Restrictive covenants –– Modification –– Section 84 of Law of Property Act 1925 –– Restriction against alterations imposed in 1992 –– Grounds (a) and (c) –– Whether restriction obsolete –– Whether discharging or modifying restriction would injure objector –– Whether compensation should be adjusted for rise in property values
By a conveyance dated September 1992, the first two applicants acquired a detached house and some redundant agricultural buildings (the Stables) from the Secretary of State for Wales, who was then acting on behalf of the Forestry Commission. The conveyance contained a restrictive covenant against the erection of any building or structure, and against the alteration or enlargement of the existing buildings without the vendor’s consent. The first two applicants obtained planning permission to convert the stables. The applicants applied under section 84(1)(a) and (c) of the Law of Property Act 1925 to discharge the restrictive covenant, or to modify it in one or other of alternative forms of wording. They contended that the restriction was obsolete (ground (a)), or, alternatively, that the proposed discharge or modification would not injure the persons entitled to the benefit (ground (c)). The Forestry Commission objected to the application.
Decision: The covenant was not obsolete within the meaning of ground (a). It provided a legitimate benefit to the objector in enabling it to control the form of development that took place on the land. However, the covenant was to be modified under ground (c) so as to permit the development for which planning permission had been obtained. It was agreed that the Stables would have been worth an additional £2,500 in 1992 without the restrictive covenant, but that the reduced consideration received by the objector at the time of the sale was £2,000. Adjusting that sum for the rise in values since 1992, the compensation payable to the objector under ground (c)(ii) was £2,450. The applicants were to pay one-half of the objector’s costs.
The following cases are referred to in this report.
Bennett’s and Tamarlia’s Application (1987) 54 P&CR 378
Chandler’s Application, Re (1958) 9 P&CR 512
Cornick’s Application, Re (1994) 68 P&CR 372
Dove’s Application, Re LP/28/1990 unreported
Driscoll v Church Commissioners for England [1957] 1 QB 330; [1956] 3 WLR 996; [1956] 3 All ER 802; (1956) 7 P&CR 371; 168 EG 521, CA
Groves’ Application, Re LP/50/1986 unreported
Jones v Rhys-Jones (1974) 30 P&CR 451; 234 EG 987; [1975] JPL 349, CA
Luton Trade Unionist Club and Institute’s Application, Re (1969) 20 P&CR 1131; [1969] JPL 582
McVey’s and Robertson’s Application, Re (1973) 26 P&CR 429
Nisbet and Potts’ Contract, Re [1905] 1 Ch 391
Pearson’s Application, Re (1978) 36 P&CR 285
Richards’ Application, Re (1984) 47 P&CR 467
Ridley v Taylor [1965] 1 WLR 611; [1965] 2 All ER 51, CA
Robinson and O’Connor’s Application, Re (1965) 16 P&CR 106; (1965) 193 EG 565; [1965] JPL 111
SJC Construction Co Ltd v Sutton London Borough Council (1975) 29 P&CR 322; [1975] 1 EGLR 105; 234 EG 363, CA
Stockport Metropolitan Borough Council v Alwiyah Developments (1986) 52 P&CR 278
Teagle’s and Sparkes’ Application, Re (1963) 14 P&CR 68; (1962) 183 EG 143; [1962] JPL 552
Wickins’ Application, Re (1962) 183 EG 541; [1962] RVR 571
Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798; [1974] 2 All ER 321; (1973) 27 P&CR 296
The first applicant, Melvyn Henry Davies, appeared for the applicants; Catherine Taskis (instructed by Eversheds, of Bristol) represented the objector.
Giving his decision, MR NORMAN J ROSE FRICS said: This is an application by Mr Melvyn Henry Davies, Mrs Jacqueline Davies and Mr Dennis Murphy (the applicants), under section 84 of the Law of Property Act 1925 (the 1925 Act), seeking the discharge or modification of a restrictive covenant affecting land in their freehold ownership at Pandy Mill, Penmachno, Betws-y-Coed LL24 0PP (the subject land). The land was sold to Mr and Mrs Davies by the Secretary of State for Wales under a conveyance dated 24 September 1992. By a transfer dated 8 November 1996, part of it, including premises known as the Stables, was gifted by Mr and Mrs Davies to Mr Murphy. Under the conveyance from the Secretary of State for Wales, the purchasers covenanted for themselves and their successors in title, for the benefit of the vendor’s adjoining land, to observe and perform two stipulations as follows:
(i) That neither the property hereby conveyed nor any part thereof shall be used for any noisy noxious or offensive trade or business or for any purpose which may be or become a nuisance damage or annoyance to the Vendor or other the owners or occupiers for the time being of such land or any part thereof.
