Injunctions and restrictive covenants: enforceable and/or avoidable covenants?

That is a slightly clumsy title, but it is impossible pithily to summarise the wide-ranging discussion in Signature of St Albans (Property) Guernsey Ltd v Wragg & ors [2017] EWHC 2352 (Ch).

In Wragg, the applicants had brought an application under s 84(2) Law of Property Act 1925 (and under CPR Part 8), which allows the Court to make declarations as to the effect and construction of any restrictions affecting freehold land. The land in question had originally formed part of a large estate; around the turn of the 20th Century it had been sold off in five parcels, each subject to a variety of restrictive covenants (“the 1910 covenants”). The claimant in the action was the owner of one of those parcels, together with some parts of other parcels. It had obtained planning permission to construct a residential care home on the intact parcel. This, it was agreed, would be in breach of the 1910 covenants, but the claimant sought to argue that those covenants did not continue to affect the property and were not enforceable against them as owners of the property.

The claimant ran two separate arguments (c.f. para 25 of the judgment). Firstly it argued that there had been breaches of the vendor covenants which deprived the defendants of the right to enforce the purchaser covenants. Secondly it said that those entitled to the benefit of the purchaser covenants had made or permitted such changes in the character of the neighbourhood that those covenants had ceased to have some practical effect, and that it was not necessary to show that the change in character meant that there was no longer any value left in the covenant at all.

The Court in Wragg applied the general principle regarding the grant of an injunction from Australian Hardwoods Pty Ltd v Commissioner for Railways [1961] WLR 425

“. . . where the agreement is one which involves continuing or future acts to be performed by the plaintiff, he must fail unless he can show that he is ready and willing on his part to carry out those obligations, which are, in fact, part of the consideration for the undertaking of the defendant that the plaintiff seeks to have enforced.”

The relevant (alleged) breach on which the claimant sought to rely was the building of houses elsewhere on the estate, which exceeded (it was argued) a density limitation. The Court’s factual observations in Wragg were that there had not been much (if anything) in the way of breach here. But the more interesting point is that the breach (if any) had been performed by the defendants’ predecessor in title. At para 68 the Court noted that:

. . . [t]he covenant in the present case not to build more than a certain number of houses is broken when the supernumerary house is built. It is not broken at every moment thereafter that the owner for the time being fails to remove it . . .

So the historic breach of the vendor covenant did not disentitle the vendor’s successors in title from enforcing the purchaser covenants.

The claimant then argued that, since there are cases where a person can become disentitled to seek an injunction because of the behaviour of a third party through whom he claims, then a breach of a covenant by a successor in title to one of the parcels of land would disentitle all successors in title to the other parcels of land from enforcing the vendor covenant by injunction (and if that isn’t sufficiently clear, the actual judgment text is at paras 69 – 70).

In response, the Court  emphasised the difference between personal and property rights. At para 79:

In English law, the burden of a positive covenant is not transmissible to (is not binding on) a successor in title, either at common law or in equity. On the other hand, in equity, the burden of a negative covenant which regulates the user or enjoyment of land is so transmissible (or binding). The hallmark of a property right, as opposed to a personal right, is that it is a right relating to a thing which is binding not only as between the parties but also against third parties. That is exactly what covenants restrictive of the user of land are.

So, even if an individual successor in title might debar him or herself from seeking an injunction by reason of their own behaviour, that would not prevent other collateral successors in title, not so disabled, from doing so.

The rest of the judgment is, I think, similarly helpful. For instance, the Court emphasises at [79] that, in the context of property law (e.g. a sale of real property), the consideration given and received is the property rights which have been transferred ([78]: “. . . the totality of the stipulations and benefits on the one side (including the covenant and the conveyance of land) against the totality of the stipulations and benefits on the other (including the covenant and the purchase price)” – and not simply one set of covenants against another set of covenants.

The second argument – based on change of character – was dealt with much more shortly, and I cite only the critical paragraph here. The discussion, however, I think worth reading in full: it is interesting.

[96] In my judgment the answer is not that there are two standards, one for judging changes in the character of the neighbourhood when caused by the applicant for an injunction or his predecessors in title, and the other for judging such changes when caused by other people.Instead, there is one standard only, which applies to everyone, except to an applicant who has (or whose predecessors have) in effect represented that the covenants are no longer enforceable, and others have relied on that representation to their detriment. In other words, the only exception is where an estoppel argument can be raised against the applicant for an injunction. That is quite different from saying that in the case of acts or omissions of the applicant or his predecessors it is enough if the covenants have lost some practical effect. In my judgment, that would be an entirely unprincipled distinction to draw, whereas a general rule for everyone subject to an estoppel defence against a particular applicant is consistent with principle.

“It is quite impossible” (the Court concluded, citing Chatsworth Estates Co v Fewell [1930] 2 Ch 224, 230) “here to say that there has been so complete a change in the character of this neighbourhood as to render the covenants valueless to the plaintiffs.” The purpose of the covenants had not, therefore, failed, and so the covenants were still available to be relied upon by the defendants.

I’d reiterate that the judgment is, I think, worth reading in full; although only a decision of the High Court, it is intrinsically interesting and a useful rehearsal of key principles.