Restrictive Covenants Declaration that a restrictive covenant is no longer enforceable

Case 

Bath Rugby Ltd v Greenwood & Ors v Bath Recreation Ltd [2021] EWCA Civ 1927

Summary

The case concerned an application by Bath Rugby Ltd under Section 84(2) of the Law of Property Act 1925 that its land was no longer affected by a pre Law of Property Act 1925 restrictive covenant preventing use of the land for trade or business, which may be a nuisance, annoyance or disturbance. The Court of Appeal granted the declaration sought, on the basis the conveyance which imposed the covenant did not sufficiently identify the land that was intended to benefit from the covenant.

Facts

The Claimant, Bath Rugby Ltd is the tenant under a long lease of the western part of a large recreation ground (known as “the Rec”) in Bath, from which it runs a rugby club. Over several years, Bath Rugby Ltd formulated a project to redevelop its land (which includes a stadium) to provide better facilities and some retail commercial outlets, and associated car parking. The Defendants opposed this proposal, relying on a restrictive covenant registered against the Claimant’s land in a conveyance dated 6 April 1922, which reads as follows:

“…no workshops warehouses factories or other buildings for the purpose of any trade or business which may be or grow to be a nuisance and annoyance or disturbance or otherwise prejudicially affect the adjoining premises or the neighbourhood shall at any time hereinafter be erected upon the said hereditaments and premises except the part thereof now in the occupation of Artcraft Limited and that nothing shall be hereafter erected placed built or done upon the said hereditaments and premises including such part thereof as last aforesaid which may be or grow to be a nuisance and annoyance or disturbance or otherwise prejudicially affect the adjoining premises or the neighbourhood…”

The Claimant accepted that if the covenant was enforceable by anyone, it had the potential to interfere with its redevelopment project. However, the Claimant contended that there is no one who can claim to have the benefit of the covenant, as the land which may have the benefit of the covenant was not sufficiently defined in the conveyance. The  Defendants (which included a number of local residents) disagreed, and claimed to have the benefit of the covenant by annexation.

Bath Rugby Ltd therefore made an application pursuant to Section 84(2) of the Law of Property Act 1925 for a declaration that it was, in effect, free from the covenant.

Issues

Did the 1922 conveyance sufficiently identify the land to which the benefit of the covenant was intended to be annexed?

First instance (where relevant)

At first instance the High Court held that the effect of the 1922 conveyance was to annex the benefit of the covenant to the vendor and its tenants, as the wording of the covenant referred to the “adjoining land or the neighborhood”. This meant that some of the Defendants did have the benefit of the covenant and it was enforceable by them (among others).

Decision on appeal

The Claimant appealed the High Court decision, and subsequent award that it should pay the Defendants’ costs on the indemnity basis.

The Court of Appeal reiterated that the critical question is “whether there is manifested in the conveyancing documents, construed in the light of the surrounding circumstances, an intention to benefit certain land".

In the Court of Appeal’s view, the words ‘adjoining land or the neighbourhood’ were neither sufficient, nor could they be construed in the artificial way that the judge at first instance had done. This was particularly so in the context of the restrictive covenant itself, which also prevented nuisance and annoyance, given that the words ‘adjoining land or the neighbourhood’ were more suitable for describing the area the prohibited activities were not to affect, rather than being a description of the benefited land to which the covenant as a whole relates.

As such, the Court of Appeal concluded that the benefit of the covenant had not been annexed to land and there was therefore no one who could now enforce the benefit. The Court of Appeal allowed the appeal.

Comment

The case is of significant practical and legal importance. The judgment provides clarification on how the court will approach annexation relating to a pre-1925 covenants, including what is considered to be “easily ascertainable”.

The case highlights the importance of clearly and accurately identifying the land to benefit from a covenant, and the implications of a failure to do so sufficiently, although issues relating to construction are more frequent in historic conveyances (such as the one seen in this case).

On a practical level, older covenants are still in existence although it is not unusual for parties to ignore or overlook them, on the basis they consider it unlikely anyone will be able to enforce them. Whilst the Defendants were ultimately unsuccessful in this case, it confirmed that there is no ‘age barrier’ to enforcing such covenants, so they should be considered carefully.

This article was first published in Property Law UK. For more information on the above please contact Emma Preece or your usual Charles Russell Speechlys contact.