Legal update

Citation

Waterson, G. and Lee, R. (2005), "Legal update", Property Management, Vol. 23 No. 3. https://doi.org/10.1108/pm.2005.11323cab.001

Legal update

Benhams Ltd v. Kythira Investments Ltd & Antr [2004] WL 3050486 QBD EWCH 2973

In this case Benhams Ltd was claiming commission of 2 per cent from Kythira Investments on the purchase of two properties with accompanying land off Branch Hill adjacent to Hampstead Heath. The claim has had a chequered history. When it first came for trial in 2003 the judge upheld the defendant’s submission that there was no case to answer. The claimant appealed and the Court of Appeal allowed the appeal. This was a retrial of the action.

Benhams employee, Mr Jeremy Gee, had close contacts with the defendants, Kythira Investments Ltd. Kythira was in the business of property development in North London. It was owned and run by three brothers, Christos, Costas and Andrus Zanthus. From about 1993 Benhams had been regularly retained to act as agent for Kythira in sales and purchases of property.

The property in question consisted of two houses, Leavesden Cottages and Spendan together with accompanying land. Both of the properties were acquired in 1998 as part of an informal joint venture in which the principal partner was a Mr Cooper, an active property developer in Hampstead and elsewhere. He had recognised that together the two properties represented an exciting development prospect. The two properties were acquired in the names of two different companies (Hong Kong International Ltd and Dreamgate Investments Ltd) to conceal the fact that the two purchases were linked.

Kythira was only interested in purchasing if they could acquire both, as together they would form a valuable development site. Mr Gee had also acted for Kythira in a string of previous property dealings and was regarded by them as a skilled negotiator. Thus, when they thought they had the chance of acquiring the properties they asked Mr Gee whether he knew Mr Cooper and whether he would be interested in providing advice on the matter including obtaining a reduction on the purchase price and possible resales. Mr Gee and Mr Cooper were well known to one another. Mr Gee agreed to attend a meeting between Kythira and Mr Cooper. However, there was no discussion of any formal retainer or commission, and at no stage was anything ever put in writing, and therein lay the problem. Kythira denied that it had ever appointed Mr Gee as agent for the purpose of the property purchase although it did not deny regular contact with him during the period of negotiations for the deal.

Kythira agued first, that there was no evidence that Benhams had at any time been appointed as agents in connection with this purchase; there was no written retainer although there had been in the case of properties in which Mr Gee had previously acted for them. Furthermore, Benhams had never invoiced Kythira for the commission that they alleged was due. There was no evidence that Mr Gee had introduced the properties to Kythira, indeed it was Mr Cooper’s agent who had done so after he had been retained to act as agent for the sale. There was no evidence either that Mr Gee had been instrumental in or materially contributed to the sale to Kythira.

Second, even if a retainer had been agreed, it was not in writing as required by S18 of the Estate Agents Act 1979 and in the absence of writing the court should refuse to enforce the agreement.

Benhams argued that there was strong circumstantial evidence to justify the court finding that Kythira did agree to retain it as agents for the purchase of the property. There was evidence that Mr Gee was well known to the principals of both partner companies in the joint venture that purchased the property and Mr Gee’s diary showed that regular contact had been maintained between them at the relevant time. The degree of Mr Gee’s continuing involvement supported Bentham’s contention that he had materially contributed to the acquisition. Benhams submitted that on the evidence 2 per cent of the purchase price was the usual amount of commission, and in any case, even if no commission was agreed the court could still award remuneration on a quantum meruit basis. In suitable cases this might take the form of commission.

Benhams further argued that by S18(6) of the Estate Agents Act 1979 the court could enforce the agreement in the circumstances of the present case, despite the lack of writing.

Gray J began his conclusion with a caution that the burden of proving both the existence of the retainer and the rate of commission lay with Benhams. He said that the absence of any written evidence of the retainer was a major obstacle for Benhams. However, the previous course of dealing between Kythira and Benhams indicated that they did on occasion retain Benhams to assist in relation to property acquisitions and that when they did so commission was usually paid even when Benhams was also to be retained on the resale of the property. Gray J remarked that although estate agents may sometimes give unpaid advice generally they expect, like other professionals, to be paid for their services as the previous transactions indicated.

