England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
		22/6/2016

Master Clark:

The applications

1. These are two applications:

(1) the claimants' application dated 8 April 2016 seeking summary judgment on the part of their claim for a declaration; and

(2) the defendants' application dated 14 April 2016 seeking that "pursuant to CPR 11 the court should decline to exercise its jurisdiction as the claim is premature" or, in the alternative, that the claim is stayed to allow the defendants to prepare their intended application to the Upper Tribunal (Lands Chamber) ("the Tribunal") under section 84 of the Law of Property Act 1925.

The claim and background to the applications

2. The claim concerns a residential development of 36 plots in a cul de sac known as Copperfields in Beaconsfield, Buckinghamshire ("Copperfields"). The first and second claimants own plot 12; the third and fourth claimants own plot 14; and the defendants own plot 13.
3. The claimants allege that the development is subject to a "building scheme" pursuant to which each plot owner is entitled to enforce the covenants contained in the common form transfer used by the developer in the first transfer of each of the plots. Those covenants include a restriction ("restriction 2") in the following terms:

"Not to use the property hereby transferred or permit the same to be used for any other purpose than a private dwelling house with garage for the use and occupation of one family only and not to divide the same into flats nor to construct or allow access thereto from any neighbouring land."

4. The claim arises out of the fact that on 31 July 2015, the defendants obtained planning permission to demolish the existing single house on plot 13, and build in its place 4 new dwelling houses ("the development").
5. The relief sought in the particulars of claim is a declaration that the common transfer created a building scheme by which the defendants (as the present owners of plot 13) are bound; and an injunction to restrain the defendants from implementing the planning permission or otherwise breaching restriction 2.
6. On 3 November 2015, the claimants' solicitors wrote a letter of claim to the defendants setting out their objections to the development and asserting that it would be in breach of restriction 2. They sought the following undertakings:

(1) not to carry out the development; or

(2) by 1 December 2015 to issue and thereafter diligently pursue an application in the Tribunal under section 84(1) of the Law of Property Act 1925, and pending the determination of the application, not to start the development.

7. The defendants' solicitors responded to this letter on 17 November 2015. Their letter did not deny the existence of the building scheme or the enforceability of restriction 2, but did not accept them. It stated:

"My clients are well aware that prior to any building works commencing there are restrictive covenant issues which need to be given full consideration. There is no question of our clients simply commencing building works without considering these issues fully."

and continued

"… your clients can be reassured that our clients have no intention of commencing building works without first resolving the restrictive covenant issues. They have confirmed no building works will be commenced by them without first putting your clients on notice of this"

8. The letter concluded:

"we envisage that we will be in a position to update your clients on our clients' position regarding the restrictive covenant issues and what steps they believe they may or may not have to take, for example, an application to the Upper Tribunal (Lands Chamber) shortly."

9. No update was provided and the claimants' solicitors wrote on 3 December 2015, stating that if neither of the undertakings sought was provided, the claimants would start proceedings. The defendants' solicitor responded on 8 December 2015 saying it was her intention to revert back in the near future to confirm the defendants' position. She did not however do so, and there was no further correspondence between the parties until 15 March 2016, when the claimants' solicitors wrote serving the claim form issued the previous day, 14 March 2016.
10. In correspondence following service of the proceedings, the claimants' solicitors repeatedly asked the defendants' solicitors whether they accepted that plot 13 was subject to a building scheme. Their response on 1 April 2016 was:

"the law requires your clients to wait and see what is to be said in Upper Tribunal application or, in this instance, the pre-application letter prior to Upper Tribunal proceedings which we are instructed to prepare."

11. On 7 April 2106, the defendants' solicitor wrote:

"The question of a building scheme is being considered in our drafting of the Defence which is due in only 7 days from now."

12. Since the claimants' application was issued on 8 April 2016, the defendants were not required to file their Defence. However, at the hearing before me they took no position as to whether plot 13 was subject to a building scheme or as to whether the development would be in breach of restriction 2.

The test for summary judgment

13. The principles to be applied on applications for summary judgment are well established. They were summarised by Lewison J, as he then was, in Easyair Ltd v Opal Telecom Limited [2009] EWHC 339 (Ch), in a formulation approved in a number of subsequent cases at appellate level, including AC Ward & Sons v Catlin (Five) Limited [2009] EWCA Civ 1098 and Mellor v Partridge [2013] EWCA Civ 477. It is unnecessary to set them out here.

