Rhone v Stephens [1994] UKHL 3

House of Lords

RhoneAppellantStephensRespondent
Lord TemplemanDate 17 March 1994
It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal of the 15th day of January 1993 complained of in the said Appeal be, and the same is hereby, Affirmed and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered. That the Costs incurred by the Respondent in this House and in the Court of Appeal be paid out of the Legal Aid Fund in accordance with section 18 of the Legal Aid Act 1988, such order to be suspended for four weeks to allow the Legal Aid Board to object if they wish: And it is also further Ordered. That the Costs incurred by the Appellants in respect of the said Appeal be taxed in accordance with the Legal Aid Act 1988.Cler: Parliamentor:

Judgment: 17 March 1994

HOUSE OF LORDS

RHONE (A.P.) AND ANOTHER (A.P.) (APPELLANTS)

v.

STEPHENS (EXECUTRIX OF MRS. M. BARNARD, DECEASED)

(RESPONDENT)

Lord Templeman Lord Oliver of Aylmerton Lord Woolf Lord Lloyd Lord Nolan

LORD TEMPLEMAN

My Lords,This appeal raises the question of the enforceability of positive covenants between owners of freehold estates and involves consideration of the rule in Austerberry v. Oldham Corporation (1885) 29 Ch. D. 750 ("the Austerberry Case").The roof which covers Walford House also covers part of Walford Cottage. Both properties were in common ownership until by a conveyance dated 27 August 1960 Walford Cottage was sold. The conveyance contained the following provisions:
"2 It is hereby agreed and declared between the Vendor and the Purchasers that all easements quasi-easements or rights in the nature of easements as now existing between the property hereby conveyed and the adjoining property of the Vendor known as Walford House aforesaid shall continue for the benefit of the respective properties.
"3 The Vendor herby covenants for himself and his successors in title owner or occupiers for the time being of the property known as Walford House aforesaid to maintain to the reasonable satisfaction of the Purchasers and their successors in title such part of the roof of Walford House aforesaid as lies above the property conveyed in wind and water tight condition."
Clause 2 of the 1960 Conveyance had the effect, inter alia, of conferring and confirming on Walford House the right to be supported by the contiguous Walford Cottage. The 1960 Conveyance also had the effect of

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conferring and confirming on Walford Cottage the right to be supported by Walford House. Clause 3 of the 1960 Conveyance did not confer any rights on Walford Cottage but by its express terms it appears to confer on the owners for the time being of Walford Cottage the right to sue the owner for the time being of Walford House for damages if the roof is not kept wind and watertight.Since 1960 both properties have been sold. The appellant plaintiffs are now the owners of Walford Cottage. The respondent defendant is the executrix of the last owner of Walford House. The trial judge ordered the owner of Walford House to pay damages to the owners of Walford Cottage for breach of the covenant contained in Clause 3 of the 1960 conveyance to keep the roof of Walford House which lies above Walford Cottage in wind and water tight condition. The Court of Appeal reversed the judge and dismissed the action.Mr. Spens who appeared for the owner of Walford House says that the covenant has never been breached because the part of the roof which is out of repair belongs to Walford Cottage. Examination of the plans attached to the conveyance however show that the covenant to repair must refer to the roof which protects both properties. So upon the true construction of the 1960 conveyance the owner of Walford House was in breach of the covenant to

