Smith Brothers Farms Ltd v The Canwell Estate Company Ltd

Under the Rentcharges Act 1977, an estate rentcharge may validly secure contributions towards services, maintenance or repairs performed for the benefit of the affected land and other land forming part of a wider estate. The benefit need not be specific, sole or direct to each parcel.

Section 2(5) operates as an anti-avoidance safeguard. It does not retrospectively invalidate a rentcharge that was valid when created. It prevents reliance on the charge to recover a particular contribution that is unreasonable in relation to the covenant.

Under a common estate scheme, a covenant to maintain estate roads and an obligation to contribute to their cost may cover all roads, even where the payer has rights of way over only one.

Canwell owned the roads and other service areas of the Canwell Estate and claimed arrears of contributions from Smith Brothers Farms, successor in title to part of the Estate. The claim relied on a registered rentcharge created by a 1990 transfer.

The Birmingham County Court, HHJ Simon Barker QC, held that the rentcharge was a valid estate rentcharge under the Rentcharges Act 1977 and that the obligation to contribute covered all roads on the Estate. Judgment was entered for Canwell. The appeal challenged the construction of section 2 of the Act and the meaning of roads in the transfer. The appellant also renewed an application for permission to appeal on rectification, principally in relation to costs.

Lord Justice Mummery gave the substantive judgment. Lord Justice Toulson and Lord Justice Kitchin agreed.

1. The appeal was dismissed. The registered rentcharge was valid and the order for payment of arrears was not wrong.
2. Under section 2(4)(b) of the Rentcharges Act 1977, the relevant question is the purpose for which the rentcharge was created. A rentcharge may support a scheme for the performance of service, maintenance or repair covenants benefiting the affected land and other land. The benefit may be indirect and need not be specific, sole or direct to every parcel. The alternative benefit-and-burden principle recognised in Halsall v Brizell [1957] 1 Ch 169 did not assist the rentcharge claim and formed no part of the appeal.
3. Section 2(5) is an anti-avoidance provision. It addresses whether a payment exceeding a nominal amount is reasonable in relation to the rent owner’s performance of the covenant. Validity is determined at the date of creation. If valid then, the rentcharge remains valid. However, when a particular contribution is sought, the rentcharge cannot be relied on to recover a payment that is unreasonable, including a payment relating to costs not incurred, costs that should not have been incurred, or excessive costs. The court applied the approach in Orchard Trading Estate Management Ltd v Johnson Security Ltd [2002] EWCA Civ 406. The appeal did not require a decision on the reasonableness of the actual charges.
4. Construed as a whole, the 1990 Transfer established a common scheme for the benefit of the Estate. The reference to roads therefore covered all roads on the Estate, not merely the road over which the appellant had a right of way. The appellant was liable to contribute its stipulated share of the total cost.
5. The renewed application for permission to appeal on rectification was refused. An appeal lies against an order, not merely against reasoning or a finding that produces no order. The rectification issue could not affect the substantive disposition, and the costs order disclosed no error.

1. Court of Appeal (Civil Division) dismissed the appeal on grounds 3 and 4 and refused permission to appeal on ground 2.
2. Birmingham County Court, HHJ Simon Barker QC, had held that the 1990 Transfer created a valid estate rentcharge and that the road-maintenance contribution covered all roads on the Estate. Judgment was entered for Canwell, including interest and costs.