Domus Living Limited v Edward VII Estates Limited

The King Edward VII Hospital Estate at Midhurst, West Sussex in the South Downs National Park is a redevelopment of the former King Edward VII hospital and its grounds; it comprises houses and luxury apartments, surrounded and interspersed with about 165 acres of woodland and open heathland. The hospital itself is a historic asset of national importance; planning permission was granted on the principle of “enabling development”, which means that the conservation of the hospital building, which by itself would make a loss, has been funded by development for which planning permission would not otherwise have been granted.

In 2016 the applicant Domus Living Limited bought a plot on the estate from BBK Homes Limited (“BBK”). The plot is now known as “Southwood” and we refer to it as such throughout. BBK had purchased Southwood from the respondent, Edward VII Estates Limited, which was then the proprietor of the estate and had planning permission for the whole redevelopment (“the 2014 permission”). The 2014 permission set out in detail the buildings to be constructed, and provided for a four-bedroomed house to be built on this particular plot. The transfer of the plot to BBK from the respondent included restrictive covenants. The applicant has built a house in breach of those covenants, and now seeks to have the covenants discharged or modified. The respondent agrees to the discharge of one of the covenants, requiring its consent for building on the plot (“the consent covenant”), but has fiercely resisted the discharge or modification of the covenant requiring any building to be constructed in accordance with the 2014 permission (“the planning covenant”). Southwood has six bedrooms and is some 1,200 to 1,300 square feet larger than provided for in the 2014 permission. The respondent says that the breach of the planning covenant was a cynical breach made with knowledge of the covenant and that, even if the Tribunal has jurisdiction to discharge it, the Tribunal should not exercise its discretion in favour of the applicant. Failing that, the respondent claims compensation.

The applicant was represented by Mr Christopher Maynard and the respondent by Mr Mark Galtrey; we are grateful to them both.

The following account of the development of the estate is a summary of the information helpfully provided by Mr Simon Marner in his witness statement. Mr Marner is the Land & Property Director of several City & Country Group plc companies, which is the holding company of the respondent. He is a witness of fact, and so cannot give opinion evidence and is not a planning expert, but the following material is not in dispute.

The King Edward VII hospital was built in the early twentieth century. The hospital was extended during the 1960s and the main hospital building (Sanatorium) and chapel were Grade II and II* listed buildings. The hospital closed in 2006. The respondent acquired the estate in 2010 with the intention of implementing a programme of restoration and development. It applied for planning permission in 2011 to demolish extensions to the Sanatorium and other buildings and convert the Sanatorium to 148 apartments, convert certain other buildings to 30 houses and apartments and to construct 79 assisted care living units, 51 apartments and 102 houses.

Permission was granted by the South Downs National Park Authority under reference 11/03635/FUL on 25 November 2011 (“the 2011 permission”) for “enabling development”, which Mr Marner described as new development of a “significant place” (e.g. listed buildings or other heritage assets) that would normally be rejected by the local planning authority. The rationale is to generate funds for the costly restoration and long-term conservation of the building or a heritage asset, by allowing the developer to generate a profit to fund the “conservation deficit”, which is the shortfall when the costs of restoration exceed the listed building’s value. The requirements for enabling development were formerly set out in Enabling Development and the Conservation of Significant Places published by English Heritage, which was replaced by Enabling Development and Heritage Assets a good practice note published by Historic England. Enabling development must fulfil the following criteria:-

The process by which criterion f. is demonstrated is through a viability appraisal which identifies projected sales income less projected costs and calculates an acceptable profit margin for the developer.

The 2011 permission authorised the building of houses in Zone 6 of the development, then known as The Pine Walk and Coppice Wood, where Southwood is situated. The houses to be built were described as Woodland Houses, and the approved design for Southwood was described as the “House 03 typology”, which was a four-bedroom house.

According to Mr Marner the 2011 permission was amended in 2012 by planning reference SDNP/12/01392/FUL but the location and design of Southwood were not affected. In January 2014 the respondent applied for a non-material amendment of the permission in respect of Plot J alone, which was also known as Plot 9 Pine Walk and later became Southwood. The amendment proposed was to the elevation and internal layout and footprint. The application was approved on 17 March 2014 under planning reference SDNP/14/00443/NMA, and that was the 2014 permission.

On 8 June 2015 Southwood was transferred to BBK for £695,000.

Later, other land was transferred by the respondent with the benefit of the planning permission to other purchasers, and some was transferred to a related company, Edward VII Estates Two Limited. The land now retained by the respondent is almost (but, as we shall see, not quite) entirely woodland and open heath on which no development is envisaged in the planning permission as it stands.

