UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2012] UKUT 112 (LC)

UTLC Case Number: LP/3/2011

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

RESTRICTIVE COVENANT – discharge – modification – covenants restricting residential redevelopment of dwellings and outbuildings forming part of grounds of listed house – benefit personal to covenantee and his family – sale of majority of benefited land to third party – whether covenants obsolete in respect of retained land under ground (a) – grounds (aa) and (c) – application granted – compensation of £40,000 awarded under section 84(1)(ii) of Law of Property Act 1925 

 

 

IN THE MATTER OF AN APPLICATION UNDER SECTION 84

OF THE LAW OF PROPERTY ACT 1925

 

by

 

JOHN COOMBES AND ELIZABETH COOMBES

 

 

Re: Brainshaugh House,

Acklington,

Morpeth,

Northumberland,

NE65 9AE

 

 

Before: A J Trott FRICS

 

Sitting at:

North Shields County Court, Earl Grey Way, Royal Quays, North Shields, Tyne & Wear, NE29 6AR

on

  20 March 2012 Sitting at:

 

Christopher Knowles, instructed by Hardington Hogg, solicitors of Alnwick, for the applicants

Martin Gillibrand, solicitor of Oglethorpe, Sturton & Gillibrand LLP, for the objector.

© CROWN COPYRIGHT 2012

The following cases are referred to in this decision:

Stockport MBC v Alwiyah Developments [1983] 52 P&CR 378

Re Mansfield District Council’s Application [1976] 33 P&CR 141

Re Skupinski’s Application [2005] RVR 269

Winter v Traditional & Contemporary Contracts Limited [2008] 1 EGLR 80.

 

DECISION

Introduction

1. The applicants, Mr John Coombes and Mrs Elizabeth Coombes, purchased the application land, Brainshaugh House, Acklington, Morpeth, Northumberland NE65 9AE, from the objector, Sir Anthony Milburn, in May 2002 for £735,000.  At that time Sir Anthony owned the whole of the Guyzance Estate of which the application land formed part. 

2. The transfer of the application land, dated 17 May 2002, contained restrictive covenants.  Clause 5 of the transfer stated:

“the Transferee covenants with the Transferor for the benefit of the Guyzance Estate only while the same is retained by the Transferor and/or his wife and/or linear descendants and/or any person holding on trust for him or them (but not further or otherwise) and to bind the Property and each and every part thereof into whosoever hands the same may come that the Transferee and the Transferee’s successors in title to the Property will observe and perform the covenants set out in Schedule 3 at all times after the date of this transfer.

3. Schedule 3 to the transfer contained the following covenants:

(1) Not without the prior written consent of the Transferor or his successors as referred to in clause 5 of this Transfer to use or permit any building upon the Property to be used other than for residential use and in particular (but without prejudice to the generality of the foregoing) not to use or permit any building to be used for the purpose of any trade or business provided that (for the avoidance of doubt) this clause shall not prohibit the letting of North End Cottage, and Nos. 2 and 3 Brainshaugh Cottages only as holiday cottages and should the steadings referred to in paragraph 4 below be converted into cottages as permitted by the terms of paragraph 4 then this clause shall not prohibit the letting of one such cottages as a holiday cottage. 

(2) Not to construct or convert any building or permit to be constructed or converted any building on any land outside the areas shown hatched red on Plan 3 for use as a dwelling-house nor to permit any building on such land converted to be used as a dwelling-house.

(3) Not to use or permit to be used the whole of any part of the Property for residential purposes of any description except:

(a)  Brainshaugh House as a single dwelling; and

(b)   Any houses formed from the converted steadings shown hatched blue on Plan 3 as up to three dwellinghouses; and

(c)  North End Cottage as a single dwellinghouse; and

(d)  The Nos.2 and 3 Brainshaugh Cottages in their existing form as two dwellings but if they shall be converted to one dwelling then as a single dwelling.

(4) Not without the prior written consent of the Transferor or his successors referred to in clause 5 of this Transfer to alter the construction or appearance of any external elevation of any building upon the Property which consent shall not be unreasonably withheld.  It shall be unreasonable to withhold consent to a conversion to a maximum of three dwellings and garages in the form of a three sided courtyard development in the steadings cross-hatched blue on Plan 3 and/or to the replacement of the North End Cottage by a similar size single storey replacement and garage and/or to the replacement of Nos.2 and 3 Brainshaugh Cottages either by a single storey dwellinghouse or by a two storey dwellinghouse and garage of similar floor area to the existing building designed and built in keeping with the existing materials of the buildings adjoining provided that all such alterations are constructed of coursed stone under slate or pantile roofs to match the existing buildings in colour and texture with roof lines to match the scale and height of the existing buildings.

(5) Nor without the prior written consent of the Transferor or his successors referred to in clause 5 of this Transfer to extend or permit any extension of any garden into any part of the field marked 3600 on Plan 1 nor to allow or permit any change of use of any such land from agricultural to horticultural use but to use the same only as a permanent pasture.

(6) Not to shoot or permit shooting of any description (including clay pigeons shooting) over any part of the Property provided that such restriction shall not restrict the Transferee from controlling ground game or vermin.

(7) To retain Brainshaugh House and the garden thereto and the steadings shown hatched blue on Plan 3 and the field marked 3600 on Plan 1 and the fishing rights described in Schedule 1 of this Transfer in one ownership at all times and not to sell or otherwise dispose or seek to dispose of any part of the same separately from the whole without the prior consent of the Transferor or his successors referred to in clause 5 of this Transfer.

