Ashburn Anstalt v Arnold

An unregistered estate contract protected by an overriding interest under the Land Registration Act 1925 does not enlarge or alter the underlying contractual rights. It protects those rights only in respect of the land actually occupied and subject to the overriding interest. The purchaser is not required to build a shop on that land. If the only relevant shop is built wholly on the protected site, or a shop is built there but no qualifying shop elsewhere is offered, the former occupier may require a lease of that shop. A shop partly outside the protected site falls outside the right, subject to a possible trivial-overlap exception. Damages in lieu of specific performance remained discretionary and were not determined in advance.

Arnold & Co. had sold its leasehold interests in shop premises at 126 Gloucester Road under agreements containing a right to remain temporarily and an undertaking to grant a lease of a shop in the proposed redevelopment. The Court of Appeal had previously held that the first provision created a lease and that the second was an estate contract protected by an overriding interest only over the land occupied by Arnold & Co. when Ashburn acquired the freehold. The estate contract had not been registered, and Ashburn had no contractual relationship with Arnold & Co.

The present consequential hearing concerned whether Arnold & Co. could restrain development, compel the grant of a lease on the protected land, or obtain damages in lieu of specific performance if Ashburn gave no undertaking to offer premises elsewhere.

The Court of Appeal, with Lord Justice Fox giving the principal reasons and Lord Justices Neill and Bingham agreeing, made the declarations sought.

1. Effect of the overriding interest. The unregistered clause 6 estate contract was void against Ashburn except to the extent that its provisions constituted an overriding interest. That interest protected existing contractual rights only in respect of the land actually occupied by Arnold & Co. It did not extend or alter those rights. Arnold & Co. could have no greater rights against Ashburn than it had against Cavendish, the former freeholder.
2. Extent of the protected land. Arnold & Co. had no enforceable rights over land outside the Gloucester Road site. It could not claim a lease of a shop built wholly outside that site. Nor could it claim a shop built partly on the site and partly outside it, because the contractual subject matter was an entire shop. The court left open whether a trivial overlap might be disregarded.
3. No obligation to build. Clause 6 did not require Ashburn to construct a shop on the protected site. The undertaking to grant a lease was contractual, but Ashburn remained free to decide where shops would be located.
4. Entitlement to a lease. If the only shop premises constructed on the development were wholly on the protected site, Arnold & Co. could insist on a lease there. The same result could follow if a shop were built on the site and other shops elsewhere, but Ashburn refused to offer any qualifying shop. In that event the court could permit Arnold & Co. to choose and enforce the choice. Question (a) was therefore answered no and question (b) yes, subject to those circumstances.
5. Damages. An award of damages in lieu of specific performance was discretionary. The court declined to speculate before completion of the development about whether such relief might become appropriate.

The plaintiffs were awarded the costs of the further argument. Leave to appeal to the House of Lords was refused.

• Court of Appeal: On 25 February 1988, following its earlier judgment on 27 October 1987, made declarations concerning the scope of Arnold & Co.’s rights and refused leave to appeal to the House of Lords.
• High Court of Justice, Chancery Division: The matter arose on appeal from a decision of Mr Evans-Lombe Q.C., sitting as a Deputy High Court Judge. No citation for that decision is stated in the judgment.