Davies & Ors v Jones & Anor

By a contract in writing dated 21st June 1999 (“the Jones-Lidl Contract”) the first defendant, Mr Jones, contracted to sell to the second defendant, Lidl, freehold property, comprising land and buildings to the northwest of Perrotts Road, Haverfordwest, for £795,000 (subsequently increased to £898,743). At the time the freehold of that land was vested for the most part in the claimants, as trustees of a retirement benefit scheme, and to a lesser extent in a Mr and Mrs Thomas. On the same day Mr Jones contracted to buy from Mr and Mrs Thomas the part vested in them (“the Jones-Thomas Contract”) for £180,000. Four months later, on 20th October 1999, Mr Jones contracted to buy the major part from the claimants (“the Jones-Trustees Contract”) for £660,000. By a deed of assignment dated 3rd August 2000 (“the Deed of Assignment”) Mr Jones assigned to Lidl his right, title and interest in both the Jones-Thomas Contract and the Jones-Trustees Contract. Both were completed on 4th August 2000 by transfers from Mr and Mrs Thomas and from the claimants direct to Lidl and the payment by Lidl to the claimants, Mr and Mrs Thomas and Mr Jones of the respective sums due to them.

Clause 18 of the Jones-Trustees Contract related to the “Purchaser’s Works” which had been defined in clause 14.1 as the ground clearance and site preparation works described in the annexed specification. Clause 18 provided that:

“18.1

On completion the Purchaser [Jones] shall retain the sum of £100,000 from the purchase monies (“the Retention”) payable to the Vendor [the claimants] until the outstanding works shall have been completed by the Purchaser [Jones]

18.2

The Purchaser [Jones] will at the joint expense of the Vendor and the Purchaser forthwith following the completion date commence and diligently proceed to complete the outstanding works....and shall complete the same...in any event within the period of three months following the completion date unless prevented from doing so by matters outside his reasonable anticipation and control.

18.3

Following completion of the outstanding works within the said period the Purchaser shall be entitled to retain one half of the proper costs of so doing from the retention with any balance then being released to the Vendor [the claimants]”

Lidl retained the sum of £100,000 from the money due by Mr Jones to the claimants on completion of the Jones-Trustees Contract. The transfers from Mr and Mrs Thomas and from the claimants to Lidl were duly registered at HM Land Registry on 29th September 2000. The Purchaser’s Works as defined in the Jones-Trustees Contract were completed by 30th June 2001 at the latest but Lidl failed to pay any part of the retention to the claimants. The claimants contend that the proper cost of those works was £30,000 Lidl claims to have spent in excess of £200,000 in completing them.

These proceedings were instituted by the claimants on 18th October 2005 against both Mr Jones and Lidl seeking the recovery of £100,000 from one or other of them. As against Mr Jones they were summarily dismissed by Wyn Williams J on 7th January 2008. He also gave the claimants permission to amend their claim against Lidl in some but not all the respects they wished. His decision was upheld by the Court of Appeal on 10th July 2008. The pleadings were duly amended and the claim was fixed for hearing before HH Judge Jarman QC on 5th and 6th May 2009. An application to adjourn the trial was made to Judge Jarman on 27th April 2009 on the basis that necessary expert evidence could not be ready in time. He acceded to that application but, so that the time set aside for the trial should not be wasted, he directed the trial of the following preliminary issue:

“Is the sum of £100,000....subject to a trust and/or fiduciary duty to hold and, as appropriate release, the same on the terms set out in clause 18 of the contract dated 20th October 1999 between the claimants and the first defendant [Jones]?”

The trial of that preliminary issue came on before Judge Jarman on 5th May 2009. Counsel for the claimants then contended that the preliminary issue was too narrow and should be extended to include the question:

“or is [Lidl] bound by some other, and if so what, duty to observe the said terms”.

The extension of the preliminary issue was opposed by counsel for Lidl on the grounds that such question did not reflect an issue raised by the pleadings, such issue would constitute the addition of a new claim by then barred by the Limitation Act 1980, such new issue did not arise from the same or substantially the same facts as the existing claims and, in any event, was raised too late. The judge was conscious of the fact that the extension would raise a new point and adjourned the hearing to the following day to enable counsel for Lidl to prepare his submissions but he allowed the extension of the preliminary issue sought by counsel for the claimants.