(8) Not to sell dispose let or otherwise permit to be used the fishing rights or any part of the same referred to in Schedule 1 of this Transfer by any fishing syndicate or fishing club.”

4. The objector sold the majority of the Guyzance Estate to an unrelated third party in 2008.  He retained two parcels of woodland; one to the west of Brainshaugh, and the other (a small copse) to the south.  He also retained the site of the remains of a grade II listed Premonstratensian nunnery chapel (the “chapel haugh”), part of which contains the Milburn family burial ground.  The chapel haugh lies 536m to the east of the main house at Brainshaugh.

5. The applicants have obtained several planning permissions for the redevelopment of the buildings at Brainshaugh but are prevented from implementing them by the restrictive covenants.  The applicants have applied to the Tribunal for the discharge, or, alternatively, the modification, of all of the covenants contained in Schedule 3 of the 2002 Transfer.  They rely upon grounds (a), (aa) and (c) of Section 84(1) of the Law of Property Act 1925.

6. The objector says that the proposed development will affect his retained land and will injure him by stopping him from controlling the appearance of the application land and preventing the over intensive development of the site.  Sir Anthony argues that the continued existence of the covenants will not impede a reasonable user of the application land.  He says that the covenants were taken for the benefit of the Guyzance Estate and each part of it.

7. Mr Christopher Knowles of counsel appeared for the applicants and called Mr John Coombes as a witness of fact and Mr Simon Brierley BSc, FRICS, a consultant with George F White LLP, as an expert valuation witness.

8. Mr Martin Gillibrand, a solicitor with Oglethorpe, Sturton & Gillibrand LLP, appeared for the objector and called Mr Michael William Orde Dip. Est. Man., FRICS, a partner in the firm of Smith Gore, as an expert valuation witness.

9. Closing submissions were made in writing following the hearing the last of which was received on 10 April 2012.

10. I made an accompanied site inspection of the application land and of the chapel haugh on 21 March 2012.

Facts

11. Brainshaugh is located in a rural area approximately two miles to the west of Acklington and one mile south of Guyzance.  The nearest large towns are Alnwick to the north and Morpeth to the south.  Newcastle-upon-Tyne is approximately 25 miles to the south.  The application land lies to the north of the confluence of Hazon Burn with the River Coquet.  It is bounded by roads on three sides, to the west, south and east, with a northern boundary fence separating the pasture belonging to Brainshaugh, and which forms part of the application land, from a neighbouring field.  The said pasture comprises an area of traditional ridge and furrow parkland extending to some 24 acres (9.7 Ha).  The application land measures about 25.8 acres (10.47 Ha) in total.   

12. The buildings at the application land are located upon the elevated ground to the west of the pasture.  The main building is a listed grade II* country house dating back to the 16^th century, with a number of extensions having been added in the 17^th and 18^th centuries.  It is a part single, part two and three storey house constructed from natural sandstone with timber span slated main roofs.  The single storey extensions have clay pantile covered roofs.  There is a walled kitchen garden to the south of the house together with formal lawns. 

13. There is an extensive range of outbuildings and farm steadings.  To the north of the main house are former stables, a workshop, a barn and byre and a cart shed.  The former stables and cart shed have been restored and re-roofed by the applicants to improve their structural integrity and to prevent further deterioration.

14. To the north of the steadings is a pair of semi-detached 1950s two-storey cottages known as 2 and 3 Brainshaugh Cottages.  These are presently let out.  To the far north is 1 Brainshaugh Cottages (also known as North End Cottage) which is a single storey unmodernised building that was previously used as two dwellings.  The applicants have undertaken some restoration work, particularly to the south elevation, in order to maintain the structural integrity of the building.

15. Brainshaugh was sold as a country house requiring restoration and the sales particulars refer to draft plans being available for inspection for the conversion of the workshop to a two room residential unit and also for the conversion of 1 Brainshaugh Cottages into a single residential unit.  Apart from the adjoining pasture the applicants also purchased the fishing rights to approximately one mile of the River Coquet, a short distance to the south of the main house.

16. After the applicants purchased Brainshaugh they renovated and repaired the main house.  They did this while living in 3 Brainshaugh Cottages.  Now that this work is completed the applicants wish to redevelop the outbuildings and steadings in accordance with the following planning permissions:

(1) Reference A/2005/0108, granted 27 April 2005: conversion of redundant farm buildings into three holiday units (the steadings, including the cart shed, barn and byre but excluding the former stables to the north of the main house).

(2) Reference A/2006/0515, granted 1 December 2006: change of use of agricultural land to domestic garden.  This permission enabled the gardens at the rear of 1, 2 and 3 Brainshaugh Cottages to be extended to the east.

(3) Reference A/2007/0451, granted 5 October 2007: alterations and extension to cottage and erection of a detached double garage (1 Brainshaugh Cottages).

(4) Reference A/2010/0040, granted 30 March 2010: conversion of former stable/feed storage space for use as a garage (the western end of the stable block facing the main house).

17. The chapel haugh lies over half a kilometre to the east of the buildings at Brainshaugh, on the opposite side of the road that leads to Guyzance Hall (and which marks the eastern boundary of the application land).  It is situated towards the east of a 17acre (6.8 Ha) triangular pasture that is bounded by the road and on the other two sides by the River Coquet.  The site comprises the ruins of a priory chapel and an adjoining walled burial ground where members of the objector’s family are buried.  The last interment appears to have been in 1999.  The buildings at Brainshaugh are visible on the elevated ground to the west.