Although Gray J was satisfied on the evidence that Mr Gee was well known to all of the parties in the acquisition, he did not feel that the evidence justified the conclusion that he introduced the property to Kythira. However, he was satisfied on the evidence that Benhams, through Mr Gee, materially contributed to the purchase. This was supported among other things by the fact that the conveyancing solicitor for Kythira routinely copied paperwork to Benhams. This was strong evidence that he regarded Benhams as agents for the acquisition even if he had not expressly been so instructed. This was supported by regular diary entries by Mr Gee over the period referring to the acquisition process in which he referred to the owners of Kythira by their first names. Thus, Gray J felt that the circumstantial evidence was strong enough to justify the inference that Kythira did retain Benhams to act as agents in the purchase of the property and that Mr Gee was instrumental in bringing about the purchase in that he materially contributed to the purchase taking place.

With regard to the commission the judge felt that although there was insufficient evidence that there was an express agreement it was implicit in the agreement to retain Benhams that the agent would be paid for its services. Furthermore, as agents are invariably paid on a commission basis and the evidence indicated that this should be 2 per cent of the purchase price plus VAT. Gray J added that he would have reached the same conclusion if he had decided on a quantum meruit basis because previous dealings between the parties indicated that this was the normal rate and in any case he would have found that 2 per cent represented a reasonable sum for the retainer. The evidence indicated that the parties intended remuneration to take the form of commission rather than a fee.

With regard to the submission under S18(1) of the Estate Agents Act that the court should refuse to enforce the agreement as Benhams had failed to comply with the requirement to provide the information required by S18(1) and (2), according to S18(5) if any person fails to comply with these requirements the contract “shall not be enforceable except pursuant to an order of the court under S18(6)”. S18(6) (a) provides that where an agent makes an application to the court for the enforcement of the contract the court “shall dismiss the application if, but only if, it considers it is just to do so having regard to prejudice caused to the client by the agent’s failure to comply with his obligation and the degree of culpability for the failure.” Gray J held that Mr Gee’s failure to comply with the requirements of S18(1) was not such as to make it just to reject Bentham’s claim nor were they sufficiently culpable to justify this. Thus, Benhams was entitled to its commission at 2 per cent plus VAT.

The decision in this case appears to reflect the reality of the way in which business is actually done in the world of commercial property where contacts and informal arrangements are the norm.

Fleurette Reed, Maurice Harvey Reed v. Connells Estate Agents [2004] WL 3111470 [2004] EWCH 2891

In 1982/83 the Reeds had built for them their dream house in Ringwood, Hampshire. The internal specification was very high but it had one defect. The back garden abutted a major road junction with a roundabout between the A31 and the A338. In addition to the house, the Reeds owned some land in Rockbourne, Hampshire and a pub, the Cricketers at Turgis Green, Hampshire which they bought from Morland Brewery in 1990. In order to acquire the pub they had borrowed heavily, £70,000 from the brewery, £135,000 mortgage on the house and a business overdraft with the Midland Bank secured on the pub and a second mortgage on the house. At the time interest rates were high and by 1993/94 the Reeds could no longer service their borrowing. They were in arrears with the mortgage and decided the only way out was to sell the house as they had accommodation at the pub.

This was not as simple as it might have seemed because at about the same time the Highways Authority began work on the roundabout behind the house. It had decided to build an underpass to take the traffic on the A31, thereby reducing the traffic on the roundabout. The mess and inconvenience of the works would affect the current value of the house at the time even though it would eventually be beneficial to the property.

