Wilkinson & Ors v Kerdene Ltd

The appellants in this case own and occupy various bungalows in the St Merryn Holiday Village (“the Village”) near Padstow in Cornwall. The site was originally part of the St Merryn Naval Air Station but was developed as a holiday village in the 1960s. About 50 bungalows were built at that time followed by a further 97 bungalows constructed between 1987 and 1988 in the areas known as Jasmine Way, Lily Way and Foxglove. All of the appellants own bungalows in this part of the Village. I will refer to them as the new bungalows.

The Village also included what has been described in the submissions as a leisure complex including a public house and nightclub; a shop and a swimming pool. In addition, there were tennis courts, children’s play areas, a boating pool (later converted into a skateboard rink) and the roads and footpaths linking up the various parts of the Village.

The conveyancing history of the site is extremely complicated. In 1987 most (if not all) of the site was owned by Devon and Cornwall Securities Limited who were mortgagees in possession. In August 1987 they sold part of the land in their ownership (described in the conveyance as 13 building plots numbered 127-139 together with the adjacent estate roads and parking areas) to Merryn Estates Limited (“MEL”). This was followed on 29^th March 1989 by a further transfer to MEL of a large part of the Village comprising further building land, the estate roads and the pumping station but not including either the leisure complex or four areas of developed building plots, some of which had already been acquired by MEL under the 1987 conveyance.

The new bungalows were all constructed and sold off by MEL prior to the 1989 transfer using land in the Village which was already in their ownership. The conveyances were in a standard form but there is a slight difference in the wording of the later conveyances, the effect of which has been the subject of argument. I will refer to the first type of conveyance used as Form A and to the second as Form B. In the Form A conveyances, MEL conveyed to the purchaser the particular bungalow identified by reference to the plot number on the plan “together with the rights set out in the First Schedule”. Clauses 3 and 4 of Form A were in these terms:

“3.

The Purchaser further covenants with the Vendor that he will make payment to the Vendor as set out in part two of the Third Schedule hereto and further that he will include a covenant as set out therein in any future Conveyance of this land entered into between himself as vendor and the purchaser in such Conveyance.

4.

The Vendor covenants with the Purchaser that it will maintain to a reasonable standard the roads drives car parks car parking spaces footpaths lawns pleasure grounds and other recreational facilities in the said Holiday Village and shall paint the external surfaces of the said bungalow in every third year and shall keep the foul sewer system and holding tank in good working order and emptied as and when required.”

The Schedule 1 rights granted to the purchaser were as follows:

“(a)

To use and enjoy and pass and repass with or without motor vehicles over and along the roads drives parking places and car parks laid out or to be laid out in the St Merryn Holiday Village.

(b)

To pass and repass on foot only over the footpaths laid out or to be laid out in the said Holiday Village.

(c)

To use and enjoy the lawns pleasure grounds and other recreational facilities laid out or to be laid out in the said Holiday Village.

(d)

(i) To connect with drain into and use the drains sewers chambers and traps pipes wires and cables constructed or to be constructed on the said Estate and in the event of the Vendor failing to repair renew maintain and cleanse the same forthwith on such repair renewal maintenance and cleaning becoming necessary the right to enter on the adjoining and neighbouring land of the Vendor to effect such repair renewal maintenance and cleaning the Purchaser doing as little damage as possible in the exercise of this right and forthwith making good any damage done.

(ii)

To enter upon the retained land of the Vendor for the purpose of carrying out repairs and renovations to the bungalow or the service pipes drains and wires thereto PROVIDED that the Purchaser shall give reasonable notice of his intention to exercise the said right and shall make good any damage caused thereby.”

Part 2 of Schedule 3 (referred to in clause 3) provided that:

“(1)

The Purchaser shall on the execution hereof pay to the Vendor the sum of £258.75 or a proportionate part plus value added tax thereon in respect of the period from the date hereof to the 1^st day of October next for the purpose of maintaining the roads car parks pleasure grounds and other recreational facilities at the said Holiday Village.

(2)

Thereafter he shall pay to the Vendor on or before the 1^st day of October in each year such sum as shall be notified to him by the Vendor.

(3)

This sum shall be computed by adding to the sum payable in the previous year such percentage increase as is indicated by the increase in the index of retail prices for the previous 12 months ending in the month of December.

