Restrictive covenant — Breach — Remedies — Whether delay or acquiescence — Failure to apply for interlocutory relief — Whether grant of injunctive relief — Whether award of damages — Whether assessed by reference to sum payable for release of restrictive covenant
By a conveyance dated 22 December 1976 Mr and
Mrs
the property other than as a livery yard, stabling and one bungalow, and not to
build on the land until plans had been submitted and approved in writing by the
vendor. In 1978 Mr and Mrs
retained to the plaintiff. The conveyance included an express assignment of the
benefit of the restrictive covenant with M. In 1980 Mr
the remainder of the retained land to the first defendant. By 1983 the
defendant had also acquired the 12 acres of land burdened by the restrictions.
In 1989 the plaintiff issued the present proceedings alleging breaches of the
restrictive covenants by reason, inter alia, of: (1) in 1986 the
bungalow had been converted into a two‑storey building, and a barn had
been enlarged without the submission and approval of plans; (2) in 1989 an
indoor riding school had been constructed without the submission and approval
of plans; and (3) the business of a riding school was being carried on. The
defendants maintained that if there had been any breaches, there had been delay
and acquiescence by the plaintiff. The judge found that there had been breaches
of the restrictive covenant and granted an injunction requiring the first
defendant to cease operating the riding school business; awarded £250 as
damages for the first defendant’s breach in failing to submit plans of the
riding school for approval; awarded £750 damages in respect of the barn and
£20,000 for the conversion of the bungalow. The defendant appealed contending
that no injunctions should have been granted and only minimal damages should
have been awarded. The plaintiff cross-appealed maintaining that an injunction
should be granted requiring the riding school to be demolished.
the express assignment of the restrictive covenant gave the plaintiff a legal
right as against M, the plaintiff had only an equitable right to enforce the
covenant against M’s successors in title. In any event, it was now doubtful
whether a distinction ought any longer to be made between a legal and equitable
right when considering a defence of acquiescence. In considering whether
injunctive relief should be granted for breaches of a restrictive covenant, the
proper inquiry was whether, in all the circumstances, it would be
unconscionable for the plaintiff to continue to seek to enforce the rights.
Between 1986 and 1989 the plaintiff knew he had rights but failed to pursue
them in respect of the works to the bungalow and the barn; there was
acquiescence and this barred all relief, including damages. There was no breach
of user restriction up to 1989. In respect of the construction of the riding
school and the current riding school use, there was no question of acquiescence
being an entire bar to relief. However, the plaintiff’s failure to apply for
interlocutory relief was an important factor. A person who, with the knowledge
that he has clearly enforceable rights and the ability to enforce them, stands
by while a permanent and substantial structure is unlawfully erected, ought not
to be granted an injunction to have it pulled down. The essential prerequisite
of an award of damages, that it should be oppressive to the defendant to grant
an injunction, was satisfied. It would be unfair to the plaintiff not to
compensate him for injury to his legal rights. Jaggard v Sawyer
[1995] 1 EGLR 146 was clear authority for the adoption of the basis of
assessing damages under Wrotham Park Estate Co Ltd v Parkside Homes
Ltd [1974] 1 WLR 798: such sum that the plaintiff might reasonably have
demanded as a quid pro quo for relaxing the restrictions in perpetuity,
so as to permit the construction of the riding school and the use of the
premises for riding school purposes. The appropriate damages of £25,000 were
based on the plaintiff’s valuation evidence, being an approximate mean between
two valuations of the relaxation of the covenant, the first based on the income
assumed to have been generated by the business, and the second on the marriage
value between the land and the facility afforded by the riding school.
The following cases are
referred to in this report.
Jaggard v
Sawyer [1995] 1 WLR 269; [1995] 2 All ER 189; [1995] 1 EGLR 146; [1995] 13
EG 132, CA
Osborne v
Bradley [1903] 2 Ch 446; [1900-3] All ER Rep 541
Sayers v
Collyer (1884) ChD 103; (1881-5) All ER 385
Shaw v
Applegate [1977] 1 WLR 970; [1978] 1 All ER 123; (1977) 35 P&CR 181, CA
Shelfer v City
of London Electric Lighting Co Ltd [1895] 1 ChD 287; [1891-4] All ER Rep
838, CA
Surrey County Council v Bredero Homes Ltd [1993] 1 WLR 1361; [1993] 3 All ER 705;
[1993] 1 EGLR 37; [1993] 25 EG 141, CA
Taylor Fashion Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133; [1981] 2
WLR 576; [1981] 1 All ER 897; sub nom Taylor Fashion Ltd v Liverpool
Victoria Friendly Society [1979] 2 EGLR 54; (1979) 251 EG 159
Tito v Waddell
(No 2) [1977] Ch 106; [1977] 2 WLR 496; [1977] 3 All ER 129
Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798; [1974] 2 All ER 321;
(1973) 27 P&CR 296
This was an appeal by the
defendants, AH Graham and Grandco Securities Ltd, and a cross-appeal by the
plaintiff, Douglas Gafford, from a decision of Judge Simpson, sitting in the
Mayor’s and City of London Court, in proceedings by the plaintiff for
injunctive relief and damages.