To solve their financial problems the Reeds first tried unsuccessfully to rent the property. They then applied to the Highways Agency to exercise its powers under S246 Highways Act 1980 to purchase the property. Things were desperate so in October 1994 the Reeds instructed Mr Spence of Connells to sell the house. Mrs Reed suggested an asking price of £225,000 but Mr Spence thought that it should be £195,000. The property went on the market. No offers at all had been received by January 1995 but Mrs Reed maintained her instructions as to the asking price. In January 1995 a possession order for the house was made in favour of the Portman Building Society that was suspended on terms as to payment. Mrs Reed then decided to take the house off the market and make further approaches to the Highways Agency. This was successful and in June 1995 the Department of Transport authorised the Highways Agency to make an offer to buy the house on an “extra statutory basis … having regard to the exceptional circumstances … and hardship”. This meant that the Reeds could have a statutory purchase under S246 but without any additional statutory compensation. The Reeds solicitor instructed Mr Spence to negotiate the purchase of the property with the district valuer and that “it should be assumed that the property was blighted and the price of the property should be on the basis that the proposed scheme of road improvement did not exist...”.

By September 1995 the road works were substantially complete, the agent showed the property to the surveyor acting for the district valuer, which resulted in an offer of £155,000. Unfortunately, to clear all debts the Reeds needed to sell at £166,000. Mr Spence tried to get the district valuer to increase his offer by providing further comparable evidence but the district valuer refused. Eventually, in February 1996 the Reeds reluctantly accepted the offer of £155,000, which left them after all expenses were paid, still £22,245 in debt to the Portman Building Society. In April 1996 the Highways Agency put the house on the market for £165,000 and sold it for £166,000. Later the same year it was sold on for £225,000. In August 1997 the Reeds sold the pub and after paying off all outstanding debts (except that owed to the Building Society) were left with £12,820.

In January 2002 the Reeds belatedly brought action against Connells alleging negligence on the part of Mr Spence in that he had failed to exercise reasonable skill and care in his negotiations with the district valuer. They claimed that he should have advised them that he was not qualified to carry out such negotiations and advised them to instruct a chartered surveyor. They alleged that it should have been obvious to Mr Spence that the district valuer’s valuation of £155,000 represented the depressed value of the house because of the partly completed road scheme when in fact the valuation should have been based on pre-scheme value of the house. In support of the allegation they pointed to the fact that Connells put the house on the market before the scheme at an asking price of £195,000. Furthermore, he should also have alerted them to the 5 per cent rise in property prices since November 1995 so as to give them the opportunity to re-negotiate the price.

With respect to Mr Spence’s dealings with the district valuer, Holland J felt unable to condemn any of his actions as negligent nor to regard his lack of academic qualifications as significant. He had sought to persuade the district valuer to raise his offer and had sought and provided comparables.

With regard to Mr Spence’s relationship with the Reeds and their solicitor he noted that Mr Spence had never been instructed to do anything other than advise on current market value of the house, which he had done. Thus, the question to ask was whether the offer from the district valuer was so ludicrous that any reasonably competent professional would have felt compelled to comment on it? The district valuer had maintained that the pre scheme value of the property was in fact no higher than the post scheme value, given its position. His Honour thought this was probably right despite the fact that the new road scheme had undoubtedly benefited the property by reducing the ambient noise level. He felt that the “post scheme plateau” for valuation purposes had yet to be reached as at November 1995. His Honour added that the original £195,000 asking price for the purposes of the particulars of sale could not be regarded as a proper valuation and the evidence indicated that if Mr Spence had been asked to do a valuation it would have been at a figure substantially less that the asking price. Holland J went on to point out that the initial sale of the house at £160,000 was consistent with the opinions of both the district valuer and Mr Spence. The increase from £160,000 to £225,000 was mystifying and anomalous but it offered no assistance to the situation as perceived in 1995 and was arguably consistent with the improvements due to the road scheme together with an upturn in the market.

His Honour did not regard Mr Spence as having been negligent in taking on the work or that his lack of academic qualifications made any material contribution to any losses suffered by the Reeds. Nor was Mr Spence negligent in not advising the Reeds to try to make an appeal for a more favourable valuation to the district valuer’s superior. He was not under any duty to intervene in August 1996 to point out that there had been some upward movement in the market since November 1995. His Honour felt that “there was no evidence that the upward movement was so pronounced as to require an intervention that would have had the effect of halting a long awaited and much wanted exchange of contracts”. The claim therefore failed.

