England and Wales Court of Appeal (Civil Division) Decisions

Court of Appeal

		29 November 1979

1. Giving the first judgment at the invitation of Megaw LJ, BRIGHTMAN LJ said: This is an appeal from a judgment of J W Mills QC, sitting as a deputy High Court judge of the Chancery Division. The dispute relates to a large development site near Newport Pagnell in Buckinghamshire. This site consists of four areas of land of roughly equal size which can, for convenience, be called the red, green, pink and blue land. There were also included in the development site certain additional bits of land which I shall ignore.
2. The plaintiff company is now the owner of the red and the green land. The defendant company, Mill Lodge Properties Ltd (which I shall call 'Mill Lodge'), is the owner of the blue land. The plaintiff company claims to be entitled to the benefit of a restrictive covenant which is said to debar Mill Lodge from building more than 300 houses on the blue land. Mill Lodge is in the process of exceeding that density by building an additional 32 houses in conformity with a new planning permission which it has obtained. The judge decided against Mill Lodge and granted an injunction.
3. In September 1970 a company called Mackenzie Hill Ltd (which I shall refer to as 'Mackenzie Hill') was about to become the owner of the site. On September 18 the Buckinghamshire County Council, as planning authority acting through the Newport Pagnell Urban District Council as its agent, granted outline planning permission to Mackenzie Hill to develop the site by the provision of housing and associated amenities. There were a number of conditions attached to the permission, of which the important ones were these:

1. The approval of the County Council shall be obtained to the number, siting, design and external appearance of the buildings (except the schools), and the means of access thereto before the development is commenced. . . .

2. This permission shall be null and void if the approval of the County Council to all the matters referred to in the last preceding condition has not been applied for in writing within three years --ie by September 1973.

4. This permission shall enure only for the benefit of the applicants and their subsidiaries.

5. This permission shall relate to the erection of a church/community centre, a shopping cluster, a petrol filling station, a public house, and approximately 1,250 private residential dwellings. . . .

Condition 8 specified the rate of development, but this topic was covered in a revised form by the agreement to which I shall next refer.

4. On the same day as the planning permission Mackenzie Hill entered into an agreement with the urban district council which has been called the phasing agreement. By this agreement the council undertook to construct roads and sewers through the site and Mackenzie Hill agreed to contribute towards the cost. Clause 7, so far as material, reads as follows (in the clause the expression 'Developers' means Mackenzie Hill and 'HI' means the development site):

(a) If the Developers shall desire to see the whole or any part of H1 they shall forthwith inform the Council and the terms and conditions of such sale or sales shall include the disclosure of this Agreement to the purchasers and provisions to safeguard the Council's position under this Agreement which shall be to the satisfaction of the Council . . . PROVIDED that this sub-clause shall not apply to the sale of any single completed dwelling to an individual purchaser.

(b) The Developers shall have the right to assign the burden and benefit of this Agreement but shall not be released from their obligations hereunder on any such assignment unless the proposed assignees shall have first furnished the Council with a Bond. . . .

5. By clause 9(a) Mackenzie Hill agreed that the rate of development should not exceed 50 houses by the end of 1970 and a further 125 houses in each of the years 1971 and 1972. The rate of development was then to be reviewed with the possibility of an increase, but not a decrease, in the rate. On that basis the development would be completed in or before the year 1980 according to whether or not the rate of development ultimately exceeded a minimum of 125 houses a year. That rate of development differed slightly from the rate laid down in the planning permission and that, no doubt, was the reason for clause 9(e) of the phasing agreement, whereunder Mackenzie Hill covenanted with the council that they would enter into an agreement under seal with the council on or before December 14 1970 incorporating the terms of clause 9(a).
6. It seems to me, reading clauses 7 and 9(e), that the urban district council contemplated that Mackenzie Hill might not itself develop but might part with the development in favour of someone else. Furthermore, as it was the urban district council which had, on the same day as the phasing agreement, in its capacity as agent for the Buckinghamshire County Council, granted the planning permission to Mackenzie Hill, the planning permission ought fairly to be read in conjunction with the phasing agreement.
7. On Februry 26 1971 Mackenzie Hill and its mortgagee sold and conveyed the blue land to Mill Lodge. By clause 3 the conveyance was expressed to be subject to and with the benefit of the phasing agreement. Clause 5(iv) set out the covenant which is the subject-matter of this action. It reads as follows:

The Purchaser hereby covenants with the Vendor that . . .

