Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd

The Supreme Court considered the proper interpretation and application of section 84 of the Law of Property Act 1925, which permits the Upper Tribunal to discharge or modify restrictive covenants where prescribed jurisdictional grounds are established and the Tribunal exercises its discretion. The court emphasised the statutory distinction between the jurisdictional stage (whether one of the section 84 grounds is made out) and the discretionary stage (whether relief should be granted), holding that an applicant’s deliberate or "cynical" breach of covenant is irrelevant to jurisdiction under the "contrary to the public interest" limb (section 84(1)(aa) and (1A)(b)) but is highly relevant to the exercise of discretion.

The Upper Tribunal had allowed an application to modify the covenant to permit occupation of 13 houses built in breach of covenant and ordered payment of £150,000. The Court of Appeal overturned that decision on multiple grounds. The Supreme Court held that the Upper Tribunal was correct to find the public interest jurisdictional ground made out on the facts, but it erred in exercising its discretion because it failed to take into account two material consequences of the developer's cynical breach (the omission to build on unencumbered land that could have achieved the same planning outcome, and the fact that the breach changed the public-interest landscape by creating a fait accompli). The Supreme Court re-made the decision and refused the application.

Background and parties

The Trust owned land adjoining a parcel (the application land) subject to restrictive covenants preventing buildings other than for parking. Millgate developed the site in breach of covenant, constructing 23 units across the wider site, including 13 dwellings on the restricted application land. Millgate applied under section 84 Law of Property Act 1925 to modify the covenant to permit occupation of the 13 units; the Upper Tribunal (Lands Chamber) granted the application subject to payment of £150,000 to the Trust. The Court of Appeal overturned that decision and refused the application; Housing Solutions (the purchaser of the 13 units) appealed to the Supreme Court.

Nature of the claim / relief sought

• The applicant sought an order under section 84 LPA 1925 discharging or modifying the restrictive covenant so that the 13 dwellings built in breach could be occupied.

Issues framed

• Whether, at the jurisdictional stage under section 84(1)(aa) and (1A)(b), the "contrary to the public interest" test permits consideration of the applicant’s deliberate breach.
• Whether the Upper Tribunal erred in exercising its discretion by insufficiently taking account of Millgate’s cynical breach.
• Whether other grounds of appeal (including reliance on Lawrence v Fen Tigers Ltd by analogy, and the effect of alternative means of satisfying affordable housing obligations) disclosed errors of law.

Court’s reasoning and conclusions

The Supreme Court explained the statutory structure of section 84, distinguishing jurisdictional grounds from discretionary considerations. The court concluded that the statutory wording requires a narrow inquiry at the jurisdictional stage: whether continuation of the covenant impedes a reasonable user of the land and whether that impediment is contrary to the public interest. The applicant’s manner of breach does not bear on that jurisdictional question and so is irrelevant until the discretionary stage. The Upper Tribunal was therefore correct to find the "contrary to the public interest" ground made out on these facts.

On the discretionary stage, however, the Tribunal had erred in law by failing to take into account two particular consequences of the cynical breach: (i) that the developer could in fact have obtained planning permission for the needed affordable housing on the unencumbered part of the site, avoiding any interference with the hospice; and (ii) that the developer’s deliberate breach created the factual situation (a completed development) that transformed the public-interest balance in the developer’s favour. Those two omitted factors were material and exceptional, and their omission vitiated the Tribunal’s exercise of discretion. The Supreme Court therefore re-made the decision and refused the application.

The court also briefly considered other grounds and concluded that the Court of Appeal was wrong to overturn the Upper Tribunal on the other grounds but agreed that the discretionary error justified refusing the application. The court left open the Trust’s remedies by other means (for example, injunctions or monetary remedies) which were not decided in this appeal.

Appeal dismissed. The Supreme Court held that (i) the "contrary to the public interest" jurisdictional ground in section 84(1)(aa) and (1A)(b) requires a narrow inquiry focused on whether the impeding of a reasonable user by continuation of the covenant is contrary to the public interest, and the applicant’s deliberate breach is irrelevant to that jurisdictional inquiry; but (ii) the Upper Tribunal erred in exercising its discretion by failing to take into account two material consequences of the developer’s cynical breach (that an alternative plan on unencumbered land would have avoided the conflict, and that the breach created a fait accompli altering the public-interest analysis). Because of that error the Supreme Court re-made the decision and refused the section 84 application.

Application to the Upper Tribunal (Lands Chamber) succeeded: [2016] UKUT 515 (LC). The Court of Appeal overturned the Upper Tribunal and re-made the decision by refusing the application: [2018] EWCA Civ 2679. The appellant’s appeal to the Supreme Court was dismissed: [2020] UKSC 45.