His Honour went on to express his dismay that the Reeds had “belatedly sought to appeal Mr Gill (the district valuer) by transferring the responsibility for his valuation to Mr Spence through expensive and stressful litigation”. He felt that this was a tragedy that could and should have been avoided.

Negligence

Maguire v. Harland & Wolff & Antr. (2005) The Independent 28th January 2005. CA.

Mr Macguire worked as a boilermaker at the defendant’s shipyard from 1961 to 1965. There were no adequate changing or washing facilities provided at work. Mr Macguire therefore came home each day in his work clothes, which were covered with asbestos dust, and left them for his wife to wash. He did not become ill as a result of exposure to asbestos dust but his wife did. Mrs Macguire died in May 2004 from mesothelioma as a result of inhaling the asbestos dust that her husband brought home on his work clothes.

Mrs Macguire brought proceedings in negligence against the defendants claiming damages and consequential losses on the basis of her familial exposure to asbestos dust. At the High Court the judge held that the risk of serious injury to the claimant’s health was reasonably foreseeable in the period from 1961 to 1965 and allowed her claim.

The defendants appealed, submitting that the risk to the claimant was not reasonably foreseeable at any time before her exposure ceased in 1965 when her husband stopped working for them. Furthermore, in light of knowledge available at the time her level of exposure would not have enabled an employee to succeed with a claim at common law.

Lords Justice Judge and Longmore gave the majority verdict of the Court of Appeal. They reversed the decision of the High Court. They said that family members were not precluded from establishing liability based on environmental contamination with asbestos dust in an appropriate case. However, in this case they felt that until 1965 there had been nothing in the literature that specifically warned about the risks of family or secondary exposure, and therefore no suggestion that risk of familial exposure should be addressed by the industry. Thus, it could not be said that the defendant should have appreciated that the claimant was at risk of any asbestos related injury and that its failure to do so was therefore negligent. Thus, Mrs Macguire’s appeal was lost.

This decision seems to be inconsistent with the case of Magereson v. J.W Roberts and Hancock v. J.W. Roberts Ltd [1996] Env. L.R. 304, in which the former Turner & Newells subsidiary, J.W. Roberts was held liable for environmental exposure of people living in the vicinity of its factory in the 1930s. The case turned on the question of foreseeability of the risk to Mrs Macguire and others like her. It was not disputed in the case that Harland & Wolf were in breach of its duty of care to its employees; there was a significant amount of loose asbestos dust, no effective extraction system, no changing and washing facilities and no warning of any danger of contact with asbestos dust. Clearly, Harland and Wolf knew of such dangers as the Chief Inspector of Factories had been warning of such dangers since at least 1959. The result was that Mr Macguire was wearing home his heavily contaminated work clothes which his wife was handling. It is hard to accept that this action was not entirely foreseeable by Harland & Wolf. Who else did they think would be washing his clothes? If Mrs Macguire’s washing of her husband’s work clothes was foreseeable then so too, in the circumstances prevailing at the factory, was her exposure to the dust carried on them. Did Harland really need some journal article to tell them this? It seems strange indeed for the courts to hold that one employer (J.W. Roberts) had knowledge that its activities from the 1930s onwards could harm its neighbours but that another could not know that its similar breaches of health and safety could kill the families of its own employees.

Occupiers liability

Higgs v. Foster [2004] EWCA Civ 843

This is another in a long line of cases that seem to suggest that the courts are hostile to adult claimants who were trespassers.

In this case Higgs was a police officer who was investigating a suspected stolen trailer. It was abandoned in the yard of a supermarket. The defendant’s premises adjoined the service area and Higgs entered them with the intention of keeping a watch on the service area in case the thief returned. The respondent’s premises were used to park coaches over night. The road frontage of the property was protected by railings and a gate with a notice marked “private”. There were two security lights activated by movement. One side of the yard was insecure with a short flight of steps leading into the yard, which were described by the judge as “inviting”.

