Use of Whitehall Court suite as offices contemplated by lease from Crown Estate Commissioners but subject to planning control–Occupier converts to office use without permission from planning authority, and commissioners give the necessary consent to service of an enforcement notice–Commissioners not liable for derogation from grant–Judgment of Willis J confirmed
This was an
appeal by Molton Builders Ltd, of 32 Old Burlington Street, London W1, from a
judgment of Willis J in the Queen’s Bench Division on July 31 1974 dismissing
their claim against the first respondents, Westminster City Council, and the
second respondents, the Crown Estate Commissioners, for a declaration that an
enforcement notice served by the council on August 9 1971 with the consent of
the commissioners was void and of no effect, alternatively (against the
commissioners) for damages for derogation from grant. The judgment of Willis J
was reported at (1975) 234 EG 115, [1975] 1 EGLR 140.
Mr J Harman QC
and Mr L Hoffmann (instructed by Beer, Dunnett & Co) appeared for the
appellants; Mr I D L Glidewell QC and Mr A B Dawson (instructed by E Woolf) for
the first respondents; and Mr G Slynn QC and Mr P L Gibson (instructed by the
Treasury Solicitor) for the second respondents.
Giving
judgment, LORD DENNING said: Whitehall Court occupies one of the finest sites
in London. It is on the
containing 110 flats or suites of rooms. Some are occupied by Members of
Parliament, others by private persons, and yet others by well-known public
companies. It is owned by the Crown Estate Commissioners. As long ago as 1931
the commissioners let it to Whitehall Court Ltd for 99 years at a rent of
£10,760 a year. There was a covenant which restricted its user. It was to be
used and kept ‘for private dwelling houses, first-class clubs, residential or
professional chambers and offices only.’
There would be a restaurant where the occupiers could entertain their
friends. Nearly 40 years later, on June 5 1968, Whitehall Court Ltd let the
whole building on an underlease to Clabon Developments Ltd for the period of
the head lease less 10 days. The rent, was £11,200 a year, but Clabon paid a
premium of £1,370,000. The underlease contained the same covenant as the head
lease restricting the user of the flats or suites. Two years later, in
September 1970, Clabon Developments Ltd sublet one of the suites to a company
called Molton Builders Ltd for nearly the rest of the term. It was suite no
139, and the rent was £290 a year. In this sublessee the covenant as to user
was a little different. The sublessee covenanted ‘to use the suite as a suite
of offices or for the purpose of private residence in one occupation
only.’ There was further a covenant not
to carry out any development within the meaning of the Town and Country
Planning Act without the previous licence in writing of Whitehall Court Ltd.
Previously
this suite, no 139, had been used as a private residence. But when it was
sublet in 1970 to Molton Builders Ltd they allowed Mr Jack Dunnett, a member of
Parliament, to occupy it as a licensee. It had eight rooms and a large hall. Mr
Dunnett decided to alter the use of it. Instead of a private residence, Mr Dunnett
altered it to a suite of offices. He happened also to have three adjoining
flats numbered 137a, 138 and 138a. He converted those three flats into one unit
as a residence containing ten rooms, four bathrooms, three toilets and a
kitchen for himself and his family. When he turned no 139 from a residence into
offices, he did not apply for planning permission. The planning authority, the
Westminster City Council, thought that the change was a breach of planning
control, but as Whitehall Court was Crown land, they could not serve an
enforcement notice without the consent of the Crown Estate Commissioners. On
July 23 1971 the commissioners wrote a letter to the Westminster City Solicitor
in which they said: ‘The commissioners consent to the service by your council
of an enforcement notice under section 15 of the Town and Country Planning Act
1968 requiring the discontinuance of the unauthorised office use of flat
139.’ On August 9 1971 the Westminster
City Council served an enforcement notice on the owner and occupier of flat
139. It said that the use of flat no 139 for office purposes was a breach of
planning control, and it required the discontinuance of the use. On September
10 1971 Mr Dunnett appealed to the Minister. His ground of appeal was ‘that planning
permission ought to be granted’ for the change of use. He pointed out that
other flats in the same block had been devoted to office use; that he had done
a lot of work in converting no 139 into a suite of offices; and that he had
given notice to the district surveyor and the health department. That appeal
has never come on for hearing. It has been adjourned pending the legal
proceedings now before us, which I must now relate.
