Land – Restrictive covenant – Pre-emption – Claimant’s predecessor in title acquiring site from defendants – Claimant’s predecessor in title acquiring land from defendant local authority – Transfer including restrictive covenant and right of pre-emption – Claimant seeking declarations as to enforceability of rights – Whether claimant discharging burden of showing restrictive covenant not enforceable against it – Whether defendants losing right of pre-emption by expiry of perpetuity period – First declaration granted – Second declaration refused
The claimant was the registered freehold owner of land known as the BBC Regional Broadcasting Centre in Southampton. The BBC (the purchaser) had acquired the site from the defendant council by a transfer dated 13 July 1989 for a consideration of £1. By a transfer dated 8 October 2004, the purchaser sold the freehold of the site to the claimant, taking a 25-year lease back. It remained in occupation of the site under the lease. On the same date, the purchaser sold and transferred its car park lease to the claimant which leased the same back to the purchaser for a term of 25 years.
By the transfer, the purchaser entered into a restrictive covenant with the defendants to be the sole occupier of the site. It also gave the defendants a right of pre-emption if the site, or any part of it, became surplus to the purchaser’s requirements.
The claimant applied to the court for: (i) a declaration that the restrictive covenant was not enforceable against it, or any successor in title; and (ii) a declaration that the right of pre-emption, in the event of any transfer of the freehold of the property by the purchaser, was similarly not enforceable.
The questions for the court were, inter alia, whether the claimant was able to discharge the burden of showing that the restrictive covenant had not been intended, at the time it was imposed, to benefit the defendants’ adjoining or adjacent land; and whether the right of pre-emption was at its inception an option within section 9(2) of the Perpetuities and Accumulations Act 1964 so that it became void with effect from the expiry of the 21-year perpetuity period in July 2010. If section 9(2) was applicable, and the period had expired, the right of pre-emption was void as between the purchaser and the defendants as the persons by whom and in whose favour it was made.
Held: The first declaration was granted. The second declaration was refused.
(1) To be enforceable against successors in title of the original covenantor the burden of a restrictive covenant, at the time it was imposed, had to have been intended to benefit, and in fact have been capable of benefiting, the land of the covenantee and continue to benefit that land at the time that its enforcement was sought. Where, as here, the restrictive covenant was expressed to be for the benefit and protection of so much of the adjoining or adjacent land of the covenantee as was capable of being benefited, the court normally started with the assumption that the restriction was capable of doing so. The burden was on the person who sought to challenge the assumption that a restriction expressed to benefit the covenantee’s retained land did in fact do so. If a restriction was bargained for at the time of sale with the intention of giving the vendor a protection which he desired for the land he retained, and the restriction was expressed to be imposed for the benefit of the estate so that both sides were apparently accepting that the restriction was of value to the retained land, the validity of the restriction had to be upheld so long as an estate owner might reasonably take the view that the restriction remained of value to his estate, and that the restriction should not be discarded merely because others might reasonably argue that the restriction was spent: Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 and Dano Ltd v Earl Cadogan [2003] EWHC 239 (Ch); [2003] PLSCS 45; [2003] 12 EG 128 (CS) applied; Lord Northbourne v Johnston & Son [1922] 2 Ch 309 and Marten v Flight Refuelling Ltd [1962] Ch 116 considered.
On the evidence in the present case, the restrictive covenant could not be said to have benefited the defendants’ adjoining or adjacent land when it was imposed in 1989 and it did not do so now. Moreover, the balance of the evidence strongly suggested that the restriction was in the nature of a money payment obligation rather than a restrictive covenant properly so called. It was not intended to protect or preserve the amenity or value of the defendants’ adjacent land. It did not bind successors in title to the purchaser. Accordingly, the claimant was entitled to the first declaration sought.
(2) An option to acquire for valuable consideration an interest in land was different from a right of pre-emption in that from its inception, the former conferred on the grantee an immediate equitable interest in the grantor’s land, and not merely when the option was exercised, whereas the latter did not and was for that purpose merely contractual. A right of pre-emption only matured into an option and conferred on the grantee an interest in the grantor’s land when it became exercisable: Pritchard v Briggs [1980] 1 Ch 338 applied.
In the light of the decision in Pritchard v Briggs, the court took the view that section 9(2) had been enacted on a wrong assumption that a right of pre-emption gave rise to an immediate interest in land. Thus it would not be right to regard the legislation as amending the law by treating rights of pre-emption exceptionally as if they gave rise to an immediate interest in land. The statutory provisions pointed to the date when the option came into existence, and the interest in the land arose, as being the relevant start date. What section 9(2) referred to was the disposition which conferred the option to acquire the interest in the land. Therefore, the date for measuring the 21-year perpetuity period was the date when the option arose rather than the date when the right of pre-emption was conferred. It followed that the period had not yet started to run and the defendants had not lost the right to enforce the right of pre-emption by the application of section 9(2): Taylor v Couch [2012] EWHC 1213 (Ch); [2012] PLSCS 180 considered.
John Furber QC (instructed by Hamlins LLP); appeared for the claimant; Philip Coppel QC and Katie Helmore (instructed by Southampton City Council) appeared for the defendants.
Eileen O’Grady, barrister