(ii) Not to erect any building or structure of any description on the property nor without the prior written consent of the Vendor to alter or enlarge the existing buildings thereon.
At the time of the conveyance, the subject land contained a detached house, Pandy Mill, together with a garage and various outbuildings, including a redundant agricultural building –– the Stables.
In July 1994 Mr and Mrs Davies applied for planning permission to convert the Stables into a dwelling-house. Such permission was granted, subject to conditions, on 12 October 1994. The applicants now seek the discharge of the second restriction. If the covenant is not discharged, they wish it to be modified as follows:
Not to erect any new residential buildings or structures of any description on the property without the written consent of the Vendor, such consent not to be unreasonably withheld and to be given without any payment whatsoever.
The final, and least favoured, alternative sought by the applicants is for the covenant to be modified so as to permit the implementation of the planning consent dated 12 October 1994. Originally, the parties agreed that r 27 of the Lands Tribunal Rules 1996 should apply to this application, and the tribunal so ordered. Following receipt of the parties’ written representations, however, I indicated that they did not contain sufficient information to enable me to determine the application
At the hearing, Mr Melvyn Henry Davies, one of the applicants, appeared on behalf of the applicants and gave evidence. Miss Catherine Taskis of counsel appeared on behalf of the objector. She called Mr JAL Armour ARICS, an area land agent employed by the objector, and Mr WJ Hastings ARICS, with Hastings & Co, of Llanrug, Gwynedd. Shortly after the hearing, I inspected the subject land and the immediate surroundings, accompanied by representatives of both parties.
From the evidence, I find the following facts. The subject property is situated approximately 4km south east of Betws-y-Coed, immediately west of a minor unclassified road that runs along the south side of the River Conwy, between the A470 Betws-y-Coed to Blaenau Ffestiniog Road and the B4406 leading from Betws-y-Coed to Penmachno. It is in a rural location, and surrounded to the north, west and south west by Forest Enterprise plantations. Opposite the property to the east, on the far side of the road, is an area of rough ground and gravelled parking, which is still in the ownership of the objector and which contains the septic tank serving the dwelling-house. This area lies between the unclassified road and the Afon Machno, with the Machno Falls situated directly opposite Pandy Mill towards the northern end of the subject land, and with mixed woodland along the riverside.
The northern section of the subject land contains the property known as Pandy Mill. This comprises a detached, stone-built dwelling-house with an attached double garage, together with gardens, principally comprising rough pasture. The southern part of the site contains a detached range of stone-built outbuildings (the Stables), which were originally clad with a slate-covered roof. These are of single-storey construction, approximately 21m long by 4.8m wide. They were formerly subdivided by two stone internal partition walls, which supported the roof covering. To the front of the building were five door openings and two small window openings, while to the rear there was a single doorway and a further window.
The subject land is served by a private water supply derived from a spring that feeds tanks and a water pipeline situated within the objector’s retained land. The land and the buildings upon it are now substantially the same as at the date of the original conveyance. At that date, part of the roof to the outbuildings was intact, but these buildings are now without a roof. Some alterations have been made pursuant to the planning consent, but without the objector’s consent. The approved planning application plans show that the internal structural partitions are to be removed and replaced by new partitions to provide three bedrooms, a bathroom, a lounge and a kitchen/dining room. In addition, four existing doorways are to be converted into window openings.
The wording of the restrictive covenant differs from that contained in the estate agents’ particulars, which were prepared on behalf of the objector in December 1991, prior to the sale to the applicants. Under the heading “Covenants”, those particulars stated:
(i) The purchasers will not be permitted to erect any building upon the site without the consent of the Forestry Commission.
