Churchill v Temple & Ors

This is an application by Mr. Trevor Churchill, the owner of 1A Loom Lane, Radlett, Hertfordshire for declarations relating to the enforceability, meaning and effect of a restrictive covenant in a Conveyance dated 6^th March 1967 (“the Conveyance”) which first transferred this land as a separate building plot. The defendants, Mr. and Mrs. Temple and Ms. Azam, own the neighbouring properties, 1 and 3 Loom Lane, and 1A Loom Lane must have been part of their back gardens.

The Conveyance was between Peter Auckland Strong and Kathleen Mary Strong, described as being “formerly of 3 Oakridge Avenue, Radlett ...., but now 4 Aldenham Avenue, Radlett (hereinafter called “the Vendors”) and Professor Samuel James Taylor and Maureen Patricia Taylor as purchasers. The land was described as being partly belonging to “Wych Elms”, 1 Loom Lane, and partly to “Clifton”, 3 Loom Lane, and it includes an entrance drive running between these properties from Loom Lane to the plot. Plans attached to the Conveyance, dated December 1966, described the land as a building plot and had the outline of a proposed house to be built on it.

Clause 2 of the Conveyance refers explicitly to Wych Elms as being the adjoining land of the Vendors. Since it refers to “the owner or owners for the time being of... Clifton”, it seems probable that Mr. and Mrs. Strong did not own that property, other than the area which had become part of the building plot conveyed. There is no evidence as to the ownership of the remaining part of Clifton.

Later in the same year, on 10^th October 1967, Mr. and Mrs. Strong conveyed Wych Elms to Mr. Cecil Johnson. The conveyance referred to it as “adjoining certain building land”, which must have been a reference to the building plot. It is not known when Professor and Mrs. Taylor built their house. Wych Elms was transferred to Mr. and Mrs. Temple on 10^th October 1995.

No other background information is available. It is not certain whether, in March 1967, Mr. and Mrs. Strong intended to sell the property (or if so when), or to retain it, for example for letting purposes. The fact that the property was sold seven months later makes it perhaps more likely that this was their intention in March 1967. It appears from information obtained from a website that Mr. and Mrs. Strong, who were both born in 1911, died in 2002 and 1989 respectively.

By clause 6 of the Conveyance, the purchasers jointly and separately covenanted, for themselves and their successors in title, with the vendors and their successors in title so as to bind so far as may be the property conveyed “into whosoever (sic) hands the same may come”, that the purchasers and their successors in title would observe and perform the covenants in the 1^st Schedule.

Paragraphs 1 and 2 of the 1^st Schedule imposed obligations relating to fencing and the construction of a soil drain and manhole to join up the soil drains from 1 and 3 Loom Lane for the benefit and use of the owners or occupiers of those properties.

Paragraphs 3 to 5 were in the following terms:-

NOT to erect or maintain on the land hereby conveyed any building other than a single private dwellinghouse with or without garages or other usual outbuildings and/or garden sheds and greenhouses

NO dwellinghouse shall be erected or maintained upon any part of the land hereby conveyed which shall not be in accordance as to situation character elevation workmanship materials sewers drains and other sanitary works with plans elevations and specifications which previous to the erection of such dwellinghouse shall have been submitted to and approved in writing by the Vendors or their surveyor such approval however not to be unreasonably withheld

NOT to make any structural alteration or addition to a permitted dwellinghouse without the written consent of the Vendors or their surveyor.”

Paragraph 6 was a covenant to pay a proportion of the cost and of cleansing and maintaining the soil and surface drains.

Paragraph 7 was a covenant not to do anything which would be a nuisance or annoyance to the vendors or their successors, or person or persons owning or occupying adjacent or neighbouring land.

Paragraph 8 made the purchasers responsible for making good any damage caused to the vendors’ remaining property during the construction of “a permitted dwelling house”.

Mr. Churchill now wishes to demolish the building which was put up by Professor and Mrs. Taylor after their purchase of 1A Loom Lane, and to build a new house, for which he has planning permission. Both Mr. and Mrs. Temple and Ms. Azam claim to be entitled to enforce paragraphs 4 and 5 of the covenants in the Conveyance, so as to prevent this. It is common ground that the demolition of the house would constitute a “structural alteration” within paragraph 5.