The case for the applicants

18. Mr Coombes said that initial contact with the vendor (the objector) took place in September 2001 when the applicants were resident in Qatar.  The applicants explained to Sir Anthony that they proposed to renovate the main house and undertake modest development works on the farm steadings and North End Cottage.  Mr Coombes said that Sir Anthony seemed to be a kindred spirit and apparently shared the applicants’ opinion about the value of the buildings and their surroundings.  Indeed Sir Anthony had considered similar development proposals, as shown by the draft plans that had been made available for inspection. 

19. The particulars of sale for Brainshaugh referred to a number of restrictive covenants being included in the sale contract.  These had been discussed with the vendor’s agent, Mr Richard Shield of Messrs Smith Gore, and he advised that the purpose of the covenants was merely to ensure that the essential character of the property would be maintained.  The applicants travelled to Brainshaugh to view the property but were outraged to receive draft restrictive covenants that went far beyond their previously stated purpose.  In a letter to Mr Shield dated 19 October 2001 the applicants said:

“… we strongly feel that the covenants, as they stand, would place unacceptable constraints, uncertainty and exposure to additional expense upon future owners who may wish to undertake reasonable renovations or alterations to the buildings on site.  They, in effect, would render this and future sales as no longer the sale of a freehold.”

20. At a meeting with the applicants in October 2001 Sir Anthony had been congenial; he was keen to sell and apparently was ready to reach agreement.  Mr Coombes said that Sir Anthony had expressed his acceptance of the applicants’ plans and proposals.  Reassured by this the applicants wrote again to Mr Shield on 29 October 2001 and offered £715,000 for the freehold interest in Brainshaugh (the guide price for which was £985,000).

21. Negotiations proceeded throughout the autumn of 2001 and were described by Mr Coombes as being “fraught”.  The terms of the deal kept changing with additional land parcels being offered and it was difficult for the applicants, living in Qatar, to understand what was going on.  The applicants commissioned a valuation of the application land from Mr D Carmichael FRICS.  His report, dated 24 November 2001, gave his opinion of the open market value as £735,000 to £785,000.  Mr Coombes said Mr Carmichael had not been aware of the detail of the restrictive covenants when producing his report; he had only seen the sales particulars.  On 25 November 2001 the applicants increased their offer to £735,000 subject to survey, vacant possession and agreement on the revised wording of the covenants.  Negotiations proceeded slowly and at one point (at or around Christmas 2001) they broke down altogether. 

22. A further meeting was held in January 2002 at which agreement was finally reached about the wording of the covenants and other outstanding matters.  Contracts were exchanged on 17 April 2002 with completion on 17 May 2002.  The sale took place after the applicants had received a further valuation report and building survey.  This was prepared by Mr Richard Sayer FRICS of Rook Matthews Sayer and was dated 15 March 2002.  The report did not refer to the restrictive covenants.  Mr Sayer valued Brainshaugh at between £750,000 and £800,000.

23. Mr Coombes said that he had not reduced his offer price when he discovered the extent of the proposed covenants but instead had concentrated upon negotiating the most favourable covenants that he could.  The current application had been made reluctantly and was only made in support of development proposals that were similar to those being considered by Sir Anthony at the time he sold Brainshaugh in 2002.  The applicants had amended their designs to meet Sir Anthony’s criticisms and the plans were unobtrusive and sympathetic to the setting of Brainshaugh.  The applicants considered Sir Anthony’s objections to be neither legitimate nor reasonable.

24. At or about the time Sir Anthony sold the bulk of the Guyzance Estate the applicants were approached by Mr Orde on Sir Anthony’s behalf with a view to discussing the possible sale to the applicants of some of the woodland and also the possibility of buying out the covenants.  The applicants engaged Mr Brierley to advise them.  The objector started by asking for £70,000 just to remove the covenants.  The applicants made a counter offer of £45,000 to include the purchase of the woodland as well as the removal of the covenants.  They then increased this offer to £60,000 just for the removal of the covenants.  That offer was refused by the objector but the offer was repeated to him several months later.  This time the objector increased his asking price to £90,000 solely for the removal of the covenants plus an indemnity against Capital Gains Tax.

25. Mr Brierley was instructed to assess the compensation payable under section 84(1) of the 1925 Act for the release or modification of the covenants.  He understood such compensation to be the:

“Consideration to reflect the loss or qualify the disadvantage suffered by the Transferor on the retained dominant land and any loss of asset value by the removal of negative covenants…”

26. Mr Brierley reviewed each of the covenants and concluded that their removal would cause no loss of value or amenity to either the objector’s retained woodland to the west or his beech copse to the south.  He further considered that given the distance between Brainshaugh and the chapel haugh and the fact that there were already a large number of east facing windows in the existing buildings there was no quantifiable loss of amenity value, disadvantage or loss of asset value in respect of the chapel haugh.  No compensation was therefore payable.

27. Shortly before the hearing on 14 March 2012 Mr Brierley produced a further report in the form of a letter to his instructing solicitors.  The report apparently followed a conference with counsel on 2 March 2012 and Mr Brierley said that he had been asked to provide an opinion of compensation for the removal of the covenants:

“on the hypothetical assumption that the covenants were still enforceable and Sir Anthony still owned the Guyzance Estate.”

His opinions had been:

“arrived at following various Lands Tribunal decisions particularly Re Skupinski’s Application [2003].

It is understood that it has been established that compensation or consideration for the modification or removal of a covenant can be fairly represented as being equivalent to one third of the uplift in value of the land as a consequence of the release of the covenant.”