The transfer of Southwood to BBK contained the following covenants:

“10 Not to erect any building or structure on the Property other than:

10.1

A single dwellinghouse with ancillary outbuildings strictly in accordance with the details approved pursuant to the Planning Permission dated [ ]; 25 November 2011 as varied by the non material amendment dated 17 March 2014 under reference SDNP/14/00443/NMA [the 2014 permission];

10.3

Not without the prior written consent of the Transferor not to be unreasonably withheld or delayed to materially alter the external parts of any building which may now or later be constructed pursuant to paragraphs 10.1 aforesaid.”

Those are the two restrictive covenants referred to in paragraph 2 above. The transfer to BBK provided that the benefit of those covenants would not pass to a purchaser of any of the respondent’s retained land unless it was expressly assigned.

Mr Andrew Henderson, the director of the applicant, acquired all the shares in BBK on 21 December 2016, and later on the same day Southwood was transferred by BBK to the applicant for £695,000.

Just before that transfer, on 16 December 2016 the applicant made a planning application to build a five-bedroom house on the plot; that application was later withdrawn and another one made in August 2017. Planning permission was granted on 5 October 2017 for a six-bedroom house; the floor space was greater than that permitted by the 2014 permission and the new permission allowed two extra bedrooms. Foundations were laid in 2020 and the new house was completed early in 2024. In April 2024 the applicant agreed a sale, but the purchaser withdrew when it became clear that the house had been built in breach of the consent covenant and the planning covenant and that the respondent was not prepared to release the covenants. The applicant has made an application to the Tribunal in its jurisdiction under section 84 of the Law of Property Act 1925 to discharge or alternatively modify the covenants.

Section 84 of the Law of Property Act 1925 reads as follows, so far as relevant:

“(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)

that the persons of full age and capacity for the time being or from time to time entitled to the benefit of the restriction, whether in respect of estates in fee simple or any lesser estates or interests in the property to which the benefit of the restriction is annexed, have agreed, either expressly or by implication, by their acts or omissions, to the same being discharged or modified; 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.”

As already indicated, the respondent does not object to the discharge of the consent covenant, and accordingly the Tribunal will make an order discharging it. The dispute is about the planning covenant. In what follows we refer simply to “the covenant” to mean the planning covenant. We discuss its discharge since that is what the applicant wants and, as will be seen, there is no need for any separate discussion of modification.

It is well-established that an application under section 84 involves two stages. First, the applicant must establish that the Tribunal has jurisdiction to discharge the covenant; it has jurisdiction if any of the grounds in section 84(1) are made out. The applicant seeks the discharge of the covenant on the grounds in section 84(1)(a), (aa) and (c). Second, the Tribunal has a discretion whether or not to modify the covenant, and in exercising that discretion will take accounts of matters including the conduct of the parties. So we look first at the question of jurisdiction.

Argument about jurisdiction under the three grounds relied upon has developed in the course of the litigation. It is helpful to look at the parties’ opening positions and then to see how argument and evidence developed. Essentially the question under ground (a) is whether the covenant can still serve its purpose, under ground (aa) the question is whether the covenant confers any benefit on the respondent and under ground (c) whether the respondent would be injured if it were discharged. Argument has focused on grounds (c) and (aa). It is well-established that if an application succeeds on ground (c) it must also succeed on ground (aa) since if the respondent will not be injured by the discharge of the covenant then it follows that the covenant cannot be conferring on the respondent any practical benefit of substantial value or advantage. We therefore focus on ground (c) and revert to (aa) and (a) at the end of our discussion of jurisdiction.

The applicant’s statement said that the covenant was obsolete because the neighbourhood has been developed and the covenant no longer serves its original purpose, that the covenant was impeding the reasonable use of the property with its current building which is consistent with the character of the neighbourhood and is not harming the respondent or anyone else; and that the covenant does not confer any benefit on the respondent.

The respondent in its notice of objection said this:

“The land was sold by the objector at a price that reflected the restrictive covenant and the size of the consented building to be erected thereon. The restriction was required by the objector to protect the value of the objector’s retained land as the original planning consent included the land and the objectors’ retained land, and this was based on the enabling development i.e. the minimum development required to secure the future of the heritage asset. The development of the retained land is not yet complete and there is a risk that the local planning authority will re-assess the land and retained land to reflect the added value created by the applicants’ land with amended consent, in their assessment. This will have a direct negative financial impact on the objector.”

There is a mix of singular and plural there, but the notice of objection was made by the respondent only. The form of notice stated that the respondent sought compensation in the sum of £302,223 if the application were to be successful.

Mr Marner’s witness statement explained the objection as follows:

“31.

