reasons.[48]First, reading the 1965 Transfer and the 1968 Deed together (as both parties contend it is appropriate), in my judgment, there are no indications, and certainly no clear indications, that the parties intended to prevent the benefit of the covenants running with the land. On the contrary, in my judgment, reading the instruments together, the parties' intentions are fully consistent with the application of s.78. The 1965 Transfer was expressed to be made with Brigadier Radford as Vendor which expression was stated to include his “successors in title owner and owners for the time being of No. 89”. Hence there is express reference both to successors in title and to the land intended to be benefited. In this regard, leaving aside s.78 for a moment, as Megarry and Wade on The Law of Real Property (8th edn, 2012) states at paragraph 32-061, the benefit of a covenant will be sufficiently annexed in equity if in the instrument the land is sufficiently indicated and the covenant is either stated to be made for the benefit of the land, or stated to be made with the covenantee in his capacity as owner of the land. Here, by virtue of clause 1, the covenants in the 1965 Transfer were made with Brigadier Radford in his capacity as owner of the land.[49]This also meets the point about the wording of s.78(1) on which Mr Small placed some emphasis: “the land of the covenantee intended to be benefited” is expressly referred to in clause 1, which governs what follows.[50]Further, as Mr Rodger observed, since the 1965 Transfer contains only three clauses in all, and clause 2 expressly states that the covenants contained in it are for the benefit of No. 89, the extended definition of the expression Vendor to include his successors in title and owners for the time being of No. 89 can only have been intended to apply to clause 3.[51]Secondly, while there is some force in Mr Small’s point about the contrast between the wording of clause 2 of the 1965 Transfer (which uses express language of annexation) and clause 3, the weight to be given to the point must be assessed in light of the other indications to be gathered from the instrument as a whole. Taking it as a whole I think it is clear that the intention was to benefit the owners for the time being of No. 89. The difference of language is, in my judgment, explained by the fact that, in clause 3 (unlike clause 2) Mrs de Froberville did not enter into covenants which bound the land. The way that the burden of the covenants in clause 3 was to be dealt with was under the proviso to clause 3(i), which required that if there was any sale to a third party that person would have to be approved by the Vendor and the transfer would have to contain like covenants as to consents and approvals of plans, drawings and specifications. That drafting technique was not repeated in the 1968 Deed. The difference of treatment of the burden of the covenants in clauses 2 and 3 of the 1965 Transfer therefore assists, in my judgment, in explaining the contrast in the drafting of the clauses.[52]Thirdly, there is nothing by way of qualification in the 1965 Transfer to suggest that Brigadier Radford wished to retain the benefit of the covenants contained in the Transfer for himself or only to contractual assignees. Moreover, the general purpose of the covenants was to control the development of the Property for the benefit of No. 89 and it seems to me that there is every reason, absent some contrary intention being expressed, for the benefit of those covenants to pass to any new owners of No. 89.[53]Fourthly, turning from the 1965 Transfer to the 1968 Deed, Brigadier Radford was described as "the Adjoining Owner". Weight may be given to the natural meaning of words in a definition: Chartbrook v Persimmon [2009] 1 AC 1101 at paragraph 94 per Lord Walker. In my judgment, the words chosen here, “Adjoining Owner”, convey the idea that the covenants in the Deed are given to the covenantee as owner of the adjoining property and this further supports the notion that the benefit of the covenants should pass to any subsequent owners. As already mentioned, even leaving aside s.78, annexation will take place in equity if the land is sufficiently identified and the covenantee is stated to be made with the covenantee in his capacity as owner.[54]The phrase “Adjoining Owner” chimes also with the description of the Vendor as “owner and owners for the time being of No. 89” in the 1965 Transfer. Again, as with the 1965 Transfer, the covenants in the 1968 Deed were concerned with placing restrictions on the ability of the owner of the Property to develop the land and again I see no reason why a reasonable reader would suppose that the parties intended that the benefit of these covenants should not pass to the owner for the time being of No. 89 except where there was an express assignment.