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Cite as: [2004] 2 All ER 991, [2004] EWCA Civ 410, [2004] WLR 2409, [2004] 1 WLR 2409

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		Neutral Citation Number: [2004] EWCA Civ 410
		Case No: 2003/0178

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE NEUBERGER)

Royal Courts of Justice
Strand, London, WC2A 2LL

01 April 2004

B e f o r e :

LORD JUSTICE AULD
LORD JUSTICE CHADWICK
and
LADY JUSTICE ARDEN
____________________

Between:

	CREST NICHOLSON RESIDENTIAL (SOUTH) LIMITED	Appellant
	- and -
	FIONA RUTH McALLISTER	Respondent

____________________

Mr Vivian Chapman (instructed by Davies Arnold Cooper of 6-8 Bouverie Street, London EC4Y 8DD) for the Appellant
Mr Nicholas Grundy (instructed by Mundays of Cedar House, 78 Portsmouth Road, Cobham, Surrey KT11 1AN) for the Respondent
Hearing dates :
____________________

HTML VERSION OF JUDGMENT

Lord Justice Chadwick :

This is an appeal and cross-appeal from an order made on 17 December 2002 by Mr Justice Neuberger in proceedings brought by Crest Nicholson Residential (South) Limited to determine the extent to which land at Claygate, Surrey, in respect of which it is the purchaser under a conditional contract, is subject to restrictive covenants. The defendant to those proceedings, Mrs Fiona McAllister, is the owner of neighbouring land and (as such) claims to be entitled to the benefit of those covenants.

The underlying facts

The land in question, which borders Claygate Common, was sold for building in 1923. The purchasers, into whose names the land was conveyed, were Mr Percy Mitchell and his brother, Mr Charles Mitchell. In July 1924 they agreed to sell the land to their company, Mitchell Brothers (Builders) Limited; but there was no conveyance and the land remained in the names of the two brothers. Between 1926 and 1936 the company sold off the land, in plots, to individual purchasers. The two brothers joined in the conveyances to those purchasers as trustees to convey the legal estate. Those conveyances imposed restrictive covenants on the land conveyed.

There were, I think, a dozen conveyances by the Mitchell brothers and their company between 19 July 1926 and 27 May 1936. Seven are relevant to this appeal. They fall into four groups: (i) conveyances dated 2 February 1928 and 15 February 1933 to Mr Arthur Edward Arthur ("the Arthur conveyances"), (ii) conveyances dated 22 August 1928 and 3 November 1933 to Mr Harry Thomas Humphreys ("the Humphreys conveyances"), (iii) conveyances dated 21 November 1930 and 3 November 1933 to Mr Edwin Robert Roberts ("the Roberts conveyances") and (iv) a conveyance dated 27 May 1936 to Mr Richard William Ffitch Wing and Mr Richard John Wing ("the Wing conveyance"). The land in respect of which Crest Nicholson is purchaser "the proposed development land" is comprised of parts of the land conveyed by each of the seven conveyances. The land of which Mrs McAllister is the owner comprises part of the land conveyed by the Wing conveyance.

The land conveyed by the Arthur, Humphreys and Roberts conveyances is now comprised in the registered titles of three properties known respectively as "Westwood", "Mylor" and "Morwenna". Each of those properties has a frontage onto a road known as The Causeway. On each of those properties there is, now, a substantial dwelling house. The proposed development land includes part of the gardens at the rear of each of those properties; that is to say, it includes what may be described as the bottom half of each of those gardens, extending back to Claygate Common.

Most of the land conveyed by the Wing conveyance is now comprised in the registered titles of three other properties known respectively as "Redruth", "Tressilion" and "Newlyn". Each of those properties has a frontage onto Cornwall Avenue, which forms an extension to Common Road. Again, there is, now, a dwelling house on each of those properties. The remainder of the proposed development land includes part of the garden of Tressilion and the whole of the property known as Redruth, through which it is intended that access to the proposed development will be obtained from Cornwall Avenue. Mrs McAllister is the registered proprietor of Newlyn.

In or about September 2000 Crest Nicholson entered into a conditional contract for the purchase of the proposed development land with a view to the development of that land by the erection of five new houses on what are now the gardens of Westwood, Mylor and Morwenna, and a sixth house in place of the existing dwelling on Redruth. Mrs McAllister opposed that development. She contended that the erection of new houses would breach the terms of the restrictive covenants of which she, as owner of Newlyn, was entitled to the benefit.