(ii) The purchasers will covenant to fence the boundaries of the property to a stock proof condition and maintain them in such condition thereafter.
However, a draft contract and conveyance, containing the covenants in their final form, was sent by the Treasury Solicitor to the first two applicants’ solicitor on 26 February 1992, some seven months before the sale was completed.
In a letter dated 18 December 1997, Mr Davies indicated that, in order to secure the objector’s approval to the proposed building works, the applicants were prepared to pay £5,000 upon completion of those works and upon receipt of the necessary finance. He added: “We understand that we have no choice but to pay this amount”. The objector required the consideration to be paid upon completion of the deed of variation, rather than upon completion of the works. Since this was not acceptable to the applicants, the consent was not documented and the current proceedings were subsequently commenced.
The application is made under subsections 84(1)(a) and (c) of the 1925 Act, and I shall consider each of these grounds in turn. Under para (a), the issue is whether:
by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Lands Tribunal may deem material, the restriction ought to be deemed obsolete.
In his written submissions, Mr Davies relied upon two matters as indicating that the restriction was obsolete. First, he suggested that the Forestry Commission changed the nature of the immediate area by felling and removing all the mature conifers on its land to the west of the subject land in May/June 1999. On the other hand, Mr Armour pointed out that Mr and Mrs Davies had bought the subject land from the Forestry Commission. The Commission’s business was the production of trees. By the nature of that business, trees were felled and new crops planted. The subject land was adjacent to the forest and the character of the neighbourhood remained unchanged. Mr Armour also drew attention to the third schedule to the original conveyance. This entitled the vendor:
to plant trees or erect such buildings or erections on any part of such (adjoining or neighbouring) land in such manner as he or they think fit.
He suggested that the applicants could not rely upon the felling of trees to show that the neighbourhood had changed, when they were fully aware that this might happen at the time they accepted the covenant. I agree with that suggestion, and, in the absence of any other evidence on the matter, I would find that there have been no material changes in the character of the subject land or the neighbourhood that render the covenant obsolete.
The applicants, however, also rely upon certain observations of Denning LJ in the Court of Appeal in Driscoll v Church Commissioners for England [1956] 3 All ER 802*. That case concerned an appeal against the decision of this tribunal not to modify restrictive covenants contained in the leases of eight dwelling-houses in Croydon. The covenants required that the premises should not be used for any trade or business, or otherwise than as a private dwelling-house, save with the previous written consent of the lessor. The applicant argued that the covenant was obsolete or impeded the reasonable use of the land. The president of the tribunal (Sir William FitzGerald) found that, although there had been changes in the size of private residences in the area, that part of Croydon was still essentially residential in character, and the owners and lessees of the houses there were entitled to the amenities that they enjoyed when they entered into their leases. Those included the benefit of a covenant that no trade or business should be carried on in the area, and that the premises should not be used otherwise than as a private dwelling-house, save with the previous written consent of the lessor. The president concluded that if those amenities were to be preserved, the Church Commissioners should still retain the control that could be exercised by giving or withholding their consent. Furthermore, it was clear that the fundamental reason for the Church Commissioners’ objection, which the evidence and site inspection indicated was valid, was the manner in which the applicant conducted his club use of the relevant premises, and the dilapidated condition into which he had allowed them to fall. The president was in no doubt that the applicant’s failure in these respects did injure both the Church Commissioners and the other objectors. He therefore concluded that the covenants were not obsolete.
* Editor’s note: Also reported at (1956) 168 EG 521
In the course of his judgment, upholding the tribunal’s decision, Denning LJ said:
It seems to me that, so long as the landlord uses this covenant reasonably for a useful purpose then, even though that purpose goes beyond what was contemplated ninety years ago, the covenant is not obsolete; whereas, if the covenant is shown no longer to serve any useful purpose, then, of course, it is obsolete. And in considering whether it still serves a useful purpose, I think that it is very important to see how the landlord, or whoever is entitled to the benefit of the covenant, has used it in the past and seeks to use in the present. If he uses it reasonably, not in his own selfish interests but in the interests of the people of the neighbourhood generally, as, for instance, when he gives his consent for any sensible change of user, then it will serve a useful purpose. I should have thought that if he uses it unreasonably, for instance, to exact a premium as a condition of his consent; or if he refuses consent altogether when he ought to give it, as, for instance, for turning it into flats, it would no longer serve a useful purpose. In short, so long as the landlord uses the covenant reasonably in the interests of the public at large it is not obsolete, but, if he seeks to use it unreasonably, then it is obsolete.