Charles Taylor (instructed by Arnold Cooper &
Tompkins) appeared for the appellants; Geoffrey Zelin (instructed by Sherwin
Oliver, of Portsmouth) represented the respondent.
Giving the judgment of the court, NOURSE LJ said: This appeal raises questions on (1) acquiesence and
(2) the remedy of an injunction or damages in lieu in relation to breaches of
restrictive covenants affecting freehold land. The principal question is
whether the owner of a dominant tenement, having (with full knowledge of his
rights) omitted
the servient tenement, ought to be granted an injunction, mandatory or
prohibitory, or damages in lieu; cf Wrotham Park Estate Co Ltd v Parkside
Homes Ltd [1974] 1 WLR 798 and Jaggard v Sawyer [1995] 1 WLR
269*.
*Editor’s note: Also reported at [1995] 1 EGLR
146
The conveyances and
the background
By a conveyance made on 31 December 1971 Mr and
Mrs
consisting of some 22 acres at Hunston, near Chichester in West Sussex. The
rectangle ran from north to south, the southern boundary having a frontage to
the road from Chichester to Hunston. At that time there was a two-bedroom
bungalow on the south-west corner of the land. Subsequently, Mr
built some stables and a yard adjacent to the bungalow. He also built another
bungalow in the central area of the southern frontage as a new home for himself
and his wife.
By a conveyance made on 22 December 1976 (the 1976
conveyance) Mr and Mrs Conwell conveyed to Mrs
western portion of the property consisting of some 12 acres and including the
original bungalow, the stables and the yard. The property conveyed was
described as ‘Littlemead Farm Stables, Hunston’. The 1976 conveyance contained
restrictive covenants by Mrs Mackie, whose burden was imposed on the property
thereby conveyed (the covenant land) and whose benefit was annexed to each and
every part of the 10 or so acres retained by Mr and Mrs Conwell (the retained
land), which included their new bungalow. It is with those restrictions that
this case is concerned. They were duly registered as a land charge Class D(ii).
The restrictions were set out in the first
schedule to the 1976 conveyance, the first three paragraphs of which provided:
1. Nothing shall be done or permitted to be done
on the property hereby conveyed which shall be or may grow to be a nuisance
damage or annoyance to the owner or occupier for the time being of the Vendor’s
Retained Property or any part or parts thereof and at no time shall the premises
hereby conveyed or any part thereof be used or permitted to be used other than
as a livery yard and stabling for horses and one residential bungalow.
2. Not more than one caravan shall be allowed to
remain on the property hereby conveyed at any one time.
3. No building of any description shall be
allowed on the land hereby conveyed or any part thereof until detailed plans
thereof have been submitted to and approved in writing by the Vendors PROVIDED
ALWAYS that this covenant shall not apply to the bungalow at present erected on
the land hereby conveyed nor to any renovating or alterations necessary to make
the same fit for habitation and use nor to the stables and outbuildings at
present erected on the land hereby conveyed.
I will refer to the second part of the first
paragraph as ‘the user restriction’ and the first part of the third paragraph
as ‘the building restriction’.
By a conveyance made on 17 May 1978 Mr and
Mrs
the new bungalow (described as ‘Littlemead Farm’) to the plaintiff, Douglas
Gafford. Although the 1976 conveyance had already annexed the benefit of the
restrictive covenants to each and every part of the retained land, the
conveyance to the plaintiff contained an express assignment to him of the
benefit of those covenants.
On 19 November 1980 Mr and Mrs Conwell conveyed
the remainder of the retained land to the first defendant, Arthur Hugh Graham,
to whom I will refer simply as the defendant. The second defendant, Grandco
Securities Ltd, is a company owned and controlled by the defendant, which
carries on the riding school business hereafter referred to. On 15 May 1981 Mrs
Mackie conveyed the covenant land to Mr and Mrs PW Brittain who, on 12 July
1983, conveyed it to the defendant. So, at that stage, the defendant became the
owner of the servient tenement. Although he owned the major part of the
dominant tenement as well, the restrictions could still be enforced against him
by the plaintiff, as the owner of the remainder of the dominant tenement.
User up to 1983
Both Mr Conwell and Mr Brittain gave evidence for
the defendant at the trial, each of them describing the use made of the
covenant land during the period of his ownership. Mr Conwell said that his wife
had run a riding school there with 50 horses and up to 20 to 30 pupils at any
one time. Mr Brittain said that he and his wife had about 17 to 20 horses, of
which four were their own and the remainder were in livery. He said that he
would not describe their establishment as a riding school. They did not give
many lessons, perhaps 30 to 40 a month, the bulk of them to children or
teenagers whose parents had horses in livery. While they were there, the
Brittains extended the two-bedroom bungalow by adding another bedroom and
bathroom. It nevertheless remained a bungalow. It has been unnecessary for us
to consider whether the extension was authorised by the proviso to the building
restriction or not. There was hardly any evidence as to what happened during
Mrs Mackie’s time. Mr Brittain said that he and his wife took over her
liveries.