(iv) in carrying out the development of the 'blue' land the Purchaser shall not build at a greater density than a total of 300 dwellings so as not to reduce the number of units which the Vendor might eventually erect on the retained land under the existing Planning Consent.

8. There was a simultaneous conveyance of the pink land to a company called Gough Cooper (Midland) Ltd (which I shall abbreviate to 'Gough Cooper'). Clause 6 of the Mill Lodge conveyance provided that the blue land was sold with the benefit, so far as the same related to the blue land, of the agreements and undertakings on the part of Gough Cooper contained in the Gough Cooper conveyance. Clause 7 of the Mill Lodge conveyance contained a covenant by Mackenzie Hill with Mill Lodge, expressed to be for the benefit of the blue land and every part thereof, that Mackenzie Hill would not build houses on the red and the green land, with an immaterial exception, before the date on which Mill Lodge had erected or had permission from the planning authority under any revised phasing agreement to erect 300 dwellings on the blue land or January 1 1975, whichever should happen first, but not in any event earlier than January 1 1974.
9. The Mill Lodge conveyance contains no express definition of the retained land. There is, however, a reference in clause 2 to 'any adjoining or adjacent property retained by the Vendor.' I read 'the retained land' in clause 5(iv) as meaning just that. I do not accept the submission of the respondent's counsel that the retained land included the pink land; clause 6 makes it clear that the pink land was not retained, but was being simultaneously conveyed to Gough Cooper. Counsel invited us to look at the contract of sale to Mill Lodge for the purpose of resolving an ambiguity as to the meaning of the retained land, but I see no ambiguity. I, therefore, conclude that the retained land means the red and the green land and the small additional areas comprised in the site, other, of course, than the blue and the pink land. To avoid confusion, I think I ought to explain that the expression 'the green land' is made use of in the Mill Lodge conveyance, but it means both the red and the green land as I use those expressions in this judgment.
10. The Gough Cooper conveyance is not, in my view, relevant to the construction of the Mill Lodge conveyance, but it is permissible to refer to it as part of the backcloth against which the Mill Lodge conveyance was made, since the Gough Cooper conveyance is referred to in the Mill Lodge conveyance as a document of simultaneous execution. Clause 4 of this conveyance was obviously intended to cover the same subject-matter as clause 5(iv) of the Mill Lodge conveyance and was in the following terms:

The Purchaser for itself and its successors in title hereby covenants with the Vendor and its successors in title that the Purchaser shall not build on the land hereby conveyed at a greater density than a total of Three Hundred dwellings so as not to reduce the number of units which the Vendor might eventually erect on the land edged green on the said plan under the existing Planning Consent obtained by the Vendor in respect of the whole of the land edged red edged blue and edged green on the said plan.

Clause 6 of the Gough Cooper conveyance is the counterpart of and has much the same wording as clause 7 of the Mill Lodge conveyance, in effect binding Mackenzie Hill to give precedence to the purchasers' building programme in the operation of the phasing agreement.

