England and Wales Lands Tribunal

[2004] EWLands LP_34_2003 (30 November 2004)

LP/34/2003

LANDS TRIBUNAL ACT 1949

RESTRICTIVE COVENANT – compensation – modification agreed – first floor playroom incorporated in house extension in breach of covenant – land to which benefit attached – whether compensation to be assessed on basis of uplift in value of covenantor's land – whether objector had suffered any loss or disadvantage – compensation awarded nil

IN THE MATTER OF AN APPLICATION UNDER SECTION 84

OF THE LAW OF PROPERTY ACT 1925

by

KAREN LORRAINE SKUPINSKI

Re:

Orchard Cottage

East Langton

Nr Market Harborough

Leicestershire

LE16 7TL

Before: The President

Sitting at Procession House, 110 New Bridge Street, London EC4V 6JL

on 22 November 2004

Adrian Davies instructed by P B Sylvester & Co for the applicant

Timothy Sisley instructed by Hewitsons, Northampton, for the objector, Mary Beatrice Margaret Hignett

The following cases are referred to in this decision:

Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798

Bracewell v Appleby [1975] Ch 408

Jaggard v Sawyer [1993] 1 EGLR 197; [1995] 1 WLR 269

SJC Construction Co Ltd v Sutton London Borough Council (1975) 29 P & CR 222

Re McVey and Robertson's Application (1973) 26 P & CR 429

Stokes v Cambridge Corpn (1962) 13 P & CR 77

The following further cases were referred to in argument:

Re Bass Ltd's Application (1973) 26 P & CR 156

Tod-Heatley v Benham (1888) 40 Ch D 80

Zetland (Marquess of) v Driver [1939] Ch 1

Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] AC 896

Gilbert v Spoor [1983] Ch 27

Wrotham Park Settled Estates v Hertsmere Borough Council [1993] RVR 56

The following further cases were referred to in skeleton arguments:

Johnson v Edgware Railway Co (1866) 35 Beav 480

Kelly v Barrett [1924] 2 Ch 379

Davie v Edinburgh Magistrates (1953) SC 34

Edgington v Fitzmaurice (1885) 29 Ch D 459

Re Henderson's Conveyance [1940] Ch 835

Re Truman, Hanbury, Buxton and Co Ltd's Application [1956] 1 QB 261

Re Bushell's Application (1987) 14 P & CR 386

Re Chandler's Application (1958) 9 P & CR 512

Re Steven's Application (1962) 14 P & CR 59

Stannard v Issa [1987] AC 175

Re Banks's Application (1977) 33 P & CR 138

Re Snaith and Dolding's Application (1996) 71 P & CR 104

Re Diggens and others' Application [2001] 2 EGLR 159

Re Tarhale's Application (1990) 60 P & CR 368

Ridley v Taylor [1965] 1 WLR 611


 


DECISION

The application

1. The applicant is the freehold owner of a dwellinghouse, Orchard Cottage, East Langton, near Market Harborough in Leicestershire. The property was conveyed by John Derrick Hignett to her and her late husband, Andrew Skupinski, by a conveyance dated 6 September 1988. The purchasers covenanted with the vendor –

"(c) to the intent and so as to bind the property hereby conveyed and each and every part thereof into whosesoever hands the same may come and to benefit and protect the adjoining and neighbouring land belonging to the Vendor and each and every part thereof not to use the area coloured yellow on the plan hereto for any purpose other than as a garden and not to erect thereon any building or addition to existing buildings without the consent in writing of the Vendor other than as a garage for the storage of a maximum of three private vehicles."

2. The applicant, Mrs Skupinski, has constructed on the land coloured yellow on the plan, in implementation of a planning permission granted on 13 July 2000, an extension to the house consisting of a 3-car garage with a playroom above. The inclusion of the playroom in the extension was contrary to the terms of the restriction. The application, under section 84 of the Law of Property Act 1925, was made to discharge the restriction on ground (c); alternatively for its modification on ground (aa) and ground (c) so as to permit the development that has been carried out. The objector, Mrs Hignett, is the successor in title to the original convenantee in respect of two parcels of land in the vicinity of the application land. She opposed both the discharge and the modification sought by the applicant, but at the hearing her counsel, Mr Timothy Sisley, said that she would not now oppose modification of the covenant. For the applicant Mr Adrian Davies said that Mrs Skupinski for her part was content for the covenant simply to be modified, so that the only issue was the compensation that the applicant should pay to the objector.

