89 Holland Park (Management) Ltd v Hicks [2013] EWHC 391
Facts
The First Claimant was the freehold owner of 89 Holland Park and the Second to Seventh Claimants were lessees of five of the six flats there. The Defendant was the owner of the land adjoining 89 Holland Park,
The freehold of No.89 and the land adjacent to No.89 were previously owned by R. In 1965, R conveyed the land adjacent to No.89 to F. The transfer contained certain restrictive covenants and these were then varied by a subsequent deed in 1968. The 1968 Deed referred to R as the 'Adjoining Owner' and F as the 'Building Owner' and contained the following clauses:
Clause 2(b) stated that the Building Owner would not make any applications in respect of any plans, drawings or specifications unless the application had previously been approved by the Adjoining Owner.
Clause 3 stated that no work would be started on the land until the plans, drawings and specifications of the buildings had been approved by the Adjoining Owner.
Clause 6 stated that "[t]he expressions 'Building Owner' and 'Adjoining Owner' shall where the context permits include their respective executors administrators and assigns".
The freehold of No.89 and of the adjoining land were subsequently conveyed to the First Claimant and the Defendant respectively. The Claimants sought declarations that they were entitled to the benefit of the covenants contained in the 1968 Deed which had been entered into by the predecessors of the First Claimant and the Defendant (as the Adjoining Owner and the Building Owner respectively).
Issues
1. Whether the Claimants were entitled to enforce the covenants in clauses 2(b) and 3 of the 1968 Deed.
2. Whether the covenant in clause 2(b) was binding on the Defendant.
3. If the covenants in clauses 2(b) and 3 were enforceable, whether they were subject to an implied proviso that the approval of the Adjoining Owner may not be withheld unreasonably.
4. Whether the Second to Seventh Claimants, as lessees of 89 Holland Park, were able to enforce clauses 2(b) and 3.
Decision
On the first issue, it was held that the benefit of the covenants in clauses 2(b) and 3 of the 1968 Deed passed to the successors-in-title and therefore to the First Claimant under s.78 LPA 1925. The Defendant had submitted that the terms of the 1968 Deed showed that the parties did not intend for the benefit of the covenants to pass to the successorsin- title of No. 89 without an express contractual assignment. It was therefore argued by the Defendant that the position was analogous to the case of Roake v Chadha1in which it was held that the effect of s.78 LPA 1925 could be displaced by evidence of contrary intention of the parties. However, it was held that in the reading of the 1965 Transfer and 1968 Deed together there were no clear indications that the parties intended for the benefit of the covenants to be prevented from passing with the land and therefore the parties' intentions were consistent with s.78 LPA 1925.
The Judge also rejected the Defendant's argument that it would have been commercially sensible for R to intend the benefit of the covenants to only pass by express assignment from him rather than with the land. The Judge distinguished the case from Crest Nicholson Residential (South) Ltd v McAllister2and Roake v Chadha, where the covenantee was selling off an estate plot by plot and therefore might wish to retain control over the land. In contrast, he stated where there is a straightforward sale of land by a vendor who retains the neighbouring land, the Judge felt it would be expected that the benefit of covenants would pass with the land.
It was further argued by the Defendant that the 1968 Deed did not sufficiently identify the land intended to be benefitted. The Judge also rejected this argument and held that the land was identifiable in accordance with s.78 of the Law of Property Act 1925 as interpreted by Crest Nicholson. The position of the other Claimants was considered in issue 4.
On the second issue, the Defendant argued that the covenant in clause 2(b) was not binding on the Defendant because it did not touch and concern the land of the Claimants. She also sought to argue that the covenant was not a restrictive covenant in any event. Regarding the first argument, it was held that the covenant touched and concerned the land of No.89 because it allowed the owners of No.89 to have some control over the adjoining land and the covenant was likely to affect the value of No.89 because of this control. The argument by the Defendant - that clause 2(b) was not a restrictive covenant because it did not affect the user of the Defendant's land – was also rejected. The Judge noted that, whilst the obtaining of planning permission does not itself involve doing anything on the land, the purpose of seeking planning permission is to carry out the development of the land. Therefore, any restriction on the obtaining of planning permission would be a restriction on the ability to develop land and would ultimately affect the use of the land.
On the third issue, it was held that it was necessary to imply a proviso in the 1968 Deed that approval or consent would not be withheld unreasonably 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. The Judge stressed that the whole purpose of the agreements was the development of the adjoining land and a specific process was set out for this in the 1968 Deed; it would therefore undermine the purpose of the agreements if the Adjoining Owner could withhold consent on a whim.
Finally, it was held that - although the Second to Seventh Claimants were not 'assigns' within the meaning of clause 6 of the 1968 Deed - they were able to enforce the covenants by virtue of s.78 LPA 1925. However, the relevant approval required under those covenants was from the First Claimant (being an 'assign' under clause 6). Accordingly, the issue was unlikely to be of practical significance as the First Claimant was a management company controlled by the Second to Seventh Claimants.
Footnotes
1 Roake & Ors v Chadha & Anr. [1983] 3 All ER 503
2 Crest Nicholson Residential (South) Ltd v McAllister [2004] 1 WLR 2409
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