The Alexander Devine Children's Cancer Trust v Millgate Developments Ltd & Anor

This is an appeal against the judgment of the Upper Tribunal (Lands Chamber) (Martin Rodger QC and Paul Francis FRICS) ([2016] UKUT 0515 (LC)) by which it granted an application by the first respondent (“Millgate”) under section 84 of the Law of Property Act 1925 to modify restrictive covenants which prevented residential development on an area of open land so as to allow such development.

Millgate was the developer of the land in question. It built houses and bungalows on it in breach of the restrictive covenants in their unmodified form. It later sold them to the second respondent (“Housing Solutions”), a provider of social housing, for use as affordable housing. Millgate did this in order to satisfy a planning obligation imposed on it by the local planning authority, the Royal Borough of Windsor and Maidenhead (“the Council”), in respect of a much bigger and more valuable housing development by Millgate in the vicinity, at a site called Woolley Hall. Millgate has given an indemnity against any loss which might be suffered by Housing Solutions if it is unsuccessful in these proceedings. Housing Solutions joined in the proceedings as a “person interested” in the land. Mr Driscoll QC acts for both Millgate and Housing Solutions on this appeal.

Although the developer, Millgate, was aware of the restrictive covenants and of objections to the development by owners of neighbouring property which had the benefit of the covenants, it only brought its application under section 84 to clarify whether it could build on the land after it had already constructed nine two storey houses and four bungalows on the site in breach of the restrictive covenants, thereby presenting the Upper Tribunal with a fait accompli. The Upper Tribunal held that the restrictive covenants against development of the land, in impeding the continued existence and the occupation of the houses and bungalows, were contrary to the public interest, as that term is used in section 84(1A)(b) of the 1925 Act and should be overridden. There are a number of indications in the Upper Tribunal’s judgment that it might well have come to a different view if Millgate had made its application before the houses and bungalows had been built and that it was the risk that (having in fact been built) they might have to be demolished if the Upper Tribunal did not accede to Millgate’s application which was the decisive factor for the Upper Tribunal in its decision to accede to Millgate’s application.

Section 84 provides in relevant part as follows:

“84 – Power to discharge or modify restrictive covenants affecting land

(1)

The Upper Tribunal shall … have power from time to time, on the application of any person interested in any freehold land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon, by order wholly or partially to discharge or modify any such restriction on being satisfied-

(a)

that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Upper Tribunal may deem material, the restriction ought to be deemed obsolete; or

(aa) that in a case falling within subsection (1A) below the continued existence thereof would impede some reasonable user of the land for public or private purposes or, as the case may be, would unless modified so impede such user; or

(b)

[modification or discharge is agreed by relevant persons]; or

(c)

that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction:

and an order discharging or modifying a restriction under this subsection may direct the applicant to pay to any person entitled to the benefit of the restriction such sum by way of consideration as the Tribunal may think it just to award under one, but not both, of the following heads, that is to say, either-

(i)

a sum to make up for any loss or disadvantage suffered by that person in consequence of the discharge or modification; or

(ii)

a sum to make up for any effect which the restriction had, at the time when it was imposed, in reducing the consideration then received for the land affected by it.

(1A) Subsection (1)(aa) above authorises the discharge or modification of a restriction by reference to its impeding some reasonable user of land in any case in which the Upper Tribunal is satisfied that the restriction, in impeding that user, either –

(a)

does not secure to persons entitled to the benefit of it any practical benefits of substantial value or advantage to them; or

b)

is contrary to the public interest;

and that money will be an adequate compensation for the loss or disadvantage (if any) which any such person will suffer from the discharge or modification..

(1B) In determining whether a case is one falling within subsection (1A) above, and in determining whether (in any such case or otherwise) a restriction ought to be discharged or modified, the Upper Tribunal shall take into account the development plan and any declared or ascertainable pattern for the grant or refusal of planning permissions in the relevant areas, as well as the period at which and context in which the restriction was created or imposed and any other material circumstances.

…”

The land in question affected by the restrictive covenants (“the application land”) is close to Maidenhead. It is located in an area designated as Green Belt in the applicable development plan.

