Douglas Gafford v A H Graham & Grandco Securities Ltd

Acquiescence in enforcing restrictive covenants depends on whether, in all the circumstances, continued enforcement would be unconscionable. The same test applies whether the right is legal or equitable.

A claimant who knowingly stands by while a permanent and substantial structure is unlawfully erected will generally be refused a mandatory injunction for its demolition. The court must nevertheless exercise its discretion flexibly. Where an injunction would be oppressive and the claimant has indicated willingness to accept money, damages in lieu may be awarded, and must adequately compensate the claimant.

In an appropriate restrictive-covenant case, damages may be assessed on the Wrotham Park basis by reference to the sum reasonably required for relaxation of the covenant.

The claimant owned land benefiting from restrictive covenants affecting adjoining land later acquired by the defendants. The covenants restricted use to a livery yard and horse stabling, required approval of plans for new buildings, and limited caravans.

The trial judge found breaches involving conversion of a bungalow, extension of a barn, construction of an indoor riding school and operation of a riding-school business. He rejected acquiescence, granted prohibitory injunctions and awarded damages.

The defendants appealed against the injunctions and damages. The claimant cross-appealed for demolition of the riding school or further relief. The central issues were acquiescence, the appropriate relief for continuing and completed breaches, and the assessment of damages in lieu of an injunction.

1. Appeal allowed; cross-appeal dismissed. The injunctions were discharged and the damages were reduced from £36,750 to £34,375. The trial costs order stood, and the defendants received two-thirds of their appeal costs.
2. As to the bungalow conversion and barn extension, the claimant knew of his rights, made no complaint to the defendant for about three years and treated those matters as closed. His right against a successor in title was equitable. Nevertheless, the distinction between legal and equitable rights should not produce different acquiescence tests. The question was whether continued enforcement would be unconscionable. On the facts, it was; all relief for those breaches was barred.
3. Use as a riding school, other than incidentally to a livery business, breached the user restriction. However, unlawful riding-school use between 1984 and 1989 was not satisfactorily established, and there was therefore no relevant acquiescence during that period.
4. The claimant acted promptly when construction of the indoor riding school began, so acquiescence was not an entire bar to relief concerning that building and the enlarged business. His failure to seek interlocutory relief was nevertheless an important factor. As a general rule, a person who knowingly stands by while a permanent and substantial structure is unlawfully erected should not obtain an injunction requiring its demolition.
5. The principles governing damages in lieu under Lord Cairns' Act are discretionary and adaptable. It would be oppressive and unfair to leave the prohibitory injunctions in place, particularly because the claimant had indicated that he would accept a cash settlement. The claimant was therefore entitled to damages instead, assessed so as to provide adequate compensation.
6. Wrotham Park Estate Co Ltd v Parkside Homes Ltd and Jaggard v Sawyer established the appropriate basis of assessment. The relevant figure was the sum the claimant might reasonably have demanded as a quid pro quo for relaxing the restrictions in perpetuity. A reasonable sum was £25,000, with three years' interest at 12.5%, producing £34,375.

• Court of Appeal (Civil Division): appeal from the Mayor's and City of London Court allowed; cross-appeal dismissed; injunctions discharged and damages reduced to £34,375.
• Mayor's and City of London Court: found breaches of the restrictive covenants, rejected acquiescence, granted injunctions and awarded damages totalling £36,750 including interest.