The relevant covenants

Each of the seven conveyances contains, in the first schedule, covenants restricting the use which is to be made of the land conveyed. The relevant covenants, for the purposes of this appeal, are those in paragraph 2 of the first schedule to each conveyance. Those paragraphs impose one or both of the following restrictions (or restrictions in substantially the same terms): (i) a restriction ("the user restriction") that "the premises shall not be used for any purpose other than those of or in connection with a private dwelling house or for professional purposes"; (ii) a restriction ("the building restriction") that "no dwelling house or other building shall be erected on the land hereby conveyed unless the plans drawings and elevations shall have been previously submitted to and approved of in writing by [the Company/the Vendor] but such approval shall not be unreasonably or vexatiously withheld".

In that context, with two exceptions, "the Company" or "the Vendor", as the case may be, means Mitchell Brothers (Builders) Limited. The exceptions are that in one of the Roberts conveyances (that dated 21 November 1930) and in the Wing conveyance, the persons or person by whom plans are to be approved for the purposes of the building covenant (described as "the Vendors" or "the Vendor") are the two brothers rather than the company. We were told that Mr Charles Mitchell predeceased his brother; that Mr Percy Mitchell died in 1949; and that the company was dissolved in 1968.

Restrictions in the terms which I have just set out are found in both the Arthur conveyances, in both the Roberts conveyances, in the later of the Humphreys conveyances and in the Wing Conveyance. The earlier Humphreys conveyance (dated 22 August 1928) contains the user restriction but does not contain the building restriction.

The restrictions contained in the first schedule to the conveyance dated 2 February 1928 were the subject of a covenant given by the purchaser, Mr Arthur Edward Arthur, in these terms:

"The Purchaser to the intent and so that the covenants hereinafter contained shall be binding on the said land and hereditaments hereby conveyed into whomsoever hands the same may come but not so as to render the Purchaser personally liable for damages for any breach thereof after he shall have parted with all interest therein hereby Covenants with the Company and the Trustees that he the Purchaser and the persons deriving title under him will at all times hereafter observe and perform the [restrictions mentioned in the First Schedule hereto]."

There is no express annexation, in that conveyance, of the benefit of the covenants to land retained by the covenantees. The later of the two Arthur conveyances (dated 15 February 1933) is a conveyance to Mr Arthur made supplemental to the earlier conveyance of 2 February 1928. Its object, as appears from the recitals, is to convey to him "a further piece of land forming part of the said fee farm estate subject to the said restrictions [imposed by the principal conveyance]". The covenants are given in the same terms. Again, there is no express annexation of the benefit of the covenants to land retained by the covenantees.

The covenants in the Humphreys conveyances did contain express words of annexation:

"For the benefit of the property at Claygate aforesaid belonging to the Vendors or the part thereof for the time being remaining unsold and so as to bind the property hereby conveyed The Purchaser hereby covenants with the Vendors and the Trustees that the Purchaser and the persons deriving title under him will henceforth at all time hereafter observe and perform all and singular the restrictions contained in the First Schedule hereto . . ."

The covenant in the first of the Roberts conveyances (dated 21 November 1930) was given by the purchaser, Mr Roberts, in these terms:

". . . to the intent that this covenant shall be binding so far as may be on the owner for the time being of the property hereby assured but upon the Purchaser only so long as he is the owner of the said property . . ."

There are no words of annexation in that conveyance. The covenant in the later Roberts conveyance (dated 3 November 1933) was given in the same terms as those in the two Humphreys conveyances.

In those cases where the conveyance contains no words of annexation it is pertinent to note the description of the land conveyed. In the first of the Arthur conveyances (dated 2 February 1928) the land conveyed is described as:

"ALL THAT piece or parcel of freehold land situate and being Plot number 6 and part of Plot number 5 on the Fee Farm Estate at Claygate in the County of Surrey…"

The land conveyed is further described as having a frontage onto the road known as The Causeway; its dimensions are given; and it is said to be "more particularly delineated and described on the plan drawn hereon." The plan drawn on the conveyance is not a plan of the Fee Farm estate; in particular, it is not a plan which shows that estate partitioned into plots. Nor is there any other provision or description in the conveyance which enables the land known as the Fee Farm Estate to be identified; unless it be by reference to the conveyance dated 23 October 1923 to Mr Percy Mitchell and Mr James Mitchell mentioned in the second schedule (documents of title of which the purchaser is entitled to have copies produced). In the later Arthur conveyance (dated 15 February 1933) the land conveyed is:

"ALL THAT piece or parcel of freehold land situate and being partly in the rear of Plot No 6 and partly in the rear of Plot No 5 on the Fee Farm Estate at Claygate in the County of Surrey."

