3.           On 13 April 1955 the land which was to form plot No.4 was sold.  The retained land of the vendor included No.6 and part of No.10.  In clause 4 of the conveyance the vendor:

“with the interest and so as to bind the adjoining property coloured Yellow and hatched blue on the said plan and to protect the property hereby conveyed hereby covenants with the purchaser that the Vendor and its successors in title and assigns will at all times hereafter observe and perform the covenants and conditions set out in the Second Schedule.”

The land coloured yellow and hatched blue (the burdened land) comprises an area of some 610m² of which approximately 585m² is located in the rear garden of No.10 immediately to the south of the existing house.  The remaining 25m² or so forms part of the rear garden of No.6.  The benefited land is the whole of the land that was sold under the 1955 conveyance.

4.           Two of the houses which the applicant proposes to build would encroach onto the burdened land.  The Second Schedule of the 1955 conveyance contains three restrictive covenants.  Restriction 2, which is the subject of this application, states:

“Not to erect any building or structure on any part of the said land now belonging to the Vendor hatched blue on the said plan.”

Facts

Issues

The case for the applicant: evidence

The case for the applicant: submissions

41.        The issue was again considered by the Court of Appeal in Dobbin v Redpath [2007] 4 All ER 465.  In that case Lawrence Collins LJ distinguished between cases where there is no building scheme and cases where there is a building scheme.  He said at 471 [23]:

“Where there is no building scheme there may be a diminishing relationship as between the weight to be attributed to the source of the complaint and the physical distance of the objector’s land interest.  By contrast where there is a building scheme, so long as the objector has an interest inside the physical compass of the building scheme, the location of the objector outside his or her land interest inside the building scheme does not affect the matter as Waller LJ pointed out [in Gilbert].”

Mr Morshead submitted that it was only in building scheme cases that one could consider practical benefits that were secured to an objector on land outside of his ownership, the reason being that all the land in a building scheme benefited from the restriction under local law.  In non-building scheme cases one could only judge whether a restriction secured substantial practical benefits from the benefited land itself.  Any such benefits to land outside of that which was the subject of the restriction should not be considered.

43.        Mr Morshead gave three further arguments why the objectors’ case was wrong:

(i) in order for the objectors to sustain their argument that they could take into account the whole of their land ownership when considering the practical benefits secured to them by the restriction it would only be necessary for them to own a minuscule part of the benefited land itself.

(ii) the object of the restriction was to protect the land conveyed under the 1955 conveyance.  The restriction could bind in perpetuity because the benefit of it attached to the ownership of land.  That was fundamental to the operation of the 1925 Act; the essence of that Act was that one had to own the land which had the benefit of restrictive covenants in order to enjoy those benefits.  This was perfectly obvious to the draftsmen of the 1925 Act.

(iii) it would be unfair if the vendor under the 1955 conveyance, who covenanted to restrict the development of his retained land in order to protect the land sold, were to find that, in effect, he had covenanted to protect a much larger area, including No.6, which was itself part of the retained land of the vendor under 1955 conveyance.  It was unfair that a benefit attaching to plot No.4 should be exploited by the owner of No.6.

52.        Mr Brown said that in cases where a decision on a proposed residential development was made by an appeal inspector the principal issues were normally:

(i)          The effect of the proposal on the character and appearance of the surrounding area; and

(ii)        The effect of the proposal on the living conditions (amenities) of adjoining residents.

In the light of the relevant planning policies Mr Brown concluded that the revised scheme would not have any materially different impact to the preferred scheme upon the character and appearance of the surrounding area.  But he considered the differences between the two schemes would materially impact upon the amenities of the objectors.

58.        The preferred scheme was said by Mr Wetherall to have a “startling effect on the visual amenity” of plot No.4.  Its design and material were in “stark contrast” to the existing roof of No.10 which was finished in grey coloured concrete tiles with a plain tile ridge.  The existing roof blended in with the colouring of the setting and was hardly noticeable.  Furthermore the existing ridge line of No.10 was 9.2m from the boundary compared with the equivalent distance of the proposed west elevation of Unit 3 which was 3.4m.  The view from plot No.4 would also be affected by the whole of the southern elevation of the proposed Units 1-3.  The visible bulk of the neighbouring buildings would be increased:

“The whole of the spatial area to the east of No.6 is being fitted with three vast lumps of masonry, aluminium and glass.”

