Jones & Anor v Oven & Anor

Restrictive covenants in a land-sale transaction may be construed to include land which is later retransferred under the transaction, where excluding it would defeat the covenants’ evident commercial purpose. Alternatively, a term may be implied where its absence would deprive the transaction of commercial and practical coherence and the term is consistent with the express provisions.

Specific performance is the appropriate remedy for a valuable contractual obligation to transfer land where damages are inadequate. It should not ordinarily be made conditional merely because the agreed bargain produces an unattractive result. Substantive damages for loss of anticipated business profits require proof of the intended business and that the loss was within the reasonable contemplation of the parties.

The claimants sold land for residential development. The contractual arrangements required the defendants, on demolition of part of a barn, to transfer a four-metre strip of land to the claimants. The claimants had also given restrictive covenants concerning activities on their retained land.

The barn was demolished in 2009, but the strip was not transferred. The parties disputed whether the restrictive covenants would apply to the strip after transfer, whether specific performance should be ordered on terms, and whether the claimants could recover damages for alleged lost profits from a proposed commercial livery business.

1. The phrase “retained land” in the 2002–2003 restrictive covenants was construed as including the strip if it was subsequently retransferred to the claimants. A literal construction would permit nuisance-producing activities on land immediately adjoining the defendants’ property and would subvert the purpose of the covenants, which was to protect the viability and value of the residential development (paras [67]–[69]).

2. Alternatively, a term would be implied that land retransferred under the contractual mechanism was subject to the same covenants as the retained land. Without that term, the transaction would lack commercial and practical coherence. The term was necessary in the relevant sense and did not contradict any express provision (para [70]).

3. Specific performance was ordered. The obligation to transfer land had been given for valuable consideration, and damages were not an adequate remedy. The court had no reason to withhold the remedy. The defendants’ failure to transfer the strip after February 2012 constituted a breach, entitling the claimants to nominal damages.

4. The court declined to impose a condition requiring the claimants separately to agree to comply with the restrictive covenants. The jurisdiction to order specific performance on terms concerns changes occurring after the contract which would make enforcement of the contract as agreed unjust or oppressive. It is not a general jurisdiction to adjust an imprudent bargain or to improve its fairness (para [72]).

5. The claim for substantive damages failed. The claimants had not proved that they intended from 2010 onwards to establish a commercial livery business. Further, even if such an intention had been proved, the claimed loss would have been too remote: the contractual reference to commercial stabling did not establish that a particular future business use was within the parties’ contemplation when the relevant liability was undertaken (paras [74]–[77]).

The court granted a declaration as to the construction of “retained land”, ordered specific performance, and awarded nominal damages of £2.