Derogation from grant — Scope of principle — Comprehensive and important review of authorities — Application in the case of interference with rights reserved to use the flank wall of a property for advertising purposes — Appeal from decision of county court judge in favour of claim that the rights in question had been frustrated — The respondent to the present appeal (the defendant below) was entitled to a 99-year lease of the property — The appellants, a company with two shareholder-directors, had in the course of time acquired the freehold and also a sublease of the property, leaving the respondent with the intermediate leasehold interest — The flank wall with its advertisement hoardings faced an open site which became a car park and eventually became vested in the appellant company’s shareholders — For a long time no difficulties arose about access from the site to the hoardings and at some stage a passageway was constructed between the wall and the remainder of the site — Later, however, the appellant company objected to ladders being placed on the site, at a point beyond the passageway, for safety in gaining access to the hoardings — When a working platform was placed above the passageway to avoid trespassing on the site the appellant company retaliated by erecting a massive hoarding close to the passageway thereby obscuring any advertisement on the flank wall — The respondent had granted a 21-year business subtenancy of the property, reserving the use of the flank wall for the purpose of advertisements — This subtenancy became vested in the appellant company
proceedings were commenced in the county court by a claim on behalf of the
appellant company for the repayment of rent, arising from a difference as to
when an increased rent under the business subtenancy began — The main issue in
the proceedings, however, was the counterclaim by the respondent for damages in
respect of interference with the use and enjoyment of the flank wall for
advertisement purposes — The county court judge dismissed the company’s rent
claim but awarded the respondent £4,700 plus interest on her counterclaim — The
company appealed
Appeal considered in the light of the authorities the application of the
derogation from grant principle and agreed that the appellant company was in
breach of its obligations under that principle when it erected the hoardings
which obscured the advertisements on the flank wall and when it allowed
advertising contractors to construct and maintain a replacement hoarding — The
judge below had also given judgment against the two shareholder-directors of
the company, but this judgment could not be supported as it was based on a
matter which was not put to them at the trial; for this reason their appeals
succeeded — The respondent had relied on two other causes of action, in
addition to derogation from grant — These failed, but the respondent had
succeeded on the main ground of derogation and the company’s appeal must therefore
be dismissed — ‘An appalling saga’, per Nicholls LJ
The following
cases are referred to in this report.
Aldin v Latimer Clark, Muirhead & Co [1894] 2 Ch 437
Beddington
v Atlee (1887) 35 ChD 317
Booth v Alcock (1873) 8 Ch App 663
British
Leyland Motor Corporation Ltd v Armstrong
Patents Co Ltd [1986] AC 577; [1986] 2 WLR 400; [1986] 1 All ER 850, HL
Browne v Flower [1911] 1 Ch 219
Cable v Bryant [1908] 1 Ch 259
Davis v Town Properties Investment Corporation Ltd [1903] 1 Ch 797
Harmer v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200
Hollywood
Silver Fox Farm Ltd v Emmett [1936] 2 KB 468
Lyttelton
Times Co Ltd v Warners Ltd [1907] AC 476
Molton
Builders Ltd v City of Westminster London
Borough Council (1975) 30 P&CR 182, CA
Myers v Catterson (1889) 43 ChD 470
Ricketts
v Enfield Churchwardens [1909] 1 Ch 544
This was an
appeal against a decision of Judge Harris QC at Westminster County Court. The
plaintiffs, Johnston & Son Ltd, appealed against the dismissal by the judge
of a claim against the defendant, the present respondent, Miss Ida Kate
Holland, for repayment of certain sums paid to her as rent. The judge also
found in favour of a counterclaim by Miss Holland against both the company and
the two individual shareholder-directors, Sidney Johnston and his wife, Elsie
Johnston, in respect of interference with her rights to the use and enjoyment
of the flank wall (northern) at 6 Queen’s Parade, Green Lanes, Harringay,
London N8.
Romie Tager
(instructed by Rose & Birn) appeared on behalf of the appellants; Ivan
Krolick (instructed by Alan R Pulver & Co)
Giving the
first judgment at the invitation of Lloyd LJ, NICHOLLS LJ said: These parties
have been engaged in disputes and litigation for over 13 years. The disputes
seem to have their origin in an incident which occurred in 1971. A poster
hoarding fell off the end wall of 6 Queen’s Parade, Green Lanes, Harringay,
London N8 (which I shall call ‘no 6’) and damaged some cars standing below.
Miss Ida Holland owns a long lease of no 6. The cars belonged to a company
called Johnston & Sons Ltd (which I shall call ‘the company’). The two
shareholders and directors of the company were Mr Sidney Johnston and his wife
Mrs Elsie Johnston. The company’s car sales business was managed by their son
Colin. The poster company’s insurers were slow in settling the company’s claim
for damage to the cars. Since then, as the judge found, Mr Colin Johnston has
been almost paranoid in his desire to spite and do down Mrs Holland. Hence this
appalling saga.
The appeal is
from a decision of His Honour Judge J P Harris QC, sitting in the Westminster
County Court on June 8 1987. The judge dismissed a claim brought by the company
against Mrs Holland for repayment of sums, totalling £2,812, paid by the
company to her as rent, and he found in favour of Miss Holland on a
counterclaim brought by her against the company and Mr and Mrs Johnston for
damages in respect of interference with her use and enjoyment of the flank wall
of no 6 for advertising purposes. He awarded her the sum of £4,700, plus
interest. From that decision the company and Mr and Mrs Johnston have appealed.
The
history
I must first
refer to the essential history. The facts are a little complicated. No 6 is at
the northernmost end of a terraced building. Miss Holland, who is now in her
eighties, has been connected with no 6 all her life. In 1907 her father, Henry
Holland, carried on a cycle and sports goods business in a shop on the ground
floor, and he and his family lived in the residential accommodation above.
Initially he seems to have been a subtenant from a Mr Brewis. In 1919, after
the first world war, Mr Brewis assigned to Mr Holland the residue of a 99-year
lease of no 6 which had been granted on September 10 1898.
