Author
Stephen Burke

Stephen Burke

Senior associate

Read More
Author
Stephen Burke

Stephen Burke

Senior associate

Read More

12 January 2021

RED alert - Winter 2021 – 4 of 7 Insights

Build first and ask questions later? Developers beware…

  • Briefing

Alexander Devine Children's Cancer Trust v Housing Solutions Ltd [2020] UKSC 45

Summary

The Supreme Court has poured scorn over a developer's "cynical breach" of a restrictive covenant. In the first time it has considered section 84 of the Law of Property Act 1925 (the Act), the Supreme Court upheld the Court of Appeal's decision to refuse an application to modify a restrictive covenant in circumstances where a developer had wilfully and intentionally commenced development works in breach of a restrictive covenant.

This judgment sends out a powerful warning to developers – conduct deemed to be cynical will be taken into account when making an application to modify or discharge a restrictive covenant.

Facts of the case

  • Millgate Developments Ltd (Millgate) made an application pursuant to section 84 of the Act to modify a restrictive covenant affecting Green Belt land close to Maidenhead (the Land).
  • The relevant restrictive covenant stated that "[n]o building structure or other erection of whatsoever nature shall be built erected or placed on [the Land]" and "[the Land] shall not be used for any purposes whatsoever other than as an open space for the parking of motor vehicles" (the Restrictive Covenant).
  • Millgate sold its interest in the Land to Housing Solutions Ltd (Housing Solutions) in 2017.
  • Alexander Devine Children's Cancer Trust (the Trust) is a charity and beneficiary of the Restrictive Covenant.
  • Millgate built a development consisting of 23 residential units on the Land with works commencing in 2014, despite being fully aware of the existence of the Restrictive Covenant.
  • In 2015, Millgate made an application to the Upper Tribunal to modify the Restrictive Covenant in accordance with section 84 of the Act.
  • The Trust objected to the application on the basis that the development would overlook the children's cancer hospice.

Previous decisions

In 2016, the Upper Tribunal held that the Restrictive Covenant should be modified pursuant to section 84 of the Act so as to permit the occupation and use of the Land for the houses and bungalows already constructed. As a condition of the modification, Millgate was ordered to pay £150,000 compensation to the Trust.

In 2018, the Court of Appeal overturned the Upper Tribunal decision and held that the Restrictive Covenant should not be modified pursuant to section 84 of the Act.

Appeal to the Supreme Court

Housing Solutions appealed to the Supreme Court on the grounds that the Court of Appeal was wrong as a matter of law on all four grounds of its appeal. The Trust argued that those for grounds should be upheld. The four grounds alleged to be errors of law were:

  • Did the Upper Tribunal fail to take proper account of Millgate's cynical breach when exercising its discretion?
    An error of law had been made by the Upper Tribunal and this was sufficient to uphold the appeal.
    However, the reasons for upholding this ground were different to those identified by the Court of Appeal, namely that the Upper Tribunal failed to take proper account of (a) the fact that Millgate could have altered their planning permission application in a way in which the Land would not have been affected; and (b) Millgate should not be able to argue that demolition of the houses would be "contrary to public policy" since this would enable it to take advantage of its own wrongdoing.
  • Did the Upper Tribunal ignore Millgate's cynical breach, at the jurisdictional stage, by regarding as highly relevant that the development had already been partially completed at the time of the application?
    No error of law had been made by the Upper Tribunal because, whilst the cynical breach must be taken into account at the discretionary stage, it must not be taken into account at the jurisdictional stage on the grounds of being contrary to public policy.
  • Did the Upper Tribunal erroneously apply Lawrence v Fen Tigers Ltd by analogy?
    No error of law had been made by the Upper Tribunal because it did not take into account wider comments made in that case regarding injunctions and damages.
  • Did the Upper Tribunal ignore Millgate's ability to satisfy its planning obligations by making alternative provision of equivalent affordable housing elsewhere?
    No error of law had been made by the Upper Tribunal because it did take this into account but decided that it was outweighed by the waste of not using affordable housing already built and immediately available. Accordingly, the appeal was upheld albeit for different reasons than those given by the Court of Appeal.

Our comment

The Supreme Court were clearly critical of Millgate's conduct, describing it as "highhanded and opportunistic", on numerous occasions a "cynical breach" and accusing it of "deliberately committing a breach of the [R]estrictive [C]ovenant with a view to making a profit from doing so".

The clear message for developers is that carrying out building works on land burdened by a restrictive covenant prior to applying to modify or discharge it should be considered extremely carefully even if planning permission has been granted.

It is unclear whether the Trust will now apply for an order to tear down the development or instead seek damages from Housing Solutions.

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