The judge heard argument on the extended preliminary issue on 6th May 2009 and gave judgment the same day. He determined the original preliminary issue in favour of Lidl but the additional issue he had allowed the day before in favour of the claimants. In that respect he concluded that:

“...there was a clear understanding that on the 3^rd or 4^th August, the rights of Mr Jones under his contract with the trustees would be given to Lidl. There was a clear benefit to them of that operation. It gave them the likelihood of completion without going through the intermediary of Mr Jones and being left perhaps with a worthless judgment in damages. There was a clear practical benefit to them. It seems to me that they did have a choice whether to take that benefit or not. That was the basis of the correspondence between the parties’ solicitors from July. They had a choice to continue the sub purchaser arrangement. They had no need, from a legal point of view, to deal directly with the trustee’s solicitors but that they did. They did so, in my judgment, because they were concerned to have completion sooner rather than later. Having taken the benefit of that arrangement, in respect of the contract in question, in my judgment, they are bound by the burden under it to pay the £100,000 if and in the event it is found the conditions for such payment have been complied with.”

The judge declared that:

“[Lidl] is bound by a duty to observe the said terms [sc. those set out in clause 18 of the Jones-Trustees Contract] as a burden appurtenant to the benefit it took under the same contract.”

Lidl now appeals with the permission of Carnwath LJ. It does so on the grounds that the judge was wrong:

The land that Lidl so acquired had been the site of a garage. Lidl proposed to use it as the site for a supermarket. Thus it was necessary to remove the garage buildings and fittings and clear the site. The garage premises and other buildings were to be removed by the claimants. Site clearance and preparation works were to be effected by Mr Jones. Provision was made in the Jones-Thomas Contract for certain fencing and other works. In the Jones-Lidl contract clause 14 contained provisions comparable to clause 18 of the Jones-Trustees Contract. Thus the vendor, Mr Jones, contracted to commence after the completion date and within 3 months complete the site preparation work indicated in the definition of the vendor’s works. On completion the purchaser, Lidl, was to be entitled to retain £100,000 from the purchase price until completion of those works to its reasonable satisfaction. If the works were not so completed then the purchaser, Lidl, might carry them out and retain the proper costs of so doing from the retention. Though similar, the provisions of clause 14 of the Jones-Lidl Contract were not the same as those of clause 18 of the Jones-Trustees Contract; under the former Lidl might reimburse itself for the whole of the cost of carrying out the works under the latter it could only retain one half of such cost.

On 19th October, namely the day before the conclusion of the Jones-Trustees Contract, there was an agreement between Mr Jones and Lidl (“the Supplemental Agreement”) whereby the price payable by the latter was increased to £898,743. In addition Mr Jones agreed to use his reasonable endeavours to procure that the property was transferred to Lidl direct by way of sub-sale. As I have already indicated the Jones-Trustees Contract was exchanged on 20th October 1999. It provided for a deposit of £30,000 in addition to the retention of the £100,000 on the terms I have quoted in paragraph 2 above. The garage premises and other buildings were excluded from the sale and the claimants were entitled within three months after completion to enter on the land and remove them.

In July 2000 solicitors for all four parties, namely Mr and Mrs Thomas, the claimants, Mr Jones and Lidl corresponded in relation to completion of the various contracts. On 13th July 2000 the solicitors for Mr Jones sent a draft transfer in respect of the land vested in the claimants to their solicitors together with requisitions on title and a completion statement showing that £630,000 was due to the claimants on completion, namely the price less the deposit already paid. They pointed out that the draft transfer was in favour of Lidl and trusted that the claimants would be prepared to transfer the land direct to Lidl. On 19th July 2000 the solicitors for the claimants confirmed to those for Mr Jones that their clients had no objection to transferring the land direct to Lidl. On 2nd August 2000 the solicitors for Lidl indicated to the solicitors for the claimants that, as agreed with the solicitors for Mr Jones, they would forward the completion moneys due to the claimants direct to their solicitors against the latters’ undertaking to forward the transfer and deeds direct to the solicitors for Lidl. On 2nd August 2000 the solicitors for Lidl wrote to those for the claimants noting that they had not been able to make the necessary arrangements for completion but had transferred the balance of the completion moneys to them on the basis that the latter would hold them to their order.

