Neil John Mackenzie v Sharon Shac-Yin Cheung & Anor

A reservation in a conveyance allowing the governors to permit a departure from restrictive stipulations may confer a power to waive or release covenants already given by the purchaser. The scope depends on the objective meaning of the conveyance, with its language central and context relevant. A power expressed simply as permitting a departure is not limited to minor variations where no textual distinction or workable boundary exists. Exercising a power reserved by the conveyance does not derogate from the grant of the covenant benefit, which was qualified from the outset. In any event, redevelopment of neighbouring land causes no derogation where it has no physical impact on the benefited property or material interference with its enjoyment.

Mr Mackenzie owned 432 Selsdon Road and Ms Cheung owned 444 Selsdon Road. Both properties formed part of the Fox Farm Estate, formerly owned by the Whitgift Educational Foundation. The 1947 conveyance of Number 444 contained restrictive covenants and reserved to the Governors a right to allow a departure from them. After planning permission was granted for nine flats, the Foundation proposed a deed modifying the covenants.

The Deputy Master concluded that the deed would not be effective to permit the development. Miles J allowed an appeal and declared that development in accordance with the deed would not breach the covenants: [2023] EWHC 220 (Ch). The issue before the Court of Appeal was the construction of the reservation and whether the proposed modification would derogate from the grant of Number 432.

Appeal dismissed. Lord Justice Newey gave the leading judgment. Lord Justice Nugee and Lord Justice Peter Jackson agreed.

1. Interpretation of the 1947 Conveyance required an objective assessment of the meaning conveyed by its language to a reasonable person with the relevant background knowledge. Textual and contextual analysis were both relevant, although the language of a formal lawyer-prepared conveyance was central. The court applied the approaches discussed in Wood v Capita Insurance Services Ltd [2017] UKSC 24 and Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896.
2. Paragraph 11 had two distinct limbs. The first protected the Governors’ freedom in future sales. The second reserved an additional power to allow a departure from the stipulations in the Third Schedule, including waiver or release of covenants given by Mr Read and his successors. The wording, the reference to the Governors also having a further right, and the continuing functions in paragraphs 4, 8 and 10 supported that construction.
3. The commercial context also supported the construction. A developer selling plots without a building scheme might wish to retain exclusive control over modifications of building restrictions, as illustrated by Crest Nicholson Residential (South) Ltd v McAllister [2004] EWCA Civ 410. Mayner v Payne [1914] 2 Ch 555 provided additional support, subject to the caution in Rees v Peters [2011] EWCA Civ 836 that similar wording in another document is not authoritative on construction.
4. The benefit of the covenants was annexed to the undisposed parts of the Estate under clause 2 and section 78 of the Law of Property Act 1925. Mr Mackenzie therefore had standing to enforce them, but the benefit was qualified from the outset by the Governors’ reserved power.
5. Exercise of that reserved power could not derogate from the grant. A grantor cannot take away the means of enjoying what has been granted, but the exercise of rights forming part of the grant itself does not derogate from it. The court applied that principle from Birmingham, Dudley & District Banking Co v Ross (1888) 38 Ch D 295, Molton Builders Ltd v City of Westminster (1975) 30 P&CR 182 and Earl of Plymouth v Rees [2020] EWCA Civ 816. In any event, the proposed redevelopment had no physical impact on Number 432 and would not materially interfere with its enjoyment.
6. The reservation was not limited to minor departures. The conveyance referred simply to a departure, drew no distinction between types of departure, and supplied no workable boundary. Permission to amend the grounds of appeal to advance a narrower construction was therefore refused. If executed, the Deed of Modification would permit the proposed development without breach of covenant or derogation from grant.

• Court of Appeal (Civil Division) — Dismissed Mr Mackenzie’s appeal and upheld the declaration that development in accordance with the Deed of Modification would not breach the covenants.
• High Court of Justice, Business and Property Courts — Miles J allowed the respondents’ appeal from the Deputy Master and granted the declaration: [2023] EWHC 220 (Ch).