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repair.At common law a person cannot be made liable upon a contract unless he was a party to it. In Cox v. Bishop (1857) 8 De. G. & J. 276 (44 E.R. 604) a lease was assigned to a man of straw and it was held that the covenants in the lease could not be enforced against an equitable assignee of the lease who had entered into possession. The covenants were not enforceable because there was no privity of contract or estate between the lessee and the assignee. The rigours of the common law which do not allow covenants to be enforced by and against successors in title were relaxed first by the doctrines laid down in Spencer's case (1583) 5 Co. Rep. 16a and then by statutory extensions of those doctrines introduced by the Grantees of Reversions Act 1540 (32 Hen. 8 c34), the Conveyancing Act 1881 and the Conveyancing Act 1911 now repealed and reproduced in sections 141 and 142 of the Law of Property Act 1925. In the result, as between landlord and tenant both the burden and the benefit of a covenant which touches or concerns the land demised and is not merely collateral run with the reversion and the term at law whether the covenant be positive or restrictive. As between persons interested in land other than as landlord and tenant, the benefit of a covenant may run with the land at law but not the burden; see the Austerberry case.Thus Clause 3 of the 1960 Conveyance, despite its express terms, did not confer on the owner for the time being of Walford Cottage the right at common law to compel the owner for the time being of Walford House to repair the roof or to obtain damages for breach of the covenant to repair. In this appeal, Mr. Munby, on behalf of the owners of Walford Cottage contends

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that equity will compel the owner of Walford House to comply with the covenant to repair the roof or to pay damages in lieu.My Lords,equity supplements but does not contradict the common law. When freehold land is conveyed without restriction, the conveyance confers on the purchaser the right to do with the land as he pleases provided that he does not interfere with the rights of others or infringe statutory restrictions. The Conveyance may however impose restrictions which, in favour of the covenantee, deprive the purchaser of some of the rights inherent in the ownership of unrestricted land. In Tulk v. Moxhay (1848) 2 Ph. 774, a purchaser of land covenanted that no buildings would be erected on Leicester Square. A subsequent purchaser of Leicester Square was restrained from building. The conveyance to the original purchaser deprived him and every subsequent purchaser taking with notice of the covenant of the right, otherwise part and parcel of the freehold, to develop the Square by the construction of buildings. Equity does not contradict the common law by enforcing a restrictive covenant against a successor in title of the covenantor but prevents the successor from exercising a right which he never acquired. Equity did not allow the owner of Leicester Square to build because the owner never acquired the right to build without the consent of the persons (if any) from time to time entitled to the benefit of the covenant against building. In Tulk v. Moxhay the speech of Lord (Cottenham L.C. contained the following passage at p. 777:
"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."
Equity can thus prevent or punish the breach of a negative covenant which restricts the user of land or the exercise of other rights in connection with land. Restrictive covenants deprive an owner of a right which he could otherwise exercise. Equity cannot compel an owner to comply with a positive covenant entered into by his predecessors in title without flatly contradicting the common law rule that a person cannot be made liable upon a contract unless he was a party to it. Enforcement of a positive covenant lies in contract; a positive covenant compels an owner to exercise his rights. Enforcement of a negative covenant lies in property; a negative covenant deprives the owner of a right over property. As Lord Cottenham said in Tulk v . Moxhay at p. 778:
"if an equity is attached to the property by the owner, no one purchasing with notice of that equity can stand in a different situation from the party from whom he purchased."
Following Tulk v. Moxhay there was some suggestion that any covenant affecting land was enforceable in equity provided that the owner of

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the land had notice of the covenant prior to his purchase. In Morland v. Cook (1868) L.R. 6 Eq. 252 lands below sea level were partitioned by a deed containing a covenant that the expense of maintaining the sea wall should be borne by the owners of the lands and payable out of the lands by an acre-scot. Lord Romilly M.R. enforced the covenant against a subsequent purchaser of part of the lands on the grounds that he had purchased with notice of the covenant. In Cooke v. Chilcott (1876) 3 Ch. D. 694 a covenant by the purchaser of land with a well to erect a pump and reservoir and to supply water from the well to all houses built on the vendor's land was enforced against a subsequent purchaser of the land burdened with the covenant on the grounds that the covenant ran with the land but that in any event the defendant took with notice of the obligation. Malins V.-C. said, at p. 701:
"I think that when a contract is entered into for the benefit of contiguous landowners, and one is bound by it and the other entitled to the benefit of it, the covenant binds him for ever, and also runs with the land. But it is equally clear that he is bound by taking the land with notice of the covenant."
These last two cases did not survive the decision of the Court of Appeal in Haywood v. The Brunswick Permanent Benefit Building Society (1881) 8 Q.B.D. 403. In that case land had been conveyed in consideration of a rent charge and a covenant to build and repair buildings; a mortgagee of the land was held not to be liable on the covenant either at law or in equity although the mortgagee had notice of the covenant. Brett L.J. said, at p. 408 that Tulk v. Moxhay :
"decided that an assignee taking land subject to a certain class of covenants is bound by such covenants if he has notice of them, and that the class of covenants comprehended within the rule is that covenants restricting the mode of using the land only will be enforced. It may be also, but it is not necessary to decide here, that all covenants also which impose such a burden on the land as can be enforced against the land would be enforced ... It is said that if we decide for the defendants we shall have to overrule Cooke v. Chilcott, 3 Ch. D. 694. If that case was decided on the equitable doctrine of notice, I think we ought to overrule it."
Cotton L.J. said, at p. 409:
"Let us consider the examples in which a court of equity has enforced covenants affecting land. We find that they have been invariably enforced if they have been restrictive, and that with the exception of the covenants in Cooke v. Chilcott 3 Ch. D. 694, only restrictive covenants have been enforced."

