Neil John Mackenzie v Sharon Shac-Yin Cheung & Anor

A restrictive covenant annexed to retained estate land remains enforceable unless the conveyance clearly reserves a power to release or modify the burden after the land has been sold. A reservation permitting departure from stipulations must be construed in its textual and factual context. Commercial common sense cannot outweigh the natural meaning of the words. A reservation in favour of the grantor is construed in favour of the grantee where it would substantially diminish a granted right. Declaratory relief may be granted before the relevant event occurs where the event is likely within a reasonable time, the dispute is live, and the declaration serves a practical purpose.

The claimant owned 432 Selsdon Road, which benefited from a restrictive covenant affecting adjoining 444 Selsdon Road. The covenant prohibited development beyond a detached dwelling and associated outbuildings. The conveyance reserved to the original estate owner a right to deal with other estate land independently of the stipulations and to allow departure from them in one or more cases.

The defendants sought summary judgment and a declaration that a proposed deed of modification by the Whitgift Foundation would release 444 from the covenant, enabling a planned development of nine apartments. The central issue was whether paragraph 11 authorised retrospective release of an existing covenant or concerned only future dealings with unsold estate land.

1. Declaratory relief. The court could determine the issue before execution of the proposed deed. Declaratory relief is discretionary and unavailable where a claim is premature, hypothetical or useless. However, the issue was fully pleaded, remained live, the deed was highly likely to be executed if effective, and the declaration would have served a clear practical purpose.
2. Construction. The court applied the textual and contextual approach stated in Wood v Capita Insurance Services [2017] AC 24. Commercial common sense could be used to test rival constructions, but not to undervalue the language, as explained in Arnold v Britton [2011] UKSC50.
3. The conveyances did not create a building scheme or local law. Paragraph 11’s opening words reserved freedom in future dealings with unsold estate land. The later words concerned the imposition of different or limited restrictions in future transactions. They did not confer a power retrospectively to release restrictions already imposed and annexed for the benefit of other land.
4. The argument based on surplusage carried little weight in conveyancing documents, whose drafting may be detailed and repetitive. A reservation or exception to a grant is construed contra proferentem the grantor and in favour of the grantee: Savill Brothers Ltd v Bethell [1902] 2 Ch 523.
5. Mayner v Payne [1914] 2 Ch 555 was distinguishable. Its reservation operated within a building scheme involving mutually enforceable covenants. That context differed fundamentally from the present conveyances, which deliberately created no such scheme.
6. The defendants’ application for summary judgment and their proposed declaration were dismissed. The claimant’s restrictive covenant therefore remained enforceable, subject to any rights independently retained by the Whitgift Foundation.