(4)

The Purchaser shall in any future Conveyance of the said land made between himself as vendor and a subsequent purchaser include a covenant in the terms set out at paragraphs (1) to (4) of this part of Schedule 3.”

The Form B conveyances were in identical terms except for paragraph 1 of Schedule 3, Part 2. In the Form B conveyances this provided that:

“The Purchaser shall on the execution hereof pay to the Vendor the sum of £258.75 together with Value Added Tax thereon or a proportionate part in respect of the period from the date hereof to the 30^th day of September next for the purpose of carrying out the various matters referred to in clause 4 hereof.”

The leisure complex described in paragraph 2 was owned and operated by Transglen Limited, a company in the same group as MEL. The evidence is that the Village was well run and maintained but in 1991 MEL and Transglen Limited sold the parts of the Village remaining in their ownership to Dreamcroft Limited (later called Grayden Leisure Limited and then St Merryn Holiday Village Limited) which in turn sold the leisure area to Salcom Limited. By 1992 Salcom Limited was in liquidation and the leisure area and adjoining land was sold on to Permabase Limited. This and Dreamcroft Limited were by then in common ownership. They in turn had financial difficulties and by January 2000 both had been wound-up. In May 2000 Wilshire Real Estate Partnership LP (as successors in title to the group’s mortgagees) sold to the respondents, Kerdene Limited, all the land comprised in title numbers CL48669 and CL81055. This consisted of the land acquired by MEL under the 1989 transfer and the leisure complex and adjoining land.

After the Village had been sold by MEL and Transglen Limited in 1991 it was allowed to fall into a serious state of disrepair. Many of the leisure facilities (including the swimming pool) were closed due to lack of maintenance and the footpaths and common areas became dilapidated and overgrown. But under Kerdene’s ownership serious attempts have been made to bring the Village back into a proper state of repair. It is common ground that Kerdene has not carried out all of the work which it would be required to do under the covenants contained in clause 4 of the original conveyances. It has not, for example, cut the lawns around the appellants’ bungalows nor has it painted them. There are also issues about the state of repair of many of the footpaths. But it has re-surfaced the roads; upgraded the foul sewer system; and restored some of the original leisure facilities such as the tennis courts, although not in their original position. It has also created two grassed areas at the southern end of the site which can be used for walking or the exercising of dogs. There is, however, no longer any swimming pool and there have been other significant changes during Kerdene’s ownership. Part of what was the leisure complex was sold by Kerdene to Herling Limited in 2006 and has been developed with the construction of 28 two-storey houses. Another part of the same land was sold to David Trathern in December 2007 for development into holiday homes and a hotel. Other parts of the Village (comprised within title number CL48669) are in the process of being developed by Kerdene into holiday homes. This is referred to as the Park Home Development.

As a consequence of the maintenance works which it has carried out, Kerdene has since 2000 sought to recover from the owners of the new bungalows the sums payable under Part 2 of Schedule 3. Some of those owners are the original purchasers from MEL and are therefore contractually liable on the covenant. But most of them are successors in title to the original purchasers against whom the positive covenant to pay can only be enforced by Kerdene if it can bring the case within the equitable benefit and burden principle applied by Upjohn J in Halsall v Brizell [1957] 1 Ch 169.

Many of the owners have refused to pay. Others (like Mr Turner who is one of the appellants) are prepared to pay a reasonable sum towards the costs actually expended by Kerdene in the repair of the roads but are unwilling to make the payments claimed which they say are excessive and unrelated to the cost of the works actually carried out. In the face of this opposition, Kerdene commenced proceedings against each of the owners who refused to pay the sums allegedly due. The claim forms were issued in April 2008. They sought payment of the arrears of the Schedule 3 contributions and an injunction restraining the defendants from continuing to use the roads and other Schedule 1 facilities unless and until the arrears were paid.

Some of the defendants (Mr and Mrs Watkins of 134 Jasmine Way) instructed solicitors and counsel to settle a defence but most (if not all) of the remaining defendants acted in person. A number of points were taken in the various defences. Most raised an argument that, absent a chain of indemnity covenants (which does not exist in this case), the burden of the positive covenant to pay has ceased to be enforceable and cannot now be enforced on the basis of the benefit and burden principle. In that connection, reliance was placed on the fact that parts of the original leisure facilities have either been sold off or no longer exist and on the failure by Kerdene to carry out maintenance in respect of all the items listed in paragraph 1 of Part 2 of Schedule 3 to the conveyances. It was also pleaded that the defendants have made no use of any of the facilities apart from the roads and footpaths.

