[2024] UKUT 33 (LC)

The final strand of Southwark’s application, and the only ground which raises arguments of substance, is that parts of the Tribunal’s order were made without jurisdiction. Those parts were said to be the modifications to clauses 3(i), (n), (o) and (p). It was not suggested that the Tribunal did not have power to modify clause 3(k), the covenant against alterations, but Mr Rainey KC nevertheless argued that the proper course would be to set aside the whole of the order rather than leave one small portion in force.

The Tribunal’s jurisdiction under section 84(1) allows it “on the application of any person interested in any freehold land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon, by order wholly or partially to discharge or modify any such restriction.”

By section 84(12), that jurisdiction is extended to covenants in leases of more than 40 years: “… this section shall, after the expiration of twenty-five years of the term, apply to restrictions affecting such leasehold land in like manner as it would have applied had the land been freehold.” The correct reading of section 84(12) may be that the power applies to restriction which affect the leasehold land “in like manner” to those described in section 84(1), or it may be that it applies “in like manner” as if the land had been freehold, but in either case the effect is the same. Section 84(12) does not give the Tribunal power to modify or discharge all restrictions affecting leasehold land, but only those which are “restrictions … as to the user thereof or the building thereon”.

As Mr Rainey KC acknowledged, clause 3(k) is a restriction “as to … the building thereon” and the modification made was undoubtedly within the Tribunal’s jurisdiction. But, he submitted, clause 3(i), the alienation covenant, was not a restriction “as to the user” of the Black Horse, and clauses 3(n), (o) and (p) were positive covenants which required the Lessee to use the Black Horse as a public house, rather than simply to refrain from using it for other purposes, and so they were not “restrictions” in the sense in which section 84(1) has been interpreted.

Dealing first with clause 3(i), the modification made by the Tribunal’s order was to that part of the covenant which prohibited the assignment of “any part or parts (as opposed to the whole) of the demised premises”. Examples of cases in which the Tribunal and its predecessor have considered whether similar restrictions are to be treated as restrictions on use within the scope of section 84(1) are noted in Preston & Newsom: Restrictive Covenants (2020, 11^th ed.) at 11-012, where the authors observe that “The parameters of any jurisdiction in relation to restrictions on occupation and disposal have yet to be fully explored.”

Until 1950, jurisdiction under section 84(1) was given to an arbitrator, referred to as “the authority” and the earliest reported decisions are of cases heard from that year on by this Tribunal’s statutory predecessor, the Lands Tribunal. The earliest relevant example identified by Preston & Newsom is Re Hickman & Sons, Ltd’s Application (1951) 7 P & CR 33 in which a covenant prohibiting ownership of more than one building plot on an estate was discharged by the Lands Tribunal (J.P.C. Done FRICS) without consideration of whether it was a restriction “as to the user”.

The next case which it is necessary to mention, Stannard v Issa [1987] 1 AC 175 (PC), is not a decision of a Tribunal, but a judgment of the Privy Council, on appeal from a decision of the Court of Appeal of Jamaica under the Jamaican equivalent of section 84(1). Reversing the trial judge, the Court of Appeal had ordered the discharge of a series of freehold covenants including one which provided that individual building plots on a private estate “shall not be sub-divided”. Before the Privy Council there was no challenge by the appellant to the jurisdiction of the courts below to entertain the application, notwithstanding that the relevant statute conferred power to modify only a “restriction … as to the user” of land. The issues in the appeal concerned the various statutory grounds on which the restrictions had been discharged and nothing said by Lord Oliver, who delivered the judgment of the Board, suggests that he was in doubt about the jurisdiction to discharge a covenant prohibiting sub-division. The only possible indication why the Board may have considered that the restriction being debated was “as to user” is at the end of Lord Oliver’s judgment where he considered the scope of what in section 84(1) is ground (c) (“the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction”). He said this, at p.188H:

“Whilst the trial judge found that some of the objections raised on behalf of the objectors were of an insubstantial nature, on no analysis could it be said that the principal objection to a modification which would permit an unrestricted sub-division of (and thus an unrestricted density on) the subject land was frivolous or vexatious.” (emphasis added)

It may be that the appeal in Stannard v Issa proceeded on the basis that a covenant against subdivision of a plot was, effectively, a density restriction, and thus a restriction on “user”. None of the restrictions of which modification was sought specifically referred to the assignment of part or the grant of leases, and the proposed use of the land which was under consideration involved the construction on one plot of blocks of flats containing 40 residential apartments for separate occupation. The focus was therefore on the use which was to be made of the land, and the extent of the building which would be permitted on it, and not on alienation.