High Court proceedings

3. On 31 August 2001, by which time the building works were substantially complete, Mrs Hignett issued a claim in the Chancery Division, alleging breach of covenant. She claimed an injunction restraining Mrs Skupinski from continuing the works and/or requiring the removal of the extension as far as built. If she was not entitled to that relief, she sought damages by way of compensation for the value to her of the right to release the covenant or give consent to the building, and her case was that that value was £40,000. Mrs Hignett sought summary judgment, and on 3 February 2003 Master Bowman, to whom her application had been remitted, gave summary judgment in her favour, ordering Mrs Skupinski to pay damages assessed at £9,400, costs to be assessed and an interim payment on account of those costs in the sum of £16,000.
4. Mrs Skupinski sought permission to appeal, including in her grounds the contention that the master should have awarded nominal damages only. On 23 May 2003 Lindsay J granted permission to appeal. That permission was not limited or subject to conditions. In granting permission the judge said that, if, as it appeared, all that the claimant was truly trying to preserve was her bargaining position so as to be able to recover a larger sum as the price of the release of the covenant, that would be a classic case for adjourning the proceedings to enable application to be made to the Lands Tribunal under section 84 of the 1925 Act. The application to this Tribunal was made on 4 July 2003, and, it appears, the High Court proceedings stand adjourned pending the determination of the application.

The land of the applicant, the land of the objector, and the locality

5. Orchard Cottage, the applicant's house, is a two-storey brick building that appears to have been formed through the amalgamation of older cottages. It is set back to the west from the road (which I will describe shortly) and is almost at right-angles to it. On its south side it faces and abuts a driveway between 4m and 7m wide and about 33m in depth. This land is owned by Mrs Hignett, and was owned by her predecessor, Col Hignett, at the time of the 1988 conveyance. Use of the driveway is shared by Orchard Cottage and the house that adjoins the driveway on its south side, Spring House. Orchard Cottage is separated from the road by a house, The Long House, which abuts the entrance to the driveway.
6. The extension to Orchard Cottage is on its west side, fronting the driveway. It is built in brick with a pitched roof. There are three garage doors on the ground floor, and on the first floor, which contains the playroom, there are three dormer windows. To the west is a fenced area of garden land, and beyond that is the open countryside. Spring House is a double-fronted brick house that fronts the road. It has a small, neglected rear garden that contains the rusting remains of four old cars and is open to the driveway.
7. The road, at the point where the driveway adjoins it, is the junction of Main Street, which runs south to north through the village, and another village street, running roughly south-west to north-east, which joins Main Street from the south-west. There is a small island of grass, a few square metres in area, in the middle. There is frontage development at the apex of the junction, and this continues southwards along both streets.
8. Opposite the driveway, on the east side of the road, there is a plot of land, about 12m wide and slightly under 50m deep, that is owned by Mrs Hignett and was owned by Col Hignett at the time of the 1988 conveyance. It is separated from the footpath alongside the road by an old brick wall, over 1m high. This wall continues to the north, where it forms the boundary to the garden of a public house, the Bell Inn, that is set back about 13m from the road. To the south of the plot is a house, The Forge, the front of which immediately abuts the footpath. The other boundaries of the plot have close-boarded fencing. At the front of the plot are cupressus leylandii trees of considerable size. The rest of the land is rough grass and rises up away from the road. The nearest point of the extension to Orchard Cottage is 50m from the plot. There is an oblique view of the front of the extension from the footpath where it abuts the southern two-thirds of the plot. The Long House cuts off the view from the northern third.
9. East Langton is a relatively small village in undulating countryside. There is a conservation area that includes the application land and adjacent property. The development for the most part consists of two-storey brick houses, of a variety of forms and settings.

