Tate & Anor Re: Dunston West Farm

Factual and Procedural Background

This opinion concerns an application under section 84 of the Law of Property Act 1925 by the Applicants for the discharge or modification of a restrictive covenant affecting freehold land known as Dunston West Farm. The covenant restricts use of the land to agricultural purposes or as a riding school and livery stable. The Applicants seek to permit residential development, including erection of a detached dwelling and conversion of existing farm buildings into three dwelling houses, pursuant to granted planning permissions.

The restrictive covenant was imposed by a 1980 conveyance by the Objector (successor to the original transferor) and benefits land owned by the Objector, a major housebuilding group in the Newcastle/Gateshead area. The Objector owns extensive land including sites identified for potential residential development within the Green Belt. The Applicants acquired the relevant land in 2007 and obtained various consents between 2008 and 2011 to enable residential development.

The Objector opposed the application, contending that discharge or modification would injure its interests, particularly in relation to planning negotiations and potential competition from the proposed dwellings. The Tribunal conducted a site inspection and heard expert evidence from both parties before issuing this decision.

Legal Issues Presented

1. Will the proposed discharge or modification injure the Objector? (section 84(1)(c))
2. Does impeding the proposed use secure to the Objector any practical benefits? (section 84(1A))
3. If so, are those benefits of substantial value or advantage? (section 84(1A))
4. Is impeding the proposed use contrary to the public interest? (section 84(1A)(b))
5. Would money be an adequate compensation? (section 84(1A))
6. What compensation, if any, should be paid?

Arguments of the Parties

Objector's Arguments

• Release of the covenant before planning approval for the Objector’s sites would result in new residents who may object to the Objector’s proposed residential developments on nearby Green Belt land, increasing opposition and risk to those projects.
• Additional residents would increase demands on local infrastructure, potentially triggering higher planning obligations (section 106 payments) for the Objector’s developments.
• Release after or near planning approval would cause competition with the Objector’s residential projects, though this ground was later withdrawn.
• The restrictive covenant enables the Objector to seek financial compensation for the increase in development value if the restriction is lifted; compensation of £250,000 was claimed.

Applicants' Arguments

• The proposed discharge/modification will not injure the Objector because the Objector’s land remains in arable use and the application site is not visible from the Objector’s potential development sites.
• Objections from new residents would carry no more weight than other local objections and might even support the Objector’s proposals, such as a country park.
• The impact on infrastructure from four additional dwellings is negligible compared to the scale of the Objector’s developments.
• The restrictive covenant does not secure any practical benefit to the Objector other than enabling it to demand payment; this is not a benefit contemplated by the statute.
• If any practical benefit exists, it is insignificant compared to the value of the Objector’s landholding.
• The restriction impeding the proposed use is contrary to public interest as it restricts an open housing market and may endanger listed buildings by preventing their viable use.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Stockport MBC v Alwiyah Developments (1986) 52 P & CR 278	Monetary payments for release of restrictive covenants do not constitute practical benefits under s84(1)(aa).	The Court relied on this authority to reject the Objector's claim that the ability to demand compensation was a practical benefit, affirming that such financial benefit is not a relevant consideration.
Re Davies & Others Application [2001] 1 EGLR 111	Used for guidance on adjusting compensation values for inflation.	The Court accepted an inflation-adjusted figure for the compensation to reflect the effect of the covenant on the original sale price.
Winter v Traditional and Contemporary Contracts Ltd [2008] 1 EGLR 80	Clarification on compensation awards and rejection of unrealistic claims for windfall percentages of released development value.	The Court cited this case to emphasize that claims for compensation based on capturing a large proportion of development value are unreasonable and unsupported by precedent.
SJC Construction Co Ltd's Application [1976] RVR 219	Context for awarding compensation based on a proportion of released development value.	Referenced in Winter, illustrating the legal context around compensation awards, but distinguished as not supporting large windfall claims.
Stokes v Cambridge Corporation (1961) 13 P&CR 77	Support for awarding compensation as a percentage of additional realizable development value in compulsory acquisition cases.	Used to contrast the Objector’s excessive compensation claim with established principles limiting such awards.
Re Collins Application (1974) 30 P & CR 527	This precedent was cited but specific application details were not elaborated in the opinion.	This case was referenced among others without detailed discussion.
Gilbert v Spoor [1983] Ch 27	This precedent was cited but specific application details were not elaborated in the opinion.	This case was referenced among others without detailed discussion.
Margerison v Bates [2008] EWHC 1211 (Ch)	This precedent was cited but specific application details were not elaborated in the opinion.	This case was referenced among others without detailed discussion.
Re Gaffney's Application (1974) 35 P & CR 440	This precedent was cited but specific application details were not elaborated in the opinion.	This case was referenced among others without detailed discussion.
Re Harper's Application (1986) 52 P & CR 104	This precedent was cited but specific application details were not elaborated in the opinion.	This case was referenced among others without detailed discussion.

Court's Reasoning and Analysis

The Tribunal first considered whether the restrictive covenant secured any practical benefits to the Objector under section 84(1)(aa). It found that the Objector’s initial objection based on competition was withdrawn and that concerns about increased objections from new residents were not justified. The Tribunal reasoned that any potential objector would investigate the local planning authority’s stance on Green Belt development before purchasing, thus limiting the risk of objection from the proposed dwellings.

The Tribunal also rejected the Objector’s contention that additional residents would increase planning obligations significantly, accepting expert evidence that the scale of the proposed development was too small to impact section 106 contributions materially.

Critically, the Tribunal accepted that the only practical benefit the restrictive covenant provided the Objector was the ability to demand financial compensation, which is not a benefit contemplated by the statute. This conclusion was supported by binding precedent from the Court of Appeal (Stockport MBC v Alwiyah Developments).

Given the absence of any other practical benefit, the Tribunal held that the Applicants satisfied ground (aa) and had the power to discharge or modify the covenant. It found no need to determine injury or public interest grounds.

In exercising its discretion, the Tribunal found no reason to withhold discharge and ordered the covenant to be discharged subject to payment of a modest compensation sum, reflecting the effect of the covenant on the original sale price, adjusted for inflation.

Regarding costs, the Tribunal found the Objector’s conduct unreasonable in persisting with a compensation claim contrary to clear legal authority and ordered the Objector to pay the Applicants’ costs incurred after a specified date.

Holding and Implications

The Tribunal ordered the discharge of the restrictive covenant.

The direct effect is that the Applicants are permitted to proceed with their residential development plans on the application site, including erection of a detached dwelling and conversion of farm buildings into three dwellings. The Objector must accept a nominal compensation payment of £3,000, reflecting the limited impact of the covenant at the time of its imposition.

Additionally, the Objector was ordered to pay the Applicants’ costs incurred after 21 March 2013 due to unreasonable conduct in pursuing an unsupported compensation claim.

The decision clarifies that financial gain from restricting development does not constitute a practical benefit under section 84(1)(aa), reinforcing established case law and discouraging speculative compensation claims. No new legal precedent was established, but the ruling emphasizes adherence to existing authority and the proper scope of compensation under the statute.