There are approximately a further 100 properties to be constructed on the Estate. This includes approximately 50 apartments in three blocks and a further

50 houses in the Courtyard. We anticipate that we will make an application under section 73 Town and Country Planning Act 1990, which is an application

to develop without compliance with conditions previously attached. This type of

application is not unusual on a large scale development which is implemented

over many years. There is a risk, when it considers that application, that the

planning authority will review the development as a whole because the original

permission was under enabling development. The fact that Southwood is a

much larger property than the one which would be built in compliance with the

covenant could affect the planning authority’s assessment of the enabling

development and this in turn could impact on its decision on the section 73

application. The change in design of Southwood resulting in the breaches of

covenant could therefore affect implementation of the planning permission and

the development of the remainder of the Estate and this would have an adverse

effect on the Respondent. There remain other areas of potential development

on the estate that could also be impacted by the breach of the restrictive

covenant by the Applicant.”

The point was that the development of the estate was not yet complete. Obviously a planning consent once granted cannot be withdrawn, but the respondent might need to make applications under section 73 of the 1990 Act in relation to planning conditions. The risk identified was that the local planning authority would re-assess its view of the scale of enabling development required to fund the conservation work; in essence, extra value has been generated at Southwood, therefore less will be allowed elsewhere on the estate.

Mr Galtrey put it this way at the hearing: enabling development, he said, is like a gift card. On the card is the credit required to meet the conservation deficit. But no more than that amount of credit is given; if therefore the developer goes beyond what it is permitted in respect of part of the estate, the local housing authority will “review the development as a whole” and less will be permitted elsewhere. We observe that this is commentary by counsel, on instructions; we have heard no expert planning evidence either about enabling development generally or about the approach taken by the South Downs National Park Authority in relation to enabling development on this estate in particular. The “gift card” metaphor is a good explanation of the respondent’s argument; it is not evidence about local planning authority policy.

Mr Marner added some more explanation in cross-examination; the original permission was for 37 units in the West Courtyard, but 51 are now being built following an application to amend the conditions of the permission. Mr Marner explained that that application “was easier because it was a swap”, because there had been a less intense development than originally permitted on another part of the estate. This was not set out in his witness statement and we have no details of the “swap” referred to. Mr Marner said that the local planning authority is “very much against development creep.”

The Tribunal gave directions on 5 September 2025, including permission for each party to call an expert valuer witness. Shortly after that the respondent then became aware that a significant part of the land it had held at the date of the 2015 transfer to BBK was transferred in 2019 to a related company, Edward VII Estates Two Limited (“E7E2”). In particular, as Mr Marner confirmed at the hearing, the incomplete residential development referred to in the first two sentences of Mr Marner’s witness statement (see paragraph 23 above) was all on land that now belongs to E7E2. E7E2 applied to be joined to the proceedings as an additional objector, and the applicant objected to that application. By an order dated 5 November 2025, following a hearing of E7E2’s application, the Tribunal refused the application because the benefit of the covenant was not assigned to E7E2 when the land was transferred (see paragraph 13 above).

Looking back at paragraph 31 of Mr Marner’s witness statement, quoted above, that left the respondent unable to rely on most of that paragraph. It was not going to be carrying out the development that formed the premise of the objection; any section 73 applications were going to be made not by the respondent but by E7E2, and therefore the risk to such applications insofar as there was one was not a risk to the respondent. The respondent’s objection therefore rested on the final sentence of paragraph 31 of Mr Marner’s witness statement: “There remain other areas of potential development on the estate that could also be impacted by the breach of the restrictive covenant by the Applicant.”

In giving directions after refusing the application for E7E2 to be joined as an objector, the Tribunal gave permission to the respondent to amend its statement of case if so advised, and to file further evidence of fact if so advised. It did neither.

By the time experts’ reports were filed and served on 8 May 2026, therefore, the only explanation – we might say the only surviving explanation – of the respondent’s objection was the final sentence of paragraph 31 of Mr Marner’s witness statement. There was no evidence that any future development was contemplated on the respondent’s retained land which appeared to consist of woods and heath. But not entirely, as we hinted above. The parties’ valuation experts were Mr Richard Meeson MRICS of Carter Jonas, and Ms Victoria Seal MRICS of JLL. The experts had been directed by the Tribunal to report as follows, so far as the substance of the respondent’s objection was concerned (there were other directions about compensation which we will come to later):

“The difference in value (if any) of the respondent’s retained land (with the benefit of planning consent granted under SDNPA planning reference SDNP/11/03635/FUL and all subsequently granted planning consents) as at the date of the experts’ reports, between:

(a)

the value on the assumption that the applicant had developed its land only in accordance with planning reference SDNP/14/00443/NMA, such that the local authority will not seek to re-assess the viability review for the enabling development as regards further development of the respondent’s land; and

(b)

the value now that the applicant has developed its land as in fact it has and not in accordance with planning reference SDNP/14/00443/NMA, such that the local authority may seek to re-assess the viability review for the enabling development as regards further development of the respondent’s land.