Issues in the claimants' application

14. The defendants' counsel did not seek to oppose the summary judgment application on any basis other than that the claim was premature and unnecessary, relying particularly on the assurances given by the defendants set out above.
15. There were therefore effectively two issues in the claimants' application:

(1) The test to be applied in determining whether a declaration should be granted;

(2) Whether that test had been satisfied.

Legal Principles

16. Section 84(2) of the Law of Property Act 1925 provides:

"The court shall have power on the application of any person interested—

(a) To declare whether or not in any particular case any freehold land is or would in any given event be affected by a restriction imposed by any instrument; or

(b) To declare what, upon the true construction of any instrument purporting to impose a restriction, is the nature and extent of the restriction thereby imposed and whether the same is or would in any given event be enforceable and if so by whom."

It was therefore common ground between the parties that the court has jurisdiction to make the order sought by the claimants.

The test for granting a declaration

17. The defendants' counsel referred me to Zamir & Woolf, The Declaratory Judgment, 4^th edn, at para 4-74 as authority for the proposition that a declaration will not be granted in relation to hypothetical facts i.e. facts which have not yet occurred and may never occur at all.
18. He relied on the decision in Faber v Gosforth UDC 19 TLR 435, in which developers intended to build a development of houses and, in the process of doing so, proposed to connect the drainage system into the municipal drains. The developers sought a declaration that they were entitled to do so, which was dismissed. The defendants' counsel submitted that the basis of the decision was that the works had not started.
19. That was, however, only one ground for the decision. I agree with the authors of The Declaratory Judgment that that ground cannot be supported. The facts were conditional rather than hypothetical – if the developers had obtained the declaration they sought they were virtually certain to proceed with the development. There are however other grounds on which the decision can be supported. Firstly, it can be supported on the basis that what was in issue was not the claimants' right to connect to the sewers, but the terms and conditions on which that connection might be made; and the evidence was insufficient to show the detail of the connection. Secondly, the statute on which the claimants based their claim provided that a dispute as to the terms of connection was to be settled by a court of summary jurisdiction or by arbitration. The existence of these means of resolving this dispute seems to have been the basis for the judge concluding that the declaration was unnecessary.
20. I do not accept the general principle advanced by the defendants' counsel that a declaration will be refused where the relevant facts have not yet occurred. Whether facts are "hypothetical" is a question of fact and degree, depending on the level of uncertainty attached to their future occurrence. As Zamir & Woolf say (at para 4-79) facts should not be treated as hypothetical as long as they are likely occur within a reasonable timescale. Furthermore, even this principle is qualified by them:

"Where, however, there are sensible practical reasons for granting a declaration the courts will do so even though the events with which the declaration deals have not happened and may not happen."

21. The defendants' counsel also submitted that in this case the test for whether a declaration should be granted was the same as whether a quia timet injunction should be granted. He put forward the following basis for that submission. The claim in this case is predicated on the assertion that the defendants intend to build and develop in accordance with the planning permission, as to which injunctive relief is sought; so that if the claim for an injunction fails, the claim for a declaration must also fail.
22. In support of this argument he relied upon CIP Property (AIPT) Ltd v Transport for London [2012] EWHC 259 (Ch), in which the Chancellor said (at para 23) that the principles for granting a declaration and the principles for granting a quia timet injunction are broadly similar. At para 26 the Chancellor set out the appropriate questions where a declaration is claimed:

(1) is the claim premature;

(2) would the declaration sought serve a useful purpose;

(3) are the issues sufficiently defined to be properly justiciable?

He inclined to the view, without deciding the point, that (2) and (3) are just tests for prematurity.

23. So far as the grant of a quia timet injunction is concerned, at para 28 he stated the test as whether there is an immediate threat to do something which requires the intervention of the court to prevent it. As to the imminence of threat, he cited Russell LJ in Hooper v Rogers at p50:

"Again it seems to me that 'imminent' is used in the sense that the circumstances must be such that the remedy sought is not premature; ...

In different cases differing phrases have been used in describing circumstances in which mandatory injunctions and quia timet injunctions will be granted. In truth it seems to me that the degree of probability of future injury is not an absolute standard: what is to be aimed at is justice between the parties, having regard to all the relevant circumstances."