There has been some debate as to whether there was
any breach of the user restriction between May 1978, when the plaintiff
acquired his property, and July 1983, when the Brittains sold the covenant land
to the defendant. Had there been such a breach, it might have been material to
the question of acquiescence in relation to later breaches. However, whatever
might have been said about the scale of the Conwells’ activities between 1972
and 1976, the evidence does not establish that there was any unlawful user of
the covenant land while it was owned by Mrs Mackie or the Brittains.
The restriction is against user other than as a
livery yard and stabling for horses. It is said by the plaintiff that use as a
riding school, outdoors just as much as indoors, is a breach of that
restriction. While I accept that that in principle is so, I do not think that
either Mrs Mackie or the Brittains can, on the evidence, be said to have been
running a riding school. Certainly, the Brittains did no more than give tuition
as an incidental part of their livery business and, in the absence of evidence
to the contrary, Mrs Mackie must be taken to have done the same. Accordingly,
it is not shown that the plaintiff would have had any ground of complaint as to
the use of the covenant land before it was acquired by the defendant in 1983.
Henceforth I will confine myself to the period of his ownership.
The proceedings
The action was commenced by a specially endorsed
writ issued in the Chancery Division on 29 August 1989. Subsequently, it was
transferred to the Mayor’s and City of London County Court. At the trial the
plaintiff alleged that the defendant had committed breaches of the restrictions
in six specific respects. He alleged, first, that in 1986 the bungalow standing
on the covenant land had, without the submission and approval of any plans,
been converted into a two-storey house with a loft above; second, that in 1986
a barn standing on the covenant land had, without the submission and approval
of any plans, been extended; third, that in 1989 an indoor riding school had,
without the submission and approval of any plans, been constructed on the
covenant land; fourth, that the business of a riding school, both indoors and outdoors,
had been carried on on the covenant land; fifth, that up to three caravans had
been placed on the covenant land; sixth, that the defendant had held car boot
sales on the covenant land. The defendant raised various defences, claiming
that the restrictions were not enforceable against him, that he had not been in
breach of them and that, if he had, the plaintiff’s claims had become barred by
acquiesence.
The trial of the action took place before Judge
Simpson over five days in October 1996. In his reserved judgment delivered on
9
defendant and found that he had been in breach of them in all the respects
alleged by the plaintiff. He found that plans had not been submitted on any of
the three occasions when they ought to have been submitted and, further, that
the plaintiff would not have approved them if they had been. He rejected the
defence of acquiesence. Having recorded that the plaintiff did not ask for the
house or the extension to the barn to be demolished, but would prefer
demolition of the riding
an injunction requiring the defendant to cease operating the business of a
riding school, whether indoors or outdoors, and a further injunction
restraining him from causing or permitting the covenant land to be used other
than as a livery yard and stabling for horses. In addition, he awarded the
plaintiff damages of £250 for the defendant’s breach in failing to submit plans
of the riding school for approval. In regard to the extension of the barn the
judge awarded damages of £750 and for the conversion of the bungalow £20,000.
The total money judgment, including interest, was for £36,750. The judge recorded
that the defendant’s placing of additional caravans on the covenant land and
allowing car boot sales to take place there had ceased and that no point was
made about them. He did, however, point out that any such activity in the
future would be prohibited by the second injunction he proposed to grant.
The judge later granted a stay of his order. So
the riding school business is still being carried on. The defendant has
appealed to this court. The judge’s decision as to the enforceability of the
restrictions against the defendant is not now questioned. The case against
enforceability appears always to have been hopeless. The controversy before us
has centred on breach, acquiesence, the form of the injunctions granted and the
amount of the damages awarded. The defendant contends that no injunction ought
to have been granted and that the plaintiff ought to have been awarded minimal
damages in lieu. In particular, he says that the £20,000 awarded in respect of
the conversion of the bungalow was grossly excessive. On the other side, the
plaintiff, by way of cross-appeal, has maintained his claim for an injunction
requiring the riding school to be demolished. Alternatively, he claims that the
existing injunctions should be maintained and that he should be awarded additional
damages in respect of the unlawful use as a riding school to date. In the
further alternative, he claims damages in lieu of those injunctions.
Argument was heard in this court on 26 and
27
to put in further written submissions on the quantum of damages to be awarded
in addition to or in lieu of an injunction in respect of the indoor riding
school and the current business, a process that was not completed until 23
February. We are grateful to counsel for their submissions, both written and
oral.
Events between 1984
and 1989
The judge said that the facts alleged by the
plaintiff were hardly in dispute. In order to assess the merits of the rival
contentions it is necessary to state them in greater detail than they were
stated by the judge.
In 1984 the defendant started to call the covenant
land ‘the Hunter’s Lodge Riding Centre’. He put up a sign bearing that name. In
his evidence, the plaintiff thought that he first complained to his solicitors
about the riding school in 1984, but their file disclosed that he did not
contact them until 1987. On 27 March 1985 the plaintiff wrote to the defendant
complaining of three matters, one of which was damage caused to his trees and
the boundary fence by the defendant’s horses. He made no complaint about a
riding school as such.