[55]As for Mr Small’s third principal argument, based on clause 6 of the 1968 Deed, the term "assigns" is, as both parties accepted capable, according to the context of its usage, of meaning either contractual assign or assignee of the land in the sense of successor in title.[56]However, Mr Small submitted that in the context of covenants affecting land, there was a clear and established meaning, namely, contractual assignee. He relied in this regard on J. Sainsbury plc v Enfield London Borough Council [1989] 1 WLR 590 and says that it establishes that, in this context, the term “assign” means contractual assignee. He says that where a term has assumed a recognised legal meaning, the court should, where possible give it that meaning, in order to promote legal certainty. He argues that because the parties have expressly set out the class of those persons who are to benefit from the covenants, by necessary implication they have excluded any wider class, including successors in title to the land.[57]I do not accept that there is a clearly established legal meaning of the term “assign” in the context of covenants affecting land. What the J. Sainsbury case shows is that in cases before the Law of Property Act 1925 the reference to the term heirs and assigns was not, of itself, sufficient to annex the benefit of a covenant to land. It does not however follow that in any case where the term “assign” is used in relation to a covenant affecting land it means only contractual assigns. Mr Rodger was inclined to accept that in pre-1925 conveyancing the word assigns generally means contractual assigns but contended, in my view correctly, that the word was one of variable meaning according to the context.[58]In my judgment there is no established uniform meaning of the term “assigns” or “assignees” which applies to all covenants affecting land. On the contrary, in my judgment it is necessary to interpret the term according to the usual principles of interpretation, taking account of the context, the other terms of the agreement and the relevant commercial and factual background. In this regard I note that chapter 32 of Megarry & Wade refers to successors in title as assignees of land.[59]The 1968 Deed must of course be read with the 1965 Transfer. The covenants in the 1965 Transfer were, as I have found given in favour of Brigadier Radford, his successors in title, and the owners from time to time of No 89. The 1968 Deed is expressed to be supplemental to the 1965 Transfer and by virtue of s.58 of the Law of Property Act 1925 is to be treated as fully recited in the 1968 Deed. I can see no reason why there should have been any intention that the class of persons for whose benefit the covenants were given in the 1968 Deed should have been narrowed from that given by the 1965 Transfer. On the contrary, in my view a reasonable reader, knowing of the background, would conclude that the class of beneficiaries of the covenants was meant to be as broad as that contained in the 1965 Deed.[60]Some weight should be given in this context, too, to the use of the descriptions “Adjoining Owner” and “Building Owner”. The use of the word “assigns” in connection with those descriptions carries the flavour of successive owners of the land, rather than contractual assignees.[61]Moreover, as Mr Rodger observed, under the 1968 Deed Mrs de Froberville only assumed obligations and was not the beneficiary of any assignable promises. Therefore the reference to her "assigns" in clause 6 of the Deed can only be to successors in title, as it is not possible to transfer the burden of a covenant in contract. I do not agree with Mr Small that the acknowledgment that certain drawings had been approved (in clause 2(a)) was assignable. The approval had been given and could not be undone; but there was no benefit of a promise in that clause (or elsewhere in the Deed) capable of assignment by Mrs de Froberville. While not decisive, I consider this point carries some additional weight.[62]Taking account of the various points made on each side of the issue, it seems to me that the word "assigns" in clause 6 of the 1968 Deed is intended to extend not merely to contractual assigns but also successors in title or, in the language of the 1965 Deed, “owners for the time being” of No. 89.[63]Turning to Mr Small’s fourth submission, I do not agree that there is any convincing commercial rationale for supposing that the parties would have intended the benefit of the covenants to pass from Brigadier Radford only on an express assignment by him, rather than passing with the land. The present situation is very different from cases like Crest Nicholson and Roake v Chadha where the covenantee was selling off an estate plot by plot and where, as Chadwick LJ explained, he might well wish to retain control over the giving of consent. In my view where the question concerns a straightforward sale of a parcel of land by a vendor who retains the neighbouring plot, the general expectation would be that the owner for the time being of the neighbouring plot would have the right to enforce covenants relating to his land.