It is not generally the role of the court to provide legal guidance to individuals or companies. Its task is to decide disputes between parties. But that did not stop Conwy Marina Village Management Company from issuing a novel claim in Re Conwy Marina Village [2021] EWHC 1275 (Ch).
The case concerned a development comprising houses and a small number of flats, all of which were subject to a covenant “not to use any part of the property other than for private residential purposes”. But some owners had been letting their properties for holidays and the management company, which was entitled to enforce the covenants, issued proceedings to establish how the covenant should be interpreted and whether it would include or exclude holiday rentals and Airbnb lettings.
The problem was that the claim form did not identify a defendant. So who would be bound by the court’s decision? There were no fewer than six court hearings at which attempts were made to ensure that there was an active defendant to the proceedings. But they were of no avail.
The management company urged the court to proceed with the hearing anyway. But the court noted that the marketing brochure for the development referred to the possibility that owners of the properties might be in a position to derive an income from holiday letting. And, if the court were to proceed, it would be unable to deal with any question of a possible estoppel based on that brochure. Nor would it be able to deal with arguments that the management company had waived the benefit of the covenant. And this meant that there might have to be further litigation in the future. So Mr Justice Morgan decided to stay the proceedings.
The judge ruled that the claim had not been properly constituted under the Civil Procedure Rules. The rules make some exceptions to the need for a defendant – for example in the case of trusts – and there is some scope for cases where no one is a defendant. But, in those cases, if someone will be bound by a decision of the court, those affected must be told that, if they stand back, they run the risk of being bound. Furthermore, if only the management company were to be bound by the court’s decision, the company could find itself in an invidious position, given that its members held different opinions about the desirability of holiday lettings.
Section 84(2) of the Law of Property Act 1925 empowers the court to interpret restrictive covenants and one leading textbook suggests that, where no one is entitled to enforce a covenant, so that it is otiose, the restriction should be removed to reflect reality. But the court was not aware of any decided case in which there was someone claiming to have the benefit of a covenant, where there was also someone with a contrary view, who could have been a party to the proceedings but did not join in with them. And the judge was not satisfied that persons who would be bound by his decision, thanks to the provisions in section 84(5) of the 1925 Act, had been given adequate warning that if they refrained from joining in the proceedings, they would be bound by them anyway. Section 84(2) empowers the court to interpret covenants – but does not oblige it to do so and the court need not, and would not, exercise its power if it considers it inappropriate to do so.
Allyson Colby is a property law consultant