In Re Barclays Bank PLC’s Application (1990) 60 P & CR 354 the Lands Tribunal (V.G. Wellings QC, President) discharged two restrictions which had been imposed by an agreement under section 52 of the Town and Country Planning Act 1971 as a condition of the grant of planning permission for a new farm dwelling in a rural area, one of which prohibited any sale, assignment or letting of the new dwelling except with substantially the whole of the farm. In the course of the decision the President said that the “restrictions impede some reasonable use of the bungalow and its site for ordinary private purposes in that the restrictions prevent it from being used for ordinary domestic residential purposes free from the restrictions”. There was no consideration of the question whether a prohibition on dealing with one parcel of land separately from a larger parcel was a “restriction as to the user thereof”.

Re Milius’s Application (1995) 70 P & CR 427 concerned the proposed discharge of a restriction which prevented disposal a flat above a shop (other than to a local resident) without the written consent of the council which had sold it to the applicant under the statutory right to buy scheme. The application was dismissed on substantive grounds, but the Lands Tribunal (HH Judge Marder QC, President) entertained “considerable doubt” as to whether it had jurisdiction to modify the restriction because it:

“… does not purport to restrict the user of the property in any way, but is a restriction on the ‘relevant disposal’, in effect a conveyance of the freehold or the grant of a lease for more than 21 years.”

Having expressed that doubt, the President went on:

“It is perhaps arguable that the user of the property may in practice be limited or restricted by the restriction on free disposition of a legal interest. On the other hand some limitation on user may be seen as a possible indirect consequence of the restriction on disposal and not as the effect or the purpose of the covenant. As Mrs Williams [solicitor for the objecting authority] put it, reasonable user of the property could not be said to be impeded by this restriction, but only if an application for consent to a disposal were unreasonably refused. The issue is not without difficulty, and I am unaware of any direct judicial authority.”

The Lands Tribunal’s unreported decision in Re Dart’s Application (2006) LP/68/2005 again concerned a planning condition which prevented the sale, letting or disposal of a shop, tearoom and living accommodation otherwise than as a whole. The Tribunal (Mr P. Francis FRICS) followed the same course as in Milius; it expressed the view, at [37], thata condition which was “restrictive of disposal rather than of user, … on the face of it would not appear to fall within section 84(1)” but dismissed the application on other grounds without reaching any firm conclusion on that point.

In Lee’s Application [2012] UKUT 125 (LC) this Tribunal (George Bartlett QC, President) refused an application to modify leasehold covenants which, amongst other things, prohibited underletting of a flat or its use otherwise than for the sole occupation of the tenant and his family. The single ground on which the application was advanced was not made out on the facts, and it does not appear to have been suggested that the Tribunal lacked jurisdiction.

In Shaviram Normandy Ltd v Basingstoke and Deane Borough Council [2019] UKUT 256 (LC) the Tribunal expressed a concluded view, albeit without much discussion, on its jurisdiction to modify a leasehold covenant to dispense with the need for the lessee to obtain the consent of the lessor to the terms and rent at which a former office building could be under-let. At [147] we said that: “We are not satisfied that a covenant the effect of which is to require consent to the terms and rent of a proposed underletting before that underletting can proceed, but which is subject to the proviso that consent cannot be unreasonably withheld or delayed, is a restriction “as to the user” of the land in question (as it must be for the Tribunal to have jurisdiction under section 84(1)).”  The point had arisen at a very late stage in the proceedings and had not been the subject of reasoned argument. Nor was it the only basis on which the Tribunal refused that aspect of the proposed modification.

In both Hickman and Barclays, the Tribunal exercised its power to discharge or modify a restriction on alienation or subdivision, but in neither case was the issue of jurisdiction considered. In Milius and Dart the existence of the jurisdiction was doubted, but no conclusion was reached, while in Lee, the issue was again left unaddressed, but the application was dismissed on other grounds. In Shaviram the absence of jurisdiction was given as one reason for refusing to modify a particular form of alienation covenant.

The final and most recent consideration of the scope of section 84(1) was my own decision in Young Camiade’s Application [2023] UKUT 96 (LC) (which post-dated the making of the order in the current case). The application was for the discharge of a covenant which prohibited the registration of a transfer of a registered lease without the consent of the covenantee. The application was not contested but the Tribunal raised the issue of its own jurisdiction to discharge the restriction. Having referred to the doubt expressed by the Tribunal in Milius, I addressed that issue at [18]-[19] as follows:

“18.

Section 84(1) allows the modification or discharge of a restriction affecting land where the restriction is “as to the user thereof or the building thereon”. The section as a whole is concerned with what may lawfully be done on land, and in that context both “user thereof” and “building thereon” appear to be intended to refer directly to the activity being conducted on the land and for which it is being used. The same focus on physical activity is apparent in Shephard v Turner [2006] 2 P & CR 28, at [58], where Carnwath LJ said that the reference in ground (aa) of section 84(1) to “reasonable user” “seems to me to refer naturally to a long term use of land, rather than the process of transition to such a use”.

