IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION							     HC 1168 

Royal Courts of Justice
The Strand
London WCA 2LL

Friday, 9th June, 2000 

B e f o r e:

MR. JUSTICE LLOYD 

	B E T W E E N:

		MORRELLS OF OXFORD LTD		Claimant

		-v-

		OXFORD UNITED FOOTBALL CLUB
AND OTHERS					Defendant

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MR. HARPER, Q.C. and MR. C. SYDENHAM appeared on behalf of the Claimant.
MR. G. FETHERSTONEHAUGH appeared on behalf of the First, Third, Fourth and Fifth Defendants.
MISS K. PURKIS appeared on behalf of the Second Defendant.

J U D G M E N T
(As Approved)
Friday, 9th June, 2000

J U D G M E N T

MR. JUSTICE LLOYD:  In 1962 Oxford City Council (or rather, at that time, the Mayor, Alderman and Citizens of Oxford, but I will describe them as Oxford City Council), was setting out and developing its Blackbird Leys Estate.  It wanted to establish a number of facilities for the inhabitants of the new estate. The present proceedings are concerned with a public house, The Blackbird.  Near to it there were to be also a health centre, a community centre and youth club, and a church, all backing on to school playing fields.  

The Council sold the site of the pub to Ind Coope (Oxford & West) Limited by a conveyance dated 20th August 1962.  The conveyance contains covenants, both by the City Council (defined as the Vendors) and by the purchaser (defined as the Company).  The site of the pub is now owned by the claimant, Morrells of Oxford Limited.  The City Council still owns a good deal of neighbouring land, including some referred to in one of its covenants.  It does, however, propose to sell some of the relevant land to three of the other defendants, to provide a new stadium for the first defendant, Oxford United Football Club Limited, so as to replace its existing premises, which do not comply with the requirements imposed since the Hillsborough disaster.  The intended development also includes a hotel and leisure complex.  Different defendants will acquire different parts of the site – nothing turns on that – and the football club will take a lease of part of it.

	The claimant contends that, once the development is complete, its use will involve breaches of clause 3(a) of the 1962 conveyance, and has brought these proceedings to restrain such breaches by injunction.  I will come to the detail in a moment, but the essential point is that the covenant is aimed at preventing land which was owned by Oxford City Council at the time of the conveyance within a half mile radius of the pub from being used for the supply or sale of intoxicating liquor.  The defendants contend that no such breach would be involved, because the covenant is limited on its true construction to acts permitted by Oxford City Council.  It is accepted, following Tophams Limited v. The Earl of Sefton [1967] 1 AC 50, that, for a covenantor to convey land on sale to a purchaser does not amount to that covenantor permitting whatever the purchaser does or allows to be done on the land.  Whether the acts of a successor in title would amount to breaches of covenant notwithstanding that proposition is the issue before me.  

There are other issues in the defences, such as whether the covenant is in restraint of trade, whether it was for the benefit of a business rather than for that of the land, waiver, and estoppel.  The defendants also contemplate a possible application, if necessary, to the Lands Tribunal under Section 84 of the Law of Property Act 1925.  However, the first, third, fourth and fifth defendants have issued an application notice before me under CPR Part 24 on the basis that the action cannot succeed because their acts as successors in title could not be a breach of the covenant.  If that were right, it would dispose of the action against them and it would be right to deal with it finally under Part 24.  It is accepted that the issue turns on the true construction of the covenant in its context, together with the question whether it is affected, and, if so, how, by Section 79 of the Law of Property Act.  

The conveyance is a short document of two and a half pages.  After  the recitals and the operative clause of the conveyance, three clauses follow, the last being an acknowledgement as to custody and production of prior title deeds.  Clause 2 contains covenants by the purchaser, and clause 3 covenants by Oxford City Council.  In clause 2 there are five subparagraphs, of which the last three are positive obligations, the details of which are not relevant to this case. Clause 3 has two subparagraphs.  The second is a positive covenant to build roads and maintain them until adoption.  The detail of that is also not relevant.  I will read clause 2, limited to subparagraphs (a) and (b), and clause 3, limited to subparagraph (a).

“2.  The Company with intent and so as to bind, so far as practicable, the property hereby conveyed into whosesoever hands the same may come, and to benefit and protect the Estate of the Vendors known as the Blackbird Leys Estate, but not so as to render the Company liable for any breach of covenant committed after the Company shall have parted with all interest in the property in respect of which such breach shall occur, hereby covenants with the Vendors that the Company and its successors in title will at all times hereafter observe and perform the restrictions following in relation to the property hereby conveyed, namely (a) that the Company will use the premises to be erected on the land hereby conveyed for a public house and other suitable outbuildings which are usually connected with such premises, and for no other purpose whatsoever, so long as the requisite renewal licence for the sale of intoxicating liquors can be obtained from the licensing justices.  (b)  No building shall be erected on the land hereby conveyed, except in accordance with plans first submitted to and approved by the Oxford City Estates Surveyor.

