Risegold Ltd v Escala Ltd

The dispute is about the extent of an easement. The owner of a freehold property was granted the right to enter into part of the adjoining freehold property when necessary for the purpose of carrying out specified operations. Mr Bernard Livesey QC, sitting as a Deputy Judge of the High Court, made an order dated 17 January 2008 dismissing a claim by the appellant, Risegold Limited (Risegold), for a declaration that it is entitled to enter upon the yard of an adjoining freehold property owned by the respondent, Escala Limited (Escala) Risegold wishes to exercise a right of entry for the purpose of carrying out proposed works of redevelopment to its freehold property in accordance with a planning permission.

The issue on the appeal, for which Lloyd LJ gave permission on 27 February 2008, is whether the deputy judge was wrong to refuse to grant the declaration sought by Risegold. The appeal turns on the construction of a Deed of Transfer (the Transfer) of Units 5 & 6 Quaker Court, Quaker Street, Stepney, London E1 (the Property) dated 28 July 1993 to a predecessor in title, Hobby Homes Limited. The Transfer (First Schedule, paragraph 5) included the benefit of the right (exercisable upon prior notice of not less than forty eight hours notice given to the owners and occupiers of the remaining property including units 3 & 4, Quaker Court- “the Adjoining Property”) to

“ …enter (without vehicles) upon such part of the yard at the rear of [the Adjoining Property] as is necessary for the purpose of carrying out any maintenance repair rebuilding or renewal to the Property subject to the minimum disturbance and inconvenience being caused to the owners and occupiers of the Adjoining Property, and to the making good forthwith of all damage caused to the Adjoining Property in the exercise of such right.”

By a Transfer dated 6 August 1993 the Adjoining Property consisting of units 3 & 4 Quaker Court was conveyed to Escala, excepting and reserving the right of entry (see clause 2 and 3^rd Schedule paragraph 5 of the Deed of Transfer for the Adjoining Property).

It is common ground that Risegold’s proposed operations are more extensive than simply “maintenance” and “repair” to the Property. The question is whether the deputy judge was wrong in holding that the operations are not covered by “rebuilding or renewal to the Property.”

Risegold bought the Property on 17 November 2005. With it went the benefit of a planning permission for the demolition of the existing single storey brick or blockwork warehouse/industrial structures at the Property and for the building of a 5/6 storey block containing commercial units on the ground floor and some 24 flats on the upper floors. The total area of the proposed building will be 22,055 sq ft compared with an existing area of 3,382 sq ft for the warehouse/industrial units 5 and 6.

The “works items” that give rise to the need to exercise the right to enter the Adjoining Property are the erection of a 1500 mm wide fence around the redevelopment site, including over the yard; the erection of scaffolding within the fencing zone; the oversail of a tower crane to be erected on the Property with an arm which will extend over the roof of the Adjoining Property and the yard; and possible extended loading bays overhanging the scaffolding for loading plaster boards etc on each floor level. The intrusion of the various works items is expected to last for various periods up to 45 weeks of the total period of construction of the new premises, which is expected to last for 65 weeks in all.

There is no real dispute that the intrusion will be necessary by reason of a duty on the part of the construction company to comply with Health and Safety Regulations. No point was taken below that it is possible for Risegold to carry out the works items without entering the Adjoining Property. Escala’s objection is neither to the need for the entry nor to the length of the period of the works: it is to the purpose for which Risegold seeks to exercise the right, which it contends is not a permitted purpose under the relevant provisions of the Transfer. Risegold contends that the purpose of the entry falls within the permitted purpose of “rebuilding or renewal to the Property.”

The Deputy Judge held that the words of the easement of entry should be given their “ordinary meaning within the context of the document as a whole as well as in their historical context.[2008] EWHC 21 (Ch), paragraph 15.” He did not accept Risegold’s submission that “the Property” meant the totality of the land and buildings constructed thereon rather than simply the buildings units 5 and 6. He also noted that there was no restrictive covenant restraining redevelopment of the Property. Equally nothing was mentioned in the Transfer expressly extending the right of entry for the purpose of any redevelopment of the Property.

As for the scope of “renewal” to the Property, the Deputy Judge noted the definitions in the Oxford English Dictionary. He said that it was possible to argue that “renewal” covered units 5 and 6 being restored to the original, as-built condition of the present dilapidated industrial buildings.