That direction required an assessment of the difference in value of the respondent’s land between the scenarios (a) where there is no risk of a re-assessment of the enabling development and (b) where there is such a risk.

Mr Meeson was unable to attend the hearing. His report said this in response to the above direction:

“5.7

The likelihood of a further review on viability would be remote and likely limited to an attempt to enhance an existing consented part of the wider scheme e.g. The Kings Collection (3 new blocks of flats) which lies partly on the E7E retained land. However, I note these are being marketed for sale by C&C and so it would be unlikely to be subject to further planning enhancement.

…

5.11

From the information currently available, I do not consider there would be any material difference in the value of the Respondent’s retained land between the 2 scenarios.”

Ms Seal’s response to that direction was as follows:

“7.21

I have been provided with details of an area of the retained land which has been used as a yard, and is therefore brownfield in nature. Set in the South Downs National Park, and to a large extent covered by protected woodland, this brownfield site would seem the only, or at least the most likely development option. I have been provided with some initial planning proposals prepared on behalf of Edward VII Estates Limited.

7.22.

The site, extending to 1,133 sq m (12,195 sq ft), is marked in red below.

[plan omitted]

7.23.

The planning proposals are for three buildings of A 165 sq m (1,776 sq ft) B 220 sq m (£2,368 sq ft) and C 100 sq m (1,076 sq ft) totalling 485 sq m (5,220 sq ft). I am not able to comment on the likelihood of these buildings achieving a planning permission for residential use, except to comment that reuse of brownfield sites is generally encouraged, and the development of the King Edward VIII hospital as a residential community would make residential use the most obvious suggestion.”

It was made clear in cross-examination that the “initial planning proposals” which Ms Seal was shown were in fact the plans for the consented development of the yard. Permission had been given for a maintenance compound comprising three non-residential buildings: an office with staff facilities and attached hazardous materials fuel store, a storage barn for machinery and materials, and a composting and log storage barn, each complete with roof-spaces designated for bats.

Ms Seal in her paragraph 7.24 speculated that permission might be achieved for residential development on the yard. She was careful to add:

“I am not in a position to comment on the planning risks, or legal basis for a viability review of the King Edward VIII Hospital site as part of an application to build housing on this brownfield site. I am therefore only able to interpret the may seek to reassess.”

The final sentence is quoted exactly; we assume that Ms Seal meant to say that she sought to interpret the respondent’s statement, in its Notice of Objection that the local planning authority might re-assess the extent of enabling development permitted on the estate in light of the development of Southwood.

Despite that, Ms Seal went on to say:

“7.25

However, considering the £176 - £190 sq ft land values attributable above to the Subject Property, with a positive planning backdrop for the mooted scheme, indicative land values could be in the order of £920,000 - £990,000. It stands to reason that if the consented areas were 1,263 sq ft smaller, then the reduction in land Value would be £222,000 - £240,000, say £230,000.”

We think that what Ms Seal was saying here was that since Southwood was around 1,263 sq ft bigger than the 2014 planning consent permitted, the residential development permitted on the yard would be 1,263 sq ft smaller than would otherwise be permitted, resulting in a loss to the respondent of £230,000.

Mr Galtrey argued that we should place no weight on Mr Meeson’s evidence because he was not present to be cross-examined on his report. We need not respond to that argument at this stage of the decision because we reach our conclusion confidently on the basis of Ms Seal’s evidence, without any need to rely on Mr Meeson.

Turning to Ms Seal’s evidence, we have to say that she did not carry out the exercise she was directed to carry out.

As we explained above she was asked to assess the difference in value of the respondent’s land between the scenario where there is a risk and the scenario where there is none – just as a valuer might assess the difference in value between land on the assumption that there is a flood risk and on the assumption that there is no such risk. However, instead of valuing the respondent’s retained land with the benefit of the covenant, Ms Seal looked only at the value of the yard. It is not at all obvious that the planning risk would have the same effect on the value of the whole of the retained land, extending (we are told) to around 100 acres, as it would have on the very small yard on which Ms Seal focussed.

Much more seriously, instead of valuing on the basis that there was a risk, Ms Seal carried out a valuation on the basis of the following assumptions all of which seem to us to be engaged in what she said at her paragraph 7.25:

It is as if Ms Seal had been instructed to value land that is at risk of flooding, and instead valued it on the assumption that it has been flooded.

