One of the principles that governs the interpretation of contracts is that every document must be read and understood on its own terms and in its own context. This means that each case will turn on its own particular facts and by reference to the wording of the covenant in question, even though the parties have adopted phraseology that the courts have interpreted previously.
Rees v Peters [2011] EWCA Civ 836; [2011] PLSCS 191 illustrates this principle. The parties asked the court to interpret a poorly worded covenant given by a seller to her buyers and their successors in title, which was described as being “for the benefit of the property hereby conveyed, or the part thereof for the time being remaining unsold and every part thereof”.
The trial judge decided that the parties had intended to place a temporal limit on the covenant and that it was no longer enforceable because it had ceased to apply when the land that benefited from the covenant was sold on. The Court of Appeal disagreed.
It refused to be swayed by the conclusions reached in any of the cases that were cited to it on the ground that judges must interpret the instruments before them. Each document is unique – and phrases used in different contexts may have different meanings. The key to the meaning of the covenant in this case was that it was, on its face, a covenant with the buyers “and their successors in title”. Consequently, the benefit remained annexed to the land when it was sold.
The new owners of the benefited land asked the court to rectify the charges register of the burdened land, which did not mention the covenant, so that it could be enforced. The proprietor of the burdened land suggested that the Land Registry should be required to compensate the owners of the benefited land for its failure to register the covenant. However, the court decided that the right to enforce the covenant was much more valuable than a monetary award.
It noted that the proprietor of the burdened land had purchased it with notice of the covenant. It had been properly registered as a class D(ii) land charge and was specifically referred to in the conveyance to him (which he then registered).
The court also noted that the registered proprietor had purchased the land with financial assistance from his company. It had contributed to the purchase price on the understanding that it would become the beneficial owner of the land burdened by the covenant. When the company went into administration, the proprietor purchased the company’s beneficial interest. He claimed that he paid more for the land because the restrictive covenant was not registered.
The decision that it would be unjust to refuse to rectify the register is not as surprising as it might seem. The registered proprietor had acquired a legal estate in unregistered land with actual and statutory notice of, and was therefore bound by, the covenant. He acquired an equitable interest subject to the burden of the restrictive covenant in accordance with normal equitable principles.
Allyson Colby is a property law consultant
