England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE MAYOR'S AND CITY OF LONDON COUNTY COURT
(His Honour Judge Marr-Johnson)
Case No. 5LB07445

		Royal Courts of Justice Strand, London, WC2A 2LL
		10/10/2007

Lord Justice Richards :

1. Nos. 5 and 7 Heathdene Road form a pair of semi-detached houses each originally designed for occupation as a single family dwelling-house. They are located in an area of south-west London known as the Streatham Lodge Estate, where most of the properties are of a similar character. The appellants are a married couple who own and live in no.5. The respondent is a property development company ("Lawntown") which purchased the freehold of no.7 in April 2004 and soon afterwards began work with a view to converting the property into flats. That gave rise to objections from the appellants and other neighbours. Conversion into flats faced two legal obstacles: first, that it did not have planning permission; secondly, that it was prohibited by restrictive covenants to which the property was subject.
2. The first obstacle was overcome when in due course the local planning authority, the London Borough of Lambeth, granted planning permission for change of use of the property from a single dwelling-house to two self-contained flats. Lawntown sought to overcome the second obstacle by an application to the county court under s.610 of the Housing Act 1985 for a variation of the restrictive covenants so as to permit the conversion into flats. The appellants were appointed to represent all those with an interest in opposing the application. His Honour Judge Marr-Johnson allowed Lawntown's application and varied the restrictive covenants so as to allow the conversion for which planning permission had been obtained.
3. Although the judge refused permission to appeal, permission was granted subsequently by Underhill J, who also ordered that the appeal be transferred to the Court of Appeal pursuant to CPR 52.14, on the basis that there was no guidance on the exercise of the court's discretion under s.610 of the 1985 Act and this court might wish to give such guidance.

The legislative framework

4. Section 610 of the 1985 Act, as amended, reads as follows:

"610.(1) The local housing authority or a person interested in any premises may apply to the county court where –

(a) owing to changes in the character of the neighbourhood in which the premises are situated, they cannot readily be let as a single dwelling-house but could readily be let for occupation if converted into two or more dwelling-houses, or

(b) planning permission has been granted under Part III of the Town and Country Planning Act 1990 (general planning control) for the use of the premises as converted into two or more separate dwelling-houses instead of as a single dwelling-house,

and the conversion is prohibited or restricted by the provisions of the lease of the premises, or by a restrictive covenant affecting the premises, or otherwise.

(2) The court may, after giving any person interested an opportunity of being heard, vary the terms of the lease or other instrument imposing the prohibition or restriction, subject to such conditions and upon such terms as the court may think just."

5. The section derives from s.27 of the Housing, Town Planning &c Act 1919, but the court was originally empowered to act only in circumstances where the equivalent of s.610(1)(a) was satisfied. The provision was carried forward on the same basis into s.163 of the Housing Act 1936. The court's power was then enlarged, so as to be exercisable in like manner in circumstances equivalent to those now set out in s.610(1)(b), by s.11 of the Housing Act 1949. The provisions were brought together without any change of substance in s.165 of the Housing Act 1957, which was then carried forward into s.610 of the 1985 Act.
6. As the wording of s.610 and the statutory history make clear, subss.(1)(a) and (1)(b) provide alternative bases for an application to the court. The application in this case was made under subs.(1)(b). It is common ground that the statutory preconditions for the application were satisfied. What is in issue is the resulting exercise of the court's power under s.610(2).
7. The terms of s.610 may be contrasted with those of s.84 of the Law of Property Act 1925 which confers a power on the Lands Tribunal to discharge or modify restrictive covenants in defined circumstances. Section 84(1) of the 1925 Act, as amended, reads:

"84.(1) The Lands Tribunal shall (without prejudice to any concurrent jurisdiction of the court) have power from time to time, on the application of any person interested in any freehold land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon, by order wholly or partially to discharge or modify any such restriction on being satisfied –

(a) that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Lands Tribunal may deem material, the restriction ought to be deemed obsolete; or

(aa) that (in a case falling within subsection (1A) below) the continued existence thereof would impede some reasonable user of the land for public or private purposes or, as the case may be, would unless modified so impede such user; or

(b) that the persons of full age and capacity for the time being or from time to time entitled to the benefit of the restriction … have agreed, either expressly or by implication, by their acts or omissions, to the same being discharged or modified; or

(c) that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction;

and an order discharging or modifying a restriction under this subsection may direct the applicant to pay to any person entitled to the benefit of the restriction such sum by way of consideration as the Tribunal may think it just to award under one, but not both, of the following heads, that is to say –

(i) a sum to make up for any loss or disadvantage suffered by that person in consequence of the discharge or modification; or

(ii) a sum to make up for any effect which the restriction had, at the time when it was imposed, in reducing the consideration then received for the land affected by it."