3.  The Vendors hereby covenant with the Company as follows.  (a)  for the benefit of the land hereby conveyed, that the Vendors will not at any time hereafter permit any land or building erected thereon within half a mile radius of the land hereby conveyed which is in the ownership of the Vendors at the date of this Conveyance, to be used as a Brewery or Club or licensed premises for the preparation, manufacture, supply, sale or consumption either on or off the premises of intoxicating liquors.”

	From that reading it is plain that paragraphs (a) and (b) of clause 2 are restrictive covenants intended to bind the pub site in the hands of its successors in title for the benefit of the Vendor’s Blackbird Leys Estate.  It is envisaged that liability under the covenant may arise as a result of acts of successors in title to the original covenantor even though, in its terms, paragraph (a) speaks of the use of the premises by the Company, rather than of the use of the premises generally. Because of that, the Company protects itself by a proviso against liability for things done after it has parted with all interest in the site.  To read paragraph (a) as referring only to use by the Company would make no sense, because the covenant expressly refers to the successors in title of the Company observing and performing the restrictions.  Accordingly, it is right to read the opening words of paragraph (a) as if they said that “the Company and its successors in title will use the premises”, and so on.  The formulae used in clause 2 are paradigms of the conventional methods of showing that the covenant binds the land conveyed so that the burden passes to successors in title and that its benefit is annexed to the Vendor’s retained land.  

Clause 3(a) is drawn very differently.  There is no reference of any kind to successors in title, or indeed to anyone other than the contracting parties.  It is, however, clear that the covenant is intended to benefit the land conveyed, (leaving aside the separate argument about whether it protects a business rather than the land itself), and, on the face of it, therefore, it passes to successors in title of the covenantee.  On the other hand, as regards the burden of the covenant, it does not say that it is to bind the retained land in the hands of successors.  It does not say that the Vendor covenants that it and its successors in title will comply with the covenant, and it does not show a contemplation of liability arising from acts or omissions of successors in title by limiting the liability of the Vendors to the time when they retain some interest in the relevant land.  In terms, the covenant is limited to use which the Vendors permit. That might not be conclusive if the covenant otherwise indicated, as clause 2(a) does, that it was intended to extend to acts of successors in title.  But in the absence of any such indication, the limited drafting of the substance of the covenant certainly does not suggest that it will be broken by use permitted by a successor in title once Oxford City Council has parted with all its interest in the land being used for the offending purpose.  

Simply reading clause 3(a) in its context, I would therefore draw the inference that it was intended to and does relate only to use permitted by Oxford City Council, and not use permitted (or undertaken) by any successor in title.

	Mr. Harper, for the claimants, submits that this is not the proper reading, and also that, even if it otherwise might be, a different result follows from the application of Section 79 of the Law of Property Act.  He points out that, if the covenant is limited to things permitted by Oxford City Council and does not extend to successors, the protection of the covenant for the pub could disappear overnight, even, he says theoretically, the day after the covenant, if Oxford City Council parted with all interest in the affected land.  Apart from the unlikelihood, in relation to land being developed by a local authority for a housing estate, that that local authority would dispose of all of its land for a radius of half a mile suddenly and quickly after giving the covenant, it can be said that there is some force in the proposition that, as regards the owner of the pub, the protection given by the covenant, if it is so limited, is less than it might be if it were expressed in the same formulae as were used in clause 2.  But in practice, as I understand it, the protection has lasted for some 38 years, so the covenant was perhaps not as precarious as Mr. Harper suggests.  It will of course continue to apply on any basis to land still owned by Oxford City Council within the half mile radius that it originally owned at the date of the 1962 conveyance.  I have to say that, on the facts of this case, I do not regard this point of Mr. Harper’s as persuasive, however it might appear in different circumstances.

