Alexis Michaela Cecile Blumenthal LP/34/2002

UPPER TRIBUNAL

LANDS CHAMBER

LP/34/2002

Case No LP/34/2002

Between

Alexis Michaela Cecile BlumenthalApplicant

Before

His Honour Judge Michael Rich QC

Venue 48/49 Chancery Lane, London WC2A 1JR

Date 14 January 2004

Hearing 7 January 2004

Property: Hyde Park Gardens, London WC2

Catchwords: Section 84(1) of the Law of Property Act 1925 – Jurisdiction – whether covenant negative or positive – Alterations covenant within Section

[1]The applicant holds a lease of 1 Hyde Park Gardens dated 20th May 1952, granted by Donald St. Aubyn Hamilton to her predecessor in title. It is for the same term of ninety five and three quarter years from 24th June 1951 as the lessor is recited in the lease as holding from the Trustees of the Paddington Estate of the Church Commissioners for England (“the Church Commissioners”), less one day. It is expressed to be subject to, but with the benefit of a lease dated 18th December 1951 granted by the lessor to The Royal Society of Literature (“RSL”) of the Ground Floor, First Floor and part basement of the premises, for a term of 44 years from 29th September 1949. The premises extend to a basement, ground and four upper floors.

[2]The lease held by Donald Hamilton from the Church Commissioners was dated 5th October 1951. It was at the same rent as was required to be paid under the applicant’s lease and, except for the nominal reversion, it was for the same term. The covenants under it correspond in every relevant particular to those contained in the applicant’s lease. It is not however suggested that it was assigned to the applicant’s predecessor in title. The copy which has been produced to the Tribunal is endorsed as having been forfeited, but even if that is so, any consequential forfeiture of the underleases has been treated as having been relieved. It is agreed between the parties that, the Church Commissioners became the immediate reversioners upon the applicant’s lease, and the RSL continued to hold under their underlease from the applicant’s predecessor in title as if the lease granted to Donald Hamilton had merely been surrendered.

[3]The lease granted to Donald Hamilton contained a covenant, in a form which was repeated in the applicant’s lease, and to whose terms I must in due course refer, that the parts of the premises granted to the RSL by the underlease dated 18th December 1951 should be occupied by the RSL. As a matter of speculation it seems likely that the RSL was occupying these areas possibly from 1949 but at any rate before the lease was taken by Donald Hamilton. It may be that their occupation was only formalised by the grant of the underlease in December 1951 subject to which the lease of the whole premises was granted to the applicant’s predecessor in title in May 1952. There is no evidence of any rights held or duties owed by the RSL earlier than the grant of the underlease.

[4]The term granted by the RSL’s underlease was due to expire in September 1993. It appears that they held over for some years before vacating. In April 2001 the then lessee of the premises applied to this Tribunal to modify the covenant restricting the occupation of the parts of the premises which had been included in RSL’s underlease to permit their occupation as three self-contained flats in private residential occupation. On 20th June 2001, the Church Commissioners entered into a Deed of Variation with the then lessee by which the user covenant in the lease was varied to permit the residential occupation of the parts of the premises previously underlet to the RSL in a number of alternative configurations. I shall, in due course refer in detail to these covenants as varied. 2 PRESENT APPLICATION

[5]On 1st April 2002, the present lessee applied to the Tribunal for the further modification of the user clause as varied by the Deed of Variation, which, as so varied, is referred to in the application as “the User Covenant”. The present application also includes an application for the modification of an absolute covenant against alterations (called “the Alterations Covenant”) to make it subject to consent not to be unreasonably withheld or delayed; and an application to modify the covenants in regard to access to the garden serving the premises together with other adjoining properties, called “the Garden Restriction”. The last is in effect largely consequential upon the discontinuance of the RSL’s occupation.

[6]By their notice of objection to the application the Church Commissioners disputed the jurisdiction of the Tribunal to order the proposed modifications under s.84 of the Law of Property Act, 1925. Accordingly by Order dated 11th September 2003, I ordered the hearing of a preliminary issue as to each of these grounds of objection to the Tribunal’s jurisdiction.