Subs.(1A) provides that subs.(1)(aa) authorises the discharge or modification of a restriction by reference to its impeding some reasonable user of land in any case in which the Lands Tribunal is satisfied that the restriction, in impeding that user, either (a) does not secure to persons entitled to the benefit of it any practical benefits of substantial value or advantage to them, or (b) is contrary to the public interest; and that money will be an adequate compensation for the loss or disadvantage (if any) which any such person will suffer from the discharge or modification. Detailed further provisions concerning the scope and exercise of the power are contained in subss. (1B) to (11). The section is applied by subs.(12) to leaseholds with a term of more than 40 years.

8. There is a substantial body of case-law giving guidance on the application of s.84 of the 1925 Act. By contrast, there are very few reported cases on s.610 of the 1985 Act. In particular, our attention has been drawn to only one that is relevant to the exercise of the power under s.610(2), namely Sarum Trust Ltd v Duke of Westminster [1953] CPL 86. That case was decided under s.163 of the 1936 Act and s.11 of the 1949 Act. It concerned an application by lessees for variation of the terms of their lease so as to permit further subdivision of the premises. The county court judge dismissed the application, on the grounds that the landlord's interests elsewhere might be affected if the application were granted, by leading to further applications of a similar kind; that the landlord's objection to an increase of density of the population was reasonable; and that there would be no advantage to the public in making the variation. On appeal, it was submitted on behalf of the lessees that where planning permission had been granted the court should vary the terms of the lease, its discretion being limited to how, and on what terms and conditions, the planning permission should be carried out. The Court of Appeal dismissed the appeal, holding that the general subject-matter of s.163 of the 1936 Act was against the contention that "may" in the section should be construed as "shall", and that the judge had been entitled to come to the conclusion he had reached.
9. In its subsequent incarnation as s.165 of the 1957 Act, the provision was the subject of comment by the Law Commission in its report dated 21 March 1985 on Codification of the Law of Landlord and Tenant - Covenants Restricting Dispositions, Alterations and Change of User (HC278). At para 9.5 the Commission stated:

"Section 165 of the Housing Act 1957 applies to freehold as well as to leasehold land and is designed to provide relief against covenants in so far as they would prevent the conversion of larger houses into two or more smaller dwellings. The purpose which it seeks to fulfil has more to do with housing than with anything else and it is in the context of housing law, rather than the law of landlord and tenant, or land law, that it should be viewed."

10. The Commission rejected the view that the section should be merged with s.84 of the 1925 Act, stating at para 9.7:

"The specific problem with which the section is designed to deal is likely to diminish in importance as large old private houses are converted, demolished or used for purposes which are no longer residential. To the extent that the section is obsolescent we think that the case for transplanting its provisions is weaker than it might otherwise be; and we think that it would be a mistake to obscure the fact that there is, while the problem lasts, a specific remedy for it. Nor would it be easy to merge the two jurisdictions, because the grounds for relief under section 165 are (understandably, in view of its purpose) less stringent than those imposed by section 84."

11. Similar observations were made at para 9.19, where the Commission stated that "[t]he problem for which section 165 provides a solution is mainly that of large houses built during the last century, or early in this century, which have outlived their original purpose as single family dwellings", and that "large houses of this kind are seldom built nowadays".
12. Our attention has been drawn to textbook passages to the effect that s.610 of the 1985 Act is easier to satisfy than s.84 of the 1925 Act but is less certain in its operation. Thus, Preston & Newsom, Restrictive Covenants Affecting Freehold Land, 9^th ed., 1998, states at p.213 that a person seeking to convert a house for multiple occupation may be able more easily to obtain a variation of the restrictions in the lease under s.610 of the 1985 Act than under s.84 of the 1925 Act, and observes in a footnote that s.610 deserves to be more widely known and used. That is picked up at p.397, where the authors describe s.610 as "admirably adapted to be employed in an epoch when people want smaller places to live in", but go on to say that few practitioners have any idea how it works or how it could work, which "is natural enough when this little exercised jurisdiction is diffused over scores of county courts whose activities are hardly ever reported". Similarly, it is stated in Scamell, Land Covenants, 1996, at pp.335-336, that the provisions of s.610 "appear especially useful and straightforward in the circumstances in which they apply and it is somewhat surprising that they are not more frequently used", but that because they are so little used there may be greater uncertainty as to the likely outcome of an application before the court under s.610 than of an application before the Lands Tribunal under s.84 of the 1925 Act.