28. Mr Brierley then applied this reasoning to each of the eight covenants.  He concluded that the removal of covenants 2, 5 and 7 would release value totalling £116,000.  The appropriate compensation was one third of this figure or £38,666.  In the acquiring authority’s closing submissions (which were signed by the instructing solicitors, Hardington Hogg, and not by Mr Knowles) it is asserted that Mr Brierley’s report dated 14 March 2012 was an assessment of value on the basis set out in section 84(1)(ii) of the 1925 Act.

29. The applicants argued that each of the three pleaded grounds of the application had been made out.  Under ground (a) the sale by the objector of the great majority of the Guyzance Estate in 2008 amounted to a material change in circumstances rendering the covenants obsolete.  The objector had not provided any evidence to show how the covenants provided real protection to him.

30. The proposed development was a reasonable user of the application land which was impeded by the covenants.  Mr Orde had conceded that those covenants did not confer to the objector any practical benefit of substantial value or advantage.  A mere loss of a bargaining position was not to be regarded as a practical benefit (see Stockport MBC v Alwiyah Developments [1983] 52 P&CR 278).  The proposals had received planning permission and were similar to the objector’s own draft plans when he sold the application land.  His objection was unreasonable, bizarre and motivated by money.  Mr Coombes had given unchallenged evidence that the plans and proposals that formed the basis of the present application had been agreed and approved by the objector before the sale in 2002.  There had been lengthy meetings where the plans were disclosed and detailed and these had been accepted as correct and reasonable by the objector at the time the transfer was being completed.  The objector had attempted to argue in closing submissions that he had not agreed the applicants’ proposals prior to the completion of the transfer.  But Mr Coombes’ evidence had not been challenged at the hearing and it was unacceptable to suggest subsequently that such evidence was unreliable.  Sir Anthony was fully able to give evidence but chose not to and Mr Orde was not present at the meetings between the applicants and the objector.  Ground (aa) was therefore satisfied.

31. The proposals caused no injury to the objector in the circumstances where he had sold a great majority of the Guyzance Estate and therefore ground (c) was satisfied.

32. Mr Orde’s valuation under section 84(1)(ii) was £147,000 which conflicted with the figure of £70,000 (revised to £90,000) that Sir Anthony had asked the applicants to pay in 2008 for the release of all of the covenants.  Mr Orde had not explained why he had taken 20% of the purchase price as being the appropriate compensation.  He had not produced a valuation under section 84(1)(i) because he had not been instructed to do so.

33. The applicants submitted that, on his own evidence, Mr Orde had conceded all three grounds of the applicants’ case.  The application had been made out in law and on the evidence and should be allowed.  Any consideration to be paid should be based upon section 84(1)(i) and therefore, on Mr Brierley’s evidence, it should be nominal.  If section 84(1)(ii) were the correct approach then it should be less than the £70,000 derived from the objector’s own case.

The case for the objector

34. The objector relied upon his grounds of objection and did not give oral evidence.  In his objection Sir Anthony said that the character of the property and the neighbourhood had not changed since the covenants were agreed in 2002.  Although he had disposed of the majority of the Guyzance Estate he had retained some of the land, including the chapel haugh, which would be affected by the proposed development.  He said that the covenants did not impede a reasonable user of the burdened land and that the applicants had purchased it in full knowledge of the restrictions.  The discharge or modification of the covenants would injure the objector by preventing him from controlling the appearance of the burdened land and stopping over-intensive development.  The covenants had been imposed for the benefit of the objector’s retained land (the Guyzance Estate) and each part of it.

35. Mr Orde was instructed to provide an expert report on:

“The increase in the market value of Brainshaugh as at 17 May 2002 had it been marketed without the restrictive covenants.”

The instructions were, in effect, to provide a valuation under section 84(1)(ii) of the 1925 Act.  Mr Orde said that he was not instructed to undertake a valuation under section 84(1)(i).

36. Mr Orde, who was personally involved with the sale of the application land in 2002, concluded that had Brainshaugh been marketed without reference to the vendor’s proposal to impose the restrictive covenants then there would have been more interest in the property.  A sale would have been very much easier to achieve had the covenants not been proposed.  Mr Orde said that the market value of the property at the time of sale in 2002 would have been about 20% higher (£147,000) if the restrictive covenants had not been imposed.

37. Mr Orde explained that his figure of 20% had been derived from a consideration of the effect on value of each of the covenants.  He had then summated these individual adjustments to give a total of 20%.  He did not give evidence as to the breakdown of this figure in his expert report or at the hearing.

38. Mr Orde considered that by impeding the proposed development the covenants, taken together, secured practical benefits of substantial value or advantage to the objector.  Those benefits included the control of development of a sensitive site and the maintenance of the peaceful and tranquil setting of the chapel haugh which had been retained by the objector.

39. Mr Gillibrand submitted that under clause 5 of the transfer the covenants were for the benefit of the Guyzance Estate only while the same was retained by the transferor and/or his wife and/or linear descendants etc.  He argued that for the applicants to sustain their view that reference to the Guyzance Estate in this context was a reference to the estate as a whole it would be necessary to insert the words “the whole of” between the words “only while” and “the same” in clause 5.

40. Mr Coombes had explained that he did not want the benefit of the covenants to pass to a third party in the event that Sir Anthony sold some or all of the Guyzance Estate.  He did not suggest, nor did the wording of the transfer provide, that if any part (however large) of the Guyzance Estate was sold then the covenants should cease to have effect and be unenforceable by Sir Anthony who was the original covenantee.