The restrictive covenants in issue are contained in a conveyance dated 31 July 1972 made between John Lindsay Eric Smith (“Mr John Smith”) as vendor and Stainless Steel Profile Cutters Ltd (“SSPC”) as purchaser. Mr John Smith was a local farmer who owned extensive open agricultural land to the south of Maidenhead. SSPC owned some industrial buildings (later known as Exchange House) on land adjacent to the application land (I will call this land “the unencumbered land”). By the conveyance, the application land was transferred to SSPC making, in combination with the unencumbered land, a rectangular plot of land (“the Exchange House site”) running between fields owned by Mr John Smith to the east and a road to the west called Woodlands Park Avenue.

The conveyance provided that SSPC covenanted for the benefit of the owners for the time being of the land then belonging to Mr John Smith situated within three quarters of a mile of the application land that at all times thereafter it would observe and perform certain stipulations which include the restrictive covenants in issue. Those restrictive covenants provide as follows:

“1.

No building structure or other erection of whatsoever nature shall be built erected or placed on [the application land].

2.

The [application land] shall not be used for any purposes whatsoever other than as an open space for the parking of motor vehicles.”

In due course, Mr John Smith’s son Bartholomew (“Mr Barty Smith”) inherited the adjacent agricultural land from his father. In December 2011 he proposed gifting the part of that land which lay along the border of the application land to the trustees of the Alexander Devine Children’s Cancer Trust (I will refer to them as “the Trust”) for the construction of a hospice for children who are seriously ill with life-limiting conditions and their carers. I will refer to this land as “the hospice land”. Mrs Fiona Devine is the co-founder and chief executive of the Trust.

The plans for the hospice were developed to make full use of the hospice land, including with recreational areas and a pleasant wheelchair path around its circuit. Planning permission was granted for the construction of the hospice on 2 December 2011. In March 2012 Mr Barty Smith gifted the hospice land to the Trust. However, construction of the hospice had to await the raising of adequate funds from charitable donations.

We were not told when Millgate acquired the Exchange House site. It seems this happened in the first part of 2013. Millgate was aware of the restrictive covenants at the time it acquired the site, presumably as a result of its own investigation of title at that time. Millgate did not adduce evidence to suggest that it made any attempt to identify persons with ability to enforce the restrictive covenants; the Upper Tribunal found that Millgate’s solicitors, DAC Beachcroft, could readily have identified Mr Barty Smith and the Trust as beneficiaries of the restrictive covenants if they had tried; and it drew the inference (which is not challenged) that Millgate either took no steps to find out who the beneficiaries were or knew the identity of some or all of them and chose not to raise the issue of the restrictive covenants before beginning to build in breach of them: [50]-[51].

In July 2013 Millgate applied for planning permission to build 23 affordable housing units on the Exchange House site. This was linked to Millgate’s application for planning permission to build 75 housing units on the Woolley Hall site for commercial sale. In due course, in March 2014 the Council granted planning permission for both developments, with the permission for the Woolley Hall development being conditional on the provision of the affordable housing on the Exchange House site. By clause 1.3 of a unilateral obligation by deed made pursuant to section 106 of the Town and Country Planning Act 1990, Millgate undertook not to occupy (i.e. make available for sale) more than 15 units constructed pursuant to the planning permission for the Woolley Hall site until 23 units constructed pursuant to the planning permission for the Exchange House site had been constructed and transferred to an affordable housing provider.

The plans submitted with the application for permission for the development of the Exchange House site showed 10 residential units to be provided in a block of flats on the unencumbered land part of the site plus the nine two-storey houses and four bungalows on the application land part of the site. It seems that the Council was not aware of the position in relation to the restrictive covenants affecting the application land. In any event it is unlikely that the Council would have viewed it as its function to use its planning powers to police or enforce those covenants or the private rights and obligations of Millgate and the Trust, rather than leaving it to them to negotiate to try to remove any private rights which might prevent the planned development of the Exchange House site from proceeding.