Responsibility for the discrepancy between what has been done and what was directed rests squarely with the respondent as well as with Ms Seal; on receiving her report the respondent could have asked her to provide an opinion in accordance with the Tribunal’s directions about the likelihood of the assumptions set out above becoming reality and the value of the yard on the basis of that risk. But it did not; instead it adopted Ms Seal’s approach, whilst admitting that there was some uncertainty about the amount of the loss. In his skeleton argument Mr Galtrey said (in the context of ground (aa)):

“In terms of the question of “substantial advantage”, there is inevitably some uncertainty about the exact degree of damage to R from A’s unlawful building. Doing her best with the information available, Ms Seal MRICS estimates that the financial impact alone would be around £230,000. Even if the amount turned out to be double or half that figure, it is on any view a substantial amount, reflecting the substantial value the covenant has to R.”

There has been no attempt to value the respondent’s retained land as a whole, with the risk of the adverse impact that Ms Seal has suggested, rather than on the assumption that that risk has eventuated.

Moreover there is no evidence to support that assumption. Taking the propositions set out above in turn, first, there is no evidence of fact from the respondent that it intends to apply for planning permission for residential development on the yard.

Second, there is no evidence that such planning permission might be, let alone will be, granted. On the respondent’s case it is difficult to see how it could be, if the “gift card”, to use Mr Galtrey’s analogy (see paragraph 25 above) is already at the limit of its credit, i.e. that the development already carried out is the maximum that could be permitted as enabling development to match the conservation deficit. The proposition that planning permission would be granted involves the very different assumption that there is in fact more conservation deficit to be made up: it will be recalled that enabling development is development for which permission would not have been granted were it not for the need to finance the conservation work. So we are to assume that there is in fact more deficit that requires finance.

As to the third and fourth assumptions, there is no evidence either that absent the breach of covenant on Southwood the local planning authority would have granted permission for just enough further development to make up that deficit, or that because of the breach of covenant on Southwood the respondent will suffer a shortfall in the land value required to meet the conservation deficit of around £230,000.

This is fanciful.

If this set of assumptions had a shred of plausibility the respondent would have been able to assemble some evidence of fact to support it. It appears that no attempt was made to do so. When asked by Mr Maynard whether there was any remaining conservation deficit Mr Marner said he did not know. As to the likelihood of planning permission, no enquiries have been made of the SDNPA. There is no evidence that planning permission would be granted if the respondent were to apply for permission for residential development on the yard (and there is no evidence that it will or might so apply). And there is no evidence as to the extent of the planning permission that would be granted absent the breach of covenant, and no admissible evidence (beyond Mr Marner’s inadmissible opinion evidence (paragraph 26 above) that the local planning authority is “very much against development creep).”

Ms Seal’s evidence is therefore of no assistance to us, and there is no evidence to substantiate the risk that the respondent asserts.

Furthermore, the likelihood of the local planning authority reacting as Ms Seal and the respondent suppose to the breach of the planning covenant seems very low indeed. Mr Henderson, the director of the applicant, gave evidence. His unchallenged evidence was that the majority of the other houses near Southwood, within the same postcode but not part of the estate, have at least five bedrooms and are of similar size to or larger than Southwood. Accordingly the whole premise of the respondent’s case – that development in this area is permitted only insofar as it is needed to fund a conservation deficit – seems very weak. Similar sized houses are being built very nearby and there is no evidence that they are enabling development. We do not doubt that permission for the King Edward VII Hospital Estate as a whole was granted on the principle of enabling development, but there is no evidence to support the idea that the estate has been developed to the very last square foot of enabling development and absolutely nothing else could be permitted. In other words, Mr Galtrey’s “gift card” analogy is not supported by evidence and would appear to be an exaggeration.

Mr Galtrey pointed out that nevertheless this is a risk that Mr Marner is worried about, and it was not put to him that the worry was not sincere. In his skeleton argument he said:

“To be clear, R is not saying that it is inevitable that the planning authority would impede the remaining development, only that it might do so (and that it might be justified in doing so). That is sufficient to amount to a practical benefit. As it is put in Preston at 13-030:

‘the ability to build without fear of challenge has a very practical impact on the use of the land’.”

The quotation from Preston & Newsome, Restrictive Covenants Affecting Freehold Land is taken out of context. The words are part of a commentary on Re Hydeshire Limited’s application (1994) 67 P & CR 93, where planning permission limited the number of houses being built. The situation was one of established fact rather than of risk. In the present case there is no substance to the argument that the respondent will be injured, within the meaning of ground (c), by the discharge of the covenant because Mr Marner is worried about a risk of which there is no evidence; and the freedom from a worry about unevidenced risk is not a practical benefit within the meaning of ground (aa).

We have no hesitation in finding that the discharge of the planning covenant would not injure the respondent.

On that basis ground (aa) is also satisfied. The covenant confers no practical benefit.

