Khoury & Anor v Kensell

A building scheme requires a sufficiently identified area of land and an intention that purchasers accept mutually enforceable covenants. That intention is determined from all the circumstances, but cogent evidence is required where it is inferred from material outside the conveyances. Similar covenants, commercial convenience, or a common vendor’s sale of several lots will not alone establish the scheme. The purchaser must have bought on the footing that the covenants would benefit the other relevant plots and that the purchaser would receive corresponding benefits. On a CPR Part 24 application, the claim must show more than a merely arguable prospect of success. The court may consider fresh evidence on appeal where doing so is necessary to determine the issue fairly, despite the ordinary restrictions on new evidence.

The claimants purchased the Oasthouse and adjoining land at Upper Tolhurst Farm. The defendant purchased the Barn, while the Farmhouse and adjoining land were sold to other purchasers. The transfers contained covenants concerning matters including planning compliance.

The claimants alleged that the properties formed part of a building scheme, so that they could enforce the defendant’s covenants. The County Court struck out the covenant claim under CPR Part 24, holding that there was no real prospect of establishing a building scheme. The claimants appealed.

On appeal, they relied on the conveyances, sales particulars, and solicitor correspondence. They also sought to introduce the underlying 1970 Conveyance and 1985 Deed of Gift to clarify the extent of the retained land. The central issue was whether the evidence disclosed a real prospect of proving the necessary geographical scope and mutual intention.

1. Appeal dismissed. The claimants had no real prospect of establishing at trial that a building scheme existed.
2. A building scheme requires, in substance, an identified area and an acceptance by each purchaser that the benefit and burden of the covenants would be mutually enforceable among the relevant purchasers. The parties’ intention is a question of fact determined from all the circumstances. Where the scheme is inferred from extrinsic evidence, cogent evidence is required. Similar covenants alone are insufficient: Birdlip Limited v Hunter [2016] EWCA Civ 603.
3. The conveyances and related documents did not sufficiently identify the land benefiting from the covenants. More importantly, they did not evidence the necessary intention that the purchasers of the Farmhouse, Oasthouse and Barn had accepted mutual covenants. The references to retained land extended beyond the three properties and could include other land.
4. The solicitor correspondence showed, at most, that similar covenants appeared in the conveyances. It did not explain to the defendant that the covenants formed part of a mutually enforceable scheme. The direct-covenant provision was consistent with the need to bind future purchasers contractually and did not establish a building scheme.
5. The express reservation allowing the seller to use retained land as it wished was inconsistent with the seller being bound, from the first conveyance, by substantially similar restrictive covenants. The commercial purpose of individual covenants could not supply the missing evidence of mutuality.
6. The court admitted the 1970 Conveyance and 1985 Deed of Gift as fresh evidence. Although they could have been obtained earlier, they were disclosed, authentic, directly relevant to the meaning of retained land, and necessary for a safe determination of the issue. The principles in Ladd v Marshall [1954] 1 WLR 1489 remained persuasive, but the overriding objective justified receiving the documents in the circumstances.

1. High Court (Chancery Division) — The appeal from the County Court decision was dismissed. The court held that the claimants had no real prospect of proving a building scheme and allowed consideration of the fresh documents for that purpose.
2. County Court at Brighton — HHJ Simpkiss struck out the claim for breach of covenant under CPR Part 24, holding that there was no real prospect of establishing a building scheme.