Restrictive covenants — Burden — Restriction — Use for purposes of a private dwelling-house — Whether restriction preventing erection of more than one dwelling-house — Enforcement — No erection of buildings without prior approval of plans — Plans requiring approval of named company — Company dissolved and incapable of restoration — Whether restriction remaining enforceable
In 1923, PM and CM acquired a site and proceeded to sell off plots for development purposes. On the conveyance of each plot, the purchaser entered into covenants with PM and CM (and their company). One covenant contained two restrictions: (1) the premises were not to “be used for any purpose other than those of or in connection with a private dwellinghouse or for professional purpose”; and (2) that “no dwellinghouse or other building shall be erected on the land… unless the plans drawings and elevation thereof shall have been previously submitted to and approved of in writing by the Company but such approval shall not be unreasonably or vexatiously withheld”. Shortly before the present proceedings, the claimant had agreed to buy six of the plots of land. It accepted that, in principle, it was bound by the covenants and that they were enforceable by the defendant, who owned land in the vicinity. The company was dissolved more than 30 years prior to the proceedings and could not be restored to the register of companies. The claimant was proposing to develop the six plots and other land. It contended that: (i) the first restriction did not prevent the erection of more than one dwelling-house per plot; and (ii) the second restriction was discharged by the dissolution of the company.
Held: (1) Only one dwelling-house could be erected on each plot under the first restriction. As a matter of ordinary language, the indefinite article “a” tends to carry with it the concept of singularity as opposed to plurality. That conclusion was reinforced by the closing words in the covenant “or for professional purpose[s]”. The conclusion was supported by the decision in Dobbs v Linford [1953] 1 QB 48. Section 61 of the Law of Property Act 1925, which provides that, in all deeds, singular includes the plural, cannot be relied upon to alter the meaning of a provision. (2) The consequence of the company having been dissolved was that the second restriction was discharged; this was a matter of interpretation. If an implied term was necessary to the same effect, the five tests for the implication of such a term, in BP Refinery (Westernpoint) Pty Ltd v Shire of Hastings (1978) 52 AJLR 20 per Lord Simon at p26, were satisfied.
The following cases are referred to in this report.
Antaios Compania Naviera SA v Salen Rederierna AB (The Antaios) [1985] AC 191; [1984] 3 WLR 592; [1984] 3 All ER 229; [1984] 2 Lloyd’s Rep 235
Beechwood Homes Ltd’s Application, Re [1994] 2 EGLR 178; [1994] 28 EG 128
Bell v Norman C Ashton Ltd (1956) 7 P&CR 359
BP Refinery (Westernpoint) Pty Ltd v Shire of Hastings (1978) 52 AJLR 20, PC
Briggs v McCusker [1996] 2 EGLR 197
Dobbs v Linford [1953] 1 QB 48; [1952] 2 All ER 827
Downie v Turner [1951] 2 KB 112; [1951] 1 All ER 416; (1951) 1 TLR 217
Enderick’s Conveyance, Re; Porter v Fletcher [1973] 1 All ER 843; (1972) 25 P&CR 254
Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594; [1980] 1 All ER 371; (1979) 39 P&CR 576; [1980] 1 EGLR 113; (1979) 254 EG 39, CA
Gillatt v Sky Television Ltd (formerly Sky Television plc) [2000] 1 All ER (Comm) 461, CA
Lambert v FW Woolworth & Co Ltd [1938] Ch 883; [1938] 2 All ER 664, CA
Liverpool City Council v Irwin [1977] AC 239; [1976] 2 WLR 562; [1976] 2 All ER 39; (1976) 32 P&CR 43; [1976] 1 EGLR 53; (1976) 238 EG 879 and 963; [1976] JPL 427, HL
Malpass (deceased), Re; sub nom Lloyds Bank plc v Malpass [1985] Ch 42; [1984] 3 WLR 372; [1984] 2 All ER 313
Master v Hansard (1876) LR 4 ChD 718
Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472
Solicitors’ Arbitration, Re [1962] 1 WLR 353; [1962] 1 All ER 772
Strathblaine Estates Ltd, Re [1948] Ch 228; [1948] 1 All ER 162; 64 TLR 178
Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444; [1982] 3 WLR 315; [1982] 3 All ER 1; (1982) 44 P&CR 153; [1983] 1 EGLR 47; 265 EG 215, HL
Westminster (Duke of) v Guild [1985] QB 688; [1984] 3 WLR 630; [1984] 3 All ER 144; (1983) 48 P&CR 42; [1983] 2 EGLR 37; (1983) 267 EG 762, CA
This was the hearing of a claim by the claimant, Crest Nicholson Residential (South) Ltd, against the defendant, Fiona Ruth McAllister, for declaratory relief.
Vivian Chapman (instructed by Davies Arnold Cooper) appeared for the claimant; Kim Lewison QC (instructed by Mundays, of Cobham) represented the defendant.
Giving judgment, Neuberger J said:
Introduction
[1] This case raises two questions in relation to a series of restrictive covenants imposed on parcels of land acquired (or to be acquired) by the claimant, Crest Nicholson Residential (South) Ltd, in Claygate, Surrey. It is common ground that, with the exception of one of the parcels, the defendant, Fiona McAllister, has the benefit of the covenants.
[2] On 23 October 1923, Percy and Charles Mitchell (the Mitchells) took a conveyance of a parcel of land at Claygate. By an agreement dated 30 July 1924, the Mitchells agreed to sell part or all of that land (the estate) to a company called Mitchell Brothers (Builders) Ltd (the company), but no conveyance in favour of the company was executed, possibly for stamp duty reasons. Thereafter, the Mitchells and the company (which they presumably controlled) proceeded to sell off various plots of land on the estate, on the basis that either the purchaser would build on the plot, or the company had already built on it.
[3] The estate consisted of the greater part of a site which is now bounded on the south-west by Fee Farm Road, on the north-west by the Causeway, on the north-east by Cornwall Avenue, and on the |page:166| south-east by Claygate Common (the common). Many of the plots on the estate fronted onto the Causeway, but there were also plots that fronted onto Cornwall Avenue, and others that fronted onto Fee Farm Road. At least two of the plots had no frontage to any road, but were to the south-east of plots fronting the Causeway, and had their south-east boundaries on the common.