The Deed of Assignment, to which I have referred, was made between Mr Jones and Lidl on 3rd August 2000. In addition the assignment of the benefit of the Jones-Thomas and Jones-Trustees Contracts by Mr Jones to Lidl it was agreed between them that the Jones-Lidl Contract and the Supplemental Agreement were thereby determined and ceased to have effect. At 3pm on that day Lidl paid £660,000 to the claimants’ solicitors, as they had promised the previous day that they would. The claimants duly executed the relevant transfer to Lidl which was forwarded to their solicitors under cover of a letter dated 7th August. On 4th August the claimants’ solicitors repaid to the solicitors for Lidl £130,000 being the aggregate of the deposit and the retention. Comparable arrangements were made with the solicitors for Mr and Mrs Thomas but they are not relevant to anything we have to decide. Thus the claimants and Mr and Mrs Thomas received the money due to them respectively by Mr Jones and the difference between what Mr Jones was liable to pay to them and entitled to receive from Lidl, namely £58,743, was paid or accounted for by Lidl to Mr Jones.

On 25th September 2000 Lidl was registered as the proprietor of the freehold of the land acquired from the claimants and Mr and Mrs Thomas respectively under two different title numbers. Whether or not Mr Jones ever attempted to execute the works for which both the Jones-Trustees Contract and the Jones-Lidl Contract provided is unclear. They were completed by contractors engaged by Lidl on or before 30th June 2001. Lidl kept the whole of the £100,000 retention. The claimants deny that they are entitled to retain any part of it. In any event, they contend, the proper cost of the works was only £30,000.

The claim form was issued on 18th October 2005, one or two days short of six years from the date of the Supplemental Agreement and the Jones-Trustees Contract. In their particulars of claim served on 13th February 2006 the claimants relied on the provisions of clause 18 of the Jones-Trustees Contract. They asserted that Mr Jones had entered into it as agent for Lidl. They claimed against Lidl, alternatively, Mr Jones £100,000 being the retention sum or that sum less one half of the proper cost of the outstanding works or damages for breach of contract. In its defence served on 12th March 2006 Lidl denied that Mr Jones was its agent. It asserted that it was not a party to the Jones-Trustees Contract and was not liable to the claimants thereunder.

In the light of that defence, and a comparable one from Mr Jones, the claimants sought permission to amend so as, amongst other things, to add claims against Lidl for breach of trust, knowing receipt of trust property, namely the £100,000 retention, and knowing assistance in a breach of trust. By then more than six years had elapsed since the outstanding works had been completed so that s.21 Limitation Act 1980 applied and CPR Rule 17.4(2) was engaged. Wyn Williams J gave permission to amend in relation to the trust claims and his decision in that respect was upheld by the Court of Appeal in July 2008, see Lidl UK GmbH v Davies [2008] EWCA Civ 976.

The particulars of claim were duly amended and re-served on 7th January 2008 to reflect the trust claims for which permission had been granted. They did not include any claim to the effect that Lidl was bound by the terms of the Jones-Trustees Contract because it had taken a benefit thereunder. In paragraph 14 it was contended that even if, which was denied, Lidl could lawfully have held the retention moneys it had unlawfully continued to retain them both in breach of the terms of clause 18.3 and in breach of trust. In paragraphs 17 and 19 the claimants denied that Lidl was bound by the Jones-Trustees Contract. In paragraphs 25 and 27 of its amended defence Lidl admitted and averred that it was not liable on the Jones-Trustees Contract. In paragraph 2 of its reply dated 4th December 2008 the claimants admitted that Lidl was not party to the Jones-Trustees Contract and relied on the fact that the claimants were not parties to the Deed of Assignment.

I have already noted in paragraph 4 above that the trust claims raised by the amendments for which Wyn Williams J gave permission were reflected in the original preliminary issue ordered to be tried by HH Judge Jarman QC on 27th April 2009. He concluded on 6th May 2009 that the sum of £100,000 was not subject to a trust or fiduciary duty and so declared. The claimants have not sought to appeal against that declaration. It is in those circumstances that the claim made by the claimants in the extended preliminary issue is the only remaining cause of action. I will, in due course, consider whether the judge was right to allow the preliminary issue to have been extended in the manner I have described, but, first, I will consider whether the judge gave the right answer to it.

