Transfer of land — Positive covenant — Covenantor taking covenant of indemnity from transferee — Further indemnity taken in subsequent transfers — Whether original covenantor liable
The plaintiff successfully claimed a declaration at first instance that the defendant was liable to indemnify it for one-half of the expense incurred by the plaintiff in making up and constructing a section of road which was an extension to Wilbury Way, Hitchin Industrial Estate, Hertfordshire. In a conveyance made between the then owners of the land to the north of Wilbury Way and the defendant in 1954, it was specified that when planning permission to develop the land was granted a further extension to the road would be built at joint expense. In 1965 the defendant conveyed some of the land to a purchaser expressly subject to “so far as the said covenants affect or relate to the land … “. Then the defendant disposed of the bulk of the land in 1985 to the respondent third party, which covenanted to observe and perform the subsisting encumbrances “so far as the same affect the property” and to indemnify against all costs and liabilities therefrom.
In 1989 the plaintiff acquired the land with the benefit of the clause and built the extension in 1989, then demanding one-half of the costs of that extension. The defendant refused to pay and, in the proceedings which followed, claimed an indemnity against the third party, which claimed from the fourth party. The defendant agreed on its liability to the plaintiff, but the judge dismissed the defendant’s claim against the third party stating that the words “so far as the same affect the property” as limiting an obligation to that which ran with the land. The defendant appealed against that dismissal.
Held The appeal was allowed.
1. The question to be answered was what, on the true construction of the clause, did the word “affect” mean. Clearly the word imposed a limitation and “affect” in the court’s view as a matter of ordinary language meant “have an effect on”. If, for example, the property was benefited by the covenant, the covenant was one that affected the property.
2. The argument that the obligation was in the result simply one to pay money could not be accepted. In determining what reasonable people in the situation of the parties to 1985 conveyance intended, they could not have intended to dissect the obligation in that way.
3. On the true construction of the clause in the 1985 conveyance, the third party covenanted to perform the agreement to build the extension at joint expense and to indemnify the defendant under an agreement which affected the property.
Edward Nugee QC and Nigel Thomas (instructed by Slaughter & May) appeared for the defendant/appellant; Kim Lewison QC (instructed by Church Adams Tatham & Co) appeared for respondent third party; Quintin Iwi (instructed by Hatten Asplin & Glenny) appeared for the fourth party.