The issues

10. On the basis of the cases advanced by the parties, the following issues arises:

(a) Whether the plot of land owned by Mrs Hignett has the benefit of the covenant. It is said on behalf of Mrs Skupinski that the benefit attaches to the driveway only.

(b) The extent to which the extension is visible from the plot and the impact on the plot of such view as there may be if, as Mrs Hignett contends, planning permission for a house on the plot can be expected.

(c) The proper basis for the determination of compensation. For Mrs Skupinski it is contended that the proper basis is the diminution (if any) in the value of the benefited land as the result of modification of the covenant. For Mrs Hignett it is said that compensation should be assessed by the amount that someone in Mrs Skupinski's position would pay to secure release from the covenant so as to allow the extension to be built.

(d) Whether, as Mr Sisley contends, this Tribunal in determining compensation is bound by the master's determination of damages.

(e) The quantum of compensation.

I will deal with these issues in turn.

The benefited land

11. The stated intent of the covenant was "to benefit and protect the adjoining and neighbouring land belonging to the Vendor." Mr Davies does not contend that these words are insufficient to identify the benefited land. His submission is that, on a proper construction, the provision means that only land that was both adjoining and neighbouring was benefited. Alternatively, he says, if there is ambiguity, the provision should be construed against the grantor. Mr Sisley says that the words conferred the benefit on adjoining land and on neighbouring land that was not adjoining. In my judgment, the latter construction is the right one. The evident purpose of the restriction was to give protection against the adverse effects of buildings or uses on the burdened land. There is no reason to believe that the parties would have regarded only adjoining land as being potentially affected by such buildings. Neighbouring land that was not adjoining could also suffer adverse effects. In the light, therefore, of what seems to me to be the purpose of the covenant, it would be correct to construe it as extending the benefit to neighbouring land of the vendor even though that land might not be adjoining.
12. The benefited land thus consists of the driveway and the plot. It is by reason of the fact that the covenant "relates to" (to use the words in section 78 of the 1925 Act) or "touches and concerns" (to use the older expression) the two parcels of land that Mrs Hignett has the benefit of it. I will return to this in the context of the question of the proper basis for determining compensation.

Impact on the plot

13. In a draft agreed statement prepared by Mr Sisley, and agreed in this respect by Mr Davies, the impact of the extension on the plot was described as the "single important fact of dispute". Evidence was given by Andrew Martin Ward BLE, FRICS, of Mather Jamie, Chartered Surveyors of Loughborough, on behalf of Mrs Hignett. Mr Ward said that, while the extension was not a dominating feature of the street scene, it was visible, despite an apple tree in the garden of Spring House; and for many months of the year any purchaser of a dwelling on the plot would have a very clear view of it up the driveway. Although I was invited by both parties to rely on photographs that were produced in order to draw my conclusions on this matter, it was clearly so crucial that I considered it necessary to view the land. I did this on the day following the hearing, and the description of the land and the locality that I have set out above reflects what I saw. Although there were witness statements from both Mrs Skupinski and Mrs Hignett, since the only important fact in dispute was the impact of the development of the plot, which I was able to judge in this way, cross-examination of either of these witnesses seemed to me to be unnecessary and inappropriate, and I so ruled.
14. I have said that from the footpath in front of the plot the extension is visible. It is an oblique view, down the driveway, and the extension 50m away occupies, in terms of degrees, a very small part of the view, which is predominantly filled by the building at the apex of the two streets (The Maltings), about 15m away, Spring House, about 30m away, the Long House, about 20m away, and a converted brick chapel to the north of The Long House, about 30m away. The white of the garage doors is more conspicuous than the dormer windows, which themselves do not appear incongruous among the various building forms that are within view.
15. From the northern third of the frontage of the plot the extension is not visible at all, since The Long House intervenes. Moreover, because of the angles at which the plot on the one hand, and the driveway on the other, are set to the road, The Long House would, I judge, foreclose views from the plot up the driveway except for a small part at the front of the plot next to The Forge. The impact of the extension on views from the plot is thus minimal, and it is in my view inconceivable that a prospective purchaser of the plot or of a house upon it would regard the additional impact of the dormer windows as adverse.