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Cotton LJ. also said, that Tulk v. Moxhay:
"lays down the real principle that an equity attaches to the owner of the land . . . The covenant to repair can only be enforced by making the owner put his hand into his pocket, and there is nothing which would justify us in going that length."
In London and South Western Railway Co. v . Gomm (1882) 20 Ch.D. 562 an option to purchase land on the happening of an uncertain event was held to be void for remoteness. It was argued that the covenant was enforceable in equity. Jessel M.R. said, at pp. 582-583:
"With regard to the argument founded on Tulk v. Moxhay, 2 Ph. 774 that case was very much considered by the Court of Appeal in Haywood v . The Brunswick Permanent Benefit Building Society, 8 Q.B.D. 403, and the court there decided that they would not extend the doctrine of Tulk v. Moxhay to affirmative covenants, compelling a man to lay out money or do any other act of what I may call an active character, but that it was to be confined to restrictive covenants. Of course that authority would be binding upon us if we did not agree to it, but I most cordially accede to it. I think that we ought not to extend the doctrine of Tulk v. Moxhay in the way suggested here. The doctrine of that case . . . appears to me to be either an extension in equity of the doctrine of Spencer's case to another line of cases, or else an extension in equity of the doctrine of negative easements . . . The covenant in Tulk v. Moxhay was affirmative in its terms, but was held by the court to imply a negative. Where there is a negative covenant expressed or implied, ... the court interferes on one or other of the above grounds. This is an equitable doctrine, establishing an exception to the rules of common law which did not treat such a covenant as running with the land, and it does not matter whether it proceeds on analogy to a covenant running with the land or on analogy to an easement. The purchaser took the estate subject to the equitable burden, with the qualification that if he acquired the legal estate for value without notice he was freed from the burden."
Lindley L.J. said, at pp. 587-588, that because in Haywood v. Brunswick Permanent Benefit Building Society (1881) 8 Q.B.D. 403 it was sought to extend the doctrine of Tulk v. Moxhay:
"to a degree which was thought dangerous, considerable pains were taken by the court to point out the limits of that doctrine . . . The conclusion arrived at ... was that Tulk v. Moxhay, when properly understood, did not apply to any but restrictive covenants."
In the Austerberry case the owners of a site of a road covenanted that they and their successors in title would make the road and keep it in repair.