[4] It appears that in the conveyance of each of the plots, covenants were given by the purchaser “to the intent that” the covenants would “be binding in so far as may be on the owner for the time being” of the plot, or words to a similar effect. In some conveyances, the land benefited by the covenants was not identified. In other conveyances, it was identified as the land at Claygate still belonging to the Mitchells/the company. In each case, the covenants were given to the Mitchells and the company. The covenants (the five covenants) were in substantially the following terms:
(1) Not to cause or permit or suffer any buildings or premises whatsoever which shall be erected on the said land to be used as and for a Public House or Beer House Inn Tavern or other licensed premises for the sale of Wines Spirits or Beer or other excisable liquors;
(2) The premises shall not be used for any purpose other than those of or in connection with a private dwelling-house or for professional purpose. No dwelling-house or other building shall be erected on the land hereby conveyed unless the plans drawings and elevation thereof shall have been previously submitted to and approved of in writing by the Company but such approval shall not be unreasonably or vexatiously withheld;
(3) No building or erection shall at any time be erected or set up between the road and the present building line of the dwelling-house now erected on the said land;
(4) The Purchaser shall hereafter maintain in good and substantial repair the existing boundary wall and fence on the [north-west] and [east] sides of the premises marked “T” on the plan hereon;
(5) The Purchaser shall not be entitled to any right of light or air which would restrict or interfere with the free use of the adjoining land of the Company for building or other purposes.
I shall refer to these covenants as paras (1), (2) etc.
[5] In the conveyance of one of the plots with which this action is concerned, para (2) does not contain the second sentence. In the conveyances of two of the plots, the last word of the first sentence of para (2) was “purposes”. Further, in the conveyance of another of the plots with which this action is concerned, the references in the above set of covenants to “the Company” are to the Mitchells. In addition, the location of the boundaries referred to in para (4) obviously depend upon the particular location of the plot concerned.
[6] Some time after all parts of the estate had been sold off, the company was wound up and dissolved. Thus, it no longer exists. Further, as it was dissolved over 30 years ago, it cannot be restored to the register of companies: see section 653 of the Companies Act 1985.
[7] The defendant is the freehold owner of a house and garden called Newlyn, which fronts onto Cornwall Avenue, and occupies a corner site between Cornwall Avenue and the Causeway. Only the rear part of Newlyn was included in the estate (apparently because Cornwall Avenue is a comparatively new road). Indeed, that part of Newlyn that was included in the estate was itself only part of a single plot that was sold by the company to the defendant’s predecessor in title by a conveyance in 1936 (the 1936 conveyance), subject to the five covenants.
[8] The claimant has agreed to buy the freehold of Redruth, a house and garden next door but one to Newlyn (south-east from Newlyn, along Cornwall Avenue). It also has agreed to buy the freehold of six other plots of land directly or indirectly behind (ie to the south-west) of Redruth and Newlyn. These plots front, or are to the rear (ie south-east) of plots fronting, the Causeway. The claimant wishes to pull down the house currently constructed on Redruth, in order to build a road off Cornwall Avenue, so as to obtain access to the six other plots, with a view to building five new houses thereon. The claimant also intends to build a new house on Redruth, in a location that would not interfere with the new road.
[9] With the exception of Redruth, the various parcels of land to be acquired by the claimant are all plots originally sold off by the company, by conveyances that pre-dated the 1936 conveyance, whereby part of Newlyn (now owned by the defendant) was sold off. In so far as it contains land that was part of the estate, Redruth was sold off by the 1936 conveyance. The issues between the parties therefore concern the six plots of land on the estate to be acquired by the claimant other than Redruth (the claimant’s land).
[10] In these circumstances, although initially in dispute between the parties, it is now common ground that:
(1) the defendant cannot enforce any of the five covenants in so far as they affect Redruth, because they are contained in the 1936 conveyance, ie in the same conveyance from which the defendant derives title to the relevant part of Newlyn;
(2) to the extent that the five covenants are negative in nature, they “touch and concern” land. That part of Newlyn that was included in the estate had not been sold off at the time that the company sold off the plots comprising the claimant’s land. Consequently, the benefit of the covenants is annexed to part of Newlyn, and the defendant is entitled in principle to enforce the covenants in so far as they have been imposed on the claimant’s land: see section 78 of the Law of Property Act 1925 and Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594*;
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* Editor’s note: Also reported at [1980] 1 EGLR 113; (1979) 254 39
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(3) paragraphs (1), (2) and (3) of the five covenants, being negative, or restrictive, in nature, are in principle binding on the claimant and enforceable by the defendant, but the covenant contained in para (4), being positive, is not. (There was no discussion about para (5), because it is irrelevant to the issues in the present action);
(4) the defendant accepts that she cannot enforce any of the five covenants against any part of the claimant’s land on an alternative ground initially advanced by her, namely the existence of a building scheme.
[11] There are two issues between the parties, and, in relation to each issue, the centrally relevant covenant is in para (2). The first issue is whether the covenant, that a plot “shall not be used for any purpose other than those of or in connection with a private dwelling-house or for professional purpose”, prevents the erection of more than one dwelling-house on that plot.
[12] The second issue concerns the effect of the company having been dissolved on the covenant, that no building shall be erected on the plot “unless the plans drawings and elevation… shall have been previously… approved of… by the Company but such approval shall not be unreasonably or vexatiously withheld”. In the case of one of the plots, the question is very slightly different, because, as I have mentioned, the consent is to be that of the Mitchells, but, not surprisingly, they have both long since died, and therefore a very similar question arises. Further, as also mentioned, the second question does not arise in relation to another plot, where the five covenants do not include the second sentence of para 2.
[13] I propose to consider these two issues in turn. Before doing so, it is right to record that I have found the resolution of both issues difficult, and my task has not been made any easier by the excellence of the arguments on each side.
First issue: Only one dwelling-house?
[14] The claimant’s construction of the first sentence of para (2) (the first covenant) essentially involves reading the words “other than those of or in connection with a private dwelling-house” as meaning “other than for residential purposes”. The defendant’s reading of the first covenant means that the plot as a whole cannot be used other than for, or in connection with, a single private dwelling-house. As with any issue of construction, other than where the answer seems plain, the fact that one can reformulate a particular interpretation so as to make it clear, can always enable the opponent of that interpretation to contend that, if that were the meaning intended, it would have been only too easy to |page:167| express it in that way. As both Mr Vivian Chapman, who appears for the claimant, and Mr Kim Lewison QC, who appears for the defendant, sensibly accept, such an argument rarely takes a dispute as to construction further. The very reason that the question of interpretation is before the court is normally because the provision has not been as clearly drafted as it might have been.
[15] I have reached the conclusion that the defendant’s interpretation of the first covenant is to be preferred. First, as a matter of ordinary language, the indefinite article “a” tends to carry with it the concept of singularity as opposed to plurality. Restriction to use as “a private dwelling-house” appears to me, at least in the absence of contextual or factual contra-indications, to mean restriction to a single dwelling-house. The fact that the first covenant is not a restriction to “a private dwelling-house” but to “[purposes] of or in connection with a private dwelling-house” does not appear to me to call that conclusion into question in the present case. What the draftsman had in mind is the various uses to which one might put the land and buildings, and, provided that the various purposes could fairly be said to be “those of or in connection with” a private dwelling-house, they would be within the covenant. However, the use of those anterior words does not, to my mind, cast doubt on the simple fact that “a private dwelling-house” tends to denote singularity. Given that it is “the premises”, ie the plot as a unit, that is not to be used other than for purposes “of or in connection with a dwelling-house”, it seems to me that the natural meaning of the words is that there can be only “a” dwelling-house, ie one dwelling-house, on the premises, ie the plot.