[64]Nor do I think there is any substance in the suggestion that by making the passing of the benefit conditional on an express assignment Brigadier Radford could have extracted more from purchasers of No. 89. In my view it is improbable that the parties to the 1968 Deed would have had in mind the rather remote possibility that Brigadier Radford would have been able to extract more from a purchaser by two transactions (a transfer and an assignment) than one transaction (a transfer, in the case where they were annexed to the land).[65]Finally on this issue, I am satisfied that the land to be benefited by the covenants is easily ascertainable from the instruments (as required by s.78 as interpreted by the Court of Appeal in Crest Nicholson). It is shown in the plan contained in the 1965 Transfer (which is to be treated as recited in the 1968 Deed); it is described in the 1965 Transfer as No. 89; and the 1968 Deed refers to Brigadier Radford as the Adjoining Owner, i.e. as the owner of No. 89.[66]For these reasons, in my judgment, the benefit of the covenants in clauses 2(b) and 3 of the 1968 Deed passed to the successors in title of Brigadier Radford and, therefore, to the First Claimant. The position of the other Claimants is considered further below (see issue (4)). Issue 2: is clause 2(b) of the 1968 Deed binding on the Defendant as a restrictive covenant?[67]Mr Small contends on two grounds that the covenant in clause 2(b) is not binding on the Defendant: firstly, that it does not touch and concern the land of the Claimants, and, secondly, that it is not a restrictive covenant at all.[68]As to the first point Mr Small referred to P & A Swift Investments v. Combined English Stores Group Plc [1989] 1 AC 632 at pp 640-642. Lord Oliver referred there to the test adopted by Farwell J in Rogers v. Hosegood [1900] 2 Ch 388, 395:
"The covenant must either affect the land as regards mode of occupation, or it must be such as per se, and not merely from collateral circumstances, affects the value of the land."
At 642, Lord Oliver said this:
"Formulations of definitive tests are always dangerous, but it seems to me that, without claiming to expound an exhaustive guide, the following provides a satisfactory working test as to whether, in any given case, a covenant touches and concerns the land: (1) the covenant benefits only the reversioner for the time being, and if separated from the reversion ceases to be a benefit to the covenantee; (2) the covenant affects the nature, quality, mode of user or value of the land of the reversioner; (3) the covenant is not expressed to be personal (that is to say neither being given only to a specific reversioner nor in respect of the obligations only of a specific tenant); (4) the fact that a covenantee is to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied and the land is connected with something to be done on, to or in relation to the land."
[69]That was said in the context of a covenant between the landlord and tenant but it is common ground that the same principles apply generally in relation to restrictive covenants concerning land.[70]Mr Small contends that if one stands back and asks whether the covenant in clause 2(b) of the 1968 Deed confers a benefit in any material way on No. 89 the answer is No. Apart from treating the matter in point of principle, he points out that there is no reported authority where such a covenant has been held to touch and concern the land.[71]Mr Rodger submits that the covenant touches and concerns the land because it allows the owners of No. 89 to have some control over the development of the Property. He also contends that the covenant is capable of affecting the value of the land of the covenantee because it gives a degree of control over the nature of such development.[72]I prefer the submissions of Mr Rodger on this point, essentially for the reasons he has given. The covenant benefits No. 89 because it allows the owner for the time being to have a degree of control over the nature of any development on or over the Property and is likely to affect the value of No. 89.[73]Mr Small’s second point is that clause 2(b) of the 1968 Deed is not a restrictive covenant at all because it does not affect the user of the Defendant's land.[74]There was initially some debate over the relevant test for this purpose. Mr Rodger referred to the speech of Lord Templeman in Rhone v. Stephens [1994] 2 AC 310 at pp 317-318. Lord Templeman referred to the classic case of Tulk v. Moxhay (1848) 2 Ph. 774 and the speech of Lord Cottenham LC at pp 777-778 where he said:
"It is said that, the covenant being one which does not run with the land, this court cannot enforce it; but the question is, not whether the covenant runs with the land, but whether a party shall be permitted to use the land in a manner inconsistent with the contract entered into by his vendor, and with notice of which he purchased."
