89 Holland Park (Management) Ltd & Ors v Hicks

Section 78 of the Law of Property Act 1925 ordinarily passes the benefit of a land covenant to successors in title and owners or occupiers of the benefited land. That effect may be displaced by a contrary intention, but clear indications are required. Terms such as “assigns” depend on the instrument’s language, context and commercial purpose; there is no universal rule that they mean only contractual assignees. A covenant requiring approval before an application for planning permission can be restrictive where, in substance, it controls development and use of land. A consent provision may carry an implied term that consent will not be unreasonably withheld.

The claimants comprised the freehold owner and long lessees of flats at 89 Holland Park. They sought declarations concerning covenants in a 1968 deed governing development of adjoining land acquired by the defendant.

The issues were whether the benefit of the covenants had passed to the claimants under section 78 of the Law of Property Act 1925; whether the covenant requiring prior approval before applying for planning permission bound the defendant as a restrictive covenant; whether consent could be withheld unreasonably; and whether the lessees could enforce the covenants.

1. The claimants were entitled to the benefit of clauses 2(b) and 3 of the 1968 Deed. Reading the 1965 Transfer and the 1968 Deed together, there were no clear indications of an intention to prevent the benefit running with No. 89. The benefited land was sufficiently ascertainable from the plan, the description of No. 89 and the description “Adjoining Owner” (paras [47]-[66]).

2. The word “assigns” was context-dependent. It could include successors in title to land as well as contractual assignees (paras [55]-[62]).

3. Clause 2(b) was binding on the defendant as a restrictive covenant. Although it operated before a planning application was made, its substance was to constrain the kinds of development for which permission could be sought and which could consequently be carried out on the land (paras [67]-[80]).

4. The consent requirements in clauses 2(b) and 3 were subject to an implied proviso that consent would not be withheld unreasonably. An unfettered veto would undermine the deed’s development purpose, and the detailed consent process would be pointless if consent could be refused without reason (paras [81]-[96]).

5. All claimants could enforce the covenants under section 78. The lessees’ leases did not exclude enforcement. The required consent was, however, that of the first claimant (paras [97]-[102]).

The parties were invited to agree the consequential order.