Duchess of Bedford House RTM Company Limited & Ors v Campden Hill Gate Limited

The appeal concerned the construction of a reservation or "carve-out" clause in a 1974 headlease and whether a communal parking practice at Duchess of Bedford House had been (i) reserved to the freeholder by a 1969 headlease as an easement or quasi-easement and (ii) excluded from transmission to the 1974 headlessee by the carve-out. The Court of Appeal held that the carve-out should be read as a negotiated compromise: subsisting rights existing in law or equity in 1974 were capable of being preserved unless they might (in a practical and realistic sense) restrict or prejudicially affect future rebuilding, alteration or development. The court preferred the lower judge's approach that the second limb of the carve-out requires a realistic prospect of restriction, rejecting an interpretation that treated the word "might" at its highest and would otherwise make the exception otiose.

The court also held that the communal parking practice could amount to a right appurtenant to Duchess of Bedford House (drawing on Newman v Jones and authorities on quasi-easements and section 62 LPA 1925). On that basis the parking right was a subsisting right in 1974 and, applying the correct construction of the carve-out clause, it was not excluded from the demise. The appeal was therefore allowed.

This is an appeal from Adam Johnson J ([2022] EWHC 2489 (Ch)) against a first instance decision of HHJ Gerald concerning parking rights in Sheldrake Place, a private roadway within the Phillimore Kensington Estate. The appellants are the freehold long lessees/flat owners at Duchess of Bedford House; the respondent is the head lessee of Campden Hill Gate and parts of Sheldrake Place.

Procedural posture and relief sought

• The Appellants sought declarations about their right to park in Sheldrake Place.
• At first instance HHJ Gerald declared in favour of the Appellants, finding a legal easement or quasi-easement to park had been reserved to the freeholder by the 1969 headlease and passed to the headlessee by the 1974 headlease.
• Adam Johnson J allowed Campden Hill's appeal and declared that the flat owners had no parking rights over Sheldrake Place; the Appellants then appealed to the Court of Appeal.

Issues framed

• Whether a settled practice of communal parking at Duchess of Bedford House in 1969 gave rise to a right (easement or quasi-easement) appurtenant to that property.
• Whether that right was reserved to the freeholder by the 1969 headlease and, if so, whether it was transmitted by the 1974 headlease or excluded by a carve-out clause.
• How to construe the carve-out clause, in particular the meaning and effect of the phrase "except those now subsisting" and the second limb which excludes rights which "might restrict or prejudicially affect the future rebuilding alteration or development or redevelopment" of the estate.
• Whether the judge below erred in his construction of the clause or his evaluative findings about whether the parking right could realistically impede future development.

Court’s reasoning and conclusion

• On legal principle the court accepted the approach in Newman v Jones that a communal settled practice of parking can become regarded as a right appurtenant to each flat in a block; such practices can be elevated to legal easements or quasi-easements for the purposes of section 62 LPA 1925 and related reservation language.
• The Court construed the carve-out clause as a compromise: the words "except those now subsisting" refer to rights which already existed in law or equity in 1974; those subsisting rights would be conveyed with the demise unless they might, in a practical and realistic sense, prejudice future rebuilding or development.
• The court preferred HHJ Gerald's test that the second limb requires that any interference be grounded in reality and not merely speculative; reading "might" at its highest would render the exception meaningless and produce commercial absurdity.
• Applying those principles the court concluded the communal parking practice in 1969 amounted to a subsisting right appurtenant to Duchess of Bedford House, and it was not shown that the right would realistically prevent or prejudicially affect future development of the estate in the sense required by the carve-out. Accordingly the right was not excluded and the appeal was allowed.

The court therefore allowed the appellants’ appeal and restored the declaration in their favour as to parking rights on Sheldrake Place East.

The appeal was allowed. The Court of Appeal held that the carve-out clause in the 1974 headlease is best construed as a compromise: rights "now subsisting" in 1974 meant rights already existing in law or equity appurtenant to particular property, and the second limb excludes subsisting rights only where there is a realistic and practicable prospect that they "might" prejudicially affect future rebuilding, alteration or development. The communal parking practice at Duchess of Bedford House in 1969 was a subsisting right (easement/quasi-easement) and, on the correct construction of the carve-out, was not excluded from the demise, so the parking rights were preserved and the Appellants succeed.

First instance: HHJ Gerald (Chancery) (first judgment) – decision in favour of the Appellants (no neutral citation stated in the judgment). First appeal: Adam Johnson J, High Court (Chancery Division) – Campden Hill Gate Limited succeeded; judgment reported at [2022] EWHC 2489 (Ch). Appeal to the Court of Appeal: allowed; leading to the present judgment [2023] EWCA Civ 1470.