In the present case, the applicants say that the objector is using the restrictive covenant unreasonably, by seeking to exact a premium as a condition of its consent, and, therefore, the covenant is obsolete. They refer, among other matters, to a letter from Mr Armour dated 12 May 1995, which stated, with regard to the second restriction in the covenant:
This restrictive covenant in the Conveyance is there to prevent further development unless of course this Enterprise is able to share in the proceeds. It is also there to prevent people from building too near to the existing forest edge.
Any observations by Denning LJ must be treated with the greatest respect. I am not satisfied, however, that they require me to find that the covenant that is the subject of this application is obsolete. First, the observations did not form part of the reasons for the judgment, since Denning LJ upheld the tribunal’s decision that the covenants were not obsolete. Second, the covenants in Driscoll were 90 years old. In the case with which I am concerned, they are only eight years old, and the applicants applied for planning permission to alter the Stables less than two years after agreeing to be bound by those covenants. (In this connection, reference was made on behalf of the objector to Re Robinson and O’Connor’s Application (1965) 16 P&CR 106*, and on behalf of the applicants to Re Wickins’ Application [1962] EGD 234† and Jones v Rhys-Jones (1974) 30 P&CR 451‡.)
* Editor’s note: Also reported at (1965) 193 EG 565
† Editor’s note: Also reported at (1962) 183 EG 541
‡ Editor’s note: Also reported at (1974) 234 EG 987
Finally, it would appear that Denning LJ’s views on the point were not shared by Hodson LJ, who gave the second judgment. He said:
The main attack on the conclusion of the President of the Lands Tribunal has been made by counsel for the applicant, however, on the ground that he was wrong in that he misdirected himself, and, alternatively, that there was no evidence on which he could come to the conclusion that the restriction ought not to be deemed obsolete, because it is said that on the face of the findings of fact which he made the restriction was obsolete, and that he was diverted from the right conclusion only by taking into consideration the activities of the Commissioners in this case. I think that has been a difficult question, because for my part I agree with counsel’s submission that in considering the question of obsolescence it is not relevant to consider whether the Church Commissioners will or will not withhold their consent to the covenant not being enforced or not being kept alive in a particular case subject to certain restrictions. One has to consider the circumstances of the covenants of the estate as found as a fact by the Tribunal and then consider whether, as a matter of law, the Tribunal was right in coming to the conclusion that the provision was not obsolete. Some assistance, I think, can be obtained, in considering this question, from what this court said in a judgment delivered by Romer LJ (the other members of the court concurring), in Re Truman, Hanbury, Buxton & Co, Ltd’s Application [1955] 3 All ER 559. In that judgment, he considered the word “obsolete” and the definitions in the Shorter Oxford English Dictionary to which the attention of the court has been drawn, and he said… that it seemed to him that:
“the meaning of the term ‘obsolete’ may well vary according to the subject-matter to which the term is applied”;
and dealing with that case (which was a case of a kind like this where a restriction in a covenant had to be considered) he said:
“… I cannot see how, on any view, the covenant can be described as obsolete, because the object of the covenant is still capable of fulfilment, and the covenant still affords a real protection to those who are entitled to enforce it.”
The last sentence was also quoted with approval in Driscoll by the third member of the court, Morris LJ.
In the present case, one must bear in mind that the applicants’ primary submission is that the covenant should be wholly discharged. Such discharge would remove from the objector any control over the erection of any building or structure on the subject land, even if such building were near to the edge of its forest. In Mr Armour’s letter of 12 May 1995, he said that one of the purposes of the covenant was to prevent people from building too near to its forest. I accept that this letter provides an accurate summary of the objector’s position. In so far as the covenant was intended to prevent building too close to the forest, its object is still capable of fulfilment and its continued existence still affords a real protection to the objector. The fact that the objector might be prepared to waive the restriction upon payment of a sum of money, provided the proposed works were otherwise acceptable to it, is, in my view, not material to the question of obsoleteness. I conclude, therefore, that the covenant is not obsolete. Accordingly, the applicants are not entitled to succeed on ground (a).