In Rhone v. Stephens Lord Templeman then went on to say this: "Equity can thus prevent or punish for breach of a negative covenant which restrict the user of land or the exercise of other rights in connection with land".[75]There was some limited debate about whether there was any authority for the idea that restrictive covenants can be in respect of "the exercise of other rights in connection with land". In this connection Mr Small referred to s.2(5) of the Land Charges Act 1972, s.50(1) of the Land Registration Act 1925 and s.84 of the Law of Property Act 1925 as well as s.78 of the Law of Property Act 1925, each of which refers to covenants "restrictive of the user of land" or cognate expressions.[76]In the end this debate did not lead anywhere as Mr Rodger ultimately accepted that the question was whether the covenant was "restrictive of the user or mode of occupation of land". It was also accepted by both parties that this question is to be approached as a matter of substance, rather than form.[77]Mr Small says that clause 2(b) is not in substance restrictive of the user of land. It does not affect what is done on the land, who can own it, or the status or physicality of the land. It does not constrain building or any other use of the land but bites at an anterior point before the application for planning permission is made and restricts the making of such an application. He suggests that a useful litmus test is whether someone other than the owner of the land is able to do the thing restrictive and points out that anyone can make an application for planning permission in relation to land whether or not he is the owner.[78]I am unable to accept these submissions. The substance of clause 2(b) is that the Building Owner is not able to apply for planning permission to develop the land without the relevant consent of the Adjoining Owner. Development cannot take place without planning permission, and clause 2(b) places a potential constraint on the nature of the permission that the owner of the Property may apply for. Hence the Building Owner may be prevented from undertaking the kind and nature of development that he or she might otherwise be able to obtain permission for and therefore carry out.[79]While the obtaining of planning permission itself may not involve doing anything on the land, the whole point and purpose of seeking planning permission is to carry out the development of the land and a restriction on the kinds of permission that the owner may obtain is in substance itself a restriction on the kinds of developments that the Building Owner may, in the event, be able to carry out. It seems to me rather unreal to divorce a restriction on the kinds of planning permission that can be obtained (which are necessary for any development to take place) from the kinds of development that may take place on the land itself, which are clearly a mode use of the land.[80]For these reasons I consider that clause 2(b) of the 1968 Deed is binding on the Defendant. Issue 3: Are clauses 2(b) and 3 subject to an implied proviso that approval or consent would not be unreasonably withheld?[81]This is a question of interpretation. I approach the question without any pre-disposition towards or against finding an implied proviso (see Liverpool City Council v Walton Group plc [2002] 1 EGLR 149 paragraph 98). The question is to be approached by considering the terms and purposes of the provision in question, the other terms, and the commercial purpose of the contract as a whole and the surrounding circumstances.[82]Mr Rodger submits that the requirement for consent in clause 2(b) and 3 of the 1968 Deed is absolute and that the Adjoining Owner and his assigns are entitled to refuse consent on any grounds at all. This would include the Adjoining Owner being able to refuse consent arbitrarily, capriciously, or at a whim.[83]In support of this submission Mr Rodger relies primarily on the change of wording from the 1965 Transfer (where the relevant covenants were subject to an express proviso) to that of the 1968 Deed, where there is no such proviso. He argues that this must have been a deliberate change.[84]He says that this can be seen not merely from the fact that words used in the 1965 Transfer were omitted in the 1968 Deed but also from the commercial context. He points out that Mrs de Froberville was in a vulnerable position by 1968. She had not complied with her obligation to develop the Property within two years, had not built the wall as required by the 1965 Transfer, and was subject to restrictions on her ability to sell the Property in an undeveloped state. He points out that the 1968 Deed released Mrs de Froberville from the restrictions on sale, and extended the time period for the development of the Property. In return for this "indulgence" as it was expressly described in the Deed, Mrs de Froberville paid the sum of £100. In these circumstances it was not commercially surprising that the proviso which had been found in the earlier transfer was removed.[85]Mr Rodger also submitted that the fact that Brigadier Radford had given approval to the plans for the purposes of the 1968 Deed (as recorded in clause 2(a)) indicated that he had shown himself to be accommodating and reasonable in the past and therefore it was not surprising that the parties had entered into clauses 2(b) and 3 in unqualified term.[86]Mr Rodger contended that it was neither necessary to give business efficacy to the agreement, nor did it go without saying, nor was it necessary to give effect to the overall meaning and purpose of the agreement to imply the proviso into clauses 2(b) and 3 of the 1968 Deed.