The facts in greater detail

13. As already mentioned, Lawntown purchased the freehold of no.7 in April 2004. The restrictive covenants to which the property was subject were contained in three instruments whose effect was recorded in the Land Registry charges register. One instrument was of unknown date, the second was a conveyance in 1909 and the third was a conveyance in 1915. The relevant restrictions in each case prevented the construction of, or conversion into, maisonettes or flats. There were also provisions securing a number of other objects. Lawntown did not seek to disturb those other provisions and they were not affected by the order under s.610. It appears from the conveyances that the benefit of the restrictive covenants extended to all properties in the Streatham Lodge Estate.
14. The judge found that Lawntown's directors were wholly ignorant of the restrictive covenants. In the circumstances, as Mr Oakley submitted for the appellants, that is a surprising finding; but nothing turns on it. What is clear is that soon after purchasing the property Lawntown began work with a view to converting it into flats. The work gave rise to protests from the appellants and other neighbours, and there was a dispute, which it is not possible to resolve on the evidence before this court, as to whether what was done at that time amounted to a breach of the restrictive covenants or of planning controls. The appellants were sufficiently concerned to commence court proceedings and to obtain, in August 2004, an interim injunction restraining Lawntown from converting the property into flats or using it otherwise than as a private dwelling house. It seems, however, that in the light of later events the injunction was eventually discharged and the proceedings were resolved without a full hearing.
15. At some point Lawntown sought to regularise the planning position. It appears that the first application for planning permission was made in 2004 but was withdrawn prior to determination. On 4 April 2005 Lawntown made a second application, for planning permission to convert the property into three self-contained flats. That application was refused by Lambeth on 6 July 2005. The reasons for refusal stated that the proposed second floor would provide sub-standard accommodation due to a severely restricted level of outlook from habitable rooms, and that the proposal represented an over-conversion of the property. Lawntown appealed against that refusal, but we were not informed of the outcome of the appeal.
16. On 21 July 2005 Lawntown made a third application, this time for planning permission to convert the property into two self-contained flats. The proposal was given publicity by Lambeth, going beyond the minimum statutory requirements. In addition to the display of a notice outside the property, 41 letters were sent to households in the vicinity of the development, inviting observations on the proposal. In response, 6 objections were received, the various complaints being that the development would result in loss of privacy, increased noise and fumes, an adverse effect on parking, increased traffic, diminution of property values, adverse change to the character of the neighbourhood, an incongruous external appearance and adverse visual amenity, and the setting of an adverse precedent. In addition, planning officers consulted the development control enforcement team, the streetcare department, the transport and highways department, the Streatham Society and Transport for London, none of whom raised objections to the proposal.
17. Lambeth's planning committee resolved to grant planning permission for the proposed development. In reaching that decision the committee had before it an officer's report setting out the site description, planning history, scheme details, the consultation process and the various planning considerations. The main issues were said to be the acceptability of the principle of use of the property as two self-contained flats, the proposed standard of residential accommodation, the impact on amenity of neighbouring properties, and the impact on car parking and transport matters. The section on planning considerations identified relevant policies within Lambeth's Adopted Unitary Development Plan and its Revised Deposit Replacement Unitary Development Plan, as well as supplementary planning guidance. It examined their application under the headings of land use, design and amenity impact, and highways and transportation issues. The conclusion reached was that the present application had overcome the previous reasons for refusal and would provide acceptable residential accommodation within a property considered large enough for conversion. It was therefore recommended that planning permission be granted, subject to conditions which included the making of provision for cycle parking. The planning committee accepted that recommendation.
18. There was a written summary of reasons for the grant of planning permission, as follows:

"In deciding to grant planning permission, the Council has had regard to the relevant Policies of the Development Plan and all other relevant material considerations. Having weighed the merits of the proposal in the context of these issues, it is considered that planning permission should be granted subject to the conditions listed below. In reaching this decision the following Policies were relevant:

Adopted Lambeth Unitary Development Plan (August 1998): H1 (Housing Provision), H10 (Residential development standards), H17 (Flat conversions), T17 (Transport implications of development proposals), CD15 (Design of new development), CD18 (Extensions), ENV24 (Waste Management and Disposal)

Deposit Replacement Unitary Development Plan (June 2004): 7 (Protection of residential amenity), 14 (Parking and traffic restraint), 15 (Additional housing), 17 (Flat conversions), 32 (Building Scale and Design), 33 (Alterations and Extensions), 50 (Waste)."

