Recent Cases on Restrictive Covenants

Hello. Welcome to this data. Long webinar entitled Recent Cases on Restrictive Covenants. In the course of this webinar, I shall look at a number of recent judicial decisions on topics such as the jurisdiction to discharge a recently imposed covenant, some of the practical difficulties which can arise out of identifying and therefore being entitled to rely on the transmission of the benefit of a pre 1926 covenant on also a recent case in relation to the definition of what is meant by retained land. But first of all, I want to turn to a case which deals with the purpose off a restrictive covenant. Andi in particular in this case, regulation of competition independent AZ Shipyards Holdings LTD. And I. M. Pei Falmouth Harbor Tribunal was required to consider whether to exercise its discretion under Section 84 of the Law of Property Act 1925. Notwithstanding the effect that modification would have on the businesses which were being conducted on the benefiting neighbouring land. Now, the upper tribunal itself recognize that this made the case somewhat unusual. The facts were that the applicants and the objectors separately owned yards in the historic dockyard of found with the applicants were a substantial group of companies whose principal activities involved the building, repair, restoration and refitting of yachts, in particular super yachts and other leisure craft. The objectors were engaged in building and repairing a variety of seagoing vessels, principally commercial military vessels. It was the objectors case that modification of the restrictive covenants would allow the applicants or their successors entitle to compete with the objectives businesses in protection. ER, the applicants wish to expand their existing activities onto adjacent land to their existing yard, which was subject with very restrictive covenant preventing amongst other things. And I quote boat building or ship built more particularly, the applicants weren't just seeking modification of the covenant to remove the reference the boat building. But we're also seeking to expand its terms so that they were identical to the permitted use provisions of the lease under which the applicants held their existing yard. The upper tribunal concluded that as matters currently stood, there was no competition between the applicants and the principal objector. In terms of their respective businesses, there was simply no overlap between them. On that basis, it could not currently be said that the Covenant in questions, secured any practical benefits as of substantial value or of substantial advantage to the principal objector in relation to the applicants activities in relation to superyachts I was. The upper tribunal also recognized that the covenant was not limited in time. The upper tribunal considered that the restrictive covenant in question, insofar as it applied to commercial and military vessels, did secure practical benefits of substantial value to the objectors. So the application therefore failed in so far as it sought modification of the covenant in relation to the use of commercial or military vessels. Consequently, the upper tribunal modified the covenant to the extent necessary to protect the objectors from competition in relation to their specific business, whilst allowing the applicants to expand their other non competing activities well now to turn to a recent decision in relation to the jurisdiction off the appropriate tribunal to discharge a recently imposed covenant. The decision is a decision of the upper tribunal in a case school Barter re Ivy House. The circumstances were that the application land comprised a substantial Victorian property which formally have been used as a local authority daycare center. The property was set in grounds of about half a maker. In January 2013 the applicants acquired the property from Somerset County Council for £249,950. The transfer to the Africans contained a covenant expressed as being for the benefit of adjoining highway land and any other adjoining land belonging to the council by which the applicants agreed and, I quote, not build any additional building for use as residential accommodation on the land comprised in the transfer Now. In fact, the council owned no land in the vicinity other than the street which served the property. After completing their purchase, the applicants applied for and obtained planning permission to divide the property into flats and to erect a new two story building containing 13 2 bedroom flats in the grounds in May 2015. Having become aware of the grant of planning consent, Somerset County Council as the transfer or under the original transfer, offered to negotiate the release of the covenant, which have referred in return for a share of the resulting developed value. But the party's subsequently failed to reach agreement on what would be inappropriate payment, and I paused just here to note that the applicants only offered £5000 to the county Council for the release of the covenant. Which group perhaps was slightly optimistic. In January 2013 just under four years after the transfer, the applicants applied to the tribunal for the government to be discharged on. The upper tribunal accepted that the short period between the date of the covenant on the application to the tribunal was not by itself on absolute bar does having the covenant discharged, it recognized the binding authority that is Jones versus Reese Jones from 1974. The upper tribunal also noted that firstly, the evidence established that the covenant had been imposed by the council purely to give it a share of any future uplifting value arising through development property and secondly that it was entirely possible that the highway land might not be capable of enjoying any practical benefit from the covenant which have been imposed. Notwithstanding these factors, the upper tribunal refused to exercise its discretion to discharge the covenant under either of the grounds in Section 84 1 double A, but the 1925 at or ground see so that is either the ground