[16] Second, it seems to me that that conclusion is reinforced by the closing words of the first covenant, namely “or for professional purpose(s)”. As Mr Chapman accepted in argument, a simple way of formulating the construction preferred by the claimant, so far as the first covenant is concerned, is that it limits the use of the plot to that of residential purpose or purposes. The fact that the draftsman self-evidently had in mind the concept of a particular type of purpose (or purposes), appears to me rather to reinforce the contention that he used the concept of “a private dwelling-house” to emphasise the singularity (as well as the use) of the permitted building. Thus, there is the contrast between that expression and the permitted types of use, namely “those of or in connection with” such a dwelling-house, and professional purpose(s).
[17] Mr Chapman contends that the practical consequences of the words “or for professional purpose[s]” tend to support the view that more than one dwelling-house would be permitted. This was on the basis that there is nothing in the first covenant to prevent the owner of a plot from erecting any number of buildings provided they were put to a professional purpose (or purposes). I am not convinced by that argument. It does not appear to assist the resolution of the first issue as a matter of language or logic. Further, I consider it is unrealistic to suppose that the parties could have envisaged that there would be any substantial, let alone intensive, professional use in any event. The estate had been previously used for agriculture, and was on the edge of a town or village. Although it may well be wrong to suggest that the words “or professional purpose[s]” are, even in this context, strictly limited to such a concept, I would have thought that what the parties probably had in mind was that any dwelling-house constructed on the plot might be occupied by a professional man, such as a doctor, a dentist, a solicitor or accountant, who might operate from home.
[18] Third, there is a further factor raised by Mr Lewison, namely the terms of para (4), the fencing covenant. It is clear that each plot was sold off by the company on the basis that the boundary fence of each plot, as shown on the plan annexed to its conveyance (including, where appropriate, the boundary with the common), was kept fenced. Mr Lewison argues that, if it had been envisaged that a plot could contain more than one dwelling-house, one would have expected the fencing obligation to extend to a duty to fence off subplots.
[19] I think that point has some force but it is very slight, partly because of its subtlety and partly because of its indirect bearing to the point at issue. Mr Chapman suggests that para (4) is neutral, because it is explicable by the fact that it would be sensible to sell off each plot with a fencing obligation so as to assist the company in selling off adjoining plots. However, that explanation does not cover the obligation to fence the boundary with the common.
[20] Fourth, it appears to me inherently more likely that the parties would have envisaged that the number of dwelling-houses would be limited by the first covenant. There was no planning control in force, at any rate in non-urban areas such as Claygate, at the time. To put it at its lowest, one would not be surprised by the company wanting to ensure that the tone of the estate was maintained, at least so long as it had plots to sell, by limiting the density of development to one dwelling-house per plot; that would also carry with it the likelihood of a good quality of house. For reasons already given, I do not consider that this argument is significantly weakened by the words “or for professional purpose [or purposes]”. Again, I do not suggest that this is a particularly forceful point: it merely seems to me more likely than not, on a common sense and commercial basis, that the defendant’s interpretation is correct.
[21] Fifth, while the invocation of authorities, in the context of an issue of interpretation of a particular contract or covenant, can be dangerous (as both counsel rightly mentioned), I think that there is a case that supports the proposition that the covenant restricting use to “a private dwelling-house” conveys the notion of singularity. The case I have in mind is a decision of the Court of Appeal, Dobbs v Linford [1953] 1 QB 48, which concerned the construction of a covenant in a lease against using the demised premises “other than as a private dwelling-house”. Two members of the Court of Appeal appear to me to have clearly taken the view that, in the absence of any contra-indication in the document in which the covenant was to be found, or in the factual circumstances in which the covenant was entered into, such a covenant would be broken if the property concerned was used for two private dwelling-houses. Romer LJ said at p52:
It seems to me, then, that one has to take this covenant as one finds it, and one finds that it is a covenant to use the premises for no other purpose than that of a private dwelling-house, and one finds, and it is not in dispute, that it has been used by the tenant, partly as a dwelling-house for her sub-tenant. That appears to me to be a plain breach of covenant…
[22] Earlier in his judgment, he had contrasted the case with an earlier decision of the Court of Appeal, Downie v Turner [1951] 2 KB 112, where a covenant in effectively identical terms was held to be not to be breached if the premises were used for two dwelling-houses. However, it was crucial to that decision, according to the reasoning of Romer LJ in Dobbs at p51, and also of Harman J at p53, that the lease containing the covenant in the earlier case also contained a covenant against subletting parts of the premises without consent if the lease envisaged that part only of the premises could be sublet, that earned with it the result that the premises could be used as at least two residences, one for the tenant and one for the subtenant. It is fair to say that the decision in Downie assists the claimant to the extent that the first covenant in the present case must be capable in a particular context of permitting the erection of more than one dwelling, but I think that the important effect of the judgment of Romer LJ for present purposes, is that, absent any contrary indication, the natural meaning of the covenant carries with it singularity.
[23] In his short judgment in Dobbs at p54, Evershed MR said, very much to the same effect as Romer LJ:
In my judgment departure from the prima facie meaning of the material words must depend upon particular words in a particular document; and that, … I think was the case in Downie v Turner…
[24] It is fair to say that a different conclusion was reached by Judge Rich QC, sitting as a judge of the High Court, in Briggs v McCusker [1996] 2 EGLR 197, a case relied upon by Mr Chapman. In that case, the relevant covenant was against using:
the said hereditaments or any part thereof or any buildings at any time thereon… otherwise than as a strictly private or professional residence or as a private stable in connection with a residence. |page:168|
[25] Judge Rich held that this covenant did not prevent more than one dwelling-house being constructed and used as such on the land burdened by the covenant. However, I am not persuaded that it is appropriate to reach the same conclusion in the present case. First, it appears from the report that he was referred to, and indeed placed some reliance on, the decision of the Court of Appeal in Downie (see Briggs at pp198F-G), but not the later, and to my mind more directly relevant, decision of the Court of Appeal in Dobbs. Second, the covenant was rather differently worded, in that, unlike here, it did not extend merely to the plot itself, but to any part thereof or any buildings thereon. If, as in the case before me, a plot cannot be used other than for the purposes of a dwelling-house, then, as I see it, the covenant is directed to the plot as a whole. If there are two dwelling-houses on the plot, then the plot, viewed as a single entity, is not being used for, or in connection with, “a dwelling-house”, but for, or in connection with, “two dwelling-houses”. However, where, as in Briggs, the covenant also extends to “any part” of the plot or, even more, “any buildings… thereon”, it is rather easier to contend that the draftsman had in mind the notion that any building erected on the plot was either to be a dwelling-house or to be used in connection with a dwelling-house. I am not saying that that is the correct approach to the covenant in Briggs, but it does appear to me to give a real basis for distinguishing that decision.