In its final amended form, the defence served by Mr and Mrs Watkins (which was settled on their behalf by Mr Colin Elliott of counsel) took four points in answer to the claim based on Halsall v Brizell:

The first two of these arguments go to the construction and enforceability of the payment covenant and the second would, if correct, provide a defence for the small group of owners who are original covenantors. The third and fourth points are relevant to the claim against successors in title based on Halsall v Brizell. As I shall explain a little later in this judgment, subsequent decisions of this Court and the House of Lords have stressed the need for there to be a sufficient degree of correlation between the covenant to pay and the grant of relevant property rights (usually easements) before equity will allow the burden of the payment covenant to be enforced against successors in title with whom there is neither privity of contract nor privity of estate. The defendant must also be theoretically at liberty to disavow any use of the benefit of the property rights as a condition of renouncing the burden of payment. The defendants who are successors in title would therefore have a defence to Kerdene’s claim if they are right in their contention that the Schedule 3 payment covenant is the quid pro quo for the site owner’s clause 4 covenant to repair and is unrelated to the grant of the Schedule 1 rights.

Because of the number of claims involved and the fact that the majority of defendants were unrepresented, a series of case management conferences took place in the Bodmin County Court in order to clarify the issues raised by the various defences. Kerdene had agreed terms of settlement with a number of defendants but there were still about 13 cases which remained to be tried. An attempt by one of the defendants, Mr Wilkinson, to obtain the summary dismissal of the claim against him failed and Kerdene raised with the District Judge the possibility of making a representation order under CPR 19.6. In written submissions to the Court it contended that there would be a considerable saving in time and expense if in the various claims (which were by then consolidated) Mr and Mrs Watkins were selected as the representative defendants with the other defendants being permitted to argue any points of defence that were open to them but were not being taken by Mr and Mrs Watkins. In this way the other defendants would have the benefit of any common defences being argued by counsel (Mr Elliott) but would be free to take any additional points of their own. These would include an allegation by Mr and Mrs Milner (the owners of plot 132) that they had been released from the payment covenant in 1991 and any arguments based on the difference between the wording of Form A and Form B. The conveyance to Mr and Mrs Watkins had been in Form A.

On 24^th February 2010 District Judge Thomas made a representation order as asked and gave directions for the trial of the consolidated claims. He ordered that Mr and Mrs Watkins should represent all of the defendants in the consolidated claims but also provided for Mr and Mrs Milner and the other defendants to take the two points referred to above. There was no appeal against this order but a number of the appellant defendants have criticised it on the basis that it prevented them from raising defences of their own beyond those referred to in the order. But it seems to me that the District Judge did accurately identify any pleaded defences which were not contained within the defence served on behalf of Mr and Mrs Watkins and the advantages of having those points argued by counsel were obvious. In any event, it is now far too late to seek to challenge case management directions made in advance of the trial.

One consequence of the representation order was that the trial judge had only one set of pleadings to consider. On 9^th April 2010 the Watkins’ defence and counterclaim was re-amended so as to make it clear that the represented defendants were relying on the four points described in paragraph 13 above. Although raised tangentially during the course of this appeal by Mr and Mrs Weston (who have appeared on behalf of Mr Wilkinson), no request was made by any of the defendants to amend the defence in order to raise the further argument that Kerdene could not enforce the payment covenant if it no longer provided all of the facilities described in Schedule 1 to the conveyance. Mr Johns told us that had this point been pleaded Kerdene would have wanted to adduce further evidence about the extent of the facilities which originally existed on MEL’s land and the steps taken by Kerdene since 2000 to restore some of the relevant facilities which had been lost. All that I need say about this point is that it will be apparent from the earlier summary of the conveyancing history that many of the most popular leisure facilities were never within MEL’s ownership and could not therefore have been included in the rights granted under Schedule 1 of the conveyances. Paragraph (c) of Schedule 1 ought therefore to be given a limited meaning consistent with the property which MEL owned at the relevant time. The loss of the swimming pool and the other facilities on the land in the ownership of Transglen Limited is unlikely therefore to have provided the defendants with a further defence to Kerdene’s claims.