The Council’s concern was to ensure that the requisite number of affordable housing units should be provided on the Exchange House site. The Upper Tribunal found that had Millgate chosen to lay out its development of the Exchange House site differently so as to honour the restrictive covenants, by building a larger block of flats with 23 units on the unencumbered land part of the site and using the application land part of the site for a car park for the flats, the Council would have approved such a proposal: [62].

In July 2013 Mrs Devine had a conversation about the Exchange House site with a director of Millgate, Mr Graeme Simpson. As appears from paras. [44]-[45] of the Upper Tribunal’s decision, it seems that it was about this time that Mrs Devine became aware of Millgate’s application for planning permission in relation to that site, although she did not see the plans it had submitted and was unaware of the detail of Millgate’s proposals. At this time she was also unaware of the restrictive covenants. She only learned of their existence after Millgate made its application to the Upper Tribunal to have them set aside. In the period prior to that application, Mrs Devine, for the Trust, made no adverse comment concerning Millgate’s application for planning permission for its development of the Exchange House site.

On 1 July 2014 Millgate began clearing the site preparatory for construction. The nine two-storey houses which it proposed building on the application land were to be erected close to the boundary with the Hospice land and the upper windows would overlook the gardens and wheelchair walk which the Trust was proposing to develop as part of its plans for the construction of the Hospice. The four bungalows were also to be erected close to that boundary.

Mr Barty Smith was unaware of Millgate’s application for planning permission in relation to the Exchange House site. He first became aware of physical development of the site when he flew over it in a light aeroplane on 30 August 2014. He consulted a solicitor. He visited the site on 15 September 2014, by which time the original light industrial buildings on the unencumbered land part of the site had been cleared and work on the new foundations across the whole site had commenced.

By letter dated 26 September 2014 Mr Barty Smith wrote to Millgate to object to the development on the application land. He referred to the restrictive covenants and stated that Millgate seemed already to be in breach of them by reason of the works it had already carried out on the application land. He wrote that Millgate should immediately halt any plans it had to build on the application land. Despite this, Millgate continued with its construction works.

It seems that Millgate passed Mr Barty Smith’s letter on to DAC Beachcroft for reply. We were told that the reply was by a letter which was eventually sent by DAC Beachcroft to Mr Barty Smith dated 20 November 2014. This pointed out that the restrictive covenants had to “touch and concern” the land of anyone claiming to be entitled to enforce them; said that Mr Barty Smith could only enforce them if they benefited land which he owned; and suggested that as he only owned open land close to the site “it is not immediately obvious why the covenants benefit your land” (the letter did not address the position of land adjacent or close to the Exchange House site if it were to be developed).

Mr Barty Smith took counsel’s advice. With the benefit of this, he replied to DAC Beachcroft by letter dated 11 December 2014. He maintained that the restrictive covenants self-evidently “touch and concern” the land neighbouring the application land and specifically asserted that they benefited both his own land (open fields retained by him in the vicinity of the application land, as identified in a map he enclosed with his letter) and the hospice land adjacent to the application land. He claimed that it was improper for Millgate to commence building works in breach of covenant and said that any application to the Upper Tribunal to modify the restrictive covenants would be vigorously opposed. He explained the reason why the enforcement of the restrictive covenants was particularly important in relation to the hospice:

“In 2012 I donated land worth £500,000 to the charity to build the Hospice as a peaceful place for children with terminal cancer to end their days in calm and dignity with access to private country gardens. Now your client seeks to build multiple units with windows and open areas facing directly into Hospice land. That is regrettable.”

It seems that at this stage Millgate was still far from completing the buildings on the application land. It was not suggested that it had yet erected the second storey of the nine houses which would overlook the hospice gardens. In continued breach of the restrictive covenants, Millgate continued to build the houses and bungalows on the application land. We were told that it was only on 10 July 2015 that the development of the 23 residential units on the Exchange House site, together with a children’s recreation area next to the bungalows, was completed.