24. I do not consider that these passages support the defendants' counsel's submission that the test for quia timet injunctive relief and declaratory relief are effectively the same, so that if an application for an injunction would not succeed, then an application for a declaration would not do so either. The Chancellor did not elide the two sets of principles. As a matter of logic, there may be circumstances in which the threat is not sufficiently imminent to justify injunctive relief, but declaratory relief is nonetheless appropriate.
25. I therefore approach the question of whether the claimants are entitled to declaratory relief on the basis of the test set out by the Chancellor in CIP.

Whether the test for declaratory relief has been satisfied

26. The defendants' counsel accepted that the issues in the Particulars of Claim are sufficiently defined to be properly justiciable, but argued that the claim was premature in the absence of evidence that the defendants threaten and intend to carry out their development.
27. However, this submission depends on his formulation of the test which I have rejected for the reasons given above. The real question in this case is whether the declaration would serve a useful purpose.
28. As to this, I agree that the defendants' intention is relevant. The starting point is their obtaining planning permission, which in the absence of any other evidence, would indicate an intention to build in accordance with the permission. As the claimants' counsel pointed out, in the correspondence between the parties, the defendants have never given assurances that they will not build in accordance with the permission, only that they would not do so "without resolving the restrictive covenant issues" (their letter of 17 November 2015).
29. In this context, this case is quite different from CIP. CIP concerned the Crossrail development in London. The claimant owned land next to Tottenham Court Road underground station ("the station"), which was owned by the first two defendants, Transport for London ("TFL") and London Underground ("LU"). They were considering the development of the station by building an oversite development, and envisaged that the third defendant, a commercial developer ("Derwent Valley") would be the developer. The claimant claimed rights of light which would be interfered with by the proposed development. Its solicitors wrote to defendants asserting the rights of light, objecting to the proposed development and seeking undertakings. Derwent Valley replied stating that it was not intended that development would take place without regard to any relevant rights to light of any third parties.
30. The defendants' application for summary judgment dismissing the claim succeeded. However, that case differed materially from the present case. Firstly, Derwent Valley did not own the relevant land and might never do so. Secondly, TFL and LU did own the land but had no proposals for development which could infringe the claimants' rights to light. Thirdly, no planning permission had been granted to anyone to do any work anywhere in such a way as might infringe those rights (and was unlikely to be granted for another 5 years). These facts founded the Chancellor's conclusion that the claim was premature.
31. In my judgment, by their letter of 17 November 2015, the defendants were acknowledging that issues had arisen between them and the claimants which would require resolution. This was reflected in their assurance that they would provide the claimants with an update (though, as noted above, none was provided) – the update could only have been to confirm that either the defendants were applying to the Tribunal or they were not proceeding with the development. Even after the commencement of the proceedings, the defendants' assertion that they would be applying to the Tribunal was a further acknowledgement of the need to resolve the issues between the parties.
32. By the date of the hearing of the claimants' application, the defendants had not applied to the Tribunal. However, their position, as set out in their application notice and evidence in support of their application was that they intended to apply to the Tribunal. Indeed, the stay sought by the defendants is to allow them to prepare their application for discharge or modification of the covenants which apply to number 13. Their counsel's skeleton argument argues that the reason a stay is sought is to enable that the issues raised by these proceedings to be dealt with in the course of the defendants' application under section 84(1).
33. At the hearing, the defendants' counsel sought to draw back from this position by suggesting that the defendants had no settled intention to proceed with the development or indeed with an application to the Tribunal. However, this is inconsistent with the defendants' own application and evidence mentioned above (and his own skeleton argument), and I do not place any weight on it.
34. I approach this application therefore on the basis that, as set out in their correspondence, and confirmed in their application notice, evidence and counsel's skeleton argument, the defendants have a settled intention to apply to the Tribunal.
35. The claimants' counsel submitted that the grant of a declaration would serve a useful purpose for several reasons. Firstly, he said, it would clarify the legal rights of the parties in circumstances where the defendants have failed to set out their position as to the existence of a building scheme; and would allow content to be given to the defendants' assurances.
36. As to this, it is clear that clarification of the parties' legal rights is not sufficient to establish a useful purpose or to justify the grant of a declaration. I agree however, that at present it is unclear whether or not the defendants accept that a building scheme exists, but deny that the development would be in breach of restriction 2; or whether they deny it exists, so that the issue of whether the development is in breach of restriction 2 does not arise.
37. Secondly, the claimants' counsel said, resolution of the issue as to the existence of a building scheme is a necessary precursor to proceedings in the Tribunal for a number of reasons. It will determine who is accepted as an objector to any application by the defendants. It will affect the nature of the objections made, in particular the availability of a "thin end of the wedge" argument (see Preston & Newsome on Restrictive Covenants Affecting Freehold Land, 10^th edn, para 15.01) to the objectors. He submitted that although the issue raised in this claim could be determined in the Tribunal, it has been fully and clearly raised in this claim, and the proportionate course would be to determine it in this claim.
38. I agree that this would be a useful purpose, subject to the question of the risk of inconsistent decisions (considered at paras 39 to 44 below); and, as noted above, the defendants do intend to apply to the Tribunal. In that context, it cannot in my judgment be said that this claim is either premature or unnecessary, and I would not refuse to grant the declaration sought on that basis.
39. Finally, the claimants' counsel submitted that the existence of the dispute was a potential blight on the claimants' properties, and resolution of it would remove that blight. There was no formal evidence as to this blight, only its assertion in correspondence. Moreover, the blight relied upon was that resulting from a prolonged period of construction works, not from the breach of restriction 2 itself, so I do not consider it to be a relevant factor.

