Restrictive covenant discharged by Lands Tribunal under enlarged jurisdiction of 1969–Compensation assessed by tribunal on basis of splitting realisable development value 50-50–Nothing wrong with tribunal’s approach in a case where there was a loss of amenity, etc, standing to be compensated
This was an
appeal by SJC Construction Co Ltd, of Ventnor Road, Sutton, from a decision of
the Lands Tribunal dated March 4 1974 determining the compensation payable to
the respondents, the London Borough of Sutton, upon modification of a
restrictive covenant prohibiting building on land at Cheam Park Way, Cheam,
Sutton. The decision of the Lands Tribunal was reported at (1974) 230 EG 906.
Mr G H Newsom
QC and Mr B Marder (instructed by A F & F W Tweedie) appeared for the
appellants, and Mr P Garland QC and Mr J Mulholland (instructed by Sharpe,
Pritchard & Co, agents for W L Barton) represented the respondents.
Giving
judgment, LORD DENNING said: This case raises a question of the compensation
payable in respect of the removal of restrictive covenants. It concerns an area
of land at Cheam in the Borough of Sutton. Originally it was land of about an
acre on which there was a house of some historic and architectural interest
called Whitehall. It was in a very favoured situation. On the other side of
Cheam Park Way there was Cheam Park. This land sloped down towards the park and
had extensive views over it. In 1959 the owner of Whitehall sold off one-third
of the land at the bottom of
dwelling-house only, with a garage. That was the restrictive covenant which was
put on in 1959. A two-storey house was built on the land at that time; there
were then private owners of both Whitehall and the new house. But since that
time there have been changes of ownership. The present owners of Whitehall, and
the two thirds of an acre with it, are the London Borough of Sutton. The
one-third acre was sold off. It is the property of a development company, SJC
Construction Co Ltd. The developers have pulled down the house which was
originally there. They want to build upon the site six four-roomed flats in a
two-storey block, six garages and a new access road. That would plainly be a
breach of the old restrictive covenant. So the developers wish to have that
restrictive covenant removed. For that purpose there has been an inquiry before
the Lands Tribunal as to whether the restriction should be removed, and if it
is removed, what the appropriate compensation should be. In the old days we
used to be very familiar with section 84 of the Law of Property Act 1925. But
the provisions have been very much altered by the Law of Property Act 1969.
These alterations are of such significance that not much guidance is to be
obtained from looking at the old statute or the cases under it. I will not read
the section in full. It is rather too complicated to do so. It is set out in
its amended form in Wolstenholme & Cherry and Preston & Newsom.
First I will
consider the question whether the restriction should be removed or not. The
President of the Lands Tribunal, who himself sat upon it, came to some
conclusions which I will summarise. First, he found that the proposed discharge
or modification did not come within section 84 (1) (a) or (c): that is, the
restriction was not obsolete, and its removal would injure the persons entitled
to the benefit of the restriction. The only ground which the President found to
be available was under the new section 84 (1) (aa), that ‘the continued
existence thereof would impede some reasonable user of the land for public or
private purposes. . . .’ He held that
the user which the development company were proposing was a reasonable user for
public or private purposes, and that the continued existence of the restriction
would impede it. Further, he held that the restriction did secure to the
persons entitled to the benefit of it practical benefits of substantial value
or advantage to them. But also he was satisfied that the continuance of the
restriction in impeding the proposed user would be contrary to the public
interest. That is section 84 (1A) (b) of the amending Act. And further, he was
satisfied that money would be an adequate compensation for the loss or
disadvantage which any person entitled to the benefit of the restriction would
suffer from its discharge or modification. All those matters were proved.
So–summarising it–it is this. The President of the Lands Tribunal was satisfied
that the proposed use by the development company was reasonable; that it would
be contrary to the public interest to continue the restriction; and that money
would be an adequate compensation for the borough council, who were entitled to
the benefit of the restriction. So he held that the restriction was to be
removed. His findings on that point have not been challenged.