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The road was sold to the defendants and it was held that the repair covenant could not be enforced against them. Cotton L.J. said, 29 ChD 750 , 773
"Undoubtedly, where there is a restrictive covenant, the burden and benefit of which do not run at law, courts of equity restrain anyone who takes the property with notice of that covenant from using it in a way inconsistent with the covenant. But here the covenant which is attempted to be insisted upon on this appeal is a covenant to lay out money in doing certain work upon this land; and, that being so ... that is not a covenant which a court of equity will enforce: it will not enforce a covenant not running at law when it is sought to enforce that covenant in such a way as to require the successors in title of the covenantor, to spend money, and in that way to undertake a burden upon themselves. The covenantor must not use the property for a purpose inconsistent with the use for which it was originally granted; but in my opinion a court of equity does not and ought not to enforce a covenant binding only in equity in such a way as to require the successors of the covenantor himself, they having entered into no covenant, to expend sums of money in accordance with what the original covenantor bound himself to do."
In re Nisbet and Potts' Contract [1905] 1 Ch 391 it was held that a title acquired by adverse possession was not paramount to, and did not destroy the equitable right of persons entitled to the benefit of prior restrictive covenants to enforce them against the land. Farwell J. said, at pp. 396-397:
"Covenants restricting the enjoyment of land, except of course as between the contracting parties and those privy to the contract, are not enforceable by anything in the nature of action or suit founded on contract. Such actions and suits alike depend on privity of contract, and no possession of the land coupled with notice of the covenants can avail to create such privity: Cox v. Bishop (1857) 8 De G.M. & G. 815. But if the covenant be negative, so as to restrict the mode of use and enjoyment of the land, then there is called into existence an equity attached to the property of such a nature that it is annexed to and runs with it in equity: Tulk v. Moxhay, 2 Ph. 774. This equity, although created by covenant or contract, cannot be sued on as such, but stands on the same footing with and is completely analogous to an equitable charge on real estate created by some predecessor in title of the present owner of the land charged. . . . effect is given to the negative covenant by means of the land itself. But the land cannot spend money on improving itself, and there is no personal liability on the owner of the land for the time being, because there is no contract on which he can be sued in contract."
For over a hundred years it has been clear and accepted law that equity will enforce negative covenants against freehold land but has no power to enforce positive covenants against successors in title of the land. To enforce

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a positive covenant would be to enforce a personal obligation against a person who has not covenanted. To enforce negative covenants is only to treat the land as subject to a restriction.Mr. Munby who argued the appeal persuasively on behalf of the owners of Walford Cottage referred to an article by Professor Sir William Wade and other articles in which the present state of the law is subjected to severe criticism. In 1965 a Report by a committee appointed by the Lord Chancellor and under the chairmanship of Lord Wilberforce (Cmnd. 2719) referred to difficulties caused by the decision in the Austerberry case and recommended legislation to provide that positive covenants which relate to the use of land and are intended to benefit specified other land should run with the land. The Law Commission published on 5 July 1971 Working Paper No. 36 in which the present law on positive rights was described as being illogical, uncertain, incomplete and inflexible. The Law Commission Report No. 127 laid before Parliament in 1965 made recommendations for the reform of the law relating to positive and restrictive obligations and submitted a draft Bill for that purpose. Nothing has been done.In these circumstances your Lordships were invited to overrule the decision of the Court of Appeal in the Austerberry case. To do so would destroy the distinction between law and equity and to convert the rule of equity into a rule of notice. It is plain from the articles, reports and papers to which we were referred that judicial legislation to overrule the Austerberry case would create a number of difficulties, anomalies and uncertainties and affect the rights and liabilities of people who have for over 100 years bought and sold land in the knowledge, imparted at an elementary stage to every student of the law of real property, that positive covenants affecting freehold land are not directly enforceable except against the original covenantor. Parliamentary legislation to deal with the decision in the Austerberry case would require careful consideration of the consequences. Moreover, experience with leasehold tenure where positive covenants are enforceable by virtue of privity of estate has demonstrated that social injustice can be caused by logic. Parliament was obliged to intervene to prevent tenants losing their homes and being saddled with the costs of restoring to their original glory buildings which had languished through wars and economic depression for exactly 99 years.Mr. Munby submitted that the decision in the Austerberry case had been reversed remarkably but unremarked by section 79 of the Law of Property Act 1925 which so far as material provides as follows:
"(1) A covenant relating to any land of a covenantor or capable of being bound by him, shall, unless a contrary intention is expressed, be deemed to be made by the covenantor on behalf of himself, his successors in title and the persons deriving title under him or them, and, subject as aforesaid, shall have effect as if such successors and other persons were expressed."