Risk of inconsistent decisions

40. Though not raised in his skeleton argument, in the course of his oral submissions, the defendants' counsel argued that if a declaration were made in these proceedings, the Tribunal could take a different view; and that this raised the possibility of conflicting decisions of different tribunals. Since this was a new point, I permitted the claimants to lodge short written submissions on it and the defendants to lodge short submissions in reply.
41. The defendants' counsel referred me to rule 35 of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 (SI. 2010/2600)("the Rules"), which provides for the Tribunal to determine who is entitled to the benefit of the relevant restriction. The Tribunal has therefore he submitted jurisdiction to determine whether a building scheme exists under this procedure. To grant a declaration in these proceedings would therefore create a risk that in latter proceedings in the Tribunal between other residents in Copperfields, the Tribunal might reach a different decision. That, he submitted was undesirable and a reason why, as a matter of discretion, I should decline to make the declaration sought.

Discussion

42. The starting point is section 84(5) of the 1925 Act which provides that:

(5) Any order made under this section shall be binding on all persons, whether ascertained or of full age or capacity or not, then entitled or thereafter capable of becoming entitled to the benefit of any restriction, which is thereby discharged, modified, or dealt with, and whether such persons are parties to the proceedings or have been served with notice or not.

43. The effect of this section is that the declaration, if granted, would bind all those entitled to the benefit of the restriction. The subsection does not provide that those whose land is burdened by the restriction are also bound. However, rule 35 of the Rules is also unsurprisingly not concerned with those whose land is burdened (since the person whose land is bound is the applicant to the Tribunal), but only with the admission of objectors to the proposed discharge or modification to the covenant i.e. those whose land has the benefit of it. In my judgment therefore, there is no risk of inconsistent decisions as between this court and the Tribunal.
44. Notwithstanding this, the declaration sought relates to all 36 plots in Copperfields; and, whilst it might be assumed that none of the plot owners would object to having the benefit of the restriction 2, they might wish to dispute that their plots were subject to that restriction. This gives rise to the possibility of inconsistent decisions in the High Court. Unfortunately, the procedure under CPR 19.8A (by which non-parties can be given notice of proceedings and, if they do not respond, be bound by the outcome) is not available in proceedings of this type.
45. However, in my judgment the possibility of a later decision inconsistent with this one is not sufficiently strong not to grant the declaration sought. The defendants' counsel, although he suggested in his submissions that there are arguments that the development would not be in breach of restriction 2, did not put forward any basis on which it could be argued that Copperfields was not subject to a building scheme; and as seen below, I have held that the claimants are entitled to summary judgment on this issue. I regard the possibility of a later inconsistent decision as theoretical only, and not a reason for declining to make the declaration now.

Defendants' application

46. The first order sought by the defendants' application is that the court should decline to exercise its jurisdiction because the claim is premature. (Counsel did not rely on CPR Part 11, and reference to it is plainly misconceived.) These arguments have been discussed, and require no further consideration.
47. The second order sought by the application is that the claim should be stayed to allow the defendants to prepare their application to the Tribunal. As noted, the defendants have been threatening to apply to the Tribunal for many months now, and even at the hearing there was no firm indication of when (if at all) they might do so. These proceedings were the only means open to the claimants to determine the issue of whether a building scheme exists. For the reasons given in paragraph 36 above, I do not consider that this claim should be stayed to allow the defendants to prepare their Tribunal application.

Existence of the building scheme

48. I conclude by considering whether the claimants can establish (to the summary judgment standard) the existence of the building scheme they allege.