The proper basis for compensation

16. Under section 84(1)

"… 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, either –

(i) a sum to make up 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."

Mr Sisley made clear that the objector's case was based on (i), and he placed reliance on Mr Ward's witness statement; an agreed statement dated 31 January 2003 by Mr Ward and Mrs Skupinski's surveyor, James Palfreyman BSc, MRICS, of Godfrey-Payton, chartered surveyors of Market Harborough; and the master's award of damages. All these adopted a valuation approach aimed establishing the increased value given to Orchard Cottage by the playroom part of the extension and the proportion of this that would, in a friendly negotiation, have been paid to Mrs Hignett for her consent to it. Mr Davies submitted that this approach was wrong; the right approach was a compensatory one, assessing the diminution in value of Mrs Hignett's land.

17. There have been cases in which a court, refusing to grant an injunction to restrain or remedy a breach of a restrictive covenant or to prevent a trespass, has granted Lord Cairns's Act damages related to the profit the owner of the burdened has made or can expect to make from the development that constitutes or involves the breach of covenant or the trespass. In Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 a developer built a number of houses in breach of a covenant restraining him from building otherwise than in accordance with a layout plan submitted to and approved by the plaintiff. Brightman J refused to grant a mandatory injunction requiring the demolition of the houses and instead awarded damages of 5% of the developer's anticipated profits. In Bracewell v Appleby [1975] Ch 408 the defendant, the owner of one of six houses served by a private road, bought an adjacent plot of land and built a house there. The only access to it was along the private road, but use for this purpose of the road, which was on land owned by the plaintiffs, constituted a trespass. Graham J refused to grant an injunction because of the plaintiffs' delay and the fact that it would have rendered the house uninhabitable, and he awarded damages based on the amount that the plaintiffs and the other dominant owners would have been willing to accept for the loss of amenity and increased use of the road, but a sum not so great that the defendant would have been deterred from building the house.
18. Jaggard v Sawyer [1995] 1 WLR 269 was another case in which the owner of one of a number of houses served by a private road had bought an adjacent plot of land and built a house on it. Access to the new house had been provided along the private road and through the defendant's garden land, which was subject to a covenant restricting its use to that of garden land only. The county court judge refused an injunction and awarded damages in the sum of the price that the defendant would have had to pay in a negotiation to acquire the right of access. He related the amount to the notional profit on the new house (see below, where I consider this case further in relation to quantum.) His decision, and his approach to the assessment of damages, was upheld by the Court of Appeal.
19. It does not necessarily follow, in my judgment, that the sort of approach adopted in the above cases to Lord Cairns's Act damages is applicable to the determination of compensation under section 84(1). In two of the cases the claim lay wholly or partly in trespass, and on the face of it there is a significant difference between the right of the owner of land on the one hand to prevent trespass and on the other, the right of a successor in title of a covenantee under a restrictive covenant to enforce the covenant, although it is right to say that the Court of Appeal in Jaggard drew no such distinction. As I have said, the successor in title is only entitled to enforce the covenant because the covenant related to, or touched and concerned, his land. It is because the covenant was entered into for the benefit of his land – or, which seems to me to be the same thing, to avoid detriment to his land – that he is given the right to enforce it. In view of this, one might have expected that damages for breach of covenant would be assessed by reference to the detriment to the enjoyment of the benefited land that the breach of covenant had or could be expected to cause.
20. Under section 84(1) compensation (or consideration as it is referred to) may be awarded under one or other of the heads set out, but not both. The first head covers any loss or disadvantage suffered by the person entitled to the benefit of the covenant by reason of the discharge or modification. It includes any diminution in the value of the benefited land and any loss of amenity, even though this may not cause a loss of value: see Scamell on Land Covenants (1996) pp 449-450. The inclusion of a specific provision in head (ii) providing, as an alternative, for a sum to make up for the effect which the restriction had, at the time it was imposed, in reducing the consideration then received for the land affected by it suggests that compensation is not payable under head (i) for any loss of bargaining power – the loss of the power to extract from the applicant a share in the increase in the value of the burdened land secured by the discharge or modification of the restriction. Nevertheless the Court of Appeal has held (see SJC Construction Co Ltd v Sutton London Borough Council (1975) 29 P & CR 222), upholding the decision of the Lands Tribunal (Mr Douglas Frank QC), that compensation under head (i) could properly be awarded on the basis of what the applicant would have paid in friendly negotiations for the removal of the restriction. In that case the President concluded that the parties would have split the development value between them. Lord Denning MR with whom Stephenson and Geoffrey Lane LJJ agreed, said at 326:

"So, we come back to the question: what is the basis or proper basis of compensation? It is simply to make up 'for [the] loss or disadvantage suffered' by the borough council. There is no method prescribed by the Act by which it is to be assessed; it is essentially a question of quantum. It is however, to be assessed for loss of amenities, loss of view and so forth, which are things which it is hard to assess in terms of money. It is similar to compensation for pain and suffering, which cannot be translated into money terms; the courts have therefore, to arrive at conventional sums which they award…."

21. Lord Denning noted that, in reaching his conclusion, the President had derived some help from Wrotham Park Estate Co Ltd v Parkside Homes Ltd. He distinguished Re McVey and Robertson's Application (1973) 26 P & CR 429, a case in which the Lands Tribunal for Scotland had refused to award compensation on such a basis, principally on the ground that in that case the objector did not suffer any loss or damage from the discharge of the covenant other than the power to obtain money from the applicant. There was a loss of amenity, an intangible matter which was incapable of exact calculation in money, and the President had taken a fair and sensible way of assessing it. Stephenson LJ said that the method for assessing compensation was not the only one but he could not say that it was unlawful or contrary to the Act or to any authority that had been cited.
22. On the basis of this authority I have no doubt that it would be open to me to assess compensation by reference to the increase in value that the playroom has given to Mrs Kupinski's land if I were to conclude that Mrs Hignett would suffer loss or disadvantage by reason of the modification of the covenant. Since, however, Mrs Hignett's entitlement to enforce the covenant derives from the covenant's ability to protect her land rather than from any reservation to her of the power to extract a share of the development value of the applicant's land, I would for my part seek if possible to assess compensation for any "loss or disadvantage" she has suffered by reference to the effect on her enjoyment of her own land rather than to the applicant's gain. Of course the assessment of compensation for loss of amenity, where such loss is not, or is not wholly, reflected in a reduction in the value of the land, must inevitably be extremely judgmental, but I would not regard the applicant's gain as a useful determinant of the objector's loss.