19. It should be noted that by s.70(2) of the Town and Country Planning Act 1990, Lambeth was required to have regard to the provisions of the development plan, so far as material to the application, and to any other material considerations; and by s.54A of the 1990 Act its decision was required to be made in accordance with the development plan unless material considerations indicated otherwise. For this purpose the development plan included not only the provisions of the Unitary Development Plan, but also a document which was taken into account but not referred to in terms, namely The London Plan published by the Mayor of London in February 2004.
20. The London Plan sets Lambeth a target of 28,910 additional homes for the period 1997-2016. Policy 3A.2 provides that Unitary Development Plan policies should seek to exceed the target figures and to identify new sources of supply, having regard inter alia to intensification of housing provision through development at higher densities, particularly where there is good access to public transport. The explanatory text indicates that the target figures include additional dwellings provided through conversions of residential properties.
21. The grant of planning permission for the conversion of no.7 into two self-contained flats was made on 15 September 2005.
22. Having obtained planning permission, Lawntown sought to tackle the problem of the restrictive covenants. On 9 November 2005 it lodged its application to the court under s.610 of the 1985 Act. The application was supported by two witness statements from Lawntown's solicitor and a witness statement from its planning expert (which was admitted into evidence by the judge in so far as it dealt with matters of fact, but not in so far as it purported to express an expert opinion). The exhibits to the witness statements included a body of documents relating to the planning application, such as the responses to the planning consultation, the officer's report, Lambeth's decision and extracts from the development plan. Notice of the s.610 application was given to the appellants and others.
23. The appellants opposed the application. Their evidence consisted mainly of a witness statement of Mr Camenzuli. He stated that it was clear from the lease already granted by Lawntown that no.7 would be densely inhabited; the area was overwhelmingly made up of family homes with long-term residents; there was already significant traffic congestion and difficulty with parking; there was concern that inappropriate conversion of no.7 would be the thin end of the wedge, resulting in future applications which would destroy the character of the neighbourhood and result in additional congestion and parking pressure; and conversion of properties or erection of purpose-built flats in the area had been limited. Mr Camenzuli submitted that in exercising its discretion under s.610 the court should take into account the additional factors specified in s.84 of the 1925 Act, as to which he averred that there had been no change in the character of no.7 or the neighbourhood or other circumstances which would justify the restriction being deemed obsolete; the continued existence of the restriction did not impede reasonable user of no.7; there had been no agreement to the restriction being discharged or modified; and the proposed discharge or modification would in fact injure the appellants and their neighbours.
24. Mr Camenzuli's witness statement also exhibited letters from other neighbours opposing removal of the restrictive covenants and contending that there was a need for large family houses in the area; there was a surplus of properties of the kind being proposed by the development; there would be traffic congestion and parking problems were the development to proceed; the area was architecturally unique and the architecture of the development was incongruous; people would not reside in the property for as long, and the level of neighbourliness and social cohesion would be damaged; there would be an adverse effect on the neighbourhood and its character, and on the availability of medical and educational services; there would be an increase in noise levels (including increased comings and goings, and the siting of living rooms and kitchens on upper floors which would interfere with the amenity of bedrooms in neighbouring houses); it would set an adverse precedent for other such developments; and there would be a diminution in the value of neighbouring properties.
25. There was also a witness statement from the occupant of no.9, expressing concern that the character of the road would be diminished by the development and that the value of properties would be reduced.
26. His Honour Judge Marr-Johnson considered the written evidence and heard submissions at a two-day hearing in January 2006, following which he reserved his judgment until 3 March 2006.

The judge's approach

27. In the absence of decided cases, the judge considered it necessary "to revert to first principles". He pointed out that the claimant brought the application and bore the burden not only of establishing that the various formal requirements of s.610 were met but also of showing that the court's discretion ought to be exercised in its favour. He described the discretion as "completely unfettered" and contrasted it with "the far more restrictive regime" of s.84 of the 1925 Act. He stated:

"16. … Since subsection (1)(b) is expressed to be alternative to subsection (1)(a), and since neither of those subsections is cross-referenced to s.84 in any way, it seems to me that Parliament must be taken to have intended that subsection (1)(b) should be a completely independent and freestanding ground upon which an application might be made to the court to vary or alter a restrictive covenant. For this reason, I am unable to accede to the defendants' suggestion that, in deciding how to exercise the court's discretion under s.610(2), it is permissible to have some regard at least to the various considerations and constraints set out in s.84. That seems to me to be an irrelevant, indeed impermissible, exercise …."

28. The judge went on to state that the legislative intention was to confer "a more general absolving power" which could be exercised in favour of a person who had the benefit of planning permission for a particular development even though he was unable to satisfy the requirements of s.84 or s.610(1)(a). However, he thought that it would be odd and unsatisfactory if the county court were simply to act as a kind of court of appeal from the local planning authority, second-guessing the authority's decision as to the suitability of a particular proposed conversion in planning terms. Those considerations led the judge to adopt in substance an approach advocated by Lawntown's counsel, Mr Coppel. The judge expressed it in these terms:

"20. … The most important consideration, in my view, is that the court should exercise its discretion not whimsically or capriciously but in a judicial manner. Essentially, this involves trying to be fair to both sides in the dispute. In most cases it is reasonable to assume that the local planning authority will have properly carried out their duty to assess the merits of the application in planning terms and will have reached their decision to grant planning permission conscientiously and reasonably. If they have been guilty of an error of law in reaching their decision, or taken into account inadmissible matters, or failed to take into account some matter which they ought to have considered, then the remedy of judicial review will be available to persons affected by the decision. However, where, as here, there has been no application for judicial review, it seems to me that the court should normally proceed on the assumption that planning permission was properly granted. Then, as it seems to me, the court should look to see what matters are put forward by the objectors to the application which would make it unfair to modify or vary the covenants in question. In my view, save in exceptional circumstances, the court should not have regard to planning matters which have already been considered and decided by the local planning authority, but should have regard to considerations which were not before the planning authority or were not relevant to their decision."

29. The judge was satisfied that in the present case Lambeth had considered the application for planning permission with considerable care. He referred to the officer's report as showing that a number of planning policies were taken into account and most of the objections now made to the court were taken into account in reaching the decision to grant planning permission. He continued:

"21. … So far as this court is concerned, it seems to me that the most important matters to consider are those which Lambeth did not take into account because they were irrelevant for the purposes of deciding whether to grant planning permission.