Higgs searched the coach yard for the thief and walked back along the row of coaches. He was not using a torch for obvious reasons. He fell down an inspection pit which was partly covered by a parked coach. Higgs suffered severe knee injuries which caused him to have to retire from the police force.

Higgs brought a claim against the defendant under the Occupiers Liability Act 1957 or alternatively under the Occupiers Liability Act 1984. He contended that he was on the premises as of right pursuant to S17 of the Police and Criminal Evidence Act 1984 and that accordingly he was a visitor pursuant to S2(6) of the Occupiers Liability Act 1957. This argument was rejected by the trial judge. Thus, his claim fell to be decided under the Occupiers Liability Act 1984. This claim also failed as pursuant to S1(3)(b) of the Act the judge held that the defendant had no cause to anticipate the presence of the claimant in the vicinity of the pit.

The defendant appealed on this point to the Court of Appeal. Latham LJ (sitting with Maurice LJ) said that reasonable grounds for believing that someone like the claimant might have been in the vicinity of the pit could only have been established if there was some evidence to show that trespassers had been on the part of the premises that exposed them to the risk complained of in the past. Since there was no such evidence, the claim failed.

The consequence of this case seems to be that it will be very difficult for a claimant who was a trespasser to succeed with this type of claim. It would be difficult for the claimant to bring evidence of past trespasses and the defendant would be unlikely to help on this point. In any case trespassers are unlikely to draw attention to their presence. Clearly, the outcome of the case might have been different if the coaches could be said to have been an allurement, but they were not held to be so. Thus, it seems that only the next trespasser on the premises who falls down the inspection pit has any chance of succeeding with such an action.

Conflict of interest

Hilton v. Barker Booth and Eastwood (a firm) The Times, 4 February 2005

The claimant in this case was a bricklayer who was an experienced sub contractor in the house building industry. He became a client of the defendant solicitors in 1978. In the mid 1980s he decided to set up in business for himself as a developer in a small way, buying and developing small sites in and around Blackpool.

In 1990 he was approached by one Neil Bromage concerning a possible development. What he did not know, but his solicitors did because they had acted for Mr Bromage, was that he was a convicted rogue only recently released from prison on licence.

Credence was added to Mr Bromage by the fact that a series of meetings took place in the presence of a partner in the defendant firm in which the plans to erect six flats and then to sell the development site were discussed.

The defendants acted for both Mr Bromage and the claimant. This was in clear breach of Rule 6 of the Solicitor’s Practice Rules 1990 which contains an unqualified prohibition on the same firm of solicitors acting for both sides if a conflict of interest exists or arises or if the seller is selling or leasing as a builder or developer. These prohibitions cannot be waived even by an informed consent. In this case there could have been no informed consent anyway because the claimant was unaware of the fact that in addition to acting for both sides in the deal, the solicitors were also advancing to Mr Bromage the money for the deposit on the contract.

Mr Bromage failed to complete and refused to vacate a caution that had been placed on the title. The claimant decided to rescind the contract. Over the next few years the claimant’s business collapsed as he vainly tried to obtain redress. It wasn’t until 1993 that the claimant was advised that he could sue the defendants in order to obtain redress.

Despite finding that the claimant would never have dealt with Mr Bromage had he known the truth, the judge still went on to find that although the solicitors were in breach of their professional duty, that breach had caused the claimant no loss. The basic reasoning was that Mr Bromage’s bankruptcy and convictions were information that the solicitors could not pass on to the claimant without being in breach of their duty to Mr Bromage. Their fault lay in continuing to act for the claimant rather than in failing to pass on the information. If they had acted correctly, the claimant would have been advised to find another independent solicitor who would probably have been unaware of Mr Bromage’s conviction. Thus, the judge dismissed the action with costs.

The Court of Appeal adopted the same line of reasoning.