The trial took place before HH Judge Vincent on 14^th December 2010. Because Kerdene had conceded that it had not carried out all the works required under clause 4 of the conveyances, no evidence was called about the state of repair or the cost of carrying out what remained to be done. None of the defendants (other than Mr Turner) accepted that some payment was due from them for the repairs to the roads which Kerdene had carried out. Their case was (and remains) that the rule in Halsall v Brizell has no application in this case and that the payment covenants are not therefore enforceable against defendants who are successors in title to the original covenantors. The defendants who are original purchasers relied upon the entire contract defence again to deny any liability under the payment covenants. No one was alleging that because Kerdene was (by its own admission) in breach of its repairing covenants, they had a counterclaim and set-off in respect of their own liability to pay. Indeed, it was an important part of the defendants’ arguments (as I shall explain later) that clause 4 was not enforceable against Kerdene as MEL’s successors in title and was not severable. Quantum was not therefore an issue.

The judge rejected the arguments that the payment covenant was personal to the original covenantors or that it formed part of an entire contract so as to be unenforceable unless and until Kerdene has completed all of its own obligations under clause 4. That left him with the argument that the fixed sum payable under Part 2 of Schedule 3 did not correlate with the only benefits which the defendants had chosen to take: i.e. the use of the roads and footpaths in the Village. Mr Elliott contended that, on the true construction of the conveyances, the payment covenant was given in return not for the grant of the Schedule 1 rights but rather in return for the vendor’s own maintenance covenant contained in clause 4. As a matter of authority, this was not sufficient to make it enforceable against successors in title.

In Rhone v Stephens[1994] 2 AC 310at p. 322 Lord Templeman said that:

“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.”

In that case part of a property which was in common ownership was sold off. The vendors and the purchaser granted and retained mutual rights of support in respect of the part sold off but the vendors also covenanted to repair the roof including that part of it which protected the purchaser’s property. After both parts had been sold on, the purchaser’s successors in title sought to enforce the repairing covenant against the successors in title to the vendor. For the reasons given by Lord Templeman, the House of Lords held that the covenant was unenforceable. The retention by the vendors of a right of support was not sufficient to enable the covenant to repair to be enforced against their successors in title. Although contained in the same conveyance, the right of support was, as a matter of analysis, independent of the obligation to repair. The quid pro quo was simply the right of support granted to the purchaser. Mr Elliott’s submission to the judge was that the same reasoning applied to the grant of the Schedule 1 rights in this case. The parties did not intend them to be conditional upon payment of the fixed sum. All that the payment covenant was intended to achieve was to recompense the vendor for the expenditure incurred in performing its covenant under clause 4. That was made particularly clear in the Form B conveyances in which the payment covenant stated in terms that payment is “for the purpose of carrying out the various matters referred to in clause 4 hereof”. That includes the painting of the bungalows which is not, of course, one of the rights granted under Schedule 1.

The judge rejected these arguments. He said:

“Mr Elliott for the Defendants contends that the charging covenant correlates with the obligation on the owner of the common parts to maintain under Clause 4. He says that it does not correlate with the rights such as the right to use the access road. If he is correct about that then the Claimant would fail not least because the obligation to maintain is not enforceable as such by a successor in title to an original purchaser and does not represent an entitlement as of right. Mr Elliott also says that because the charging covenant provides for a fixed sum covering all the maintenance obligations and cannot be broken down and apportioned between the corresponding rights there is no correlation with the benefit the Defendants have chosen to take, namely to use the access road only.

I cannot accept these contentions. In my judgment the benefit that falls to be considered is, without doubt, the legal right contained within the First Schedule including the right to use the access road. In my judgment the relevance or correlation falls to be considered as between those rights and the Clause 3 charging provision. What needs to be established is, as I have mentioned, a relevance or correlation. What does not have to be established is that the two provisions coincide. The fact that the burden in the shape of the payment provided for is not divided between the rights could, in theory, represent a separate potential problem but it does not undermine the proposition that the charging provision is relevant to and correlates with the right to use the access road.”

At the conclusion of Mr Elliott’s submissions, Judge Vincent asked whether any of the defendants present who had Form B conveyances wished to argue that the wording of Form B produced a different result. The transcript shows that none of the relevant defendants wished to take that point. The judge therefore entered judgment against all the defendants for the sums claimed.

