Vendor and purchaser — Restrictive covenants — Alleged breaches by Secretary of State for Health — Houses purchased by Secretary of State and intended to be used in pursuance of the government’s ‘Care in the Community’ programme, whereby persons who have suffered mental disability are being returned from hospitals to live in the community — Questions as to whether this use was in breach of restrictive covenants contained in the transfer of the properties to the Secretary of State — Whether the use intended was use as a private dwelling-house only — Whether use constituted a ‘detriment’ within a covenant prohibiting a nuisance, annoyance, danger or detriment — Appeal from decision of Ferris J, who held that the use proposed would be a breach of both covenants — Court of Appeal agreed in regard to the private dwelling-house covenant, but not in regard to the suggested detriment
company, which was the housebuilding arm of the Cheltenham & Gloucester
Building Society, claimed against the defendant Secretary of State that the
proposed use by the latter of two houses purchased by him was in breach of the
restrictive covenants contained in the transfers — One of these covenants
prohibited the use of the properties for any purpose other than as a private
dwelling-house — The other relevant covenant prohibited any nuisance,
annoyance, danger or detriment to the transferor or the owners or occupiers of
other parts of the estate — The purpose for which the Secretary of State
purchased the houses was to implement the ‘Care in the Community’ programme —
This involved using each of the houses as a home for people who had suffered in
the past from mental disability, but were now being returned from hospitals to be
integrated into the community — The occupants, four in each house, would have
the services of a trained nurse and other support staff, including night
service, supplied by the National Health Service — The Secretary of State
appealed against the decision of Ferris J that the use of the properties
constituted a breach of both restrictive covenants
considering the alleged breach of the covenant restricting use to that of a
private dwelling-house the court examined a number of authorities — It was
clear that in several respects the present case met the requirements for use as
a private dwelling-house — The number of residents in each house was small, not
more than four; the relationship between them was that of a group of friends or
at any rate associates; and the occupants made no payment for their board or
lodging — Although the owner did not reside there himself, he did everything in
his power to make each house the home of the residents, giving them
responsibility for domestic duties and decisions — However, there was a vital
difference from a private dwelling-house — The occupants remained within the
continuing care for which the Secretary of State was responsible — They
occupied these particular houses because they were former in-patients of a
dsnearby hospital — They were being treated and rehabilitated, with a view to a
full return to the community, by the National Health Service under the
responsibility of a minister of the Crown — Praiseworthy as these arrangements
were, the court agreed with Ferris J that they did not constitute the normal
use of a private dwelling-house
covenant alleged to have been breached was that which prohibited acts which
might constitute a nuisance, annoyance, danger or detriment — It was not
suggested that there was any question of nuisance, annoyance or danger — The
submission was that there had been a ‘detriment’ to the owners or occupiers of
other parts of the estate by way of ‘impaired marketability’ of their
properties — The only evidence of this appeared to be that in a buyers’ market
an astute purchaser of a property had been able to make use of the general
nature of the programme to obtain a small reduction in the purchase price of a
property — The conclusive objection to the claim under this head was, however,
that the only detriment contemplated by the covenant was one which affected the
enjoyment of part or parts of the estate — The financial loss suggested, even
if it could be proved, was not within this covenant — The court therefore
differed from Ferris J in his finding that there had been a breach of this
covenant — The result was that the appeal would be allowed in part
The following
cases are referred to in this report.
German v Chapman (1877) 7 ChD 271; 47 LJCh 250; 37 LT 685; 42 JP
358; 26 WR 149, CA
Heglibiston
Establishment v Heyman (1977) 36 P&CR
351; 246 EG 567, [1978] 1 EGLR 79, CA
Rolls v Miller (1884) 27 ChD 71
Segal
Securities Ltd v Thoseby [1963] 1 QB 887;
[1963] 2 WLR 403; [1963] 1 All ER 500
Tendler v Sproule [1947] 1 All ER 193, CA
Thorn v Madden [1925] Ch 847
This was an
appeal from the decision of Ferris J (reported at [1990] 1 WLR 1272) whereby he
held that the use proposed to be made by the Secretary of State for Health of
two properties on the Charlcombe Park Estate, Dean Hill Lane, Weston, Bath,
would constitute breaches of restrictive covenants by which the Secretary of
State was bound. The respondents (plaintiffs below) were C & G Homes Ltd, a
wholly-owned subsidiary of, and the housebuilding arm of, the Cheltenham &
Gloucester Building Society.