The issues between the parties are as follows:-

Whether Ms. Azam is entitled to enforce the covenants in paragraphs 4 and 5.

Whether the requirement in paragraphs 4 and 5 for the approval or written consent “of the Vendors or their surveyor” should be construed as meaning the approval or written consent of the vendors or their successors in title or their respective surveyors.

If not, whether the effect of the death of the vendors is (a) to free the purchasers or their successors from the need to obtain consent or (b) to make it impossible for them to obtain such consent, and therefore to make the prohibitions in paragraphs 4 and 5 absolute.

Whether it was an implied term of paragraph 5 that consent should not be unreasonably withheld.

It is not disputed that the benefit of the covenants was assigned by Mr. and Mrs. Strong to Mr. Johnson, and by Mr. Johnson to Mr. and Mrs. Temple, and that Mr. and Mrs. Temple are entitled to enforce them. But there is no such assignment in favour of Ms. Azam. It is nevertheless submitted on her behalf that she is entitled to enforce it under section 56 of the Law of Property Act 1925. It may be arguable, on the basis of what was said by the Court of Appeal in Beswick v. Beswick [1966] Ch. 538, that a 3^rd party to a contract relating to real property can enforce a promise made for his benefit, although this is doubtful: see Megarry and Wade 7^th ed. paragraph 32-007. But the provisions of paragraphs 4 and 5 of the 1^st Schedule are not expressed to be for the benefit of the then owners of 3 Loom Lane. Therefore section 56 does not assist Ms. Azam, and she has no right to enforce these covenants.

Turning to the construction of paragraphs 4 and 5, each provides clearly that approval or consent must be sought from “the Vendors or their surveyor”, “the Vendors” having earlier been defined as Mr. and Mrs. Strong. Neither paragraph makes any reference to the successors in title of the vendors, or to any surveyor whom they might employ.

Both parties relied on the principles of construction explained in Investors Compensation Scheme Limited v. West Bromwich Building Society [1998] 1 W.L.R. 896 at 912-3, in which Lord Hoffmann approved the well-known dictum of Lord Diplock in Antaios Compani Naviera S.A. v. Salen Rederier AB [1985] A.C. 191, 201 about the construction of provisions which, read literally, would be absurd, and also on later well-known authorities including B.C.C.I. v. Ali [2002] 1 A.C. 251.

There are several previous cases in which the court has had to consider a similar issue, that is whether a covenant of this kind involving a prohibition on some use of the purchaser’s land unless consented to by the vendor, was to be construed as requiring the consent of the vendor’s successors in title.

In Bell v. Norman C. Ashton Limited (1956) 7 P. & C.R. 359, which concerned a building scheme in Leeds, the conveyance provided:-

Except with the written consent of the vendors (who shall have the power to authorise the erection and user of buildings for the purpose of retail sale shops on any of the lots abutting upon Otley Road) no part of the estate or any building thereon shall be used for any other purpose than that of a garden or private dwelling-house and no other than detached or semi-detached houses with outbuildings ancillary thereto shall be erected upon the said estate and not more than two houses shall be erected on any one plot and no dwelling-house or other building erected upon the said estate shall cost less than £400 (exclusive of the cost of the land) ... and every dwelling-house or other building erected on the said estate shall be erected according to an elevation and design to be approved of by the vendors their heirs or assigns.” (my emphasis)

Harman J. rejected the contention of the owner that the consent of the personal representative of the deceased vendor sufficed: it was clear from the covenant that the draftsman referred to the vendor’s heirs when that was what was intended.

In Mahon v. Sims [2005] 3 E.G.L.R. 67, Hart J. had to consider the following covenant:-

He held that, whilst the literal meaning of “the Transferors” was Mr. and Mrs. Houghton, the vendors, the term was not a defined expression to any greater extent than that it was the term used by the transfer to describe them. Further, the covenant itself was apt to include successors in title, because that was the effect of section 78 of the Law of Property Act 1925 and because express words of annexation were used, making it clear that the benefit of the covenant was intended to run with the retained land. These points were sufficient to make it possible to read “the Transferors” as including successors in title.