Its dimensions are given and it, too, is said to be "more particularly delineated and described on the plan drawn hereon." That plan is not a plan of the Fee Farm estate; and, again, there is no provision or description in the conveyance which enables the land known as the Fee Farm estate to be identified.

In the first of the Roberts conveyances (dated 21 November 1930) the land conveyed is described as:

"ALL THAT piece or parcel of land situate in and fronting a road called The Causeway . . . which with its dimensions boundaries and abuttals thereof is more particularly delineated in the plan hereon and thereon coloured pink TOGETHER with the messuage or dwelling house recently erected thereon and known or intended to be known as "Morwenna" Number 11, The Causeway" . . ."

There is no reference in that conveyance to the Fee Farm estate; and nothing to identify any land retained by the covenantees for which the benefit of the covenant is taken.

It is clear from the terms of the two Humphreys conveyances that, at the date of the first conveyance (22 August 1928) there was no dwelling house on the land conveyed but that, by the date of the later conveyance (3 November 1933, the dwelling house known as Mylor had been erected on the land conveyed in 1928. The later conveyance is of "land at the rear of Mylor". It is clear, also, that, at the date of the first of the Roberts conveyances (21 November 1930) the dwelling house known as Morwenna had already been erected on the land conveyed – the conveyance itself refers to Morwenna. The later conveyance is of "land at the rear of Morwenna". And it is, I think, clear that there was no dwelling house on the land conveyed by either of the Arthur conveyances at the dates of those conveyances. To complete the picture, the land conveyed by the two Arthur conveyances was sold on by Mr Arthur to his neighbour, Mr Humphreys, by a conveyance dated 3 April 1939. The dwelling house known as Westwood, which now stands on the land conveyed by the first of the Arthur conveyances, was built after April 1939.

The covenants in the Wing conveyance, dated 27 May 1936, are given in a form which differs from that found in the six earlier conveyances. In the Wing conveyance the purchasers covenant:

". . . for the benefit and protection of the remainder of the property of the Vendors and of the Company at all times hereafter . . ."

It is, of course, under that conveyance that Mrs McAllister derives her own title to the property now known as Newlyn. It was common ground that, absent a building scheme, she could not claim to be entitled to the benefit of covenants imposed by the Wing conveyance.

These proceedings

These proceedings were commenced in November 2001. The relief sought, under CPR Pt 8, included a declarations (i) that, on the true construction of the seven conveyances to which I have referred (particulars of which are set out in the schedule to the claim form) the covenants in paragraph 2 of the first schedules thereto do not restrict the respective covenantors and their successors in title from using the premises conveyed by each conveyance for the erection of more than one private dwelling house and (ii) that, on completion of its contract to purchase part of the land conveyed by those conveyances Crest Nicholson will not be prevented by those covenants from developing the land in the manner proposed (as illustrated by plans put in evidence). The claim was subsequently amended to seek determination of the additional question whether, on the death or dissolution of the person or persons to whom drawings, plans and elevations were to be submitted for approval under the building covenant, (i) the building covenant became absolute and unqualified, or (ii) the covenant became spent, or (iii) there was some other (and, if so, what) consequence in relation to that covenant.

The matter came before Mr Justice Neuberger in October 2002. It was accepted on behalf of Mrs McAllister that there was no building scheme. It was accepted, also, that she was not entitled to the benefit of the covenants imposed by the Wing conveyance. It was common ground that, as the owner of so much of the land now in her title as was conveyed by the Wing conveyance, Mrs McAllister was entitled to the benefit of the covenants imposed by the Arthur, Humphreys and Roberts conveyances. The judge held that the building restriction had become spent on the dissolution of the company or the death of the survivor of the two brothers (as the case might be). But, on its true construction, the effect of the user restriction was to preclude the covenantor and his successors in title to the premises conveyed by each of the Arthur, Humphreys and Roberts conveyances from using the premises conveyed by that conveyance for the erection of more than one private dwelling house or for professional purposes. Those findings are reflected in the order dated 17 December 2002.

The judge gave each party permission to appeal to this Court. Crest Nicholson filed an appellant's notice on 29 January 2003, challenging the judge's finding as to the effect of the user restriction. It was said that the judge should not have construed the words "a private dwelling house" to mean "a single private dwelling house"; and, on the true construction of those words, ought to have made the declaration sought in the claim form; that is to say, ought to have declared that, on completion of its contract to purchase part of the land conveyed by the seven conveyances, Crest Nicholson would not be precluded from developing the land acquired in accordance with its proposals. Mrs McAllister cross-appealed, by respondent's notice filed on 4 March 2003. She challenged the judge's finding that the building restriction was spent. It is said that, on a true construction of that restriction against building, it became absolute upon the dissolution or death or of the person or persons to whom, under its terms, drawings, plans and elevations were to be submitted for approval.