The northern
flank wall of no 6 overlooked an open site, beyond which was the Queen’s Head
public house. At the time when Mr Holland acquired the lease of no 6, the
licensee of this public house was a Mr Robert Chattey. He held a lease of the
public house plus the adjoining open site for a term of 70 years from Midsummer
Day 1885.
From at least
1909 Mr Holland used the northern flank wall of no 6 for advertising purposes.
The wall was readily visible to people passing along Green Lanes. On July 23
1919, which was the date on which Mr Holland acquired the lease of no 6 from Mr
Brewis, Mr Holland entered into an agreement with Mr Chattey, the licensee of
the Queen’s Head. By that agreement, which I shall call ‘the 1919 agreement’,
Mr Chattey, described as ‘the Landlord’ and Mr Holland, described as ‘the
Tenant’ agreed
that the
Landlord shall let and the Tenant shall rent all that space on the South side
of the grounds adjoining the ‘Queen’s Head’ Hotel, Green Lanes, Harringay in
the County of Middlesex on premises belonging to the Tenant including the
forecourt thereof for advertising purposes as from the 24th day of June 1919 at
the yearly rent of one shilling (1/-) payable on the four usual quarter days in
each year the first payment to be made on the 29th day of September 1919.
The agreement
provided that the tenancy thereby created was terminable on three months’
written notice on either side. The agreement superseded a similar agreement
made in 1909 between Mr Chattey and Mr Brewis.
Miss Holland
relies on the 1919 agreement as one of her causes of action in the present
case. For the moment it is sufficient to note that the advertisement hoardings
fastened on to the flank wall of no 6 projected forward some inches from that
wall and overhung the Queen’s Head open site of which Mr Chattey had a long
lease. The 1919 agreement was intended to regulate the position regarding those
hoardings. Although the drafting of the agreement leaves much to be desired, it
is tolerably clear that the agreement either operated as a demise to Mr Holland
by Mr Chattey of the narrow strip of air space of a few inches forward from the
northern flank wall over the whole area of that wall or, if that space were not
sufficiently clearly defined to be capable of being the subject-matter of a
demise, operated as a grant to Mr Holland of an easement to affix and retain
advertisement hoardings on the flank wall. It matters not for the purposes of
this action which of these alternatives is the correct one. In either event, by
implication there was included a grant of rights of access over Mr Chattey’s
land reasonably necessary for maintaining and using the hoardings.
I return to
the history. Mr Holland died in 1927. On March 28 1935 his executors, who were
his widow, Mrs Sarah Holland, and a Mr Hyman Stark, executed an assent in
favour of Mrs Holland of the lease of no 6. By then the Holland family had
moved away from no 6. No 6 was sublet, but advertising on the flank wall of no
6, by or on behalf of Mrs Holland, continued.
At some time
during the 1930s an alteration was made to no 6. An external staircase giving
direct access to the first floor was constructed against the northern wall of
no 6. From the foot of this staircase to the front of no 6 a passageway, some 4
ft 6 in wide, was constructed. This was separated from the Queen’s Head open
site by a fence. It is not known now who carried out these works — whether Mrs
Holland or a subtenant of hers — or what arrangements were made with Mr Chattey
or the freeholders of the Queen’s Head. Thenceforth the open site was reduced
in size by the removal from it of this passageway. I shall refer to the residue
of the Queen’s Head open site remaining after the removal of this passageway
from it as ‘the car lot’ and to this passageway as ‘the passageway’.
The second
world war came and went. In 1950 the then lessee of the Queen’s Head
surrendered the residue of the 1885 lease to the freeholder, the Cannon Brewery
Co Ltd.
In 1953 Cannon
Brewery let the car lot to Mr Johnston and two partners, who were trading as
Atomic Cars, for use by them for buying and selling secondhand cars. The
letting was for three years, and thereafter until determined. Meanwhile
advertising on the flank wall of no 6, licensed by Mrs Holland, continued. In
1954 the Borough Billposting Co, which belonged to Odham’s Press Ltd, was the
licensed advertiser. On September 1 1954 it entered into a written agreement with
Cannon Brewery regarding access over the car lot for the purpose of posting
advertisements. If ladders up to the hoarding were placed in the passageway
they were at too steep an angle for safety. So it was better to place the foot
of the ladders on the car lot side of the fence dividing the car lot from the
passageway. The 1954 agreement recited the 1919 agreement and that the interest
of Mr Chattey in that agreement ‘is now vested’ in Cannon Brewery and that the
interest of Mr Holland ‘is now vested in Mrs Holland his widow’. The agreement
provided for Cannon Brewery, ‘with the consent which has been obtained of its
tenants Messrs W A Johnston, S A Johnston and L N Johnston trading as Johnston
& Sons’, to grant to Odham’s
all necessary
access over and through the private forecourt of [Cannon Brewery’s] property
known as the Queen’s Head Hotel, Green Lanes, Harringay aforesaid for the
purpose of maintaining and posting advertisement boards on the flank wall of
the adjoining property known as No 6 Queen’s Parade, Harringay . . .
The first of
the four conditions then set out was that the agreement should remain in force
for one year and thereafter until determined by three months’ notice or unless
and until the 1919 agreement should be determined.
Advertising on
the flank wall of no 6 continued throughout the 1950s, with access to the
hoardings being achieved by ladders resting in the car lot used by Atomic Cars.
In 1960 Mrs
Holland granted to her tenant of no 6, a Mr Henry Wade, a new 21-year lease, at
a rent of £500 per annum, in place of his then existing lease. The new lease
was dated January 6 1960. It is upon the reservation contained in this lease,
which I shall call ‘the 1960 lease’, that Miss Holland principally founds her
cause of action against Mr and Mrs Johnston and the company. The property
demised by the 1960 lease was described as:
ALL THAT
lock-up shop messuage and premises with dwelling rooms over situate at and
known as 6 Queens Parade, Harringay in the County of Middlesex and all ways
sewers drains lights easements and appurtenances thereto belonging or
appertaining . . ..