As for the scope of “rebuilding” the Property, the Deputy Judge recognised that the terms of the Transfer did not require the new building on the Property to be in all respects the same as the original buildings, but he thought that it was implicit that there was a substantial replacement of what was already there and that

“…the points of similarity are sufficient to make the new nonetheless recognisable as being in broad substance equivalent to what was there before…..it will be a matter of fact and degree as to the point at which the new building can no longer be described as a re-built version of the old but replacement with something different.” (paragraph 25).

He concluded that there was “abundant internal evidence” that the scope of the right was intended to be strictly limited and to “derogate to the minimum possible extent from the enjoyment of the servient owner of his land.” He referred to the requirement of minimum disturbance and inconvenience to the servient owner and to the limitation of the right to such part of the yard “as is necessary” for the specified purpose. Further, the right of entry was “without vehicles.” The right of entry was thus “severely restricted as to occasion and limited in extent.” Comparing the photographs of existing buildings and the artist’s impression of the proposed development he concluded that it was not “rebuilding or renewal to the Property.”

On behalf of Risegold Mr Dilworth made many detailed criticisms of the construction adopted by the Deputy Judge. In his respondent’s notice Mr Pryor, appearing for Escala, sought to uphold, on additional grounds, the construction that the right of entry did not extend to Risegold’s substantial redevelopment of the Property. In particular, he stressed the need to construe “Property” and “renewal” in the context of the facts and state of affairs pertaining in July 1993.

I do not find it helpful, on this point of construction, to set out all the various arguments for and against the Deputy Judge’s conclusion. This court must itself go back to the beginning and it must decide for itself what construction to place on the entry provision in the Transfer. The relevant findings of fact by the Deputy Judge must be taken into account. The Deputy Judge correctly reminded himself of the need to construe the provision in context, reading it as a whole and having regard to the surrounding circumstances. The reasons for his construction of the Transfer will assist, as will Risegold’s criticisms of his reasons.

It might be helpful to begin with three general points on the nature, object and exercise of the right.

First, this is a right of entry into Escala’s Adjoining Property: the limited purposes -“rebuilding and renewal to the Property”- for which the easement may be exercised must be read in that context of the nature of the right. It is important to remember that this is not, for instance, a restrictive covenant giving the owner of the Adjoining Property a right to object to Risegold’s use of its own property in replacing one storey warehouse/industrial units with a mixed development 5/6 storey building. I would also say that other instances of the use of the terms “rebuilding or renewal” in planning law or in positive leasehold covenants are unhelpful and, indeed, positively misleading. It does not follow that because “rebuilding” has a restricted meaning in planning legislation, in a planning permission or in a leasehold covenant that it should bear a similarly restricted meaning in a right of entry provision. This really is a case in which, in a well-worn phrase, “context is everything.”

Secondly, the scope of the right is conditioned by its underlying object. When the original common owner of the Property and the Adjoining Property first sold off the Property it was thought necessary to grant a right of entry onto the Adjoining Property for certain purposes. It must have been contemplated that the situation of the existing land and buildings would not remain the same for ever, that there would be possible changes in the character of the area and of the buildings that might be put on the Property and that certain operations relating to the Property could not be carried out without access to the Adjoining Property. The terms in which the right was couched reflected both the access needs of the owner of the Property and the protection of the owner of the Adjoining Property against unnecessary disturbance and inconvenience and against damage.

Thus, the relevant operations relate to “the Property”, not to some other property or to something other than the Property, for example the operation of a particular business on the Property. I see no ground, however, for confining the meaning of “the Property” referred to in the right of entry to existing structures or for excluding the land on which the structures stand. The two go together. The Transfer covers both the buildings and the land on which they stand. “Rebuilding or renewal to the Property” must be read in that context.

Third, the exercise of the right is subject to important safeguards set for the protection of Escala from inconvenience, nuisance and damage suffered by it. The right of entry cannot be exercised with vehicles. Disturbance and inconvenience to Escala, as servient owner of the Adjoining Property, must be kept to a minimum. Damage to Escala’s Adjoining Property during the entry must be made good forthwith.