Lord Walker delivered the unanimous opinion of the House of Lords. He began by stating that:

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  The notion that one breach of duty by the defendants, failure to tell the claimant that they could not act for him and that he should seek independent advice, should exonerate the defendants in respect of a subsequent and more serious breach of duty, failure to disclose to the claimant facts which would have saved him from ruin, seemed contrary to common sense and justice.

It was also contrary to the principles stated by the Court of Appeal itself in Moody v. Cox and Hatt (1917) 2 Ch 71. All three judgements in that case held that if a solicitor put himself in a position of having two irreconcilable duties it was his own fault. If he had a personal financial interest which conflicted with his duty, he was even more obviously at fault.

The defendants in this case had submitted that a solicitor who had conflicting duties to two clients could not prefer one to another. Walker LJ agreed that that this was the general rule and it distinguished the case of two irreconcilable duties from a conflict of duty and personal interest, where the solicitor was bound to prefer his duty to his own interest. As the solicitor could not prefer one duty to another he had to perform both as best he could and this might result in him having to pay compensation for his failure to perform one of them. But the fact that he had put himself in an impossible position did not exonerate him from liability or in any way to modify his duty to either client.

Their Lordships allowed the appeal and left the quantum of damages to be assessed by a judge if not previously agreed.

Restrictive covenants

Martin v. David Wilson Homes Ltd [2004] EWCA Civ 1027; [2004] 39 EG 134

This case hinges on the particular meaning to be ascribed to a restrictive covenant affecting a number of plots of land, and couched in identical terms in relation to each of the plots concerned, which had been imposed when the land in question had been sub-divided and sold off to private owners by the Telford Development Corporation in 1988. The contract(s) of sale provided that the purchaser of each plot would within 18 months of completion of the purchase carry out and complete the construction of a single private dwelling house on their individual plots in accordance with detailed approvals from the Development Corporation, and that had apparently been done. The restrictive covenants which gave rise to the present dispute apparently formed part of the 6th Schedule to each of the 1988 conveyances which, first laid down restrictions on the design and so on of any buildings which were to be erected on each of the plots within five years of the date of conveyance, then imposed design restrictions on the “gates boundary walls and fences of any dwelling house erected or to be erected on the said land”, and finally and most importantly provided as follows: that the purchaser (and presumably his or her successors in title) would:

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  Not at any time…carry on or permit or suffer to be carried on the said land or any part thereof or in any building or buildings erected or to be erected thereon any trade or business whatsoever and not to use or permit or suffer any building or buildings erected thereon or on any part thereof to be used for any other purpose than as a private dwelling house either with or without garages and other necessary outbuildings.

The question at issue was whether the restrictive covenant as worded restricted the use of each of the original plots to use as the site of a single dwelling house only, or whether it merely restricted the nature of the user rather than the number of the dwellings, a matter of no little import as it would appear that the appellant was intending to use two of the original plots for the construction of a further 24 dwellings, and had indeed already started to carry out the intended development.

The Court of Appeal considered the wording of the covenant in the light both of the other terms of the contracts and conveyances concerned and of existing case law, and (distinguishing the earlier case of Crest Nicholson Residential (South) Ltd v. McAllister [2002] EWHC 2443 (Ch); [2003] 1 All ER 46, where Neuberger J had indicated that the use of the indefinite article would in his opinion rather tend to indicate an intended limitation of use to use as the site of a single dwelling house only) and came to the conclusion that no such limitation should be inferred in this case; judgement in favour of the appellant developers was given accordingly.

Jarvis Homes Ltd v. Marshall and another [2004]EWCA Civ 839; [2004] 44EG 254

In this case the Court of Appeal was concerned with the precise meaning of a pair of linked restrictive covenants which had been imposed mutually on two parcels of adjoining land (now known respectively as Nos. 28 and 30 Ox Lane, Harpenden) at the time that No. 28 had been sold-off back in 1964. The covenants affecting No. 28 were expressed “…so as to bind so far as may be the land hereby conveyed into whosoever’s hands [the same] may come … ” and provided that the purchaser and the persons deriving title under him would not at any time thereafter:

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  permit the land hereby conveyed including the site of the existing dwelling house thereon to be used for the construction of more than one two-storey private dwelling house with all necessary outbuildings and garage for use in connection therewith; or

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  use or permit o[r] suffer to be used the land hereby conveyed or any part thereof or any building or erection now or at any time hereafter erected thereon for any trade business or manufacture but will use the same as a private residence only.