[26] Third, Judge Rich gave three specific reasons for rejecting the argument that “a strictly private or professional residence” denoted singularity, in Briggs at p198H-J. I am not convinced that any of those three reasons apply in the present case. The first reason was that the consent of the vendor was needed for the construction of any building on the plot, and, consequently, it was unlikely that the covenant he was considering was concerned with building, as opposed to use. At first sight, that reasoning applies in the present case, because of the covenant contained in the second sentence of para (2). However, I think there is a subtle distinction: unlike the relevant covenant in Briggs, that covenant is not concerned with obtaining consent to the erection of a building as such, but with obtaining consent to the plans, drawings and elevation (hereinafter “plans”) of a proposed building. In other words, the covenant upon which Judge Rich relied in Briggs gave the covenantee a right to object to a particular building because he did not want another building on the land, whereas, as I see it, the covenant in the second sentence of para (2), in the present case, does not envisage the company being able to object to a building as such, but merely to the plans thereof.
[27] The second reason for Judge Rich’s decision was that the covenant he had to construe was “in the midst of other restrictions which are restrictions as to use as opposed to development”. I do not think that that can fairly be said about the first covenant, which follows para (1), a user covenant, which is followed by para (3), a development covenant, and, perhaps most importantly in this context, which is the first sentence of a two-sentence covenant, whose second sentence is concerned with development, not use. The third reason for Judge Rich’s decision depended upon the reference to the private stable in the covenant before him, and that plainly has no bearing on the issue to be decided in the present case.
[28] It is also to be noted that, as Judge Rich mentioned, Goulding J considered that a prohibition upon use of certain land “or any part thereof or any message or building… erected thereon or on any part thereof for any purpose other than that of a single private dwellinghouse”, restricted the covenantor to building only one dwelling-house on the plot: see Re Enderick’s Conveyance [1973] 1 All ER 843, discussed in Briggs at p198A-S. As is clear from the extracts of the judgment of Goulding J quoted by Judge Rich, the detailed provisions of the covenant in Enderick were slightly different from those of the covenant in Briggs, and he therefore felt justified in reaching a different answer. Mr Lewison did not, in my view rightly, place much reliance upon Enderick, because, while similar, the covenant in that case was expressed in slightly different words, and, inevitably, fell to be construed in the context of a different document with different provisions or (possibly) different surrounding circumstances. However, I note that Goulding J said that singularity was “more consonant with a strictly grammatical and literal reading of the covenant” (quoted in Briggs at p198E).
[29] In the end, at best from the claimant’s point of view, the decisions in Briggs and Enderick serve to indicate that provisions, such as the first covenant in the present case, could have the meaning for which either party contends. However, particularly when one takes into account the strong observations of two members of the Court of Appeal in Dobbs as to the natural meaning of an expression such as that found in the first covenant, it appears to me that, in so far as it is legitimate to rely upon authority, the reasoning in that case supports the defendant’s contention here.
[30] Obviously, when construing an expression in a document, one must be very careful of relying upon authority. Indeed, there are cases that suggest that, in such a case, it is almost impermissible to refer to authorities as to the meaning of other documents, even when they involve interpreting the same expression. However, it does appear to me that it is not illegitimate to bear in mind the desirability of certainty and consistency in relation to the court’s approach to the prima facie meaning of fairly common expressions in conveyances, leases, and, indeed, other types of document. It is desirable, where possible, for people to know with a reasonable certainty what their rights may be: uncertainty breeds costs, worry, and litigation. Where, as in Dobbs, the Court of Appeal has taken a pretty clear view as to the natural meaning of an expression such as “a private dwelling-house”, it seems to me that, while accepting that the same expression can obviously have a different meaning because of its textual or factual context, as the decision in Downie indicates, the court should be slow to depart from that meaning without some reason. I am reinforced in that view in this case, because both Romer LJ and Evershed MR referred to authority as assisting them in construing a covenant whose central words were identical to those in the present case (see Dobbs at pp53-54).
[31] Mr Lewison very properly drew attention to section 61 of the Law of Property Act 1925, which provides that, in all deeds, unless the context otherwise requires, the singular includes the plural (and vice versa). As explained by Russell J in Re Solicitors’ Arbitration [1962] 1 WLR 353 at p356, that statutory provision, “is designed to shorten the drafting of deeds and nothing more”. However, that obviously does not mean that the provision can effectively be ignored. None the less, as exemplified by that very case, such a statutory provision, “which is designed to save verbosity, cannot properly be relied on” to alter the meaning of a provision if the court is satisfied that the provision was not intended to have the extended meaning that would result from applying section 61. It is fair to say that it is not as obvious to me that section 61 should not be applied in the present case as it appears to have been to Russell J in relation to the provision before him. However, it seems to me that the factors that have persuaded me that “a private dwelling-house” is to be given its natural meaning, ie to be limited to singular, should lead to the conclusion that “the context otherwise requires”. Apart from the natural reading of “a private dwelling-house”, and the contrast with “for professional purpose [or purposes]”, it is to be noted that the application of section 61 in Dobbs would have produced a different result from that obtained.
Second issue: Effect of the dissolution of the company
[32] The defendant’s primary contention is that, in light of the fact that the company has ceased to exist, the covenant contained in the second sentence of para (2) (hereinafter the second covenant) has become a covenant preventing any development on the plot of land to which it applies, ie that the covenant has become absolute. The claimant’s primary contention is that the consequence of the company ceasing to exist is that the second covenant is effectively discharged.
[33] The defendant’s construction has the merit, at least on the face of it, of giving effect to the strictly literal meaning of the second covenant. That is because the covenant prohibits the erection of any building on the plot, unless the company gives its approval to the plans, drawings and elevation (hereinafter plans). Given that the company has ceased to exist, and therefore can no longer give its approval, there is simple force in the contention that the exception to the prohibition |page:169| cannot be invoked, and that, in those circumstances, the exception falls away and the prohibition stands unqualified.
