Breach of covenant — Compensation — Damages — Agreement for sale of land to claimant — Covenant against building — No formal transfer of land — Claimant building on land in breach of covenant — Order for specific performance of agreement — Whether claimant entitled to damages for breach of agreement — Whether defendant entitled to damages for breach of covenant — Claim and counterclaim allowed
The claimant purchased from the defendant a property that comprised a farmhouse and land. The parties later entered into an agreement for the claimant to buy additional adjacent land, to be enjoyed with the farmhouse. The agreement contained a covenant not to erect any buildings. The defendant’s solicitor registered the agreement at the Land Registry, but the claimant failed to notify the Registry of a formal transfer or to register his own title.
The claimant built on the land and, when he came to sell the property contained in both titles, the defendant required him to provide compensation for breach of the covenant before he would enable the claimant to give good title to his purchasers. The claimant denied that the defendant was entitled to compensation on the grounds that he had expressly or impliedly consented to the building being constructed, and claimed that the defendant was barred from recovering compensation by laches, acquiescence, waiver or estoppel.
The claimant was granted an order for specific performance of the agreement and the defendant executed a transfer of the additional land so that the claimant could proceed with his sale. The claimant brought an action for damages for the loss of the monies he would have received had the defendant agreed to the transfer earlier. The defendant counterclaimed for damages for breach of the non-building covenant. He contended that the additional land had been sold as amenity land and that, by building on it, the claimant had made a development profit of about £62,000, which should be shared between them.
Held: The claim and counterclaim were allowed.
Damages for breach of contract at common law were likely to be nominal only where the breach was of a negative covenant, such as in the present case, having regard to the difficulty of establishing actual damage to the land for the benefit of which the covenant was provided: Surrey County Council v Bredero Homes Ltd [1993] 1 EGLR 37 referred to.
The claimant might lose his entitlement to damages if he had been guilty of such acquiescence as to make it unconscionable for him to rely upon his legal right. A person’s behaviour would not usually be regarded as unconscionable unless it also caused him to act to the detriment of the other person involved. In the present case, the defendant’s delay in agreeing to the transfer did not make it unconscionable for him to seek to pursue his right to claim damages for breach of covenant: Gafford v Graham [1999] 3 EGLR 75; [1993] 41 EG 159 distinguished.
Damages should be awarded in such sum as the defendant might reasonably have demanded as a quid pro quo for relaxing the covenant had the claimant so applied, on the basis that each party was willing to agree a proper and not a ransom price. In the present case, the probable figure for a release of the covenant was £8,000: Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 referred to.
However, the defendant must have known or foreseen that his delay would delay completion, which was likely to cause loss to the claimant. On the evidence, the loss that the claimant had established was the loss of use of sums that he would have applied in the reduction and discharge of borrowings from a mortgagee and his bank. He was entitled to recover the actual cost of interest paid by him to those lenders and insurance and water rates.
Marc Dight (instructed by CKFT) appeared for the claimant; James Quirke (instructed by Evans Roberts, of Powys) appeared for the defendant.
Eileen O’Grady, barrister
