Lease granted of part of building for use as gift shop – Lessor covenanting with claimant not to permit such use elsewhere in building – Defendant taking lease of another part with no corresponding restriction – Whether restriction binding on defendant by operation of Landlord and Tenant (Covenants) Act 1995 or otherwise
In February 1997 the claimant (Oceanic) took a 20-year lease of part of a famous London building, formerly known as County Hall, for the purpose of operating a shop to serve visitors to the recently completed London Aquarium. By clause 3.27.3 Oceanic covenanted not without the written consent of the landlord to “use the demised premises or permit or suffer them to be used” otherwise than as a high quality gift shop. By clause 4.6 the landlord, which was the registered freehold proprietor of the entire building, covenanted that it would “not permit any other gift shop to be operated in the Building provided that the restriction shall not apply to any hotel in the Building”.
In July 1998 the landlord granted to the defendant (United) a 15-year lease of another part of the building, the use being restricted to a “Football Hall of Fame” and ancillary uses. However, the United lease contained no restriction on use as a gift shop. Following a refusal by United to give an assurance that no such shop would be opened in the Hall of Fame, Oceanic issued proceedings against United for an injunction to restrain such use and/or for damages. Oceanic contended that clause 4.6 had created a restriction on the use of land, and that the burden of that restriction had passed to United either by operation of section 3(5) of the Landlord and Tenant (Covenants) Act 1995 or because United had notice of clause 4.6 before it took the 1998 lease. United took issue on all three points.
Held: The restriction could not be enforced against United.
1. Oceanic was correct in so far as it contended that clause 4.6 created a restriction on use. On a natural reading, a covenant not to permit a use carried with it an obligation on the covenantor himself not to make such use of the property. Without further qualification, it would be odd if the person over whom the covenantor had the most immediate control (himself) were to be excluded from the covenant. While there was some force in Oceanic’s contention that a more limited meaning could be gathered from the absence in Clause 4.6 of the coventional and more comprehensive form of words used in clause 3.27 (see Kemp v Bird (1877) 5 ChD 974), that fact should not normally justify departing from the natural meaning of either provision, it being right for the court to bear in mind that draftsmen may take the wording of different clauses from different precedents.
2. By section 3(5) of the Landlord and Tenant (Covenants) Act 1995 the covenant of a landlord or tenant that was restrictive of the user of land was enforceable, not only against an assignee, but also against any other person owning or occupying “any demised premises to which the covenant relates”. Since the words “any demised premises” could not have been intended to apply to any premises which happened from time to time to be demised, it was common ground that some qualifying words had to be implied. Oceanic urged that the words referred to any premises demised by the landlord. United sought to limit those words to the premises demised by the lease in question. Although the meaning advocated by Oceanic was somewhat more natural, the more limited meaning was to be preferred if only because the same expression had been used in two neighbouring sub-sections in a manner which (as accepted by Oceanic) could only allow for the more limited meaning. Accordingly the burden could not pass to United under the 1995 Act.
3. Having been granted by a registered proprietor, the United lease took effect as a registered disposition under section 19(2) of the Land Registration Act 1925, even though the lease itself, being for a term of less than 21 years, was not registrable. Subject to certain exceptions, which did not apply in the present case, United, being a party to a registered disposition, took its lease “free from all. . . estates and interests”: see section 20(1) of the 1925 Act. There was accordingly no room for the equitable doctrine of notice. Nor could a contrary conclusion be drawn from section 50 of the Act, which, while allowing for the protection of restrictive covenants by notice, made a specific exception for covenants between a lessor and lessee. That such a conclusion had been drawn in Dartstone Ltd v Cleveland Petroleum Co Ltd [1969] 1 WLR 1807 from a similar provision in the Land Charges Act 1925 did not assist Oceanic, as that case was concerned with unregistered land.
4. While it was unsatisfactory that a tenant under a lease for not more than 21 years, having the benefit of a landlord’s covenant restrictive of use of other land, could not protect his interest by the entry of a notice, other means were available – albeit more complex and time consuming – of achieving the desired protection: see Ruoff & Roper on Registered Conveyancing, loose-leaf edition, April 1999, para 21-19.
Jonathan Gaunt QC and David Lord (instructed by Goldsmiths) appeared for the claimant; Timothy Fancourt (instructed by Ashurst Morris Crisp) appeared for the defendant.
Alan Cooklin, barrister