Mr and Mrs Watkins then applied for permission to appeal in respect only of the correlation/choice of benefit argument which I granted on the papers. Permission was not sought on any other ground. I indicated that I would consider separately any application for permission to appeal by the other defendants and would not continue the representation order for the purposes of any appeals. Subsequently on 21^st April 2011 I granted permission to appeal to a number of other defendants but limited to the same grounds as in the case of Mr and Mrs Watkins.

Since then a number of cases have been settled including the claim against Mr and Mrs Watkins. We have therefore dealt with extant appeals in the cases of Mr Waiton and Ms Sell (who have Form A conveyances); Messrs Wilkinson, Hancock, Turner and Morland (who all have Form B conveyances); and Mr and Mrs Bone, Mr Russell and Mr Rabey (who are all original purchasers). The appeals were first listed to be heard on 22^nd November 2011 before a constitution comprising Pill, Arden and McFarlane LJJ. Concerns were expressed that the judge had not had the benefit of any argument on the Form B conveyances and Mr Elliott, who now acted for Mr Hancock (one of the Form B appellants), indicated to the court that he did wish to take whatever points were available on Form B. The appeal was therefore adjourned and the matter was remitted to Judge Vincent to deal with the arguments on Form B and to make any additional findings of fact relevant to the grounds of appeal for which I granted permission.

At a further hearing on 23^rd April 2012 the judge heard submissions from or on behalf of Mr Morland, Mr Hancock and Mr Wilkinson, all of whom were in person and unrepresented. Many of the arguments (as in this court) ranged far beyond the grounds of appeal for which permission has been granted. It remained common ground that Kerdene has not carried out all the relevant works of repair but has repaired and maintained the roads which each of the appellants continue to use. At the end of the hearing the judge re-affirmed his earlier ruling that the payment covenants remained enforceable against successors in title and rejected the submission that the Form B covenants should, by virtue of the difference in wording referred to earlier, be construed as producing a different outcome. He said:

“11.

I found in clear terms that on form A the benefit was the legal rights contained including the right to use the access road. The relevance or correlation that is required by for example the decisions in Rhone v Stephens and Thamesmead v Allotey, both cited in my original judgment, was found by me to be borne to or with the charging provision in the deed representing the burden assumed by a successor in title who made the choice of taking the benefit. I specifically rejected the argument advanced on behalf of the Watkins, first that the charging covenant correlated with the obligation on the owner to maintain as opposed to the rights to use the access road, for example. Second, that there could be no correlation because the maintenance charge was not divisible between the corresponding rights and in particular referable to particular benefits that a purchaser chose to take.

12.

Now I just want to consider the way in which the form B conveyance differs. The only material differences that I have been able to discern are that in each conveyance, each type of conveyance, the payment covenant refers to an obligation to make payment as set out in the third schedule. In form A this is referred to in the charging clause as a maintenance charge. In form B the charging covenant does not say that but instead within its third schedule it refers to the payment being made for the purpose of carrying out various matters referred to in clause 4 and clause 4 is explicitly a maintenance covenant. The difference lies in what is expressed as being the purpose of the payment. In form A it does not include the painting of the bungalow but in form B it does. Notwithstanding that each type of conveyance contains a covenant by the vendor to carry out that painting.

…..

14.

Fundamental to the three applications before me is what I regard as the applicants’ misunderstanding of this point. They are each quite correct that the charges are expressly for the purpose of maintenance. This is true of part A and part B, both. They have in my judgment muddled the question of purpose with the issues of correlation and relevance. Mr Hancock filed a three-page skeleton argument and by way of evidence copies of invoices from Kerdene to him. His argument was framed in five broad points or parts, as he termed them. First, he contended that the invoices were for services not rights, and he had no knowledge that Kerdene was claiming for rights and not maintenance. In this point in my judgment he again misunderstands the case. Kerdene has never asserted that the charges were for the rights. I have determined that the charging covenant bears relevance to the rights which is a quite different matter.

…..

16.

Thirdly, he complains that Kerdene are in serious breach of the maintenance covenant which again, on the analysis that I gave within the trial, misses the point. The fourth argument is a repeat of the first and fails for the same reason. The fifth point is in fact the only one which falls within the permission that the Court of Appeal gave because it turns on the wording of the form B conveyance and contends that the charging covenant which encompasses schedule 3(ii) correlates with the maintenance covenant because payment is expressed within the schedule to be for the purpose of carrying out the matters set out in the maintenance covenant. Mr Hancock suggests that this proves that the charging covenant correlates with the maintenance covenant. In my judgment it does not. It did not in the form A case and the differences in wording between the two forms of conveyance do not undermine that proposition. Indeed it is quite clear in each that the payments are indeed maintenance charges.”

