Dano Ltd. v Earl Cadogan

LORD JUSTICE SCHIEMANN: Lord Justice Carnwath will deliver the first judgment.

LORD JUSTICE CARNWATH: : The short point raised by this appeal is the meaning, in a restrictive covenant imposed in 1929, of the term "the Cadogan Settled Estate in Chelsea". The judge decided the issue in favour of the respondents ("Dano"), with the result that the covenant was in effect unenforceable. Three other grounds for challenging the covenant were decided in favour of the appellants ("Cadogan"), and are no longer in issue.

The property in question ("the Site") is 60 and 62 Chelsea Manor Street, London SW3, a rectangular piece of land on the west side of Chelsea Manor Street. In 1929 it was part of a large area of land owned by the Cadogan family, comprised in a settlement of 1889. Under the Settled Land Act 1925 the fee simple was vested in the tenant for life, who had a statutory power to sell the land subject to the terms of the Act.

In 1929 the Sixth Earl, acting under those powers, sold to the Metropolitan Borough of Chelsea an area of land to the west of Chelsea Manor Street ("the Sale Land") including the Site. The conveyance contained the following restrictive covenant, the interpretation of which is in dispute.

The greater part of the Sale Land was let in 1930 by the council to the Peabody Donation Fund for a term of 999 years with a clause requiring use of the flats for the working classes (since amended to "affordable housing"). Flats have been erected on the land so let and are occupied under assured tenancies. The Site was not part of that lease. As envisaged by the conveyance, it was used for erection of a public house which remained until 1999, being known in more recent times as "the Rat and Parrot". In 2000 the Site was sold to the Council to Dano, who have planning permission to build four private houses. They wish to do so free of the restriction to use "for the working classes."

The 1889 settlement remained in force until 1961, when the legal structure of the estate was reorganised, no doubt for sound management or fiscal reasons. At that time the Seventh Earl held the life interest and his son, Viscount Chelsea, the fee simple in remainder. The precise details of the new arrangements are not material and it is sufficient to adopt the judge's summary:

The present proceedings were begun in November 1991. The defendants were the Eighth Earl Cadogan, and three of the companies which acquired interests in 1961. So far as relevant to the appeal, the claim sought a declaration that there was no longer any "Cadogan settled estate in Chelsea" within the meaning of the restrictive covenant, and therefore no property which the restrictive covenant was capable of benefiting.

Before the judge, Mr Barnes QC for Dano submitted that the words of the covenant imposed a "condition subsequent" on its enforceability. The words "Cadogan Settled Estate in Chelsea" referred to land which was subject to the then Settlement. That ceased to exist, when the Settlement was brought to an end in 1961. Once the condition subsequent was broken, the covenant was spent, and could not be revived by a new and different legal arrangement. Miss Appleby for Cadogan submitted that, adopting a "purposive" interpretation of the covenant, it imposed two requirements, both of which were satisfied: i) the adjoining or neighbouring property was comprised in the settlement at the date of the conveyance, ii) it was property in which, at the date of enforcement of the restrictive covenant, a member of the Cadogan family is interested. She accepted that, if the requirement ceased to be satisfied in March 1961, the covenant thereupon became spent and unenforceable for all time, irrespective of any subsequent arrangements.

The judge had "no hesitation" in rejecting Miss Appleby's interpretation which was, he said, "quite impossible to reconcile with the words and grammar used by the parties to the conveyance." He said:

Notwithstanding that, clear view the judge himself gave permission to appeal because of the possible impact of the decision on the wider area covered by the 1929 conveyance (now administered within the lease of the Peabody Trust).

On the appeal, Miss Appleby for Cadogan asks us to take account of what she describes as the "extraordinarily significant" consequence of the judge's interpretation, which we describes as follows:

So far as the construction of the covenant is concerned, she adopts substantially the same interpretation as she advanced before the judge. This, as I understand the submission, involves treating the expression "the Cadogan Settled Estate" as referring simply to the Cadogan family estate as it existed at the time. As she puts it in her skeleton argument:

Like the judge I am afraid I have no hesitation in rejecting this submission as incompatible with the language of the covenant.

It is not unusual to find the benefit of a restrictive covenant annexed to land described by reference to a named "estate". In such a case it will be a matter of construction of the particular covenant whether it continues to apply to land originally within it, once the named estate has ceased to exist in any recognisable form. Had the covenant here referred simply to the "Cadogan Estate in Chelsea", there might have been some room for argument. However, inclusion of the word "settled" leaves no doubt at all. It necessarily directs attention to the settlement as it then existed, and not to a different legal arrangement created some 30 years later.

I am also unimpressed by the suggestion that this undermines the objectives of the arrangements with the Council or the Peabody Trust. If it was a matter of concern to the Cadogan family in 1961, it is unfortunate that it was not addressed then before dismantling the settlement. However, as I said, there is no evidence at all the philanthropic objectives of the Sixth Earl are significantly at risk, given that the bulk of the land has been secured for 999 years in the control of a charitable housing trust, under a lease from the housing authority.

I would dismiss this appeal.

SIR CHRISTOPHER STAUGHTON: : It is, in my judgment, clear that at least one of the parties in this case, that is to say the vendor, intended that the covenant should remain enforceable as long as the adjoining or neighbouring land, or any part of it, was Cadogan land. I use that expression not in any legal sense but one as indicating that one could identify the land as being connected with the Cadogan family. I can readily conclude that the Chelsea Borough Council intended that too. But the covenant did not say that. The covenant laid down how long it should be enforceable. It did so by saying that it was to last as long as the adjoining or neighbouring land, or any part of it, formed part of the Cadogan settled estate in Chelsea, but not further.

There are occasions when the law takes a purposive view, so it is said, when interpreting the language to be found in a written contract or other document. I, for my part, do not feel able to apply a purposive construction in this case so as to have the effect that the covenant remains in force despite the clear wording as to when it should end.

Accordingly, I would dismiss this appeal.

LORD JUSTICE SCHIEMANN: I agree with my Lords that this appeal should be dismissed broadly speaking for the reasons that they give. As it seems to me the covenant as framed uses the phrase "so long as such adjoining or neighbouring property or any part thereof forms part of the Cadogan Settled Estate". Firstly as a way of identifying, broadly speaking, the land, which was to have the benefit of the covenant; secondly, to indicate that there should be a Cadogan link when the Cadogan link was lost, then the benefit of the covenant should no longer be enforceable. And it describes the nature of the link between the land and the Cadogans as being a "settled estate". It seems to me when this ceased to be a settled estate that link was broken.

Therefore this appeal will be dismissed.