Property – Transfer – Restrictive covenants contained in 1962 transfer – Alterations or change of use to respondent’s building not permitted without consent of transferor – Whether appellant having right to give or withhold consent as current owner of land benefited by covenants – Respondent obtaining declaration that consent of original transferor required – Appeal dismissed
The appellant and respondent owned neighbouring properties in the City of London. Both sites had been owned by the Port of London Authority (PLA); the appellant’s property was the PLA’s former headquarters. The respondent’s land, which comprised an office building, was subject to restrictive covenants for the benefit of the appellant’s land contained in Schedule 3 to the 1962 transfer from the PLA to the respondent’s predecessor in title. Paragraph 1 of the schedule prohibited external alterations or additions to buildings or any erections on the land without the written approval of “The Estate Officer for the time being of the Transferor” to detailed plans and elevations. Paragraph 2 stipulated that any change of use from offices and a car park would also require the prior written consent of the transferor, such consent not be unreasonably withheld. The covenants were expressed to run with the land and, in one place only, to affect successors in title.
The respondent wanted to demolish the office building and construct a hotel in its place. It obtained the approval of the PLA’s property director, as the modern equivalent of the estate officer, for the alterations and the change of use. The appellant maintained that it, and not the PLA, had the right to give or withhold consent as the owner for the time being of the land benefited by the covenant. The respondent brought proceedings for a declaration that, on the correct interpretation of the 1962 transfer, the appellant had no right to insist that its consent should be sought. The appellant contended that such an interpretation of the covenants would lead to commercial absurdity, and that the word “Transferor” should be interpreted to include successors in title.
The High Court held that, prima facie, the transfer defined “Transferor” to mean the PLA only. The draftsman had made express reference to successors in title elsewhere in the transfer that were intended to be included. In those circumstances, there was no room for an implication, under section 78 of the Law of Property Act 1925, that “the Transferor” included successors: [2007] EWHC 1829 (Ch); [2007] 46 EG 178. The appellant appealed.
Held: The appeal was dismissed.
Where a draftsman had defined a term for the purposes of his document, it was possible that, in some instances he could have intended some other meaning. If, approaching the document through the eyes of the intended reader, here a conveyancer, the court concluded that, notwithstanding his chosen definition, the draftsman must have meant something else by the use of the term, it would so construe the document. However, such a conclusion would be reached only where, if the term were given its defined meaning, the result would be absurd. It was not sufficient that one conclusion made better commercial sense than another.
On the true construction of the transfer in the present case, the word “Transferor” in the agreement meant the PLA alone. The parties to the contract had never contemplated or catered for a situation in which the PLA would leave a successor in title. This was not a case where, in construing a document, the court had to assume that the parties had thought of every “what if?”.
John Male QC and Katharine Holland (instructed by Denton Wilde Sapte LLP) appeared for the appellant; Guy Fetherstonhaugh QC (instructed by Herbert Smith LLP) appeared for the respondent.
Eileen O’Grady, barrister
