Facts:
Mr Mackenzie and Ms Cheung both own properties on Selsdon Road. He owns number 432 and she owns number 444. Infinity Homes & Developments Ltd., which is a developer, wanted to purchase Number 444 and has obtained planning permission to demolish the house to replace it with a block of nine flats. The two plots were initially owned by the Whitgift Educational Foundation with number 444 being conveyed first.
Both conveyances contained similar clauses. This case concerned a standard restrictive covenant, “no building be erected on the said land except one detached dwelling house and the stables or garage offices and outbuildings thereto, which said property shall not be used at any time otherwise than as a private residence” and a provision which is less common providing that “The Governors reserve 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 in any one or more cases.”
Decision:
The Court of Appeal confirmed Miles J’s judgment. The Court rejected the appellant’s argument that the vendors’ exercise of the power would amount to a derogation from grant. In deciding so, the Court, applying Earl of Plymouth v Rees [2020], ruled that the exercise of the right could not amount to a derogation from grant where that right was part of the conveyance.
The Court first reiterated the three ways an original covenantee can become entitled to the benefit of a restrictive covenant (by assignment, annexation or under a building scheme). The Court explained that the benefit of a restrictive covenant transmitted by annexation will not be enforceable by the owner of the land.
Looking at the construction, the Court ruled that various features of the release provision, such as the word also, indicated the intention of the parties to enable vendors to vary or discharge the restrictive covenants. The Court agreed that the two parts of paragraph 11 had different purposes and that the second half was not a clarification of the first. The Court concluded that the second part of paragraph 11 was intended to give the Governors an additional right.
Implication:
The case implies that the power of restrictive covenants with release provisions will be reduced which could mean that a greater range of developments could take place. The judgement also makes it clear that there must be an appropriately worded conveyance confirming that the covenant can be released by the original vendor or party named in the conveyance. This means that a successor in title will not be able to prevent such a release. Property lawyers will need to carefully consider whether such a release provision has been included.
The rejection of the derogation argument is important as it will limit the applicability of the doctrine in the case of freehold covenants.