[7]The grounds upon which the Tribunal’s jurisdiction is disputed are, however, distinct as between each of the three proposed modifications. When therefore, at the outset of the hearing I was told that it was hoped to be able to resolve the application in respect of the garden restriction by agreement, I agreed to hear no argument in respect of that part of the application. If that part of the application is not so resolved, it will therefore, notwithstanding the Order of 11th September 2003, be open to the Church Commissioners, if so advised, to make submissions at the substantive hearing as to the Tribunal’s jurisdiction to modify the garden restriction.

[8]This decision is therefore confined to the issue of the Tribunal’s jurisdiction to modify the User Covenant and the Alterations Covenant. It will be convenient to set out the arguments and decision on each of the issues separately. THE USER COVENANT

[9]By clause 2 of the lease the lessee covenanted “in the manner set out in the First … Schedule[s] hereto, and also that each and all of the restrictions imposed by the covenants agreements and provisions set out in the said Schedule hereto as to the user of the demised premises …shall at all times during the said term be duly observed and complied with.” This form of covenant is repetitive, but it acknowledges that the covenants to be complied with are both restrictive and positive.

[10]By paragraph 13 of the 1st Schedule to the lease the lessee covenanted as follows:

“A. 23. That neither the demised premises nor any part thereof shall be used for any illegal immoral or improper purposes or for or as a hospital or charitable 3 institution or for the teaching of singing of music of any sort or for any trade business or manufacture or profession whatsoever but that the Lessee will keep and use the demised messuage and any additions thereto as follows:- B (1) As to part of the Basement and the Ground and First Floors as the headquarters of The Royal Society of Literature with Club rooms on the said Ground floor and First floors and with the part of the Basement as a self-contained flat for private residential occupation by the Society’s Secretary. (2) As to the Second floor as a self-contained flat in one private residential occupation only. (3) As to the Third and Fourth floors as a self-contained Maisonette in one private residential occupation only. (4) As to the remainder of the said Basement as a self-contained Flat for the lodging of one Housekeeper or Caretaker only employed by the Lessee in or about that part of the messuage occupied by them and such Housekeeper’s and Caretaker’s Husband and Wife as the case may be but having no other person living with him or her and no consideration by way of rent or any other payment or return shall be received other than actual service as Housekeeper or Caretaker. C. And will not further sub-divide the demised premises or use the same for any other purpose whatsoever. D. And also will keep maintain and treat the entrance hall … and any other parts … which are intended to be used in common by tenants in a style and manner suitable and appropriate for high class private residential Flats and Maisonettes and will in particular cover and keep covered with carpet or other material in good condition suitable for flats and maisonettes of the class aforesaid …. the said staircase and hall and any other such parts of the demised premises as are usually so covered …. keep the front door or doors always closed excepting only when required to be opened and keep such door or doors and the outside entrances generally in such condition as to appear from the outside to be the door or doors and entrances to a high class private dwellinghouse in one occupation …. E. And also will keep and use any forecourt garden or ground forming part of the demised premises as and for private ornamental forecourt garden and ground only in connection with the demised messuage.”

I have omitted sections of irrelevant covenants whilst adding letters to the side of different parts of the paragraph to assist references back.

[11]By the Deed of Variation dated 20th June 2001, new covenants were substituted for two out of four of the subparagraphs to which I have attached the letter “B” in setting out paragraph 13 of the 1st Schedule of the lease, as follows:

“1.2.1 In lieu of paragraph 13(1) aforesaid 4 “(1) As to the part of the basement and ground and first floors of the Premises formerly occupied by The Royal Society of Literature (1)(a) As to the part of the basement as a self-contained flat in private residential occupation. (1)(b) As to the ground floor as a self-contained flat in private residential occupation (1)(c) As to the first floor as a self-contained flat in private residential occupation” and (1)(d) Without prejudice to the foregoing as to the part of the basement and ground and first floors of the Premises formerly occupied by the Royal Society of Literature as a self-contained flat in private residential occupation. (1)(e) Without prejudice to the foregoing as to the part of the basement and the ground floor of the Premises formerly occupied by the Royal Society of Literature as a self contained flat in private residential occupation. (1)(f) Without prejudice to the foregoing as to the part of the ground and first floors of the Premises formerly occupied by the Royal Society of Literature as a self-contained flat in private residential occupation. 1.2.2 In lieu of paragraph 13(4) aforesaid ‘(4) As to the remainder of the basement as a self-contained flat in private residential occupation.’”