In 1985 the defendant obtained planning permission
for the conversion of the bungalow. The judge found that the plaintiff entered
an objection to the application with the local planning authority but did not
write to the defendant because, as the plaintiff claimed, he did not know where
the defendant lived. The judge said he could have easily found that out. The
defendant made no application for planning permission in respect of the
extension to the barn. As to those two matters, the judge made the following
further findings:
The plaintiff was aware of the work beginning on
the bungalow and although he raised it with his own solicitors he did not
complain to Mr Graham. In 1986 extension works were carried out on the barn but
Mr Gafford did nothing about it because he imagined the local authority would
have it removed because no planning permission had been obtained for them. He
telephoned the local authority offices about the matter and mentioned it to his
own solicitors. The works were finished in a week but he did not get in touch
with Mr
anywhere. Mr Gafford has always had a copy of his title deeds and read them in
1987 to 1988. During the whole period he was aware of their terms and therefore
was aware of the restrictive covenants. At all times he had the details of the
covenants in his mind. Although he complained to his solicitors about these
various matters no complaint was made to Mr Graham until the correspondence
above-mentioned. The riding lessons were carried on for five years without
challenge.
The correspondence referred to by the judge
started with a letter of 7 March 1989. Before that, on 31 March 1988, the
plaintiff had written to the local planning authority recording his objection
to the granting of planning permission for the construction of the indoor
riding school. He said:
The proposed building would be an enormous
structure, ugly and in full view from my property. I am surrounded on all sides
by this poorly managed establishment and I suffer a constant assault by this
dirt, noise, smell and animals and I am therefore opposed to any extension of
this enterprise in any form.
The application shows that an estimated 20
vehicles a day will be entering and leaving. The actual number is already about
double that and the use of this building will certainly increase it further.
Notwithstanding the plaintiff’s objection,
planning permission was granted on 31 October 1988, after an appeal to the
Secretary of State. The plaintiff said in evidence that in February 1989 he
became aware that something was afoot, in that large quantities of concrete
began arriving by lorry load, which he presumed were for the foundation work
for the riding school. He wrote to the solicitors then acting for him on 22
February and on 7 March 1989 they wrote to the defendant at his home address in
Chichester. Their letter alleged that the defendant was in breach of the
covenants in that:
(1) Your activities in that area generally
constitute a nuisance to our Client.
(2) You are in breach of the user clause
mentioned in paragraph 1 of the First Schedule of the 1976 Conveyance.
(3) You have erected, and are in the course of
erecting, buildings on the land in breach of paragraph 3 of the said Schedule.
The letter contained a request that the defendant
should cease all building activities on the riding school forthwith and that he
should make proposals on the matters complained of, including the conversion of
the bungalow and the extension to the barn. It ended by saying that in the
event that nothing had been heard from the defendant within seven days:
we must formally put you on notice that our
Client will consider himself at liberty to take whatever action seems to him
necessary to preserve his position and that such action may include an
injunction for damages and costs.
The judge recorded that a without prejudice reply
was written by the defendant’s solicitors on 15 March, two days after the work
had started. On 10 April the plaintiff’s solicitors wrote to the defendant’s
solicitors, stating their understanding that the defendant had not ceased
building activities on his land. Having repeated the breaches alleged and the
request that the defendant should cease all works and provide them with his
proposals for rectification of the various breaches, they also repeated their
threat to commence proceedings for an injunction.
On 11 April the defendant’s solicitors replied
asking for a precise statement of the damage suffered by the plaintiff and for
a statement of the sort of consideration he would be seeking in exchange for
giving his approval to the works. Meanwhile, without prejudice correspondence
was being exchanged. On 28 April the plaintiff’s solicitors wrote putting the
defendant’s solicitors on notice that:
such correspondence or delay is not to be taken
as any acquiesence on our Client’s part and, further, any projects that your
Client commences or continues on his land in breach of covenant are a matter
for him and at his own risk.
The judge found that the construction of the
riding school was completed by the end of April, at about the time that that
letter would have been received.
On 12 May the plaintiff’s solicitors wrote the
defendant’s solicitors a without prejudice letter, which, with the agreement of
both sides, was
which they maintained that a reasonable amount to be paid to the plaintiff in
settlement of the dispute was £100,800. The defendant’s solicitors replied on
21 June stating that he had no intention of making any payment whatsoever. As I
have said, the writ was issued on 29
earlier threats, the plaintiff made no application for interlocutory relief.
The bungalow and the
barn
I deal first with the conversion of the bungalow
and the extension to the barn, the former having constituted a clear breach of
both user and building restrictions and the latter a clear breach of the
building restriction. The defendant claims that the plaintiff’s rights to
relief in respect of those breaches are barred by acquiesence. I have already
read or referred to the judge’s findings in respect of these two matters,
which, if taken in isolation, suggest that he thought that acquiesence had been
made out. Although he did not make a clear distinction between the bungalow and
the barn on the one hand and the other matters of complaint on the other, I
think that the following further observations were directed, at least in part,
to the bungalow and the barn:
In view of the absence of complaint to Mr Graham
over several years and the general inactivity in the matter, it was submitted
on behalf of the defendants that by the date of the issue of the writ the
plaintiff had lost any entitlement to claim equitable relief and if that is the
case he has also lost his entitlement to seek damages in lieu. However, it
seems to me that this argument overlooks the fact that the plaintiff also has
the benefit of a legal assignment.