Legal principles for determining existence of building scheme

49. The classic statement of the principles governing building schemes is found in Elliston v Reacher [1908] 2 Ch 374, at 384. To succeed, the claimants must show:

(1) that both the claimants and the defendants derive title under a common vendor;

(2) that previously to selling the lands to which the claimants and defendants are respectively entitled the vendor laid out his estate, or a defined portion thereof (including the lands purchased by the claimants and defendants respectively), for sale in lots subject to restrictions intended to be imposed on all the lots, and which, though varying in details as to particular lots, are consistent and consistent only with some general scheme of development;

(3) that these restrictions were intended by the common vendor to be and were for the benefit of all the lots intended to be sold, whether or not they were also intended to be and were for the benefit of other land retained by the vendor; and

(4) that both the claimants and the defendants, or their predecessors in title, purchased their lots from the common vendor upon the footing that the restriction subject to which the purchases were made were to enure for the benefit of the other lots included in the general scheme whether or not they were also to enure for the benefit of other lands retained by the vendors.

50. More recently, the Privy Council has emphasized two essential pre-requisites for a building scheme (Jamaica Mutual Life Assurance Society v Hillsborough Ltd [1989] 1 WLR 1101, at 1106):

"It is now well established that there are two prerequisites of a building scheme namely: (1) the identification of the land to which the scheme relates, and (2) an acceptance by each purchaser of part of the lands from the common vendor that the benefit of the covenants into which he has entered will enure to the vendor and to others deriving title from him and that he correspondingly will enjoy the benefit of covenants entered into by other purchasers of part of the land. Reciprocity of obligations between purchasers of different plots is essential."

Evidence as to existence of the building scheme

51. The claimants' counsel submitted that this is a paradigm instance of a building scheme. The undisputed evidence before me establishes the following matters.
52. Copperfields was developed in or about 1970 by Burrow Construction Company Ltd ("the developer") and, at the time of construction, was known as Brownswood Road Estate. When each of the 36 plots was first disposed of by the developer, a common form of transfer was used ("the Common Transfer"). That included the following covenant ("the covenant") on the part of the purchasers::

"…the Transferees hereby jointly and severally covenant with [the developer] and all persons claiming under it as purchasers of other plots on the land edged blue on the said plan (being [the developer's'] [Copperfields]) to the intent that the burden of this covenant may run with and bind the land hereby transferred and every part thereof and to the intent that the benefit thereof may be annexed to and devolve with each and every other plot on the said land edged blue on the said plan to observe and perform the restrictions and stipulations set out in the Third Schedule hereto so far as they relate to the land hereby transferred."

The covenant is, as the claimants' counsel submitted, clearly expressed as intended to bind successors in title, and to benefit all plot owners in Copperfields and their successors in title.

53. The plan was in evidence before me, and all 36 plots in Copperfields are within the blue edging. Restriction 2 is to be found at paragraph 2 of the Third Schedule referred to.
54. The covenant is referred to on the Charges Register of the Official copy of register of title for all the plots on Copperfields in materially identical terms (the reference to the parties to and date of the particular version of the Common Transfer used in relation to each plot being the only difference). So far as the defendants' property is concerned, the reference is at para 4 of the Charges Register:

"The land tinted yellow and tinted pink on the filed plan falls within the area covered by a building scheme constituted under the provisions of transfers by [the developer]. The Transfer of the land tinted yellow and tinted pink on the filed plan is dated 30 July 1970 in favour of Victor Owen Pring and Jean Elizabeth Pring and its plan indicates the extent of the area affected by the scheme."

(emphasis added)

55. As the claimants' counsel submitted, the requirements for a building scheme are clearly met:

(1) The land covered by the scheme, and the nature of the scheme, is set out and identified in the Common Transfer.

(2) All the owners of the different plots on Copperfields are subject to identical obligations, and the obligations are said to be for the benefit of all the other owners; accordingly the necessary reciprocity exists;

(3) As for the burden of the covenant, the covenant is clearly expressed as being intended to burden the land and benefit the rest of Copperfields, and has been registered against each property on Copperfields, including the defendants'.

56. As previously noted, the defendants have not at any stage put forward any position (let alone any argument) as to the existence or otherwise of a building scheme.

Conclusion

57. For the reasons set out above, therefore, in my judgment the defendants have no real prospect of successfully defending the claim for the declaration, and I will order summary judgment in the claimants' favour.