But now we
come to the point before us: what is the compensation to be? The person entitled to the benefit is
entitled to be paid ‘such sum by way of consideration as the tribunal may think
it just to award under one, but not both, of the following heads. . . .’ The particular one here is, ‘A sum to make up
for any loss or disadvantage suffered by that person in consequence of the
discharge or modification.’ So here the
problem before the President was to award such sum as was just to make up to
the borough council ‘for any loss or disadvantage’ suffered by them in
consequence of discharging the restriction. The President fixed in this
particular case the sum of £9,500. He did it in this way. He envisaged there
might be friendly negotiations between the parties as to the removal of the
restriction, and he said, ‘. . . I think that the most likely outcome of
friendly negotiations would have been an agreement to split the development
value equally and I so decide.’ He had
evidence from the council’s officers as to development value, that is, the
value with and without the restriction; and he said the amounts were £35,000
and £54,000 respectively. That gave a realisable development value of £19,000;
and splitting it gave £9,500, and he awarded that sum.
Now, Mr
Newsom, on behalf of the development company, has submitted that the President
was wrong in principle in awarding compensation on that basis. He said, in the
first place, that the basis was inconsistent with a case decided by the Lands
Tribunal in Scotland, McVey and Robertson v Glasgow Corporation
(1973) 26 P & C R 429. The President was aware of that case. He considered
that it was not applicable by reason of the wording of the Scottish Act and the
particular provisions of Scottish land law. We have been taken through that
case by counsel. It seems to me, as it did to the President, that it is
distinguishable on these grounds. First, the Scottish statute is in many
respects different from the English. But, secondly, if one examines the facts
and circumstances of the Scottish case, it is very different. The Glasgow
Corporation (who were entitled to the benefit of the restriction) did not
suffer any loss or disadvantage from its removal, except that they were
deprived of the right or power to obtain money. That appears from page 435. The
Lands Tribunal in Scotland held that a right or power to obtain money was not
the subject of compensation under the statute, when no other loss or
disadvantage had been incurred. That seems to me entirely right. But I think
the position would have been very different if there had been any loss or
disadvantage, such as injury to the amenities or obstruction of view or
increase in noise, or anything of that kind. So the Scottish case was decided
on its special circumstances, in that there was no such loss or disadvantage at
all. The only thing that the Glasgow Corporation lost was the opportunity of
extracting money as the price of removing the restriction. Such was not the
subject of compensation.
So we come
back to the question, what is the basis, or proper basis, of compensation? It is simply compensation to make up ‘for the
loss or disadvantage suffered’ by the borough council. There is no method
prescribed by the Act by which it is to be assessed. It is essentially a
question of quantum. But it is to be assessed for loss of amenities, loss of
view, and so forth, which are things which it is hard to assess in terms of
money. It is similar to the compensation for pain and suffering, which cannot
be translated into money terms. So the courts have to arrive at conventional
sums which they award. So here the loss was a disadvantage to the borough
council, the occupiers of the house Whitehall, and to their tenants. The
borough council propose, I gather, to put up many old people’s homes on the
land they have there. They are entitled to be compensated for the loss of amenities,
the loss of view across to the park, and so forth. That has to be translated
into money terms. Some calculation has to be made. The President did it by
finding the realisable development value, and splitting it equally. I see
nothing wrong in his approach. He found some help from the case of Wrotham
Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798. In that
case the plaintiff sued for an injunction for breach of a restrictive covenant.
Brightman J refused an injunction but granted damages in lieu thereof. He
assessed the damages by taking a percentage of the realisable development
value. He said at p 815: ‘I think that the landowner would then reasonably have
required a certain percentage of that anticipated profit as the price for the
relaxation of the covenant. . . . In assessing what would be a fair percentage
I think that the court ought, on the particular
that case. The President here looked at it in much the same way. He took a much
higher percentage. Instead of 5 per cent he took 50 per cent. He took the
realisable development value and split it equally. That was, he said, fair to
the parties. It was a method by which he was getting at the loss or
disadvantage. I see no error of law in it. The loss or disadvantage is an
intangible matter which is incapable of exact calculation in money, and he took
a fair and sensible way of assessing it. I see no error of law in the way the
President dealt with the matter, and I would therefore dismiss the appeal.
STEPHENSON LJ:
I agree. I too cannot see anything wrong with the method by which the President
of the Lands Tribunal has assessed the compensation (or consideration) which he
thought just to award the respondents under the amended section 84 of the Law
of Property Act 1925. The modification of this restrictive covenant clearly
resulted in the respondents suffering the loss of a practical benefit of
substantial value or advantage. For that substantial loss or disadvantage they
were entitled to substantial compensation. That they got from the President,
and by a method which I would not say was the only method, but could not say
was unlawful or contrary to the statute or to any authority which has been
cited to us. I therefore agree that this appeal should be dismissed.
GEOFFREY LANE
LJ: I also agree.
The appeal
was dismissed with costs.