It is common
ground that by this lease Mrs Holland demised to Mr Wade no 6 and also all her
estate or interest or rights, whatever precisely they may have been, in and over
the passageway. The 1960 lease contained the following reservation:
except and
reserving unto the Lessor the use of the exterior of the flank wall of the
premises on the north side thereof for the purpose of affixing posters or
advertisements thereto and the right to grant licences therefor.
Mrs Holland
died soon afterwards, on May 2 1960. Her personal representatives were her
daughter Miss Holland and Mr Hyman Stark. On June 7 1960 they made a formal
written assent, in favour of
which had been granted in 1898.
On July 24
1961 the brewery company, now known as Ind Coope (London) Ltd, granted a
tenancy of the car lot to the company for three years and thereafter until
determined by notice. The company had been incorporated on January 25 1960.
This tenancy superseded the tenancy of the car lot which the three partners had
from 1953. This tenancy is still subsisting. In the following year the company
expanded further. On September 10 1962 the company purchased from Mr Wade for
£750 the goodwill of Mr Wade’s car sales business and the residue of the 1960
lease of no 6. In this way the company became Miss Holland’s lessee.
Matters
remained thus until, in 1968, the company acquired the freehold of no 6. Thus
the position regarding no 6 then became as follows: the company was the
freeholder, Miss Holland was entitled to the residue of the old 99-year
headlease, due to expire at midsummer 1997, and the company was the tenant from
her under the 21-year lease granted in 1960 which had reserved the advertising
rights in favour of the landlord.
The
previous litigation
I can leave
the conveyancing history there for the moment and turn to the previous
litigation between the parties. I have mentioned the incident concerning the
damaged cars in 1971. The poster company sought to re-erect its hoarding, but
it was prevented by the company from having access to the car lot for this
purpose. On October 23 1974 Miss Holland issued a writ against the company
claiming an injunction and damages. Meanwhile, the brewery company, at Mr Colin
Johnston’s behest, gave notice in August 1974 terminating the 1954 access
agreement from, apparently, the end of 1974. The action was tried on February 9
1977 by Sir Douglas Frank QC, sitting as a deputy High Court judge. Before him
it seems to have been common ground that, following the termination of the 1954
access agreement, Miss Holland no longer had any right of access over the car
lot. Furthermore the company accepted that it had no right to obstruct use of
the passageway by Miss Holland for the purpose of obtaining access to the
hoardings. Nevertheless, having regard to the course of conduct of the company,
the judge granted an injunction. The injunction was expressed in wide terms,
but I do not think that the injunction can have been intended to apply to the
company’s activities on the car lot. It was intended to deal with the company’s
activities on the only land over which Miss Holland’s rights, as then presented
to the court, extended, namely the passageway. The judge also awarded Miss
Holland £525 damages, plus interest and costs.
The
subsequent history
I continue
with the history. The 1960 lease, held by the company as a business tenancy,
was due to end at Christmas 1980. In May 1980 Miss Holland gave notice under
Part II of the Landlord and Tenant Act 1954 determining the tenancy. She did
not object to the grant of a new lease. The company duly served a counternotice
and applied to the county court for a new lease. I shall have to return to that
aspect of the relationship between the parties at a later stage.
Meanwhile,
after the trial in February 1977, Miss Holland sought to resume advertising on
the flank wall of no 6. In July 1982 she entered into a licence with A W May
Ltd. A W May agreed to take the site for advertising purposes for five years at
£1,000 per annum. The company, and in particular Mr Colin Johnston, were
adamant in refusing A W May any access on to the car lot with ladders.
By September
1982 it seemed that A W May had found a solution, by which access could be had
to the hoardings without needing to go on to the car lot at all. A working
platform was to be erected, above the passageway, against the flank wall. In
order to frustrate this the company, acting by Mr Colin Johnston, erected a
massive hoarding of its own, along the edge of the car lot, close against the
passageway. The company’s hoarding was about 5 ft away from and parallel to the
flank wall of no 6. Its size and height were such as substantially to obscure
any advertisement which might be affixed to the flank wall of no 6. The
company’s hoarding did not prevent physical access to that wall from within the
passageway, but by obscuring most of the wall any advertisement on it would be
effectively hidden from public view. So the wall ceased to be of any use as a
site for advertisements. The judge expressed himself as wholly satisfied that
the only reason why that hoarding was put up by the company was to try to stop
A W May and Miss Holland gaining some advantage from this advertisement site.
Initially the
company’s hoarding was blank. Then for a few months in the spring of 1983 the
company put up some simple advertisements concerning its own car sales
business. In July 1983 professional advertisers erected a replacement hoarding
and since then they have displayed posters on a panel measuring 21 ft in width
and 10 ft in height. The bottom edge of the panel is some 12 ft or so from the
ground.
I can now
conclude the conveyancing history by mentioning three matters. First, on August
31 1982 the company, the sitting tenant of the car lot, entered into an
agreement to buy the freehold of the car lot. That agreement was completed by a
conveyance made on November 17 1982 by Ind Coope (London) Ltd, in favour not of
the company but of Mr and Mrs Johnston personally. Second, in September 1985
the freehold of no 6 was transferred by the company to Mr and Mrs Johnston.
Third, in May 1987 the landlord and tenant proceedings were disposed of by a
new lease of no 6 being granted by Miss Holland to the company for the residue
(save for a nominal reversion) of her interest under the 1898 headlease. The
new lease contained a reservation of advertising rights similar to that
contained in the 1960 lease.
The
present litigation
The present
proceedings were started by the company against Miss Holland on January 3 1985.
She served a counterclaim against the company and Mr and Mrs Johnston in
respect of the obstruction of the advertisement on the flank wall of no 6.
I shall
consider the counterclaim first. Miss Holland’s claims in respect of the
erection of the hoarding on the car lot, and the denial of access over the car
lot, are put forward under three heads. First, her rights under the reservation
in the 1960 lease. Second, her rights under the 1919 agreement. Third,
nuisance. The judge found in her favour on the first ground. He was also
satisfied that the 1919 agreement had not been determined and that until it was
ended it still bound the owners of the land to which it related. He rejected
the claim in nuisance.