John Macdonald
QC and David Van Hee (instructed by Thrings & Long, of Bath) appeared on
behalf of the appellant; David Oliver QC and J Stephen Whitaker (instructed by
Laytons, of Bristol) represented the respondents.
Giving the
first judgment at the invitation of Lord Donaldson MR, NOURSE LJ said:
Covenants against use for the purposes of any trade or business and for any
purpose other than as a private dwelling-house are often found in conveyances
and leases of residential property. The effect of such covenants in regard to
well-recognised uses, for example as a lodging-house, is no longer in doubt,
although the question being one of fact and degree, the circumstances of
individual cases from time to time cause difficulty. Here we are confronted
with a novelty: the use by the Secretary of State for Health, through the
agency of a district health authority, of each of two adjoining houses on a new
development as a permanent home for four persons in his care, being people who
have suffered in the past from mental disability and are now to be returned to
the community under the current policy of ceasing to maintain in hospitals
those who no longer need to be there.
The background
to the case and the material facts as they stood at that time are set out in
the judgment of Ferris J at [1990] 1 WLR 1272 and need not be repeated. The
judge held that the use which the Secretary of State was making of the houses
was in breach of two of the covenants contained in the transfers by which they
were acquired. He made a declaration accordingly and ordered an enquiry as to
damages. The Secretary of State appeals to this court. In the six months or so
which have elapsed since the trial he has continued to use the houses as
before. It is not suggested that that was not a proper course for him to take,
the assumption no doubt being that if it had been a case in which an injunction
could have been issued a stay would have been granted pending the appeal.
Like the
judge, I will start with the covenant in para 24.2 of the third schedule to
each of the transfers:
24. Not at
any time within ten years of the date hereof: . . .
24.2 to carry on or from the Property or any part
or parts thereof any trade business or manufacture whatsoever (with the
exception of the profession of a Solicitor Doctor Dentist Private Teacher
Accountant Architect or other professional person provided that any necessary
local authority approval is obtained for such use) and not to use the said
dwelling-house nor to use the said garage for any purpose or purposes other
than those incidental to the enjoyment of a private dwelling-house.
At [1990] 1
WLR 1272 at pp 1275E to 1276F, in describing the use to which the houses were
to be put, the judge quoted at some length from an affidavit of Mrs Maureen
Teresa Wykes, who is employed by the Bath District Health Authority as locality
manager for the Bath Mental Health Unit, her principal concern being to plan
and provide mental health services for the City of Bath. In another part of her
affidavit Mrs Wykes described how the residents had been fully involved in the
selection of furnishings for their own rooms and in the choice of colour
schemes, also in the selection and purchase of the smaller items for their
homes. In a second affidavit before the judge she told of the ways in which the
residents had been able to develop their participation in normal domestic duties
and decisions. Now, in a third affidavit which has been admitted without
objection in this court, Mrs Wykes has brought the supervisory and supportive
arrangements up to date. They can be summarised by saying that from the middle
of September the numbers of staff in attendance have been reduced, there being
either one trained nurse and one untrained person or two untrained persons to
provide domestic support during the day and one untrained to provide domestic
support at night and another untrained to sleep in. It is anticipated that
later in the year a single untrained person will cover all duties at night. Mrs
Wykes has also described the medical and other services of which the residents
have the benefit. She states that, apart from those of the patient services
manager, all the services are available to persons living in their own homes
who have need of them. She adds that there have been no incidents or friction
with other occupiers of houses on the estate and that the residents have
settled in well.
The question
whether the use which is being made of the two houses is in breach of the
covenant in para 24.2 depends upon the true construction of the covenant. At
the outset of his argument Mr Macdonald QC, for the Secretary of State,
emphasised that it was entered into in 1989, at a time when the Town and
Country Planning (Use Classes) Order 1987 had introduced a new class C3 for
dwelling-houses in these terms:
Use as a
dwelling-house (whether or not as a sole or main residence) —
(a) by a single person or by people living
together as a family, or
(b) by not more than 6 residents living together
as a single household (including a household where care is provided for
residents).