At present there were no high level terraces or balconies at No.10 whereas, under the preferred scheme, there would be an open roof terrace behind a glazed screen “just over the hedge within a few metres”.  There was bound to be an increase in noise levels from the use of the terrace.  Mr Wetherall concluded that the preferred scheme would have a serious impact upon the objectors’ amenity.

59.        In a supplementary report Mr Wetherall considered the impact of the preferred and revised schemes upon the chalet-bungalow at No.6 and not just the impact on plot No.4.  He produced photomontages showing the before and after views from the rear ground floor bedroom and the first floor bedroom at No.6.  He said that the view from the ground floor would be “obliterated” by the preferred scheme, rendering the outlook “landlocked”.  The view from the first floor was now filled with buildings creating an outlook that was “harsh and busy”.  Mr Wetherall noted that the revised scheme placed the front elevations of Units 1-3 more or less in line and significantly reduced the length of the west elevation of Unit 3 that adjoined No.6.  He said:

“Viewed from the adjacent land, the visual impact is much reduced as the width of the building is less as, to a certain extent, the units hide behind each other.

But the effect of the revised scheme was more imposing upon the chalet-bungalow at No.6 because Unit 3 was closer to both the dwelling and the boundary. 

The case for the objectors: submissions

70.        In that case it was submitted by the applicant that as the view which would be affected by the proposed development was not enjoyed from the land of the objectors then it could not constitute  a practical benefit within the meaning of section 84(1A).  The covenants in that case ran with the land and the applicant said that practical benefits were restricted to benefits the observance of which directly benefited the land of the covenantee.  Eveleigh LJ said at 32C that the court was concerned to construe the words of a statute and noted that section 84 was not solely concerned with cases which could only arise when the covenant was in its inception capable of benefitting the land of the covenantee.  Section 84 applied to restrictions of any kind and Eveleigh LJ said at 32E to 33A:

“I therefore do not think that it is permissible to construe section 84(1A) only in the context of restrictive covenants which run with the land.  The first task is to construe the section in isolation and then to relate it to the facts of the present case.

The words of section 84(1A)(a), in my opinion, are used quite generally.  The phrase “any practical benefits of substantial value or advantage to them” is wide.  The subsection does not speak of a restriction for the benefit or protection of land, which is a reasonably common phrase, but rather of a restriction which secures any practical benefits.  The expression “any practical benefits” is so wide that I would require very compelling considerations before I felt able to limit it in the manner contended for …

 ….

In my judgment the Tribunal was entitled to hold that the view was a benefit whether or not that benefit could be said to touch and concern the land.  However, I am also of the view that the land of the objectors is, in each case, touched and concerned by the covenant.”

75.        The correct approach to the assessment of such loss was to be found in Winter where Carnwath LJ said at [35] that the award of a share of development value while not an established practice:

“… is a possible approach in circumstances where a simple estimate of the diminution in the value of the objectors’ properties is unlikely to be a fair reflection of their subjective loss.”

The negotiable share approach adopted by Mr Wetherall was therefore permissible on the facts of the case.

84.        Gilbert involved a restriction that was imposed as part of a building scheme.  In the case of a building scheme the restrictions are enforceable by and against all owners of plots within the boundary of the scheme regardless of when they or their predecessors acquired their plots from a common vendor.  It is a system of reciprocal rights and obligations amounting to a local law.  Thus in Gilbert Waller LJ said at 35B:

“As between each of these owners, including the applicant, there were mutual rights and mutual obligations.  These rights and obligations were for the benefit of the whole estate.  Each owner would be aware of the restrictions imposed on the other owners including the restriction imposed on the applicant.  These restrictions would influence and control the development of the whole estate.  Accordingly if the restriction remains in force, the objectors or other owners of land within the building scheme could enforce the restriction.”

And later at 36A:

“If a building estate contains a pleasant approach with restrictions upon it and some building is done contrary to those restrictions which spoils the approach, if then the owner of a plot complains about that breach, the fact that he does not see it until he drives along the road, in my opinion, does not affect the matter.  He is entitled to the estate being administered in accordance with the mutual covenants, or local law; so in this case.”