41. The wording of the covenants was the subject of protracted and difficult negotiations and Mr Gillibrand argued that Mr Coombes’ evidence that the applicants had only agreed to the covenants because the objector had given general approval to their proposals was inconsistent with the terms actually agreed.  The covenants were of three types.  Firstly, there was the covenant which required the transferor’s approval, such approval not to be unreasonably withheld (No.4); secondly, there were covenants requiring the transferor’s consent but with no provision that such consent should not be unreasonably withheld (Nos. 1 and 5); and, lastly, there were covenants containing an absolute prohibition (Nos. 2, 3, 6, 7 and 8).  Covenant 4 was consistent with Mr Coombes’ evidence of an agreement with the objector as to the applicants’ general intention to renovate the property but the remainder of the covenants were quite inconsistent with such evidence.

42. The objector could not have agreed the applicants’ plans before the transfer was completed because at that time those plans had not been prepared.  The objector did not object to the general and very limited intentions for renovation of Brainshaugh but he did object to the detailed plans for extending cottage No.1 into the adjoining field and for the installation of a new dwelling with a large window overlooking the chapel haugh.  It was inconceivable that had the applicants’ plans been approved by the objector he would then have entered into absolute covenants which would prevent the implementation of those plans.  The applicants had agreed the terms of the covenants knowing the nature and extent of their restrictions.

43. Although the objector maintained that he would suffer real loss or damage if the covenants were discharged or modified as proposed by the applicants, Mr Gillibrand submitted that this was a case where compensation should be awarded under section 84(1)(ii).  The applicants and the objector having agreed the price of the property, it was submitted that the objector should be compensated for the effect of the restrictions in reducing the original consideration paid.  Mr Orde was the only witness to give evidence as to the value of the restrictions on this basis.  He was an experienced valuer who was well acquainted with the application property and the Guyzance Estate.

44. Mr Orde’s recollection of the discussion between the parties about the various prices asked by the objector for the release of the covenants contrasted with that of Mr Coombes (assisted by Mrs Coombes).  Mr Orde’s evidence was that those various prices reflected different alternatives about the extent of the property that was to be included in any sale and the extent to which the covenants were to be released.  In any event no agreement on price was reached.

45. Mr Orde had only considered a valuation under section 84(1)(ii) because that was the appropriate measure of compensation where the covenants had been agreed recently and were manifestly agreed in the context of negotiations for which the covenants were of great importance to both sides.  Mr Brierley’s letter of 14 March 2002 did not, contrary to the applicants’ submissions, provide any evidence as to alternative (ii).  The discussions that took place in 2008 about the value of additional property and/or the discharge of the covenants was not relevant to the value of the covenants and the reduction in the purchase price in 2002.

Conclusions

46. In his skeleton argument Mr Knowles invited the Tribunal to find that the covenants became spent when Sir Anthony sold the Guyzance Estate to a third party in 2008.  At the start of the hearing I explained that it is not within the Tribunal’s jurisdiction to make a declaration regarding the construction of the 2002 transfer.  Such a declaration can only be made by the court under an application made in accordance with section 84(2) of the 1925 Act.  The applicants made no such application but applied to this Tribunal for the discharge or modification of the covenants.  In order to succeed in their application the applicants must satisfy me that they have established at least one of the grounds upon which they rely; in this case grounds (a), (aa) and (c).

Ground (a)

47. A covenant is obsolete under ground (a) where it is no longer possible for it to serve its original purpose by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Tribunal may deem to be material.  The original purpose of the covenants in this case was set out in clause 5 of the transfer:

“The Transferee covenants with the Transferor for the benefit of the Guyzance Estate only while the same is retained by the Transferor and/or his wife and/or linear descendants and/or any person holding on Trust for him or them (but not further or otherwise).”

48. The Guyzance Estate is the land shown edged in blue on Plan 2 of the transfer.  It covers a very large area (although no measurement was given in the evidence) and includes the land that was retained by the objector.  The retained land forms a small fraction of the whole estate and contains no dwellings or other buildings apart from the priory remains at the chapel haugh.

49. It is not suggested by the applicants that there has been a change in the character of the property, i.e. the application land, or in the character of the neighbourhood.  They rely upon changes in other circumstances of the case which they consider to be material; namely the sale by the objector of the great majority of the Guyzance Estate to a third party and which therefore now falls outside of the benefit of the covenants.

50. In Re Mansfield District Council’s Application [1976] 33 P&CR 141, the President, Douglas Frank QC, said at [144]:

“Moreover, I think ‘other circumstances’ refers to physical circumstances and not a change in legal status”.

Scamell on Land Covenants says of this decision at page 395:

“… It is submitted with respect that there is nothing in paragraph (a) which would exclude non-physical circumstances from qualifying as material.”

In my opinion a disposal of the great majority of the Guyzance Estate to a third party who cannot take the benefit of the covenants is a material change of circumstances for the purposes of ground (a).  That change requires a consideration of whether the original purpose of the covenants, which was to benefit the Guyzance Estate, can still be served in its application to the very small part of the Estate that was retained by the objector.

51. This conclusion makes the implicit assumption that the benefit of the covenants is annexed to the whole of the Guyzance Estate rather than to the Guyzance Estate as a whole.  If the applicants can show that ground (a) is satisfied on this assumption then a court declaration under section 84(2) becomes otiose.

52. The objector did not give evidence but relied upon his grounds of objection.  Ground (c) of that objection (which was made after the objector had sold the majority of the Guyzance Estate) explains his view of the purpose of the covenants: see paragraph 34 above.

53. In his closing submissions Mr Gillibrand says that the covenants:

“Were imposed by the Objector (and accepted by the Applicants) to preserve the amenity of the Guyzance Estate, which included the family burial ground and chapel, which in the view of the Objector and Mr Orde could be adversely affected, for example, by the loss of the Objector’s ability to maintain the exclusive, tranquil and historic setting of an attractive private burial ground.”