I should add that the applicants also referred to the decision of this tribunal in Re Luton Trade Unionist Club and Institute’s Application (1969) 20 P&CR 1131. In that case, the tribunal held that in appropriate cases a covenant may be obsolete because its object is no longer capable of fulfilment, even though the proposed building works might cause injury to the objectors. In my opinion, that case is not relevant to the current application, in view of my finding as a fact that the purpose of the covenant is indeed still capable of fulfilment.
The applicants also rely upon section 84(1)(c) of the 1925 Act. Here, the issue is whether this tribunal is satisfied:
that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction.
Mr Armour’s written submission indicated that the covenant was included because the objector:
would not have wanted new building and/or alterations/enlargement of the existing buildings to take place outside of its control.
Against this background, he considered that the objector would be prejudiced if the covenant were modified or discharged either wholly or partially. In support of this approach, Miss Taskis referred to Re Teagle’s and Sparkes’ Application (1963)14 P&CR 68*.
* Editor’s note: Also reported at (1962) 183 EG 143
At the hearing, Mr Armour said that the purpose of imposing the covenant was fourfold. First, it provided protection to the forest and trees. It enabled the objector to prevent development from taking place too close to the edge of the forest to the south, west and north of the subject land. Such development could potentially damage certain trees and force the objector to fell them prematurely in order to prevent such damage. The covenant could also help to avoid any problems arising from the objector’s need to drain water into the road in order to keep it away from the trees. Second, the objector wished to ensure that any buildings erected on the subject land would not be damaged by vibration or other matters resulting from the objector’s use of access roads to its forest. Third, the covenant gave the objector some control over amenity. It might wish to prevent a form of development that it considered to be ugly or out of scale with the surrounding area, even if the local planning authority were prepared to approve it. Although the general area was not particularly interesting, the subject land occupied an attractive riverside location, which should be protected. Finally, the covenant enabled the objector to share in any increase in value of the subject land, should further development be permitted in the future.
Mr Davies argued that the objector could not reasonably expect to obtain any protection for its retained land by controlling development on the subject land. He said that the Snowdonia National Park Authority were the guardians of Snowdonia and everything within it. They had imposed 10 conditions upon the planning consent, dated 12 October 1994, most of which were designed to safeguard the appearance and visual amenities of the area. He also alleged that, at the time of the original sale, the proposed restrictive covenant was not mentioned in negotiations, so the applicants had no knowledge of any intention to provide the objector with protection for its retained land. He quoted various observations that had been made by the objector in correspondence and in its formal notice of objection to this tribunal. These, he said, were all to the same effect, namely that the objector wished to extract money for its consent to vary the covenant. This, he suggested, was the only benefit that the objector received from the covenant. In the circumstances, he submitted that the objector would suffer no injury or loss of amenity if the covenant were discharged, and that its objection was “misguidedly frivolous”.
Mr Davies referred to Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 2 All ER 321; Re Chandler’s Application (1958) 9 P&CR 512; SJC Construction Co Ltd v Sutton London Borough Council (1975) 29 P&CR 322*; Re McVey’s and Robertson’s Application (1973) 26 P&CR 429; Re Bennett’s and Tamarlia’s Application (1987) 54 P&CR 378; Re Pearson’s Application (1978) 36 P&CR 285; Ridley v Taylor [1965] 1 WLR 611; Re Nisbet and Potts’ Contract [1905] 1 Ch 391.