He then held that this made “far better sense” of the covenant than the literal meaning, adopting the reasoning of Judge Kirkham in the County Court:-

... By taking an objective approach, the court must ascertain the meaning which the covenant would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties to the original deed, in the situation they were in at the time the covenant was given. In my judgment, the parties to the original deed must have intended to use the word Transferors in the same sense throughout the covenant. Further, as the benefit is annexed to the land, it is reasonable to infer that, absent some contrary indication, successors in title were also to have the benefit of the proviso. I see no reason to depart from that inference. There is no apparent reason why Mr and Mrs Houghton would want to maintain control over the land after they themselves had sold the land that witness statement to be benefited. Having sold 1 Wharf House, they had no proprietary interest to protect, which would seem to be the only reason for wanting to maintain control over the Garden. It must have been in the reasonable contemplation of the original parties that Mr and Mrs Houghton might sell 1 Wharf House and then become untraceable so that their consent could not be obtained; the risk would then be that the covenant might be rendered absolute.

In the circumstances of this case - a private treaty relating to a single property - it is unlikely that the parties intended that a third party, who had retained no interest in the land benefitted, could control development of a site so as to override the interests of a successor in title who does have the proprietary interest to protect. This is not a building or development scheme where a common vendor might wish to retain control. A private sale of a single dwelling is different from the circumstances which obtain in a building or estate scheme. In a private sale, of the sort in this case, it would be unusual for a person who had disposed of his interest in the property to retain the right to give or withhold consent to building.

If it had been intended that that unusual situation obtain, namely that Mr and Mrs Houghton, having disposed of their interest in 1 Wharf House, should nevertheless be entitled to give or withhold consent to building, then the covenant would be likely to have made that clear. If the original parties had really intended that this part be treated differently from the earlier parts of the covenant, then they would have made it clear by using different wording, so as to differentiate the word Transferors in its third use in the covenant from the meaning which it bears earlier in the covenant. The covenant did not state in clear terms that Mr and Mrs Houghton alone would be able to give or withhold consent.”

Hart J. referred in the course of his judgment to the earlier decision of Neuberger J. in Crest Nicholson Residential (South) Limited v. McAllister [2003] 1 E.G.L.R. 165, in which the issue was whether the effect of the original covenantee ceasing to exist was to make the covenant absolute or to discharge it. However, in upholding the reasoning of Judge Kirkham, and in particular her view that there was normally no reason why in a case relating to one property the original transferors would want to maintain control over the land after they had sold it, he did not refer to what Neuberger J. had said in Crest (which related to a building scheme) at §46:-

Next I was referred to the decision of the Court of Appeal in City Inn (Jersey) Limited v. 10 Trinity Square Limited [2008] E.W.C.A. Civ. 156. This concerns a transfer in 1962 by the Port of London Authority of a property called Mariner House situated in the vicinity of its headquarters at 10 Trinity Square close to the Tower of London. The relevant covenant read:-

Jacob L.J. (with whom Wall and Wilson L.JJ. agreed) referred to the opening words of the transfer, which defined the Port of London Authority, the vendor, as “the Transferor” and said that it was “obviously a strong thing to say” that a draftsman who had actually defined a term had in some places intended some other meaning, and that such a conclusion could only be reached “where, if the term is given its defined meaning the result would be absurd, given the factual background, known to both parties, in which the document was prepared”. He said that “nothing less than absurdity” would do. It would not be enough that “one conclusion makes better commercial sense than another”.

Jacob L.J. then analysed various provisions of the transfer, but said that the appellant’s “big point” was that it made no commercial sense for the Port of London Authority to remain the beneficiary of any of the covenants once it had completely moved away: there was no reason why it would wish to control any change of use or alteration to the property once that had happened. Only a successor in title would want the benefit of the covenants.

The main reason for rejecting this submission is set out at §31:-

Jacob L.J. also referred to other difficulties in the way of the appellant’s construction, namely that conveyancers would normally include the hallowed phrase “successor in title”, where this was intended, and that it would be unworkable in circumstances in which the land was sold in different parcels, so that there was more than one successor in title.

Finally, I was referred to the decision of Mr. Edward Bartley Jones Q.C., sitting as a deputy judge, in Margerison v. Bates [2008] 3 E.G.L.R. 165, which was decided shortly after City Inn.