The
reservation
First, the
reservation in the 1960 lease. For the company and the Johnstons, Mr Tager
presented a straightforward argument. He accepted that the reservation of the
advertising rights in favour of the original lessor, Mrs Holland, operated by
way of a regrant of those rights by the original lessee, Mr Wade. He also
accepted that Mr Wade was under an implied obligation not to derogate from that
grant made (or notionally made) by him. Mr Tager submitted, and this is clearly
right, that that implied obligation falls to be construed by reference to the
circumstances existing at the time of the grant. In 1960 Mr Wade had an
interest in no 6 and the passageway, but he had no interest in the car lot.
Accordingly, submitted Mr Tager, the implied obligation then assumed by Mr Wade
would not have extended to any acts which might be done by him on the car lot.
If in the future Mr Wade should ever buy the car lot, or acquire a lease of it,
he would be free to build or erect hoardings, or whatever, on the car lot as he
might choose, regardless of any impact this might have on the use of the flank
wall of no 6 as an advertising site. Mr Wade’s successors stand in Mr Wade’s
shoes. Hence the company and the Johnstons are not affected in their use and
enjoyment of the car lot by the reservation contained in the 1960 lease of no
6.
Mr Tager
adopted, as part of his submissions, the following sentence appearing in Hill
and Redman, Law of Landlord and Tenant, 17th ed, vol 1, at p 206:
The doctrine
of derogation
from grant
is limited by
the condition of affairs existing when the lease is made, and as a man cannot
by implication grant that which he has not got, or grant easements over
adjoining land which does not belong to him, the rule as to derogation will not
extend to property acquired by the grantor after the grant of the lease.
A passage to
the same effect appears in Halsbury’s Laws of England, 4th ed, vol 27,
para 334. Mr Tager drew our attention to the decision of the Court of Appeal in
Chancery in Booth v Alcock (1873) 8 Ch App 663. There the lessor
of a house, 26 Old Change, also owned an underlease of an adjoining property, 3
Distaff Lane, expiring in 1868. Subsequently he acquired the freehold reversion
of 3 Distaff Lane. In 1872 he pulled down 3 Distaff Lane and was proposing to
build on the site in a manner which, it was said, would interfere with the
access of light to 26 Old Change. The court held that general words in a grant
must be restricted to that which the grantor then had power to grant and they
will not extend to anything which he might
Ch D 317. That was another rights of light case and Chitty J said (at p 326):
If the
adjoining land is owned by a stranger, of course there is no implied grant.
Mr Tager also
reminded us of the classical exposition of the derogation from grant principle
given by Parker J in Browne v Flower [1911] 1 Ch 219. Running
through this is the theme that the principle is one which, in appropriate
circumstances, restricts the activities of the grantor on land which is
retained by him at the time of the grant. For example, at p 224 Parker J said:
The
plaintiffs next relied on the maxim that no one can be allowed to derogate from
his own grant. This maxim is generally quoted as explaining certain
implications which may arise from the fact that, or the circumstances under
which, an owner of land grants or demises part of it, retaining the remainder
in his own hands. The real difficulty is in each case to ascertain how far such
implications extend.
Later he said
(at p 225):
But the
implications usually explained by the maxim that no one can derogate from his
own grant do not stop short with easements. Under certain circumstances there
will be implied on the part of the grantor or lessor obligations which restrict
the user of the land retained by him further than can be explained by the
implication of any easement known to the law. Thus, if the grant or demise be
made for a particular purpose, the grantor or lessor comes under an obligation
not to use the land retained by him in such a way as to render the land granted
or demised unfit or materially less fit for the particular purpose for which
the grant or demise was made.
In the present
case the judge’s conclusion on this point was as follows:
What has to be
decided in this counterclaim is what is the extent of this reservation or exception
and what terms should be implied therewith. Does it bind the lessees in respect
of land which they subsequently acquired?
Can they frustrate the effect of the reservation and exception which
they agreed to by acts which they have done by erecting, or causing to be
erected, this hoarding. I am satisfied, as I have said, on the evidence that
the Company initially and thereafter from November 1982, the Directors of the
Company, intentionally and maliciously frustrated this reservation and
exception. In my judgment the law must be in a sorry state if the plaintiff
Company by its directors can get away with this. I distinguish the derogation
from the lessor’s grant cases as this is not a covenant on the part of the
lessor. We are dealing with a reservation or exception in the lease whereby the
lessor reserves something to her.
I find that
by erecting this hoarding and maintaining it there, the Company by its servants
or agents are in breach of the term which must be implied in the said
reservation or exception. Otherwise that reservation and exception agreed in
1960 and apparently re-agreed in 1987 would be useless and worthless and could
be defeated by the malicious acts of the plaintiff Company and/or its
directors.
With great
respect to the judge, I am unable to accept the distinction he seems to be
drawing. I see no reason to suppose that the obligations arising under the
non-derogation from grant principle, in relation to land acquired by the
grantor after making the relevant grant, are more onerous in the case of a
regrant by a lessee than they are in the case of a grant by a lessor.
The
purpose of the reservation
Before
addressing Mr Tager’s submissions I turn to consider the purpose of the
reservation in the 1960 lease.
In 1960 no 6
had two uses. Internally, the building was used as a lock-up shop on the ground
floor with living accommodation upstairs. The principal purpose of the 1960
lease was that Mr Wade should have the benefit of that use for 21 years.
Externally, the flank wall was used as an advertisement site. The purpose of
the reservation was that this use should be retained by Mrs Holland. This use
was sufficiently valuable for it to be worthwhile for Mrs Holland, with Mr
Wade’s agreement and as part of their bargain, expressly to retain this right.
Mr Wade did
not own the car lot nor did he have any tenancy of it. Neither did Mrs Holland.