As I have said, it was common ground before the judge that (with the exception of the land conveyed by the Wing conveyance) Mrs McAllister was entitled to the benefit of the covenants. The judge recorded that concession in his judgment, [2002] EWHC 2776 (Ch), reported at [2003] 1 All ER 46. He noted, at paragraph 10, that:

". . . although initially in dispute between the parties, it is now common ground that . . . (2) To the extent that the . . . covenants are negative in nature, they "touch and concern" land. That part of Newlyn which was included in the estate had not been sold off at the time that the company sold off the plots comprising the claimant's land. Consequently, the benefit of the covenants is annexed to part of Newlyn, and the defendant is entitled in principle to enforce the covenants in so far as they have been imposed on the claimant's land: see section 78 of the Law of Property Act 1925 and Federated Homes Ltd –v- Mill Lodge Properties Ltd [1980] 1 WLR 594; . . . "

In the skeleton argument prepared on its behalf by counsel, and dated 24 January 2003, Crest Nicholson did not seek to withdraw that concession. It was accepted that Mrs McAllister "has the benefit of the restrictive covenants in the conveyances of Westwood, Mylor and Morwenna by statutory or express annexation". But, at the hearing in this Court, counsel applied to withdraw the concession that the covenants had become, or remained, annexed to the land conveyed by the Wing conveyance in 1936. It was said that, on a true construction of the relevant conveyances and having regard to the language of section 78 of the Law of Property Act 1925, there was no annexation to land which ceased to be in the ownership of the company or the two brothers. That application was not opposed; and we thought it right to grant it. It was not suggested that the point raises any issue of fact on which (if the concession had not been made) evidence would have been called at trial. Annexation being now in issue, it is appropriate to consider that first. If, or to the extent that, the benefit of the covenants in the several conveyances is not annexed to the land now in Mrs McAllister's title, the questions which the judge was asked to determine become academic.

Annexation

It is trite law that, in order to enforce a covenant affecting land, a person (say, A) who is not the original covenantee must show that he is entitled to the benefit of it. Further, if A seeks to enforce the covenant against a person (say, B) who is not the original covenantor, A must show that B has become subject to the burden of the covenant. Absent, on the one hand, an express assignment (or chain of assignments) of the benefit of the covenant and, on the other hand, an express covenant for indemnity (or chain of covenants) from successors of the original covenantor (neither of which is not alleged in this case), A cannot enforce the covenant against B at law. But, since the decision in Tulk v Moxhay (1848) 11 Beavan 571, the covenant may, nevertheless, be enforced in equity if certain conditions are satisfied. In the present case it is not in dispute that, in equity, the burden of the covenants imposed in the Arthur, Humphreys and Roberts conveyances has passed to the present owners of Westwood, Mylor and Morwenna; in so far as there is someone who can enforce those covenants. The question now raised is whether Mrs McAllister, as the owner of part of the land conveyed by the Wing conveyance, is such a person: is she a person entitled to the benefit of the covenants imposed in the Arthur, Humphreys and Roberts conveyances?

The benefit of a covenant may pass in equity (as in law) through a chain of assignments. That is not this case. Or the benefit of a covenant may pass where land has been sold off under a building scheme (which is not now alleged). Absent a chain of assignments or a building scheme, the benefit of a covenant may, nevertheless, pass to the owner for the time being of land to which it has been annexed. In covenants made before 1926 it was necessary to show, by construing the instrument in the light of surrounding circumstances, that annexation to the covenantee's retained land (or some part of it) was intended. Express words of annexation were not required. "If, on the construction of the instrument creating the restrictive covenant, both the land which is intended to be benefited and an intention to benefit that land, as distinct from benefiting the covenantee personally, can clearly be established, then the benefit of the covenant will be annexed to that land and run with it, notwithstanding the absence of express words of annexation" – see Megarry and Wade, The Law of Real Property (6th Edition, 2000) at paragraph 16-062, citing His Honour Judge Rubin in Shropshire County Council v Edwards (1982) 46 P & CR 270, 277.

In relation to covenants imposed in instruments made after 1925 (as were the covenants with which we are concerned in this appeal) the position is governed by the provisions of section 78 of the Law of Property Act 1925 (Benefit of covenants relating to land). Section 78(1) is in these terms:

"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."

