Summary

On the proper construction of a commercial agreement, a strip of land that had to be retransferred back to its original owners was subject to restrictive covenants which applied to the rest of the owners' retained land. The parties' intention had been for the owners' retained land to be burdened by covenants in order to make the neighbouring defendants' land viable for residential development, and a literal reading of the covenants would negate that purpose.

Facts

The court was required to determine issues arising out of a neighbour dispute concerning a strip of land

The strip had been part of a parcel of land sold and transferred by the claimants in 2003 to the defendants' predecessors in title for the purposes of a residential development. The contract contained a provision that if a barn on the land transferred was demolished at any time, the defendants' predecessors would re-transfer the aforementioned strip to the claimants. The claimants also entered into restrictive covenants binding part of the land which they had retained (the "retained land") by prohibiting the carrying on of activities which would be normal in an agricultural setting, but which would be a nuisance to residential estate neighbours. The defendants' predecessors in title constructed a residential property which they sold to the defendants in 2005. The defendants were required to transfer the strip to the claimants in the event of demolition of the barn. In 2009, the defendants demolished the barn.

The issues were whether (1) the restrictive covenants entered into in 2003 applied to the strip once transferred back to the claimants; (2) the appropriate remedy for the breach of the covenant to retransfer the land was specific performance; (3) if so, it should only be ordered on terms that the claimants agreed to use the strip in accordance with the 2003 restrictive covenants; (4) the defendants were in breach of contract in failing to transfer the strip after demolishing the barn; (5) the claimants had suffered any recoverable loss in relation to lost profits from a commercial livery business which they claimed they had intended to launch once they had the strip back.

Held

(1) The first issue was a question of construction as to whether the phrase "retained land" could include land which was not at that time retained, but was adjacent to the retained land, and was later transferred back to the claimants under the transfer provisions to add to the retained land. If the words of the covenant were read literally, then the strip could not be part of the retained land as defined. However, the consequences of the literal reading meant that the claimants were restrained from carrying on certain activities on the retained land which would be a nuisance to the defendants, but were not restrained in relation to the strip. That negated the purpose of entering into the covenants in the first place. It was plain that the parties' intention was that the land which the claimants retained in the vicinity of the defendants' land was to be burdened by covenants in order to enhance its value to the defendants' predecessors in title and to make it viable to undertake the residential development. The phrase "retained land" in the 2003 restrictive covenants was to be construed as including the land which was subsequently retransferred to the claimants pursuant to the terms of the transfer itself. If that was wrong, then a term should be implied in order to give business efficacy to the transaction (see paras 67-69 of judgment).

(2) There was no suggestion that damages would be an adequate remedy, and there was no reason in principle not to grant specific performance of the covenant (para.71).

(3) The issue of whether specific performance should only be ordered on terms that the claimants agreed to use the strip in accordance with the restrictive covenants fell away on the basis of the earlier decision as to construction. However, the court would not have so ordered. The jurisdiction to impose terms when ordering specific performance was not related to some kind of general appreciation of the overall fairness of the situation. Specific performance was ordered because the parties had contracted that a thing be done. Assuming that the phrase "retained land" did not include the strip, and that there was no implied term, that was what would be ordered (para.72).

(4) The defendants were in breach of contract and should have transferred the strip to the claimant at least from February 2012. The claimants were entitled to £2 in nominal damages (para.73).

(5) The claimants had not suffered any recoverable loss as a result of the breach entitling them to substantive damages. They could not prove that they had intended to establish a commercial livery business using the strip. Even if the court was wrong about that, an issue of remoteness would arise. The range of possible uses of land was so wide, and so many regulatory and other hurdles had to be jumped before they could be undertaken, that there had to be something particular to show that a party undertaking a liability to transfer land was aware that the proposed recipient used it in any particular way (paras 74-75, 77).

Judgment accordingly