Mr Macdonald
accordingly submitted that since these houses are being used as dwelling-houses
in the eyes of the planning legislation, the covenant should be construed to
the like effect. On the assumption, which is no doubt correct, that the
planning view of the matter was part of the factual background known to both
covenantor and covenantee, it is certainly a factor to be taken into account in
construing the covenant. No less to be taken into account is that parties to a
conveyancing transaction, having entered into a covenant in a long-established
and familiar form, must have intended that it should have the effect which
earlier authorities have said that it has.
Consistently
with the fundamental rule that due effect must be given to all of the words in
which the parties have expressed themselves, I regard this covenant as having two
limbs: (1) not ‘to carry on or from the property . . . any trade business or
manufacture . . .’; and (2) ‘not to use the said dwelling-house nor to use the
said garage for any purpose or purposes other than those incidental to the
enjoyment of a private dwelling-house’. That was the initial view of Ferris J.
But on consideration he thought that he ought to approach the covenant as a
whole, looking at both limbs together as opposite sides of the same coin. In
making that approach he was influenced by what was said by Lindley LJ in Rolls
v Miller (1884) 27 Ch D 71 at p 87, a case where the covenant was
only against the carrying on of any trade or business, from which it was
implied that the property was not to be used otherwise than as a
dwelling-house. Although in the end it may make no difference, I think that, if
the judge had been referred, as we were, to German v Chapman (1877)
7 Ch D 271, he would have thought that his initial view was correct. I should
add that the second limb, although expressed at greater length, was treated by
both sides as the equivalent of ‘not to use the said dwelling-house . . . for
any purpose or purposes other than those of a private dwelling-house’.
I will
consider the five authorities to which we were referred in chronological order.
In German v Chapman a conveyance of freehold property contained a
covenant by the purchaser not to erect or build on the land more than four
dwelling-houses and also that no
dwelling-house,
or other building so to be erected or built upon the same land shall at any
time hereafter be used or occupied otherwise than as and for a private
residence only, and not for any purpose of trade.
It was held by
this court that the proposed erection, by the trustees of a charitable
institution for the daughters of missionaries, of a large building capable of
holding 100 girls who were to be boarded, lodged and educated there was a
breach of the covenant not to use or occupy the land otherwise than as and for
a private residence. It was acknowledged that no trade was involved in the
project, but it was held that the covenant had two separate limbs which must be
separately considered. At p 277 James LJ said:
. . . it is
impossible to say that in the ordinary use of English language the using of a
place for a large institution (although a very charitable and beneficial
institution) for the reception of one hundred girls to be lodged, boarded, and
taught at that place, is using it as a private dwelling-house. To my mind such
an institution is no more a private residence only than a club of gentlemen or
a working men’s club, or any other establishment of that kind, where a great
number of persons are brought together. Whose private residence can it be said
to be?
In Rolls v
Miller the lease of a house contained a covenant by the tenant that he
should not:
use,
exercise, or carry on, . . . in or upon the premises hereby demised any trade
or business of any description whatsoever . . .
It was held by
this court that the proposed use of the house as a ‘Home for Working Girls’,
where working girls and young women between the ages of 15 and 25 who were
without situations and temporarily unable to support themselves would be
provided with board and lodging, would be a breach of the covenant,
notwithstanding that no payment was required or made. At p 86, having held that
no trade was being carried on, but that it was not essential that there should
be payment in order to constitute a business, Cotton LJ, in a passage quoted by
Ferris J [1990] 1 WLR 1272 at p 1278, concluded that what was being done must
be considered as carrying on the business of a lodging-house. At p 88 Lindley
LJ came to the same conclusion. The judgments emphasised that a superintendent
and staff were employed to receive and look after the girls on the owners’
behalf and that the owners themselves did not live there. Ferris J found Rolls
v Miller the most helpful of the authorities which were cited to
him. Having referred to the conclusions of Cotton and Lindley LJJ, he said at p
1278:
In my
judgment, the same has to be said here. I am asked by Mr Macdonald to say that
this covenant must be construed according to the standards of 1989, not those
of 1884 when Rolls v Miller was decided, but although that may be
right as a matter of principle, I cannot see what has changed in the meaning of
language, or in the way that things are done, which enables me to distinguish
this case from that case.