87.        The reasonable user which is impeded by the restriction is the preferred scheme.  The applicant argues that for the purpose of examining the benefits secured by this impediment it is necessary to compare the preferred scheme not with the existing house at No.10 but with the revised scheme.  This type of argument was considered by the President of the Lands Tribunal in Fairclough Homes in which he said at paragraph 30:

“In such a case as this, the provision [section 84(1A)], it seems to me, operates in this way.  By preventing development that would have an adverse effect on the persons entitled to its benefit the restriction may be said to secure practical benefits to them.  But if other development having adverse effects could be carried out without breaching the covenant, these practical benefits may not be of substantial value or advantage.  Whether they are of substantial value or advantage is likely to depend on the degree of probability of such other development being carried out and how bad, in comparison to the applicant’s scheme, the effects of that development would be.”

In Shephard Carnwath LJ said about the same issue at 624 [37]:

“… in considering the practicality and substantiality of the benefits to the objectors of being able to prevent that use, there must be an element of comparison with what would happen if the modifications are not allowed.  If an equally damaging development could be carried out without breaching the restrictions, and there is evidence that it is likely to happen, then the apparent benefits of impeding the proposed development may be illusory.

…

… in judging the effectiveness of the protection provided by the covenants, one is concerned with practicality, not theory.”

In my opinion this guidance requires an assessment of whether the revised scheme would proceed in the event that the application is refused.  This in turn depends upon the answer to three questions:

(i)         would planning permission be granted for the revised scheme;

(ii)       would the revised scheme be viable; and

(iii) does the applicant intend to proceed with the revised scheme.

I deal with each of these in turn.

Planning Permission

89.        There are therefore advantages (reduced size, reduced length, and no roof terrace at Unit 3) and disadvantages (closer proximity of Unit 3 to the house and boundary at No.6, more habitable rooms in the northern elevation and a generally cramped appearance) of the revised scheme to the objectors in their capacity as neighbouring land owners for planning purposes.  I do not accept that it is “overwhelmingly likely” that planning permission would be granted as submitted by Mr Morshead.  I think that there are real concerns about moving Unit 3 closer to No.6 and to the boundary between the properties.  The reconfiguration of the layout of Unit 3 means that it is in closer proximity to No.6 but any problems of overlooking will be mitigated by the significant differences in level between the properties, the use of obscure glazing on the top floor (assuming that this would be acceptable for a kitchen) and the fact that the properties are offset and do not directly overlook each other.  But the siting of Unit 3 is significantly less satisfactory than under the preferred scheme.  The previous decisions of the inspectors on appeal are a material consideration but I do not accept that the local planning authority would be “perverse” not to follow them as suggested by Mr Morshead.  In this connection Mr Weekes relies upon the decision of the Court of Appeal in North Wiltshire District Council in which Mann LJ said at 145:

“In this case the asserted material consideration is a previous appeal decision.  It was not disputed in argument that a previous appeal decision is capable of being a material consideration.  The proposition is in my judgment indisputable.  One important reason why previous decisions are capable of being material is that like cases should be decided in a like manner so that there is consistency in the appellate process.  Consistency is self-evidently important to both developers and development control authorities.  But it is also important for the purpose of securing public confidence in the operation of the development control system.  I do not suggest and it would be wrong to do so, that like cases must be decided alike.  An inspector must always exercise his own judgment.  He is therefore free upon consideration to disagree with the judgment of another but before doing so he ought to have regard to the importance of consistency and to give his reasons for departure from the previous decision.”

Viability

Intention

97.            Clause 4 of the 1955 conveyance said that the intention of the restrictive covenants contained in the Second Schedule was to “protect the property” conveyed under that conveyance.  The principal purpose of restriction 2 was, in my opinion, to protect the views towards to sea from the land that was sold under the 1955 conveyance.  Mr Cubberley accepts this in terns in his witness statement.  Mr Weekes submitted that the purpose of the restriction was not limited to protecting that specific view but was also intended to protect the visual amenity of plot No.4 generally.  I accept that argument, based on the wording of clause 4 of the 1955 conveyance, but nevertheless place more weight upon the protection of the view to the south east.  Other practical benefits which are secured by the restriction, such as visual amenity, noise and density of development, can be taken into account but they may be accorded less weight.  In Shephard Carnwath LJ said at 625 [41]:

“The purpose of the present restrictions is also apparent on their face: in summary, to preserve the character and environment of the Close, by limiting density, preventing disturbing activity, and restricting building and other clutter in the garden areas in front of the houses.  Notably absent is any restriction designed to protect the continuity of the facades.  “The largely unbroken façade” may be an attractive feature of the Close, but its protection is not part of the contractual scheme of which the restrictions form part.  At most it can only be an incidental and uncovenanted benefit of the achievement of the other contractual objectives.  That does not mean that such a benefit is irrelevant.  It does however mean that it is a factor which the Tribunal is entitled to give less weight in the overall judgment of substantiality.”