The effect of section 78 of the 1925 Act was considered by this Court in Federated Homes Ltd v Mill Lodge Properties Ltd [1980]1 WLR 594. In order to understand what the Court decided it is necessary to have in mind the facts in that case. The defendant, Mill Lodge Properties Ltd, was the owner of land ("the blue land") which it had acquired under a conveyance dated 26 February 1971 from a developer, McKenzie Hill Ltd. At the time of the conveyance McKenzie Hill owned a larger site, comprising (in addition to the blue land) three other parcels described respectively as "the red land", "the green land" and "the pink land". The whole was subject to conditions contained in a planning consent (granted in 1970) and a related phasing agreement. The conveyance of 26 February 1971 contained a covenant, by the defendant as purchaser, that in carrying out development of the blue land it would 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". The covenant was made with the vendor; it was not expressed to be made with the vendor's successors in title or persons deriving title under it or them. By a simultaneous conveyance the pink land had been sold by McKenzie Hill to another purchaser, Gough Cooper (Midland) Limited. The Gough Cooper conveyance contained a similar covenant. On 25 March 1971 McKenzie Hill sold and conveyed the red land and the green land to its mortgagee, William Brandt's Sons & Co Ltd. Those conveyances contained express assignments of the covenants in the two conveyances of 26 February 1971. On 25 February 1972 Brandt's sold and conveyed the green land to the plaintiff, Federated Homes Limited. At or about the same time Brandt's sold the red land, also, to the plaintiff; but the red land was conveyed, on 1 March 1972 by Brandt's to BTA Trading Co Ltd, as sub-purchaser, Federated Homes joining in that conveyance as purchaser. That conveyance contained an express assignment of the covenants in the conveyances of 26 February 1971. In 1975, BTA Trading - which had, by then, changed its name to UDT Properties Ltd and had become registered with title at HM Land Registry - sold the red land back to Federated Homes and, on 18 March 1975, executed a land registry transfer. The transfer contained no express assignment of the benefit of the covenants in the February 1971 conveyances. In the meantime the original 1970 planning consent had lapsed, the defendant had obtained new planning consents for the erection of dwellings on the blue land and was threatening to build, under those consents, in a way which would prejudice Federated Homes in relation to the development that it would be permitted to carry out on the red land and the green land. The proceedings, commenced in 1978, sought to enforce the 1971 density covenant against the defendant as the owner of the blue land (and the original covenantor).

It can be seen, therefore, that, in relation to the green land but not in relation to the red land, the plaintiff was able to rely on a chain of express assignments. It was contended on behalf of the defendant, Mill Lodge, that on a true construction of its February 1971 conveyance the covenants which it imposed were personal to the original covenantee, McKenzie Hill and so not assignable. That was said, inter alia, to follow from the fact that the covenant was made only with "the vendor" and not with successors in title. The Court disposed of that latter point shortly. Lord Justice Brightman (with whose judgment the other members of the Court agreed) pointed out (ibid, 602D) that section 78 of the 1925 Act provided, in terms, that "a covenant relating to any land of the covenantee shall be deemed to have been with the covenantee and his successors in title, which presupposes assignability".

The Court rejected, also, the contention that the covenant had become spent when the original 1970 planning consent lapsed. The effect, as Lord Justice Brightman observed (ibid, 603B), was that the covenant was plainly enforceable for the benefit of the green land. He said this:

"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. 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 to relief, and that the plaintiff'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."

Nevertheless, he went on to consider annexation, which was, of course, material to the question whether the density covenant was enforceable for the benefit of the red land. He explained that:

"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."

As I have said, the object of the covenant in the 1971 conveyance was expressed to be "so as not to reduce the number of units which the vendor might eventually erect on the retained land under the existing planning consent". The retained land was not defined; but Lord Justice Brightman had held (ibid,599F) that, on the true construction of the 1971 conveyance to Mill Lodge, "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". So there was no doubt as to the identity of the retained land. That is important to a proper understanding of the following passage in his judgment (ibid,604C-G)

"[Counsel for Mill Lodge] 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 [counsel] was inclined to place at 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.

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 third views because, in my opinion, this covenant relates to land of the covenantee on either interpretation of section 78. Clause 5(iv) shows 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 formula is sufficient for annexation purposes; see Rogers v Hosegood [1900] 2 Ch 388.

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 [counsel] 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."

It is clear that the Court approached the question of annexation in the Federated Homes case on the basis that the density covenant was taken for the benefit of retained land which could be identified in the 1971 conveyance. Lord Justice Brightman expressed his conclusion in these terms (ibid, 605A-C):

"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."

There is, in effect, statutory annexation of the benefit of the covenant to "the land intended to be benefited by the covenant". The words which I have emphasised, which are incorporated by Lord Justice Brightman in the passage which I have just cited, are derived, of course, from section 78(1): "For the purposes of this subsection . . . '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."