In Tendler v
Sproule [1947] 1 All ER 193 a tenancy agreement of a house contained an
agreement by the tenant:
. . . not to
use the said premises or any part thereof for any trade or business but keep
the same as a private dwelling-house only . . .
After the
contractual tenancy had expired the tenant held over as a statutory tenant and
later took in ‘two paying lodgers’. It was held by this court that that was a
breach both of the covenant against business use and also of the covenant to
keep the premises as a private dwelling-house only. In referring with approval
to the decision of Tomlin J in Thorn v Madden [1925] Ch 847, Morton
LJ said, at p 194:
I think that
the real gist of the decision is that the taking in of paying guests is a
business and that a house which, or part of which, is used to take in paying
guests is not a house which is being kept as a private dwelling-house only.
In Segal
Securities Ltd v Thoseby [1963] 1 QB 887 a lease of a maisonette
contained a covenant by the tenant:
to use the
demised premises for the purpose of a private residence in the occupation of
one household only.
Residing with
the tenant was a woman friend of hers, who shared the accommodation, meals and
expenses on terms that yielded no profit to the tenant, and another woman, who
had come in answer to an advertisement and who lived an independent life, there
being no real sharing of meals and social life in the sense that she lived as
part of a family. Having referred to Thorn v Madden and Tendler
v Sproule, Sachs J, at p 894, said:
To my mind,
in the way of life of 1962, the mere taking in of a single paying guest who
shares the family life so far as practicable would not, save in exceptional
circumstances, be regarded by a reasonable man as a breach of a covenant to use
the house as a private residence only; nor would I myself willingly hold that
to be such a breach; nor do the authorities on analysis bind a court so to
hold. It is in each case a question of fact and of degree whether the taking in
of paying guests is of an order that, having regard to all the circumstances,
constitutes a breach of the covenant in question.
The judge
thought that had the friend been the only person there with the tenant, no
breach would have been established. However, he held that the circumstances of
the other woman’s coming and being there caused there to be a breach, albeit by
no great margin.
In Heglibiston
Establishment v Heyman (1977) 36 P&CR 351 a lease of a flat
contained a covenant that the tenant would not:
. . . use or
permit the said flat . . . to be used for the purpose of any art trade or
business whatsoever . . . but shall and will use the said flat as and for a
private residence only and in particular will not take in boarders or lodgers.
The flat was
occupied for some of the time by the tenant and for all of the time by his son
and the woman with whom he was living as man and wife and by an old school
friend of his as well. The three permanent occupants paid no rent, but they
shared the household expenses, including the gas and electricity bills and the
food. The county court judge found that the woman was treated as if she was the
son’s wife and that the son’s friend was treated as his brother. He therefore
held that they were not lodgers or boarders and that there was no breach of the
covenant. His decision was affirmed by this court. In delivering the leading
judgment, Browne LJ, at p 360, said that there was all the difference between a
person who made fixed periodical payments and a person who merely agreed to
share part of the expenses of a single household. He approved the approach of
Sachs J in Segal Securities Ltd v Thoseby.
These
authorities show that the question of fact and degree which has to be answered
in each case will involve a consideration of all or some of the following
matters: the number of occupants; the degree of permanence of their occupancy;
the relationship between them; whether payment is made or not and, if so,
whether it is only a contribution to expenses or something more; whether the
owner or lessee resides there himself and, if not, whether he has people there
to supervise and support those who do.
In German v
Chapman and Rolls v Miller charitable boarding
institutions which made no charge to the occupants were held in the one case
not to be a private residence and in the other to be a lodging-house. In both
cases there were many occupants, whose occupation was either temporary or not
more than short term. In Rolls v Miller importance was attached to the fact
that the owners employed a superintendent and staff and did not reside there
themselves. Tendler v Sproule and Segal Securities Ltd v Thoseby
establish that the presence of no more than two (or even one) paying guests
or lodgers can cause there to be a breach of both limbs of the covenant. Heglibiston
Establishment v Heyman, on the other hand, shows that the presence
of three other persons who are, or are treated as being, members of the
tenant’s family, who pay no rent and who merely share the household expenses,
will not bring about a breach.