We also find that the covenant is obsolete. Its original purpose was, we agree, to protect the grant of permission for enabling development. But in light of the transfer of all the residential development land to E7E2 the respondent is not going to be carrying out any more enabling development and the covenant has no remaining purpose.

Accordingly the Tribunal has jurisdiction to discharge the covenant. It has a discretion whether or not to do so.

The respondent argues that the Tribunal should not discharge the planning covenant because of the applicant’s poor conduct. It says that Mr Henderson knew about the covenant all along and built in knowing breach of the covenant, cynically; and that the applicant deliberately concealed its acquisition of the land from the respondent in the hope of getting away with the breach of covenant.

In order to understand those arguments we have to go back to the process by which the applicant acquired Southwood.

It will be recalled (paragraph 14 above) that Mr Henderson acquired the shares in BBK in December 2016, and on the same day caused BBK to transfer Southwood to the applicant. Mr Henderson’s evidence is that he did not know about the planning covenant at that time. It was not mentioned in the sales particulars. He said in cross-examination that his solicitors did not produce a report on title for the property and did not tell him about the restrictive covenant.

The transfer to the respondent was not registered at HM Land Registry when it was completed. Moreover, the 2015 transfer to BBK Limited contained a positive covenant on the part of BBK to notify the respondent of any transfer of the legal estate in Southwood and to pay a fee of £75 plus VAT with that notification, and to ensure that the purchaser (i.e. the applicant) entered into a deed of covenant with the respondent to observe the covenants in the 2015 transfer. Neither of those things was done.

In 2021 the applicant needed to charge the property in order to finance the construction of the house and so of course the bank required the title to be regularised; the transfer was registered, the respondent was notified of the transfer, and the respondent executed a deed of covenant as required by the 2015 transfer. Mr Henderson was asked in cross-examination if his solicitors explained to him the covenants the company was making, and he said that he asked what the covenants were and was not told.

Mr Galtrey put it to Mr Henderson that from start to finish he deliberately kept the respondent in the dark about the transfer and the development of Southwood, did all he could to stop the respondent from finding out and to avoid responsibility for the breach of covenant, which he knew about all along. Mr Henderson denied all of that.

For the respondent it was argued that it would be wrong for the Tribunal to exercise its discretion in favour of the applicant. Mr Galtrey said it was not credible that Mr Henderson, who claimed to be an experienced property developer and was represented by solicitors throughout, was unaware of the planning covenant until 2024. Rather, this was a case where a developer has, in order to increase its own profit, deliberately breached the covenant and completed the unlawful development before even making the application to the Tribunal.

Such behaviour, said Mr Galtrey, was described by Lord Burrows in Alexander Devine Children’s Cancer Trust v Housing Solutions [2020] 1 WLR 4783 as a “cynical breach”. His Lordship repeatedly stressed the importance of deterring a cynical breach, and emphasised at paragraph 58 that it was particularly important to do so where the cynical breach had not just benefitted the applicant but also potentially interfered with the objector’s own development plans, as the respondent argues is the case here.

Accordingly the Tribunal should exercise its discretion against modifying or discharging the covenant.

We are not persuaded by that argument.

We do not accept that Mr Henderson, and his solicitors, on behalf of the applicant concealed the acquisition and development of Southwood. The failure to register the transfer was careless, but more would be needed to show that the objective of failing to register was to conceal the purchase. Failure to register the transfer at HM Land Registry would in any event be wholly ineffective to conceal the planning application made in 2016, for the larger development, which was publicised in the normal way. Mr Marner’s evidence, which we accept, was that the respondent was unaware of the planning application made in 2016, and of the further application made in 2017; but the applicant could not have relied on the respondent not becoming aware of the applications – let alone of the physical work of development itself. The same goes for the failure to notify the respondent of the transfer to the applicant or to enter into the deed of covenant. Mr Henderson’s unchallenged evidence was that in August 2017 he and a colleague were in contact with a Mr Nagra of City & Country about negotiating a wayleave for the house on Southwood; further, they emailed City & Country in 2021 on a number of occasions about a gas connection, and left telephone messages. Those were not the actions of a company trying to conceal the fact that it owned and was developing the land.

We do accept that it is not credible that Mr Henderson’s solicitors failed to provide a report on title in 2016, setting out the restrictive covenants to which the property was subject, when he acquired BBK. The point of the acquisition of BBK was to develop the property, and so the solicitors’ task and duty would be to advise their client as if the purchase were a conveyancing transaction. It is not credible that they were so negligent as to fail to provide a report on title. If they were, we would have expected evidence from them, since they continue to act for the applicant, confirming that that they did not provide a report.

It is equally not credible that the solicitors did not explain the nature of the covenants that the respondent was entering into in 2021.