She was at risk as to what the present or a future owner or tenant of the car
lot might do on that land. He might obscure the flank wall by building on the
car lot. He might erect his own advertising hoardings, wherever he wanted on
the car lot. But in my view the parties cannot for one moment have contemplated
that, whatever a stranger might do, if Mr Wade, lessee of no 6, should himself
acquire some estate or interest in the car lot while he was still the lessee of
no 6, he would be free wholly to frustrate the purpose of the retention of the
advertising rights by putting up his own advertising hoarding immediately in
front of Mrs Holland’s hoarding. That would be, in substance, to take over the
advertising site for himself; a fortiori, that he would not erect a
blank screen for the sole purpose of obscuring Mrs Holland’s advertisements.
That would be to make use of the car lot for the sole purpose of defeating the
reservation. To my mind it was necessarily implicit in the terms of the 1960
lease and the reservation of the advertising rights that Mr Wade would not
himself frustrate the purpose of that reservation by taking either of the steps
I have just mentioned.
Of course,
depending upon its size and position, the erection of a building on the car lot
might equally have the effect of rendering Mrs Holland’s wall useless as an
advertising site. But it would be going much too far to spell out a common
intention that if Mr Wade bought the car lot he would not build on it in such a
way as to obstruct the use of the flank wall of no 6 for advertising. However,
I do not think that this is inconsistent with Mr Wade not being free to take
either of the two steps mentioned above. Constructing a building is one thing.
Erecting a blank hoarding for the sole purpose of screening the flank wall, or
erecting one’s own advertising hoarding for the purpose of effectively taking
over the advertising site for oneself, is altogether different.
Derogation
from grant
I turn next to
Mr Tager’s submissions on the law. They are formidable. We have not been
referred to any case in which it has been decided, or even suggested, that the
non-derogation from grant principle can apply in respect of activities of the
grantor on neighbouring land subsequently acquired by him. Despite this, a
rigid inflexible limitation excluding such activities by a grantor from the
scope of the principle in all circumstances is capable of producing such
unattractive results that, given the rationale underlying the principle, I am
emboldened to consider whether, indeed, there is any such overriding limitation.
The expression
‘derogation from grant’ conjures up images of parchment and sealing wax, of
copperplate handwriting and fusty title deeds. But the principle is not based
on some ancient technicality of real property. As Younger LJ observed in Harmer
v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200 at pp 225, 226, it
is a principle which merely embodies in a legal maxim a rule of common honesty.
It was imposed in the interest of fair dealing:
‘A grantor
having given a thing with one hand,’ as Bowen LJ put it in Birmingham,
Dudley & District Banking Co v Ross, ‘is not to take away the
means of enjoying it with the other.’
‘If A lets a plot of land to B,’ as Lord Loreburn phrases it in Lyttelton
Times Co v Warners, ‘he may not act so as to frustrate the purpose
for which in the contemplation of both parties the land was hired.’ The rule is clear but the difficulty is, as
always, in its application.
As one would
expect, the principle applies to all forms of grants. It was applied recently
by the House of Lords to the sale of a car by the manufacturer: see British
Leyland Motor Corporation Ltd v Armstrong Patents Co Ltd [1986] AC
577. The principle operates to restrict the future activities of a grantor. One
field, and perhaps it was the earliest field, in which the principle finds
expression is the grant by implication of easements over land retained by the
grantor corresponding to the continuous or apparent quasi-easements enjoyed at
the time of the grant over the property retained (see Parker J in Browne v
Flower, at p 225). In such cases there must necessarily be retained land
over which the easement being implied is to operate. Booth v Alcock
(1873) 8 Ch App 663 is an example of this.
It is also
well established that the principle is not confined to cases of the implication
of an easement. For instance, in Aldin v Latimer Clark, Muirhead
& Co [1894] 2 Ch 437 Stirling J applied the principle to protect the
access of air to sheds used for drying timber even though the law does not
recognise a right by way of easement to the access of air except where such
right is enjoyed through a definite aperture or channel. Parker J in Browne v
Flower (at p 226) regarded the implied obligation in such cases as
analogous to that which arises under a restrictive covenant. In Megarry and
Wade on the Law of Real Property, 5th ed, p 849, the view is expressed that
in truth the doctrine is an independent rule of law. This approach was approved
by Lord Denning MR in Molton Builders Ltd v City of Westminster
(1975) 30 P&CR 182, at p 186. He stated the broad principle thus:
. . . if one
man agrees to confer a particular benefit on another, he must not do anything
which substantially deprives the other of the enjoyment of that benefit:
because that would be to take away with one hand what is given with the other.
That being the
general principle, the next step must be to apply it to a particular factual
situation. In a case such as the present, that
grantor can fairly be regarded as necessarily implicit, having regard to the
particular purpose of the transaction when considered in the light of the
circumstances subsisting at the time the transaction was entered into.
It is at this
point that I find myself unable to see why that exercise must be subject to the
overriding limitation contended for by Mr Tager in the present case. The
proposition can be tested by taking, by way of illustration, a building
adjoining open land and having, in consequence, potential as an advertising
site: as in the present case. Assume that the building and the open site are in
common ownership. The owner lets the right to put up and maintain a poster on
the flank wall of the building for five years, for a lump sum or at annual
rent. Unless there are further factors which rebut the implication, it seems to
me necessarily implicit in such a transaction that the lessor cannot, within
the period of the lease, erect on the open site his own advertising hoarding a
few feet in front of the wall of the building, obscuring the wall, and thus
make it impossible in practice for the wall to be used for the very purpose for
which he has granted rights and for which he has been paid or is being paid.
Take, next,
the same facts, save that at the time of the grant the lessor does not own the
adjoining site, but subsequently, while the lease of the advertising rights is
still current, he buys the adjoining site. Can he, in such a case, any more
than in the first example, be at liberty to frustrate the whole purpose of the
letting by erecting his own advertising hoarding hard up against the flank wall
of the building, as in the first example?
In my view common honesty permits of only one answer to that question.