[12]The effect of the substituted subparagraphs is agreed to be to permit the area previously sub-let to the RSL to be used for private residential occupation as:(i) three flats, one on each floor, or

(ii) one dwelling on all three floors, or

(iii) two dwellings, one on the basement and ground floors and the other on the first floor, or

(iv) two dwellings, one on the ground and first floors and the other in the part basement. Additionally, the caretaker’s flat as designated in the lease in that part of the basement not let to the RSL, is permitted to be used “as a self–contained flat in private residential occupation”

[13]The application for modification would, as I understand it, but this is a matter for discussion at the substantive hearing, permit additionally the part of the basement not previously let to the RSL to be incorporated either into a single basement flat or into a single dwelling on all three floors. Neither the Deed of Variation nor the further modifications now proposed would affect the use of the second floor as a single flat nor the use of the third and fourth floors as a single maisonette. Although this would involve a modification of a covenant entered into, in its modified form, less than 25 years ago, it is accepted on behalf of the Church Commissioners that that does not exclude the jurisdiction of the Tribunal, although it would go to the way in which the Tribunal should exercise any discretion: see Ridley v. Taylor

[1965] 1WLR 611

. 5

[14]The jurisdiction of the Tribunal under s84 in respect of leases granted for terms exceeding 40 years of which 25 years have expired, is the same as in respect of freeholds, namely to discharge or modify “any restriction … as to user …” There is no dispute, on this aspect of the application that the covenant affects user. The contention of Mr Thom QC who appears for the Church Commissioners is that the covenant is a positive covenant and therefore not a “restriction” within the meaning of the Section. Mr Kirk Reynolds QC, for the applicant accepts that if, properly construed the covenant proposed to be modified is a positive covenant then there is no jurisdiction to modify it. This was likewise conceded by counsel in Westminster City Council v. Duke of Westminster

[1991] 4 All ER 136

and no attempt was made to argue that the fact that a covenant may be partly negative in its effect was sufficient to found jurisdiction if, on its true construction it imposes positive obligations on the covenantor. I did not invite argument on this point although my further consideration of the decision of the Court of Appeal in Abbey Homesteads (Developments Ltd v Northamptonshire County Council

[1986] 1EGLR 24

in the course of preparing this decision, leads me to think that it is a question worthy of further consideration. The issue as joined by the parties is therefore solely whether the covenants as to use of the basement ground and first floors require the lessee actually to use these areas for one or another of the uses now permitted or merely forbid their use for any other purpose.

[15]Counsel were further agreed that although it is, of course, the true construction of the substitute covenants with which I must be concerned, the Deed of Variation should not readily be taken to have altered what was a purely negative covenant into a positive one or vice versa, and so the proper starting point is the true construction of paragraph 13 of the 1st Schedule of the lease as originally executed. In construing it, moreover, both counsel are agreed that I am not bound by the words used but must determine the true substance of the covenant.

[16]I have helpfully been referred to a number of cases where the positive or negative nature of covenants has fallen to be considered for different purposes. Again both counsel accept that these are illustrative only, because matters of construction depend on the words used and the context in which they are used. None the less three cases do seem to me to be of particular assistance in leading me to the proper construction of the user clause in this case. In the Westminster Case the covenant which fell to be construed was :

“That save as hereinafter provided the demised premises shall not nor shall any part thereof be used for any art trade business or profession whatsoever but that the said demised premises with the offices thereto shall be kept and used only for the purposes of the Grosvenor Housing Scheme as dwellings for the working classes … and for no other purpose Provided that the ground floor and basements of the said demised premises may be used as shops offices surgeries and storage in connection therewith”

Harman J. held that at p. 147:

“…In my judgement the obligation here undertaken is a positive obligation. The word “used” carries to my mind a connotation of a duty to use. The whole phrase suggests to me, what in my view is shown by the heads of agreement and other material in evidence to be the case, that the purpose of the grant was to provide buildings in which the City of Westminster would keep tenants. It is not a covenant that could be performed by keeping the buildings empty with a view to reducing expenditure on 6 maintenance. In my judgement, the contrast in wording between the negative covenant in the first lines of the covenant followed by the words “but that” show a clear shift of meaning from restraint to activity.”