This case concerned the conveyance of a part of a large plot of land consisting of a large dwellinghouse with generous gardens on which the purchaser was to build a bungalow. Clause 2(c) contained the following covenant:-

Not to make any addition or enlargement or alteration to the ... bungalow outbuildings and motor garage without plans having been first approved by the Vendor and her consent thereto signified in writing such consent not to be unreasonably withheld.”

The deputy judge first considered whether, in circumstances in which “the Vendor” was a defined term in the conveyance, and referred to the then owner of the property, who had later died, it had been held by the Court of Appeal in City Inn that the term could only be given a different meaning - to include successors in title - if otherwise it would give rise to absurdity. He concluded that, taking the judgment as a whole, the Court of Appeal in City Inn was merely construing the relevant transfer in accordance with the principles set out in recently leading cases including Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 W.L.R. 896 at 912-3 and Bank of Credit & Commerce International SA v. Ali (No.1) [2002] 1 A.C. 251 at §8 per Lord Bingham. He therefore held that it was open to him to construe the conveyance as a whole, which might involve giving the definition different meanings in relation to the various individual provisions in the conveyance.

He then considered the other provisions of the conveyance to see whether, at any point, the draftsman had or may have used the phrase “the Vendor” to include her successors in title, but concluded that she had not, and that she had in one provision expressly referred to “the Vendor or her successors in title”.

He then considered the arguments as to what made commercial sense, but concluded that, notwithstanding that it made greater commercial sense to extend the definition of the person who could give consent to successors in title, this was not sufficient to overcome the clear literal meaning of the term, in circumstances in which the draftsman had clearly referred to successors in title in a different provision:-

The deputy judge then referred to Mahon and City Inn, and in particular to the possibility that the parties had not thought of every contingency:-

Turning to the present case, the draftsman has shown no such commendable consistency as was to be found in Margerison. On the contrary, as Mr. Davies has submitted, the drafting is haphazard, especially in relation to this particular point. Thus, the exception to permit access for the purpose of cleaning the soil drain is expressed to be “for the Vendors and also for the owner or owners for the time being of .. “Clifton””. Here “the Vendors” can only sensibly be read as including their successors in title, who would already require access. It cannot have been intended that later owners of Clifton would have access, but later owners of Wych Elms would not. Much the same is true of the provisions of clause 5 and of paragraph 6 of Schedule 1. On the other hand, elsewhere the provisions of the Conveyance refer correctly to “the Vendors” (clause 2), “the Vendors their successors in title” (second part of the demise), “the owners or occupiers of the property hereby conveyed” (clause 3) and “the Vendors or their successors” (1^st schedule paragraph 7).

I agree with Mr. Davies’ submission that the drafting is in the relevant respect haphazard, but it is not uniformly incorrect, so as to suggest that the term “Vendors” was always meant to include successors in title. This is a possible meaning. Because of the inconsistencies, “the Vendors” is an ambiguous term and, in contrast with City Inn and Margerison, the “commercial realities” would not have to overwhelm the literal meaning in order to prevail.

In considering the realities, commercial or otherwise, in this kind of case, it seems to me that the following points are to be borne in mind:-

In many cases, including this one, the issue of construction arises long after the contract was entered into, and as between parties who are not the original parties to the contract. It is then usually impossible to know what were all the facts known, or reasonably available, to the parties, to which Investors Compensation requires the court to have regard, because the parties are not there to provide the evidence. Some of the facts may be clear, but there is a real risk that the court is proceeding on the basis of incomplete evidence as to the relevant background, and that it may therefore misunderstand it.

This seems to me to provide justification for the approach of the deputy judge in Margerison, that he should not allow his perception of the commercial realities to override clear language on the conveyance. But this conveyance does not have clear language.

I do not think that what Jacob L.J. said in City Inn, that the parties may not have thought of all the ‘what ifs’, is part of the ratio of that case, and I have reservations about it. In the first place, Investors Compensation implies that one should assume that the parties have thought of all the contingencies which would have been apparent to a reasonable outsider with knowledge of the relevant factual background. What either of the parties had actually thought of would not be relevant or admissible, even if evidence of it was available. Secondly, in a conveyancing transaction of all transactions, it is counter-intuitive to attribute lack of foresight to the parties, when, normally, they will have been represented by professionals whose job it is to think of all the implications. Thirdly, which of the ‘what ifs’ does one assume to have been overlooked? It seems to me that, unless the whole exercise of construction is to become even more like educated guesswork than it already is, where the parties to the agreement are not parties to the claim, one must assume that the parties did take into account reasonably forseeable contingencies.