The legal
proceedings have been started by the underlessees, Molton Builders Ltd, and not
by Mr Dunnett, as he is only a licensee. On October 31 1971 Molton Builders Ltd
issued a writ against the city of Westminster. Afterwards they joined the Crown
Estate Commissioners as defendants. They seek a declaration that the
enforcement notice is void and of no effect; alternatively, they claim damages
against the Crown Estate Commissioners. They allege that when the Crown Estate
Commissioners gave their consent to the enforcement notice, that act was a
derogation from their grant. It is put in this way, that when the Crown Estate
Commissioners in 1931 granted the lease for 99 years, it contained permission
for this suite to be used not only for residential purposes but also for
professional chambers and offices. Molton Builders say that when the Crown
Estate Commissioners consented to the service of an enforcement notice
requiring the discontinuance of the use for office purposes their act was a
derogation from that grant, with the result that the consent was invalid in
itself, so that the enforcement notice is invalid: or alternatively, that they
ought to be able to claim damages from the Crown Estate Commissioners for
giving their consent. So the case is put entirely on derogation from grant. At
one time there was a suggestion of a breach of a covenant for quiet enjoyment,
but that has been abandoned, because Molton Builders Ltd were only
underlessees, and there was no privity of contract between them and the
commissioners, so they cannot sue the commissioners in covenant. But a
derogation from grant is said to be a property right of which underlessees can
take advantage.
In the first
place, it is necessary to consider the position of Crown land under the
planning permission. At the relevant time the current Act was the 1962 Act, but
the material sections are re-enacted in the 1971 Act, so for convenience I will
quote them from the 1971 Act. The Act deals with Crown land in sections 266 to
268. The result is this, that when the Crown itself (by itself or by a
Government department) is in occupation of Crown land, it is exempt from
planning control, but that when Crown land is leased to others, then those
others, who are in occupation of it, are subject to planning control. They must
not make any material change of use unless they get planning permission. That
appears from section 266 (1)(b), which says that Part III of the Act applies to
Crown land ‘to the extent of any interest therein for the time being held
otherwise than by or on behalf of the Crown.’
So Part III applies to the leasehold interest in Whitehall Court. It is
that part that contains the provisions for planning control. It includes
section 23 (1), which says, ‘Planning permission is required for the carrying
out of any development of land.’ And
‘development’ includes any ‘material change of use’: see section 22 (1). So
neither Molton Builders Ltd nor Mr Dunnett could make any material change of
use of no 139 unless they got planning permission. So when Mr Dunnett and
Molton Builders Ltd changed the use from residential use to office use, they
required planning permission. Molton Builders Ltd did not apply for it, nor did
Mr Dunnett. They did not get planning permission and have not got it. That was
plainly a breach of planning control. Another provision about Crown land is
section 266 (2) (a), which says: ‘Except with the consent of the appropriate
authority’–and that is in this case the Crown Estate Commissioners–‘no order or
notice shall be made or served under any of the provisions of [inter alia]
section 87 of this Act in relation to land which for the time being is Crown
land.’ Now section 87 gives power to
serve enforcement notices, so the effect of section 266 (2) (a) is that the
planning authority, the Westminster City Council, were not allowed to serve an
enforcement notice except with the consent of the Crown Estate Commissioners.
In this case, as I have said, there was a breach of planning control by
changing from residential use to office use, but as it was Crown land, the
Westminster City Council could not serve an enforcement notice unless they got
the consent of the Crown Estate Commissioners.