The master's award of damages

23. Mr Sisley submits that the Tribunal in determining this application is bound by the master's award of damages. Although the award is the subject of a pending appeal, it has not been set aside. Mr Sisley says that the effect of the judgment is not to determine the amount of compensation that the Tribunal may award – indeed he contends that compensation should be awarded in a greater sum – but to create an estoppel in relation to the approach to the assessment of compensation. He submits that Mrs Skupinski is estopped by virtue of the judgment from contending for any other approach to the assessment of compensation than that on the basis of which the master gave judgment. The submission was briefly stated and was not elaborated.
24. The award of damages by the master clearly creates no issue estoppel, and Mr Sisley does not contend that it does. I cannot see that the judgment itself could have created any sort of an estoppel in relation to the matter that I have to determine. Nor in my view, is there any estoppel by convention arising from the conduct of the parties. Mr Ward in his report of 16 July 2004 described the negotiations between himself and Mr Palfreyman. His report dated 27 August 2002 in the High Court proceedings addressed the question of what sum would be reasonable and properly payable by the applicant to the objector for the relaxation of the covenant to enable the extension to be completed. In that report he assessed the damages at £13,500. Mr Palfreyman, in his report of 20 December 2002, concluded that in his view the sum reasonably payable was £5,675. Mr Palfreyman and he met on two occasions on 17 May 2002 and 24 January 2003. At the meeting in May 2002 they considered the issues and Mr Palfreyman was particularly concerned about factors affecting the value of Orchard Cottage such as ownership of the driveway being in third party hands, the poor design of the garage/playroom extension and the blight of abandoned cars on the adjacent garden. They agreed to recommend to their clients the sum of £12,000 as the appropriate damages figure. On 17 June 2002 the experts had a telephone conversation in which Mr Palfreyman said that he had taken further instructions and that he was concerned that in the earlier negotiations the playroom and its effect on the overall value of Orchard Cottage had been overstated and that the share of the uplift in value to be paid in damages for modification of the covenant should be less than 50%. At the further meeting on 24 January 2003 the experts discussed further the increase in value of Orchard Cottage as a result of construction of the first floor habitable rooms. Mr Palfreyman's view was £30,000 - £40,000 and Mr Ward agreed with the figure of £40,000. They also agreed that the estimate received for the building costs of £16,130 was reasonable. Having deducted the building costs from the increase in value, they agreed to apply a Stokes percentage (see Stokes v Cambridge Corpn (1962) 13 P & CR 77) of 33?%, resulting in a figure for modification of the covenant of £8,000. It was also agreed that due to house price inflation between May 2002 and January 2003 that figure should increase to £9,400. A joint statement was signed by both experts on 30 and 31 January 2003 respectively.
25. Mr Palfreyman stated in a witness statement in the High Court proceedings dated 1 April 2003 that in his opinion there was no injury to or devaluation of either the driveway or the plot by reason of the breach of covenant. Mr Ward said that he received this statement in September 2003 along with a copy of the application to the Lands Tribunal, which had been made in July 2003 and had been accompanied by the statement. It surprised him because he could not recall having had any conversations with Mr Palfreyman after they had issued their joint statement in January 2003.
26. It does not appear to me that the dealings between Mr Ward and Mr Palfreyman have created any estoppel by convention in relation to the present proceedings. Mr Palfreyman's statement of 1 April 2003 made clear that the applicant's contention was that there had been no injury to or devaluation of the benefited land. Mr Ward in his report sought to bring the figure previously agreed with Mr Palfreyman from May 2002 to July 2004 values, taking account of increase in house prices and building costs, and he applied the agreed Stokes percentage of 33?% to reach his compensation figure. I can, however, see nothing in the conduct of the applicant to suggest an acceptance on her part for the purpose of these proceedings that compensation was to be assessed on the basis of the benefit to her of the modification of the covenant, or, if it was, that the figures (or any of them) agreed by Mr Ward and Mr Palfreyman for the purpose of the High Court proceedings should be treated as applying. Nor has there been any prejudice to the applicant. Mr Ward has given evidence, and he has been able to state why he considers his figures are the correct assessment of the compensation payable.