It is always necessary to keep in mind the position of both parties. It is not enough just to consider what the vendor may have wanted to achieve. There is also the consideration that the purchaser might not see what the vendor wants as being in his interests, and that the vendor might, as a result, find it difficult to sell, or to get his price, if he insists upon it. The resulting covenant may represent a compromise. It is therefore not surprising to find covenants which are not altogether logical from the point of view of either party, or do not entirely achieve the probable aims of either of them. See Bank of Nova Scotia v. Hellenic Mutual War Risks Association (Bermuda) Ltd [1990] Q.B. 818 at 870 (C.A.).

On the particular question which arises here, whether it makes sense for the original vendors to have a power of veto after they have sold part of their property, there are, as Neuberger J. said, possible aesthetic, financial and altruistic reasons even, in my view, in a one property case. Of these, no doubt, financial reasons are likely to be the most powerful. Where vendors retain part of their property, they may wish to be in a position, when they come to sell it, to promise the purchaser that they will exercise their powers under the covenant if requested to do so. This might be a valuable right, enabling them to sell at a good price, if potential purchasers of the retained part of the property might otherwise have been afraid of developments next door.

Of course, a covenant with successors in title would serve this purpose even better, but it might not be acceptable to the purchasers. I therefore do not think that the approach of Judge Kirkham in Mahon is of universal application, even in cases not involving a development or building scheme. It may not always sufficiently take into account the realities of the vendor’s position as regards both his negotiations with his current purchaser and his future negotiations with a purchaser of the retained land.

There is one other complication which arises in this case, as it did in Margerison, that is the relationship between different issues of construction. In particular, in considering this issue, the implications are different according to whether, if the claimant’s construction is correct, the covenant falls away on the death of the vendors on the one hand, or becomes absolute, in the absence of anyone who can consent, on the other. For the reasons set out below, I consider that the former is correct, and I proceed to consider this issue on that basis.

Mr. Davies’ principal argument is similar to the argument advanced successfully in Mahon, but less so in City Inn and Margerison. He submits that it makes no sense especially in a case not involving a building estate, to construe paragraphs 4 and 5 of the 1^st Schedule literally. He submits that it is clear that Mr. and Mrs. Strong were living elsewhere in Radlett by March 1967, and would have no interest in enforcing these covenants. Therefore, looked at sensibly, it is only, or at least mainly, the subsequent purchaser of Wych Elms who would have an interest in enforcing the covenants and to construe them in such a way as to exclude the requirement for their consent would be absurd.

I do not accept this argument. As Mr. Power correctly reminded me, in assessing whether the provision, read literally, makes sense or is absurd, the court must look at it from the point of view of both parties to the agreement. Even assuming (as seems likely but not certain) that Mr. and Mrs. Strong intended in March 1967 to sell Wych Elms, their interest in the matter would be to sell both it and the building plot for the best possible price. To that end, it would be sensible for them to retain such control over what was built at 1A Loom Lane as would be acceptable to the purchaser of the building plot, in order to avoid the market value of Wych Elms being affected by it. These provisions would enable them to object if, for example, Professor and Mrs. Taylor sought to build something much larger than indicated on the plans attached to the Conveyance which they considered to be disproportionate to the size of the plot. Further, if uncertainty as to what would be built proved to be a stumbling block when they tried to sell Wych Elms, they would be in a position to overcome this by contracting with the purchasers to exercise their rights under these provisions if requested to do so, with or without a time limit.

