(1) Millgate Developments Ltd (2) Housing Solutions Ltd v (1) Bartholemew Smith (2) Alexander Devine Children’s Cancer Trust (2016)
The tribunal ordered the modification of a covenant not to build on a plot of land on which a developer, in knowing breach of the covenant, had built an affordable housing development. Notwithstanding that the adjoining land benefiting from the covenant was intended for use as a children's hospice with private and secluded outdoor amenities, the public interest in the provision of affordable accommodation was sufficient to override the private rights of the objectors.
A developer applied for an order that the tribunal exercise its discretion under the Law of Property Act 1925 s.84 to modify a restrictive covenant which it had knowingly breached by building a housing development.
The land on which the development was built (the application land) was immediately adjacent to land owned by a trust which was building a children's hospice. The hospice land had been gifted to the trust by one of the objectors and had the benefit of the covenant binding the application land. The covenant specifically prohibited the use of the application land for building or for any purpose other than parking. The conveyance which contained the covenant also provided for an overage payment in the event of future planning permission being granted. The developer built 13 affordable houses on the application land. According to the objectors, the carefully planned environment of the hospice and the outdoor amenities they intended to provide there for terminally ill children and their families were seriously compromised by the presence of the new development so close to their boundary. The developer offered a contribution of £150,000 to the trust in return for the trustees' consent to the modification of the covenant.
The developer submitted that it was in the public interest to modify the covenant, the main purpose of which was said to be to enable the vendor to secure a share in any potential future development value, not to confer a practical benefit on the adjoining land.
(1) The buildings on the application land did not impede views from the hospice land but they did have an adverse impact on the setting of the hospice by their scale and proximity. The recreation areas within the hospice grounds would no longer be as private and secluded as they would have been if the covenant had been observed. The covenant therefore secured practical benefits for the hospice land (see paras 61-67, 72-73 of judgment).
(2) Bearing in mind the use which the trustees wished to make of the hospice land, namely the provision of an attractive and supportive environment for children with life-limiting conditions, the cost of planting a sufficient screen to counteract overlooking and loss of privacy from the houses on the application land would be between £37,440 and £70,000. A practical benefit, the loss of which could be mitigated only by expenditure of that magnitude, could properly be regarded as a benefit of substantial value or advantage within the meaning of s.84(1A). The same conclusion was reached by considering how those lost benefits affected the service intended to be provided by the hospice. Therefore, the tribunal had no power to modify the covenants under the first limb of s.84(1)(aa) (paras 92-93, 95-96).
(3) The existence of planning permission for the use of the application land for housing was a material consideration under s.84(1)(aa). Although it did not mean that private rights could necessarily be overridden, it did reflect an objective assessment of appropriate land use which fully took into account the public interest pursuant to s.84(1B) of the Act. It was also highly material that the development consisted of affordable housing intended for occupation by tenants who were likely to have been waiting for such accommodation for a considerable time. Impeding occupation of the houses which now stood on the application land and were immediately available to meet a pressing social need was clearly not in the public interest where the covenant was the only obstacle to their being used. Thus, the public interest in the instant case was sufficiently important and immediate to justify the exercise of the tribunal's power under s.84(aa) to override the objectors' private rights (paras 101-102, 104, 106-107).
(4) Although the provision of additional boundary planting would not insulate the hospice entirely from all adverse consequences of the use of the application land for housing, in principle an award of money sufficient to provide that planting was capable of providing adequate compensation to the trustees (para.110).
(5) The exercise conferred on the tribunal by s.84(1) to discharge or modify a restrictive covenant was to be exercised judicially and not with a view to simply punishing a covenant-breaker, Green Masjid and Madrasah Trustees, Re Green Masjid and Madrasah Trustees, Re  UKUT 355 (LC) applied. In the instant case, the public interest factor outweighed all others since it would be unconscionable for the houses on the application land to remain empty. The tribunal therefore exercised its discretion in the developer's favour (paras 116, 120-121).
(6) An award of compensation pursuant to s.84(1) was intended as compensation for the loss or disadvantage suffered by the trustees so far as the relevant practical benefit was concerned and was not designed to transfer to them some share in the developer's profit. Taking into account the developer's offer and its experience and resources in assessing an appropriate level of compensation, the sum of £150,000 was awarded to the trustees as a condition of the modification (paras 123, 126).