54. The sole focus of the objection as expressed in the closing submissions is the protection of the amenity of the chapel haugh (no mention is made of the retained woodland).  The nature and context of that amenity must be taken into account.  Nobody lives at the chapel haugh; it is a ruined priory and burial ground.  Mr Coombes said that he had never seen the objector visit the burial ground in the ten years that he has owned the application land.  That evidence was not challenged by the objector.  The burial ground is set back 200m from the closest point of the application land and 536m from the existing buildings at Brainshaugh.  There is no public access to the priory ruins.

55. The covenants were imposed to protect the amenity and enjoyment of the Guyzance Estate; it does not follow that they will necessarily continue to fulfil that purpose only in respect of those parts of the estate which have been retained.  Restrictions 1 to 4 and 7 are concerned with the use and ownership of the application land and, in particular, the use of the existing buildings and their potential for redevelopment.  In my opinion none of these restrictions protects the amenity of the retained land.  Restrictions 6 and 8 are concerned with sporting rights and were imposed in the context of the objector’s then ownership of the whole of the Guyzance Estate.  From the correspondence in the evidence it appears that these covenants were imposed to enable the objector to protect the retained fishing and shooting rights of the Guyzance Estate at the time the application land was sold.  That purpose is no longer relevant, or capable of fulfilment, following the sale of the great majority of the Guyzance Estate to a third party in 2008.  I have considered whether an ancillary purpose of restriction 6 (which bans shooting for sport on the application land) was to protect the peace and quiet of the chapel haugh.  I do not believe that it fulfilled such a purpose and, in any event, visits to the chapel haugh by the objector, and to the burial ground in particular, are transient (and rare) events and are unlikely to conflict with any shooting over the application land.  In my opinion restrictions 1 to 4 and 6 to 8 no longer serve their original purpose when applied to the retained parts of the Guyzance Estate.  The amenity of the retained land, as described above, is minimal and, in my opinion, is adequately protected by restriction 5 which controls the eastward extent of any development.

56. I therefore conclude that ground (a) has been satisfied in respect of restrictions 1 to 4 and 6 to 8.  These restrictions are obsolete and should be discharged.  Restriction 5 is not obsolete.

Grounds (aa) and (c)

57. Given my conclusions in respect of ground (a) it is not necessary for me to comment in detail upon the other two grounds of the application.  But it is necessary to consider restriction 5 under ground (aa) and also to review the objector’s motivation and behaviour in making and pursuing his objection. 

58. At the start of the hearing Mr Gillibrand said, in answer to a question from the Tribunal, that the principal ground of objection was one of compensation.  I saw nothing in the evidence to suggest that the objector has any genuine or sustainable objection to the applicants’ proposed development.  Sir Anthony has now sold the great majority of the Guyzance Estate and has retained only an area of woodland to the west of Brainshaugh, a small copse to the south and the chapel haugh to the east.  The chapel haugh is more than half a kilometre from Brainshaugh and has been retained by Sir Anthony because it is his family burial ground.  To suggest that by impeding the proposed development, part of which, at most, will be 6m closer to the chapel haugh and will have one extra window overlooking it, the covenants would secure to the objector practical benefits of substantial value or advantage is, frankly, absurd.  Mr Orde’s evidence on the point was confused.  He began by saying that any practical benefits were not substantial but then decided that their cumulative effect was “much more significant” than any individual benefit.  By the end of his cross-examination it appeared that he had decided after all that the cumulative effect of the practical benefits was substantial.  I did not find his evidence on this issue to be helpful or objective.

59. The proposed development will improve Brainshaugh and will refurbish and redevelop outbuildings and steadings that would otherwise remain derelict.  The proposals are sympathetic with the setting and have obtained planning permission.  They are a reasonable user of the application land and are impeded by restrictions 1 to 5 and 7.  The applicants consulted the objector as they prepared their plans and altered them to suit his wishes.  Mr Coombes, who I found to be an honest and straightforward witness, is understandably exasperated that having done his best to satisfy the objector about the appropriateness of his proposed development and to ensure its conformity with what he reasonably believed were Sir Anthony’s own aspirations for the application land, he should be faced with an objection that ostensibly relies upon the covenants securing substantial practical benefits but which is really only about compensation.

60. By impeding the proposed development covenants 1 to 5 and 7 do not secure to the benefit of the objector any practical benefits of substantial value or advantage to him.  The applicants have therefore satisfied ground (aa) in respect of these covenants.  The application to discharge covenants 1 to 4 and 7 would have succeeded under ground (aa) had I not already found them to be obsolete.  The application to discharge restriction 5 under ground (aa) fails because I consider that it is possible that any future development of a greater area of the application land which is significantly nearer to the chapel haugh might not satisfy this ground.  I therefore grant the modification of restriction 5 to allow the development for which planning permission has been obtained.

61. At the hearing the parties agreed the following wording of a proposed modification to restriction 5:

“Not to build on so much of the field OS 3600 as lies to the east of the line marked “A” to “B” on the plan annexed or to use any part of such part of such field for any purpose other than agriculture.”

To date the parties have failed to agree the position of the line to be marked “A” to “B” (although the objector has submitted a plan to the Tribunal showing the line that would be acceptable to him).  The parties’ agreement on the point is not necessary to enable me to determine this application.  The modification of restriction 5 shall be by proviso by reference to the extant planning permissions. It is open to the parties to extend the developable area of land eastwards by negotiation.  If no such agreement is possible then any proposed development of further land affected by the modified covenant 5 will need to be the subject of a fresh application under section 84 of the 1925 Act.