* Editor’s note: Also reported at [1975] 1 EGLR 105
In Re Bennett, the tribunal member, Mr VG Wellings QC, made the following observations:
I have not been persuaded by the applicants that the restrictions in either case ought to be deemed obsolete nor that an order ought to be made under paragraph (b) of section 84(1) of the Act of 1925. However, on the evidence, it is plain that if the proposed modifications are permitted, no one, least of all the trustees, will suffer any loss of amenity and that there will be no diminution in value of any property retained by the trustees or indeed by any other persons. On the contrary, the works which have been carried out at No 18 Victoria Place and those which are intended for No 150 Devonport Road constitute and will constitute improvements of those respective premises. In my judgment, the only loss which the trustees will suffer if the restrictions are modified in the manner prayed is the loss of a bargaining position. On the authorities, that kind of loss is in the circumstances of the present case not one which the trustees are entitled to ask to be taken into account. Accordingly, the applicants are in both cases entitled to succeed under both paragraphs (c) and (aa) of section 84(1) of the Act.
In the present case, Miss Taskis frankly conceded that she was not able to cite any authority for the proposition that the protection of the public purse, by securing payments on the occasion of future development, was a reasonable objective of a restrictive covenant. I am in no doubt that, if the loss of the ability to share in any future increase in value of the subject land is the only injury that the objector will suffer from discharge or modification of the covenant, then its objection under para (c) must fail. However, in the light of all the evidence and my site inspection, I am satisfied that the restrictive covenant provides a legitimate benefit to the objector in enabling it to control the form of development that takes place on the subject land. In particular, as Mr Armour indicated in his letter of 12 May 1995, the covenant enables the objector to prevent building too near to the existing forest edge. This control is essential if the objector is to be able fully to protect its forest.
The primary application to this tribunal is for the discharge of the covenant. The covenant includes a prohibition on the erection of any building or structure of any description on the property. Although this goes further than is necessary for the objector simply to prevent building too near to the forest edge, if it were discharged in its entirety the objector would lose the power to prevent such building. To that extent, I consider that the objector would suffer injury if the application were to succeed. Accordingly, the application for the discharge of the covenant fails to satisfy the requirements of section 84(1)(c) of the 1925 Act.
I now turn to the applicants’ proposed modification of the covenant to read as follows:
Not to erect any new residential buildings or structures of any description on the property without the written consent of the Vendor, such consent not to be unreasonably withheld and to be given without any payment whatsoever.
The effect of such an amendment would be to remove from the objector any control over the erection, for example, of new agricultural buildings on the subject land. From my inspection of the site, it is clear that such structures, if built too close to the edge of the forest, could cause damage to the objector’s trees. The first application for modification therefore also fails to meet the test in para (c).
The final application is to modify the covenant so as to permit the implementation of the planning permission dated 12 October 1994. Apart from the question of financial compensation, the objector does not suggest that the proposed conversion of the Stables to a dwelling-house will cause it any injury. As previously indicated, the loss of the opportunity to charge the applicants for permission to carry out that conversion is not something that I may take into account. I recognise that this is a case where an objection has been lodged by the original covenantee under a contract entered into only eight years ago; that two of the three applicants were party to the original conveyance and that the third applicant obtained his interest in the Stables by way of gift. Nevertheless, I consider that, in the circumstances, the restrictive covenant can, and should, be modified, to the limited extent proposed, upon ground (c).
The objector requested that I should make an award under subpara (ii) of para (c), namely:
a sum to make up for any effect which the restriction had, at the time when the restriction was imposed, in reducing the consideration then received for the land affected by it.
The objector submitted that it would have sought a higher price for the subject land if there had been no restriction. In support of this submission, reference was made to Re Cornick’s Application (1994) 68 P&CR 372; Stockport Metropolitan Borough Council v Alwiyah Developments (1986) 52 P&CR 278; Wrotham Park Estate Co Ltd v Parkside Homes Ltd (ibid) and Re Richards’ Application (1984) 47 P&CR 467.
The valuation experts instructed by the parties have agreed that:
The difference in the value of The Stables with and without a restrictive covenant as at the date of the purchase (1992) is in the sum of £2,500.
In his initial written submission, Mr Davies referred to the difference between the restrictive covenant mentioned in the agents’ particulars and those contained in the subsequent conveyance as follows:
It was only on 24 September 1992 –– the day we received the conveyance, signed the conveyance and actually moved house –– that we became aware of extra wording in the covenant, not previously advised to us. By leaving the extra wording… and the delivery of the conveyance until the very last day the Forestry Commission were assured of our acceptance of this “fait accompli” as presented by them.
