Cynical Breach of Restrictive Covenant Dashed by Supreme Court
Section 84 of the Law of Property Act 1925 confers upon the Upper Tribunal (UT) a power, in specified circumstances, to discharge or modify restrictive covenants affecting land.
For the first time the highest UK Court was required to decide an appeal on this section: Alexander Devine Children’s Cancer Trust (Respondent) v Housing Solutions (Appellant): [2020] UKSC 45
The dilemma in this case was that a charitable children’s trust sought to maintain the benefit of a restrictive covenant to which it was entitled, so that terminally ill children in a hospice built on the Trust’s land could fully enjoy, in privacy, the use of the grounds.
On the other hand, there was a company seeking to ensure that 13 units of affordable housing built in breach of the restrictive covenant did not go to waste.
In 1972 a farmer sold part of his land to a company (the application land) that already owned the land next door (the unencumbered land). As part of the sale the company covenanted that at all times thereafter (i) no building structure would be built on the application land, and (ii) the application land would only be used for car parking.
The farmer’s son (BS) later inherited the land adjacent to the site and in 2012 made a gift of part of the land to the Alexander Devine Children’s Cancer Trust (the Trust) for the construction of a children’s hospice.
Soon afterwards, knowing of the restrictive covenants, a property developer called Millgate acquired the site. In 2013 it applied for planning permission to build 23 affordable houses on the site, 13 of which were to be built on the application land in breach of the restrictive covenants.
Some would overlook the hospice’s planned gardens and wheelchair walk. Planning permission was granted and building work commenced.
In September 2014 BS wrote to Millgate objecting but they continued nonetheless and in May 2015 agreed to sell the development to Housing Solutions.
Thereafter, Millgate applied to the Upper Tribunal seeking modification of the restrictive covenants. BS and the Trust objected.
The Upper Tribunal allowed Millgate’s application to modify the restrictive covenants on condition that it paid £150,00 to the Trust as compensation. The Court of Appeal overturned the decision of the UT on 28 November 2018.
The Supreme Court (Lord Kerr, Lord Lloyd-Jones, Lord Kitchin, Lord Hamblen, Lord Burrows) unanimously dismissed the appeal of Housing Solutions although for different reasons to those given by the Court of Appeal.
Was Millgate’s deliberate and cynical breach of the restrictive covenants relevant at the first, or jurisdictional stage? The Court of Appeal found that it was but the Supreme Court found that it was not.
The ‘contrary to public interest’ ground required a narrow interpretation. Its focus was on the impeding of a reasonable user of the land and whether the impediment by continuation of the restrictive covenant, was contrary to the public interest.
The question was not the wider one of whether in all the circumstances it would be contrary to the public interest to maintain the restrictive covenant.
Did the UT fail to consider properly, at the discretionary stage, Millgate’s cynical conduct? The Court of Appeal found that it did. The Supreme Court agreed but for different reasons.
It was only appropriate for an appellate court to interfere in a discretionary decision of a specialist tribunal if it had made an error of law.
It did: it failed to consider two relevant factors at the discretionary stage: (i) Millgate could have built on the unencumbered land, not the application land; and (ii) Millgate would have been unlikely to satisfy the ‘contrary to the public interest’ ground had it applied to modify the restrictive covenants before building on the application land.
Millgate could not be rewarded for presenting the Upper Tribunal with a fait accompli.