However, that does not mean either that Mr Henderson is dishonest or that the breach was cynical. Mr Maynard observed that he is a person who, for better or for worse, does not read things. We accept that that is highly probable. It is one thing for a solicitor to produce a report on title, it is another for the client to read it, and yet another for the client to take on board its implications for his own plans. Memory is malleable, and it is perfectly likely that Mr Henderson believes that his solicitors did not give him the necessary information in 2016 and 2021, when in fact they did but he did not take it in.

That is obviously not ideal. But it is not dishonest.

There may be reasons other than carelessness why Mr Henderson did not take the information in. One is that the 2014 consent did not specify the permitted area of the development; one has to work it out. The respondent’s main concern is said to be the size of the house on Southwood (Mr Marner confirmed in cross-examination that the core of the respondent’s case was about the size of the property rather than the number of bedrooms), and it is not clear that the obligation to develop in accordance with the 2014 consent involves an obligation not to go beyond a particular square footage.

The other reason is that Mr Henderson was intending to apply, and did apply, for a fresh planning permission for the property. We do not think that it would have been obvious to Mr Henderson, and it may not have been obvious even to his solicitors, that the planning covenant would cause difficulty vis-à-vis the respondents once a fresh planning consent was in force. The objection, it will be recalled, is premised on the unevidenced assumption both that the respondent may apply for residential planning permission in the future and that the local planning authority would react in a very particular way to the breach of covenant; it is not particularly likely that either Mr Henderson or his solicitors will have foreseen that those assumptions would be made by the respondent.

Accordingly, despite rejecting his evidence about what his solicitors told him, we accept that Mr Henderson was not aware of the existence, nor of the nature and effect, of the planning covenant until 2024 when he came to sell the property and ran up against the purchaser’s misgivings and the respondent’s objection, at which point he had to get to grips with an issue to which he had previously given no thought and therefore had forgotten. In his witness statement he said: “when we built the house, we did not think for a moment that it was subject to any size restriction limiting it to a smaller size” and we accept that evidence.

So we reject the allegations of dishonesty on Mr Henderson’s part, and we reject the suggestion that the property was developed in cynical breach of covenant. This is not the situation that obtained in Alexander Devine where development proceeded in full knowledge of the covenant.

If the planning covenant did confer a practical advantage on the respondent, albeit not one of substantial value or advantage, so that we had jurisdiction to discharge it only under ground (aa), we might now pause to consider whether Mr Henderson’s carelessness in failing to take notice of what he must have been told about the planning covenant should be a reason not to exercise discretion in the applicant’s favour. We might in that event consider whether to weigh against that the respondent’s failure to keep an eye on planning applications, its failure to object to the 2017 permission, and its failure to notice the development at Southwood for some years, despite communications from the applicant (paragraph 69 above). But we have found that there is no evidence whatsoever that the covenant confers any benefit on the respondent, and that the respondent will not be injured by its discharge. And it is obsolete. We therefore have no hesitation in exercising our discretion to discharge the planning covenant.

The question then arises whether any compensation should be awarded to the respondent. Section 84 says this:

“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.”

We have found that the respondent will suffer no loss or disadvantage as a result of the discharge of the planning covenant, so there is no question of compensation under head (i). Under head (ii) the Tribunal is required to determine a question of fact: was the consideration received by the respondent from BBK actually lower than it could have received for the land free of the restrictive covenant.

Following some discussion at the hearing we invited the parties to make submissions about what that factual enquiry involves, and both Mr Maynard and Mr Galtrey have helpfully done so. We accept Mr Galtrey’s analysis in the sense that the mere fact that this particular purchaser would not have paid any more in the absence of a restriction, or if a less onerous restriction had been in place, does not answer the question. The issue is whether the respondent could in fact have sold the land for more without the covenant. That requires consideration of the market, and the respondent cannot succeed under this head if it cannot show that in fact the property could have been sold for more absent the covenant (Broomhead’s application [2003] 2 EGLR 157, Re Wards Construction (Medway) Limited’s application (1994) 67 P & CR 379).

To that end the Tribunal’s directions of 5 September 2025 required the valuation experts to give their opinion about:

“The difference in value (if any) of the applicant’s land at the time of the transfer dated 8 June 2015 from the Respondent to BBK Homes Limited, between:

(a)

the price paid for the land subject to a restriction not to erect any building or structure on the property other than a single dwellinghouse with ancillary outbuildings in accordance with the details set out under South Down National Parks Authority (“SDNPA”) planning reference SDNP/14/00443/NMA; and

(b)

the value of the land if it had been sold subject to a restriction not to erect any building or structure on the property other than a single dwellinghouse with ancillary outbuildings strictly in accordance with the details set out under SDNPA planning reference SDNP/17/05851/CND; and

(c)

the value of the land if it had been sold subject to no building restriction.