Quantum

27. Mr Ward in his report said that he had taken the building costs and the increased value to Mrs Skupinski's property created by the extension from those agreed with Mr Palfreyman and had updated them. The difference between the before and after value was £61,620, and the building costs were £17,682, giving a net increase of £43,938. To this he had applied a Stokes percentage of 33?%. He had started with 50% but had been persuaded that a lesser percentage was appropriate. The payment due to the objector on this basis was £14,500.
28. In his oral evidence Mr Ward said that he had also considered the amount by which Mrs Hignett's land had been reduced in value by the adverse effects of the playroom part of the extension. As far as the plot was concerned, he considered that it was suitable for development by the construction of a house and that this would be in accordance with the development plan. He placed a value on the land of £200,000 to £250,000 with the benefit of detailed consent and assuming no onerous conditions. With the present prospect of obtaining planning permission, this amount should be discounted by 20% to £160,000 to £200,000. He thought that, because of the extension, a purchaser would reduce the amount he would pay for the plot by something less than 10%. His judgment was that the reduction would be between £10,000 and £15,000.
29. As far as the driveway was concerned, Mr Ward said, the reduction was harder to assess. The only likely purchasers of this land were Mrs Skupinski and the owners of Spring Cottage. The driveway was just over 200 sq m in area, and he valued it at £20,000 to £25,000. The owners of Spring Cottage would pay more for the driveway because they could then control development on the extension land through the restrictive covenant. He considered that they would pay a premium of £5,000 for the driveway in order to prevent the playroom part of the extension, which was clearly visible from the garden land.
30. I am quite unable to accept on the material before me, and in particular in the light of my view, that Mrs Hignett has suffered any loss or disadvantage in her enjoyment of either the driveway or the plot through the construction of the playroom above the garage. While the covenant confers some benefit on the driveway – for instance by enabling the prevention of development that might cause greater usage and thus greater maintenance requirements – it is not itself adversely affected by the playroom part of the extension, and Mr Ward did not suggest that it was so affected. His assessment of the loss in value arose from the detriment that he considered was suffered by the owners of Spring Cottage who, he said, would pay a premium of £5,000 if purchasing the driveway. This, however, is to attribute to the driveway the value of the detriment suffered by Spring Cottage, which does not have the benefit of the restriction. Such detriment cannot, in my judgment, give rise to an entitlement to compensation. In any event it does not appear to me that at the present time the owners of Spring Cottage, whose overgrown rear garden is used as a tip for abandoned cars, would be prepared to pay anything for any small amenity advantage that preventing the playroom part of the extension might constitute.
31. As far as the plot is concerned, I have described above the minimal impact that the playroom part of the extension has had. It does not seem to me to be adverse, and I do not accept that a purchaser of the plot would even contemplate reducing his bid on account of it. My conclusion is that no sum is payable under section 84(1) to reflect any loss or disadvantage to Mrs Hignett in consequence of the modification of the covenant.
32. I was asked by the parties to state what sum I would award if compensation were properly to be addressed by reference to the uplift in value of Mrs Skupinski's land. Mr Davies contended that on this basis, which he termed the restitutionary (as distinct from the compensatory) basis, a substantially lesser percentage of the uplift than 33?% should be taken. He relied on Wrotham Park Estate Ltd v Parkside Homes Ltd and Jaggard v Sawyer. In the former case 5% was taken. In the latter, he said, the damages awarded by the county court judge were one-ninth, or 11%, of the increase in value. So something in the range 5% to 11% was appropriate.
33. Mr Davies's derivation of 11% from Jaggard was based, as he later recognised, on a misreading of the decision. The defendant's house was at the end of a cul-de-sac that served 10 houses. Access to the new house built by the defendant was obtained along the road and across the defendant's garden land. The road was a private road, owned in parts by each of the owners, so that its use as an access to the new house constituted trespass against each of the other 9 owners, and each of them had the benefit of the restrictive covenant that the defendants had breached through the construction and use of the access across the garden. The county court judge (see [1993] 1 EGLR 197 at 203E) considered that the defendants should have been prepared to pay not less than £5,000 to achieve access by acquiring a right of way and having the covenant waived. He took a slightly higher figure than this, £6,250, and then divided it between the other 9 owners, giving £694.44 per owner. He said that the figure that he had taken was between a quarter and a third of the hypothetical profit of £24,000 or £22,000. (In fact the percentages are 26% and 28%).
34. The percentages in the two cases relied on by Mr Davies were thus 5% and between 26% and 28%. He is, however, wrong to describe the two awards of damages as restitutionary. In Jaggard Bingham MR said ([1995] 1 WLR 269 at 281H-282A):

"I cannot, however, accept that Brightman LJ's assessment of damages in the Wrotham Park case was based on other than compensatory principles. The defendants had committed a breach of covenant, the effects of which continued. The judge was not willing to order the defendants to undo the continuing effects of that breach. He had therefore to assess the damages necessary to compensate the plaintiffs for this continuing invasion of their right. He paid attention to the profits earned by the defendants, as it seems to me, not in order to strip the defendants of their unjust gains, but because of the obvious relationship between the profits earned by the defendants and the sum which the defendants would reasonably have been willing to pay to secure release from the covenant."