On July 23
1971 the Crown Estate Commissioners gave their consent in the letter which I
have read. Now Molton Builders Ltd say that the Crown Estate Commissioners, by
giving their consent, acted in derogation of their grant. This makes it
necessary to consider the scope of the doctrine of derogation from grant. The
doctrine is usually applied to
principle of law that 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. It is said to be ‘a principle which merely
embodies in a legal maxim a rule of common honesty’: see Harmer v Jumbil
(Nigeria) Tin Areas Ltd [1921] 1 Ch 200 at p 225 per Younger LJ. Sometimes
it is rested on an implied term in the contract, but this is not correct; it is
a principle evolved by the law itself. Applied to sales or leases of land, it
means that when a man has sold land, or granted a lease of it, and expressly or
impliedly agrees that the other party shall be at liberty to use it for a
particular purpose, then he must do nothing actively to render the premises
unfit, or materially less fit, for the particular purpose for which they were
sold or let: see Browne v Flower [1911] 1 Ch 219 at pp 225-7. The
obligation can be enforced against him and his successors, not only by the
original buyer or lessee, but also by those claiming under them. It is in this
respect akin to a right of property. The principle is well stated in Megarry
& Wade’s Law of Real Property, 3rd ed, at p 683:
It is a
principle of general application that a grantor must not derogate from his
grant, he must not seek to take away with one hand what he has given with the
other. This obligation binds not only the grantor himself but persons claiming
under him; and the right to enforce it passes to those who claim under the
grantee.
And at page
817:
It is
sometimes said to rest upon an implied promise, but it is in truth an
independent rule of law, and has nothing to do with restrictive covenants or
the equitable doctrine of notice.
Mr Harman
relied on the principle there stated. He says that in 1931, when the Crown
Estate Commissioners let Whitehall Court to the head lessees, it was
contemplated that the flats or suites could be used for the stated purposes,
namely, for residential or professional chambers or offices. He says that, by
consenting to the enforcement notice, they are derogating from their grant
because they are preventing no 139 being used for the purpose of professional
offices.
There is I
think a short answer to this contention. When a man sells or lets land for a
particular purpose, it is always subject to the proviso that it is lawful to
carry on that purpose. Neither the buyer nor the tenant can pray in aid the
doctrine so as to enable him to do something that is unlawful. That is shown by
Pwllbach Colliery Co Ltd v Woodman [1915] AC 634, where a
landowner let a piece of land to a butcher on which to build a sausage factory.
The same landowner had also let adjacent land to a colliery for the purpose of
mining coal. The colliery company put up an apparatus which deposited coal dust
on to the sausage factory. It was held that the butcher could sue the colliery
company for nuisance causing injury to his business. The grant to the colliery
company did not authorise the making of a nuisance. So here the grant in 1931
to the lessees for ‘residential or professional chambers or offices’ was
subject to it being lawful to carry on any particular one of those purposes.
Until the planning Acts were passed, it was perfectly lawful for the lessees to
use the suites or flats for any of those purposes; but when the planning Acts
were passed in 1947 it became unlawful to make any material change of use
without getting planning permission. It was not lawful in 1970 for Mr Dunnett
or Molton Builders to change the use of no 139 from residential to office use
without planning permission. They never got planning permission for that change
of use. It was therefore unlawful. Long before the enforcement notice was
served, it was already unlawful. Later on, when the Crown Estate Commissioners
gave their consent to the service of the enforcement notice, that was simply a
consent to the law taking its course: to the law being enforced against a
person who had changed the use without planning permission. It cannot be a
‘derogation from grant’ simply to allow the law to take its course in stopping
something which was unlawful.
In any case,
Mr Dunnett and Molton Builders Ltd have appealed to the Minister against the
enforcement notice. The appeal operates as an application for planning
permission. So they are in fact in the same position as if they had done what
they ought to have done in the beginning: they are applicants for planning
permission. The action by the Crown Estate Commissioners in giving consent to
the enforcement notice has not prejudiced them in the least. It has only made
them seek planning permission, as they ought to have done. It cannot therefore
be said to be a derogation from grant. Even if this be wrong, however, there is
a further point. The Crown cannot contract itself out of its public duty. In Commissioners
of Crown Lands v Page [1960] 2 QB 274 on p 291 Devlin J said:
When the
Crown, or any other person, is entrusted, whether by virtue of the prerogative
or by statute, with discretionary powers to be exercised for the public good,
it does not, when making a private contract in general terms, undertake (and it
may be that it could not even with the use of specific language validly
undertake) to fetter itself in the use of those powers, and in the exercise of
its discretion.