What are the
essential circumstances of the present case?
Taking, wherever there may be a doubt, the view more favourable to the
Secretary of State, I would say that they are these. The number of residents of
each house is small, no more than four. The period of their residence is
permanent or indefinite. The relationship between them is that of a group of
friends or at any rate of associates. They make no payment for their board or
lodging. The owner does not and cannot reside there himself. He does everything
within his power to make each house the home of the residents, giving them, so
far as practicable, responsibility for domestic duties and decisions and, so we
were told by Mr Macdonald, the right to determine the composition of their
group. But the owner remains under a statutory duty to care for them. He does
that by means of the attendance of two staff during the day and one at night
and the provision of the services of the patient services manager and regular
medical services.
Although I do
not find it necessary to express a concluded view on the first limb of the
covenant, I doubt whether the Secretary of State is carrying on a business on
or from either of these houses. The small number of residents, the permanence
of their residence, the relationship between them and the absence of any
payment for their board and lodging together suggest to my mind that it is not
the business of a lodging-house. And, while I accept that ‘business’ is a word
of wide application, my impression — and when you have assembled all the
features of a case it is really no more than a matter of impression — is that
it is not a business of any other kind.
Is, then, the
Secretary of State using these houses for any purpose or purposes other than
those of a private dwelling-house? I
think that he is. The basic proposition inherent in Mr Macdonald’s argument was
that because each house is the private dwelling-house of those who reside
there, therefore it is being used by the Secretary of State as a private
dwelling-house. I think that it might well be possible to say that he is using
the houses as dwelling-houses. But I cannot agree that he is using them as
‘private’ dwelling-houses.
We were not
referred to any judicial definition of a private dwelling-house. It seems that
judges, no doubt wisely, have been content to say whether, in any given set of
circumstances, the description is or is not satisfied. The definition of a
private house given in the Shorter Oxford English Dictionary (1933) is:
The
dwelling-house of a private person, or of a person in his private capacity.
Where the
owner himself is in occupation it can usually be said that he is using it as his
private dwelling-house. But he can still use it as a private dwelling-house
without occupying it himself, for example where he lets it to another
individual for use as his private dwelling-house. Use as or for the purposes of
a private dwelling-house seems to assume that there is at least one private
individual who, whenever he chooses, can occupy the house as his own, even
though he may not be in actual occupation, for example where he allows his
children and some friends to live there.
In the present
case no emphasis of the residents’ ability to treat the house as their
permanent home nor of the advanced degree of autonomy which is given them in
the running of it can obscure the continuing responsibility of the Secretary of
State for their care or the incidental powers which are vested in him. In
particular he has the power to determine a resident’s licence to occupy the
house and in an emergency he would have both the power and the duty to do so
without notice. More significant in practice is his responsibility to provide
supervision and support for the residents, a responsibility which has not been
diminished by the reduction in numbers of the staff who are needed to
administer it. Moreover, the responsibility being one which belongs to a
minister of the Crown, the houses are in that sense used for public and not for
private purposes.
In a
commendable search for a label, Mr Oliver QC, for the plaintiffs, referred us
to the definition of ‘a residential care home’ in section 1(1) of the
Registered Homes Act 1984:
[an]
establishment which provides or is intended to provide, whether for reward or
not, residential accommodation with both board and personal care for persons in
need of personal care by reason of old age, disablement, past or present
dependence on alcohol or drugs, or past or present mental disorder.
That certainly
shows that these houses might be residential care homes within the definition
of the 1984 Act. It does not show conclusively that they are not private dwelling-houses
within the contemplation of the covenant.