By an agreement dated 22 May 2015, Millgate agreed to sell the development at the Exchange House site, once it was completed, to Housing Solutions. The sale of the site was subject to a condition that there should be no reasonable risk of any court application being successful in respect of the restrictive covenants for an injunction to stop or restrict the development or demolish the existing development; and Millgate provided Housing Solutions with the benefit of certain insurance policies and an indemnity against any wasted expenses or losses which Housing Solutions might suffer if that condition was not fulfilled.

On 20 July 2015 Millgate issued its present application to the Upper Tribunal seeking modification of the restrictive covenants pursuant to section 84. The modification sought was to allow the nine houses and four bungalows which Millgate had already built on the application land to continue to stand there and be occupied as residential properties. Millgate gave notice of the application to Mr Barty Smith and the Trust. They both entered objections to the application.

On 28 July 2015 Millgate transferred and Housing Solutions accepted conveyance of the unencumbered land part of the Exchange House site (with the block of 10 residential flats on it).

In September 2015, the construction of the hospice began.

By an agreement dated 9 February 2016, the relevant section 106 obligation in respect of the Woolley Hall site (which required Millgate to provide 23 units of affordable housing on the Exchange House site as a condition for being able to release properties at the Woolley Hall site for sale) was varied to permit Millgate, in partial substitution for that original obligation, to make a payment of £1,639,904 to the Council if Millgate’s application to the Upper Tribunal was not successful and the application land was not transferred to Housing Solutions by 30 September 2017. This payment was intended to enable the Council to secure an equivalent amount of replacement affordable housing (13 units) at other locations in its area. The effect of Millgate making this payment would be that it would be able to market and sell the residential units it had built on the Woolley Hall site. This agreement meant that the Council’s requirement for affordable housing as the quid pro quo for planning permission for development of the Woolley Hall site would be satisfied whether the restrictive covenants remained in place and were enforced or not. In any event, as an alternative, presumably Millgate could have agreed with the Council to allocate 13 units from those built on the Woolley Hall site to satisfy the Council’s affordable housing requirement, albeit that would have reduced Millgate’s profits from the development of that site.

On 18 November 2016 the Upper Tribunal promulgated its decision on Millgate’s application to modify the restrictive covenants. The Upper Tribunal held that the restrictive covenants should be modified pursuant to section 84 so as to permit the occupation and use of the application land as the site of the houses and bungalows which had been constructed on it. As a condition of this ruling taking effect, Millgate was ordered to pay £150,000 as compensation to the Trust, that being the Upper Tribunal’s assessment of the cost of remedial planting and landscaping works to screen the hospice garden from view plus an element of compensation for loss of amenity.

On 15 February 2017, the day before the last day on which the Trust could appeal according to the Civil Procedure Rules, when no application had been received for permission to appeal, the view was taken that the condition in the sale agreement between Millgate and Housing Solutions had been satisfied and Millgate immediately that day transferred the 13 housing units on the application land to Housing Solutions. Although, of course, extensions of time for appealing are frequently granted, no effort was made to check with the Trust whether it intended to apply for permission to appeal. On the following day, 16 February, Millgate received notice of the Trust’s application for permission to appeal and a short extension of time in which to do so, if that was necessary. Floyd LJ granted permission to appeal and an extension of time.

Housing Solutions is now the owner of the 13 housing units on the application land. This means that, in the event, Millgate did not have to pay the Council the sum stipulated in the agreement of 9 February 2016, referred to above. As against Millgate, Housing Solutions continues to have the benefit of the indemnity provision in the sale agreement, should the restrictive covenants be restored and enforced. Some of the 13 housing units are now occupied by tenants.

Before the Upper Tribunal, Millgate submitted that the restrictive covenants conferred no substantial advantage on the land belonging to Mr Barty Smith and the hospice land and that the requirements of section 84(1)(aa), read with subsections (1A) and (1B), were satisfied. Millgate also relied on section 84(1)(c). The Trust, on the other hand, submitted that the carefully planned environment of the hospice and the outdoor amenities which were to be provided there for terminally ill children and their carers were seriously compromised by the presence of new housing so close to the boundary of the hospice land.