So it can be
said that the doctrine of derogation from grant cannot be so applied as to
fetter the Crown Estate Commissioners in the use of the powers which it has to
exercise for the public good. But I prefer not to go into this point. It might
involve a discussion as to the distinction, if any, between Crown lands and the
Duchy lands. It is sufficient that here there was no derogation from the grant,
because no grant can be said to give permission to the grantee to do an act which
turns out to be unlawful. The turning of this flat from residential to offices
was unlawful because permission had to be, and should have been, obtained, and
it was not. I find myself in agreement with the judge, and I would dismiss the
appeal.
BROWNE LJ: I
agree that this appeal should be dismissed. Once one escapes from the seductive
labyrinth of Mr Harman’s argument, it seems to me that the appeal fails on a
fairly simple ground which has already been stated by my Lord. The plaintiffs’
case is based on derogation by the Crown Estate Commissioners from their grant
made to Whitehall Court Ltd by the lease of May 9 1931, and made in particular
by that clause which provides that the premises shall be used only for purposes
specified, including professional chambers or offices. Assuming that what the
Crown Estate Commissioners did in this case was a derogation from that grant, I
find great difficulty in seeing how Mr Harman’s clients, Molton Builders Ltd,
are entitled to sue the commissioners in respect of such a derogation, but in
the view I have formed it is unnecessary for me to express any opinion on that
point, and I do not do so. It is common ground that there was no implied
warranty in the 1931 lease that the uses referred to in the relevant clause, clause
9 (c), could lawfully be carried on in 1931, still less that they would remain
lawful throughout the 99 years of the lease; if any authority is needed for
this view, see Hill v Harris [1965] 2 QB 601, per Diplock LJ at
pp 614 and 615 and Russell LJ at p 617. But Mr Harman says it is enough if both
parties intended and contemplated (as no doubt they did in this case) that
Whitehall Court, including the suite now in question, no 139, could and would
be used for any of those purposes. He says that if the landlord acts in such a
way as to prevent or damage one of these contemplated uses, he is derogating
from his grant. In my judgment, Willis J was plainly right in saying, ‘I think
that [counsel for the commissioners] is correct when he says that the right to
use the premises for the purposes set out in the 1931 lease must be construed
as subject to the qualification that such uses must
119]. Counsel’s argument on this point, which I also accept, is set out at
(1975) 234 EG 117. I do not see how the parties could have intended or
contemplated anything else.
In 1931 there
was no effective planning legislation, but since the Town and Country Planning
Act of 1947 planning permission has been required for any material change in
the use of land. On the hearing of this appeal everyone has for convenience
referred to the provisions of the Town and Country Planning Act of 1971, which
reproduces all the provisions of the earlier Acts which were in force in 1970
and are relevant for present purposes. Leaving out the position of the Crown
and its tenants for the moment, the relevant provisions of the 1971 Act are as
follows. Section 22 (1) defines ‘development’ as including the making of any
material change in the use of any buildings or other land. Section 23 (1)
provides, ‘Subject to the provisions of this section, planning permission is
required for the carrying out of any development of land.’ Sections 25 to 35 deal with applications to
the local planning authority for planning permission, and section 36 provides
for an appeal to the Secretary of State against the refusal by a local planning
authority to grant permission. Section 87 (1) provides that ‘where it appears
to the local planning authority that there has been a breach of planning
control after the end of 1963 . . . they may serve a notice under this section
(in this Act referred to as an ‘enforcement notice’) requiring the breach to be
remedied.’ Subsection (2) provides,
‘There is a breach of planning control if development has been carried out,
whether before or after the commencement of this Act, without the grant of
planning permission required in that behalf in accordance with Part III of the
Act of 1962 or Part III of this Act’ (which contains section 23). In my
judgment, those words in subsection (2) defining ‘breach of planning control’
are simply a definition of that phrase for the purposes of subsection (1) of
that section. I do not think it affects the situation that a person who carries
out development without permission is in breach of his duty to obtain
permission under section 23 (1), even before an enforcement notice is served.