It appears that the judge’s reference to a legal
assignment was brought about by the citation to him in argument of the decision
of this court in Shaw v Applegate [1977] 1 WLR 970, where, at
p979H, Goff LJ, relying on the judgment of Farwell J in Osborne v Bradley
[1903] 2 Ch 446 at p451, expressed the view that it is easier to establish a
case of acquiesence where the right is equitable only. Shaw v Applegate
was a case where it was the original covenantor who was alleged to have been in
breach, so that the right of the covenantee by assignment was indeed a legal
right. Here Judge Simpson was evidently impressed by the express assignment to
the plaintiff of the benefit of Mrs Mackie’s covenant with Mr
Conwell. That certainly gave the plaintiff a legal right as against Mrs Mackie.
But he cannot now enforce the restrictions against her. He seeks to do so against
one of her successors in title to the covenant land. His right against the
defendant, being enforceable only because the burden of the covenant runs with
the covenant land in equity, is equitable only. Accordingly, the judge was
wrong to place weight on the assignment of the benefit of the covenant to the
plaintiff.
For myself, I doubt whether a distinction ought
any longer to be made between a legal and equitable right when considering a
defence of acquiesence in a case of this kind. In Shaw v Applegate,
at p978D, Buckley LJ said:
The real test, I think, must be whether upon the
facts of the particular case the situation has become such that it would be
dishonest or unconscionable for the plaintiff, or the person having the rights
sought to be enforced, to continue to seek to enforce it.
At p780C, Goff LJ agreed that the test was
whether, in the circumstances, it had become unconscionable for the plaintiff
to rely on his legal right. If that is the correct test for a legal right, it
could hardly be suggested, unconscionability being the soul of equity, that
there should be some lower test for an equitable right. Moreover, in his
admired judgment in Taylor Fashions Ltd v Liverpool Victoria Trustees
Co Ltd [1982] QB 133* (a case of common mistake as to the registrability of
an option to renew a lease) Oliver J, after an extensive review of the earlier
authorities on equitable estoppel, acquiesence and the like concluded, at
p155C:
The inquiry which I have to make therefore, as it
seems to me, is simply whether, in all the circumstances of this case, it was
unconscionable for the defendants to seek to take advantage of the mistake
which, at the material time, everybody shared…
*Editor’s note: Also reported at sub nom
Taylor Fashion Ltd v Liverpool Victoria Friendly Society [1979] 2
EGLR 54
Thus here the inquiry must be whether, in all the
circumstances, it would be unconscionable for the plaintiff to continue to seek
to enforce the rights that he undoubtedly had in 1986 to complain of the
conversion of the bungalow and the extension to the barn. On the facts found or
referred to by the judge, I am unable to answer that question except in the
affirmative. The plaintiff knew what his rights were. He never made any
complaint or objection to the defendant at the time. His objection to the
application for planning permission in respect of the bungalow and his
complaints to his solicitors can avail him nothing. He made no complaint to the
plaintiff until his solicitors wrote their letter of 7
three years after the acts complained of. He only complained of them then
because of the much more serious threat presented by the proposed construction
of the riding school. Before that he had effectively treated the conversion of
the bungalow and the extension to the barn as incidents that were closed.
For these reasons, I would hold that the plaintiff
acquiesced in the conversion of the bungalow and the extension to the barn, his
acquiesence being a bar to all relief in respect of those matters. I would
discharge the judge’s awards of £20,000 and £750 damages accordingly. That
makes it unnecessary to consider the quantum of those awards.
User between 1984
and 1989
I deal next with the question whether the
defendant carried on a riding school business between 1984 and 1989 in breach
of the user restriction. Again, had there been such a breach, it might have
been material to the question of acquiesence in relation to later breaches. I
have already stated my view that the carrying on of such a business, not simply
as an incidental part of a livery business, would have constituted a breach.
That was the view taken by the judge who, in relation to the user restriction
as it affected the indoor riding school, said:
It seems to me that the words used are clear and
the true construction of this covenant admits of no doubt. The activity of a
riding school does not fall within it and accordingly Mr Graham is in breach of
this stipulation also.
I agree. However, the judge made no finding as to
the period between 1984 and 1989, except that the construction of the riding
school followed a period when riding lessons were given outside, the lessons
being carried on for five years without challenge.