22. The principal matters alleged by the objectors but not taken into account by Lambeth appear to me to be the following. (1) Possession of the benefit of the restrictive covenants in this case is perceived by many to be a valuable thing in itself. It ensures that houses in the locality will remain in single family ownership and will not become fragmented into smaller domestic units. The objectors do not wish to lose that perceived valuable benefit. (2) Relaxation of the covenants in this case will, it is said, set a bad precedent for future cases because it will make it easier for other similar applications to succeed in the future. (3) Conversion of this property into flats will, it is said, have a negative effect on the selling price of other houses in the neighbourhood."

30. In relation to (1), the judge considered it self-evident that in any case where an application of this nature was granted, those who formerly enjoyed the benefit of the restrictive covenants were going to lose that benefit. No doubt that was why the court was given the power to impose conditions and grant relief on suitable terms if the justice of the case required it. On this issue, the court had to conduct a balancing exercise between the interests of the claimant and the interests of the objectors.
31. In relation to (2), the judge accepted that if this application were allowed it would probably be easier for similar applications to succeed in the future. That was a matter to be borne in mind when the balancing exercise was carried out.
32. In relation to (3), the judge stated that there was virtually no evidence before the court that surrounding house prices would suffer if no.7 was converted into flats. He observed that one might have thought that if this application were granted, the "hope value" of further applications for planning permission being granted in the future might lead to a hardening of local values; but there was no evidence about that. He declined to attach any weight to an estate agent's letter dated 15 September 2004, but produced only at a late stage in argument, which purported to inform the appellants that no.5 might suffer a reduction in value if no.7 were converted into flats.
33. The judge rejected a contention that the approach taken by him would infringe the appellants' rights under articles 6 and 8 of the European Convention on Human Rights or under article 1 of the First Protocol to the Convention. As to the last of those provisions, he expressed the view that the power to impose conditions was wide enough to include a condition in a suitable case that monetary compensation should be paid to a specified person or persons affected by the removal of a covenant.
34. The judge came finally to the balancing exercise to which he had previously referred:

"26. … On the one hand, the claimant wishes to develop a five bedroom single family house of which it is the freehold owner. The claimant has obtained planning permission to convert the premises into two substantial two bedroom flats, which would enable two smaller households to exist in premises where formerly there was the potential for only one larger household. On the other hand, many, although not all, of the local residents wish the houses in their street to remain in single family occupation. It is, I suspect, largely a question of wishing to maintain and preserve the happy local family atmosphere which I am told prevails in the neighbourhood. I take into account all the various considerations which I have mentioned earlier. In my judgment, the crucial factor which tips the scales in favour of the claimant and against the objectors is the urgent demand for more housing in London. As I mentioned earlier, the Mayor of London's plan for additional homes has set Lambeth a target of 28,910 new homes during the period 1997 to 2016. The plan expressly contemplates that what it euphemistically refers to as 'higher densities' will be required. It is a regrettable but, I believe, incontrovertible fact that in many parts of this country the old family structures are breaking down and the tendency nowadays is for people to live in smaller family units than was the case in their parents' or grandparents' day. The result is that more, smaller units of family accommodation are required to house those people. Putting the matter another way, this is a small and crowded island and nowhere to the best of my knowledge are the housing pressures more acute than in London. More living accommodation is required than can easily be made available. I propose therefore to accede to the claimant's application that the covenants should be varied."

35. The judge went on to consider what conditions or terms should be imposed. It did not appear to him to be a case where any order for financial compensation would be either desirable or appropriate. But he was sympathetic to the appellants' argument that the covenants should be relaxed only to the extent that Lawntown be permitted to convert no.7 into two flats rather than three; and the order finally made was limited in that way.

The submissions on appeal

36. For the appellants, Mr Oakley submitted that the judge fell into error by limiting his assessment in the way he did. He accepted that the role of the court is entirely distinct from that of the local planning authority and that the court is not a court of appeal from the authority's decision on the planning application. But in his submission the court was wrong to disregard factors just because they had been taken into account in reaching the planning decision. The court's discretion under s.610 is a broad one, and in exercising that discretion the judge should have considered all relevant factors, including the various objections advanced by those benefiting from the restrictive covenants. By excluding relevant factors from consideration (including loss of privacy, increased noise and adverse effect on visual amenity), the judge's approach also gave rise to a breach of articles 6 and 8 of the European Convention on Human Rights. Further, on the particular facts, the judge ought to have taken an adverse view of the conduct of Lawntown and should have included that in his assessment; and the judge was wrong to treat The London Plan as "the crucial factor". Taking all relevant factors together, the balance should have come down in favour of the appellants. Alternatively, if the judge was right to modify the covenants, he should have ordered financial compensation for the appellants and their neighbours for the loss of the protection conferred by the covenants. By failing to do so he was in breach of article 1 of the First Protocol to the Convention.
37. For Lawntown, Mr Coppel supported the judge's approach. He submitted that there is a fundamental difference between s.610 of the 1985 Act and s.84 of the 1925 Act. They are separate regimes and one cannot read across to s.610 from s.84 and the authorities on it. The object of s.610(1)(b) and (2) is to facilitate removal of restrictive covenants in a very particular circumstance, where planning permission has been granted. The reason is that prior to the introduction of a comprehensive planning regime, restrictive covenants were relied on as a means of protecting amenity; but now that the planning process secures that protection, the need for restrictive covenants falls away. If the local planning authority is satisfied that a development is not going to have an adverse effect on amenity, it should not be necessary to clear the same hurdle again when seeking to discharge the restrictive covenants. It is only in exceptional circumstances, e.g. where the amenity provisions in the local plan are out of date, that it is necessary for the court under s.610 to take into account matters already considered as part of the planning process.