[34] The defendant’s construction also appears to be consistent with three earlier decisions. In Bell v Norman C Ashton Ltd (1956) 7 P&CR 359, the relevant covenant was in these terms:
Except with the written consent of the vendors… no… building… shall be used for any other purpose than that of a… private dwelling… and not more than two houses shall be erected on any one plot…
[35] At p365, Harman J said:
[The covenant] does not say “Except with the written consent of the vendors, their heirs or assigns,” but “Except with the written consent of the vendors.” When those words are used, whatever they may mean, it seems to me that the only persons who could consent were the vendors, and, they not being available, there is no dispensing power to which the defendants can resort.
[36] In Re Beechwood Homes Ltd’s Application [1994] 2 EGLR 178*, the Court of Appeal considered two covenants or restrictions. Restriction 4 provided that no building should be erected upon the burdened land unless an appropriate plan had been “previously submitted to and approved of in writing by the vendors… which approval shall not be unreasonably withheld”. Restriction 9 prohibited any part of the burdened land being “used as a road or way without the consent in writing of the vendors first being obtained”. Dillon LJ, giving the only reasoned judgment, said at pp179M-180B:
As to the consents, I accept [counsel’s] submission that the case proceeded in the Lands Tribunal and must therefore proceed in this court on the common basis that the power to consent under restriction 4, or under restriction 9, is a dispensing power attached to an otherwise absolute prohibition.
Thus when, as has happened,… there is no one to answer the description of the vendors… and so no one to give the consent, the position is that the dispensing power has gone. But the restrictions remain unmitigated by any dispensing power. It is not the position that the restrictions vanish with the dispensing power.
It follows, if no dispensing power on the part of the vendors… subsists, that to do anything in breach of restriction 4 or restriction 9…, would require either the consents of everyone who has the benefit of the covenants, or relaxation of the covenants by the Lands Tribunal under section 84.
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* Editor’s note: Also reported at [1994] 28 EG 128
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[37] In Briggs, in addition to the point already discussed, Judge Rich had to consider a covenant against erecting any building on the land in that case “without first obtaining the written approval of the vendor” in circumstances where the vendor had ceased to exist. At pp198M-199A, he considered that, in view of the fact that the vendor had died, the effect of the covenant was effectively governed by the reasoning of the Court of Appeal in Beechwood.
[38] Despite the consistency of the approach and result indicated by these three authorities, and even bearing in mind that Beechwood is a reasoned decision of the Court of Appeal, I must confess to finding the result of the defendant’s construction both surprising and unsatisfactory, at least in the context of the second covenant in the present case. Indeed, in my view, it should be rejected.
[39] It appears to me very unlikely that the parties to each of the original conveyances of the claimant’s land could have envisaged that, if and when the company ceased to exist, the second covenant could become absolute in its effect. The second covenant is not actually concerned with the number or type of buildings that can be erected, or the use to which it (or they) can be put: that appears to me to be primarily governed by the first covenant (and indeed by para (1)). The second covenant is simply concerned with giving the company a degree of control over the plans of any building that is proposed to be erected on a plot. Thus, if there was a desire to rebuild a dwelling-house that had burned down, or to erect an ancillary building to an existing dwelling-house, the question whether the covenantor was entitled to put up the number or type of buildings that he wished to erect would be governed by para (1), the first covenant in para (2), and, to an extent, para (3). The second covenant would only be concerned with the approval of the plans of any such new building.
[40] Furthermore, the effect of the defendant’s construction of the second covenant is effectively to take away or nullify the right given to the purchaser by the first covenant, if the company is dissolved. That would be a particularly surprising result, given that both covenants are included in the same paragraph (and therefore were seen as part of the same arrangement) and that the purchaser would have no control over the dissolution of the company. In those circumstances, it seems to me perverse to attribute to the parties an intention that, if the company that had to approve the plans ceased to exist, then that covenant could prevent any development at all.
[41] As Mr Chapman points out, that perversity is reinforced by the fact that, under the second covenant, the approval of the company to such plans cannot be unreasonably, or vexatiously, withheld. It is well established that this means that, if the approval is not forthcoming without good reason, then the plans can be implemented. Yet the consequence of the defendant’s contention is that, merely because the company ceased to exist, the second covenant would absolutely prohibit the owner of a plot from erecting any building on the plot, even one that unquestionably complied with all the other covenants, and that could not conceivably have been reasonably objected to by the company.
[42] However, at least on the face of it, it also seems unlikely that the parties, who have agreed a restriction on a plot for the benefit of the company’s remaining land, could have intended that the second covenant should simply cease to exist if the company is dissolved. After all, one of the points of imposing the covenant for the benefit of a covenantee’s land is that the benefit of the covenant is not merely for the covenantee, whose interests fall away when it ceases to own any of the benefited land, but it is also for the successor owners of any part of that land. Accordingly, at any rate at first sight, the claimant’s contention seems to have real problems.
[43] In Preston & Newsom on Restrictive Covenants (9th ed) at p120, there is this:
Where such a covenant [sc. not to develop land except in accordance with a plan] is taken by a vendor for the protection of his retained land and, on a subsequent sale, he takes a like covenant from the purchaser of part of the land retained on the earlier sale, the second purchaser cannot compel the vendor to enforce for his benefit the covenant taken on the first sale: the vendor is entitled to exercise his powers independently of the second purchaser’s interest, at least in the absence of evidence that there is a scheme.
[44] It is fair to say that the only authority cited in this proposition, Master v Hansard (1876) LR 4 ChD 718, does not seem to have been a case where section 78 of the 1925 Act, or its statutory predecessor, applied, or at any rate was considered. However, it was not suggested in the present case that the company held its right to approve plans on trust for, or in some other way for the benefit of, subsequent purchasers of plots on the estate.
[45] In these circumstances, it seems to me that when the covenants were entered into between the company and the Mitchells, as vendors, and the claimant’s predecessors, as purchasers, the parties would have envisaged the following. So long as the company (or the Mitchells) retained any part of the estate, the second covenant would, or at least could, be enforced for the benefit of that retained land. However, although it is true that after the company ceased to have any beneficial interest in the estate, the owners of plots with the benefit of the second covenant annexed would have the benefit of the second covenant, it would be of little value to them, unless the company chose to take their interests into account when its approval was sought.
[46] The company’s grounds for refusing approval to plans, after it parted with any beneficial interest in the estate, could only have been aesthetic, financial, or altruistic. Aesthetic because, at least in the landlord and tenant context, consent to alterations can reasonably be withheld on reasonable “aesthetic artistic or sentimental grounds (per MacKinnon LJ in Lambert v FW Woolworth & Co Ltd [1938] Ch 883 at p911), although it is fair to say that, on the facts of this case, and bearing in mind that the approval would be that of a company, this looks |page:170| an unlikely ground. The company might have had a financial ground, in the sense that it might have been able to demand money for giving its consent, at least in a case where it might have had reasonable grounds for refusing approval. An altruistic ground might have been raised if the company had thought it right to take into account the interests of those owning land to which the benefit of the covenant is annexed. I think it questionable whether that could have been a properly relevant factor; even if it could have been, then the passage I have cited from Preston & Newsom suggests that plot owners such as the defendant could not have required the company to take such a factor into account.
