Dano Ltd. v Earl Cadogan

Monday, 19 May 2003

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

2. 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 facts

3. 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.

4. 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.

"... AND the Purchasers to the intent and so as to bind so far as practicable the property hereby assured into whosoever hands the same may come and to benefit and protect the property adjoining or neighbouring to the property hereby assured for themselves and their assigns hereby covenant with the Vendor and his successors in title as Owners of the property adjoining or neighbouring to the property hereby assured so long as such adjoining or neighbouring property or any part thereof forms part of the Cadogan Settled Estate in Chelsea but not further or otherwise that the property hereby assured shall not nor shall any buildings thereon erected be used for any purpose whatsoever except for the housing of the working classes ..." (emphasis added)

5. 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."

6. 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:

"10. By a deed of exchange dated 16 March 1961 ("the Deed of Exchange") Viscount Chelsea assigned to the Seventh Earl Cadogan his interest in remainder in certain of the properties comprised in the Settlement; and the Seventh Earl Cadogan assigned his life interest in the remaining properties in the Settlement to Viscount Chelsea. The effect was that the properties comprised in the Settlement were divided between the Seventh Earl Cadogan and Viscount Chelsea in fee simple absolute possession.

11. By deed dated 17 March 1961 the Seventh Earl Cadogan conveyed to Viscount Chelsea the various properties to which he had become absolutely and beneficially entitled pursuant to the Deed of Exchange.

12. By deeds of discharge dated 17 March 1961 and 23 March 1961, pursuant to the SLA s17, the trustees of the Settlement declared themselves discharged from their duties in respect of the properties which were the subject of the Deed of Exchange.

13. By a series of deeds and agreements made on and after 23 June 1961, the equitable interest in the lands formerly comprised within the Settlement, and which were the subject of the Deed of Exchange and thE deed of conveyance of 17 March 1961, was vested in various private companies. These companies are ultimately owned and controlled by the trustees of a deed of settlement of 6 December 1961, under which the trustees stand possessed of the trust assets for the benefit of beneficiaries who are either descendants of the Seventh Earl Cadogan or are married to such descendants."

It is accepted that as a result of those arrangements the Site ceased to be settled land.

7. 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.

The judgment below

8. 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.

9. 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:

"29. The Defendants' interpretation involves a radical rewriting of the Restrictive Covenant. In particular, it undermines fundamentally the words 'so long as [the benefited land] forms part of the Cadogan Settled Estate in Chelsea'. [my emphasis]. It requires rewriting those words along the following lines: 'provided [the benefited land] forms part of the Cadogan Settled Estate in Chelsea at the date hereof and continues at all times hereafter to be land in which a member of the Cadogan family has a legal or equitable interest'. The extent of the re-writing required by the Defendants' interpretation is highlighted by Miss Appleby's acceptance of the proposition that, on the Defendants' interpretation, if, in March 1961, the freehold of the lands comprised i the Settlement had been transferred out of the Settlement and divided between a hundred different members of the Cadogan family, any one of those family members could at any time thereafter enforce the Restrictive Covenant (provided it could be shown that his or her land was in fact benefited by the covenant) since, in each case, that family member's land would still continue to satisfy the requirement that it 'forms part of the Cadogan settled Estate in Chelsea.'"

10. 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).

The appeal

11. 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:

"...the declaration effectively releases The Royal Borough of Kensington & Chelsea, as successors in title, from the obligation to keep the land for such use or its modern day equivalent of affordable housing/key worker accommodation or housing for persons in lower income groups. It will be open to the Royal Borough of Kensington and Chelsea to vary the terms of the lease of the Housing Land to the Peabody Trust to enable a redevelopment of the Housing Land for residential and/or other purposes unconstrained by the restrictive covenant or the interests of the buildings' occupiers."

I should emphasise that she does not refer to any present intention of the Royal Borough or the Peabody Trust to take the land out of use for affordable housing, and there is no evidence to suggest that they have that intention. She expressed concern, however, that circumstances may change at some time in the unforeseeable future. She is also concerned to emphasise that the objectives of her clients are not financial, but are purely concerned with achieving the philanthropic objectives of the original covenant.

12. 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:

"It matters not whether the Cadogan Estate remained 'settled' or that the legal title in neighbouring (or adjoining land) in the properties fell into the ownership of members of the Cadogan family, in particular the 7th Earl Cadogan and Viscount Chelsea for a period of time in 1961.

The 'Cadogan Settled Estate in Chelsea' was simply the correct title of the Cadogan Estate in Chelsea in 1929 to identify land holdings of the Estate of which the Conveyance land formed part. The covenant was for the benefit of all those legally or beneficially interested in the land forming part of the Cadogan Estate whether or not it was settled."

The word "settled", she submits, is "simply descriptive, as a fact, of the nature of the estate in 1929".

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

14. 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.

15. 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.

16. I would dismiss this appeal.

17. 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.

18. 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.

19. Accordingly, I would dismiss this appeal.

20. 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.

21. Therefore this appeal will be dismissed.

(Appeal dismissed; costs order to be agreed and drafted between the parties).