of continued existence would impede some reasonable user of the land or in relation to see proposed discharge. The covenant would not injure the person who benefited from it subject to that person possibly receiving compensation compensation for the discharge of the covenant. Even though the upper tribunal accepted that the conditions for granting relief under both grounds had indeed been made out, it held that the following factors militated against exercising its discretion in the applicants favor first the covenant walls very recent, even though that wasn't an absolute bar to the application. The shortness of time since the imposition of the Covenant on the Closeness of the Applicants connection to the Original Covenant tour they themselves for being the original cover lintels were factors which could be taken into account into account as justifying a refusal. And secondly, the land had been sold for a price which reflected the existence of the restriction. It was entirely unclear on the reason for that was because the party is simply didn't produce any evidence about this as to what some would fairly competent the council for the discharge of the restriction. In light of the fact that the property with the benefit of the planning permission was now estimated estimated, really worth something in the region of £1.7 million now. Because the applicants were the original covenant tools, it was irrelevant, as the upper tribunal duly identified, that the covenant might know find successors in title and B that because it existed only to secure the payment of average and so didn't touch and concern the supposedly benefited land. Or indeed, it was entirely possible that the highway land might not benefit a tall from the covenant which have been imposed. That being said, there does seem to be something which went a little awry in relation to this particular matter. First Assign noted before on offer of only £5000 to secure the release of the covenant against the background off a £1.5 million uplifting value as a result of the grant of planning permission was perhaps a little miserly on the part of the applicants and secondly, and it seems reasonably clear from the tone off the upper tribunal's judgement that it would have ordered the covenant to be discharged if only it could have been satisfied, satisfied is the proper amount of any compensation which might have been awarded in favor of the council. So there does seem to have been a slight failing on the part of the applicants to consider all the alternatives on to put all relevant Della evidence before the tribunal as part and parcel off their application all now to look at a recent decision in relation to the transmission of the benefit of pre 1926 covenants. Pacing question is suddenly sorry Water versus Kilday and it was in relation to, as the title of a suggests would coat reservoir. The applicant Water Authority wished to carry out development off would coat reservoir. But the reservoir was subject to, amongst other things, certain restrictive covenants which were contained in a 1910 deed, which, if impossible, would prevent the development from going ahead. Unfortunately for the objectors who owned properties close to the reservoir, they were unable to produce the original 1910 deed. However, they were able to point to the text of the covenant's contained in that deed because these were set out in the charges register of the registered title to the reservoir. Unfortunately, though, the charges register did not set out any introductory words which might indicate by whom or in favor of whom those covenants had been made. Against that background, the upper tribunal held that the covenants were unenforceable. It did so on the following basis. First, there was no evidence of any express assignment of the benefit off the covenant to the objectors. Second, there was no evidence of any building schemes on which the objectors could rely. Third, this left only annexation the puffs as a possible method by which the benefit of the covenants might have passed to the objectives. But the absence of any express words to show that the covenants were taken for the benefit of either the owners for the time being of the benefiting land, all for the benefit of that land itself because the charges register didn't contain those words meant that annexation was not proven. Four. The absence of the requisite express words from the 1910 deed could not be made good by statute because Section 78 of the Law of Property Act 1925 did not apply. The covenants, of course, predated to the first of January 1926 on the predecessor to Section 78 namely Section 58 of the Convincing Act 18 80 well only deemed the covenants to have been made with the covenant teas, and I quote his heirs and assigns. And that was not a sufficient degree of annexation in the light of the decision in J. Sainsbury on Enfield London Borough Council from 1989 Fifth against that background and with the text of the charges register not disclosing who the original covenant, he actually waas. Although to be fair, the upper tribunal thought that this could be inferred from the wording of the covenants. Nor, equally importantly, it being unclear as to the extent of the land actually owned by the Covenant E or Covenant. Ease at the relevant time meant that it was not possible for the objectors to prove that they had the benefit off the relevant covenants. As I say, this decision is a straight some of the difficulties that can be encountered when attempting to enforce pre 1926 covenant, not least the difference in wording between the 18 81 act on the 1925 Act that can be particularly difficult where three absence of express contractual words means that reliance on statutory words of annexation, uh, is a lot more important one now to turn to the last topic, which I want to consider in the course of this webinar, which is a retained land and the meaning of it. The decision in question is a high court decision in the case, Jones versus oh it when the high court was required to consider whether the phrase retained