The Upper Tribunal found that the restrictive covenants were not of benefit to the land owned by Mr Barty Smith, by reason of the interposition of the hospice land between the application land and the open fields which Mr Barty Smith continued to own. On this basis the Upper Tribunal dismissed his objections to Millgate’s application under section 84. It is unnecessary to say more about this aspect of the case.

The Upper Tribunal found that the visual impact of the nine new houses and four new bungalows built on the application land would be significant for sick children and their carers and visitors using the grounds and outdoor facilities at the hospice, including the wheelchair walk and a treehouse located near the boundary with the application land. Much denser and less attractive planting along the boundary would be required to screen the buildings than had been planned for the hospice, for which it had been hoped that there could be relatively open planting along the boundary with unimpeded views of sky through the gaps. The Upper Tribunal found that the effect of the nine houses on the application land along the boundary with the hospice land was that sick children and others using the outdoor facilities at the hospice would be subjected to a more urban, less private, less secluded and less attractive environment than would have been the case if the restrictive covenants had been honoured by Millgate, and that Millgate’s conduct meant that practical benefits in the form of enhanced privacy and seclusion for the hospice land had been lost: [67]. In the special circumstances of the hospice, the Upper Tribunal also found that protection from the ordinary noise associated with use of the adjoining gardens of the houses and the bungalows and the children’s recreation area on the application land next to the bungalows was a practical benefit: [68].

The Upper Tribunal directed itself by reference to the seven questions relevant to an application made under section 84 identified by the Lands Tribunal (J. Stuart Daniel QC) in Re Bass Ltd’s Application (1973) 26 P&CR 156, 158-159. It was common ground that the proposed use of the application land to provide 13 units of affordable housing was “reasonable user of the land” within the meaning of that phrase in section 84(1)(aa) which would be impeded by the covenants. The Upper Tribunal identified the practical benefits associated with the restrictive covenants referred to above; and held that those practical benefits were of substantial value or advantage to the Trust: [95]. Accordingly, the Upper Tribunal held that Millgate’s case based on section 84(1)(aa) read with subsection (1A)(a) and its case based on section 84(1)(c) should be dismissed.

The Upper Tribunal then turned to consider Millgate’s alternative case based on section 84(1)(aa) read with subsection (1B)(b), namely that the restriction posed by the restrictive covenants, in impeding the reasonable user of the application land for occupation of the 13 units for affordable housing, for which planning permission had been given, “is contrary to the public interest” and that money would “be an adequate compensation for the loss or disadvantage” which the Trust would suffer from the modification of those covenants.

In his submissions to the Upper Tribunal Mr Driscoll argued that there was a relevant analogy with the approach of Lord Sumption JSC in his judgment in Lawrence v Fen Tigers [2014] AC 822 at [155]-[161]. That case concerned a claim based on the tort of nuisance, for an injunction to restrain noise created by the use of a stadium for motor sports, being a use authorised by planning permission. The use of the stadium might be a breach of the private rights of the objecting landowner but it served the interest of other people who derive enjoyment or economic benefit from such use, as recognised by the grant of planning permission; Lord Sumption suggested that in a nuisance case in such circumstances the solution to the problem posed by such conflicting interests should be to allow the activity to continue but to compensate the objecting landowner financially for the loss of amenity and the diminished value of his property ([157]). The Upper Tribunal accepted Mr Driscoll’s submission that this provided a relevant parallel for the present case and agreed with him that the existence of planning permission for use of the application land is a material consideration under section 84(1)(aa) read with subsection (1B)(b), as indicating that the restrictive covenant operates contrary to the public interest: [100]-[102].

At [102]-[107] the Upper Tribunal said this:

“102.

The fact that planning permission has been granted does not mean that private rights can necessarily be overridden, but it does reflect an objective assessment of appropriate land use which fully takes into account the public interest. Section 84(1B) of the 1925 Act specifically requires that when determining whether a restriction ought to be discharged or modified under ground (aa), the Tribunal must take into account the development plan and any declared or ascertainable pattern for the grant or refusal of planning permissions in the relevant areas, as well as any other material circumstances.

103.