19.

In my judgment the restriction in this case is clearly not a restriction “as to the user” of No. 1 Acacia Grove. It is concerned only with the completion of a disposition by registration in the register of title. It does not impinge, directly or indirectly, on what the flat may lawfully be used for. I am not persuaded that the effect of such a restriction in limiting who may become the registered proprietor of the flat is relevant or that any possible practical impact which such a limitation may have on the use which may be made of the flat is sufficient to bring the restriction within the Tribunal’s power. Even if, in practice, the effect of the restriction was that the flat could not be sold and was left unoccupied for a time, that would not demonstrate that the restriction itself was a restriction on the use of the land.”

On behalf of the applicant, Mr Upton submitted that, although the restriction in clause 3(i) does not directly affect the activity being conducted on the land, the use of the property was in practice restricted by the prohibition on the sub-letting of part. He also relied on the fact that it had not been suggested in Lee that a covenant against sub-letting was beyond the scope of section 84(1), although he acknowledged that since the application had been dismissed and the issue of jurisdiction had not been considered, that was perhaps not a very weighty point.

It may be that a distinction can be drawn between a restriction on alienation (the transfer of title to the land or the grant of a tenancy or sub-tenancy) and a mere restriction on sub-division (which would explain the absence of any discussion of jurisdiction in Stannard v Issa). The latter may properly be regarded as a restriction on the use of the land, because it prohibits the creation of separate units of occupation and is not expressly concerned with the ownership of those separate units. The former is much more difficult to treat as a restriction on use. If the approach suggested in Young Camiade is correct, a restriction on assignment or letting is of a type which is not concerned with the activity conducted on the land or with what it is being used for, but only with the ownership of one interest in the land, which may not be the interest of the person using the land at all.

I prefer to say nothing further about a covenant which restricts sub-division, because it is not necessary to do so to determine Southwark’s application. I nevertheless accept Mr Rainey KC’s submission that a covenant in the terms of clause 3(i), which prohibits the assignment of “any part or parts (as opposed to the whole) of the demised premises”, is not a restriction as to the user of the land. I do not accept Mr Upton’s submission that it is sufficient to confer jurisdiction that the practical effect of a restriction may inhibit a particular type of use, and I adhere to what I said in Young Camiade at [19].

In my judgment clause 3(i) was not a restriction which the Tribunal had jurisdiction to modify.

Southwark’s ground of objection to the modification of the covenants requiring the demised premises to be used as a licensed victualling house only and to be kept open as such so long as the necessary licences could be obtained (clause 3(n)), to use its best endeavours to obtain a renewal of all licences (clause 3(o)), and for so long as the demised premises shall be licensed, to use them as a bona fide refreshment house for supplying food and liquor to the public (clause 3(p)(i)), is that each of these stipulations imposes a positive obligation on the Lessee. It is not in dispute that section 84(1) does not give the Tribunal jurisdiction to discharge or vary positive covenants.

A relatively early example of the Lands Tribunal recognising that it had no power to modify a positive covenant is Re Blyth Corporation’s Application (1962) 14 P & CR 56 in which the Tribunal dismissed an application to discharge a covenant to erect and maintain a boundary fence on the grounds that it fell outside the jurisdiction. Young Camiade is a more recent example.

Mr Upton submitted that the substance of clause 3(n) was the restriction that the premises were to be used as a “licensed victualling house only”, which was plainly negative, and that the remainder of the restriction and the whole of clauses (o) and (p) were, as he put it, “parasitic” on the opening words of clause 3(n) and should be considered as part of a single composite prohibition on any use other than as licensed premises. I do not accept that submission.

A keep open covenant is undoubtedly positive, whether it is included in the lease of a pub or of any other sort of premises. In Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1, Lord Hoffmann described such a covenant in the lease of a supermarket as “a positive obligation to keep the premises open for retail trade during the ordinary hours of business”.

The text of clause 3(n) is quoted in full at [17] above, and it is apparent that it contains different types of obligation. I accept that the opening portion, down to the word “only”, are restrictive; they prevent the use of the premises for any purpose other than as a licensed victualling house. But the remainder of the covenant goes much further than simply emphasising that negative obligation. It requires the Lessee positively to keep the premises open as a pub and to conduct the business of a pub or to cause someone else to do so. The covenant also requires the achievement of a positive outcome, namely, preserving “the character of the said premises with the licensing authorities and the public”. That could not be achieved except by causing the premises to be operated a pub.