11. A month later Mackenzie Hill sold and conveyed the red and the green land to William Brandt's Sons & Co Ltd (which I shall call 'Brandt's'). Brandt's was in fact Mackenzie Hill's mortgagee of the blue and the pink land at the time of the earlier conveyance, but nothing turns on that. The conveyance to Brandt's was dated March 25 1971 and it contained an express assignment of the benefit of the covenant contained in the Mill Lodge and the Gough Cooper conveyances. Just under a year later Brandt's sold and conveyed the green land to the plaintiffs. This conveyance, which was dated February 25 1972, likewise contained an express assignment of the benefit of those covenants.
12. Shortly afterwards Brandt's and the plaintiff company conveyed the red land to BTA Trading Company Ltd. In that conveyance the plaintiff was the purchaser and BTA was the subpurchaser. This conveyance, which is dated March 1 1972, also contained an express assignment of the benefit of the covenants. Following that conveyance BTA's title became registered at the Land Registry. On March 18 1975 BTA, which by then had changed its name to UDT Properties Ltd, sold and conveyed the red land to the plaintiff company. This conveyance was in the form of a transfer applicable to registered land. It did not contain any express assignment of the benefit of the covenants in the Mill Lodge and the Gough Cooper conveyances.
13. The original outline planning permission granted in 1970 lapsed in 1973 because approval of the county council to all the matters referred to in Condition 1 had not been applied for in respect of the total site within three years. In fact, Mill Lodge proceeded with the separate development of the blue land under new planning permissions granted in 1971 and 1972 for a total of 300 dwellings.
14. Towards the end of 1977 the plaintiff company applied for planning permission in respect of the red and the green land. The balance of density left available for these areas, having regard to the Mill Lodge and Gough Cooper conveyances, was approximately 650 dwellings if the principle of the 1970 planning permission still applied. The application was, in fact, for a much greater density, but after a planning inquiry the 1970 density of about 1,250 dwellings for the entire site was reaffirmed. It was at about this time that the plaintiff company discovered that, on January 9 1975, Mill Lodge had obtained planning permission for the erection of an additional 32 dwellings on the blue land. It is not in dispute that the existence of such additional dwellings would or might prejudice the plaintiff company in relation to the development that might be permitted on the red and the green land; and, therefore, if the plaintiff company's rights would be infringed by the building of the further 32 dwellings, the plaintiff company would suffer damage.
15. In September 1978, after much prevarication on the part of Mill Lodge, the plaintiff company issued a writ to restrain Mill Lodge from building on the blue land at a greater density than a total of 300 dwellings in breach, it was alleged, of clause 5(iv) of the Mill Lodge conveyance. The defences raised by Mill Lodge so far as relied upon in this appeal were as follows: (1) the covenant in clause 5(iv) was said to be personal to Mackenzie Hill so that the benefit thereof was incapable of assignment to the plaintiff company; (2) alternatively, it was said that the covenant became spent when the 1970 planning permission became void at the end of the three-year period; (3) it was said that, if the covenant was assignable and was not spent, then the benefit did not become vested in the plaintiff company by assignment or otherwise.
16. That, in broad effect, was how the defence was pleaded so far as relevant for present purposes. In a reserved judgment the learned deputy High Court judge held that the covenant was not personal to Mackenzie Hill and was not spent when the original planning permission lapsed. As regards the transmission of the benefit of the covenant, he held that the benefit was not annexed to the red and the green land, so that it did not automatically pass upon conveyances of the red and the green land. However, he found, as was clearly the fact, that there was an unbroken chain of assignments between transferor and transferee of the green land, so that the benefit of the covenant was now vested, by reason of such assignments, in the plaintiff company as the present owner of the green land. There was no such unbroken chain of assignments in the case of the red land; but the judge considered that section 62 of the Law of Property Act 1925, which implies general words into a conveyance of land, was apt to carry the benefit of the covenant from UDT Properties Ltd, the previous assignee of such benefit, to the plaintiff company when the registered transfer in its favour was made. The defence, therefore, failed. The judge rejected a submission that damages would be the proper remedy. He granted an injunction against building in excess of the permitted density and gave liberty to apply for a mandatory injunction.
17. I deal first with the question of construction, upon which two issues arise: whether the covenant was personal to Mackenzie Hill and whether it is spent.
18. Mr Price, for the appellants, pointed out that the planning permission was expressed by condition 4 to enure for the benefit of Mackenzie Hill and its subsidiaries. That meant that a purchaser from Mackenzie Hill, not being a subsidiary company, had no legal right as between itself and the Buckinghamshire County Council to rely on the planning permission as authority to carry out development which would otherwise be contrary to planning legislation. Possibly the condition was inserted to enable the planning authority to object to development by somebody of whom it did not approve. Mr Price sought to argue from this that the covenant in the Mill Lodge conveyance was personal to Mackenzie Hill and not assignable. It was designed, he submitted, to protect a non-assignable planning permission and therefore should itself be treated as non-assignable.