The policy behind paragraph (aa) and its supporting provisions which were added to section 84(1) by the Law of Property Act 1969 was explained by Carnwath LJ in Shephard v Turner [2006] 2 P&CR 28:

“The general purpose is to facilitate the development and use of land in the public interest, having regard to the development plan and the pattern of permissions in the area. The section seeks to provide a fair balance between the needs of development in the area, public and private, and the protection of private contractual rights”

104.

The fact that the housing in this case is social housing intended for occupation by tenants who are likely to have been waiting for such accommodation for a very long time is also a highly material consideration. The local planning authority clearly considered that the provision of affordable housing was an important part of the balancing of interests which led to Millgate being granted planning permission for its more profitable residential development at Woolley Hall. The houses which have been built are attractive and well built, and are currently standing empty because of the restriction imposed by the covenants.

105.

The objectors’ case on this aspect of the application was understandably rather muted. Although he was clearly outraged by Millgate’s highhanded and opportunistic behaviour, and thought the new housing estate was “horrendous” (an assessment with which we cannot agree) Mr Smith acknowledged that it was unlikely that the houses would be pulled down. Mrs Devine was more positive and did not want to see them left empty.

106.

It is no answer to the current wasteful state of affairs to say, as Ms Windsor did, that Millgate could have built their allocation of affordable housing on other land, or that it could now buy its way out of the problem by making a payment towards the provision of social housing elsewhere. Whether those would have been sufficient answers to Millgate’s case on public interest if we had been dealing with an application before any housing had been built on the site is not a question which arises. The question for the Tribunal is whether in impeding the occupation of the houses which now stand on the application land, and which are otherwise immediately available to meet a pressing social need, the covenants operate in a way which is contrary to the public interest. We are satisfied that they clearly do because it is not in the public interest for these houses to remain empty and the covenants are the only obstacle to them being used.

107.

In reaching that conclusion we are mindful of the Tribunal’s early jurisprudence in public interest cases, and in particular of the dictum of Douglas Frank QC in Re Collins’ Application (1975) 30 P&CR 527, 531 that for an application to succeed on the ground of public interest it must be shown that that interest is “so important and immediate as to justify the serious interference with private rights and the sanctity of contract”. Whether that restrictive gloss remains the correct approach may require reconsideration in light of Carnwath LJ’s explanation of the policy underlying ground (aa) in Shephard v Turnerand Lord Sumption’s observations on the reconciliation of public and private rights in Lawrence v Fen Tigers, but it is not necessary to pursue that thought further at this time. We are satisfied that the public interest in play in this case is sufficiently important and immediate to justify the exercise of the Tribunal’s power under section 84(1)(aa) to override the objector’s private rights.”

Although on the appeal Mr Driscoll drew attention to the position of Mrs Devine as recorded at [105], I do not think that significant weight should be attached to this. The Upper Tribunal was there recording an answer given by Mrs Devine in the context of cross-examination, which does not represent the settled position of the Trust in the litigation. That position has throughout been that the Trust would far prefer the restrictive covenants to be honoured and enforced, to secure the benefits for terminally ill children and their carers using the facilities of the hospice which the Upper Tribunal identified. Mrs Devine was not being asked for her view of the overall public interest in this case, and she was not the right person to give such a view. An answer given by her in the heat of cross-examination cannot be regarded as determinative of the public interest issue which the Upper Tribunal had to address.

The Upper Tribunal then held that although the provision of significant additional boundary planting would not insulate the hospice land from all the adverse consequences of the use of the application land for housing, an award of money to allow for such additional planting was capable of providing adequate compensation to the Trust: [110]. Mr Driscoll emphasises that no appeal has been brought in respect of that part of the Upper Tribunal’s decision. (I have some doubt whether in the circumstances of this case the finding by the Upper Tribunal that money would be adequate compensation for the detriment which it found would arise for sick children and their carers using the facilities of the Trust if the restrictive covenants were modified was correct, but as there is no appeal in relation to this it is not necessary to explore this issue).