Discussion and conclusion

38. Section 610 of the 1985 Act is plainly intended to be a separate regime from s.84 of the 1925 Act. There is no automatic carry-across from one to the other, though matters relevant under s.84 may also be relevant under s.610.
39. The discretion under s.610 is a broad one, but it is wrong to describe it as "unfettered" and I doubt whether the judge's use of that term was intended to be taken literally. As Lord Bingham observed in South Bucks District Council v Porter [2003] 2 AC 558 at para 29, in the context of the court's discretionary power under s.187B of the Town and Country Planning Act 1990 to grant an injunction to restrain a breach of planning control, such a discretion is not unfettered but must be exercised judicially, which meant in that context that the discretion had to be exercised "with due regard to the purpose for which the power was conferred". In the present context it is a statement of the obvious, and does not provide any real assistance, to say that the purpose for which the power was conferred is to enable restrictive covenants to be varied so as to permit the conversion of a single dwelling-house into flats where planning permission for such use has been granted. The underlying policy appears to be to facilitate the more intensive use of large dwelling-houses: the provision was introduced in 1949, at the time of the post-war housing shortage, and the Law Commission's 1985 report indicates that it was aimed at a perceived problem of large houses which had outlived their original purpose as single family dwellings. But the statute does not create any presumption in favour of the variation of a restrictive covenant where planning permission has been granted, let alone any duty to vary the covenant (as to which, see Sarum Trust Ltd, above). It is left to the court to take account of all relevant factors and to carry out a balancing exercise, giving such weight as it judges appropriate to the various factors in the exercise of its discretion.
40. In order to carry out that task properly, the court must have regard to the interests sought to be protected by the restrictive covenant, and the extent to which those interests will be harmed by the proposed variation, as well as to the interests of the person seeking to vary the covenant and the advantages that will accrue from the variation. That last factor may engage matters of public as well as private interest, in particular where there are said to be policy considerations in favour of the more intensive use of existing dwelling-houses.
41. Most importantly, it is for the court to make its own assessment of the relevant factors and the weight to be accorded to them. It must not leave matters out of account, or give them no weight in the overall balancing exercise, merely because they have already been considered by the local planning authority in granting planning permission. The court's task under s.610, although triggered by the grant of planning permission, is separate from the planning process and requires an independent exercise of judgment. That does not mean that the court has to second-guess the authority's planning judgments or to reach a view on the correctness of the grant of planning permission. It is simply that the authority's factual assessment is not determinative, however careful it may have been, and the court has to examine the facts for itself and to carry out its own balancing exercise.
42. That view is supported by Re Martin's Application [1989] 1 EGLR 193, which is relevant to this point even though it is a case under s.84 of the 1925 Act. The applicants had entered into an agreement with the local planning authority under s.37 of the Town and Country Planning Act 1962 that part of their land would not be used for any purpose other than as a private open space. They later applied for outline planning permission for the erection of a house on it. The application was refused by the authority but succeeded on appeal to the Secretary of State. When the authority refused to release the applicants from the provisions of the agreement, they applied to the Lands Tribunal under s.84. The application was dismissed. On appeal to the Court of Appeal, the applicants contended that the purpose of the s.37 agreement had gone with the grant of planning permission and that the covenant should therefore be discharged or modified. The court rejected that contention, pointing out that the s.37 regime and the regime governing the grant of planning permission were distinct and independent from each other. Fox LJ, giving the main judgment, continued:

"In my view, the applicants' contention is wrong in so far as it suggests that the granting of planning permission by the Secretary of State necessarily involves the result that the Lands Tribunal must discharge the covenant. The granting of planning permission is, it seems to me, merely a circumstance which the Lands Tribunal can and should take into account when exercising its jurisdiction under section 84. To give the grant of planning permission a wider effect is, I think, destructive of the express statutory jurisdiction conferred by section 84. It is for the tribunal to make up its own mind whether the requirements of section 84 are satisfied …. All the facts of the case have to be examined by the Lands Tribunal …."