Having set out the facts and having dealt with the trust issues Judge Jarman QC dealt with this issue in paragraphs 20 to 23 of his judgment. In his consideration of it he referred to the speech of Lord Templeman in Rhone v Stephens [1994] 2 A.C 310, and thereby indirectly to Halsall v Brizell [1956] 1 Ch 169 and Tito v Waddell (No.2) [1977] Ch 106. He also referred to the judgment of HH Judge Pelling QC in Baybut and others v Eccle Riggs Country Park Ltd 2nd November 2006 (2006 WL 3206169) but not to the judgment of Peter Gibson LJ in Thamesmead Town Ltd v Allotey (1998) 30 HLR 1052 or Sir Nicolas Browne-Wilkinson V-C in IDC Group v Clark [1992] 1 EGLR 186.

I have quoted the judge’s conclusion in paragraph 7 above. It is criticised by counsel for Lidl on the following grounds:

I did not understand counsel for the claimants to place much, if any, emphasis on the “clear understanding” to which the judge referred. Rather, he pointed to the Deed of Assignment as the source of Lidl’s rights. Not only did it contain an assignment by Mr Jones to Lidl of the benefit of the Jones-Thomas and Jones-Trustees Contracts but it provided for the discharge of the Jones-Lidl Contract. Accordingly, this case is not a conventional sub-purchase. I would accept that submission. Thus the rights of Lidl were derived successively from the Deed of Assignment and the transfers executed on completion by the claimants and Mr and Mrs Thomas. The receipt of the benefit of the assignment by the subsequent transfers was conditional on Lidl’s performance of the obligations of Mr Jones under the Jones-Thomas and Jones-Trustees Contracts. Counsel for the claimants then contended that such conditionality was sufficient to impose on Lidl the burden of complying with the provisions of clause 18 of the Jones-Trustees Contract. In addition he submitted that if the conditions for the imposition of the burden on Lidl existed then it must be open to the claimants to enforce that burden by action, if only by way of a claim for unjust enrichment.

I turn then to the decided cases. The origin, in modern times, for the application of the doctrine of benefit and burden is the judgment of Upjohn J in Halsall v Brizell [1956] 1 Ch 169. That case concerned the enforceability of a deed of covenant entered into by the owners of building plots in a development in Liverpool against the successors in title of the original covenantors. The owners of the plots for the time being enjoyed the benefit of the roads and sewers constructed as part of the development and, on behalf of themselves and their successors in title, had covenanted with the trustees to pay part of the cost. Some house-owners, being successors in title to the original covenantors, refused to pay an increased contribution and the trustees and other house-owners applied to the court to determine whether on the true construction of the deed and in the events which had happened the trustees were entitled to require the house-owners to pay the contributions they claimed.

It was conceded in argument in response to a question from the judge that there was a rule that one who accepts the benefit of a deed must also accept the burden of it (see p.180). At page 182 Upjohn J observed that it was plain that the defendants could not be sued on the covenants contained in the deed because the covenant to pay was positive, aspects of it infringed the rule against perpetuities and because the parties before him were not parties to the original contract. He then considered the foundation of the doctrine of benefit and burden, as formulated in Coke on Littleton 230b and applied in Elliston v Reacher [1908] 2 Ch 665, 669, and concluded (p.182/3):

“If the defendants did not desire to take the benefit of this deed, for the reasons I have given, they could not be under any liability to pay the obligations thereunder. But, of course, they do desire to take the benefit of this deed. They have no right to use the sewers which are vested in the plaintiffs, and I cannot see that they have any right, apart from the deed, to use the roads of the park which lead to their particular house, No. 22, Salisbury Road. The defendants cannot rely on any way of necessity or on any right by prescription, for the simple reason that when the house was originally sold in 1931 to their predecessor in title he took the house on the terms of the deed of 1851 which contractually bound him to contribute a proper proportion of the expenses of maintaining the roads and sewers, and so forth, as a condition of being entitled to make use of those roads and sewers. Therefore, it seems to me that the defendants here cannot, if they desire to use this house, as they do, take advantage of the trusts concerning the user of the roads contained in the deed and the other benefits created by it without undertaking the obligations thereunder. Upon that principle it seems to me that they are bound by this deed, if they desire to take its benefits.”

