Dano Ltd. v Earl Cadogan

A restrictive covenant must be construed according to its language and the particular instrument. Where its duration is expressed by reference to land forming part of a named settled estate, the word settled refers to the legal settlement then in existence. It does not extend to a later and different arrangement merely because the land remains connected with the same family. A purposive construction cannot preserve enforceability against clear wording identifying when the covenant ends. Once the settlement has been dismantled and the land no longer forms part of that settled estate, the covenant’s benefit is no longer enforceable.

In 1929, land sold by the Cadogan family to the Metropolitan Borough of Chelsea was made subject to a restrictive covenant limiting its use to housing for the working classes. The covenant operated while neighbouring property formed part of the Cadogan Settled Estate in Chelsea. The estate structure was reorganised in 1961 under the Settled Land Act 1925, and the Site ceased to be settled land.

Dano acquired the Site and sought to develop it for private housing. The High Court, Chancery Division, decided that the covenant was in effect unenforceable. The appeal concerned whether the reference to the Cadogan Settled Estate meant the settlement existing in 1929 or continuing Cadogan family ownership in another legal form.

The appeal was dismissed unanimously. Costs were to be agreed and drafted between the parties.

1. The covenant’s duration depended on the adjoining or neighbouring property, or part of it, forming part of the Cadogan Settled Estate in Chelsea. The issue was one of construction of the particular covenant.
2. The word settled had legal significance. It directed attention to the settlement as it existed in 1929, rather than to a different legal arrangement created approximately 30 years later. The proposed interpretation, under which the covenant remained enforceable while any member of the Cadogan family retained an interest, was incompatible with the language and grammar of the covenant.
3. The reorganisation in 1961 brought the settlement to an end and the Site ceased to be settled land. The covenant therefore ceased to be enforceable. It could not be revived by the subsequent vesting of interests in family-controlled companies.
4. Lord Justice Carnwath rejected reliance on the wider philanthropic purpose of the covenant. If continued protection was thought necessary in 1961, the matter should have been addressed before the settlement was dismantled. Sir Christopher Staughton agreed that an asserted intention to preserve restrictions could not override the clear words specifying when the covenant ended.
5. Lord Justice Schiemann explained that the relevant phrase both identified, in broad terms, the land intended to receive the benefit and required a continuing Cadogan link of the specified settled kind. Once that link was lost, the benefit was no longer enforceable.

• Court of Appeal (Civil Division): On 19 May 2003, the court dismissed the appeal unanimously. [2003] EWCA Civ 782
• High Court, Chancery Division: Mr Justice Etherton decided the construction issue in favour of Dano, with the result that the covenant was in effect unenforceable. Three other grounds were decided in favour of Cadogan and were not pursued on appeal.