The Upper Tribunal correctly identified, as is common ground, that satisfaction of the relevant conditions set out in section 84(1)(aa), read with subsections (1A) and (1B), gave rise to a discretion in the tribunal (“ … shall have power …”) whether to modify the restrictive covenants or not. At [113]-[121] the Upper Tribunal considered how it should exercise its discretion. It noted that the tribunal will not generally be inclined to reward parties who deliberately flout their legal obligations by deliberately breaching a restrictive covenant ([114], referring to Re George Wimpey Bristol Ltd’s Application [2011] UKUT 91 (LC) at [35]), and also that “[i]f it was thought easier to secure a modification in favour of a completed development than for one not yet commenced the contract breaker would have a real incentive to press on even in the face of strong objections by the beneficiaries of a covenant” ([115]). However, partly in reliance on Re the Trustees of Green Masjid and Madrasah’s application [2013] UKUT 355 at [129], the Upper Tribunal held as follows at [120]:

“ … our decision will have an effect not only on the parties but also on 13 families or individuals who are waiting to be housed in these properties if, and as soon as, the restrictions are modified. We consider that the public interest outweighs all other factors in this case. It would indeed be an unconscionable waste of resources for those houses to continue to remain empty.”

The Upper Tribunal so ruled even though it was not satisfied that Millgate had acted in good faith and without any intention to force the hand of the beneficiaries of the restrictive covenants ([117], distinguishing in that regard Re SJC Construction Company Ltd’s application (1974) 28 P&CR 200), nor that Millgate had been unaware of the objectors’ right to enforce the covenants until the works were nearing completion ([117], distinguishing in that regard Winter v Traditional & Contemporary Contracts Ltd [2008] 1 EGLR 80); and even though it had rightly characterised Millgate’s behaviour as “highhanded and opportunistic” at [105]. In its respondent’s notice Millgate tried to mitigate the impact of these findings by contending that it was not aware that the restrictive covenants were enforceable, albeit it took the risk that they were. However, there was no evidence from Millgate which said this and in the absence of such evidence the inference is that it did in fact appreciate that the restrictive covenants were enforceable, as indeed they are. Mr Driscoll could not identify for us any reasonable argument to impugn the enforceability of the restrictive covenants for the benefit of the Trust, and again the inference is that Millgate did appreciate that they were enforceable. The Upper Tribunal did not make a finding that Millgate had no awareness that the restrictive covenants were enforceable, and any such finding would have been contrary to the basic tenor of its decision and the findings it did make.

In reaching its decision in relation to the exercise of discretion, the Upper Tribunal also attached weight at [119] to the fact that Millgate had responded positively to encouragement by the tribunal at the hearing to try to come to a compromise solution satisfactory to both sides, by making an open offer to the objectors to contribute £150,000 to the Trust and to pay its costs if it would consent to the modification. The Upper Tribunal said, “We regard Millgate’s proposal as constructive and it is regrettable that it appears not to have elicited a positive response from the objectors.”

The Trust appeals to this Court on four grounds: (1) the Upper Tribunal erred in treating Lord Sumption’s observations in the Fen Tigers case as providing relevant guidance in the present case; (2) the Upper Tribunal erred in its interpretation and application of section 84(1A)(b) (public interest) by treating the fact that the 13 housing units had been built by the time of the application under section 84 as a highly relevant factor, thereby incentivising law breaking and unduly undermining the protection against development afforded by the restrictive covenants in this case; (3) the Upper Tribunal erred in its assessment of the public interest, in its application of subsection 84(1B) and in its exercise of discretion, by failing to have regard to a material circumstance, namely that Millgate had by the agreement dated 9 February 2016 assumed an obligation owed to the Council to make alternative provision of equivalent affordable housing elsewhere by means of the payment of £1,639,904 should the restrictive covenants remain in place and liable to be enforced; and (4) the Upper Tribunal erred in its exercise of discretion by failing to attach appropriate weight to the fact that Millgate had deliberately and knowingly breached the restrictive covenants by proceeding with the development on the application land in the way that it did.

I begin with some observations regarding the interaction of restrictive covenants affecting land, the grant of planning permission and the operation of section 84.

