Supreme Court Judgement: Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd [2020] UKSC 45
s.84 Law of Property Act 1925, arguing ‘public interest’ and a warning to Developers to discharge or modify restrictive covenants prior to commencing development work.
Key Contact: Jennifer Butcher
Author: Abby Stephens
On 6th November 2020, the Supreme Court handed down judgement and in doing so rejected a property company’s attempt to modify restrictive covenants so that thirteen affordable houses built in breach could remain in place.
This is the first time that the highest court (whether House of Lords or Supreme Court) has considered section 84(1) of the Law of Property Act 1925 (“the Act”). Under this section of the Act, an application can be made to a tribunal for the discharge or modification of a restrictive covenant and gives the tribunal discretion to do so where one or more specified grounds are satisfied, so as to enable the development of burdened land.
Background
In July 1972, a farmer sold a parcel of land (“the Land”) to a company that already owned the land next door (“together the Site”). As part of the sale, the company covenanted that at all times (i) no building structure would be built on the Land, and (ii) the Land would only be used for car parking (“the Restrictive Covenants”). The farmer’s son, Mr Smith, later inherited a parcel of land adjacent to the Site and in 2013 gifted part of this land (“the Hospice Land”) to Alexander Devine Children’s Cancer Trust (“the Respondent”).
Millgate Developments Ltd (“Millgate”) subsequently acquired the Site, with the knowledge of the Restrictive Covenants, and in July 2013 applied for planning permission to build twenty-three affordable houses. Thirteen of the houses were to be built on the Land and therefore in breach of the Restrictive Covenants, as some of these houses would overlook the Hospice Land. Planning permission was granted, and construction began in July 2014, which was objected to by Mr Smith in September 2014. In May 2015, Millgate agreed to sell the Site to Housing Solutions Ltd (“the Appellant”).
Court Proceedings
In July 2015, Millgate retrospectively applied to the Upper Tribunal (“UT”) seeking modification of the Restrictive Covenants under section 84 of the Act, arguing that the social housing development was in the public interest. The Respondent and Mr Smith objected to this application. Construction of the hospice began in September 2015 and on 18 November 2016 the UT allowed Millgate’s application, with a condition that £150,000 was to be paid to the Respondent by way of compensation.
On 28th November 2018, the Court of Appeal (“CA”) overturned the UT’s decision and the Appellant subsequently appealed to the Supreme Court. One of the crucial factors in the CA’s decision was that Millgate proceeded with the development, in full knowledge of the Restrictive Covenants.
On 6 November 2020, the Supreme Court unanimously dismissed the appeal and the application to modify the Restrictive Covenants was refused, however for different reasons to those given by the CA. It was held that the threshold to exercise discretion had not been satisfied and therefore the primary remedy is an injunction to remove the offending development.
In the leading judgement, Lord Burrows stated that the UT erred in law by failing to consider (i) had Millgate respected the rights of the Respondent by applying for planning permission to develop an alternative plot on the Site (which did not benefit from the Restrictive Covenants) then an application under section 84 of the Act would not have been required; and (ii) had Millgate respected the rights of the Respondent by making the application before development had started, it is likely they would not have been able to satisfy the “contrary to public interest” limb of section 84(1)(aa), as they would have been met with the objection that planning permission would be granted for affordable housing on alternative unencumbered land on the Site. Therefore, the upholding of the Restrictive Covenants would not be contrary to the public interest.
Comment
The decision has important legal and practical implications for developers seeking to rely on the public interest limb of section 84 of the Act and highlights the importance of seeking to discharge any restrictive covenants prior to commencing development works.
If you have any questions in relation to the above or would like any advice in relation to breach of restrictive covenants, please contact Jennifer Butcher in our Dispute Resolution team.