	It seems to me that the difference between clauses 2 and 3 is striking and is not explained away by any of the distinctions drawn by Mr. Harper.   Each clause includes both positive and negative covenants, and there is no difference in nature between a vendor’s and a purchaser’s covenant such as to explain the different drafting. The observations of Neuberger J. in Oceanic Village Limited v. United Attractions Limited [2000] 1 AllER 975 at 981, about different drafting techniques in a lease which he was considering between a covenant in clause 3.27 and another in clause 4.6, are no doubt apt for the sort of long and complex document that was before him.  Here I have a short document with two immediately adjacent clauses on one page.  Clause 2 is certainly carefully drawn, and it seems to me that clause 3 is as well, and the differences are deliberate and are intended to achieve different results.

	Mr. Harper submits that a covenant such as clause 3(a) is capable of binding the land in the hands of purchasers since 1st January 1926, as it would not have been before, by virtue of Section 79.   This section, which was new in 1925, is in the following terms.  It is headed “Burden of covenants relating to land.”

“(1).  A covenant relating to any land of a covenantor, or capable of being bound by him, shall, unless a contrary intention is expressed, be deemed to be made by the covenantor on behalf of himself, his successors in title, and the persons deriving title under him or them and, subject as aforesaid, shall have effect as if such successors and other persons were expressed.  This subsection extends to a covenant to do some act relating to the land, notwithstanding that the subject matter may not be in existence when the covenant is made.

(2). For the purposes of this section, in connection with covenants restrictive of the user of land, ‘successors in title’ shall be deemed to include the owners and occupiers for the time being of such land.  

(3).  This section applies only to covenants made after the commencement of this Act.”

	Of course, the nature of the obligation being negative, the covenant is one which, if appropriately worded, could affect successors in title under the normal rules relating to restrictive covenants.  The question is whether the effect of Section 79 would be such as to transform it into a covenant appropriately worded, and, if so, whether a contrary intention is expressed so that the statutory transformation does not operate.   

On the face of the section, its effect appears to be to require that in relation to clause 3, after the opening words “The vendors”, there be read in words such as “for themselves, their successors in title, owners and occupiers for the time being of the retained land of the Vendors mentioned in paragraph (a) below, and persons deriving title under any of them”, so that the covenant be expressed to be made by or on behalf of all of those persons.  By itself that would not produce a very sensible result, because the substantive words of the covenant in paragraph (a) would be limited to the use permitted by the Vendors.  However, by analogy with clause 2(a) as it stands, it would be fair and proper in that situation to construe clause 3(a) in such a context as extending to use permitted not only by the Vendors, but also by the successors in title and those deriving title under them.  It does not seem to me that Section 79 achieves that modification of the text of the covenant directly, but that its effect on the opening words of the covenant would require a consequential change in the reading of paragraph (a).

	I was shown some observations about the operation of Section 79, some of them also commenting on Section 78.  In the notes to the 12th Edition of Wolstenholme and Cherry’s Conveyancing Statutes, of which Sir Benjamin Cherry, one of the draftsmen of the 1925 legislation, was one of the authors, the comment to Section 79 was that both that and Section 78, which was not entirely new at that time, “remove conveyancing difficulties in regard to the form of covenants”.  A comment to Section 78, but referring also to Section 79(2) is that these “render unnecessary any special words when restrictive covenants are entered into; it will only be necessary to show what land is intended to be bound, and what land is to have the benefit of the covenants”.  Similar text appears in the 13th Edition, though the notes there recognise that Section 78 had by then been held to effect changes in the substantive law, and the possibility that Section 79 might also be held to do so was noted.  

Section 79 has been considered on a number of occasions by judges.  In Re Royal Victoria Pavilion Ramsgate [1961] Ch 581, Pennycuick J. had to consider a covenant by the vendors with the purchasers, that until a given date some 17 years later, the use of certain premises should be limited in certain respects. This followed a clause in which the purchasers for themselves and their successors and their assigns covenanted with the vendors that the purchasers would observe certain restrictions on the use of the property conveyed.  After the clause in question there was a plainly personal covenant by the vendors with the purchaser.  The judge held that the covenant looked as if it were intended to be purely personal.  As regards Section 79, he held that a relevant contrary intention might be expressed not only by specific words directed to the point, but could be, and was in that case, sufficiently contained in the wording and context of the instrument despite the absence of any specific exclusion.  He said at page 589:

“It can hardly be the intention of the Section that a covenant which, on its natural construction, is manifestly intended to be personal only, must be construed as running with the land, merely because the contrary is not expressly provided.”