The decision of this Court in the Federated Homes case leaves open the question whether section 78 of the 1925 Act only effects annexation when the land intended to be benefited is described in the instrument itself (by express words or necessary implication, albeit that it may be necessary to have regard to evidence outside the document fully to identify that land) or whether it is enough that it can be shown, from evidence wholly outside the document, that the covenant does in fact touch and concern land of the covenantee which can be identified.

It is clear from Lord Justice Brightman's reference (ibid) to Rogers v Hosegood [1900] 2 Ch 388 that it is sufficient for the conveyance to describe the land intended to be benefited in terms which enable it to be identified from other evidence. In Rogers v Hosegood the covenant was given for the benefit of the vendors, their heirs and assigns "and others claiming under them to all or any of their lands adjoining or near to the [premises conveyed]." The Court of Appeal held that to be a sufficient description (ibid, 403-404):

"The real and only difficulty arises on the question – whether the benefit of the covenants has passed to the assigns of Sir John Millais as owners of the plot purchased by him on March 25, 1873, there being no evidence that he knew of these covenants when he bought. Here, again, the difficulty is narrowed, because by express declaration on the face of the conveyances of 1869 the benefit of the two covenants in question was intended for all or any of the vendor's lands near to or adjoining the plot sold, and therefore for (amongst others) the plot of land acquired by Sir John Millais."

The question left open in the Federated Homes case had, I think, already been answered in the judgment of this Court in Marquess of Zetland v Driver [1939] Ch 1, a decision not cited in Federated Homes. The applicable principles were restated in the following passage, (ibid,7-8):

"Covenants restricting the user of land imposed by a vendor upon a sale fall into three classes: (i) covenants imposed by a vendor for his own benefit; (ii) covenants imposed by a vendor as owner of other land, of which that sold formed a part, and intended to protect or benefit the unsold land; and (iii) covenants imposed by a vendor upon a sale of land to various purchasers who are intended mutually to enjoy the benefit of and be bound by the covenants: Osborne v Bradley [1903] 2 Ch 446, 450.

Covenants of the first class are personal to the vendor and enforceable by him alone unless expressly assigned by him. Covenants of the second class are said to run with the land and are enforceable without express assignment by the owner for the time being of the land for the benefit of which they were imposed. Covenants of the third class are most usually found in sales under building scheme, although not strictly confined to such sales. It is not suggested that the present covenant falls within this class. Nor will it assist the appellant if it falls within the first class, since he was not the original covenantee or an express assignee from him. If, therefore, the appellant is entitled to sue on this covenant it must fall within the second class above mentioned.

Such covenants can only be validly imposed if they comply with certain conditions. Firstly, they must be negative covenants. . . . Secondly, the covenant must be one that touches or concerns the land, by which is meant that it must be imposed for the benefit or to enhance the value of the land retained by the vendor or some part of it, and no such covenant can ever be imposed if the sale comprises the whole of the vendor's land. . . . Thirdly, the land which is intended to be benefited must be so defined as to be easily ascertainable, and the fact that the covenant is imposed for the benefit of that particular land should be stated in the conveyance and the persons or the class of persons entitled to enforce it. The fact that the benefit of the covenant is not intended to pass to all persons into whose hands the unsold land may come is not objectionable so long as the class of persons intended to have the benefit of the covenant is clearly defined." [emphasis added]

In its later decision in the Federated Homes case this Court held that the provisions of section 78 of the 1925 Act had made it unnecessary to state, in the conveyance, that the covenant was to be enforceable by persons deriving title under the covenantee or under his successors in title and the owner or occupier of the land intended to be benefited, or that the covenant was to run with the land intended to be benefited; but there is nothing in that case which suggests that it is no longer necessary that the land which is intended to be benefited should be so defined that it is easily ascertainable. In my view, that requirement, identified in Marquess of Zetland v Driver remains a necessary condition for annexation.