The planning consent reference SDNP/17/05851/CND was the 2017 permission.

In response to that direction both valuers started, not with the price paid for the land as described in point (a), but with their assessment of the market value of the plot subject to that restriction. Both felt that there was no difference between the market value of the land on the assumption in point (b) and on the assumption in point (c), so they each compared the market value of the land subject to a restriction requiring compliance with the planning covenant and its market value subject to a restriction requiring compliance with the 2017 permission.

The values the experts produced were curious. According to Mr Meeson, the applicant paid well over the odds in 2015 because £695,000 was close to his valuation of the land at £700,000 on assumption (b) above whilst on assumption (a) it was worth only £550,000. For Ms Seal, the market value in 2015 with the covenant was £695,000, and without the planning covenant it would have been worth £985,000.

When the experts wrote their reports they did not have the evidence about the actual sale process that we heard, contained as it was in documents that had not yet been disclosed at the date the Tribunal’s directions were given.

Importantly, the sales particulars for Southwood made no mention of the planning covenant. They mentioned existing restrictive covenants but there was no suggestion in the sales particulars that any new covenants were to be imposed.

A marketing report from Strutt & Parker indicates that 12 prospective purchasers viewed the property in 2013. Most felt the price was too high. An offer of £650,000 was rejected in October 2013. Thereafter Mr Marner said he was not aware of any more interest in the property – he accepted Mr Maynard’s suggestion that the property languished on the market – until BBK Limited offered £695,000. The memorandum of sale, made when the offer was accepted, made no mention of the new covenants to be imposed. Obviously by the time contracts were exchanged BBK Homes Limited knew about the restrictions which would have been set out in the draft contract. Yet the price did not change.

Mr Maynard suggested to Mr Marner that there was not a shred of evidence that the imposition of the planning covenant had any effect on the price paid by BBK Limited, and he agreed.

What is important is not that BBK would not have been willing to pay any more in the absence of the covenants. It is that no-one was prepared to pay any more, in the market, from 2013 to the date of sale, for the property on the basis that there was no planning covenant, because that was the basis on which it was marketed.

In the face of that rather stark fact, we have to ask whether we can give any credence at all to Ms Seal’s view that the property would have been worth £985,000 without the planning covenant. Inevitably this is a high hurdle for her to surmount. She has no explanation for, because did not know about, the evidence that the property languished on the market for two years and just one purchaser was eventually found who was willing to buy it for £685,000, on the basis that no new covenants were being imposed. Does her evidence give us any confidence the property could in fact have been sold on that basis for £985,000?

We have to say that it does not. Ms Seal valued the property using a residual appraisal, in which the gross development value (i.e. the sale value of the finished development) was assessed by analysis of comparable evidence before deducting the estimated costs of development, including developer’s profit, to leave a plot value. In the hearing it became apparent that in several instances Ms Seal had relied on comparable sales without full investigation of what was included in the sale price. She accepted that evidence of sales which included grade II listed property, or additional land (as much as 38 acres in one case) or equestrian use were unsuitable as comparable evidence for a new six bedroom house, and particularly unsuitable for analysis on a price per sq foot basis. We therefore have little confidence in Ms Seal’s use of comparable evidence to assess the value of the finished development.

The assessment of deductions to be made in a residual appraisal requires many assumptions to be made on acquisition costs, construction costs, professional fees, marketing and disposal costs, and finance on costs incurred until a sale is achieved after an assumed period of marketing. An important final element of a residual appraisal is the assumption as to the amount a developer will require as profit from the development. The underlying assumptions adopted by Ms Seal were optimistic, including profit at 15%, finance at 5%, a build period of 10 – 15 months and a marketing period of 3 months. These gave rise to modest deductions from the gross development value and provided a high residual value. Ms Seal admitted that more conservative assumptions on costs and profit than those she adopted would be equally valid.

Ms Seal’s assessment of the value of the plot without the restriction therefore appears to us to be unrealistic. And that is consistent with the fact that there was no purchaser in the market prepared to pay that price when the plot was marketed without reference to the planning covenant in the sales particulars. There was clearly no market for the plot at, or anywhere near, £985,000. Ms Seal’s evidence has therefore not demonstrated to us that the respondent could have achieved a higher price for the property in 2015 in the absence of the covenant. The burden of proof of that is upon the respondent, and it has not discharged that burden. We do not need to give any further consideration to the evidence of Mr Meeson on this point.

No compensation is payable under head (ii).

The respondent has consented to the discharge of the consent covenant. We have jurisdiction to discharge the planning covenant. We exercise it in the applicant’s favour and discharge the covenant. No compensation is payable.