[47] Thus, as I see it: (a) the second covenant was purely concerned with the approval of plans for buildings whose number and use was limited by the first covenant, and whose location was limited by para (3); (b) the approval of the company to any plans could not be unreasonably withheld; and (c) the terms of the second covenant were legally unenforceable against the company by those owning land to which it was annexed. Accordingly, I consider that the claimant’s contention is, at least on the arguments so far considered, much more sensible and realistic, indeed far more likely to have accorded with the intention of the parties to the original conveyances of the claimant’s land, than that of the defendant. However, there are three factors that need to be considered, namely the words of the second covenant, the authorities, and section 84 of the 1925 Act, referred to by Dillon LJ in Beechwood.
[48] The first, and ultimately the overriding, factor is the actual wording of the second covenant. As I have mentioned, there is obvious linguistic and logical force in Mr Lewison’s contention that it consists of a prohibition (“No… building shall be erected…”) subject to an exception (“unless the plans… shall have been… approved of… by the Company”) and that, as the exception can no longer be implemented, the prohibition has become effectively absolute. Mr Chapman accepts that that is the natural meaning of the second covenant, as a matter of pure language, but contends that a term should be implied to the effect that, if the company ceases to exist, then the whole of the second covenant is discharged.
[49] The principles applicable to the implication of terms into commercial contracts appear to me to apply equally in principle to the implication of terms into a restrictive covenant. So far as authority on that topic is concerned, Mr Lewison refers to Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472, where, at pp480-482, Sir Thomas Bingham MR emphasised the care that must be taken before implying a term into a contract. He began by referring to BP Refinery (Westernpoint) Pty Ltd v Shire of Hastings (1978) 52 AJLR 20 at p26, in which Lord Simon of Glaisdale identified five requirements that must be satisfied by a term before it will be implied into a contract:
(1) It must be reasonable and equitable;
(2) It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
(3) It must be so obvious that it “goes without saying”;
(4) It must be capable of clear expression;
(5) It must not contradict any express term of the contract.
[50] In Philips Electronique, at p482, Sir Thomas said:
Given the rules which restrict evidence of the parties’ intention when negotiating a contract, it may well be doubtful whether [an] omission was the result of the parties’ oversight or of their deliberate decision, if the parties appreciate that they are unlikely to agree on what is to happen in a certain not impossible eventuality, they may well choose to leave the matter uncovered in their contract in the hope that the eventuality will not occur.
The question of whether a term should be implied, and if so what, almost inevitably arises after crisis has been reached in the performance of the contract. So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting, but wrong.
[51] However, when considering the law relating to implied terms, one must also bear in mind the guidance given by Lord Wilberforce in Liverpool City Council v Irwin [1977] AC 239* at pp253E-254A. In that passage, he started by giving various examples of different types of cases in which the court may imply a term, and ended by referring to the facts of that case as representing “a fourth shade on a continuous spectrum”. There are undoubtedly certain well-established principles that will apply to any implied term, such as those enunciated by Lord Simon and quoted by Sir Thomas Bingham. However, as Lord Wilberforce’s analysis indicates, the principles must be applied by reference to the facts of a particular case. Thus, the five covenants in the instant case are all fairly shortly expressed, so that it is perhaps rather easier to imply a term than it would be in the case of a “lengthy and carefully drafted contract” that showed “every sign of careful professional drafting” (as in Philips Electronique — see p482), or of a lease containing “a number of careful and elaborate provisions” (as in Duke of Westminster v Guild [1985] QB 688† at p699H).
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* Editor’s note: Also reported at [1976] 1 EGLR 53; (1976) 238 EG 879 and 963
† Editor’s note: Also reported at [1983] 2 EGLR 37; (1983) 267 EG 762
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[52] I consider that this is one of those cases where it is not entirely easy to say whether the claimant’s interpretation involves simply construing the second covenant in its context or implying a term into the covenant. Given that it is common ground that the dissolution of the company puts an end to the exception to the prohibition, it does not seem to me to involve departing from the words of the second covenant to conclude that, in effect, the exception is so fundamental to the prohibition that, if the exception is discharged, by dissolution of the company, the prohibition is discharged with it.
[53] I suppose one way of formulating the issue is whether the exception to the prohibition is such an essential part of the prohibition itself that, if the exception goes, the prohibition must go. The fact that, as a matter of linguistics and as a matter of pure logic, it does not necessarily follow that the prohibition must go if the exception goes, is not the end of the matter. The fact that it is not necessary as a matter of logic does not mean that it is unnecessary as a matter of commercial common sense. As for the linguistic aspect, “detailed semantic and syntactical analysis… must be made to yield to business common sense” — per Lord Diplock in Antaios Compania Naviera SA v Salen Rederierna AB (The Antaios) [1985] AC 191 at p201D.
[54] In all the circumstances, it appears to me that, if the company ceases to exist, the second covenant is discharged. I am doubtful whether this involves implying a term as much as interpreting the second covenant in its context. However, if it does involve the implication of a term, I am satisfied that the five tests identified by Lord Simon are satisfied in respect of the implied term contended for by the claimant. In essence, the reasons for my conclusion have already been expressed, but it is right that I should expand on them a little. The overriding point is that, when read in the context of the rest of the five covenants, and in particular the first covenant with which it is so clearly linked in para (2) itself, it seems to me that, if the exception to the prohibition in the second covenant is discharged because the company has been dissolved, then the prohibition is discharged as well. The prohibition and the exception are so intimately bound together that if one goes, so does the other.
[55] More particularly, when the second covenant is read in the context of the other covenants, the second covenant was intended to give the company a right of veto (which right could only be exercised on reasonable grounds) in relation to the plans for any building to be erected on the plot. Given that any such building must, in any event, comply with the first covenant in para (2), and indeed with the four other covenants, I do not consider that the parties could have intended that the second covenant could become absolute. After all, the other covenants specifically govern the number, use and type of buildings that can be erected, whereas the second covenant is merely concerned with approval of plans.
[56] This is reinforced by the fact that both conceptually, and in light of the way the five covenants are set out, the second covenant is closely |page:171| linked to the first covenant. Indeed, in a sense, they are part of the same covenant. It would seem bizarre that the undoubted right to erect a dwelling-house (and ancillary buildings) could be thwarted by the company being dissolved, ie by the very entity, whose approval of plans (not to be unreasonably withheld) is required, ceasing to exist.