land meant not only the land actually retained by the transfer or time, but whether he could also include land which might be transferred back to the transfer or in the future, under the terms of the transfer. Now, the background to all this was that in 2000 and two, the claimant sold part of his farm, which are called the bread land, to develop her for the purpose of residential development. The material part of that transfer was a covenant by a claimant not to do anything on his retained land. In other words, not to do anything on the farm which might cause a nuisance or annoyance all materially affect the use and enjoyment off the transferred land for residential purposes. Now in 2000 and three, the claimant sold a further part of his farm. This time, I'll call it the Greenland against to the same developer and again, for the purposes of residential developed the material parts of the 2003 transfer were again a covenant by the claimant not to do anything on his retained land, which might cause in nuisance or annoyance or materially affect the use and enjoyment of the transferred land for residential purposes. But also, secondly, a covenant by the developer that if a bond situated on the green land by the land being transferred under the 2003 transfer were ever to be demolished, then a strip of the Greenland would be transferred back to the claim. Now we do course to develop a built a house on the red land and sold it to the defendant. The transfer to the defendant contained to say, a covenant in the same terms as that given by the developer to the claimant, namely that if all were demolished in part of the Greenland would be transferred back. The defendant, in due course in do calls, also became owner off part of the Greenland in 2009 the defendant demolished the bar. The claimant and the defendant were unable to agree on the terms of the transfer of the strip of land back to the claimant. In 2012. The defendant obtained a county court injunction against the claimant who was keeping pigs on his retained land and was trespassing onto the strip of land causing smell, flies and noise. The claimant retaliated by seeking an order for specific performers of the positive covenant to transfer the strip of land back to him, and he also claimed damages for the defendant speech of contract. The defendant argued that the strip of land should be subject to the same restrictive covenants as have been given by the claimant in the 2000 to 2003 transfers. In other words, a covenant not to do anything on the strip of land which might be half raise some what a nuisance or annoyance at the defendant. The claimant refused to accept this on the claimant refused to accept this because it was common ground between the parties that the effect of the 2003 transfer of the strip of land to the developer as part of the Greenland was to extinguish the covenant, which have been given in in the 2000 to transfer in relation to what was then the claimants retained land, which of course included a strip of land which was subsequently sold in 2003. The fact that the strip of land in question had come into the common ownership off the developer as a result of the 2000 and three transfer meant that on the face of it, the restrictive covenants in relation to it have been released as a result, off the merger off the two titans, the weather. The defendant argued firstly that as a matter of construction of the 2002 and or 2003 transfers, the expression retained land use in those transfers included not only land actually retained by the claimant after those transfers, but also included land which might be re transferred back to him in circumstances which were envisaged by those transfers and which had since come to pass. Or alternatively, the court should imply a term into the sale contracts which had preceded the 2002 and toothy 2003 transfers to the effect that on any re transfer of the strip of land to deployment. That strip of land would be subject to the same covenants as the retained land in the 2003 transfer, on the basis that it made no commercial or practical sense to exempt the strip of land from the restrictive governments, when in fact it was closer to the residential development land than the land actually retained by the claimant. Now he's on a judge. Paul Matthews, sitting as a judge of the high court, held that both the defendant's arguments were good. He considered that something had clearly gone wrong with the drafting. It was plain in his view, that the parties intended the land retained by the claimant in the vicinity of what was now the defendant's land should be burned by covenants in order to enhance the value of the defendants land and make it viable for residential development. Construing the phrase retained land in the way argued for by the defendant supported that intention. Even if it's a matter of construction that were wrong, he nonetheless held that a term had to be implied to give business efficacy to the transaction without it without an implied term that the re transferred land would be subject to the same covenants is the retained land. The transaction lacked any commercial or practical coherence. The judge was no doubt right to say that something had gone wrong with the drafting. If by that one means that the draftsman appeared not to have contemplated the consequences of part of the original pertained land passing from on, then returning to the claim. Now, with the I've interested suggests that is perhaps rather more debatable, whether the consequence of that or not have begun. And indeed indeed within action in professional negligence against the draftsman of the transfers rather than a where some might say it rather strained reliance on either the doctrine of construction. All the rules is to implies terms in order to alleviate Thea otherwise adverse consequences of the failure to understand and appreciate the consequence off the strip of land. Passing into the common ownership of 1/3 party before returning to the claimant that concludes. This webinar on all that remains is for me to thank you