35. And at 291 D-E Millett LJ said:

"It is plain from his judgment in the Wrotham Park case that Brightman J's approach was compensatory, not restitutionary. He sought to measure the damages by reference to what the plaintiff had lost, not by reference to what the defendant had gained. He did not award the plaintiff the profit which the defendant had made by the breach, but the amount which he judged the plaintiff might have obtained as the price of giving its consent. The amount of the profit which the defendant expected to make was a relevant factor in that assessment. But that was all."

36. I have said that in awarding compensation in the present case I would not regard the uplift in value of Mrs Skupinski's land as of any assistance in determining the loss or disadvantage to Mrs Hignett as the owner of the benefited land. In any event I do not consider that there is any such loss or disadvantage. If, however, contrary to my view, it were to be held that compensation ought to be paid to Mrs Hignett and that the proper measure of such compensation was the amount that the parties, assuming an unlimited and unqualified right on the part of Mrs Hignett to enforce the covenant, would have agreed in a friendly negotiation for release of the covenant, I would see no reason to disagree with Mr Ward's figure of £14,500.
37. The parties are agreed that the restriction should be modified on ground (aa), and I so determine (although I would note that my conclusions would also support modification on ground (c), and their agreement would satisfy ground (b)). The restriction is modified so as to permit the development that has been carried out on the application land pursuant to the planning permission granted on 9 October 2000 by Harborough District Council on application number 00/00849/FUL. I make no direction as to the payment of any sum by way of consideration.
38. The parties are now invited to make representations as to costs, and a letter relating to this accompanies this decision, which will only take effect when the question of costs has been determined.

30 November 2004

George Bartlett QC, President

ADDENDUM ON COSTS

39. I have now received the parties' submissions on costs. On behalf of Mrs Skupinski it is said that she should be awarded her costs as she has succeeded in obtaining modification of the covenant without compensation. Reliance is also placed on offers made by her and demands made by Mrs Hignett from 8 December 2000 onwards and the fact that, following the decision of the master, she levied execution on Mrs Skupinski's goods in the sum awarded as damages, £9,400. On behalf of Mrs Hignett it is pointed out that the application to the Tribunal was for both discharge and modification, and it was not restricted to modification until the Tribunal hearing. It is said further that she was successful in establishing that the plot of land had the benefit of the covenant and as what would be the appropriate calculation of quantum if it fell to be determined by reference to the increase in value of the applicant's land. Reference is also made to an exchange of correspondence on mediation.
40. In the case of applications to the Tribunal under section 84 the normal rule as to costs, that they follow the event, does not apply. The reason for this is that the nature of the application is that it seeks the compulsory removal or restriction of the property rights of the person entitled to the benefit of the covenant. Because of this, while regard will be had to offers to settle, an unsuccessful objector will not normally have to pay the applicant's costs unless he has behaved unreasonably. In the present case the application was made following the view expressed by Lindsay J, in granting leave to appeal against the master's order, that, if all that the claimant, Mrs Hignett, was truly trying to preserve was her bargaining position so as to be able to recover a larger sum as the price of the release of covenant, then that would be a classic case for adjourning the proceedings for an application to be made under section 84. I do not think that, against this background, Mrs Hignett could be said to have been behaving unreasonably in objecting to the application, since that was the procedure that the judge evidently regarded as the appropriate means of resolving the dispute. Moreover the application sought in the alternative the discharge or the modification of the covenant, and it was not until the hearing itself that it was confined to modification alone. The only offer that was made for the purposes of the present proceedings was that made by the applicant shortly before the hearing, and it is accepted by Mr Davies that it did not make clear whether the amount offered, £3,500, was being offered for discharge or modification. Thus Mrs Hignett has been successful in resisting discharge of the covenant whilst she has been wholly unsuccessful in her objective of extracting the largest sum she could for its modification in that I have awarded her nothing by way of compensation. In these circumstances the proper result, in my judgment, is that each party should bear their own costs. Accordingly I make no order as to costs.

17 December 2004

George Bartlett QC, President