There are, I think, good reasons for that requirement. A restrictive covenant affecting land will not be enforceable in equity against a purchaser who acquires a legal estate in that land for value without notice of the covenant. A restrictive covenant imposed in an instrument made after 1925 is registrable as a land charge under class D(ii) – section 10(1) of the Land Charges Act 1925 and, now, section 2(5) of the Land Charges Act 1972. If the title is registered, protection is effected by entering notice of the restrictive covenant on the register – section 50 of the Land Registration Act 1925 and, now, section 11 of the Land Registration Act 2002. Where practicable the notice shall be by reference to the instrument by which the covenant is imposed and a copy or abstract of that instrument shall be filed at the registry – section 50(1) of the Land Registration Act 1925 and section 3(5) of the Land Charges Act 1972. It is obviously desirable that a purchaser of land burdened with a restrictive covenant should be able not only to ascertain, by inspection of the entries on the relevant register, that the land is so burdened, but also to ascertain the land for which the benefit of the covenant was taken – so that he can identify who can enforce the covenant. That latter object is achieved if the land which is intended to be benefited is defined in the instrument so as to be easily ascertainable. To require a purchaser of land burdened with a restrictive covenant, but where the land for the benefit of which the covenant was taken is not described in the instrument, to make enquiries as to what (if any) land the original covenantee retained at the time of the conveyance and what (if any) of that retained land the covenant did, or might have, "touched and concerned" would be oppressive. It must be kept in mind that (as in the present case) the time at which the enforceability of the covenant becomes an issue may be long after the date of the instrument by which it was imposed.

In Marquess of Zetland v Driver (supra) the vendor was tenant for life of settled land at Redcar in Yorkshire. By a conveyance dated 10 September 1926 a part of that land (subsequently known as No 200, Lord Street) was conveyed to a purchaser, Mr David Goodswen. The purchaser covenanted "to the intent and so as to bind as far as practicable the said property hereby conveyed into whosesoever hands the same may come and to benefit and protect such part or parts of the lands in the Borough Township or Parish of Redcar . . . now subject to the settlement (a) as shall for the time being remain unsold or (b) as shall be sold by the vendor or his successors in title with the express benefit of this covenant . . ." that he would observe the restrictions and stipulations set out in the second schedule to the conveyance. Those restrictions included a restriction on use which, in the opinion of the vendor, might be detrimental to him or the owners or occupiers of any adjoining property in the neighbourhood. In 1935 Mr Goodswen conveyed No 200 Lord Street to the defendant, Mr Driver, who thereafter sought to use it for the sale of fried fish. The plaintiff, as successor to the original covenantee, took the view that that use was detrimental to adjoining property in the neighbourhood and sought to enforce the covenant.

After setting out the principles in the passage to which I have already referred, the Court of Appeal said this (ibid, 8-9):

"Applying these conditions to the present case, the covenant sued upon appears to comply with them. The covenant is restrictive; it is expressly stated in the conveyance to be for the benefit of the unsold part of the land comprised in the settlement and such land is easily ascertainable, nor is it suggested that at the date of the conveyance the land retained was not capable of being benefited by the restrictions, and lastly the appellant is the successor in title of the original covenantee and as such is the estate owner of part of the land unsold which is subject to the settlement. . . ." [emphasis added]

But the Court went on, at (ibid, 10) to say:

"It is to be noticed in the present case that the benefit of the covenant is not intended to pass to a purchaser without express assignment. It is not necessary for us to express any opinion as to what would be the effect of a sale of part of the settled property with an express assignment of the covenant; but, if such a purchaser could enforce the covenant, it could only be for so long as some successor in title of the original covenantee retained some part of the settled property, since such a person alone can form the requisite opinion.

"For these reasons the appeal must be allowed. The appellant is entitled to the injunction which he seeks subject to two limitations. In the first place the injunction must be limited to fried fish . . . because the opinion of the appellant as to the nuisance was confined to fried fish, and secondly, the period of the injunction must be confined to so long as the appellant or some successor in title of the original vendor retains unsold any part of the settled property for the benefit of which the covenant was imposed. . . ." [emphasis added]."

It is important to keep in mind that the covenant was taken to benefit such part or parts of the lands subject to the settlement "as shall for the time being remain unsold". The words which I have emphasised make clear that the land intended to be benefited may be defined so as to exclude land subsequently sold off from the vendor's estate. That principle was recognised in the recent decision of this Court in Dano Limited v Earl Cadogan and others [2003] EWCA Civ 782 (unreported, 19 May 2003).

To my mind, the decision in Marquess of Zetland v Driver (supra) goes much of the way to answer a second question which this Court did not need to address in the Federated Homes case: whether the effect of the section 78 of the Law of Property Act 1925 is displaced by a contrary intention manifested in the instrument itself. But that question was addressed, specifically, in Roake and others v Chadha and another [1984] 1 WLR 40, to which I now turn.