Clearly it would have been possible, as was the
case during the period of the Brittains’ ownership between 1981 and 1983, for
the lessons to be given as an incidental part of the defendant’s livery
business. Indeed, it could be said that the lack of a positive finding in
relation to the period up to 1989, coupled with his finding in relation to the
period after that date, demonstrates that that was how the judge viewed it. In
any event, an unlawful user between 1984 and 1989 is not satisfactorily
established on the evidence. The sign put up in 1984 proves nothing. Although
the conversion of the bungalow enabled more resident staff to be accommodated
on the premises, it has not been shown that they were not all employed in the
livery business. Further, no qualified riding instructor was employed before
the erection of the indoor riding school and no licence under the Riding Establishments
Acts 1964 and 1970 was obtained until 8 May 1990. The available financial
information shows a very substantial increase from 1989 onwards both in the
income of the business and in the number of horses stabled. The judge referred
to an advertisement in the local paper at the end of 1990, which read: ‘Riding
lessons and schooling. Seven days a week. Large floodlit indoor school.’ I
think that Mr
not until 1989 that the scale of the business became excessive.
I therefore conclude that there was no breach of
the user restriction between 1984 and 1989 and that there was nothing in which
the plaintiff could have acquiesced. On any footing the question of acquiesence
during that period appears to be a sterile one. It is very difficult to see
how acquiesence in the business of an outdoor riding school up to 1989 could
amount to acquiesence in the much larger business of an indoor and outdoor
riding school after that date.
The indoor riding
school and the current business
I now come to the plaintiff’s real and substantial
complaints, which arise out of the construction of the indoor riding school and
the carrying on of the much larger business to which it has led, the former
having constituted a clear breach of the user and building restrictions and the
latter a clear breach of the user restriction. Again, the defendant claims that
the plaintiff’s rights to relief in respect of those breaches are barred by
acquiesence.
A helpful introduction to this part of the case is
an observation of Fry
at p110:
Acquiesence may either be an entire bar to all
relief, or it may be a ground for inducing the Court to act under the powers of
Lord Cairns’ Act.
Here there can be no question of acquiesence being
an entire bar to all relief in respect of the riding school and the current
business. In contrast to his inaction over the conversion of the bungalow and
the extension to the barn, the plaintiff acted promptly at the end of February
1989 when he first became aware that something was afoot, and his solicitors’
letter of 7 March was received by the defendant before the construction works
began. Further, their letter of 28 April demonstrated that the plaintiff would
continue to assert whatever rights he had. The criticism that can be made of
him is that he made no application for interlocutory relief. Had he carried out
the threat made in the letter of 7
doubt that he would have been granted an injunction restraining further
execution of the works. There could have been no doubt as to the enforceability
of the restrictions or their prohibitive effect and an interlocutory injunction
would have followed almost as of course. Accordingly, the plaintiff’s omission
to apply for interlocutory relief was an important factor to be taken into
account by the judge when considering whether he ought to grant a mandatory
injunction at trial for the demolition of the building.
In refusing to grant such an injunction while
holding the defendant to the terms of the user restriction, the judge said:
By failing to issue a writ and motion for an
interlocutory injunction at the outset, he or his advisers took the risk that
the building would be completed before the trial of the action could take
place. Moreover, it has been in existence for seven and a half years. It would
not be right to compel its destruction now when it could be used, or adapted
for use, in a way which would not violate the covenant. No reason has been advanced
why it could not be used for stabling horses, which is an activity allowed by
the stipulations.
Later, having referred to some observations of
Sir
269 at p283, and to the defendant’s submission that the grant of any injunction
would be oppressive and disproportionate, the judge said:
As against that, it seems to me that Mr Graham,
who was aware of the covenants and knew that use of his land was limited,
disregarded the plaintiff’s rights and, even after he was challenged, proceeded
to complete the building work without stopping while the matter was
investigated. He was determined to press ahead in the face of the complaint and
saw the riding school as an opportunity for profit; hence the advertisement mentioned
above. Knowing that the action had commenced he started up the business. This
tells me much about his attitude and reflects little credit upon him. He has
demonstrated that he does not care much about Mr Gafford or his rights and
reasonable concerns. The decisions not to submit plans for approval were taken
deliberately. In these circumstances it would not be oppressive to grant an
injunction.
In regard to that reasoning, Mr Taylor, for the
defendant, has contended that the adaptation of the riding school for the
stabling of horses could only be achieved, if at all, at exorbitant expense.
That may well be so, although it must at once be said that the evidence did not
address that point. Mr Taylor submits that the injunctions granted by the
judge, if they are allowed to stand, will sterilise the use of the building. On
the other side, Mr Zelin has submitted that if the building cannot sensibly be
adapted for any permissible use it is serving no useful purpose and should be
demolished. He contrasts the facts here with those of the Wrotham Park
case, where, at p711B, Brightman J evidently gave great weight to the
unpardonable waste of much-needed houses that would be the consequence of his
directing that they should be pulled down.
The principles on which judges should act when
deciding whether to grant injunctions or to award damages in lieu under Lord
Cairns’ Act were recently considered by this court in Jaggard v Sawyer
(supra), where the earlier authorities are fully discussed. They need
not be discussed again. While many of them might suggest that a judge’s
function in granting relief under that Act is more circumscribed than is the
norm, it is important to emphasise that the principles, being principles of
discretion, must always remain adaptable to the facts of individual cases. Such
indeed was the view of Millett LJ who, in a passage I entirely and gratefully
adopt, said at p288A:
Reported cases are merely illustrations of
circumstances in which particular judges have exercised their discretion, in
some cases by granting an injunction, and in others by awarding damages
instead. Since they are all cases on the exercise of a discretion, none of them
is a binding authority on how the discretion should be exercised. The most that
any of them can demonstrate is that in similar circumstances it would not be
wrong to exercise the discretion in the same way. But it does not follow that
it would be wrong to exercise it differently.