In Tito v Waddell(No.2) [1977] Ch 106 Sir Robert Megarry V-C considered the principle applied by Upjohn J in Halsall v Brizell on pages 299 to 303. He concluded (p.302) that the ‘pure principle’ of benefit and burden was distinct from a conditional benefit or the annexation of a burden to property. In Rhone v Stephens [1994] 2 A.C. 310 the House of Lords disapproved of the pure principle as enunciated by Sir Robert Megarry but cast no doubt on his comment (p.302) that whether or not an instrument or transaction has created a conditional benefit or a burden annexed to property depends on the proper construction of the instrument or transaction in question.

In Rhone v Stephens [1994] 2 A.C. 310 a successor in title to the original covenantee sought to enforce a covenant to repair a roof against the successor in title to the original covenantor. Lord Templeman, with whom the other four members of the Appellate Committee agreed, noted that equity cannot, any more than the law, compel an owner to comply with a positive covenant entered into by his predecessor in title. He then referred to the ‘pure principle of benefit and burden’ enunciated by Sir Robert Megarry V-C and continued:

“I am not prepared to recognise the "pure principle" that any party deriving any benefit from a conveyance must accept any burden in the same conveyance. Sir Robert Megarry V.-C. relied on the decision of Upjohn J. in Halsall v. Brizell  [1957] Ch. 169. In that case the defendant's predecessor in title had been granted the right to use the estate roads and sewers and had covenanted to pay a due proportion for the maintenance of these facilities. It was held that the defendant could not exercise the rights without paying his costs of ensuring that they could be exercised. Conditions can be attached to the exercise of a power in express terms or by implication.  Halsall v. Brizell  was just such a case and I have no difficulty in wholeheartedly agreeing with the decision. It does not follow that any condition can be rendered enforceable by attaching it to a right nor does it follow that every burden imposed by a conveyance may be enforced by depriving the covenantor's successor in title of every benefit which he enjoyed thereunder. The condition must be relevant to the exercise of the right. In Halsall v. Brizell there were reciprocal benefits and burdens enjoyed by the users of the roads and sewers. In the present case clause 2 of the 1960 conveyance imposes reciprocal benefits and burdens of support but clause 3 which imposed an obligation to repair the roof is an independent provision. In Halsall v. Brizell  the defendant could, at least in theory, choose between enjoying the right and paying his proportion of the cost or alternatively giving up the right and saving his money. In the present case the owners of Walford House could not in theory or in practice be deprived of the benefit of the mutual rights of support if they failed to repair the roof.”

Thus Lord Templeman stressed that conditions may be attached to the exercise of a right or power by express terms or by implication, thereby recognising that, as Sir Robert Megarry had considered, the question is one of construction of the relevant instrument or transaction. Even so, as Lord Templeman pointed out, the condition must be relevant or reciprocal to the exercise of the right.

The principle was considered again by the Court of Appeal in Thamesmead Town Ltd v Allotey (1998) 30 HLR 1052. In that case the successor in title to the original covenantor refused to pay his share of the costs of repairing and maintaining sewers he had the right to use as appurtenant to his house. The covenantee in which the relevant housing estate was vested sued for their recovery. The defence was that as the defendant had not been a party to the original covenant he could not be liable for the sums claimed. That defence succeeded at first instance and on appeal. Peter Gibson LJ, with whom Hobhouse and Butler-Sloss LJJ agreed, noted that there was an exception to the rule that the burden of a positive covenant does not run with the land in cases where the covenantor may not take the benefit of a transaction without undertaking the burden imposed by it. He referred to Halsall v Brizell and Rhone v Stevens. He noted that Lord Templeman had suggested that there were two requirements for that exception to apply, namely (1) relevance of the burden or its discharge to the exercise of the rights which enable the benefit to be obtained and (2) the opportunity to choose whether or not to exercise the right or having taken the right whether to renounce its benefit, as opposed to a choice whether or not to acquire the rights at all. In relation to those requirements he concluded (p.1060):

“Similarly, it is not possible to enforce every burden in a conveyance by depriving the covenantor's successors in title of every benefit which he enjoyed under the conveyance. There must be a correlation between the burden and the benefit which the successor has chosen to take. Lord Templeman plainly rejected the notion that taking a benefit under a conveyance was sufficient to make every burden of the conveyance enforceable. Further, there is no authority to suggest that any benefit obtained by a successor in title, once the property has been transferred to him, to enable the enforcement of a burden under the conveyance is sufficient, even if that benefit was not conferred as of right by the conveyance. In my judgment, it cannot be sufficient that the taking of an incidental benefit should enable the enforcement of a burden against a person who has not himself covenanted to undertake the particular burden. Lord Templeman's reference to rights and power suggests that the successor in title must be able as of right to obtain the relevant benefit. I have already pointed out that not only is there no right conferred on the defendant by the 1988 transfer to use the communal areas but also the plaintiff has no obligation to maintain those areas.