Professor and Mrs. Taylor’s interests would be the opposite. They would not want any restrictions. However, it seems clear from the plans that they had had some dealings with Mr. and Mrs. Strong for about 6 months, and they were clearly prepared to agree to the provisions of the 1^st Schedule. As these stood, they would entitle Mr. and Mrs. Strong to object, reasonably, to the building they were putting up or, once it was put up, to a structural alteration or addition. But the Taylors might not have anticipated that, in practice, they would be likely to do so after, or at least long after, Wych Elms was sold. It is also possible that, through their pre-contractual dealings, they were confident that Mr. and Mrs. Strong would not act unreasonably. It would be quite another thing for the Taylors to have agreed to such restrictions in favour of successors in title, and therefore in perpetuity. This is true especially of paragraph 5 which, unless subject to an implied term, would have prevented them from making a structural alteration or addition of any kind or at any time or for any reason, without either obtaining the permission of subsequent owners of whom they had no knowledge, or embarking on an application to the Lands Tribunal under section 84 of the Law of Property Act 1925. It is difficult to imagine that such an onerous restriction would have been acceptable.

Therefore, looked at from the point of view of both parties, reading these covenants in accordance with their literal terms, which restrict the right to withhold consent to the original vendors, makes perfectly good sense and involves no absurdity. They represent what looks like a reasonable balance between the interests of both parties, in circumstances in which Mr. and Mrs. Strong would want to retain control to protect the value of Wych Elms, but Professor and Mrs. Taylor would not want to have an indefinite restriction. If there is anything surprising about these provisions, it is that they potentially entitled Mr. and Mrs. Strong to object for an unlimited period after they no longer owned the property. But this may simply be because Professor and Mrs. Taylor were content to assume that in practice there was little long term danger of their doing so.

Turning to the structure of the provisions, they too suggest that what the parties had in mind was control in the short term over the initial building. This was what was to happen immediately, having been under consideration since at least October 1966. Therefore, it would be natural to provide in paragraph 4 for approval by the vendors or their surveyor for the initial construction, and in paragraph 5 for consent to be required for any alteration to what had been permitted. Essentially, in my view, these provisions were designed to operate in the short term, to prevent an inappropriate house being built or, once built, inappropriately altered to get round some earlier objection.

The words “the Vendors or their surveyor” also provide some support for this view: they suggest that the parties had in mind a surveyor who was already involved. If the parties had meant to include the vendors’ successors, they would not have known what sort of professional they might choose to transmit their decision. It could equally well be an architect or a solicitor.

For these reasons I hold that “the Vendors” in paragraphs 4 and 5 means the vendors only, and not their successors in title.

Mr. Davies submitted, in the alternative, that Mr. and Mrs. Temple were entitled, under the ordinary law of assignment, to exercise Mr. and Mrs. Strong’s rights under paragraphs 4 and 5. I do not accept this argument. Once it is decided that the words, “the Vendors and their surveyor”, mean what they say, and do not on their proper construction include successors in title, then the only contractual right which can be assigned is the right to have plans submitted to Mr. and Mrs. Strong or their surveyor for approval or consent. Otherwise, the effect of the assignment would be to enlarge the assignee’s rights.

The next question to consider is the effect of Mr. and Mrs. Strong’s death. This too is a question of construction, governed by the normal principles. Read literally, both paragraph 4 and paragraph 5 would become an absolute bar once either of the Vendors had died, since no consent could be obtained from “the Vendors” and there could be no such person as “their” surveyor. Even if “the Vendors” were to be construed as “the Vendors or either of them”, in accordance with the Interpretation Act, this consequence would follow on the death of both. No approval of consent could be obtained, and all that would be left would be the prohibition.

However, if unconstrained by previous authority, I would unhesitatingly hold that this is not the correct construction of these provisions. Otherwise, Mr. and Mrs. Strong’s death would put subsequent owners in the same position as they would have been in if the covenants had been with their successors. Indeed as regards paragraph 4 they would be in a better position, since consent could be refused for a bad reason or for none at all.

In my opinion, a straightforward application of Lord Diplock’s dictum in Antaios leads to the conclusion that paragraphs 4 and 5 do not operate as absolute bars once Mr. and Mrs. Strong have died, but on the contrary that these paragraphs become ineffective. Otherwise, for example, if they had died in an accident before construction had commenced, the position would be that Professor and Mrs. Taylor had bought a building plot, on which they now could not build. Equally, even in circumstances in which both died long after the Conveyance after a full life, as they did, from that moment on there would be an absolute bar against any structural alteration of any kind whether for reasons of convenience or safety. They or any subsequent owner would be barred, if the defendants’ argument were correct, not only from demolishing the building but also from adding a porch or a conservatory or a new chimney. Once Mr. and Mrs. Strong had died, the owner of 1A could be held to ransom by the owner of Wych Elms, subject only to the possibility of making a section 84 application. This would be absurd, and the terms of the Conveyance cannot sensibly be construed to mean this.

