Goodman & Ors v Elwood

A positive covenant may bind a successor in equity where the benefit and burden arise from the same transaction, the benefit is conditional on or reciprocal to the burden, and the successor has an opportunity to reject the benefit. The meaning of “successors in title” is objective and contextual. It may include a person who acquired the relevant property before the covenant was executed where exclusion would defeat the bargain’s commercial purpose. A positive covenant burden need not be registered where it creates only a personal equitable right, not an estate or interest in land. Maintenance liability extends to the roadway and lighting existing when the rights and covenants were granted, but not later improvements absent rights over them.

The three defendant appellants appealed from preliminary issue decisions of His Honour Judge Simon Barker QC, sitting in the Chancery Division of the High Court. The proceedings concerned claims for arrears of contributions towards maintaining Roadway 4 on an industrial estate. The appeal addressed the contractual effect of maintenance covenants in the transfers, whether the burden could pass in equity under the benefit and burden principle, whether registration was required, and whether liability extended to a later-added one-metre strip and street lighting. The central questions were whether the road owner was a successor within the covenant and whether the later works fell within the rights and obligations created by the transfers.

Appeal allowed in part. The appeal was allowed on the scope of the maintenance obligation but dismissed on contractual liability, the equitable burden and registration.

1. Construction of the contractual covenant. Although “successors in title” will ordinarily refer to subsequent owners, the meaning of the words depends on the language and admissible background. Applying the objective approach in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, the September transfer was part of the factual matrix. The parties knew that title to Roadway 4 had already passed to Mr Elwood. Excluding him would defeat the commercial purpose of the covenant. He was therefore a successor within clause 3(a) of the December transfer, and the appellants were liable to contribute to maintenance falling within its terms. The reasoning in Cherry Tree Investments Ltd v Landmain Ltd [2012] EWCA Civ 736 supported admitting the September transfer as background.
2. Benefit and burden. The conditions identified in Davies v Jones [2009] EWCA Civ 1164 applied to the September transfer. The rights of way and the contribution obligation arose from the same transaction. The obligation was substantively linked to the rights, notwithstanding that the link was not expressed as a formal condition. The successors could theoretically reject or surrender the rights. A successor acquiring part of the retained land assumed the proportionate contribution appropriate to that land. The burden passed to the owner of the rights and estate, not to an occupier.
3. Registration. The effect of section 20(1) of the Land Registration Act 1925 was that registration applied to an incumbrance capable of creating an estate or interest in the registered land. The equitable burden of a positive covenant created only a personal right of enforcement and therefore did not require registration. It was not an overriding interest under section 70(1).
4. Later improvements. The one-metre strip and lights were added after the transfers. No right of way over the strip had been found, and the verge was subject only to a terminable licence. Crane Road Properties LLP v Hundalani [2006] EWHC 2066 (Ch) was distinguishable because the extended right of way in that case had been acquired. The later improvements therefore fell outside the appellants’ contribution liability, although refusal to pay could expose any licence to termination.

1. Court of Appeal (Civil Division) allowed the appeal concerning the one-metre strip and later street lighting, and otherwise dismissed the appeal.
2. High Court of Justice, Chancery Division, Birmingham District Registry, His Honour Judge Simon Barker QC, determined preliminary issues concerning contractual liability, the benefit and burden principle, and the scope of the maintenance obligation.