62. Restrictions 6 and 8 are not relevant under ground (aa) because they do not impede the reasonable (proposed) user of the application land.  I would not discharge or modify them under ground (aa).

63. Having found that restrictions 1 to 4 and 6 to 8 are obsolete under ground (a) it follows that, in my opinion, their discharge will cause no injury to the objector under ground (c).  Similarly, the proposed modification of restriction 5 under ground (aa) would not cause any injury to the objector.

Compensation

64. Section 84(1) of the 1925 Act states that:

“An order discharging or modifying a restriction 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 for any loss or disadvantage suffered by that person in consequence of the discharge or modification; or

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

65. In my opinion the objector has suffered no loss or disadvantage in consequence of the discharge of restrictions 1 to 4 and 6 to 8 or from the modification of restriction 5.  Therefore no award of compensation can be considered under section 84(1)(i).

66. Mr Brierley’s evidence about compensation was limited to a consideration of section 84(1)(i).  He did not address the possibility of compensation under section 84(1)(ii).  In their closing submissions the appellants say that Mr Brierley applied the test under section 84(1)(ii) in his letter of 14 March 2012 and “discounting the error in authority” had indicated a compensation figure of some £38,000.  I reject that submission.  In my opinion the letter of 14 March 2012 was a valuation under section 84(1)(i).  Mr Brierley says that his opinion as expressed in that letter was arrived at “following various [unspecified] Lands Tribunal decisions particularly Re: Skupinski’s Application 2003.”  He went on to explain his understanding that compensation for the discharge or modification of a restrictive covenant was fairly represented by one third of the consequent uplift in the value of the application land.

67. Re Skupinski’s Application [2005] RVR 269 was a case involving a valuation under section 84(1)(i) and not (ii).  The decision states at page 271 [16]:

“Counsel for the objector made clear the objector’s case was based on (i)…”

In his conclusions the President said at 272 [22]:

“… 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 the applicant’s land if I were to conclude that the objector would suffer loss or disadvantage by reason of the modification of the covenant.”

In my opinion the President’s reference to “loss or disadvantage” is a clear indication that he was considering the issue of compensation under section 84(1)(i).

68. The applicants refer to “the error in authority”.  I take that reference to be a comment that I made at the hearing that Skupinski was no longer the relevant authority in respect of the “negotiated share approach” and that the applicants should consider the Court of Appeal’s decision in Winter v Traditional & Contemporary Contracts Limited [2008] 1 EGLR 80.  But Winter was another case that considered compensation under section 84(1)(i) and not (ii).  The negotiated share approach relied upon by Mr Brierley in his letter dated 14 March 2012 has nothing to do with section 84(1)(ii) and Mr Brierley conceded in cross-examination that while he had commented in further correspondence dated 14 March 2012 upon Mr Orde’s opinion of value under basis (ii) he had not provided such a valuation himself.  I consider the applicant’s suggestion to the contrary in their closing submissions to be disingenuous.

69. The only evidence of the appropriate consideration under section 84(1)(ii) was that of Mr Orde.  His opinion was that the sale price would have been 20% higher (£147,000) “if the restrictive covenants had never been proposed”.  In cross-examination he said that this figure was a summation of adjustments in respect of each of the covenants but he gave no evidence about those individual adjustments or how he had calculated them.

70. I consider Mr Orde’s valuation to be too high for the following reasons:

(i) I am satisfied that the applicants, while not having obtained Sir Anthony’s approval to their development proposals before they purchased the application land (“because we do not yet have any precise plans in mind” - correspondence from the applicants to Mr Orde dated 14 January 2002), considered that Sir Anthony was in broad agreement with their vision for the application land:

 “we believe that both parties share a common vision for Brainshaugh (ibid).

The objector accepted this statement of mutual intent in Mr Orde’s email response dated 15 January 2002 to the applicants’ letter.  The applicants therefore entered into the restrictive covenants believing that Sir Anthony was supportive in principle of their proposals.

 

(ii)       Mr Coombes explained in his evidence that the applicants, having agreed a price within the range put forward by the applicants’ two valuers, tried to negotiate the covenants into a less onerous form.  He said that there had been no indication that the price would have been higher without the imposition of the covenants. 

(iii)     The said two valuers, Mr Carmichael and Mr Sayer, who advised the applicants about the purchase price, were not aware of the detail of the proposed covenants. 

(iv)      The agreed purchase price of £735,000 was not discounted in terms to reflect the onerous nature of the covenants.  There was no evidence that during the negotiations for the sale of the application land the effect of the covenants had been quantified by either party in monetary terms.

(v)        The price of £735,000 was at the bottom of Mr Carmichael’s valuation range and below that of Mr Sayer.  But the addition of £147,000 as suggested by Mr Orde would take the open market value without any covenants (£882,000) well beyond the range of both valuers. 

(vi)      Mr Orde assumes the discharge of all the covenants whereas I am only modifying restriction 5 so as to allow the proposed development.  A restriction against the wider development of field OS 3600 still remains.

71. Taking these factors into account and considering the evidence as a whole I consider that the purchase price of the application land in the absence of covenants 1 to 4 and 6 to 8 but with covenant 5 remaining in its modified form would have been £775,000 as at the date of transfer in May 2002.  I therefore determine that it is just to award the sum of £40,000 under section 84(1)(ii) to make up for the effect of the covenants in reducing the consideration then received by the objector.  The objector did not give any evidence or make any submissions about whether compensation should be adjusted for the lost opportunity to invest this sum from May 2002 until the present and I therefore make no such adjustment.