I would therefore hold, if free to do so, that the parties plainly did not intend what they have said, and that their loose language must, applying Lord Diplock’s dictum, yield to commonsense. The reasonable outside person, equipped with the relevant background knowledge, as such part of it as is available to the court, would read this covenant as one which applied only in the lifetime of the vendors.

Mr. Davies however submitted that I am bound by the decision of the Court of Appeal in In Re Beechwood Homes Limited’s Application [1994] 2 E.G.L.R. 178 to hold that, on the death of Mr. and Mrs. Strong, clauses 4 and 5 became absolute covenants against new building or alterations of an existing building.

In Re Beechwood Homes, the Court of Appeal dismissed an appeal from the decision of the Lands Tribunal refusing to modify covenants under section 84(1)(a) and (aa) of the Law of Property Act. The property was one of the three plots which had been conveyed to different purchasers in 1934 and 1935 for development, subject to restrictions which prevented building more than one dwellinghouse, and then not until plans had been submitted to and approved by the vendors or their surveyor for the time being, such approval not to be unreasonably withheld, and also a restriction prohibiting the use of any part of the land as a road or way without the consent of the vendors first being obtained.

He then said, a little further on in the judgment, that for the purposes of section 84(1A) the restrictions had not become obsolete because the dispensing power was obsolete and no longer subsisted and was no longer exercisable: “the restrictions merely become absolute and thus more onerous”.

This decision was considered by Neuberger J. in Crest (above), in which the purchasers had covenanted with the vendor company in 1923 not to use the premises “for any purpose other than those of or in connection with a private dwelling house” and “not to erect a dwelling house or other building on the land conveyed unless the plans and drawings had been previously submitted to, and approved in writing by, the company, such approval not to be unreasonably or vexatiously withheld”. These covenants were in essence the same as paragraphs 3 and 4 of the Conveyance in this case. By the time of the proceedings in 2002, the vendor company had been dissolved for so long that it could no longer be restored to the register.

The defendant contended, relying on Beechwood Homes and the subsequent decision of H.H. Judge Rich in Briggs v. Cusker [1996] 2 E.G.L.R. 197, which followed it, that the effect of the company ceasing to exist was that the covenant became absolute, whereas the claimant contended that the effect was to discharge it.

Neuberger J. said at paragraph 33 that the defendant’s construction had the merit of giving effect to the strictly literal meaning of a covenant; there was simple force in the contention that, since the exception to the prohibition could not be invoked, it fell away, and the prohibition stood unqualified.

However, he went on to say that it was very unlikely that the parties would have had this intention. In particular, the right given by the first covenant (paragraph 3 in this case) was a right to construct a single dwelling house, and the second covenant was concerned with giving the company a degree of control over the plans of any such building proposed to be erected. The effect of the defendant’s construction of the second covenant would therefore be to remove or nullify the right given to the purchaser by the first covenant. It would be perverse to attribute the parties an intention that, if the company which had to approve the plan ceased to exist, then that covenant could prevent any development at all: see paragraphs 38-41.

He then said at paragraph 45 that the parties would have envisaged that, so long as the company retained part of the estate, the second covenant could be enforced for the benefit of the retained land. After disposal, however, once the company had disposed of any retained land, although the owners of plots would be entitled to enforce the covenant if it was annexed, it would be of no value to them unless the company chose to take their interests into account when its approval was sought (another possibility, as I suggest above, may be that the vendor could contract to do so).

He concluded (paragraphs 52-61) that on the proper construction of the contract, applying commercial commonsense, the prohibition and the exception in the covenant were so intimately bound together that, if the exception was discharged so was the prohibition. Alternatively, there was an implied term to that effect. The current position is that the implication of a term is to be seen as an aspect of construction: see A-G for Belize v. Belize Telecom [2009] 1 W.L.R. 1988 at paragraph 19.