[57] The parties to the various conveyances of the claimant’s land, faced with an officious bystander asking whether, if the company were dissolved, they intended the second covenant to be an absolute bar against building, or to be discharged, would, in my view, have unhesitatingly opted for the latter. In terms of self-interest, once they had sold off the estate, neither the company nor the Mitchells could have cared less, but I think the purchaser would have been little short of horrified at the thought of the covenant becoming absolute, possibly at the whim of the company’s shareholders, and certainly due to circumstances wholly beyond the control of the purchaser. This would have been reinforced by the fact that the second covenant is only concerned with approval of plans, and there are other covenants restrictive of building and use.
[58] In so far as the company or the Mitchells might have thought about prospective purchasers of other plots on the estate, there would have been at least two factors that would have influenced them in rejecting the notion of the covenant becoming absolute. The first is negative, namely that the fact that successors of the company would be able to enforce the covenant could not have influenced the company in arguing for the covenant becoming absolute. That is not only because the company would expect to have no interest in the covenant once it was dissolved, but also because the company would owe no duty to those successors, as I have mentioned. There is nothing in the original conveyances of the claimant’s land to indicate that the five covenants were taken for the benefit of anything other than the remaining land owned by the company or the Mitchells. That brings me to the second factor. The company and the Mitchells presumably had in mind that they would impose similar covenants on purchasers of subsequent sales of plots, as they indeed did, and as they had done on previous sales of plots. Given that the covenants were self-evidently imposed to make the plots more attractive to potential purchasers, it is scarcely likely that the company and the Mitchells would have envisaged imposing a covenant that a prospective purchaser might think could prevent for all time any future development of the plot he was purchasing.
[59] More generally, it appears to me that the interpretation of a contractual term for the benefit of a third party may often lead to difficulties if the third party ceases to exist. The result obviously must depend upon the words used, but it must also depend upon commercial common sense. Thus, consider a case in which a purchaser (or tenant) of land or a chattel agrees with the vendor (or landlord) not to sell on (or assign) the land or chattel, without giving a third party company the right of first refusal. If the company ceases to exist, the defendant’s argument here would result in the land (or chattel) being permanently unsaleable (or unassignable): the exception to the prohibition against sale (or assignment) could not be complied with because the purchaser (or tenant) could not make an offer to a non-existent entity, and, accordingly, the prohibition would become absolute. I do not think that that could be right; in my view, the dissolution of the company in such a case would not merely discharge the exception, it would discharge the whole prohibition. So here.
[60] As Mr Chapman points out, the parties cannot have intended the first development of a plot, the erection of a new garage, a greenhouse or other outbuilding, or the replacement of an old fire-damaged house with a new house, would be absolutely prevented simply because of the dissolution of the company. If that were the case, the purchaser from the company and the Mitchells would be at the mercy of the whim, spite or greed of those controlling the company, who could cause it to be dissolved at any time. It seems very unlikely that the parties could really have envisaged permitting what really amounts to a self-induced frustration of the second covenant, indeed of the composite covenant contained in para (2).
[61] Before concluding on this question, I think it is prudent to go back to Lord Simon’s five tests on the basis that my conclusion may involve implying a term. Although at first sight it may be said that the implied term does not result in a “reasonable and equitable” result for the owners of land benefiting from the covenant, the point is answered by the fact that the company could give its approval under the covenant without taking into account their interests in any way. Accordingly, the discharge of the second covenant on the dissolution of the company does not deprive the owners of the land of a covenant with any real legal teeth. Further, without the implied term, it seems to me that the effect of the covenant would be plainly oppressive. As to the second test, it seems to me that what amounts to “the contract” in the present case would be lacking in business efficacy if there were no implied term. The notion of the second covenant read in its context and (with its reference to approval not being unreasonably withheld) representing a permanent block on building is not sensible, and does not, I think, comply with what the parties intended. Once one analyses the position after the company has disposed of all its beneficial interest in the estate, I think that the third test is satisfied, namely that the implied term is so obvious that it goes without saying. The covenant is plainly capable of clear expression and does not contradict any express term agreed between the parties.
[62] The second matter that I must consider is the effect of the authorities. The decision of Harman J in Bell is not binding on me. However, I believe that, in any event, it can be distinguished on three grounds. First, there was no proviso to the effect that “the written consent of the vendors” was not to be unreasonably withheld. Second, if the covenant in that case became absolute upon the death of “the vendors”, it would not in any way have sterilised the ability of the covenantor to build or use the land. Once the covenant became absolute, the covenantee was restricted to “two houses”, each of which was to be used as “a private dwelling-house”. Third, unlike in this case, the covenant in Bell, by becoming absolute, did not, as in the present case, sterilise any other covenant to which it was, as it were, subservient. Apart from this, while it cannot be pretended that it is clear from the report, it does not appear to me that the point dealt with in the passage I have quoted from Harman J was contested. It looks to me as if the real issue between the parties was whether the reference to “the vendors” extended to their heirs and assigns, and it was held that it did not.
[63] I acknowledge that Beechwood cannot be so readily distinguished. Restriction 4 in that case was concerned with the approval of plans for any building, and it also provided that such approval was not to be unreasonably withheld. However, as is clear from the opening part of the passage I have quoted from the judgment of Dillon LJ, the basis of the reasoning of the Court of Appeal was that the proper construction of the restriction was essentially as the defendant contends in the present case, namely an absolute prohibition subject to an exception, and that it was not open to the appellant to argue otherwise. Either it was not argued, or the Court of Appeal held that it could not be argued, by the covenantor that the covenant should be read in a broader, more purposive, way, or that it should be treated as subject to an implied term of the sort that Mr Chapman contends here. As to Briggs, it appears to me that it was either virtually common ground, or Judge Rich decided, that he was effectively bound by the reasoning in Beechwood. It does not appear that he had the benefit of the arguments that I have had.
[64] Although there are grounds for distinguishing, or not following, these three cases, and although this is a question of the proper construction of a specific provision in a specific agreement, I am concerned about departing from what Mr Lewison justifiably says is the consistent approach of the courts to covenants of this sort. Indeed, internal consistency in this judgment rather reinforces that concern, in light of my reliance upon Dobbs on the first issue. However, I have concluded that the cases relied upon by the defendant in relation to this second issue are, on a fair analysis, properly distinguishable. As I am of the view that the right interpretation of the second covenant is that it is discharged upon the dissolution of the company, it seems to me wrong to be deflected from that construction simply because there are previous decisions that went the other way. It |page:172| is not as if the wording of the provisions in any of the three cases on the second issue was identical (as it was in Dobbs, at least in relation to the centrally relevant three words on the first issue). Nor does it appear that the arguments that have led me to my conclusion were considered in those three cases.