Section 88 provides for appeals to the Secretary of State against enforcement
notices. Subsection (1) provides various grounds for appeal, and as my Lord has
pointed out, Mr Dunnett’s notice of appeal in this case relates only to grounds
(a) and (g), (a) being ‘that planning permission ought to be granted for the
development to which the notice relates.’
Subsection (3) of section 88 provides, ‘Where an appeal is brought under
this section, the enforcement notice shall be of no effect pending the final
determination of the appeal.’ Subsection
(5) provides for the powers of the Secretary of State on an appeal, including
among other things, power to ‘grant planning permission for the development to
which the enforcement notice relates.’
And finally, by subsection (7), ‘Where an appeal against an enforcement
notice is brought under this section, the appellant shall be deemed to have
made an application for planning permission for the development to which the
notice relates. . . .’
When in 1970
the plaintiffs (or Mr Dunnett) wished to make a change in the use of this suite
from residential to office use, they were required by section 23 (1) to make an
application for planning permission, but they did not do so. Apart from the special
provisions as to Crown land in section 266 of the Act, an enforcement notice
could have been served on them and they would then have had a right of appeal
to the Secretary of State. The general effect of section 266 (1) (b) and (2)
(a) seems to be clear. The Crown is not bound by the Town and Country Planning
Acts, and does not have to get planning permission in respect of its own
interest in Crown lands, but its tenants do have to get planning permission in
respect to their interests: see Ministry of Agriculture, Fisheries and Food
v Jenkins [1963] 2 QB 317, especially what my Lord said at p 325.
Section 266 (1) (b) refers to Part III of the Act, which contains section 23,
and to Part V, which contains section 87. The plaintiffs (or Mr Dunnett) were
therefore required by section 23 (1) to make an application for planning
permission for their change of use, but did not do so. The only relevant
limitation on the obligation or liability of a tenant or subtenant holding
under the Crown is section 266 (2) (a), which prevents an enforcement notice
under section 87 being served without the consent of ‘the appropriate
authority,’ which is in this case the Crown Estate Commissioners. The effect of
granting such consent will no doubt probably be that an enforcement notice will
be served, as it has been in this case. But when it is, the person on whom it
is served has a right of appeal to the Secretary of State, just as he would
have had if he had originally applied for planning permission and it had been
refused by the local planning authority. This right of appeal has been
exercised in this case, and by virtue of section 88 (7) this is deemed to be an
application for planning permission.
As Willis J
said, and I have said, the original grant of 1931 was in my judgment subject to
the qualification that the use of the premises must be in accordance with the
general law. I think that the ‘general law’ in this context clearly includes
not only the common law (as in Pwllbach Colliery Co v Woodman
[1915] AC 634) but also statute law. I think it is also clear that it includes
not only the law as it was in 1931 but also any changes in the law during the
currency of the term. When the plaintiffs (or Mr Dunnett) made their change of
use in 1970, they were required by section 23 (1) to apply for planning
permission; if they had applied and been refused, they would have had a right
of appeal to the Secretary of State. Now that an enforcement notice has been
served and they have appealed to the Secretary of State, they are deemed to
have made an application for planning permission. As Willis J said, they are
only being put in the position of having to obtain now permission which they
should have applied for in the first instance: see judgment (1975) 234 EG 119.