With those general points in mind I turn to the key question as to what operations are permitted purposes in exercising the right of entry. “Rebuilding”, in the dictionary sense of building again or afresh, clearly includes the reconstruction of an existing building to be as originally built or to be similar. But is that all that it includes? I do not think so. Take demolition of the existing buildings. Although not expressly mentioned, the right of entry must include works of demolition of the existing buildings in the course of the rebuilding them. What then of demolition of existing buildings, but without any rebuilding? Is that included? On the construction adopted by the deputy judge it is not included. Why not? If planning permission had not been obtained it is possible that more profitable use could be made of the Property by demolition of the existing buildings and using the space for car parking or open air storage. Why would the right of entry into Adjoining Property not be exercisable for demolition in such a case? The exercise of the right in those circumstances would probably be less intrusive to the Adjoining Property than in the case of rebuilding the buildings as built. It is improbable, in my view, that the parties to the Transfer intended to prevent the owner of the Property from simply demolishing the existing buildings in order to use the Property as an open space. A literal construction of the right of entry produces consequences that are not sensible and are unlikely to have been within the reasonable contemplation of the parties at the time of the creation of the right.

In the course of argument Keene LJ put another example. What if Risegold were able to carry out the proposed redevelopment of the Property in accordance with the planning permission without the need for entry onto the Adjoining Property? Would Risegold or subsequent owners of the Property not be entitled to exercise the right of entry for the purpose of maintenance and repair of the buildings in that redevelopment? Mr Pryor was unable to supply a convincing reason as why the right of entry would not be available in that case.

Arden LJ put the case of the destruction of the existing buildings on the Property by fire and Risegold proposing to put up different buildings. In the absence of a restrictive covenant affecting the Property, would the parties really have intended that no right of entry should be available to Risegold in such a case ?

In my judgment, these examples indicate that “rebuilding” must be capable of bearing a broader and more flexible meaning than that favoured by the Deputy Judge. More broadly construed the provision would permit entry onto the Adjoining Property in order to preserve existing buildings on the Property, or to pull down the buildings on the Property and (a) to put up no new buildings in their place, or (b) to put up buildings similar to the demolished buildings, or (c) to put up different buildings in the place of the demolished buildings. So far as Escala is affected by entry onto the Adjoining Property (with express protection against nuisance and damage), it is difficult to see why it cannot object to (b) but can, on its construction, object to (a) and (c).

I would also point out that the narrower construction contended for by Escala involves a significant element of uncertainty in the availability of the right of entry. This would make it more difficult for the parties to operate in practice. There would be considerably more scope for disagreement between the parties about the availability of the right, if its exercise depended on whether the proposed buildings on the Property were “similar” or not to the existing buildings.

I fully recognise that the Deputy Judge’s conclusion on the scope of the right of entry for the purpose of “rebuilding” is a possible construction of the language of paragraph 5. With respect, however, it is not the only possible construction. It produces consequences which I think would have surprised the parties if they had been drawn to their attention at the time when the right was created. Some flexibility of meaning and some certainty of operation is required to make the right of entry work in a sensible fashion. A broader construction is available on the language in which the right is defined; its exercise is limited to protect the interests of the servient owner; and the consequences would be consistent with the underlying object of the right. In brief, the right, construed in a wider way, would enable the owner of the Property to make the fullest use of it in a lawful manner without prejudicing the legitimate interests of Escala as owner of the Adjoining Property.

Although I would base my decision on the construction of “rebuilding” I would add that, if I am wrong about that, Risegold would be entitled to rely on “renewal” to the Property in order to exercise the right of entry in this case. As Mr Dilworth pointed out, the order in which the permitted purposes are arranged appears to have a “crescendo effect” so as to give a different and wider meaning to “renewal” of the Property than to “rebuilding.” The extended meaning would cover building operations and developments to the Property which are not covered by “rebuilding.”.

I would allow the appeal. The right of entry invoked by Risegold covers its redevelopment to the Property as either rebuilding or renewal within the meaning of paragraph 5 of Schedule 1 to the Transfer.

I agree, and would merely add that particular significance needs to be attached to the combination of the two terms “rebuilding” and “renewal”. When taken together, it seems to me that they must contemplate something more than just some form of reproduction of the existing single storey buildings, and Mr Pryor found himself in some difficulty in confining both words to such a meaning, especially since repair is already dealt with separately. On his approach, “renewal” fell somewhere between repair of the existing buildings and their “rebuilding” in the sense of their replacement with a similar structure, but this seems to leave little scope for any real role for “renewal” as some intermediate concept. It also ignores the way in which the paragraph is constructed, rising as it does from maintenance, through repair and thence to rebuilding (in what Mr Dilworth vividly characterised as a crescendo) and culminating in renewal.

The reality is that the parties to the Transfer chose to refer both to rebuilding and to renewal, and I cannot see how one can restrict both those terms so as to exclude the construction of a new and different building on the Property. I too would allow this appeal.

I also agree.