Factual and Procedural Background
This appeal concerns the decision of the Upper Tribunal (Lands Chamber) which granted an application by the first respondent ("Company A") under section 84 of the Law of Property Act 1925 to modify restrictive covenants preventing residential development on a parcel of open land ("the application land"). Company A, a developer, had built houses and bungalows on the land in breach of these covenants before applying to modify them. The properties were later sold to the second respondent ("Company B"), a social housing provider, to satisfy a planning obligation linked to a larger nearby development.
The restrictive covenants originated from a 1972 conveyance between a local farmer ("Individual A") and an industrial company ("Company C"), restricting building on the application land and limiting its use to open parking space. The land is located near a hospice site owned by a charitable trust ("the Trust"). The Trust and Individual A objected to the modification application, citing harm to the hospice environment.
Company A was aware of the covenants but proceeded to build without prior application to modify them, presenting a fait accompli. The Upper Tribunal found the covenants impeded reasonable use of the land and were contrary to the public interest, allowing modification subject to compensation to the Trust. The Trust appealed, challenging the Upper Tribunal’s legal reasoning and discretionary exercise.
Legal Issues Presented
- Whether the Upper Tribunal erred in applying guidance from a nuisance case by analogy to section 84 applications for modifying restrictive covenants.
- Whether the Upper Tribunal erred in treating the existence of completed development in breach of restrictive covenants as a relevant factor under section 84(1A)(b), thus incentivising unlawful conduct.
- Whether the Upper Tribunal failed to properly consider alternative provision of affordable housing in assessing the public interest and discretion under section 84.
- Whether the Upper Tribunal erred in its exercise of discretion by failing to adequately weigh the deliberate breach of covenants by Company A.
Arguments of the Parties
Appellant's Arguments (The Trust)
- The Upper Tribunal wrongly relied on Lord Sumption’s observations in a nuisance case (Lawrence v Fen Tigers) as relevant guidance for section 84 applications.
- The Tribunal’s approach improperly rewarded Company A’s deliberate breach of the covenants by giving weight to the existence of completed buildings.
- The Tribunal failed to consider that Company A had alternative means to satisfy affordable housing obligations without breaching the covenants.
- The Tribunal did not sufficiently consider Company A’s high-handed and opportunistic conduct in exercising its discretion.
Respondent's Arguments (Company A and Company B)
- The existence of planning permission and the pressing social need for affordable housing justified modification of the restrictive covenants.
- The public interest in allowing occupation of the already built housing outweighed the private rights under the covenants.
- Compensation to the Trust was adequate to address any loss or disadvantage caused by the modification.
- The conduct of Company A should not preclude modification given the circumstances and public interest considerations.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Lawrence v Fen Tigers [2014] AC 822 |
Guidance on injunctive relief and damages in nuisance cases involving planning permission. |
The Upper Tribunal applied Lord Sumption’s reasoning by analogy to section 84 cases; the Court of Appeal rejected this analogy as inappropriate for modifying restrictive covenants. |
| Shephard v Turner [2006] 2 P&CR 28 |
Explanation of the policy underlying section 84(1)(aa) balancing public and private interests. |
Confirmed the need for a fair balance between development needs and protection of private contractual rights. |
| Re Bass Ltd's Application (1973) 26 P&CR 156 |
Seven questions relevant to section 84 applications and the public interest test. |
Used to guide the Upper Tribunal’s assessment of practical benefits and public interest in the present case. |
| Re Collins' Application (1975) 30 P&CR 527 |
Requirement that the public interest justifying interference with private rights must be "so important and immediate". |
The Court reaffirmed this standard and held the Upper Tribunal should have followed it strictly. |
| Re S.J.C. Construction Co Ltd (1974) 28 P&CR 200 |
Applicant’s conduct relevant to satisfaction of public interest condition under section 84(1A)(b). |
The Court held that the Upper Tribunal erred by postponing consideration of conduct to discretionary stage instead of at the precondition stage. |
| Re George Wimpey Bristol Ltd's Application [2011] UKUT 91 (LC) |
Discretionary principle that tribunals should not reward deliberate breaches of restrictive covenants. |
Supported the Court’s view that the Upper Tribunal erred in exercising discretion in favour of Company A despite deliberate breach. |
| Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 |
Warning against incentivising breaches of restrictive covenants by allowing easier modification post-development. |
Referenced to emphasize the risk of encouraging unlawful development if discretion is exercised leniently. |
| Colls v Home and Colonial Stores Ltd [1904] AC 179 |
Factors affecting whether injunction or damages should be granted, including defendant’s conduct. |
Used to support the argument that deliberate unlawful conduct should lead to refusal of modification. |
| Winter v Traditional & Contemporary Contracts Ltd [2008] 1 EGLR 80 |
Legitimate reasons for late section 84 applications after breach. |
Recognized as an example where late application may be justified, but not applicable here. |
Court's Reasoning and Analysis
The Court began by emphasizing the fundamental distinction between planning permission and private property rights. Planning permission does not override private restrictive covenants; developers must negotiate or apply under section 84 before breaching such covenants.
The Court rejected the Upper Tribunal’s reliance on Lord Sumption’s nuisance case reasoning, finding it incompatible with the statutory framework and the nature of restrictive covenants as binding contractual rights. The Court highlighted that section 84(1B) provides specific guidance on considering planning permissions and development plans, which the Upper Tribunal misapplied by giving undue weight to planning permission as fully reflecting the public interest.
The Court underscored the importance of the developer’s conduct in assessing whether the public interest condition under section 84(1A)(b) is satisfied. Company A’s deliberate breach of the covenants before making its application was contrary to the public interest and should weigh heavily against modification.
Further, the Court found that the Upper Tribunal erred by ignoring the availability of alternative affordable housing provision secured by Company A’s agreement with the local authority, which undermined the public interest claim for modification.
In exercising discretion, the Court held that the Upper Tribunal failed to properly weigh Company A’s high-handed and opportunistic conduct. The Court endorsed the principle that tribunals should not reward deliberate breaches by facilitating easier modification of covenants post-development.
Accordingly, the Court concluded that no discretion arose under section 84(1) to modify the covenants and that the Upper Tribunal should have refused the application.
Holding and Implications
ALLOWING THE APPEAL
The Court allowed the appeal, holding that the Upper Tribunal erred in law and in the exercise of discretion by modifying the restrictive covenants. The Court held that Company A’s deliberate breach and failure to engage properly with the covenant holders before development meant the public interest condition was not satisfied, and no discretion to modify arose.
The direct effect is that the modification granted by the Upper Tribunal is set aside and the restrictive covenants remain in force. The Court did not remit the case for further consideration, as the facts were sufficiently explored. No new precedent altering the law was established; rather, the Court reaffirmed existing principles regarding the interplay of restrictive covenants, planning permission, and section 84 applications, emphasizing procedural propriety and respect for private rights.