I would however draw attention to the reference to the heads of agreement and other evidence which showed that the Duke had granted the land to the City in accordance with a private Act of Parliament passed for the purpose of establishing the Grosvenor Housing Scheme, a scheme of housing for the working class.

[17]In the Abbey Homesteads Case the covenant arose under an agreement which recited that it was made under s.52 of the Town and Country Planning Act 1971 which permits agreement “for the purpose of restricting or regulating the development or use of land”. Paragraph 5 of the Schedule to the agreement provided as follows:

“An area of 1.3 hectares adjacent to the playing field and amenity open space areas shall be reserved for school purposes” but the precise definition of the 1.3 hectares was left to the covenantor. Lawton LJ was dismissive of the argument that since there was no covenant not to use for other purposes, it must be construed as positive. He said at p.26C “on a natural reading of para 5… the developers covenanted … that 1.3 hectares should not be used other than for school purposes. This covenant was just as restrictive as the seminal one in Tulk v Moxhay (1848) 2 Ph 774 which was to keep the plot and land forming Leicester Square Gardens as it was at the time of the conveyance. Under paragraph 5 all the developers had to do was to refrain from building on the 1.3 hectares”

. Parker LJ for his part at p. 26L posed the question “Were the respondents free to build houses on the land?” and answered it “No they were not!” and commented “If that is not restrictive I do not know what is”.

[18]In Montross Associated Investments SA v Moussaieff

[1990] 2EGLR 61

Mr Thomas Morrison QC sitting as a Deputy Judge in the Chancery Division construed a clause which forbade a number of named uses and continued “but will use the demised premises either for the business of high class retailers of jewellery and/or antiques and/or luxury goods and/or a travel agency or a recognised Bank ..” as negative. He treated the words “will use” as merely an emphatic statement of the prohibition of other uses. The Court of Appeal at

[1992] EGLR 55

found it unnecessary to decide whether he was right in that construction. It is clear however that Nourse LJ at p.56 K thought that it was at least possible that it should have been construed as a positive obligation and Parker LJ at p.57C said “I find it hard to suppose that, when a series of negative covenants are followed by the words “but will use”, the intention was merely to create an emphatic negative. The change of language is marked, it is positive in form and I am not convinced that any good reason exists for holding that the substance is different from the form.” 7 The decision of Hoffman J. in Tea Trade Properties Ltd v CIN Properties Ltd

[1990] 1 EGLR 155

from whom the expression “emphatic negative” derives at p.157J does not in my judgement help with the construction of the covenant in paragraph 13 of the lease.

[19]There can, in my judgement, be no doubt that the words used to introduce section “B” of the paragraph, “will keep and use” are, as accepted in the Westminster and in the Montross Cases, apt to impose a positive obligation actually to use the premises as there required. Linguistic analysis supports this even more strongly than in the case of the covenant which fell to be construed in the Westminster Case. The contrast in wording to which Harman J. drew attention in that case with the preceding general negative covenant which was to similar effect as section “A” of Paragraph 13, is further emphasised in paragraph 13 by a change in voice from the passive to the active:

“but that the lessee will” (my underlining). But if there is a contrast in wording between what is a negative covenant in “A” and language apt for a positive covenant in “B”, there is at least an anomaly in the reversion to a negative covenant in “C” “And will not further sub-divide the demised premises or use the same for any other purpose whatsoever”

. If “B” is construed as negative, “C” is an apt completion of the covenant; if, however, “B” is construed as positive then “C” is at best unnecessary emphasis. The paragraph then proceeds through a number of positive obligations, which I have merely excerpted at paragraph 10 of this Decision to section “E”, which also uses the formula “and will also keep and use”. But the use to which the relevant part of the demised premises is to be put is “as and for private ornamental forecourt garden and ground only”. There is no provision for its maintenance as a garden or its upkeep as such, as opposed to its merely being kept, which seems to imply no more than not using it for another purpose. I construe the covenant at “E” as negative, notwithstanding its use of the formula “keep and use”, and I regard the language employed at “B” as equivocal in its context, particularly of the negative sweep-up contained at “C”.