43. Further support can be derived from South Bucks District Council v Porter, to which I have already made brief reference. In that case the House of Lords laid down the approach to be applied by the court when considering an application by a local planning authority for an injunction to restrain a breach of planning control. By s.187B(1) of the 1990 Act, an authority may apply to the court for such an injunction where it considers it necessary or expedient for any actual or apprehended breach of planning control to be restrained. By s.187B(2), on such an application "the court may grant such an injunction as the court thinks appropriate for the purpose of restraining the breach". At paras 27-33 Lord Bingham stressed that the court's jurisdiction under s.187B is an original, not a supervisory, jurisdiction. Issues of planning policy judgment are within the exclusive purview of local planning authorities and the Secretary of State, but "the court is not precluded from entertaining issues not related to planning policy or judgment, such as the visibility of a development from a given position or the width of a road" (para 30). As Lord Clyde expressed it at para 71:

"In exercising its power the court must not re-assess matters which are the subject of a planning judgment. But that does not mean that the factors which have been considered by the authority in making their planning judgment may not be properly taken into account by the court in deciding whether or not to grant this particular remedy. In looking at the factors which weighed with the authority the court is not embarking upon a reassessment of what was decided as a matter of planning judgment but entering upon the different exercise of deciding whether the circumstances are such as to warrant the granting of the particular remedy of an injunction."

44. It follows, in my judgment, that in the present case the judge was wrong to confine his attention to those matters that Lambeth had not taken into account in reaching its decision to grant planning permission. The consequence of his limited approach was that he failed to have proper regard to many of the appellants' objections to the variation of the restrictive covenants, such as the effect on amenity of neighbouring properties. This was a sufficiently fundamental error of principle that his exercise of discretion cannot stand. The appropriate course in the circumstances is for this court, which has seen all the material that was available to the court below, to exercise a fresh discretion of its own in the matter. That is the course that I shall follow.
45. I have referred already to the various objections made in opposition to the s.610 application (which to a large extent repeat the substance of objections to the planning application). Some are very general in nature and some amount to different ways of expressing much the same point. I have had regard to them all but will single out for comment what I consider to be the most important matters.
46. As regards external appearance and visual amenity, in relation to which we are assisted by photographs that were handed in at the hearing, the principal concern relates to the roof extension and rear extension. A problem about that, however, is that, whilst the work was no doubt carried out with a view to converting the property into flats, it is not in itself in breach of the restrictive covenants. It cannot therefore be said to count against the proposed variation of the restrictive covenants. It was for a like reason, namely that the work fell within permitted development rights and did not require planning permission, that Lambeth left it out of account when deciding whether to grant planning permission for the proposed development. The only relevant external alterations for the purposes of the planning application were said to be the provision of two cycle stands and an area accommodating two refuse bins in the front garden. In the context of s.610 those matters are in my view of little substance.
47. Conversion into flats is likely to involve a higher density of occupation of no.7, which may in turn result in some increased noise. Any effect would be felt particularly by no.5, as the adjoining property of a pair of semi-detached houses. This seems to me to be a point telling against the grant of the variation sought, but not one of great weight.
48. As regards traffic noise, fumes and congestion, and parking, there is no evidence that a higher density of occupation of no.7 will create a serious problem. The officer's report for the planning decision refers to a site visit at 11.45 pm on 30 May 2005, which was said to confirm that, whilst parking stress was high on Heathdene Road, there was available parking capacity at either end of the road. The report also stated that the council's transport officer considered that parking stress in the area would not increase above 90% following the development. Although criticism is made of the site visit as being on an unrepresentative date (a bank holiday Monday), no detailed evidence has been adduced to contradict the council's findings.
49. Of greater significance are the wider objections based on the wish to preserve the character of the neighbourhood. This seems to me to be a valid concern, and one to which substantial weight is properly to be attached as a factor telling against the variation sought. It is clear that the maintenance of the character of the neighbourhood is one of the purposes for which such restrictive covenants were imposed in the first place, and it is understandable that purchasers of properties may have attached value to them for that reason. The point is underlined by the fact that where a change has already occurred in the character of a neighbourhood, it can form in itself the basis for an application under s.610 of the 1985 Act or under s.84 of the 1925 Act: where such a change has occurred, the covenants may have lost their purpose. The appellants have emphasised in their evidence that no such change has occurred to date to the Streatham Lodge Estate or at least to that part of it where Heathdene Road is located.
50. A further objection advanced is that a decision to grant the variation will set an adverse precedent. Some assistance on how to approach such an issue is to be derived from the authorities under s.84 of the 1925 Act. In Re Hunt's Application (1997) 73 P&CR 126, the President of the Lands Tribunal cited and applied a passage from an earlier decision of his in Re Snaith & Dolding's Application (1995) 71 P&CR 104, at 118:

"Any application under section 84(1) must be determined upon the facts and merits of the particular case, and the Tribunal is unable to bind itself to a particular course of action in the future in a case which is not before it …. It is however legitimate in considering a particular application to have regard to the scheme of covenants as a whole and to assess the importance to the beneficiaries of maintaining the integrity of the scheme. The Tribunal has frequently adopted this approach …."

51. The President observed that the scheme in Re Hunt's Application had the primary intention of securing a relatively low density residential development of houses and bungalows, and that the subject property represented the first attempt to deviate from the scheme and constituted an obtrusive and discordant departure by building on a plot which was too small. He also referred to the possibility of future subdivision of other plots. He continued, at 135:

"In the circumstances therefore, I have reached the conclusion that to grant this application would have the effect of opening the first breach in a carefully maintained and successful scheme of development, and would render it more difficult to resist further applications for the subdivision of plots with the consequent threat of increasing density and loss of character. Thus to grant the application would in my judgment deprive the objectors of a substantial and valued practical benefit, namely the assurance of the continued integrity of the building scheme."