In Roake v Chadha land forming part of what was formerly known as the Sudbury Court Estate in North Wembley was laid out in lots and the individual lots sold off to purchasers in the 1930's. The individual lots were conveyed using a standard form of transfer. The schedule to the transfer contained a restriction on building on the land conveyed; in particular it required that no building should be erected other than one private dwelling house at a cost of not less than £500 and that plans drawings and elevations should first be submitted for approval by the vendor company. The covenant was imposed in the following terms, so far as material:

"And the purchaser to the intent and so as to bind (so far as practicable) the land hereby transferred into whosoever hands the same may come . . . hereby covenants with the vendors but so that this covenant shall not enure for the benefit of any owner or subsequent purchaser of any part of the vendor's Sudbury Court estate at Wembley unless the benefit of this covenant shall be expressly assigned that he the purchaser and his successors in title will observe and perform all and every the provisions conditions and stipulations set out in the schedule hereto so far as they relate to or affect the premises hereby transferred or any part thereof."

The defendants were successors in title to the purchaser of one of the former lots (No 4 Audrey Gardens) which had been sold and conveyed by a transfer dated 4 April 1934. They proposed to erect an additional house on that land. It was common ground that that would be in contravention of the restriction in the conveyance. The plaintiffs were the successors in title to the purchasers of two other lots on the estate (No 1 Audrey Gardens and No 104 Abbotts Drive), which had been conveyed by transfers dated, respectively, 28 May 1934 and 22 March 1935. Neither transfer contained an express assignment of the benefit of the covenant imposed by the transfer of 4 April 1934, nor had the benefit of that covenant been expressly transferred by any other instrument. Nevertheless, the plaintiffs sought a declaration that they were entitled to the benefit of that covenant and an order restraining the defendants from building in breach of it.

It was accepted on behalf the plaintiffs that the express words of the covenant appeared to exclude annexation. It was accepted, also, that their case could not be advanced on the basis of a building scheme. But it was said that, nevertheless, the covenant imposed by the transfer of 4 April 1934 had become annexed to the land then forming part of the Sudbury Court Estate and subsequently conveyed out of that estate by the transfers of 28 May 1934 and 22 March 1935 by the operation of section 78 of the 1925 Act. Reliance was placed on the contrast between the language of section 78 and section 79 (Burden of covenants relating to land) of that Act. Section 79(1) is in these terms, so far as material:

"A covenant relating to any land of a covenantor or capable of being bound by him, shall, unless a contrary intention is expressed, be deemed to be made by the covenantor on behalf of himself his successors in title and the persons deriving title under him or them, and, subject as aforesaid, shall have effect as if such successors and other persons were expressed . . ." [emphasis added].

It was pointed out, correctly, that the words which I have emphasised are not found in section 78(1) of the Act. So, it was said, the legislature must have intended the provisions of section 78 (Benefit of covenants relating to land) to be mandatory; it must have intended that those provisions could not be excluded by a contrary intention, however clearly expressed.

His Honour Judge Paul Baker QC, sitting as a Judge of the High Court, rejected that submission. After analysing the judgment of Lord Justice Brightman in Federated Homes Ltd v Mill Lodge Ltd (supra), and pointing out that no reason of policy had been suggested to explain why section 78 of the 1925 Act should be mandatory, the judge said this, at [1984] 1WLR 40, 46B-H:

"I am thus far from satisfied that section 78 has the mandatory operation which [counsel] claimed for it. But if one accepts that it is not subject to a contrary intention, I do not consider that it has the effect of annexing the benefit of the covenant in each and every case irrespective of the other express terms of the covenant. I note that Brightman LJ in the Federated Homes case did not go so far as that, for he said, at page 606:

'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.'

So at least in some circumstances Brightman LJ is considering that despite section 78 the benefit may be retained and not pass or be annexed to and run with land. In this connection, I was also referred by [counsel for the defendants] to Elphinstone's Covenants Affecting Land (1946), p.17, where it is said in a footnote:

'but it is thought that, as a covenant must be construed as a whole, the court would give due effect to words excluding or modifying the operation of this section…'

The true position as I see it is that even where a covenant is deemed to be made with successors in title as section 78 requires, one still has to construe the covenant as a whole to see whether the benefit of the covenant is annexed. Where one finds, as in the Federated Homes case, the covenant is not qualified in any way, annexation may be readily inferred; but where, as in the present case, it is expressly provided:

'this covenant shall not enure for the benefit of any owner or subsequent purchaser of any part of the vendor's Sudbury Court Estate at Wembley unless the benefit of this covenant shall be expressly assigned…'

one cannot just ignore these words. One may not be able to exclude the operation of the section in widening the range of the covenantees, but one has to consider the covenant as a whole to determine its true effect. When one does that, then it seems to me that the answer is plain and in my judgment the benefit was not annexed. That is giving full weight to both the statute in force and also what is already there in the covenant."