Neuberger J. addressed Beechwood Homes at paragraphs 36 and 63 of his judgment. He referred to the passage in the judgment of Dillon L.J. to the effect that it was common ground between the parties that the provision was an absolute prohibition subject to an exception and that it was not open to the appellant to argue otherwise, and said that either it was not argued, or the Court of Appeal held that it could not be argued, that the covenant should be read in a broader, more purposive way, or that it should be subject to an implied term. He said that in Briggs, it was either common ground, or Judge Rich decided, that he was bound by Re Beechwood Homes. Therefore he was free to reach the conclusion set out above.

Crest went to the Court of Appeal, where different issues arose. However, Chadwick L.J. (with whom Auld and Arden L.JJ. agreed) approved Neuberger J.’s decision: see [2004] EWCA Civ. 410 at §53.

For these reasons, I do not consider that I am bound by the decision of the Court of Appeal in Beechwood Homes to hold that, on the proper construction of these provisions, the death of Mr. and Mrs. Strong made the prohibitions in paragraphs 4 and 5 absolute. The Court of Appeal in that case held that, because the appeal before it concerned an application to modify the covenant, the appellant could not contend that the covenant had already been effectively discharged. Its continued existence was central to the application and to the appeal. The Court of Appeal therefore did not consider the issue of construction which arose in Crest and now arises in the present case.

I am therefore bound to follow the judgment of Neuberger J., which I gladly do since it is in my view obviously right. There are only two differences between Crest and the present case. The first is that the vendors in the present case ceased to exist through death, rather than through the dissolution of a company. This is not a reason for distinguishing Crest, and Mr. Davies has not suggested otherwise. The second difference is that there is, in the present case, the additional covenant in paragraph 5 against any structural alterations. However, this serves only to strengthen the conclusion that these covenants were intended to operate in the short term, when Mr. and Mrs. Strong were still around to object to an alteration to what they had permitted under paragraph 4. The parties cannot sensibly be taken to have intended that the purchaser or his successors would be unable to make any structural alteration, at any time in the future, or at least not without an application to the Lands Tribunal.

Although I have reached the clear conclusion that these provisions, on which the defendants rely, have been discharged by the death of Mr. and Mrs. Strong, provisions of this kind – which seem to be quite common – may give rise to difficulties which might not be so easily solved. For example, the vendors might still be alive, but untraceable. Or they might be traceable, but unable or unwilling, several or many years after the sale, to consider the request for approval or consent. In such circumstances, the covenants would still be in force, and might represent an insuperable barrier. This might seem to be an unreasonable commercial result. But it is difficult to see how these provisions can be construed, or how an implied term could be said to exist, which covered these eventualities. Such a result could probably only be avoided by a term which had a different default position, for example one which permitted the building or the alteration, provided that the plans had been submitted to the vendor, who had then not refused consent. However, the existence of potential difficulties of construction which might arise on different facts does not, in my view, alter the conclusion at which I should arrive on the issue of construction which has arisen in the present case.

The conclusions I have reached so far make it unnecessary for me to consider the final question, whether paragraph 5, if it had still been effective, would have been subject to an implied term that the vendors or their surveyor should not unreasonably withhold consent. However, I will deal with it shortly. Even in a conveyance which is not, perhaps, drafted perfectly, it would be difficult to imply such a term when precisely that term is explicitly set out at the end of the immediately preceding paragraph 4. Nevertheless, I might have been prepared to imply it if I had held that the covenant was to be read as a covenant with the vendors and their successors, so that otherwise there would be an absolute bar on all alterations of any kind forever. But, as set out above, I think that this provision was essentially intended to apply in the short term, to enable Mr. and Mrs. Strong (and not their successors) to object to something which altered the structure of the building from which they had previously given permission. On that basis, an absolute right to refuse consent does not seem unreasonable, and I would therefore hold that nothing further is to be implied.

Put another way, the apparently deliberate absence in paragraph 5 of the proviso that consent should not be unreasonably withheld which is in paragraph 4 does suggest that the parties did not intend these provisions to operate except in the short term, and in any event not outside Mr. and Mrs. Strong’s lifetimes.

As indicated at the end of the hearing, if the parties are able to agree all consequential matters, or provide written submissions where there is no agreement, by 6pm on the day before judgment is handed down, there will be no need for anyone to attend.