52. It would be wrong to adopt that reasoning in full, since it reflects the specific terms of s.84(1)(aa) and (1A) of the 1925 Act, which have no equivalent in the broad discretion conferred by s.610 of the 1985 Act. Equally, however, it would in my view be wrong to close one's eyes under s.610 to the impact of a conversion on the integrity of the scheme of the covenants (albeit there cannot be said to be the same degree of existing integrity in the present case as there evidently was in the case just cited). Moreover, consistency has a value, as has been recognised in the planning context; and the court can be expected to take that into account when considering future applications. I shall therefore proceed on the basis that if the present application is successful, it may make it easier for similar applications in respect of other properties in the area to succeed in the future – though every application will still have to be considered on its own merits in the light of the circumstances prevailing at the time.
53. As to the contention that the proposed conversion will result in a diminution of property values, I agree with the judge that there is virtually no evidence to support it and that the possibility of acquiring large dwelling-houses for conversion into flats might well have the opposite effect of enhancing property values. The estate agent's letter of 14 September 2004 to which the judge refers as having been produced only towards the end of oral argument does not take matters very far; and in the circumstances I, too, do not think it right to attach any weight to it.
54. Turning to factors in favour of the variation sought, I think it right to take into account, as did the judge, the very fact that Lawntown wishes to convert a property of which it is the freehold owner, and that the proposed development has been found by the local planning authority, after careful consideration, to meet the conditions for the grant of planning permission.
55. In my view it is also a relevant factor, and one to which substantial weight can properly be attached, that there is, as the judge put it, an urgent demand for more housing in London. To take that into account is very much in line with the underlying policy of s.610, to which I have already referred. It is true that no.7 does not fall within the description of "large houses … which have outlived their original purpose as single family dwellings", to which the Law Commission's 1985 report referred as the perceived problem at which the provision was aimed. But the provision itself has a wider potential application; and whether or not the particular problem has diminished in importance, as the Law Commission thought likely, the provision has a continuing relevance in modern conditions. London faces a housing shortage, with a need to find additional homes and a recognition that the conversion of existing premises into smaller units is one means of obtaining them. This is apparent not only from The London Plan, to which the judge made particular reference, but also from Lambeth's own Revised Deposit Replacement Unitary Development Plan, which takes account of The London Plan in setting targets for additional dwellings and makes clear that the conversion of existing houses into flats is expected to contribute to meeting those targets and is to be subject to a less restrictive approach in future (see, in particular, policies 15 and 17). To take account of such matters does not involve straying into the impermissible area of planning judgment. The development plan reflects in this respect a matter of wider public interest. It is legitimate and appropriate for the court, in the exercise of its discretion, to have regard to the public benefit of meeting the need for additional homes through conversion of existing houses into flats.
56. Taking all relevant factors into account, I am of the opinion that the balance comes down decisively in favour of granting the variation sought by Lawntown. Thus, although I have carried out a fresh exercise of discretion, my conclusion is the same as that reached by the judge below.
57. The approach I have adopted removes any possible argument under article 6 or article 8 of the Convention. In any event I do not accept that the judge's approach gave rise to any problem under those articles.
58. There remains the alternative argument that, if the judge was right to modify the restrictive covenants, he should have ordered financial compensation for the loss of the protection conferred by the covenants. I agree with the judge that the power under s.610 to vary the terms of a covenant "subject to such conditions and upon such terms as the court may think just" enables the court to make provision for financial compensation in a suitable case, thereby addressing any problem that might otherwise arise under article 1 of the First Protocol to the Convention. I also agree with the judge that this is not a case where an order for financial compensation is appropriate, given in particular the absence of any cogent evidence that conversion of no.7 into flats will result in a diminution in the value of no.5 or of other neighbouring properties. I would reject Mr Oakley's submission that, in the absence of any evidence on either side as to the financial value to be put on the benefit of the restrictive covenants, the court should direct a separate hearing on the question of compensation. It is far too late to raise such a possibility now. If compensation was to be sought, it was incumbent on the appellants to make a case for it at the two-day hearing before the judge. They failed to do so.
59. Throughout my analysis I have left on one side the fact that the conversion of no.7 has been carried out since the judge made his order, no stay having been sought in respect of that order, and there are now separate families living in the two flats created by the conversion. Had I otherwise been minded to differ from the conclusion reached by the judge, this additional factor might well have been a good reason for not interfering with the judge's order. As it is, however, I see no reason to interfere with any part of the judge's order even on the material that was before the judge himself. In my judgment he was right to grant Lawntown's application under s.610 and to make the order he did.
60. I would therefore dismiss the appeal.

Lord Justice Lawrence Collins :

61. I agree.

Lord Justice Gage :

62. I also agree.