19. I do not think that the appellants can gain much comfort from the form of the planning permission. The planning permission was certainly not exclusive to Mackenzie Hill because it was available to a subsidiary of Mackenzie Hill; so the benefit was clearly assignable to that extent. Theoretically, and not I think as a matter of reality, there was nothing in the planning permission to prevent the assignment of the benefit. The only restriction was that the proprietor who ultimately relied upon the permission would have to be either Mackenzie Hill or a subsidiary. There could, in theory, be any number of intermediate transfers of the land, with the benefit of the permission, through persons who would not have been themselves qualified to rely upon the permission. I think this is a narrow point and I do not stress it. Mr Price also relied upon the fact that clause 5 is penned as a covenant with the vendor (no mention of assigns) and that it is linked with the number of dwellings which the vendor (again no mention of assigns) might erect on the retained land.
20. But, apart from these considerations, I entirely agree with the learned deputy High Court judge when he said that it is neither necessary nor natural nor sensible to read the covenant as personal to Mackenzie Hill. Generally speaking, the benefit of a contract between businessmen is assignable without mention of assignability unless the contract is of a personal nature, which the restrictive covenant was not. Furthermore, clause 3 of the Mill Lodge conveyance stated that the property was sold subject to and with the benefit of the phasing agreement and, as I have already mentioned, clauses 7 and 9(e) of that agreement in terms contemplated that Mackenzie Hill might sell the development site in whole or part. So it is hardly possible to argue that the parties must have contracted on the basis that Mackenzie Hill personally would develop the retained land. I conclude that the restrictive covenant was not personal, but was assignable, which seems to me to correspond with business realities.
21. If there were still any doubt, section 78 of the Law of Property Act 1925 in my view sets that doubt at rest. For it provides that a covenant relating to any land of the covenantee shall be deemed to have been made with the covenantee and his successors in title, which presupposes assignability. I shall have occasion in due course to examine this section at greater length.
22. I turn to the defence that the covenant is now spent as the 1970 planning permission has lapsed. The concluding words of clause 5(iv) are: 'so as not to reduce the number of units which the vendor might ultimately erect on the retained land under the existing planning consent.' As no dwellings can now be erected in reliance upon the original planning consent, the covenant has, it was argued, lost its purpose. This resolves itself into the question whether the concluding words form an integral part of the restrictive covenant or are merely explanatory of the covenant without controlling it. I think that the answer is largely a matter of impression and is not susceptible of prolonged argument. It does, however, seem to me a little unlikely that the parties intended to tie the restrictive covenant to the original planning permission so that the covenant and the permission should stand and fall together. There would seem no purpose in such rigidity. There must always have been a strong possibility, if not a likelihood, that a developer would have to apply for a new planning permission at some stage (as happened) because the three-year deadline for seeking planning approval for the siting, design and external appearance of the buildings and the means of access thereto does not fit easily into the 10-year phasing of the development.
23. There is the additional consideration that, if the covenant were linked to the 1970 planning permission, it is difficult to see its value. The 1970 planning permission was to become void if detailed approval were not applied for in relation to the entire site within three years. As Mackenzie Hill was selling off and therefore not developing the blue and the pink land, the 1970 planning permission seems to me to have had a very doubtful future. It could hardly have been anticipated that Mackenzie Hill would be applying for detailed approval for the development of land which was going to be developed by others. There was no covenant by Mill Lodge or Gough Cooper to apply for detailed approval within the three-year period; so the covenant, if linked to and dependent upon the 1970 planning permission, becomes somewhat of a nonsense as Mr Price was, I think, constrained to admit. I think that the more natural and businesslike construction of the subclause is to read the reference to the existing planning permission as explanatory and not as controlling.
24. Having reached the conclusion that the restrictive covenant was capable of assignment and is not spent, I turn to the question whether the benefit has safely reached the hands of the plaintiff company. The green land has no problem, owing to the unbroken chain of assignments. I am disposed to think that that is sufficient to entitle the plaintiff company to relief, and that the plaintiff company's right to relief would be no greater at the present time if it were held that it also had the benefit of the covenant in its capacity as owner of the red land. However, the judge dealt with both areas of land and I propose to do the same.
25. An express assignment of the benefit of a covenant is not necessary if the benefit of the covenant is annexed to the land. In that event, the benefit will pass automatically on a conveyance of the land, without express mention, because it is annexed to the land and runs with it. So the issue of annexation is logically the next to be considered. The judge said this:

The next heading with which I must deal is 'annexation,' to which I will now come. It is a somewhat technical thing in the law of restrictive covenants. A good deal of argument was addressed to me on annexation by both sides. Submissions are made about express annexation, implied annexation, that is to say, annexation implied from surrounding circumstances, and annexation by assignment. In my judgment, there was in this case no 'annexation' of the benefit of the covenant to the retained land or any part of it. Section 78, in particular, of the Law of Property Act does not have the effect of annexing the benefit of the covenant to anything. It is simply a statutory shorthand for the shortening of conveyances, which it perhaps has done to some extent in this case. Annexation depends upon appropriate drafting, which is not here in this case, in spite of a recent process which can perhaps be called 'a widening of the law' in these matters. The attendant circumstances moreover, positively militate against annexation because, as Mr Price rightly pointed out to me (though he did so in the course of his argument on construction), the restriction in this particular case is of limited duration and plainly not applicable to ultimate purchasers of plots of the land intended to be benefited. 'Annexation,' in my judgment, is for the parties to the covenant itself to achieve if they wish to, and (though those parties may no doubt provide for annexation at a later stage) I am not satisfied or prepared to hold that there is any such thing as 'delayed annexation by assignment' to which the covenantor is not party or privy.

26. The reference to 'delayed annexation by assignment' is to a proposition that a covenant can, on a later assignment, thereby become annexed to the land by the act of the assignor and the assignee alone.
27. In my judgment the benefit of this covenant was annexed to the retained land, and I think that this is a consequence of section 78 of the Law of Property Act 1925, which reads:

(1) A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title
and the persons deriving title under him or them, and shall have effect as if such successors and other persons were expressed.

For the purposes of this subsection in connexion with covenants restrictive of the user of land 'successors in title' shall be deemed to include the owners and occupiers for the time being of the land of the covenantee intended to be benefited.

(2) This section applies to covenants made after the commencement of this Act, but the repeal of section 58 of the Conveyancing Act 1881 does not affect the operation of covenants to which that section applied.