	In Sefton v. Tophams Limited [1965] Ch 1140 and [1967] 1AC 50, the relevant covenant by the purchaser was limited in time to the life of the covenantee, or, in certain circumstances, a later date, and was expressed so that the purchaser should not remain liable for a breach of the covenant occurring on the relevant land after they had parted with all interest in it.  It was formulated as a covenant by the purchaser with the vendor, relevantly, not to cause or permit the land in question to be used otherwise than for horse racing purposes.  Clause 3, the clause in which this covenant appeared, was followed by another clause, 4, introduced by the words “The purchaser, so as to bind, so far as may be, the land conveyed for the benefit of the vendor as the owner of neighbouring estates and his sequels in title, hereby covenants with the vendor” that they would observe certain other restrictions on the use of the land.  

At page 1156 Stamp J. said that, subject to any contrary intention, the effect of Section 79 was to read the clause 3 covenant as made by the purchaser on behalf of itself, its successors in title and the persons deriving title under them.  He also held that, although the contrast with the words of clause 4 might have amounted to a contrary intention excluding the section, the proviso limiting the liability of the purchaser under clause 3 was a confirmation showing a positive intention that Section 79 should apply.  He therefore held that the covenant was made on behalf of not only the purchaser but also on behalf of its successors in title.  He decided the case in favour of Lord Sefton on the basis that to convey the land to a purchaser, knowing that the purchaser intends to use it otherwise than for horse racing, was to permit it to be used otherwise than for that purpose, and, therefore, a breach of covenant restrainable by injunction.

	In the Court of Appeal issue was joined only on the last point, namely, whether a conveyance in those circumstances was a permitting of an infringing use.  The majority held that it was, and did not refer to Section 79.  Russell L.J. would have held otherwise, but did mention Section 79 in the context of saying that the parties to the conveyance envisaged, rightly or wrongly, that the covenants would be binding on a subsequent purchaser. The House of Lords, by a majority, held otherwise on the meaning of the word “permit”.  Different views were expressed, none as a matter of decision, as to whether the covenant was intended to bind subsequent purchasers.  Lord Upjohn mentioned Section 79 in the following terms at page 73:

“I will only add that upon this aspect of the matter I think too much significance was placed in the courts below upon the impact of Section 79(1) of the Law of Property Act 1925. During the course of the hearing before your Lordships, it became common ground that, so far as relevant to any question that your Lordships have to decide, it does no more than render it unnecessary in the description of the parties to the conveyance, to add after the respondent’s name ‘his executors, administrators and assigns’, and after Tophams’ name ‘and their successors in title’. This can really have little or no weight in considering the liability of Tophams’ assigns in relation to a restrictive covenant affecting land.”

	Lord Wilberforce, who was in the minority together with Lord Reid, had something to say about the section in two short passages.  The first is at page 81 and is as follows:

“I should add that Section 79 of the Law of Property Act 1925 itself does not have the effect of causing Tophams’ covenants to run with the land.  It merely extends the scope of Tophams’ covenants.”

	At page 82 he said:

“And, lastly, Russell L.J. refers briefly to Section 79 of the Law of Property Act 1925 ‘for what it is worth’.  This is very little, in my view, since it is not concerned with imposing covenants on the land or on purchasers, but with the liability of the covenantor.”

	In Federated Homes Limited v. Mill Lodge Properties Limited [1980] 1 WLR 594, a case in which Section 78 was held to have made a potentially dramatic difference to the law as regards annexation of the benefit of a restrictive covenant, and in which the defendant was the original covenantor so that Section 79 did not need to be applied, Brightman L.J. at page 606 said that they had been referred to some of the passages which I have just cited, “to the effect that Section 79 achieved no more than the introduction of a statutory shorthand into the drafting of covenants.  Section 79, in my view, involves quite different considerations, and I do not think that it provides a helpful analogy.”

	Most recently, in Rhone v. Stephens [1994] 2AC 310, the House of Lords held, making good a forecast in the notes to Section 79 in the 13th Edition of Wolstenholme and Cherry, that Section 79 did not have the effect of making the burden of a positive covenant pass to successors in title.  Lord Templeman said at page 322 that “this provision has always been regarded as intended to remove conveyancing difficulties with regard to the form of covenants, and to make it unnecessary to refer to successors in title”.

	If those various observations, especially those of Lord Upjohn and Lord Wilberforce, had been necessary for the decision in the case in which they were given, they might, I think, have been expressed more fully and the underlying reasoning might be clearer.  Lord Wilberforce certainly said that the section had nothing to do with making a covenant run with the land.  However, it seems to me that whether importing the statutory phrase into a particular covenant does make the covenant run with the land must be a question of construction of the particular covenant.  In the present case, the effect of the section on a covenant such as that in clause 3(a) might be to make it read as follows:  

“The Vendors, for themselves, their successors in title, owners and occupiers for the time being of the retained land hereafter mentioned, and persons deriving title under any of them, hereby covenant with the Company”, [and  here Section 78 would insert reference to the Company’s successors in title], “for the benefit of the land conveyed, that the Vendors will not at any time hereafter permit any land or building erected thereon within half a mile radius of the land hereby conveyed which is in the ownership of the Vendors at the date of this conveyance to be used for [the particular proscribed purposes].”