Of course in
considering what is necessarily implicit in a transaction in a case where the
grantor owns no other land, very great weight indeed must be given to that
factor. It will be a very exceptional case for it to be necessarily implicit in
a lease that the activities of a lessor who owns no adjoining land, and has no
plans to buy any adjoining land, are to be restricted on the adjoining land
should he ever become owner or tenant of that land. Whether it is so implicit
or not will depend on all the circumstances, including the purpose of the grant
and the nature of the activities sought to be restrained. But if the facts in a
given case point clearly to such a restriction being implicit, I can see no
reason in principle why the law should treat that case differently from one
where the lessor already owns the adjoining land at the time of the lease. Why,
I ask myself, should the law, as much in such a case as any other, not give
effect to what, echoing the words of Bowen LJ in Myers v Catterson
(1889) 43 Ch D 470 at p 481,
was the
obvious intention of the parties, so as to give the transaction between them
that minimum of efficacy and value, which, upon any view of the case, it must
have been their common intention that it should have?
I have given much
thought to the question whether the conclusion I have reached on this point, if
it is correct, is one which is still open to any court below the House of
Lords. I mention one passage in particular from the judgment of Younger LJ in Harmer
v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200 at p 226:
. . . the
obligation laid upon the grantor is not unqualified. If it were, that which was
imposed in the interest of fair dealing might, in unscrupulous hands, become a
justification for oppression, or an instrument of extortion. The obligation
therefore must in every case be construed fairly, even strictly, if not
narrowly. It must be such as, in view of the surrounding circumstances, was
within the reasonable contemplation of the parties at the time when the transaction
was entered into, and was at that time within the grantor’s power to fulfil.
But so limited, the obligation imposed may, I think, be infinitely varied in
kind, regard being had to the paramount purpose to serve which it is imposed.
I do not think
that the implication of an obligation in the terms I have mentioned in the
present case offends against what is said there. An obligation on Mr Wade to
ensure that the owner or occupier of the car lot would not erect a hoarding
immediately in front of the flank wall of no 6 would not be one within his
power to fulfil. But an obligation that he would not erect such a hoarding if
he should become the owner or tenant of the car lot was one which it would
always be within his power to fulfil.
In the end,
while I recognise that the conclusion I have reached on the facts in the
present case is an application of the derogation from grant principle in novel
circumstances, I think that this conclusion accords with basic principle and is
not one from which this court is constrained by authority.
For these
reasons I reject Mr Tager’s submission that because Mr Wade had no interest in
the car lot in 1960, he and his successors as tenants under the 1960 lease are
untouched by the derogation from grant principle in relation to anything they
may do on the car lot.
Successors
in title
As Mr Wade had
no interest in the car lot when the 1960 lease was entered into, there can be
no question of any obligation undertaken by him operating in the nature of a
restrictive covenant over that land so as to bind successive owners of that
land as such. But Mr Wade himself remained bound by the obligation so long as
he continued as the tenant of no 6. Furthermore, the company as his successor
to the lease of no 6, was and is bound by the obligation. The obligation not to
derogate from a grant applies to a person deriving title from a grantor in the
same way as it applies to the grantor himself (Cable v Bryant
[1908] 1 Ch 259).
Reliance was
placed by Mr Tager on the decision of this court in Davis v Town
Properties Investment Corporation Ltd [1903] 1 Ch 797. The lessor of an
office building assigned the reversion to the defendant company. The company
bought some adjoining land and erected a new building of such a height that it
caused the chimneys in the office building, of which the plaintiff was the
original lessee, to smoke. The plaintiff’s action for breach of the covenant
for quiet enjoyment was dismissed. Collins MR said (at p 804):
Even if the
lessor’s covenant could be extended to cover user by him of land subsequently
acquired, such an obligation could not pass with the assignment of the
reversion to the defendants, who acquired the adjoining land under another
title, and have done what they have done under that other title, and not as
claiming under the lessor. So far as the covenant was personal or collateral,
it would not run with reversion and bind the assignee. This was decided on the
statute of Hen 8 in Spencer’s Case.
In the present
case the obligations of Mr Wade are not collateral. A covenant can ‘touch and
concern’ demised property even though nothing has to be done on the demised
property. In Ricketts v Enfield Churchwardens [1909] 1 Ch 544 it
was held that a covenant by a lessor not to build on a certain part of the
adjoining land touched and concerned the demised property. Likewise here: the
obligation on Mr Wade was not to do certain things on the adjoining land which
if done would wholly frustrate the purpose for which the reservation was made.
Substance
and not form
I add a
footnote on this part of the appeal. Although, in strict law, the reservation
in the 1960 lease took effect as a regrant by Mr Wade of the advertisement
rights, the conclusion I have reached on the application of the derogation from
grant principle is, I should emphasise, not dependent on that highly technical
conveyancing notion. I have sought to indicate the broad, commonsense rationale
of the principle which bears the title of ‘derogation from grant’. In 1960 Mrs
Holland and Mr Wade, I have no doubt, viewed their transaction as a simple
lease of the building, with a retention by Mrs Holland of certain rights. I
think that it is safe to assume that the notion that Mrs Holland had granted to
Mr Wade a lease of the building including the advertising site, and that he had
then at once granted the advertising rights back to her, was not at the
forefront of either of their minds on January 6 1960. So be it. The principles
underlying the doctrine labelled ‘derogation from grant’ apply as much to
grantees as to grantors. The point was covered by Lord Loreburn LC in Lyttelton
Times Co Ltd v Warners Ltd [1907] AC 476. He referred (at p 481) to
the ‘similar and equally binding duty’ that may be laid on a grantee.
The maxim
that a grantor cannot derogate from his grant expresses the duty ordinarily
laid on a man who sells or leases land. But it does not touch a similar and
equally binding duty that may in certain cases be laid on a man who buys or
hires land. If A lets a plot to B, he may not act so as to frustrate the
purpose for which in the contemplation of both parties the land was hired. So
also if B takes a plot from A, he may not act so as to frustrate the purpose
for which in the contemplation of both parties the adjoining plot remaining in
A’s hands was destined . . . When it is a question of what shall be implied
from the contract, it is proper to ascertain what in fact was the purpose, or
what were the purposes, to which both intended the land to be put, and, having
found that, both should be held to all that was implied in this common
intention.