In the present case I start from this position.
Although the judge may have underestimated the cost and the practical
difficulties of adapting the riding school for the stabling of horses, it would
not be right for this court to interfere with his decision not to grant a
mandatory injunction for its demolition. Without that part of his reasoning, a
powerful case was still made out for the refusal of such a drastic order. As a
general rule, someone who, with the knowledge that he has clearly enforceable
rights and the ability to enforce them, stands by while a permanent and
substantial structure is unlawfully erected, ought not to be granted an
injunction to have it pulled down.
So what is to be done? There may be force in
Mr
costly and impracticable exercise. Further, it may be realistic to suppose that
the defendant would thus be left with far more stabling than would be needed
for the purposes of a livery business. Equally, the court would be reluctant to
force a building constructed for one purpose to be adapted to another unless no
other solution was fair and reasonable.
It may well be that if those had been the only
relevant considerations, the defendant would have shown insufficient grounds
for the injunctions to be discharged, especially when account is taken of the
judge’s strictures on the conduct and attitude of the defendant, which amount
to saying that he acted in blatant and calculated disregard of the plaintiff’s
rights. There is, however, a further factor, which tips the balance in favour
of an award of damages. By his solicitors’ letter of 12 May 1989 the plaintiff
made it clear that he would be prepared to accept a cash sum in settlement of
the dispute. The suggested figure of £100,800 was obviously excessive and it
would in any event have had to be reduced in order to leave the bungalow and
the barn out of account. But the plaintiff’s position was made clear. He would
have been prepared to settle the dispute on payment of a cash sum. Why should
he not be held to that position and granted damages in lieu of an injunction?
It is said that an insurmountable obstacle to such
an award is presented by the observations of Lindley and AL
v City of London Electric Lighting Co Ltd [1895] 1 ChD 287. At p315
Lindley LJ said:
But in exercising the jurisdiction thus given
attention ought to be paid to well settled principles; and ever since Lord
Cairn’s Act was passed the Court of Chancery has repudiated the notion that
the Legislature intended to turn that Court into a tribunal for legalizing wrongful
acts; or in other words, the Court has always protested against the notion that
it ought to allow a wrong to continue simply because the wrongdoer is able and
willing to pay for the injury he may inflict.
At p 322, AL Smith LJ said:
Many Judges have stated, and I emphatically agree
with them, that a person by committing a wrongful act (whether it be a public
company for public purposes or a private individual) is not thereby entitled to
ask the Court to sanction his doing so by purchasing his neighbour’s rights, by
assessing damages in that behalf, leaving his neighbour with the nuisance, or
his lights dimmed, as the case may be…
In my opinion, it may be stated as a good working
rule that —
(1) If the injury to the plaintiff’s legal rights
is small,
(2) And is one which is capable of being
estimated in money,
(3) And is one which can be adequately
compensated by a small money payment,
(4) And the case is one in which it would be
oppressive to the defendant to grant an injunction: —
then damages in substitution for an injunction
may be given.
It is said that an award of sizeable damages in
this case would disregard those observations, and in particular AL
LJ’s good working rule.
In Jaggard v Sawyer Sir Thomas
Bingham MR, having read those and an intervening passage from the judgment of
AL Smith LJ, said at p278B:
Many later cases have turned on the application
of this good working rule to the particular facts of the case before the court.
This case may be said to do the same.
At p287H Millett LJ, having read the observations
of Lindley LJ and AL Smith LJ’s good working rule, said:
Laid down just 100 years ago, AL Smith LJ’s
check-list has stood the test of time; but it needs to be remembered that it is
only a working rule and does not purport to be an exhaustive statement of the
circumstances in which damages may be awarded instead of an injunction.
Then followed the passage I have already read. In
the result, this court applied the good working rule and affirmed the judge’s
decision to make a small award of damages.
Both Shelfer v City of London Electric
Lighting Co and Jaggard v Sawyer were cases where the
suggestion that the plaintiff’s rights should be bought out for a cash sum was
strongly resisted. Thus in Jaggard v Sawyer, at p286G, Millett LJ
referred to Mrs Jaggard’s understandable complaint that what the judge had in
effect done was to grant Mr and Mrs Sawyer a right of way in perpetuity over
her land for a once and for all payment. Here the plaintiff can make no such
complaint. His willingness to settle the dispute on payment of a cash sum can
properly be reflected by an award of damages. Nor, once that is established,
can it be an objection that the amount of damages may be large. The injury to
the plaintiff’s legal rights must be adequately compensated. In such a case the
first and third conditions of the good working rule do not apply.