The site of No. 28 had now been purchased or contracted to be purchased by the developers Jarvis, who proposed not only to demolish the existing dwelling house and erect a new one with garage more or less in the same location as the original dwelling house, but also to use about one-fifth of the plot known as No. 28 as the site of a new roadway to be built (together with new street lights, of which two would be sited on No. 28) as a roadway to provide access to a plot of back-land on which Jarvis proposed (subject to obtaining the necessary planning permissions) to construct ten new houses; it was also proposed that eventually, as is generally the case, the new access road would be adopted by the local highway authority as a public highway maintainable at the public expense.

The owners of No. 30 contended that the construction of the proposed access road and/or its subsequent use to provide access to the back-land and/or the construction of the street lights would be in breach of the terms of the restrictive covenant. At first instance, Judge Howarth, sitting as a deputy judge of the Chancery Division had held that the construction and use of the proposed road works did not offend against the restrictive covenants.

The Court of Appeal disagreed: delivering the unanimous decision of the court, Neuberger LJ said that while the covenants did not preclude the demolition and replacement of the existing single dwelling house, the closing ten words of clause (b) referred not simply to the use of the dwelling house itself but to the whole of the plot of land known as No. 28; moreover, so would the construction of the proposed new street lights on part of No. 28 for the purpose of lighting the proposed new access road would be in breach of clause (a); moreover, though the point had not been fully argued it would appear to his lordship that clause (a) would also preclude the use of part of No. 28 for building works generally and that therefore the wording of this clause of the restrictive covenants would also preclude the construction of the roadway. “Game, set and match” to the appellants, then, really!

Mortimer and another v. Bailey and another [2004] EWCA Civ 1514; [2005] 02 EG 102

This case provides an interesting exposition on the principles which may apply when a claimant is seeking a mandatory injunction by way of remedy for an alleged breach of a restrictive covenant. Briefly, the appellants had set out to construct a single storey extension to their property which if completed would apparently have diminished the free flow of light and air to the property of the claimants, particularly of afternoon winter sunshine, and also detracted from a sense of “openness” enjoyed by the claimants’ property. The covenant in question required inter alia that before proceeding with any such building works the defendants should seek the consent of the complainants “such consent not to be unreasonably refused”.

In February 2003 the defendants notified the complainants of their intentions before commencing work, and provided them with copies of the architects’ plans; the complainants informed the defendants of their objections and also made constructive suggestions as to how these might be overcome; there were some further discussions which came to nothing and the defendants then applied for planning permission for a slightly modified version of the proposed extension with a reduced roof pitch, for which planning permission was granted despite the objections of the complainants; then, in early June 2003 the defendants commenced the building works, having apparently taken legal advice to the effect that the complainants’ refusal of consent was unreasonable in light of the grant of planning permission. On 20 June 2003 the complainants’ solicitors then informed the defendants’ solicitors that they were instructing counsel with a view to issuing court proceedings, and on 18 July 2003 wrote to them further, stating that it was the complainants’ intention “to have the extension pulled down and removed”. On 7 August 2003 there was a preliminary hearing where the complainants sought an interim injunction, which was refused because the building works by that time were very nearly complete, and also because the judge was of opinion that damages would provide an adequate remedy.

When the case went for a full hearing, however, in November 2003, the trial judge, Judge Bowers, came to the conclusion that there had been a clear breach of covenant and that damages would not provide an adequate remedy, and granted a mandatory injunction requiring that the offending extension be demolished by 31 March 2004. The defendants appealed, but without success: the complainants had notified the defendants in good time that they objected to the proposed building works, and that they would seek to prevent them by court action; the defendants had chosen to proceed with the works notwithstanding, and in effect they had chosen to do so at their own risk. Peter Gibson LJ said that in the circumstances he had no hesitation in dismissing the appeal; Jacob LJ went somewhat further, though his judgment as reported was far shorter. He said:

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  I agree. This was a hopeless appeal. I would add only this. Where there is doubt as to whether a restrictive covenant applies or whether consent under a restrictive covenant is being unreasonably withheld, the prudent party will get the matter sorted out before starting to build, as could have been done in this case. If he takes a chance, it will require very strong circumstances where, if the chance has been taken and lost, an injunction will be withheld.