The grant made by the Crown Estate Commissioners in 1931 was subject to the
qualification that the uses referred to in clause 9 (c) should not contravene
the general law. Before the change of use was made in 1970, the plaintiffs (or
Mr Dunnett) were required by section 23 (1) to get planning permission. They
did not do so, and the change contravened that section. The effect of the
giving of consent by the Crown Estate Commissioners was to give effect to the
implied qualification in the grant and to allow the general law to take its
course, thereby putting the plaintiffs in the same position as if they had done
what the law required them to do and applied for planning permission before
they made the change of use. If on the appeal against the enforcement notice
planning permission is granted, the office use can continue. If it is refused,
the plaintiffs are in no worse position, so far as use is concerned, than if
they had complied with the requirement of section 23 (1) in the first instance
and their application had been refused by the local planning authority and by
the Secretary of State on appeal. In my judgment the granting of consent by the
Crown Estate Commissioners was in these circumstances not a derogation from
their grant. On that ground I would dismiss the appeal. This conclusion, as my
Lord has said, makes it unnecessary to consider the other points argued on this
appeal, and I express no opinion about them.
GEOFFREY LANE
LJ: The primary question to be decided in this case is whether the Crown Estate
Commissioners derogated from their grant of 1931 by giving consent to the
service of an enforcement notice when they had an option as to whether that
notice was to be served or not. There is no dispute that at the time of the
lease of 1931 both parties envisaged that the premises might be used either as
offices or as a private dwelling; and there is no dispute that the
effect of an enforcement notice may be, if the appeal is unsuccessful, to
prevent the present occupier, Mr Dunnett, from using the premises as an office
if he wishes to. A landlord by permitting a certain type of user under the
terms of his lease does not warrant that such user will always be legal or
possible. He does not even warrant that such user is legal at the time when the
lease is granted: Hill v Harris [1965] 2 QB 601. The effect of
the various Town and Country Planning Acts has been to curtail many of the
rights which tenants enjoyed under their leases; but the tenants’ rights are,
of course, subject to the overriding consideration that they must be exercised
in accordance with the law in existence at the time, whether it be common law
or whether it be the law enacted by statute: Pwllbach Colliery Co Ltd v Woodman
[1915] AC 634. That was a case of nuisance under the common law. The same
principle applies in respect of statute law. So if the law changes, and the
tenant’s rights, if he exercises them, are in breach of the law, then the
landlord incurs no liability to the tenant under normal circumstances under the
terms of the lease.
So much would
appear to be self-evident. There is nothing in the 1962 Act–which is the
operative Act we have to consider–that exonerates the lessee from the terms of
section 13 (1) of the 1962 Act, which is now section 23 (1) of the 1971 Act,
namely, ‘Subject to the provisions of this section, planning permission is
required for the carrying out of any development of land.’ Indeed, by virtue of section 199 (1) of the
1962 Act, now section 266 of the 1971 Act, it is provided, ‘Notwithstanding any
interest of the Crown in Crown land, but subject to the following provisions of
this section, any restriction by Part II of this Act [which includes section
13] shall apply to Crown land to the extent of any interest therein for the
time being held otherwise than by or on behalf of the Crown.’ In short, despite the exemptions of land
occupied by the Crown itself, tenants of the commissioners and those claiming
under them require planning permission before development. The change of user
in the present case amounted to development, and it could not be carried out
without planning permission under section 13 (5). No permission was obtained,
so that was a breach of section 13 (1). It is true that the consequences of the
breach, namely, the serving of an enforcement notice and all that may follow
thereafter, could not by virtue of section 199 take place unless consent was
obtained from the Crown Estate Commissioners; but that does not mean that the
breach was cured or ceased to be a breach. Thus what the commissioners were
here doing was to give their consent to the law taking its course in respect of
a breach of the planning regulations in the 1962 statute. It would be a very
strange thing if such an act, the giving of consent in those circumstances,
were to amount to a derogation by the landlord from his grant, entitling the
tenant or his successors in title to a declaration against the local authority
that it was of no effect and entitling him to damages against the landlord and
the Crown Estate Commissioners. In my judgment it does not. There must be read
into any covenant of this sort–a covenant as to user–a proviso that the user is
in accordance with the law. This user was not. There was accordingly no
derogation by the landlord; and in so far as the landlord did take away
anything in this case, it was something which he had not given. I agree with
the reasoning and the conclusions of the learned judge, and I agree that the
appeal should be dismissed.
The appeal
was dismissed, with an order for costs in favour of each respondent. Leave to
appeal to the House of Lords was refused.
