Mackenzie v Cheung and another

Sale of land – Vendor and purchaser – Restrictive covenant – Appellant seeking declaration that respondent’s property subject to restrictive covenant limiting construction on land to one detached dwellinghouse – Respondents’ application for summary judgment dismissed – High Court reversing decision – Appellant appealing – Whether vendor, when dealing with subsequent conveyances of retained land, obliged to impose restrictions in covenant – Appeal dismissed The appellant and the first respondent were the registered proprietors of Nos 432 and 444, Selsdon Road, Croydon, respectively. The second respondent was a developer with an option to purchase No 444 and planning permission to demolish the house and build a block of nine flats. In November 1947, No 432 was sold out of the estate by the charity that owned it. No 444 was sold in October 1947. The October conveyance contained a restrictive covenant, of which the appellant had the benefit, that no building should be erected except one detached dwellinghouse. Under paragraph 11 of the Third Schedule, the vendor reserved “the right to deal with any of the plots situated upon this estate or any of their adjoining or neighbouring land without reference to and independently of these stipulations and also reserve the right to allow a departure from them…”. The appellant sought a declaration that No 444 was subject to the restrictive covenant. The respondents applied for summary judgment and a declaration that, following the execution of a deed of modification releasing the first respondent from the 1947 covenants to the extent necessary to permit the construction of the flats, the development of No 444 would not be a breach of covenant. The respondents’ application for summary judgment was dismissed but the deputy judge declared that the proposed development of No 444 would be a breach of covenant even if the deed of modification was executed: [2022] EWHC 1694 (Ch); [2022] PLSCS 116. The High Court allowed an appeal, reaching the opposite conclusion: [2023] EWHC 220 (Ch). The appellant appealed. Held: The appeal was dismissed. (1) Someone other than the original covenantee could become entitled to the benefit of a restrictive covenant relating to land in three ways: by assignment, by annexation or under a building scheme. Where a building scheme existed, covenants would be enforceable by the owners of all plots within its scope: Whitgift Homes Ltd v Stocks [2001] EWCA Civ 1732; [2001] PLSCS 250 considered. However, where the benefit of a restrictive covenant was transmitted as a result of annexation to land which the covenantee retained at the time the covenant was given, owners of land which the covenantee had disposed of previously would not be able to enforce the covenant. The effect of annexation where the developer of an estate sold off the various developed plots subject to restrictive covenants was that the first purchaser would not be able to enforce the covenants entered into by the purchasers of any of the other plots, whereas the last purchaser would be able to enforce the covenants entered into by all the other purchasers. In the present case, there was no relevant building scheme but the appellant was nonetheless entitled to the benefit of the restrictive covenants in the 1947 conveyance. (2) Interpretation of a contract involved assessment of the objective meaning of the language which the parties had chosen to express their agreement. The ordinary and natural meaning of the second part of paragraph 11 had a distinct function conferring an additional right. That was evident from the use of the word “also” and the meaning of “departure” being most obviously that the vendors could allow the purchaser to do something which otherwise they could not. The charity was envisaged as having a continuing role as regards plots it had previously disposed of. Where development land was sold off in plots without imposing a building scheme, it was likely that the developer would wish to retain exclusive power to give or withhold consent to a modification or relaxation of a restriction on building imposed on each purchaser; unfettered by the need to obtain the consent of every subsequent purchaser to whom (after imposing the covenant) he had sold off other plots on the development land. If it were otherwise he would create a situation in which the ability of a purchaser of one plot to enforce covenants against the owner of another plot depended on the order in which the plots had been sold off: Crest Nicholson Residential (South) Ltd v McAllister [2004] EWCA Civ 410; [2004] PLSCS 81; [2004] 1 WLR 2409 considered. (3) The general principle of law was that, if one person agreed to confer a particular benefit on another, they must not do anything which substantially deprived the other of the enjoyment of that benefit. In the case of a lease or tenancy agreement, what had been granted was the right to exclusive possession of the land on the terms of the lease or tenancy. If a landlord exercised rights in accordance with the terms of the lease or tenancy that could not amount to a derogation from grant, because those rights were part of the grant itself. Similarly, the exercise by the charity of a power granted by the Third Schedule itself could not amount to a derogation from any grant of the benefit of the covenants given in that schedule. In any event, there was no question of redevelopment of No 444 in accordance with the deed of modification having such a serious effect on Number 432 as to give rise to a derogation from grant. When the charity sold No 432, the purchaser acquired a plot of land with the ability to build a house on it. The proposed redevelopment of No 444 would have no physical impact on No 432, nor make it difficult to live there. The planning officer considered that the redevelopment would respect the pattern and rhythm of the neighbouring area and would not harm the appearance of the street scene: Mayner v Payne [1914] 2 Ch 555, Rees v Peters [2011] EWCA Civ 836; [2011] PLSCS 191; [2011] 2 P&CR 18 and Earl of Plymouth v Rees [2020] EWCA Civ 816; [2020] PLSCS 130; [2020] 4 WLR 105 considered. (4) Accordingly, the second part of paragraph 11 empowered the charity to waive or release covenants given in that schedule so that, if the deed of modification was executed, development of No 444 in accordance with it would involve neither a breach of covenant nor a derogation from grant. Mark Warwick KC and Henry Moore (instructed by Wellers Law Group LLP) appeared for the appellant; Carl Fain and Richard Miller (instructed by Davitt Jones Bould) appeared for the respondents. Eileen O’Grady, barrister Click here to read a transcript of Mackenzie v Cheung and another