On the face of it, such a covenant would seem to me one whose burden was intended to pass with the land.  It would be rather similar to clause 2 in that respect, although not of course identical.  The effect of Section 79, if it applies, on a differently worded covenant, might be different, but it seems to me that, since if the Section is to apply at all it must relate to land of the covenantor, or land capable of being bound by the covenantor, then, given the imported reference to the covenant being made by the covenantor not only for himself but on behalf of and, therefore, presumably so as to bind the owners and occupiers for the time being of the land in question, it must be likely that the Section would, where it applies, make it clear that the burden of the covenant does run with the land.  

That is not consistent with what Lord Wilberforce said in Tophams v Sefton, and I am therefore hesitant as to whether it is correct.  Mr. Balcombe, arguing the point in that case, is quoted at page 59 as referring to London County Council v. Allen.  The importance of that may be, therefore, that it does not dispense with the need for the covenantee to have land which is capable of being benefited by the covenant.  It was not shown in evidence in Tophams v. Sefton that the Earl of Sefton did have any such land, and of course the section does not dispense with that requirement.  If, however, as here, the covenantee does have relevant land, (that indeed which is expressly referred to in the covenant as taking the benefit of the covenant), this point does not stand in the way of the covenant being enforceable by virtue of the section against successors in title, as it may have done in Tophams v. Sefton.

	It seems to me that, when considering the possible application of Section 79, it is right, first, to come to a view as to the meaning and effect of the clause apart from the Section, then to consider what its effect would be if there were read into it the words needed to satisfy the Section, and then to address the question whether the clause expresses a contrary intention, in the way described by Pennycuick J., so as to exclude the effect of the Section.   I have already said that the clause by itself appears to me to be intended to be personal.  I need not repeat or expand on my reasoning.  I have also said that the effect of Section 79 appears to me to be to add words to the opening part of the clause, but not directly into subparagraph (a), but that the effect of the expansion of those opening words would itself be to alter the proper construction of paragraph (a).  Mr. Harper says that this is correct, and I think Mr. Fetherstonehaugh agrees on behalf of the first, third, fourth and fifth defendants.  Mr. Harper contends that the effect is to make the covenant bind the lands in the hands of successors in title.  Given Lord Wilberforce’s observations, Mr. Fetherstonehaugh does not accept that, but he does accept that the effect would be to make Oxford City Council liable as covenantor for things done by its successors in title, even though those successors might, or he says would, not be liable themselves.  In those circumstances, he submits that the context, especially the contrast with clause 2, does show a contrary intention, and he relies very much on the analogy of Pennycuick J’s decision in Royal Victoria Pavilion Ramsgate.   

	I have indicated a tentative view that the effect of the Section on the covenant would be that it should be read in the manner set out earlier, and that a covenant so worded would run with the land of the covenantor.  I do not need to, and do not, decide whether that is the correct view of the Section.  If it is, as Mr. Harper submits, it transforms a purely personal covenant limited to acts of the vendor into a full-scale restrictive covenant binding on all successors in title.  If it does not have that effect, at least it would render the vendor liable, though not the successors in title, for acts permitted or done by successors in title over which, having parted with the land, the vendor has no continuing control. That would not be enough for Mr. Harper’s purposes, but it would still be a good deal too much for Mr. Fetherstonehaugh’s liking.  

In my view, if the draftsman had supposed that the covenant would have an extended effect of either of those two kinds, he would at least have inserted a proviso corresponding with that in clause 2, limiting the liability of Oxford City Council to things done while it still had an interest in the relevant land.  In my judgment, on either footing, the effect of importing the words indicated in Section 79 would be to change the covenant from that which was intended into something rather different, or, on Mr. Harper’s submission, something very different.  

In those circumstances, it seems to me that, for reasons similar to those expressed by Pennycuick J. and quoted earlier, the covenant does express a contrary intention such as to exclude the application of Section 79, that the effect of the covenant is, therefore, limited to use permitted by Oxford City Council, and that, accordingly, after a sale of relevant parts of the land to the third, fourth and fifth defendants, the use of any part of the land so sold for the purpose in question would not be a breach of the covenant, and I, therefore, propose to accede to the application before me.

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