[87]Mr Small frankly accepted there is some force in the point about the absence of an express proviso in the 1968 Deed, but submitted that these points were outweighed by the other indications that supported the implication of the proviso.[88]I prefer the Defendant's submissions on this issue. First, as Mr Small submits, the whole purpose of the Agreements was the development of the Property by Mrs de Froberville. That was why the land had been sold to her in the first place. The only purpose for owning the plot was to build a house or houses on it. That is reflected too in the fact that in the 1968 Deed Mrs de Froberville was described as the Building Owner. The provisions of the 1968 Deed (like those of the 1965 Transfer) are concerned with the development of the Property and restrictions on what might be developed. In my judgment, it would wholly undermine the purpose of the agreement if the Adjoining Owner was given a complete and unfettered right, exercisable on a whim, to veto any development of the development plot which Mrs de Froberville had bought and promised to develop.[89]Secondly, a process is set out in clauses 2(b) and 3 for the seeking of planning permission and the provision of definitive plans and specifications, and for the giving or withholding of consent by the Adjoining Owner. It would be pointless to provide for such a process if the Adjoining Owner could, without any reason, refuse consent.[90]Thirdly, this is a case where the subject matter of the consent is something quite specific rather than a general consent. This is a factor which weighed with the Court of Appeal in Cryer v. Scott Brothers (Sunbury) Ltd (1988) 55 P. & C.R. 183. An advance submission of plans, drawings or specifications is action of a most specific kind.[91]Fourthly, Mr Rodger’s observation that Brigadier Radford had acted reasonably in accommodating Mrs de Froberville in the recent past seems to me to cut rather the other way. It tends to support the view that had the parties been asked at the time whether the Adjoining Owner was permitted to withhold his consent to the drawings, plans, or specifications unreasonably they would have answered "no".[92]Fifthly, as Mr Small observed, clause 5 of the 1968 Deed provides for the payment of expenses incurred by the Adjoining Owner in connection with the process of approving any modified plans and approving definitive drawings and specifications, and costs incurred by the Adjoining Owner in connection with the building itself. He submits that this is a further indication that what was expected was a process of consultation between the parties about further plans, drawings and specifications and that this is a further indication that reasonable discussion was anticipated. This, he submitted, supports the idea that the consent of the Adjoining Owner to the plans, drawings and specifications of the Building Owner should not be withheld unreasonably. I agree with Mr Small that this is another factor in favour of the implication of the proviso.[93]Reverting to the choice of language, it is of course right that the parties to the 1965 Transfer did include the express proviso and thereby ensured that Brigadier Radford could not withhold his consent arbitrarily or unreasonably. This did not appear in the 1968 Deed. Mr Rodger said that the inference was that the parties intended a different regime. I cannot agree. I can see no reason why the parties should have decided when it came to the 1968 Deed to create an entirely different regime where the Adjoining Owner should be able effectively to defeat the purpose of the grant by having an absolute, unfettered, right of veto over any development.[94]I am not persuaded by the contention that Mrs de Froberville may have been in a somewhat more vulnerable position commercially by 1968. We know little about the bargaining positions of the parties in 1968 and even if it could fairly be said that Mrs de Froberville was seeking an indulgence, it does not to my mind explain why she should have subjected herself to the arbitrary or unreasonable right of veto for which the Claimants now contend. The only value of the Property was as a building site. She was still to undertake the development of the Property, and clauses 2(b) and 3 contained a process similar to that contained in the 1965 Transfer for seeking and obtaining consent from the Adjoining Owner in respect of that property. The purpose of the agreement remained the development of the Property. Though Mrs de Froberville may have been facing some difficulties under the terms of the 1965 Deed, I cannot accept that the parties intended to give the Adjoining Owner an unqualified right of veto, where the Adjoining Owner had previously had only a qualified right.[95]Standing back, I agree with Mr Small that the various factors favouring suggesting only a qualified right of veto outweigh any inference that may be drawn from the omission of the express words of proviso in clauses 2(b) and 3 the 1968 Deed.[96]In my judgment, if the parties had been asked in 1968 whether the Adjoining Owner was to be able to withhold his consent under clauses 2(b) and 3 unreasonably, arbitrarily, or capriciously, the parties would have said "of course not". In my judgment reading the Deed as a whole, in its commercial context, and in the light of its purposes, it is necessary to imply a proviso into these clauses in order to give business efficacy to the agreement; and to give effect to the reasonable expectations of the parties as set out in the agreement as a whole.