100.         Having determined that the restriction secures practical benefits of substantial advantage to the objectors it is not necessary for me to comment in detail upon the evidence about value.  It is sufficient that I summarise my conclusions on the main valuation points which I do below:

(i) I do not consider that the negotiated share approach is appropriate in this instance.  In Winter the Court of Appeal said that it is a possible approach in circumstances where a simple estimate of the diminution in value of the objectors’ property is unlikely to be a fair reflection of their subjective loss.  If a percentage is used in such cases it is likely to be at or around 5%.  Mr Wetherall used 33% based on the Stokes approach.  I do not think that this is a reasonable method to adopt and it is not one which reflects the practical benefits secured by the restriction.

(ii) I reject Mr Bevans’ opinion that the preferred scheme would have no effect on the value of the benefited land.  He considers the question in the context of a hypothetical sale of the benefited land to a third party in the absence of a right of way.  What should be determined, in my opinion, is the amount of value secured by the restriction to the persons who have the benefit of it, namely the objectors, given the factual context in which the benefited land is owned together with No.6.  As was stated in Winter at [35] it is the measure of the subjective loss of the objectors that should be assessed.

(iii) The effect of the preferred scheme on the value of No.6 (the chalet-bungalow) is not relevant since it does not have the benefit of the restriction.  It is only the effect of preferred scheme on the benefited land that should be considered.

(iv) Mr Wetherall’s alternative valuation of the benefited land is on the basis that it is a residential redevelopment site.  Mr Wetherall conceded that he is not a planning expert and his views are speculative and unsupported by expert planning evidence.  Indeed Mr Jobbins produced cogent arguments why planning permission would not be granted for a house at plot No.4. I do not accept that plot No.4 should be valued as a development site. 

(v) There was no agreement between the parties about the value of the benefited land.  Mr Bevans accepted that the value of the objectors’ total land ownership was £1.75m and that the effect of the preferred scheme on that total land ownership would be to reduce it by £0.3m to £1.45m.  Mr Wetherall said that half of this diminished value, or £0.15m, was attributable to the benefited land. 

(vi) In my opinion the sum of the values of plot No.4 and 6 Minterne Road when valued separately would be less than their value as a combined site.  In other words the combination of the sites creates marriage value.  There is only indirect evidence of the value of plot No.4 on its own (other than as a redevelopment site).  This shows a value of £0.5m, being the difference in the figures that Mr Wetherall gave for the value of the combined site (£1.75m as agreed by Mr Bevans) and the value of No.6 on its own (£1.25m but not so agreed).  Adopting this figure in the absence of any other evidence (and which I take to include any marriage value) then if the restriction were modified to allow the construction of the preferred scheme I consider that it would be reduced by 10% or £50,000.  In my opinion this would represent a practical benefit of substantial value secured by the restriction in impeding the preferred scheme.

Decision

Dated 9 February 2012

A J Trott FRICS

Addendum on Costs

102.  I have now received submissions on costs from both parties. 

103.  The objectors argue that they have been successful in opposing the application and deny that they have acted unreasonably.  They accept that the original valuation prepared by the objectors personally, before obtaining expert valuation evidence, was high but argue that the evidence of both parties on the point was effectively overruled by the Tribunal’s decision.  The objectors submit that the applicant was unreasonable in producing the revised scheme late in the proceedings.  They say that there were no offers of settlement that were relevant.  The objectors ask for their costs on the standard basis and seek a payment on account of £55,000 (out of an estimated total of £85,000) within 21 days of the date of the decision.

104.  The applicant submits in the alternative that the objectors have acted unreasonably; or even if they have not so acted that in the circumstances of the case they should not receive their costs in full; or in respect of 6 Minterne Road the provisions of Practice Direction 12.5 should not apply.

105.  The applicant says that the objectors were unreasonable in three respects:

(i) They were late in raising the argument that 6 Minterne Road had the benefit of the restriction.  The objectors failed on this issue.

(ii) They exaggerated their claim in their notice of objection.  Their expert, Mr Wetherall, supported this exaggerated claim in his evidence.

(iii) On 18 March 2011 the applicant made an offer (lodged with the Tribunal as a sealed offer) to redesign Units 2 and 3 to reduce the height of the flank wall to below the height of the boundary hedge.