[Counsel]'s second argument was that the judge erred in holding that the burden of a positive covenant is enforceable only if and to the extent that a successor in title chooses to exercise the corresponding right. That overstates what in fact the judge did say. He did not use the words “to the extent that”. [Counsel] submits that once a successor in title enters into the transaction by which he takes title he is liable regardless of whether he has actually chosen to enjoy a benefit. He submits that the judge has confused the acquisition of the right with the exercise of the right. He suggests that any other construction would lead to an impractical result requiring the plaintiff to monitor the exercise of rights by persons living in Thamesmead. For my part, I see considerable force in the common sense of that argument, but in the light of the authorities the argument seems to me impossible. As I have already pointed out, in Halsall v. Brizell, at 182, Upjohn J. was expressing the relevant principle in terms that the successors in title could choose whether or not to take the benefit of the deed. Similarly, in Rhone v. Stephens, Lord Templeman in distinguishing Halsall v. Brizell, expressed himself in terms which indicated that the successors in title had to have a choice whether to exercise the right or, having taken the right, whether to renounce the benefit. Lord Templeman was not expressing himself in terms that the successors in title had to have a choice whether to acquire the rights at all. Accordingly, I must reject this second argument also.”

Thus Peter Gibson LJ also stressed the need for a correlation between the burden and the benefit the successor in title has chosen to take and his ability to choose whether or not to take the benefit.

The principle was applied in 2006 in two cases on which counsel for the claimants relied. The first was Jenkins v Young Bros Transport Ltd [2006] 1 WLR 3189 and the second Baybut v Eccle Riggs Country Park Ltd 2006 WL 3206169. In the former a solicitor had, in the name of his then firm, entered into a conditional fee agreement with a client. While the litigation proceeded he moved firms twice. On each occasion the benefit of the CFA was assigned by the former firm to the subsequent firm. The client was successful and his costs, to be paid by the defendant, were then assessed. The defendant in the action contended that he should not be made to pay the costs due under the CFA after its first assignment because the claimant was not liable to pay them. That contention failed before the costs judge and Rafferty J sitting with assessors. The latter concluded that the benefit and burden of the CFA might be assigned because:

“The benefit of being paid was inextricably linked to the meeting by Girlings of its burden of ensuring to the best of its ability that the claimant succeeded.”

Plainly an inextricable link between benefit and burden would satisfy the tests formulated in all the earlier cases. That is sufficient for present purposes, though I have some doubt whether the relevant benefit and burden were correctly described.

In Baybut v Eccle Riggs Country Park Ltd the purchaser of a caravan park purported to terminate the 10 year licences under which the owners of the various caravans occupied their respective pitches. HH Judge Pelling QC concluded (paragraph 59) that the new owner of the caravan park was subject to the burden of the licences not only because they had been novated but also because

“[he, the purchaser] deliberately chose to take the benefit of the caravan site...and the income stream that it represented....it could not have done so without accepting the burden of the licences entered into by the claimants with [the former owner].”

But this was said in the context that the sale agreement of the caravan site had contained a covenant by the purchaser with the vendor to perform and observe the future obligations imposed by the licences. Thus, under the sale agreement the purchaser took the benefit of the licences conditionally on accepting the burdens thereunder. In addition the principle that one who takes the benefit of a licence to occupy the land granted to another in the form of an income stream, presumably by receiving periodical payments, will be bound by the burden to permit the licence-holder to occupy his pitch is also well known. Both grounds are in accordance with the principles formulated by Lord Templeman and Peter Gibson LJ.

Rhone v Stephens and Thamesmead Town Ltd v Allotey are binding on us. They establish a number of propositions the application of which are exemplified in the other cases to which I have referred, namely Halsall v Brizell, that part of Tito v Waddell which was not disapproved in Rhone v Stephens, Jenkins v Young Bros Transport Ltd and Baybut v Eccle Riggs Country Park Ltd. In my view those propositions are:

Applying those propositions to the facts of this case I conclude that the judge reached the wrong conclusion. First, a “clear understanding”, such as he referred to in the passage from his judgment I have quoted in paragraph 6 above, is an insufficient base from which to start. An understanding such as he described can neither confer benefits nor impose burdens. What is required is a transaction having legal effect. In this case the benefit and burden is alleged to arise from land. Accordingly the relevant transaction must be effected by a deed or other document.