[20]I turn therefore to consider the factual context in which the lease was granted. It followed the wording already contained in the head-lease granted to Donald Hamilton on 5th October 1951. If the covenants had been only those contained in sub-paragraphs (2) and (3) referring to the second floor and to the 3rd and 4th floors respectively, I do not think that one would naturally read those obligations as positive, amongst other reasons because of the use of the adverb “only”. Mr Thom correctly points out that the adverb may qualify “in one Residential occupation only” rather than the whole covenant “to keep and use as a self- contained flat in one residential occupation only”. Nevertheless, on balance I think that the covenants at sub-paragraphs (2) and (3) are more naturally read as negative rather than positive, and certainly there is no such change of language as to make it sensible to read sub- paragraphs (1) and (4) as positive if one reads (2) and (3) as negative. But the head lessee was entering into the covenant at sub-paragraph (1) before, as far as the evidence of the documents goes, there was any obligation on the part of the RSL to occupy at all. At the date when the applicant’s predecessor in title entered into the 1952 lease an underlease had been taken by the RSL but for a term less than half of the term granted to and taken by the applicant’s predecessor. It is improbable that the parties intended that the covenantor should enter into an obligation which he had no power to comply with, and I would not so construe the covenant unless the words used compelled such construction. 8

[21]That it should not be so construed is, in my judgement, reinforced by further consideration of the documents. Firstly the form of covenant itself, although pointing to activity rather than restraint in using the active rather than the passive voice introduces an inconsistency in specifically referring to “the Lessee”, because the only active keeping and using that the Lessee can do of premises as the Headquarters of the RSL is to keep them available by not using them for other purposes. The underlease, subject to which the lease was granted meanwhile contained a covenant in non-matching form, “will not use or permit or suffer to be used the demised premises or any part thereof for any illegal or immoral purpose nor as a hospital or for teaching of singing or music of any sort Nor for any trade business manufacture or profession whatsoever But will keep and use the demised premises as and for the general purposes of the Tenant and its members.” The underlined obligation in the underlease is less specific than the requirements of sub-paragraph (1) of paragraph 13 of the lease which the lessee had no right to enforce. The RSL moreover had a right to assign. There is room for argument, which it is not necessary to resolve, as to whether this was limited to the circumstances of the RSL being unable to continue it activities. At the least to construe the obligation in the lease as a positive obligation rendered the Lessee liable to find himself in breach of covenant for circumstances which he had no power to prevent. That at the least makes an intention to create a positive intention unlikely.

[22]Although, having regard to the agreed position of counsel I have directed my attention firstly to the original provisions of paragraph 13, I think that the substituted provisions as drafted point the same way. The revised sub-paragraph (4) does not use the word “only” where sub-paragraphs (2) and (3) do. That would be more consistent with a positive covenant. But the formulation of the substituted sub-paragraph (1) is far from clear to impose a positive obligation. The expression “without prejudice” to introduce alternative uses which are acceptable is, I think, a misuse of language, on any basis, but it must mean that the alternative which it introduces may be substituted for the “foregoing”. If the foregoing was intended to be an obligation rather than a permission, the use of “without prejudice to the foregoing” seems to me to be particularly inapt.

[23]For the above reasons I conclude that the user covenant is not a positive covenant but is a restrictive covenant, and that the Tribunal does accordingly have jurisdiction to modify in accordance with s.84 of the Act. THE ALTERATIONS COVENANT

[24]Paragraph 15 of the 1st Schedule of the Lease contains the covenant “that the Lessee will not make or permit or suffer to be made any alteration in the external or internal plan or construction or in the height roof principal or bearing walls timbers or girders elevation or architectural appearance of the said building or any part thereof Nor erect nor build nor permit nor suffer to be erected or built any new additional or substituted building whatsoever upon the demised premises or upon any area forecourt yard garden or ground thereof.”

[25]It is clear that some work, which would be in breach of such covenant, unless expressly licensed, would be necessary in order to permit the part of the premises previously underlet to 9 the RSL to be converted to at least some, if not all, the uses permitted by the Deed of Variation, and, if the Tribunal is so persuaded, to be permitted by any further modification of the user covenant. The application is, however, to modify the covenant by adding after the word “not” the words “(without the Lessor’s consent, not to be unreasonably withheld or delayed)”. Although, of course, it is a matter for the substantive hearing, and I have not therefore heard argument as to its appropriateness, if the Tribunal does have jurisdiction to modify the covenant as asked, I thought that it would be helpful to the parties to observe, in the course of the hearing, that my inclination would be to reserve to the Tribunal the opportunity to consider specific schemes of alteration, rather than to modify the covenant so radically. I record that observation in this Decision.