I can turn then to the issues on the appeal which are really quite short points. What Lord Templeman emphasised in Rhone v Stephens was that a successor in title to the original covenantor did not incur a liability to perform a positive covenant such as the covenant to repair in that case unless it had some real relation to a right granted in his favour under the conveyance which he did wish to exercise. The reference in his speech to the exercise of those rights being conditional upon the performance of the positive obligation is not, as he made clear, limited to cases in which it is expressly so conditional. In Halsall v Brizell the owners of houses on an estate covenanted to pay a due proportion of the cost of maintaining and keeping in good repair the roads, sewers, promenade and sea wall serving the estate. There was nothing in the conveyance itself which in terms made the enjoyment of these facilities conditional upon the payment of the maintenance charge and the charge was payable under the terms of the conveyance for their maintenance and not for the exercise of the right to enjoy and make use of them. But Upjohn J said of the owners of the houses who were successors in title to the original covenantors:

“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.”

What this recognises (as Judge Vincent himself held) was that, in substance, the payment of an annual charge for the maintenance of facilities which the defendants are only entitled to use by virtue of rights granted under the deed is relevant to the continued exercise of those rights even though it is in fact (and in terms) a contribution to the cost of their maintenance. The two are not inconsistent. Quite the contrary.

In some cases (like Rhone v Stephens) the positive obligation may be completely unrelated to the rights which the owner seeks to exercise. A more obvious example is the decision of this court in Thamesmead Town Ltd v Allotey [1998] 37 EG 166 where the property owners on an estate were asked to contribute to the cost of repairing landscaped and community areas over which they had been granted no rights at all. At page 99 Peter Gibson LJ said that:

“The reasoning of Lord Templeman suggests that there are two requirements for the enforceability of a positive covenant against a successor in title to the covenantor. The first is that the condition of discharging the burden must be relevant to the exercise of the rights that enable the benefit to be obtained. In Rhone v Stephens the mutual obligation of support was unrelated to and independent of the covenant to maintain the roof. The second is that the successors in title must have the opportunity to choose whether to take the benefit or, having taken it, to renounce it, even if only in theory, and thereby to escape the burden and that the successors in title can be deprived of the benefit if they fail to assume the burden. On both those grounds Halsall v Brizell was distinguished. Although Lord Templeman expressed his wholehearted agreement with Upjohn J's decision, Lord Templeman's description of that decision was limited to the defendant being unable to exercise the rights to use the estate roads and to use the sewers without paying his costs of ensuring that they could be exercised. Nothing was expressly said about the cost of maintaining the sea wall or promenade and it is a little difficult to see how, consistently with Lord Templeman's reasoning and, in particular, the second requirement for the enforceability of a positive covenant, the cost of maintaining the sea wall would fall within the relevant principle.

…..

Mr Routley submits that the judge was wrong in law in holding that a positive covenant can be enforced against the assignee of the covenantor only where the burden of that covenant is a condition attached expressly or by implication to the exercise of a reciprocal right granted by the covenantee. He says that the judge should have held that such a covenant was enforceable against such a person where the burden of the covenant was a condition attached expressly or by implication to the enjoyment of a reciprocal benefit granted or provided by the covenantee, either contained in the same deed or as part of the same agreement or arrangement. In developing this argument, Mr Routley submitted that where the burden of a positive covenant is conditional upon a reciprocal or a relevant benefit, it will be enforced. He pointed out that this is not restricted to the benefit of rights granted by a deed. That is true. An oral agreement or arrangement will suffice, as was held in ER Ives Investment Ltd v High [1967] 2 QB 379. But that is irrelevant, as here the plaintiff has only the transfer on which it can rely. Mr Routley also pointed out that the benefits need not be expressly related to a corresponding burden, but can be related by implication. That is not in dispute. He drew attention to the fact that Lord Templeman did not use the language of benefit throughout, but also referred to rights and power. He submitted that this meant that Lord Templeman was deliberately distinguishing a right or power, upon which a positive covenant might be made conditional, from the benefit of a covenant. This led him to submit that the communal areas could be used or enjoyed without the defendant walking on them and that their mere existence was sufficient to confer a relevant benefit. Mr Routley pointed to the judge's comment on the importance of the provision of services by the plaintiff to the character and atmosphere of Thamesmead and the advantage to the owners of properties therein that the value of their properties would be maintained by the continued provision of such services.