Privity of contract: Landlord and Tenant Act 1995

Avonridge Property Co. Ltd v. Mashru [2004] EWCA Civ 1306; [2005] 05 EG 204

As readers will be aware, the 1995 Act modified the law relating to the continuing liability of landlord and tenant under the basic principles of privity of contract, primarily as regards liabilities in respect of leases commencing on or after 1 January 1996 (“New leases”). Section 25(1)(a) of the 1995 Act contains an anti-avoidance clause which is set out in the following terms:

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  Any agreement relating to a tenancy is void to the extent that … it would apart from this section frustrate the operation of any provision of this Act…

Section 8 of the 1995 Act sets out quite detailed provisions dealing with the possible application by the landlord for release from the landlords’ covenants on assignment of the landlord’s reversion, and with application by the landlord to the court for release of such obligations if the landlord’s initial request to the tenant for release is refused.

In the instant case the question at issue was whether a provision in Clause 6 of certain subleases whereby the liabilities of the mesne landlord would automatically come to an end on disposal by the mesne landlord of the headlease offended against the provisions of s.25(1)(a).

Yes, it did, said the Court of Appeal: to quote Jonathan Parker LJ:

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  I reach this conclusion without regret, since it seems to me to be wholly consistent with the recommendations of the Law Commission in its report [No 174 entitled Landlord and Tenant Law: Privity of Contract and Estate 1988]…As the Law commission said in para. 4.5 of the report a landlord should have the opportunity to seek a release of its landlords’ obligations “if, but only if” it complies with prescribed conditions. The words in…Clause 6 of the subleases represent a clear attempt by the appellant [mesne landlord] to avoid the need to do so. I would dismiss this appeal.

Hooper and Pill LJJ agreed.

Business tenancies

Parsons and another v. George and another [2004] EWCA Civ 912; [2004] 40 EG 150

In this case the Court of Appeal had to decide whether the court had jurisdiction to amend the names of the parties under CPR 19.5(1)(c) where the defendant had been named wrongly in error and where by the time that application to amend the name of the defendant was made the period of time permitted under Part II of the Landlord and Tenant Act 1954 for the commencement of proceedings for the grant of a new tenancy had already expired. The court considered the case law which had earlier been applied to the old RSC Ord.20 where the courts had in the main adopted a fairly liberal interpretation of the powers of the courts in cases such as this, and in particular the cases of Evans Construction Co. Ltd v. Charrington and Co. Ltd. [1983] 1QB 810; [1982] 2EGLR 61; (1982) 264 EG 347 and Signet Group plc. v. Hammerson Properties plc (1997) The Times, 15 December, as well as its own more recent decision as to the proper interpretation of CPR 19.5(3) in Home-Roberts v. SmithKline Beecham plc [2001]EWCA Civ 2006; [2002] 1WLR 1662, before deciding that the court did indeed have jurisdiction to amend the names of the parties in such a case, and that the discretion of the court in this instance should be exercised in favour of the claimant tenants since the error in the circumstances of this particular case had been obvious and neither the landlord nor her solicitors could have been misled by it.

As to the terms of the new lease where the landlord was assembling land with a view to carrying out a comprehensive redevelopment and there was a difference of opinion between the parties as to whether the new lease should contain a break clause, and if so as to when and on what terms it should be exercisable, see: Davy’s of London (Wine Merchants) Ltd v. City of London Corporation and another [2004] EWHC 2224; [2004] 49EG 136

The law is stated as it is understood to be up to 28 February 2005

Geoffrey Waterson and Rosalind Lee