In summary, I
would say that if a house cannot fairly be described as someone’s private
dwelling-house, it cannot be said to be being used as such. I therefore ask
myself the question which was asked by James LJ in German v Chapman:
Whose private dwelling-house can it be said to be? It is not the Secretary of State’s. And I am
unable to say that it is the residents’. In the end, although by somewhat
different route, I have come to a clear conclusion that Ferris J’s decision on
the first question was correct. I would therefore affirm his declaration and
his order for an inquiry as to damages, so far as they relate to the covenant
contained in para 24.2
I can deal
more briefly with the covenant contained in para 20 of the third schedule to
each of the transfers:
20 Not to
cause or permit or suffer to be done in or upon the Property any act or thing
which may be or become a nuisance annoyance danger or detriment to the
Transferor or owners or occupiers for the time being of other parts of the
Estate.
Mr Oliver
submitted that, by allowing the houses to be occupied as he has, the Secretary
of State has caused or permitted or suffered to be done in or upon each of the
houses some act or thing which has caused a detriment to the plaintiffs, within
the terms of this covenant. It is not suggested that there has been a nuisance,
annoyance or danger. Nor is it suggested that there has been a detriment to the
owners or occupiers of the other parts of the estate.
The detriment
alleged is a financial loss to the plaintiffs caused by what the judge
described as ‘the impaired marketability’ of other houses on the estate. The
three instances put forward and the evidence in support of the alleged loss,
such as it is, are summarised by the judge at [1990] 1 WLR 1272 at pp 1279H to
1280E. In this court at any rate the detriment principally, if not exclusively,
relied on was the reduction of £3,000 in the price and the other benefits
achieved by Mrs Midgley on the purchase of plot 20.
Mr Macdonald’s
primary submission was that the covenant does not impose any restriction on the
persons who may occupy the property. It restricts only the acts or things which
the occupants, whoever they be, may do there. Although Ferris J thought that
that was too narrow a view, I suspect that it accords with the construction
which most conveyancers would put on a covenant in this form, again a very
familiar one.
Be that as it
may, there is a further and conclusive objection to the plaintiffs’ arguments
on this second question. The only detriment within the purview of the covenant
is one which affects the enjoyment of some part or parts of the estate. That
inevitably follows from the linking of ‘detriment’ with ‘nuisance, annoyance,
danger’, all of which affect the enjoyment of land, and the reference to ‘the
Transferor or owners or occupiers for the time being of other parts of the
Estate’, which confirms that the detriment etc must be suffered by the
plaintiffs as owners of the part or parts of the estate which for the time
being they retain. A financial loss suffered in their exploitation of the
retained land, but dissociated from their enjoyment of it, is something with
which the covenant is not in the least concerned.
Although that
is enough to dispose of the second question in favour of the Secretary of
State, I will add that I am very doubtful whether, on the evidence which was
before the judge, it was established that the plaintiffs had suffered any
relevant financial loss. To take only the case of Mrs Midgley, admittedly it
was shown that she had succeeded in wielding the Secretary of State’s intended
user of the houses as a weapon to obtain a reduction of £3,000 in the purchase
price and other benefits. It was not shown, at all events not satisfactorily
shown, either that Mrs Midgley would not have purchased if the plaintiffs had
stood their ground or that the reduced price, less the cost of providing the
other benefits, fell short of what the plaintiffs would have got for plot 20
elsewhere.
For these
reasons I respectfully disagree with Ferris J’s view that there has been a
breach of the covenant contained in para 20. I would therefore discharge his
declaration and his order for an inquiry as to damages, so far as they relate
to that covenant. To that extent, and to that extent only, I would allow the
Secretary of State’s appeal.
Agreeing, RUSSELL
LJ said: For those who are residing in the two adjoining houses on the
Charlcombe Park Estate, with which this case is concerned, the result of this
appeal will be deeply disappointing. I have no doubt that they regard the
properties as their home, just as much as any other house in the development is
the home of the family residing there.
But,
unhappily, this cannot be the approach which the lawyers must adopt. The
covenant in para 24 of the third schedule to each of the transfers prohibited
the use of the properties ‘for any purpose . . . other than . . . a private
dwelling-house’. The emphasis must be on the word ‘private’. The houses are
owned but not occupied by the Secretary of State. The residents do not occupy
as tenants. They occupy because, and only because, they happen to be former
patients of a nearby hospital who are being treated and rehabilitated by the
National Health Service pursuant to the ‘Care in the Community’ policy. This is
the obligation of the Secretary of State, and the former in-patients remain
under the statutory care of the Secretary of State who provides, within the
houses, staff to fulfil his statutory duty.