106.  Even if the objectors did not act unreasonably this is not a case where the usual presumption in paragraph 12.5 of the Tribunal’s Practice Directions should apply given the above matters and the findings of fact and law which the Tribunal made.

107.  The attempt by the objectors to annex the benefit of the restriction to 6 Minterne Road was not particularised in full until the filing of their counsel’s skeleton argument.  The issue should have been dealt with as a preliminary issue in which case the provisions of Practice Direction 12.5 would not have applied; per Carnwath LJ in Winter at paragraphs 20-22.

108.  The applicant submits that the Tribunal should exercise its discretion and disallow the element of the objectors’ costs in respect of those issues where they were unsuccessful.  It argues that the appropriate order should be that the applicant should pay a proportion of the objectors’ costs and that the appropriate proportion should be 65% assessed on the standard basis.

109.  The applicant opposes any payment of costs on account to the objectors because there is nothing to corroborate the objectors’ assertion that they are living off income from (unspecified) capital and their costs are said to be estimates.  Alternatively any payment on account should be limited to the sum of £25,000.

110.  Three sealed offers were made by the applicant.  The first, referred to in paragraph 105(3) above, was made on 18 March 2011.  Apart from providing details of a compromise scheme design that letter also offered a payment of £25,000 to the objectors “in full and final settlement of their claims and to withdraw their notice of objection on the basis that each party pays their own legal costs”.  The second offer was made on 17 October 2011 and was in the sum of £30,000 together with payment of the objectors’ legal costs.  The offer was time limited until 25 October 2011.  The third offer was made on 8 November 2011 and was in the sum of £60,000 together with payment of legal costs.  The offer was time limited until 10 November 2011.

111.  In my opinion the failure of the objectors to accept any of these sealed offers is not relevant to the issues in the case.  They were opposed to the application in principle and produced cogent arguments why the revised scheme was not acceptable.

112.  While the objectors succeeded in their objection, there are two aspects of the case where they were unsuccessful.  Firstly, in their argument that the benefits of the restriction should be considered by reference to their total land ownership, including 6 Minterne Road, and, secondly, in Mr Wetherall’s valuation evidence which he based upon the negotiated share approach.

113.  The objectors argue that the issue about whether No.6 had the benefit of the restriction was a matter of legal submission only and added little to the costs of the hearing.  But those submissions took up a significant part of the hearing and required the preparation of a supplementary report by Mr Wetherall involving new evidence and the preparation of photo montages.

114.  Mr Wetherall persisted in pursuing a negotiated share approach despite his professed acquaintance with the Court of Appeal’s decision in Winter.  I found that this was not a reasonable approach under the circumstances (see paragraph 100(i) above).  Mr Wetherall’s initial valuation had included the unexplained use of a multiplier of three (based solely it seems upon “valuer’s intuition”) which he, correctly in my opinion, abandoned in his supplementary report.  I did not generally find Mr Wetherall’s evidence to be helpful and his persistent use of the negotiated share approach to give what he described as “an equitable amount” did not, in my opinion, reflect an objective approach to the required valuations.  His alternative approach was based upon the assumption, found to be erroneous and, by Mr Wetherall’s own admission, not based upon any planning expertise, that No.4 could be developed by a house. Again I do not think that this demonstrates the necessary objectivity of approach.

115.  I am invited by the applicant to award only a proportion of the objectors’ costs.  In view of the fact that the objectors were not successful on the issues outlined above and given their expert’s unreasonable persistence with the negotiated share approach I agree with that proposal in principle.  However I do not accept that the objectors should only receive 65% of their costs.  In my opinion the objectors should receive 85% of their costs, such costs to be assessed by the Registrar on the standard basis unless agreed.

116.  The objectors have asked for a payment on account.  They are both retired persons but their financial circumstances are not known and their actual (as opposed to estimated) costs have yet to be finalised and substantiated. I do not consider it appropriate to order a payment on account before the costs are agreed or assessed.  In any event there is doubt whether this Tribunal, under its own rules, has the power to order a payment on account in the circumstances of this case.  The application of the Civil Procedure Rules (under which payments on account can be ordered) under rule 10(5)(c) of the Lands Chamber Rules only applies, in my opinion, where an application is made to the Senior Courts Costs Office for the detailed assessment of costs. 

Dated 29 February 2012

A J Trott FRICS