Property Litigation Blog: Declarations – the hidden weapon in the property litigator’s armoury?

Introduction

You have probably all had clients who want to stop a development which may interfere with their property rights but who are reluctant to apply for an interim injunction. Having to offer a cross-undertaking as to damages is likely to put off the average householder. On the other hand, there is no guarantee that a court will grant a mandatory injunction to pull down a building following a trial of the issues, particularly since there has been a judicial shift in favour of the development of land following the restating of the circumstances in which damages will be awarded in lieu of an injunction.

In Coventry v Lawrence [2014] AC 822, the Supreme Court revisited the authorities and confirmed that whilst an injunction remains the primary remedy, a more flexible approach is required. Whilst if all 4 requirements of the test set out by AL Smith LJ in Shelfer v City of London Electric Lighting Co (No.1) [1895] 1 Ch 287 were met, the court would usually refuse injunctive relief, the court had a discretion which should not be fettered. So, all factors are relevant including the public interest. In particular, Lord Neuberger indicated that in a case where there was no prejudice to the claimant other than the bare fact of an interference with his rights and there is no other ground for granting an injunction, the court ought to “incline to damages” (paragraph 122).

Equally, developers need to know where they stand. Whilst it is tempting to plough on with a development despite objections, sometimes the court will order a building to be demolished: see for example HKRUK II (CHC) Ltd v Heaney [2010] EWHC 2245 (Ch), a right to light case. The court concluded that a mandatory injunction was appropriate and ordered the developer to demolish two floors of a new building that had already been let.

Seeking a declaration: the way forward?

One solution to this dilemma might be to encourage clients to instigate court proceedings at an early stage and to seek a declaration as to their rights. Whilst this goes against the grain in a world where alternative dispute resolution (ADR) is king, endless exchanges of correspondence can be expensive and frustrating for the client.

The jurisdiction to grant a declaration is statutory and is contained in section 19 of the Senior Courts Act 1981. The court may make a binding declaration whether or not any other remedy is claimed: see CPR 40.20. It is a matter for the court’s discretion whether to grant a declaration in the circumstances of any particular case, although it is of course a judicial discretion to be exercised in accordance with general principles.

Pavledes v Hadjisavva

A declaration was sought by the objector in Pavledes v Hadjisavva [2013] EWHC 124. This case involved a potential right to light infringement. H owned a house adjoining P’s property and had obtained planning permission to build a two-storey extension. P obtained a surveyor’s report and asserted that H’s proposed development would infringe their right to light. H disputed that evidence. Extensive correspondence ensued for the next three years. H eventually gave an undertaking not to begin work without giving 14 days’ notice. The undertaking was without prejudice to H’s contention that the development would not affect P’s rights.

P issued proceedings for a declaration to protect their position. H submitted that no practical purpose would be served by granting a declaration, as there was no imminent threat to P’s rights. The court disagreed. David Richards J stated that as a matter of principle an imminent infringement was unnecessary. Having decided that there was a real dispute between the parties the judge asked himself the question: would it be just and would it serve a useful purpose to grant declaratory relief? The judge decided that it would. It is interesting to note that H submitted that if P had plans to sell their property, there would be a justification for the grant of a declaration at that stage, but not in circumstances where a sale was no more than a possibility in the future. The judge rejected that submission. He said:

“I do not accept that the claimants are obliged to wait until then before seeking a declaration of their rights. I see every reason for dealing with it now, rather than waiting until either the claimants wish to sell or the defendants re-assert their position, and then having to deal with it, perhaps at very short notice.”

Signature of St Albans (Property) Guernsey v Wragg

In the very recent case of Signature of St Albans (Property) Guernsey Ltd v Wragg and others [2017] EWHC 2352 (Ch), it was the developer’s turn to seek declaratory relief in respect of the enforceability of restrictive covenants which, on their face, prevented the developer from building a residential care home. The developer invoked, inter alia, the court’s statutory jurisdiction contained in section 84(2) of the Law of Property Act 1925, which provides as follows:

“The court shall have power on the application of any person interested –

(a) To declare whether or not in any particular case any freehold land is [or would in any given event be] affected by a restriction imposed by any instrument; or

(b) To declare what, upon the true construction of any instrument purporting to impose a restriction, is the nature and extent of the restriction thereby imposed and whether the same is [or would in any given event be] enforceable and if so by whom.”

The background to the case was that in the late 19th century, the land now owned by the developer had been part of a larger estate belonging to Mr Henry Jenkin Gotto. The land was subject to restrictive covenants benefiting other parts of the estate with the intention of preserving ”so far as possible the residential character of the neighbourhood at a high level of quality” (paragraph 98). It was accepted by the developer that if the covenants were enforceable, the construction of the care home would be a breach of covenant. It argued that the covenants were not enforceable for two reasons.

Firstly, there had been breaches of the vendor covenants which deprived the defendants of the right to enforce the purchaser covenants. For this purpose the claimant relied on the decisions in Measures Brothers Ltd v Measures [1910] 2 Ch 248, Australian Hardwoods v Railways Commissioner [1961] 1 WLR 425, Chappell v Times Newspapers [1975] 1 WLR 482, and National and Provincial Building Society v British Waterways Board, CA unreported, 26 November 1992. Secondly, the developer argued 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. The developer submitted 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 (as in Chatsworth Estates v Fewell [1931] 1 Ch 224).

HHJ Paul Matthews (sitting as a judge of the High Court) rejected both arguments.

As to the first argument, there was no dispute that some of the defendants’ predecessors in title had breached the covenants. In some instances more than one house had been built on a particular plot and in particular a block of flats known as Pine Ridge had been built on part of the estate. The judge concluded that as a matter of construction, the covenants did not require a successor in title (rather than either the original vendor or the covenant breaker) to remove a supernumerary house. Further, there was no evidence that the conduct of any of the objectors’ own predecessors in title had breached the covenants and the breach by the predecessor in title of a neighbouring owner did not prevent the objectors from enforcing the covenants on their own behalf. Any application of the benefit and burden doctrine identified in Halsall v Brizell [1956] 1 Ch 169 was rejected as that doctrine applied to positive covenants only and had no application in this case which concerned negative covenants.

As to the second argument, the covenant still had value despite the increase in density caused by past breaches. There was no lower standard of change in the character of the neighbourhood where the change was in some way attributable to the acts or omissions of the objectors or their predecessors in title. The judge clarified that the only exception would be where an applicant for an injunction had in effect represented that the covenants were no longer enforceable, in which case an estoppel might arise.

The judge therefore concluded that the restrictive covenants continued to affect the developer’s land and were in principle enforceable by injunction by any or all of the defendants.

Whilst the developer lost in this case, it seems entirely sensible that it chose to seek a declaration before incurring further significant costs in relation to the development. There were 20 defendants. The principle legal issues that were common to all could be dealt with swiftly and (relatively) cheaply by way of Part 8 proceedings seeking declaratory relief. The developer was able to avoid the additional time and cost involved in dealing with multiple injunction proceedings.

This article was first published on Practical Law’s Property Litigation Blog.