Duchess of Bedford House RTM Company Limited & Ors v Campden Hill Gate Ltd

Factual and Procedural Background

This appeal concerns the interpretation of a reservation of rights clause in a head lease related to parking rights at a property known as Duchess of Bedford House, located in a private road called Sheldrake Place East, part of a garden square called Sheldrake Place. The Appellants are owners of long leases of flats at Duchess of Bedford House, while the Respondent, Campden Hill Gate Limited ("Campden Hill"), is the head lessee of adjoining mansion blocks and associated land including roads and gardens.

The Appellants sought a declaration of their parking rights on Sheldrake Place. The first instance judge (HHJ Gerald) ruled in their favor regarding parking on Sheldrake Place East. Campden Hill appealed, and Adam Johnson J allowed the appeal, declaring that the Appellants have no right to park on any part of Sheldrake Place. The dispute centers on the interpretation of a reservation clause in a 1969 Headlease and a "Carve-Out Clause" in a 1974 Headlease, and the application of section 62 of the Law of Property Act 1925.

The freehold title to the relevant properties is held by the trustees of the Phillimore Kensington Estate ("Phillimore Estate"). The Phillimore Estate granted a long lease of Duchess of Bedford House in 1938, and by 1969 most flats were let under short Rent Act tenancies. In 1969, a long headlease was granted to Campden Hill’s predecessor covering Campden Hill Gate and Sheldrake Place. The 1969 Headlease reserved certain rights to the Phillimore Estate, including easements and quasi-easements enjoyed by adjoining or neighboring premises.

In 1974, the leasehold structure changed with the grant of a new long lease of Duchess of Bedford House to a new headlessee. The Appellants hold long underleases granted after 1974. The key legal question is whether parking rights reserved in the 1969 Headlease passed to the 1974 headlessee and subsequently to the Appellants, or whether they were excluded by the Carve-Out Clause in the 1974 Headlease.

Legal Issues Presented

1. What is the proper construction of the reservation of rights clause in the 1969 Headlease, particularly whether it reserved a right to park on Sheldrake Place East to the Phillimore Estate?
2. Whether the right to park, if reserved in 1969, passed to the 1974 headlessee and subsequently to the Appellants, or was excluded by the Carve-Out Clause in the 1974 Headlease.
3. What is the proper interpretation of the Carve-Out Clause, especially the meaning and effect of the phrase "except those now subsisting" and the scope of rights excluded based on potential future rebuilding or development?
4. Whether the right to park amounts to a legal easement or quasi-easement appurtenant to Duchess of Bedford House under the principles established in Newman v Jones and related authorities.
5. Whether the judge erred in interfering with factual findings regarding the impact of parking rights on potential future development.

Arguments of the Parties

Appellants' Arguments

• The Carve-Out Clause should be construed narrowly to exclude only the creation of new rights by operation of section 62 LPA 1925, not the transmission of subsisting rights.
• The second limb of the Carve-Out Clause should not be given a broad scope that excludes subsisting rights on the basis of mere possibility of future development.
• The judge wrongly interfered with the factual findings of HHJ Gerald regarding the practical effect of parking rights on future development.
• The right to park was reserved as a legal easement or quasi-easement by the 1969 Headlease based on a settled practice of parking by residents, consistent with the principles in Newman v Jones.
• The right to park falls within the reservation clause even if it was not recognized formally as an easement at the time.
• The Appellants opposed the admission of fresh evidence relating to underground utilities, arguing that the documents could have been obtained earlier and would not materially affect the issues.

Respondent's Arguments

• The Carve-Out Clause excludes the transmission of the right to park because it might restrict or prejudicially affect future rebuilding or development of the estate.
• The phrase "except those now subsisting" refers narrowly to rights expressly granted under the 1938 Headlease, not to informal or tolerated practices.
• The right to park is too vague and diffuse to constitute a legal easement or quasi-easement.
• The judge was correct to give a broad interpretation to the Carve-Out Clause, emphasizing the word "might" to capture potential future developments.
• The Appellants' evidence was insufficient to establish a right to park appurtenant to each flat, and the principle in Newman v Jones does not apply to this reservation.
• Fresh evidence on underground utilities was not admitted because it was speculative and could have been obtained with reasonable diligence before trial.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by analyzing the language of the Carve-Out Clause in the 1974 Headlease, noting its inelegant drafting and the placement of the phrase "except those now subsisting" in its middle. The court agreed with the lower judge's construction that the clause excludes all rights over the Phillimore Estate except those rights which were subsisting at the time of the 1974 Headlease, provided they do not restrict or prejudicially affect future rebuilding or development.

The court accepted that the Carve-Out Clause was a negotiated compromise between the freeholder’s interest in preserving control over future development and the headlessee’s expectation to receive subsisting rights. The clause prevents the automatic creation of new rights by operation of section 62(2) LPA 1925, but conveys existing rights unless they might interfere with future development.

The court preferred the approach of HHJ Gerald to the second limb of the Carve-Out Clause, which requires a practical and realistic assessment of whether a right might restrict or prejudicially affect future rebuilding or alteration. The court rejected the broader interpretation that any possibility, however remote, would exclude a right, as this would render the exception meaningless.

Regarding the right to park, the court found that it was a subsisting right reserved by the 1969 Headlease as a legal easement or quasi-easement, based on a settled practice of parking by residents. The court applied the reasoning in Newman v Jones which held that a communal parking right can be appurtenant to a block of flats and thus to individual flats within it, without needing evidence that every tenant exercised the right.

The court rejected the Respondent’s argument that the parking right was merely tolerated or too vague to be an easement. It found no evidence of protest against parking by residents and accepted that the reservation clause’s broad wording encompassed such rights.

The court also considered the Respondent’s contention that the phrase "now subsisting" should be narrowly read as rights expressly granted under the previous 1938 lease. It rejected this restrictive interpretation, observing that the reasonable reader would understand it to include subsisting rights recognized in law or equity at the time.

On the issue of the impact of parking rights on future development, the court agreed with HHJ Gerald’s factual findings that the existence of a right of way over Sheldrake Place East limits the scope of alteration or development, and that the parking right does not materially prevent such works. The court found that the lower judge erred in substituting his own evaluative judgment on this factual matter.

The court refused the Appellants’ application to admit fresh evidence regarding underground utilities, citing late submission, lack of material impact, and questions over the accuracy and credibility of the documents.

Holding and Implications

The court ALLOWED THE APPEAL.

The court held that the Carve-Out Clause in the 1974 Headlease should be construed as excluding the creation of new rights by operation of section 62(2) LPA 1925 but conveying subsisting rights unless they might realistically restrict or prejudicially affect future rebuilding or development. The right to park on Sheldrake Place East was reserved by the 1969 Headlease as a legal easement or quasi-easement, passed to the 1974 headlessee, and further passed to the Appellants as lessees of flats in Duchess of Bedford House.

The court found no error in the first instance judge’s factual findings on parking practice and rejected the broader exclusion of parking rights under the Carve-Out Clause as applied by the lower judge. The decision restores the parking rights of the Appellants and clarifies the interpretation of complex reservation and exclusion clauses in leasehold arrangements involving communal rights.

No new precedent was established beyond the application and clarification of existing principles concerning easements, leasehold reservations, and the interpretation of carve-out clauses in head leases.