[26]The objection taken in the notice of objection is that “the Alterations Covenant is not a covenant as to the user of the premises within the meaning of Section 84(1) of the Law of Property Act 1925”. That I find a difficult matter of construction, although it is one which I will address, for reasons which I will explain. It seems to me however that it is not determinative of the Tribunal’s jurisdiction which extends to any restriction in regard to leasehold land within s.84(12) “as to the user thereof or the building thereon” (my underlining). S205 (1)(ix) of the Act defines “Land” to include buildings or parts of buildings. There is nothing in the context of S.84 to require the reference to building on land other than to include building works on the building demised, and it seems to me to be clear that the Tribunal does have jurisdiction to modify the Alterations Covenant in respect of virtually everything that is forbidden by it, on the basis that it is a restriction “as to… the building thereon”.

[27]The covenant does however forbid the making of any alteration to the internal plan, which might require no more building work than the demolition of a non-bearing wall and redecoration. I do not think that such work could properly be classed as “building thereon”, and it might be said that the express inclusion of a reference to building in the Section is a reason for not treating such building work as “user thereof”. Such construction would, however, in my judgement, be perverse and would work against the evident purpose of the Section, and I reject it.

[28]In reaching this conclusion, I coincide with the conclusion arrived at by Professor Scamell in his book “Land Covenants” at p. 329 to which Mr Kirk Reynolds QC referred me. The author there said :

“The only category of “restriction” to which section 84(1) applies is a restriction as to the “user” of land or as to the “building” on land. Prima facie, a restriction on building is a species of restriction on user – and this seems to be implicit in certain other statutory provisions dealing with restrictive covenants.”

He then went on in a footnote to say “there can be little doubt that an express restriction on altering any building is a restriction on user within the meaning of s.84(1).” This may well be right as to alterations. I would however doubt that all building work is to be classified as user, and some I think cannot be classified as “building thereon”, but, in my judgement everything within the Alterations Covenant falls into one or other category, if not both.

[29]In Langevad v Chiswick Quay Freeholds Ltd

[1999] 1 EGLR 61

, Buxton LJ analysed s.10(4) of the Leasehold Reform Act 1967 by reference to other enactments. I think that when he turned from that section to s. 84(1) of the Law Property Act 1925, he had in mind the 10 difficulty of construing “user” to include all building works, if the word is used in an enactment which refers to both separately, as s. 84 does. Section 10(4) of the 1967 Act defined restrictive covenants to which it was to apply, parenthetically as “(that is to say any covenant or agreement restrictive of the user of any land or premises)” (my underlining). He concluded that this definition did not exclude covenants restrictive of building works from falling within the sub-section. They were covenants restrictive of user. He gained support for that conclusion from his consideration of other statutes which he regarded as more relevant than s. 84(1). However, at p.63A he said:

“it is right, however, to remark about section 84 of the Law of Property Act that, although the sidenote to the section is “power to discharge or modify restrictive covenants affecting land”, the terms of the section itself purport to be a definition or explanation of that expression “restrictive covenants”

. They are therefore less compelling as an aid to our problem of construction than the more definitional terms adopted in the Land Charges Act. It is also right (although I make this point with caution, because it was not fully explored before us) that the powers of the Lands Tribunal under section 84 may go wider than powers in relation to restrictive covenants in the property lawyer’s sense of the word.” So far as the researches of counsel go, this is the only case where any consideration has been given to the scope of s.84 in regard to covenants against alterations. It certainly gives me no reason to treat what would be restrictive covenants within the property lawyer’s sense of the word, as not within the jurisdiction granted to this Tribunal by the Section.

[30]For these reasons, I conclude that the Tribunal does have jurisdiction to modify the Alterations Covenant if, and in so far, as it may be persuaded at a substantive hearing. CONCLUSION

[31]If the parties can agree the appropriate order as to costs and further directions for the hearing of the substantive issue, they may deliver to the Tribunal a proposed agreed order for approval. Otherwise the applicant should apply for the fixing of a further hearing to determine costs and to give directions for further trial. Dated 14 January 2004 (signed) His Honour Judge Michael Rich QC 11