I summarise the position as follows. The essential
prerequisite of an award of damages is that it should be oppressive to the
defendant to grant an injunction. Here that prerequisite is satisfied. It would
be oppressive and therefore unfair to the defendant to allow the judge’s
injunctions to stand. The plaintiff should receive an award of damages instead.
It would be unfair to him for them not adequately to compensate him for the
injury to his legal rights. It is to the quantification of those damages that I
finally turn.
Quantum of damages
Since the judge did not consider the quantum of
damages in respect of the indoor riding school and the current business, either
side could have asked for that question to be remitted to him. It was because
they were both content that we should decide it ourselves that we gave counsel
leave to put in further written submissions.
A welcome consequence of Jaggard v Sawyer
is that it has firmly established the Wrotham Park basis of assessing
damages as the basis appropriate to cases such as this. There have been some
differences of opinion as to the correct analysis of that decision, the
difficulty being, as the plaintiffs there conceded, that the defendants’
breaches of covenant had caused no diminution in the value of the land to which
the benefit of the covenant was annexed: see [1974] 1 WLR at p812F-G. No doubt
it was for that reason that in Surrey County Council v Bredero Homes
Ltd [1993] 1 WLR 1361* Steyn LJ expressed the view at p1369 that the Wrotham
Park damages were defensible only on the basis that they were
restitutionary in nature. However, that view was rejected in Jaggard v Sawyer
by both Sir Thomas Bingham MR and Millett LJ who, agreeing with Megarry V-C in Tito
v Waddell (No 2) [1977] Ch 106 at p335, thought that Brightman J’s
approach had been compensatory, in that the damages awarded were intended to
compensate the plaintiffs for not having obtained the price they would have
been able to obtain for giving their consent, had they been asked to give it.
*Editor’s note: Also reported at [1993] 1 EGLR 37
The compensatory analysis, if accompanied by a
recognition that it was not a diminution in value of the dominant tenement that
was compensated, is perfectly acceptable. Equally, in a case where there has
been such a diminution, there seems to be no reason why it should not be taken
into account in assessing the sum that might reasonably have been demanded as a
quid pro quo for relaxing the covenant. Whatever the correct analysis
may be, Jaggard v Sawyer, as both sides agree, is clear authority
for the adoption of the Wrotham Park basis of assessing damages in this case.
I therefore proceed to assess them by reference to the sum that the plaintiff
might reasonably have demanded as a quid pro quo for relaxing the
restrictions in perpetuity, so as to permit the construction of the indoor
riding school and the carrying on of an indoor and outdoor riding school
business.
This question was fully dealt with in evidence and
argument before the judge on the footing that he would either grant a mandatory
injunction for the demolition of the riding school or damages in lieu. Expert
evidence was given for the plaintiff by Mr TE James, a chartered accountant,
and Mr SJ Lush, a chartered surveyor. On the defendant’s side evidence was
given by Mr J Walters, a chartered accountant who had taken on the defendant as
a client after the death of his previous accountant in March 1996. Each expert
put in written evidence and gave oral evidence at the trial. There was also
documentary evidence, much of it relating to the second defendant’s business.
The judge, having decided to grant a prohibitory injunction, did not consider
the evidence pertaining to this head of damages and made no findings on it.
We have been supplied with transcripts of the
evidence of all the witnesses and with copies of the trial bundles of
documents. In agreeing that we should decide the question of damages ourselves,
the parties have shown themselves to be content that we should do so without
having had the advantage of seeing and hearing the witnesses give their
evidence. We have, however, had the advantage of considering the detailed
sequential written submissions of counsel, in which many references to the
evidence have been made.
In the circumstances stated, it would not be
profitable for the evidence to be examined and the submissions discussed. In
the end, as with many questions of damages, it is a matter of judgment. Mr
Zelin has submitted that the correct figure is £26,500, being the approximate
mean between two valuations of the relaxation of the covenant made by Mr Lush,
the first based on the income assumed to have been generated by the business
and the second on the marriage value between the land and the facility afforded
by having the riding school. Mr Taylor has submitted that the correct figure is
£5,000, being 5% of the approximate cost of constructing the riding school. I
am in no doubt that Mr
guide to the amount that the plaintiff might reasonably have demanded for a
relaxation of the restrictions in the spring of 1989. I think that he might
reasonably have demanded a round sum of £25,000 and I would award damages in
that amount.
We have also received written submissions on
interest. On the damages he awarded in respect of the conversion of the
bungalow and the extension of the barn in 1986 the judge only allowed interest
for the six years up to 1992. That was because he thought that the plaintiff
was largely responsible for the action not having come to trial, as it ought to
have done, in 1992. By the same token, Mr Zelin accepts that interest on the damages
now to be awarded should only run for the three years
rate awarded by the judge. That produces a figure of £9,375 and a total award
of £34,375.
I would allow the appeal, dismiss the
cross-appeal, discharge the injunctions granted by the judge and reduce the
amount of the damages from £36,750 to £34,375. No doubt it will be desirable to
make a declaration as to the defendant’s rights, the form of which can be
discussed with counsel after judgment.
PILL and THORPE LJJ
agreed and did not add anything.
Appeal allowed;
cross-appeal dismissed.