I do not
believe that any objective description of two houses occupied by the patients
and administered by the NHS could ever embrace the phrase ‘private
dwelling-house’. For my part, because the policy of the Secretary of State is
to take the patients out of the environment of the hospital I do not regard the
houses as hospital annexes or indeed any other type of institution. While
recognising the imperfections of any description in the new and unique policy
of the Secretary of State, I would regard and describe the houses as small NHS
homes for people who have suffered from mental disability. Whatever be an apt
description, however, and in agreement with the Master of the Rolls and Nourse
LJ, I am abundantly satisfied that the houses, in their current occupation and
ownership, are not private houses, and that consequently the Secretary of State
is in breach of covenant.
As to para 20
of the third schedule to each of the transfers, I too take the view that the
‘detriment to the transferor’ is directed to the enjoyment by them of other
parts of the estate. Nothing of the kind was alleged or proved and, in my view,
the financial loss alleged is not caught by para 20.
For these
reasons I agree with the order proposed by Nourse LJ and, to the limited extent
he indicates, would allow the appeal.
Also agreeing,
LORD DONALDSON OF LYMINGTON MR said: This appeal is not about the
merits of the ‘Care in the Community’ policy. No one has said a word against
it. What this appeal is about is something quite different.
Every year
thousands of houses change hands. In many, possibly most, of these cases the
transfer is subject to covenants, that is to say conditions. Where what is
being sold is a ‘second hand’ house, there may be little scope for altering the
conditions which probably date from when it was built. In the case of a new
house, the builder or developer has a much freer hand, but it is his hand and
no one else’s. It is also the case that where an estate is being developed, it
is usual for all houses to be sold subject to the same covenants. Whether the
house is new or second hand, the covenants have to be agreed between the seller
and the buyer before a sale can take place. If the parties are unable to agree,
the seller must find another buyer and the buyer must look elsewhere for a
house.
In the present
case C & G Homes Ltd (‘C & G’) and the Secretary of State did agree
upon the covenants which would govern the transfer and no doubt each thought
they had a common understanding as to their meaning. It was only after
completion that it emerged that C & G thought that they meant one thing and
that the Secretary of State thought that they meant another.
It is not the
first time, and will assuredly not be the last, that such a dispute has arisen
between a willing seller of a house and his willing buyer. If the parties
cannot compose their differences, the courts have to decide which (if either)
is right and what the covenants mean. That, and that alone, is what this appeal
is all about.
The conditions
agreed by both C & G and the Secretary of State included the following,
which appear in the third schedule to the transfer:
20 Not to
cause or permit or suffer to be done in or upon the Property any act or thing
which may be or become a nuisance annoyance danger or detriment to the
Transferor or owners or occupiers for the time being of other parts of the
Estate.
. . .
24 Not at any time within ten years of the date
hereof
. . .
24.2 To carry on or from the Property or any part
or parts thereof any trade business or manufacture whatsoever (with the
exception of the profession of a Solicitor Doctor Dentist Private Teacher
Accountant Architect or other professional person provided that any necessary
local authority approval is obtained for such use) and not to use the said
dwellinghouse nor to use the said garage for any purpose or purposes other than
those incidental to the enjoyment of a private dwellinghouse.
The Secretary
of State contends that neither covenant prevents his using the two houses for
the purpose for which he bought them, namely implementing the ‘Care in the
Community’ programme. C & G contend that one or other or both covenants do
have this effect. It may well be that it would be a serious blow to the
Secretary of State’s programme if C & G were right. Furthermore, it may
well be that C & G attaches an exaggerated importance to these covenants.
Neither consideration can influence us in reaching a decision. We have simply
to decide what the covenants mean.