28. Mr Price submitted that there were three possible views about section 78. One view, which he described as 'the orthodox view' hitherto held, is that it is merely a statutory shorthand for reducing the length of legal documents. A second view, which was the one that Mr Price was inclined to place in the forefront of his argument, is that the section only applies, or at any rate only achieves annexation, when the land intended to be benefited is signified in the document by express words or necessary implication as the intended beneficiary of the covenant. A third view is that the section applies if the covenant in fact touches and concerns the land of the covenantee, whether that be gleaned from the document itself or from evidence outside the document.
29. For myself, I reject the narrowest interpretation of section 78, the supposed orthodox view, which seems to me to fly in the face of the wording of the section. Before I express my reasons I will say that I do not find it necessary to choose between the second and the third views because, in my opinion, this covenant relates to land of the covenantee on either interpretation of section 78. Clause 5(iv) shows quite clearly that the covenant is for the protection of the retained land and that land is described in clause 2 as 'any adjoining or adjacent property retained by the Vendor.' This formulation is sufficient for annexation purposes: see Rogers v Hosegood [1900] 2 Ch 388.
30. There is in my judgment no doubt that this covenant 'related to the land of the covenantee,' or, to use the old-fashioned expression, that it touched and concerned the land, even if Mr Price is correct in his submission that the document must show an intention to benefit identified land. The result of such application is that one must read clause 5(iv) as if it were written: 'The purchaser hereby covenants with the vendor and its successors in title and the persons deriving title under it or them, including the owners and occupiers for the time being of the retained land, that in carrying out the development of the blue land the purchaser shall not build at a greater density than a total of 300 dwellings so as not to reduce, etc.' I leave out of consideration section 79 as unnecessary to be considered in this context, since Mill Lodge is the original covenantor.
31. The first point to notice about section 78(1) is that the wording is significantly different from the wording of its predecessor, section 58(1) of the Conveyancing and Law of Property Act 1881. The distinction is underlined by subsection (2) of section 78, which applies subsection (1) only to covenants made after the commencement of the Act. Section 58(1) of the earlier Act did not include the covenantee's successors in title or persons deriving title under him or them, nor the owners or occupiers for the time being of the land of the covenantee intended to be benefited. The section was confined, in relation to realty, to the covenantee, his heirs and assigns, words which suggest a more limited scope of operation than is found in section 78.
32. If, as the language of section 78 implies, a covenant relating to land which is restrictive of the user thereof is enforceable at the suit of (1) a successor in title of the covenantee, (2) a person deriving title under the covenantee or under his successors in title and (3) the owner or occupier of the land intended to be benefited by the covenant, it must, in my view, follow that the covenant runs with the land, because ex hypothesi every successor in title to the land, every derivative proprietor of the land and every other owner and occupier has a right by statute to the covenant. In other words, if the condition precedent of section 78 is satisfied --that is to say, there exists a covenant which touches and concerns the land of the covenantee--that covenant runs with the land for the benefit of his successors in title, persons deriving title under him or them and other owners and occupiers.
33. This approach to section 78 has been advocated by distinguished textbook writers; see Dr Radcliffe in 57 Law Quarterly Review 203, Professor Wade in the Cambridge Law Journal (1972) 157 under the apt cross-heading 'What is wrong with section 78?' and Megarry and Wade, Law of Real Property, 4th Ed 764. Counsel pointed out to us that the 4th edition of Megarry and Wade's textbook indicates a change of mind on this topic since the 3rd edition.
34. Although the section does not seem to have been extensively used in the course of argument in this type of case, the construction of section 78 which appeals to me appears to be consistent with at least two cases decided in this court. The first is Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500. In that case an agreement was made in April 1938 between certain landowners and the Catchment Board under which the Catchment Board undertook to make good the banks of a certain brook and to maintain the same, and the landowners undertook to contribute towards the cost. In 1940 the first plaintiff took a conveyance from one of the landowners of a part of the land together with an express assignment of the benefit of the agreement. In 1946 the brook burst its banks and the land owned by the first plaintiff and tenanted by the second plaintiff was inundated. The two important points are that the agreement was not expressed to be for the benefit of the landowner's successors in title; and there was no assignment of the benefit of the agreement in favour of the second plaintiff the tenant. In reliance, as I understand the case, upon section 78 of the Law of Property Act, it was held that the second plaintiff was entitled to sue the Catchment Board for damages for breach of the agreement. It seems to me that that conclusion can only have been reached on the basis that section 78 had the effect of causing the benefit of the agreement to run with the land so as to be capable of being sued upon by the tenant.
35. The other case, Williams v Unit Construction Ltd (unreported in the usual series of law reports but fully set out in the 19th volume of The Conveyancer 262), was decided by this court in 1951. There a company had acquired a building estate and had underleased four plots to Cubbin for 999 years. The underlessors arranged for the defendant company to build houses on the four plots. The defendant company covenanted with Cubbin to keep the adjacent road in repair until adopted. Cubbin granted a weekly tenancy of one house to the plaintiff without any express assignment of the benefit of the covenant. The plaintiff was injured owing to the disrepair of the road. She was held entitled to recover damages from the defendant for breach of the covenant.
36. We were referred to observations in the speeches of Lord Upjohn and Lord Wilberforce in Tophams Ltd v Earl of Sefton [1967] 1 AC 50, which appear at pp 73 and 81, to the effect that section 79 of the Law of Property Act (relating to the burden of covenants) achieved no more than the introduction of statutory shorthand into the drafting of covenants. Section 79, in my view, involves quite different considerations and I do not think that it provides a helpful analogy.
37. It was suggested by Mr Price that, if this covenant ought to be read as enuring for the benefit of the retained land, it should be read as enuring only for the benefit of the retained land as a whole and not for the benefit of every part of it; with the apparent result that there is no annexation of the benefit to a part of the retained land when any severance takes place. He referred us to a passage in Re Union of London and Smith's Bank Ltd's Conveyance, Miles v Easter [1933] Ch 611 at p 628, which I do not think it is necessary for me to read.
38. The problem is alluded to in Megarry and Wade Law of Real Property, current edition, at p 763:

In drafting restrictive covenants it is therefore desirable to annex them to the covenantee's land 'or any part or parts thereof'. An additional reason for using this form of words is that, if there is no indication to the contrary, the benefit may be held to be annexed only to the whole of the covenantee's land, so that it will not pass with portions of it disposed of separately. But even without such words the court may find that the covenant is intended to benefit any part of the retained land; and small indications may suffice, since the rule that presumes annexation to the whole only is arbitrary and inconvenient. In principle it conflicts with the rule for assignments, which allows a benefit annexed to the whole to be assigned with part, and it also conflicts with the corresponding rule for easements.