In his respondent’s notice and in argument before us counsel for the claimants placed principal reliance on the Deed of Assignment. That Deed effected a transaction having legal consequences, namely the assignment of the benefit of the Jones-Thomas and Jones-Trustees Contracts by the claimants to Lidl. But the benefit derived by Lidl from that assignment was not thereby made conditional, as it might have been, on Lidl performing and observing the obligations of Mr Jones under those contracts. In the absence of a covenant to that effect contained in the Deed of Assignment the transaction did not purport to impose any burden on Lidl. Both contracts imposed on Mr Jones substantial obligations to carry out various site works. There is nothing in the Deed of Assignment from which it would be possible to find by implication an undertaking or requirement imposed on Lidl to carry out Mr Jones’s obligations. Accordingly the questions whether acceptance of the benefit was conditional on performance of the burden and whether Lidl had sufficient opportunity to disclaim or reject the benefit do not arise.

The benefit to Lidl might have been realised by assigning the benefit of the contracts to some third party purchaser. In that event there could have been no question of Lidl undertaking any burden. But in all probability the benefit of the Deed of Assignment would be realised, as it was, by completing the contracts the benefit of which Lidl had thereby acquired. Completion took place on the 4th August and some reliance was put on that transaction by counsel for the claimants. But in my view that transaction cannot avail the claimants either. Completion of those contracts was not dependent on Lidl undertaking any of the burdens imposed on Mr Jones by clause 18 of the Jones-Trustees Contract, indeed they did not arise until after completion. The relevant transfers did not contain any stipulation requiring Lidl to perform and observe the obligations of Mr Jones under the contracts thereby completed. Accordingly, as with the Deed of Assignment so with the transfers there is nothing which could be regarded as either expressly or by implication imposing any relevant obligation on Lidl. Again the questions whether receipt of the benefit is sufficiently relevant to or conditional on the imposition of the burden and whether Lidl had sufficient opportunity to disclaim or reject the benefit do not arise.

The fact is that clause 18 of the Jones-Trustees Contract was contractually binding on Mr Jones. The obligations thereby imposed arose after completion of the contracts. There was no subsequent transaction by which benefits were conferred and burdens imposed capable of attracting the principle relied on. In the absence of a covenant in the Transfer binding Lidl to perform and observe Mr Jones’ obligations under clause 18 of the Jones-Trustees Contract they could not be imposed on Lidl but remained the obligations of Mr Jones alone. Mr Jones was originally a party to these proceedings. Why the claim against him was made only on the basis that he was the agent of Lidl is not for us to speculate. For these reasons I would allow the appeal and, subject to our conclusion on the other issue, set aside the judge’s answer to that part of the preliminary issue and make a declaration in the opposite sense.

In those circumstances it is unnecessary to consider whether if the burden had been imposed on Lidl it was capable of being enforced by action at the suit of the claimants. But in the light of counsel’s submissions I wish to add a few words in relation to it. Counsel for Lidl submitted that the burden could only be enforced by withholding the relative benefit not by action. He relied on the statement of Upjohn J in Halsall v Brizell to the effect that it was plain that the trustees could not sue on the covenant. Counsel also relied on the dictum of Sir Nicolas Browne-Wilkinson in IDC Group Ltd v Clark [1992] 1 EGLR 187, 190 that:

“the only means of enforcement in a Halsall v Brizell type of case is to prevent the person from enjoying the rights which they seek to enjoy under the document, save upon the terms that they give effect to the positive obligations imposed on them.”

It is not hard to envisage situations in which the failure of the person benefitted to perform the associated obligations could satisfy the conditions for a claim in unjust enrichment. Further I am unclear how that statement can be reconciled with cases dealing with compensation for letting down the surface of land in performance of a right to do so subject to paying the surface owner compensation. In such a case it seems that the landowner may sue the mineworker for compensation see, for example, the decision of the Exchequer Division in Aspden v Seddon (1875-6) 1 Ex D 496 and of the Court of Appeal in Westhoughton UDC v Wigan Coal and Iron Co. [1919] 1 Ch 159. Further, alternative means of enforcement have been allowed in both Jenkins v Young Bros Transport Ltd and Baybut v Eccle Riggs Country Park Ltd although this point does not appear to have been raised in either of them. It is not, if, as I understand to be the case, the other members of the court agree with my conclusion so far, necessary to resolve this issue in this case.