Issue 4: Can the covenants be enforced by the lessees of No 89?

[97]This is a short point. It is common ground that if the Claimants are successful on the first and second issues the First Claimant is entitled to enforce clauses 2(b) and 3 of the 1968 Deed. I should also note that the Claimants accept that the consent required under those clauses is the consent of the First Claimant as the Second to Seventh Claimants are not "assigns" within the meaning of the 1968 Deed. The question raised by issue 4 is therefore unlikely to be of any practical significance since the First Claimant is a management company controlled by the Second to Seventh Claimants. Nonetheless the parties have addressed me on this point and seek a ruling on it.[98]Mr Small has two submissions. First, he says that, since (as is common ground) the Second to Seventh Defendants are not “assigns” within the meaning of clause 6 of the 1968 Deed, there is a contrary intention in that instrument which displaces s.78. Secondly, he says that the Second to Seventh Claimants are unable to enforce the covenants because the leases under which they hold expressly excepted the "full right and liberty for the lessor in her absolute discretion to deal as she may think fit with any part of the Building or any lands or premises adjacent or near to the Building and to erect thereon any buildings whatsoever and to make any alterations and carry out any demolition rebuilding or other works which she may think fit or desire to do.”[99]Mr Rodger relies on the terms of s.78, which provides in terms that the covenants are to be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them, and that the term "successors in title" shall be deemed to include "the owners and occupiers for the time being of the land of the covenantee intended to be benefited."[100]I prefer the Claimants’ arguments. As to Mr Small’s first argument, in my view there is nothing contradictory or inconsistent about the Second to Seventh Claimants being able to enforce the covenants, even if they are not “assigns”; and I do not consider that the fact that they are not “assigns” shows an intention that the covenants should not be enforceable by them under s.78. Rather, I consider the correct analysis is that Second to Seventh Claimants are able to enforce the covenants (by virtue of s.78) but that the relevant consent required under those covenants is that of the First Claimant (as an “assign” within the meaning of clause 6).[101]As to Mr Small’s second argument, I do not think that the exceptions in the lease have anything to do with the restrictive covenants. The relevant exceptions are, in my judgment, concerned only with the land and property of the lessor and cannot sensibly be read as extending to adjoining land owned by others. By the time the leases were entered into the Property had already been transferred to Mrs de Froberville. Moreover I do not consider that the giving or withholding of consent under the covenants is a “dealing” with any adjoining property within the scope of the contractual exception.

Conclusions

[102]For these reasons, in my judgment:(a) the Claimants are entitled to the benefit of clauses 2(b) and 3 of the 1968 Transfer;(b) the Defendant is bound by clause 2(b), as well as clause 3, of the 1968 Transfer;(c) the requirement for approval or consent under clauses 2(b) and 3 of the 1968 Transfer is subject to the implied proviso that such approval or consent shall not be withheld unreasonably; and(d) the covenants are enforceable by all of the Claimants.[103]I thank both Counsel for their clear and helpful written and oral submissions. I invite them to agree, if possible, an order reflecting the terms of this judgment.

Cited in 6 later judgments