39. I find the idea of the annexation of a covenant to the whole of the land but not to a part of it a difficult conception fully to grasp. I can understand that a covenantee may expressly or by necessary implication retain the benefit of a covenant wholly under his own control, so that the benefit will not pass unless the covenantee chooses to assign; but I would have thought, if the benefit of a covenant is, on a proper construction of a document, annexed to the land, prima facie it is annexed to every part thereof, unless the contrary clearly appears. It is difficult to see how this court can have reached its decision in Williams v Unit Construction Ltd unless this is right. The covenant was, by inference, annexed to every part of the land and not merely to the whole, because it will be recalled that the plaintiff was a tenant of only one of the four houses which had the benefit of the covenant.
40. There is also this observation by Romer LJ in Drake v Gray [1936] Ch 451 at p 465. He was dealing with the enuring of the benefit of a restrictive covenant and he said this:

. . . where one finds not 'the land coloured yellow' or 'the estate' or 'the field named so and so' or anything of that kind, but 'the lands retained by the vendor,' it appears to me that there is a sufficient indication that the benefit of the covenant enures to every one of the lands retained by the vendor, and if a plaintiff in a subsequent action to enforce a covenant can say: 'I am the owner of a piece of land that belonged to the vendor at the time of the conveyance,' he is entitled to enforce the covenant.

41. In the instant case the learned judge in the course of his judgment appears to have dismissed the notion that any individual plot-holder would be entitled, even by assignment, to have the benefit of the covenant that I have been considering. I express no view about that. I only say this, that I am not convinced that his conclusion on that point is correct. I say no more about it.
42. In the end, I come to the conclusion that section 78 of the Law of Property Act caused the benefit of the restrictive covenant in question to run with the red land and therefore to be annexed to it, with the result that the plaintiff company is able to enforce the covenant against Mill Lodge, not only in its capacity as owner of the green land, but also in its capacity as owner of the red land. For these reasons I think that the judge reached the correct view on the right of the plaintiff company to enforce the covenant, although in part he arrived there by a different route.
43. There remains only the question whether we ought to interfere with the remedy granted by the judge of an injunction against the building of the 32 extra dwellings. The case of Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287 is authority for the proposition that a person who has the benefit of a restrictive covenant is, as a general rule, entitled to an injunction on the trial of the action as distinct from an award of damages unless (1) the injury to the plaintiff's legal rights is small, (2) it is capable of being estimated in terms of money, (3) it can adequately be compensated for by a small payment and (4) it would be oppressive to the defendant to grant an injunction. In my view, the first, third and fourth of these conditions have not been shown to be satisfied.
44. I would, therefore, uphold the injunction and I would dismiss this appeal.
45. BROWNE LJ agreed.
46. Also agreeing, MEGAW LJ said: There is only one matter on which I would desire to add a few words. That is in respect to the passage quoted by Brightman LJ towards the end of his judgment from the judgment of Romer LJ in Drake v Gray. It is right to observe that the passage which my Lord read has been the subject of criticism by Buckley J, as he then was, in Russell v Archdale [1963] Ch 38. The criticism appears at p 47. Buckley J suggests that the passage in question in Romer LJ's judgment is obiter dictum and that there is difficulty in accepting the distinction which Romer LJ there drew between, on the one hand, land described as the land marked yellow on the plan or the estate of the vendor known as such and such a name and, on the other hand, reference to the remaining land or retained land. It is, however, right to point out that Buckley J at p 47 says:

No doubt every case of this kind, being one of construction, must be determined on the facts and the actual language used

and he goes on to say that, with the utmost respect to Romer LJ, he cannot see that the distinction is a valid one.

47. For myself, I would regard the observations made in the passage which Brightman LJ read from Megarry and Wade at p 763 as being powerful reasons, and I find great difficulty in understanding how, either as a matter of principle, or as a matter of practical good sense in relation to a legal relationship of this sort, it can be said that a covenant which ex hypothesi has been annexed to the land as a whole is somehow or other not annexed to the individual parts of that land.
48. I agree that the appeal should be dismissed.

The appeal was dismissed with costs. Leave to appeal to the House of Lords was refused.

The electronic text of this judgment was provided by Estates Gazette, whose assistance is gratefully acknowledged.