Given, as I understand to be the case, the other members of the court agree with my conclusions so far, it is unnecessary to deal with this issue. But, in deference to the argument of counsel, I wish to add a few words in respect of it. In paragraphs 5 and 12 to 15 above I have described the state of the proceedings at the time the application was made to the judge on 5th May 2009 to enlarge the preliminary issue. Given that it was common ground that Lidl was not bound by clause 18 of the Jones-Trustees Contract it plainly required some amendment to the pleadings to raise an issue capable of being formulated into a preliminary issue that Lidl was bound by clause 18 on the grounds sought to be alleged. As the transfers had been executed on 4th August 2000 and the works completed by 30th June 2001 any such amendment would have been made outside the period permitted by the Limitation Act 1980 for any such new claim. Accordingly the requisite amendment could not be made unless it satisfied the requirements of CPR Rule 17.4(2).

Although counsel for Lidl told us that he had addressed the judge on both the Act and the Rule, neither is referred to in the judge’s short judgment given on 5th May. He said:

“In my opinion, neither the particulars of claim nor the rather short response to it in the defence properly clarifies the precise issues between the parties. Although the phrase is not happily worded, in my judgment there is just about enough reference in the amended particulars of claim to the second defendants holding monies in breach of the terms of clause 18.2 of the agreement. This, as everyone accepts, is not a matter which raises any new fact. The question is one of law. I do have sympathy with Mr Child who says that after formulation of preliminary issues last week, he has not come prepared to argue that particular point today. But we have two days for hearing of the preliminary issues, it does seem to me having regard to the overriding objective that all outstanding legal points should be addressed by this court during these two days if that can be done without prejudice to the second defendants. In my judgment by dealing with this point tomorrow that should give a reasonable amount of time for Mr Child to address the legal points now raised. That is the course of action I propose to adopt.”

The judge was concerned, and rightly so, to avoid a waste of the court’s resources if it was possible to do so. But in my view he did not deal adequately with the submissions counsel told us had been made to him. There were serious points to be considered and determined. First, was an amendment to the particulars of claim needed to justify an enlarged preliminary issue authorised by CPR Rule 17.4(2)? That rule provides that

“The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.”

There can be no doubt that the effect of the requisite amendment would be to add a new claim; nor was it in issue that the period of limitation in respect of that claim had expired. Accordingly the amendment could not be allowed unless the new claim arose out of the same or substantially the same facts as the existing claim. In the passage I have quoted the judge considered that no new fact was involved but no proposed amendment had been formulated and in his judgment the following day the judge relied on a “clear understanding” which had not been pleaded and was not relevant to any existing claim.

Second, even if the judge had been satisfied that the re-amendment to the particulars of claim necessitated by the proposed extension of the preliminary issue was permitted by CPR Rule 17.4(2) he still had a discretion whether or not to allow it. The claimants had sought to amend their particulars of claim on three previous occasions. On the most recent, in January 2008, Wyn Williams J had refused to allow them to raise other new claims. The judge did not appear to take account of this relevant consideration at all.

Whilst the judge was right to try to avoid any waste of the Court’s resources I am bound to say that I cannot accept his conclusion. At the very least he should have insisted on a properly formulated amendment to the particulars of claim. Only then could he have satisfied himself that the amendment to the pleadings and thereby to the preliminary issue was permissible under CPR Rule 17.4(2). He was entitled to refuse the application on account both the absence of any properly formulated amendment, the lateness of the application and the fact that earlier similar amendments had been sought and refused.

For these reasons I consider that the judge’s exercise of his discretion was plainly wrong. But counsel for Lidl, understandably, did not ask for an adjournment so as immediately to raise the matter with the Court of Appeal. The preliminary issue was extended, argued and determined in the manner I have described. In my view the proper answer to the preliminary issue so extended is that for which counsel for Lidl contends. In those circumstances I see no reason to set aside his order extending the preliminary issue if the alternative is to set aside the declaration he made and substitute the declaration Lidl seeks.

In my view the judge was wrong:

I agree.

I also agree.