[65] Third, there is the fact that the unattractiveness of the defendant’s argument is mitigated by the provisions of section 84. That provision originally gave an arbitrator, now the Lands Tribunal, the power to discharge or modify a restrictive covenant affecting freehold land if one or more of the requirements set out in section 84(1) were satisfied. The provisions of section 84(1) have been significantly modified since it was first enacted in 1925, so that it is now substantially easier to obtain a modification or discharge of a restrictive covenant than it was. The relevant amendments for the purposes of this case were made by the Law of Property Act 1969.
[66] When considering the proper interpretation of the second covenant, however, one must concentrate on the position as it was when the covenant was entered into. As at that date, a covenant such as the second covenant could have been modified only if:
(1) The covenant “ought to be deemed obsolete”; this is difficult to establish — see section 84(1)(a) and per Romer LJ in In re Truman, Hanbury Buxton & Co Ltd’s Application [1956] 1 QB 261;
(2) The continued existence of the covenant “would impede the reasonable user of the land… without securing practical benefits to other persons”; the reference to “the reasonable user” means that this provision only applies if the covenant hinders reasonable use “to a real sensible degree” — see section 84(1)(a) and per Lord Evershed MR in In re Grey & Galton’s Application [1957] 2 QB 650;
(3) All those persons entitled to the benefit of the covenant agreed to the discharge or modification — see section 84(1)(b);
(4) That the discharge or modification would “not injure the persons entitled to the benefit” of the covenant — see section 84(l)(c).
[67] Although the existence of this statutory power of modification must be taken into account when construing the second covenant, and although it mitigates the harshness of the conclusion that the second covenant would become absolute if the company ceased to exist, I do not think it provides a very satisfactory answer to the problems thrown up by the defendant’s argument. First, these statutory conditions would, on this hypothesis, be applied to an absolute covenant against building, a very different concept from a covenant against building without approval of plans, not to be unreasonably withheld. Second, these conditions were, at least in general, much more restrictive than the effect of a requirement for the company’s approval to plans, not to be unreasonably withheld, particularly once the company beneficially owned no land that could benefit from the covenant. Third, even if one or more of these statutory conditions were satisfied, the tribunal to whom an application to modify or discharge would be made (now the Lands Tribunal, and then an arbitrator) would have a discretion to refuse modification or discharge. Fourth, the second covenant in the present case was, at least potentially, perpetual, and, although pretty unlikely, it would always have been possible that section 84: could have been repealed. Fifth, it is worth mentioning that, even so long as the company existed, it would always have been open to the owner of land burdened by the second covenant to invoke section 84: it is not as if it was a substitute right that would spring into existence only if and when the company ceased to exist.
[68] In these circumstances, I conclude that, in light of the dissolution of the company, the second covenant is no longer enforceable. It is right, however, to add two further points. First, if the second covenant were held on trust (or even on some basis akin to a trust) by the company in favour of subsequent purchasers of plots on the estate to which the benefit of the covenant was annexed, then I would have reached a different conclusion from that contended for by either party. If the benefit of the second covenant had been held by the company on trust (or something akin thereto) for such subsequent purchasers, then I think the result would be as follows. Having disposed of all the land that benefited from the second covenant, the company would effectively be a bare trustee of the covenant for the subsequent purchasers. On that basis, the company’s power to grant approval to plans would effectively be exercisable for the benefit of those subsequent purchasers. In other words, the company would have to take into account the interests of those subsequent purchasers.
[69] On that hypothesis, the covenantor exists and is, at least on the face of it, bound by the covenant, and the persons beneficially entitled to the benefit of the covenant exist, namely the owners of the plots of land to which the benefit of the second covenant is annexed. It seems to me that, in those circumstances, if the claimant wishes to erect a building, then, at least so far as the second covenant is concerned, he can seek the approval of the plans of the persons entitled to the benefit of the covenant, and, if some of them object, he can seek a declaration that their consent is being unreasonably withheld. In my view, to conclude that the covenant is discharged in such circumstances would be unrealistic, and to conclude that it became absolute would be even more insensible than if the covenant is not held on trust for the owners of the land to which its benefit is annexed. If the benefit of the covenant were held on trust by the company for the owners of plots of land to which its benefit was annexed, then the absence of the company from any proceedings would seem to me to be irrelevant, both as a matter of common sense, and as a matter of law: see by analogy Re Strathblaine Estates Ltd [1948] Ch 228.
[70] The second point that should be mentioned is this. Had I concluded that the defendant’s primary contention was to be preferred to that of the claimant, ie that the second covenant was to be treated as absolute rather than discharged following the dissolution of the company, a further question would have had to be considered. That question would have been whether, rather than the covenant becoming absolute, the court should, in effect, substitute its own judgment for that of the company. In other words, as the machinery for the approval of plans in the second covenant having broken down due to the non-existence of the company, the court should, as it were, step in and determine the question itself.
[71] Such a contention would be based upon the decision and reasoning of the House of Lords in Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444*. In that case, Lord Fraser of Tullybelton (with whom Lords Diplock, Scarman and Bridge of Harwich agreed) said, at p484C, that he rested his decision “on the general principle that, where the machinery is not essential, if it breaks down for any reason the court will substitute its own machinery”.
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* Editor’s note: Also reported at [1983] 1 EGLR 47; (1982) 265 EG 215
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[72] Although I was responsible for raising this contention, I am satisfied that it could not succeed. It appears to me that Mr Lewison is right in his argument that “the consent of the company is an essential feature of the exception to the prohibition on building”, if the effect of the second covenant is as he contends on behalf of the defendant. In those circumstances, it would follow from the observation I have quoted from Lord Fraser in Sudbrook, and also from what was said by Sir Robert Megarry V-C in Re Malpass [1985] Ch 42 and by Mummery LJ in Gillatt v Sky Television Ltd (formerly Sky Television plc) [2000] 1 All ER (Comm) 461, that there is no room for the court to step in and to provide its own machinery.
[73] While it would be wrong to make too much of the point, I think that that reasoning rather tends to confirm the view I have formed on the main issue on the second covenant. If the second covenant is to be read as a whole, as I think it must, and if it is vital that it be the company, and no-one else, whose approval is to be obtained, that would tend to suggest that the permanent disappearance of the company discharges the whole covenant, and not merely the need for approval. After all, the effect of the covenant is to prevent a building (otherwise permitted to be erected and used) being constructed unless and until the company has approved the plans. If the existence of the company is of the essence of that approval, it would seem to follow that the covenant, and |page:173| not merely the ability to obtain approval, is discharged upon the dissolution of the company.
Conclusion
[74] In these circumstances, I conclude that the effect of the covenants contained in para (2) of the five covenants is that:
(1) only one dwelling-house can be erected on each plot by virtue of the first covenant;
(2) the consequence of the company having been dissolved is that the second covenant has been discharged.
