Cygnet Healthcare Ltd v Greenswan Consultants Ltd

An assignee of the benefit of a restrictive covenant may enforce it under section 78 of the Law of Property Act 1925 even where the assignment is not an absolute assignment complying with section 136. A party entitled to require works under a covenant may carry them out where the covenantor has failed to do so and recover the reasonable cost, subject to the covenant’s terms. Rectification of the register may be ordered where a mistake has been substantially contributed to by the registered proprietor or where it would otherwise be unjust to leave the register unaltered. A claimant seeking damages for breach of an access covenant must take reasonable steps to mitigate its loss.

Two actions concerning adjoining healthcare development land in Stevenage were tried together. In the roadway action, the claimant sought an indemnity from Greenswan for the cost of constructing a distributor road which Greenswan had covenanted to build. Greenswan counterclaimed for alleged trespass, interference with access and defective construction.

In the second action, the claimant sought rectification of the register to give effect to a restrictive covenant preventing use of adjoining land for mental-health care. Greenswan and Pineriver counterclaimed for damages and rectification concerning rights to connect to a foul-water system. The central issues were the enforceability of the roadway covenant, rectification for mistake, and whether the drainage claims were defeated by the defendants’ failure to mitigate.

1. The claimant was entitled to enforce the roadway covenant and recover the cost of construction. Although the assignment did not comply with section 136 of the Law of Property Act 1925, it was effective under section 78 because the benefit was annexed to the retained land. The court applied Federated Homes v Mill Lodge Properties Ltd [1980] 1 WLR 594.

2. Greenswan had failed to construct the road despite repeated opportunities. The claimant was therefore entitled to construct it when delay threatened its development. The absence of adoption as a highway did not defeat recovery, particularly since the road had been built to a professionally prepared design and the claimant sought less than the cost of an adoptable road.

3. The counterclaim in the roadway action failed, save for nominal or very minor damages for two admitted trespasses. The alleged additional trespasses, boundary-marker interference and consequential losses were not proved.

4. The failure to include the restrictive covenant resulted from a mutual mistake. Greenswan, through Mr Raja and its solicitors, had knowledge of the intended covenant and had substantially contributed to the mistake. It would also be unjust for Greenswan to rely on separate legal personality to retain the benefit of the mistake. Rectification was therefore appropriate in principle under paragraph 3 of Schedule 4 to the Land Registration Act 2002.

5. The defendants had continuing drainage rights, but their damages claim failed. The claimant had reasonably imposed conditions on access, and the defendants had failed to take available opportunities to connect. They had therefore failed to mitigate their loss. The drainage counterclaim was dismissed, and the claimant obtained judgment on the second action. No order for specific performance or further rectification was made concerning the drainage connection.

Not stated in the judgment.