Mr John
Macdonald QC, appearing for the Secretary of State, rightly submits that these
two covenants have to be construed in the light of circumstances as they
prevailed in 1989 when the transfers of the two houses were executed. Early
decisions of the courts must be
changed. Nevertheless I have no doubt that the general guidance contained in
the judgment of Lindley LJ in Rolls v Miller (1884) 27 Ch D 71,
at p 87 as to the approach to be adopted is still good law. He said:
Now the first
question to be considered is what is the object of this covenant. The covenant
must be construed consistently with that object, and on the other hand,
something may fall within the scope of the covenant which does not fall within
the words. One must look, therefore, at both the words and the object.
In other
words, if the covenant is to require or prevent a particular course of action,
it must fall within both the object and words of the covenant.
I have already
set out the words. What then is their object?
I think that it is plain. It is to ensure that the Charlcombe Park
estate is developed as a normal residential estate. To this end words have been
used in covenant 24.2 which are apt to prevent the houses being used for
professional or business purposes, other than in connection with specified
professions which might fit in with a residential estate. Thus the use of the
houses as boarding or guest houses or as student hostels would be excluded. To
this end words have also been used in covenant 20 to ban conduct which may be a
nuisance, annoyance or danger to other owners or occupiers. All this is
reasonably clear, but it does not solve the central problem.
In many
respects the way in which the Secretary of State’s houses are being used is
quite indistinguishable from the way in which the other houses on the estate
are being or will be used. All are being used as dwelling-houses. Indeed it is
central to the ‘Care in the Community’ policy that this should be the case. The
intention is that the occupants shall be weaned from their reliance upon
institutionalised care and progressively assisted to take their full place in
the community. Furthermore, although in the last century it would have been
very unusual to have four occupants from different families sharing the same
house, this today is common at least in the case of students and young people.
It is therefore necessary to see whether there is anything else which
distinguishes the purpose for which these houses are being used from the
purposes for which private dwelling-houses are normally used.
Private
dwelling-houses are used for the accommodation of the owner or a tenant and his
family. They are also used to accommodate small groups, such as students, who
club together and take a joint tenancy of the house. There are other
permutations, but a common feature is that at least one of the occupants has an
interest in the house as owner or as tenant or that the occupiers have a family
relationship with the owner, eg a case in which parents make a house available
for occupation by children or grandchildren. That is not this case, for none of
the occupants of these houses owns or has a tenancy and, of course, they cannot
properly be described as members of the Secretary of State’s family.
Describing the
nature of the use being made of the houses, and attaching a label, is not
conclusive, but it may be illuminating. In so doing I am concerned with the
position as it is, rather than as it may become when the process of accustoming
these occupants to life in the community is further advanced. They remain
patients in the care of the National Health Service to the extent at least that
they are ineligible for social security benefits and rely upon the National
Health Service for money to buy the requirements of the household, such as
food. This does not matter of itself — other people live on allowances — but
the source of the allowance and the relationship between the occupants and the
hospital underlines the special nature of their occupation and thus the special
nature of the use which is being made of the houses. They have a resident house
leader who is a registered nurse and two support workers on a daily basis, all
of whom are employed by the National Health Service. If a label can be attached
to such a use, it seems to me to be that of ‘hospital annexe’ or ‘mental health
hostel’. Praiseworthy though this no doubt is, I have to say that, in my
judgment, this is not a use which would be regarded as a normal use of a private
dwelling-house. It follows that I have to conclude that the Secretary of
State is in breach of covenant 24.2.
The position
in relation to covenant 20 is quite different. Once again I have to look to the
object and to the words. It is not directed to the use being made of the
property, that being the subject-matter of covenant 24.2. It is directed
instead at conduct in or upon the premises which causes or may cause nuisance,
annoyance, danger or detriment to other owners (which incidentally would at
present include C & G) or occupiers of other parts of the estate or to C
& G. No complaint whatsoever is being made in relation to the conduct of
the occupants in or upon the premises. The evidence relied upon as constituting
a detriment to C & G relates solely to the use of the premises made by the
Secretary of State and amounts to no more than that in a buyers’ market a
particular purchaser was astute enough to use the general nature of that use as
a lever to obtain a small reduction in the purchase price.
There has been
no breach of covenant 20.
To that extent
only I agree that the appeal should be allowed.
The appeal
was allowed in part but the respondents were awarded the costs of the appeal.