Whichever way
one approaches the reservation in the 1960 lease, whether one views it as a
regrant by Mr Wade or views it less technically, either way the conclusion is
the same.
A breach
by the company
It follows from
what I have said above that in my view the company was in breach of its
obligations under the derogation from grant principle when it erected the
hoardings against the passageway in
contractors to construct and maintain a replacement hoarding in 1983. When the
company took an assignment of the 1960 lease from Mr Wade in 1962 it already
had a tenancy of the car lot. But at that time the end wall was unobscured and
the advertisements, licensed by Miss Holland, were being displayed on the end
wall. If notice were material, which I do not think it is, the company could
have been in no doubt on what was the purpose of the reservation in the lease
being acquired by it. The company was content to take the benefit of the lease,
knowing of that purpose. Common honesty seems to me to forbid the company at
one and the same time taking the benefit of that lease and taking steps to
frustrate the purpose for which the reservation was made in favour of the
lessor.
In my view the
judge’s assessment of damages is unimpeachable. Had the company not erected the
hoardings, Miss Holland’s deal with A W May would have proceeded to fruition.
The 1898 lease of no 6 contained a covenant against making alterations or
additions unless the previous licence in writing of the lessor had been
obtained. But section 19(2) of the Landlord and Tenant Act 1927 applied to that
covenant, and it would have been unreasonable for the company, as freeholder of
no 6, to have refused its consent to Miss Holland’s contractor A W May fixing a
working platform to the wall.
Judgment was
given against Mr and Mrs Johnston as well as the company. This appears to have
been on the basis of the judge’s finding that when Mr and Mrs Johnston had the
contract for the purchase of the car lot made by the company in August 1982
completed in favour of themselves and not the company, that was ‘a device or
endeavour to try and escape any liability on the part of the company’ for a
breach of the reservation and the injunction granted by Sir Douglas Frank. I
understand that, in saying this, the judge was deciding that in truth the
beneficial owner of the car lot was the company and not Mr and Mrs Johnston.
There is a
procedural difficulty here. At the trial Mr Tager submitted to the judge that
no such case had ever been pleaded. The judge decided that there was no
necessity to plead such a case. He reached his conclusion on the facts from the
answers given in cross-examination by the only witness of substance called for
the company and Mr and Mrs Johnston: Mr Colin Johnston. The judge was rightly
determined to get at the true facts and decide the case accordingly, but I do
not think that it can have been right to give judgment against Mr and Mrs
Johnston on the footing that they were, in truth, holding the car lot merely as
agents for the company, without that point having been brought out properly
into the open, and alleged, in time for the company and the Johnstons and their
advisers to consider the point and lead evidence on this point. In the
circumstances I do not think that this conclusion adverse to Mr and Mrs
Johnston ought to stand.
I add a
cautionary footnote. Mr Krolick voiced the fear that the company might now
surrender its tenancy of the car lot to Mr and Mrs Johnston and then disclaim
all responsibility for the advertising hoarding, saying that the company no
longer has any estate or interest in the car lot. What the legal position would
be in that event was, rightly, not pursued on this appeal. I will say only
this. One recoils from the prospect of yet further litigation between the
parties. But if the company should follow such a course, the court would be
astute to see that the obligations imposed on the company by the derogation
from grant principle are not circumvented simply by property being shuffled
from the company, wholly owned by Mr and Mrs Johnston, to Mr and Mrs Johnston
personally. The law is not so ineffectual that an obligation springing from a
rule of common honesty can be turned aside so easily.
The 1919
agreement
The second
cause of action relied on by Miss Holland was based on the 1919 agreement. I
can deal with this quite shortly. I need to mention only one of Mr Tager’s
arguments. The grantor under the 1919 agreement was Mr Chattey. Mr Chattey was
not the freeholder of the Queen’s Head and the adjoining open site. His lease,
granted in 1885, was due to expire at June 24 1955. Thus, although the 1919
agreement was to continue until determined, from its inception the life of the
agreement, as a matter of strict law, was confined to midsummer 1955. In 1950
the then lessee surrendered the 1885 lease. This surrender did not, per se,
prejudice the 1919 agreement nor, conversely, did it operate automatically to
extend the life of that agreement.
Of course this
is a somewhat technical point and if there were evidence that after 1955 Mrs
Holland and the freeholder of the car lot, Cannon Brewery, had continued to act
on the assumption that the 1919 agreement was still subsisting, the court would
readily infer that by their conduct those parties had impliedly agreed that the
agreement should continue. But, not surprisingly, there is no such evidence
here. After the construction of the external staircase in the 1930s the
passageway (apparently) ceased to be regarded as part of the Queen’s Head open
site and became treated as part of no 6. Thereafter there was no need in
practice for any agreement between Mrs Holland and Cannon Brewery regarding the
fixing of advertisements to the flank wall of no 6. The hoardings were above
the passageway. All that was required was, at most, a formal or informal
arrangement for Mrs Holland’s advertising contractors to be afforded access on
to the car lot from time to time with their ladders. In practical terms nothing
was needed beyond a simple access agreement such as the 1954 access agreement.
Mr Krolick
relied on the recitals and provisions of the 1954 agreement as showing that
Cannon Brewery understood that the 1919 agreement was still in existence, that
Mrs Holland was entitled to the benefit of it, and that the 1919 agreement
would be continuing beyond June 24 1955. But Mrs Holland was not a party to the
1954 agreement and, given the practical considerations I have mentioned, I do
not think that the terms of that agreement, or the continuing enjoyment by
Odham’s of access arrangements under that agreement until 1971, provide a
satisfactory basis for inferring the continuance of the 1919 agreement after
1955, particularly as the 1919 agreement seems to have been wholly forgotton by
everyone who had ever known of it until, over 30 years later, Miss Holland
happened to come across the documents among other old papers, shortly before
the trial of this action in June 1987. The 1919 agreement was not even resurrected
in the previous litigation between the parties, although the 1954 access
agreement was prominent in that litigation.