The Order

72. The applicants have not stated in terms the modifications to the covenants that they are willing to accept.  Under section 84(1C) of the 1925 Act I have the power to add such further provisions restricting the user of or the building on the application land as appears to me to be reasonable in view of the relaxation of the existing provisions, and as may be accepted by the applicant.  I may refuse to modify a restriction without some such addition.

73. The following order will accordingly be made:

In Schedule 3 of the transfer dated 17 May 2002 –

(i) Restrictions 1 to 4 and 6 to 8 are discharged on ground (a)

(ii)                    Restriction 5 is modified on ground (aa) by insertion of the following words at the end of the restriction:

“Provided that the development permitted under the following planning permissions may be implemented in accordance with the terms, details and approved drawings referred to therein:

(a)      A/2005/0108, granted 27 April 2005

(b)     A/2206/0515, granted 1 December 2006

(c)      A/2007/0451, granted 5 October 2007

(d)     A/2010/0040, granted 30 March 2010

Reference to the above planning permissions shall include any subsequent planning permission that is a renewal of that planning permission and any other matters approved in satisfaction of the conditions attached to such permission.”

74. An order discharging restrictions 1 to 4 and 6 to 8 and modifying restriction 5 in accordance with the above wording shall be made by the Tribunal provided, within three months of the date upon which this decision shall take effect, the applicants shall have:

(i) signified their acceptance of the proposed modification to restriction 5, and

(ii)   paid the sum of £40,000 to the objector.

75. A letter on costs accompanies this decision which will take effect when, but not until, the issue of costs has been decided.  The attention of the parties is drawn to paragraph 12.5 of the Practice Directions of the Lands Chamber of the Upper Tribunal dated 29 November 2010.

 

Dated: 17 May 2012

 

A J Trott FRICS

 

 

 

 

Addendum on Costs

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

77.            The applicants ask for their costs.  They submit that the objector acted unreasonably throughout the entirety of the proceedings.  The applicants tried to negotiate a settlement with the objector in 2008 in order to avoid litigation.  They had offered the sum of £60,000 for the removal of the covenants and renewed this offer before the substantive hearing.  The objector had failed to beat that offer and as such is responsible for all litigation costs notwithstanding his wholly unreasonable approach to the application.  The actions of the objector amounted to nothing more than greed and had made litigation inevitable.

78.            The objector asks for his costs.  He argues that the applicants needed to establish one of the four grounds in section 84(1) of the 1925 Act and that the Tribunal had to hear evidence in support of the application in any event.  Consequently the involvement of the objector added little if any cost to the process.  The applicants sought to remove the property rights of the objector and in the normal course should expect to pay the costs of the procedure for so doing.  It was necessary for the Tribunal to reach a decision about the sum by way of consideration that it thought it just to award.  The applicants had not provided copies of relevant correspondence from Mr Brierley until at or immediately before the hearing and the objector was therefore unable to assess the applicants’ case properly.  The applicants had not conformed with the Tribunal’s directions about the preparation of an agreed statement of facts and provided no written evidence about any negotiations to discharge the covenants.  In the circumstances the objector had behaved reasonably in requiring the applicants to establish their case before the Tribunal and to enable the Tribunal to make an award of compensation.

79.            Practice Direction 12.5 of the Practice Directions of the Lands Chamber of the Upper Tribunal (27 November 2010) sets out the principles that will be applied in respect of the exercise of the Tribunal’s discretion regarding liability for costs in cases involving applications made under section 84 of the 1925 Act.  The applicants have succeeded in their application.  Seven of the eight covenants have been discharged and the eighth covenant has been modified.  But under Practice Direction 12.5(3) the objector will not normally be ordered to pay any of the applicants’ costs unless he has acted unreasonably.

80.            In my opinion the objector acted unreasonably in pursuing an objection to the pleaded grounds (a), (aa) and (c) when his true purpose (acknowledged by Mr Gillibrand at the start of the hearing to be the “principal ground” of objection) was to secure compensation. It would have been reasonable and appropriate for him to limit his objection to a consideration of the sum that the Tribunal may think it just to award under section 84(1)(ii).  In my opinion the objector’s grounds of objection did not reasonably reflect the material change of circumstances represented by his sale of the great majority of the Guyzance Estate since the covenants were imposed.  Notwithstanding the proposed removal of the objector’s property rights it was unreasonable, on the facts, for him to pursue a token objection, unsubstantiated by evidence, to the pleaded grounds of the application.  

81.            I have considered the objector’s behaviour in the context of several aspects of the applicants’ actions in this case.  Firstly, unlike the objector, the applicants did not, despite their closing submissions to the contrary, address the question of the appropriate sum to be awarded under section 84(1)(ii) of the 1925 Act.  Secondly, the applicants say that during “open negotiations” they offered to the objector the sum of £60,000 to remove the covenants and that the objector had failed to beat that offer in the award from the Tribunal.  But the applicants did not make any formal sealed offer to settle that was copied to the Tribunal for consideration under Direction 12.7 and their expert spoke to much lower figures of compensation.  Finally, despite raising the issue at the hearing the applicants have not forwarded to the Tribunal a plan, agreed or otherwise, showing the line referred to in the proposed modification to restriction 5 (see paragraph 61 above).  The objector sent the Tribunal a copy of the plan that is acceptable to him on 10 April 2012.

82.            I determine that the applicants shall receive 50% of their costs, such costs to be assessed by the Registrar on the standard basis unless agreed.

 

 

Dated 12 June 2012

 

 

A J Trott FRICS