The grant of planning permission does not generally have any impact upon private property rights. It is a decision taken regarding what development of a particular site can be regarded as acceptable in planning terms, with reference to the public interest. Actual development in accordance with a grant of planning permission may depend upon the developer being able to negotiate to buy out or overcome any private property rights which stand in the way of the development. A developer is able to apply for planning permission in relation to land it does not yet own, in which case it would obviously have to acquire the land before it can proceed to develop it. There is no difference in principle where a private contractual or property right in the form of a restrictive covenant stands in the way of a proposed development: the developer has to negotiate to secure release from the restrictive covenant (or make an application under section 84 to have it discharged or modified) if the development is to proceed in accordance with the planning permission.

Mr Driscoll was critical of the Trust in the present case for not writing on its own behalf to object to the application for planning permission for the development and for not seeking an interlocutory injunction to restrain Millgate from building in breach of the restrictive covenants. I do not consider that this absence of action by the Trust has any significant bearing on the issues we have to decide. Well before any significant harm had been caused in relation to the hospice Millgate knew (or recklessly shut its eyes to the possibility) that the restrictive covenants applied for the benefit of the hospice land; it had been specifically warned by Mr Barty Smith that it should desist building on the application land in breach of those covenants; and it had had its attention drawn to the particular interest of the Trust in having the restrictive covenants honoured. Mr Driscoll did not suggest to us that Millgate had any good argument that the restrictive covenants were not enforceable; nor that Millgate had any good argument in answer to the complaint that it was acting in continuing breach of those covenants from the commencement of the development of the application land. If Millgate wished to act lawfully and in a way which would avoid this state of affairs, on the footing that it thought it had a good case for modification of the restrictive covenants pursuant to section 84, it was incumbent on Millgate to make the relevant application for modification rather than just acting in violation of those covenants as it did.

Even if the Trust had been aware of the restrictive covenants at the time of the application for planning permission for the Exchange House site (which it was not), it would not have been incumbent on the Trust to object to the grant of planning permission as a condition for its being able to enforce the restrictive covenants of which it was the beneficiary. It would have been entitled to sit and wait and rely upon its private contractual or property rights (as Mr Barty Smith effectively did on its behalf) if Millgate ever tried to carry out the development in breach of those rights.

Mr Driscoll was also critical of the Trust for failing to take prompt action at an earlier stage to seek interlocutory injunctive relief against Millgate in respect of its breach of the restrictive covenants. However, I do not think that is significant for present purposes. The Trust was not aware of the restrictive covenants until the buildings on the application land were complete and Millgate made its section 84 application. In any event, there may be many reasons why a person might not wish to proceed to litigation and usually their attitude and actions in that regard will have little or no bearing on the issues which arise on an application under section 84. That is the case here. In fact, Ms Windsor told us that when Mr Barty Smith considered the possibility of an application for interlocutory relief, he did not consider that he could afford to take the risk on a cross-undertaking in damages which might well have covered potentially very substantial commercial losses of Millgate if it had continued to be prevented from selling the residential units at the Woolley Hall development.

Section 84 sets out a power for the Upper Tribunal in certain circumstances to discharge or modify restrictive covenants affecting land. However, in interpreting and applying that provision it is necessary to bear in mind that it is a private contractual right with property-like characteristics which is sought to be removed or modified, against the objection of the right-holder. That is not something which Parliament intended should occur lightly or without very good reason. As Carnwath LJ (as he then was) put it in Shephard v Turner [2006] EWCA Civ 8; [2006] 2 P&CR 28 at [58], section 84(1)(aa) “seeks to provide a fair balance between the needs of development in the area, public and private, and the protection of private contractual rights.” In my view, the statement by Douglas Frank QC as President of the Lands Tribunal in Re Collins’ Application (1975) 30 P&CR 527, at 531, that for an application to succeed in reliance on the public interest ground in section 84(1A)(b) it must be shown that that interest is “so important and immediate as to justify the serious interference [which discharge or modification under section 84 would involve] with private rights and sanctity of contract” remains the proper approach. Rather than expressing doubt about this guidance at para. [107] of its decision, the Upper Tribunal ought to have followed it.

I agree.

I also agree.