For this
reason, which was not canvassed before the judge, I do not think that the 1919
agreement assists Miss Holland in the present litigation. I should add, for
good measure, that after Miss Holland found and produced the 1919 agreement,
notice was given on behalf of the company and the Johnstons determining it. So,
in any event, it is now gone for good.
Nuisance
I agree with
the judge that the claim advanced on the basis of nuisance fails. Mr Krolick
relied on the well-known case of Hollywood Silver Fox Farm Ltd v
Emmett [1936] 2 KB 468. In that case the defendant was making noises, which
emitted from his property to the plaintiff’s for the purpose of annoying and
injuring the plaintiff. In the present case nothing is being emitted from the
car lot. I am not aware of any case which suggests that, in the absence of
interference with an easement or some other proprietary right, the occupier of
land may commit a nuisance if he erects a structure wholly on his own land,
whether this is done with or without the intention of annoying or injuring his
neighbour.
Nor do I think
that the absence of planning permission for the erection of the hoardings by
the company assists Miss Holland. Her remedies in respect of any such breach of
the planning legislation lie elsewhere.
The
company’s repayment claim against Miss Holland
I turn now to
the company’s claim against Miss Holland. This claim relates to part of the
sums paid by rent by the company to Miss Holland between September 1982 and the
date when the new 1987 lease of no 6 was entered into. In short, what happened
was that after the county court proceedings for a new lease were started in
1980, the parties through their solicitors negotiated on the terms of a new
lease. On February 2 1982 Miss Holland’s solicitors, O H Parsons &
Partners, wrote to Rose & Birn, the company’s solicitors, seeking
confirmation that the Johnstons would permit access for A W May to place
advertisements on the flank wall of no 6, and stating that if that confirmation
were forthcoming Miss Holland would agree the terms of the new lease as
follows:
(1) A new lease should be for ten years;
(2) There should be rent reviews every four
years;
(3) There should be a rental of £1,750 per annum.
In their
answer dated March 16 1982 Rose & Birn stated their clients were prepared
to agree terms 1-3, but the only confirmation they gave concerning the flank
wall was that the terms of the injunction granted by Sir Douglas Frank would be
adhered to.
Nearly six
months later Parsons wrote again, on September 16.
this:
There remains
the question of the new Lease. The terms of the Lease have of course been
agreed, and my client will be submitting a demand for the rent at the new rate
of £1,750 for the next quarter.
Do you want a
new Lease prepared, or do you simply wish a memorandum setting out the agreed
terms to be attached to the old Lease?
Miss Holland
then sent to Mr Johnston a demand for a quarter’s rent at the new rate, and
this was paid on September 21. On October 1 Rose & Birn wrote to Parsons,
stating that it would be sufficient to attach to the old lease a memorandum of
the new terms, and they asked for a draft of such a memorandum.
Having
reviewed this and other correspondence, the judge concluded that the parties’
solicitors thought the terms of the new lease had all been agreed and that it
was on this basis, together with the willingness of the company to pay the rent
at the new rate, that the company started paying rent at the increased rate in
September 1982.
The dispute
which arose subsequently concerned the date of commencement of the new term.
The company’s solicitors put forward March 1982, being the date when the terms
were agreed: the 10 years would commence then, and the increased rent would be
payable from then. Miss Holland’s solicitors put forward the date of expiry of
the 21-year term of the old lease, namely, Christmas Day 1980. Eventually the
parties’ solicitors agreed that the correspondence I have referred to did not
constitute a binding contract for the grant of a new lease, because there had
been no agreement on the date of commencement of the new, 10-year term. The
county court proceedings were then revived, and in May 1987 terms for a new
lease were agreed, and a new lease was executed. I need not mention the
detailed terms of the new lease. What is in issue on the claim is the difference
between the old rent (of £500 per annum) and the amount actually paid (£1,750
per annum) over the period from September 1982 to September 1984.
In this court
the company based its claim exclusively on the ground of money paid under a
mistake of fact, the mistake being Mr Colin Johnston’s belief that the parties
had reached a binding agreement for a new lease whereas, as it later
transpired, they had not. The judge concluded that the mistake was one of law,
as to the construction of the letters, and not one of fact, and dismissed the
company’s claim accordingly.
I agree with
the judge that this claim fails, although I would prefer to rest my decision on
a different ground. The contractual term of the 1960 lease expired at the end
of 1980, subject to the operation of Part II of the 1954 Act. The company
wanted to obtain a new lease for the residue of Miss Holland’s headlease of no
6, which itself was due to expire in 1997. In 1982 the company was ready to pay
rent at the increased rate of £1,750 per annum in place of the old rent of £500
per annum fixed as long ago as 1960. When the rent payments were made, in
September 1982 and subsequently, the company believed that it had secured
agreement for the grant of a new, 10-year lease. It later turned out this was
wrong. Had that been the end of the story, and had the company not succeeded in
obtaining a new lease of no 6, there might have been some substance in its
claim for repayment.
In the event,
however, the company did obtain the new lease it wanted and it did obtain what,
when it made the rent payments from 1982 to 1984, it thought it had already
agreed. Indeed, it obtained more: it obtained a lease, stretching right through
to 1997. And it remained in occupation throughout. Thus the mistake made in
1982 was overtaken by subsequent events. I can see no justification for the
company now being entitled to claim repayment of any of the rent it has paid.
In my view the claim for restitution fails.
Accordingly, I
would allow the appeal by Mr and Mrs Johnston regarding the counterclaim, but
dismiss the company’s appeal in relation both to the claim and the
counterclaim.
LLOYD LJ and
SIR ROGER ORMROD agreed and did not add anything.
The appeal of
the first plaintiffs, Johnston & Sons Ltd, in their claim and counterclaim
was dismissed. The appeal of the second and third plaintiffs, Mr and Mrs
Johnston, was allowed with costs. The defendant, Ida Kate Holland, was ordered
to pay the costs of the second and third plaintiffs in the Court of Appeal and
below. The plaintiffs’ application for leave to appeal to the House of Lords
was refused.