In response to this allegation and my own request for more evidence on the point, the objector produced copies of the documents sent by the Treasury Solicitor on 26 February 1992 to the solicitors acting for the first two applicants. At the hearing, Mr Davies said that he did not remember whether his solicitors had advised him at the time of the contents of the draft conveyance, although he conceded that it was likely that they would have done so. He also suggested, however, that
On the balance of probabilities, I find that the first two applicants were aware of the terms of the restrictive covenant by the time they finally reached agreement upon the purchase price of £57,000 –– a reduction of £3,000 from the price originally agreed. It is, in my view, significant that, although Mr Davies said that he did not read the contract before signing it, but relied entirely upon his solicitors to advise him, and that he had felt “shock, amazement and anger” when Mr Armour wrote to him in May 1995 advising of the need to obtain the objector’s consent for the proposed works, he did not then approach his solicitors to check the legal position with them. In any event, I accept the evidence of Mr Armour to the effect that if, prior to exchange of contracts for the sale at £57,000, the applicants had expressly asked for permission to convert the Stables to a dwelling-house, the price required would have been increased. Mr Davies said that he could not have afforded to purchase the subject property for more than £57,000, and that no higher offer was submitted by any other party. That may or may not be so, but, in my view, it is beside the point. It is agreed that the Stables would have been worth an additional £2,500 in 1992 if the restrictive covenant had been removed. It follows that the existence of that covenant reduced the value of the property by that amount and thus the consideration that the objector received for it.
It is necessary to remember that the covenant went further than merely preventing the alteration of the Stables without the vendor’s prior written consent. It also prevented the enlargement of that building without consent and prohibited absolutely the erection of any building or structure within its curtilage. In the absence of any evidence as to the apportionment of the agreed diminution in value, I find that the restriction upon altering the Stables without consent reduced the consideration received by the objector in 1992 by £2,000.
Finally, I must decide whether the payment of £2,000 today would “make up” for the fact that the original consideration was reduced by that amount eight years ago. In my view, it would not. In Re Groves’ Application (LP/50/1986, unreported) the president, Sir Douglas Frank QC, accepted the objectors’ submission that the original value should be adjusted for inflation. A similar approach was adopted by the member Judge Marder QC, in Re Dove’s Application (LP/28/1990, unreported). The parties have agreed that the Retail Prices Index increased by 22.31% between September 1992 and August 2000, the latest date for which figures were available. In the circumstances of this case, I adopt this factor as the best indication of inflation. Adjusting the original reduction in the consideration received for the subject land upon this basis, therefore, produces the sum of £2,446, which I round up to £2,450. Accordingly, I order the restriction to be modified so as to permit the conversion of the Stables to a dwelling in accordance with the planning permission granted by Gwynedd County Council on 12 October 1994 under reference NP4/29/116B. I also award, by way of compensation, a sum of £2,450 to be paid by the applicants to the objector.
The above decision concludes my determination of the substantive issues in this application. It will take effect as a decision when the question of costs is decided, and at that point, but not before, the provisions relating to the right of appeal in section 3(4) of the Lands Tribunal Act 1949 and Part 52 of the Civil Procedure Rules will come into operation. The parties are invited to make submission as to the costs of this application and a letter accompaning this decision sets out the procedure for submissions in writing.
Giving his decision on costs, MR NORMAN J ROSE FRICS added: The applicants persisted with their application to have the restrictive covenant removed entirely. They succeeded only to the extent of obtaining a modification to permit the conversion of the Stables to a dwelling in accordance with the 1994 planning permission. That modification was not referred to at all in their written submissions and was only put forward by them at the end of the hearing, effectively as “a last resort”.
The objector succeeded in securing rejection of the covenant’s proposed discharge or substantial modification. I consider, however, that the proceedings were unduly prolonged by the objector’s unsuccessful contention –– maintained throughout –– that a primary purpose of the covenant was to prevent further development unless the objector was able to share in the proceeds.
In all the circumstances, the order of the tribunal is that the applicants will pay one-half of the objector’s costs of the application. Such costs are to be agreed, or, in default of agreement, assessed upon the standard basis by the Registrar of the Lands Tribunal.