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This provision has always been regarded as intended to remove conveyancing difficulties with regard to the form of covenants and to make it unnecessary to refer to successors in title. A similar provision relating to the benefit of covenants is to be found in section 78 of the Act of 1925. In Smith and Snipes Hall Farm Ltd. v. River Douglas Catchment Board [1949] 2 K.B. 500 followed in Williams v. Unit Construction Co. Ltd. (1951) 19 Conv. (N.S.) 262 it was held by the Court of Appeal that section 78 of the Act of 1925 had the effect of making the benefit of positive covenants run with the land. Without casting any doubt on those longstanding decisions I do not consider that it follows that section 79 of the Act of 1925 had the corresponding effect of making the burden of positive covenants run with the land. In Jones v. Price [1965] 2 Q.B. 618, 633, Willmer L.J. repeated that:
"a covenant to perform positive acts ... is not one the burden of which runs with the land so as to bind the successors in title of the covenantor: see Austerberry v. Oldham Corporation."
In Sefton v. Tophams Ltd. [1967] A.C. 50 Lord Upjohn at p. 73 and Lord Wilberforce at p. 81 stated that section 79 of the Law of Property Act 1925 does not have the effect of causing covenants to run with the land. Finally in Federated Homes Ltd. v. Mill Lodge Properties Ltd. [1980] 1 W.L.R. 594, 605-606, Brightman J. referred to the authorities on section 78 of the Act of 1925 and said that:
"Section 79, in my view, involves quite different considerations and I do not think that it provides a helpful analogy."
Mr. Munby also sought to persuade your Lordships that the effect of the decision in the Austerberry case had been blunted by the "pure principle of benefit and burden" distilled by Sir Robert Megarry V.-C. from the authorities in Tito v. Waddell (No.2) [1977] 1 Ch. 106, at 301 et seq. I am not prepared to recognise the "pure principle" that any party deriving any benefit from a conveyance must accept any burden in the same conveyance. Sir Robert Megarry relied on the decision of Upjohn J. in Halsall v. Brizell [1957] Ch. 169. In that case the defendant's predecessor in title had been granted the right to use the estate roads and sewers and had covenanted to pay a due proportion for the maintenance of these facilities. It was held that the defendant could not exercise the rights without paying his costs of ensuring that they could be exercised. Conditions can be attached to the exercise of a power in express terms or by implication. Halsall v. Brizell was just such a case and I have no difficulty in whole-heartedly agreeing with the decision. It does not follow that any condition can be rendered enforceable by attaching it to a right nor does it follow that every burden imposed by a conveyance may be enforced by depriving the covenantor's successor in title of every benefit which he enjoyed thereunder. The condition must be relevant to the exercise of the right. In Halsall v. Brizell there were reciprocal benefits and burdens enjoyed by the users of the roads and sewers. In the present case

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Clause 2 of the 1960 Conveyance imposes reciprocal benefits and burdens of support but Clause 3 which imposed an obligation to repair the roof is an independent provision. In Halsall v. Brizell the defendant could, at least in theory, choose between enjoying the right and paying his proportion of the cost or alternatively giving up the right and saving his money. In the present case the owners of Walford House could not in theory or in practice be deprived of the benefit of the mutual rights of support if they failed to repair the roof.In the result I would dismiss the appeal and make the usual order for costs against the appellant subject to the usual appropriate legal aid reservations.

LORD OLIVER OF AYLMERTON

My Lords,For the reasons given by my noble and learned friend Lord Templeman I too would dismiss the appeal.

LORD WOOLF

My Lords,I have benefited from reading in draft the speech of my noble and learned friend. Lord Templeman. I agree with it and for the reasons he gives I would dismiss this appeal.

LORD LLOYD

My Lords,I have read the speech of my noble and learned friend. Lord Templeman, in draft. I agree that for the reasons he gives this appeal should be dismissed.

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LORD NOLAN

My Lords,For the reasons given by my noble and learned friend Lord Templeman I too would dismiss the appeal.

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