I have no hesitation in rejecting this argument. Mr Routley seems to me to read far more into Lord Templeman's words than could possibly have been intended. Lord Templeman was plainly seeking to restrict, not enlarge, the scope of the exception from the rule that positive covenants affecting freehold land are not directly enforceable except against the original covenantor. Lord Templeman treated Halsall v Brizell as a case where the right to use the estate roads and sewers was conditional on a payment of a due proportion of the maintenance expenses for those facilities. While agreeing with the decision, Lord Templeman made clear that for a burden to be enforceable it must be relevant to the benefit. He said that simply to attach a right to a condition for payment would not render that condition enforceable. Similarly, it is not possible to enforce every burden in a conveyance by depriving the covenantor's successors in title of every benefit that he enjoyed under the conveyance. There must be a correlation between the burden and the benefit that 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.”

In that case it was possible to apportion the amount claimed for repairs between the various facilities on the estate just as in a conventional service charge for a block of flats. Insofar as the defendants had no rights to use the communal areas, they could not be compelled to pay that part of the bill. But it has always been accepted in this case that the payment of a fixed annual amount increased by reference to an index of inflation rather than the actual cost incurred is not capable of being apportioned in that way. That was part of Mr Elliott’s submissions to the judge and it is repeated in the skeleton argument used to obtain permission to appeal.

His submission was that the consequence of this is that the burden of the fixed sum does not correlate with the exercise of the rights granted in the way that a severable charge did to the rights to use the roads and footpaths in the Thamesmead case. There the charge was enforceable insofar as it related to the rights actually granted. Here it is payable (if at all) regardless.

But that, with respect to him, is a non sequitur. In the Form A conveyances the payment is due (according to Part 2 of Schedule 3) for the purpose of maintaining the roads, car parks, pleasure grounds and other recreational facilities under Schedule 1. In the Form B conveyances it is a payment towards all the matters referred to in clause 4 which includes the Schedule 1 facilities together with the upkeep of the lawns and the painting of the bungalows. In that form of conveyance it does therefore arguably contribute towards the cost of work carried out by the site owner which is not within the rights granted under Schedule 1. But unless the charge can be apportioned (which it is common ground that it cannot) then it remains in my view recoverable provided that it also relates at least in part to the rights which are included in Schedule 1.

The successors in title (whether under Form A or Form B conveyances) have therefore no answer to these claims unless they can show that the payment covenant has no relation whatever to the Schedule 1 rights which they have continued to exercise. As a matter of construction, that is not correct for the reasons I have given. Although the continued exercise of the Schedule 1 rights is not made expressly conditional upon payment (any more than it was in Halsall v Brizell or in Thamesmead Town Ltd v Allotey) the payment is intended to ensure that the rights remain capable of being exercised. The authorities require one to look beyond the express terms of the conveyance and consider what in substance the covenantor is paying for. Here, as in Halsall v Brizell, the payment, at leastin substantial part, is intended to provide a contribution to the cost of maintaining the roads and other facilities over which the owners of the bungalows are granted rights. None of them has ceased to use the roads nor wishes to do so. In this case (unlike in the two authorities referred to) there is also a covenant by the original site owner (in clause 4) to carry out the repairs. But I am not persuaded that this is sufficient in itself to sever any link between the payment covenant and the Schedule 1 rights. It merely provides the covenantor with the added assurance that (at least while the site remains the property of the original covenantee) the work will be carried out. But the performance (or not) of that covenant is not the determinant of liability. That remains the subsistence of the Schedule 1 rights.

I would therefore dismiss the appeals. In the case of the appellants who are original covenantors, none of the grounds of appeal for which permission has been granted assist them. In the case of the appellants who are successors in title, the appeals fail for the reasons I have given. It is, I think, a matter of regret that the opportunity of mediation which the Court offered to the parties at the last hearing has not produced a settlement of this long-running dispute. That is, I think, particularly unfortunate in the case of Mr Turner who seemed willing in principle to agree to some payment being made for the services he receives. Perhaps now that we have given our decision both sides can approach their future relationship in a more constructive manner.

I agree.

I also agree.