Whether, despite imposing positive obligations, a keep open covenant could nevertheless be brought within the scope of section 84(1), was a question to which the answer did not seem to me to be entirely obvious. Such a covenant would preclude the use of the premises for any other sort of business (or at least any other business incompatible with the continued use of the premises as a pub). While the keep open part of the covenant was being complied with the premises could not, for example, be used as a school, or to provide accommodation for recovering alcoholics. The possibility that such a keep open covenant did impose a restriction on the use of the land was addressed during the hearing.

Mr Rainey KC relied on Westminster City Council v Duke of Westminster [1991] 4 All ER 136 which concerned a head lease of 604 residential flats on the Millbank Estate which had been constructed by the Duke and the City at their joint expense following a private Act of Parliament, and which were let by the Duke to the City on terms which included a covenant that the demised premises would be “kept and used only for the purposes of the Grosvenor Housing Scheme as dwellings for the working classes.” The question arose whether the Lands Tribunal had jurisdiction to modify or discharge the covenant under section 84. Harman J held that it did not because the obligation undertaken by the covenant was positive in nature, as indicated by the word “used”, which he considered carried a connotation of a duty to use. The parties were in agreement that “the Lands Tribunal can only modify restrictive covenants” (page 147f) and, having construed the relevant part of the covenant as positive it followed that that part fell outside the jurisdiction of the Tribunal (although other negative restrictions in the same covenant could be the subject of an application, page 149j). It is clear that Harman J did not consider that the restrictive consequences of a positive obligation were sufficient to bring it within the scope of the section. At page 147e he said this:

“It is of course true that a duty to use land for some purpose necessarily means that the land shall not be used for other purposes. Nevertheless the duty to use remains a positive obligation although a negative implication may flow from it.”

A subsequent appeal to the Court of Appeal in the Westminster case was substantially settled on terms agreed between the parties; one esoteric point could not be resolved because the parties were not free to contract out of the private Act, but the appeal was unopposed and the decision on that point was reversed: (1992) 24 HLR 572 (CA). Nevertheless, Harman J’s dictum is cited in the leading textbooks in support of the proposition that a positive covenant cannot be modified, even if its main effect might be negative. More importantly, it was specifically relied on with evident approval by the Court of Appeal in Blumenthal v Church Commissioners for England[2005] 1 EGLR 78 in which the issue was whether the Lands Tribunal had jurisdiction to modify a restriction which limited the use of a basement flat to the provision of accommodation for a caretaker in connection with a business conducted elsewhere in the building. In the course of his judgment, at [24], Sir William Aldous, with whom Waller and Carnwath LJJ agreed, said this of section 84:

“It confines the Land Tribunal’s jurisdiction to covenants which restrict user. Thus it would be natural when deciding this case to consider whether the covenant related to use of the land and then go on to decide whether it was restrictive. There is no dispute about user. In one sense all covenants as to user are restrictive. For example the covenant to paint a house blue is a positive obligation requiring the tenant to paint the house a particular colour and it is also a negative obligation preventing the tenant painting the house any other colour. The fact that positive covenants have a negative effect was recognised by Harman J in the Westminster case in the passage of his judgment set out above. The authorities show that the Lands Tribunal and the Courts have excluded from the jurisdiction of the Lands Tribunal covenants which are positive even though they also contain a restrictive element. No doubt that is because the Lands Tribunal’s jurisdiction is confined to modifying restrictive covenants.”

Since Harman J’s concise statement in the Westminster case more than 30 years ago it has been accepted that the practical effect of a positive covenant in preventing the use of the land for any other purpose is not a sufficient consideration to confer jurisdiction on the Tribunal to modify or discharge such a covenant. It might be argued that that approach gives greater weight to form than to substance, but there is undoubtedly a substantive difference between a covenant to run a pub and a covenant to use premises for no purpose other than the running of a pub. It was not argued by Mr Upton that Harman J was wrong, nor was Blumenthal referred to in argument. I therefore accept Mr Rainey KC’s submissions on this point.

To the extent that clause 3(n) is restrictive (i.e. so far as it requires the Lessee “to use the demised premises or cause or permit the same to be used as a licensed victualling house only”) the Tribunal had jurisdiction to modify it. But for the reasons I have given it had no jurisdiction to modify the rest of the clause. The introduction of the new restrictions in clauses 3(n)(i) and (ii) preventing the use of the premises other than within the specified use classes might be seen as a modification of the original prohibition on use other than as a licensed victualling house. But they are also plainly inconsistent with what must remain of clause 3(n), the positive obligation to trade and keep open as licensed premises (except to the very limited extent that they permit the ground floor to be used as licensed premises). The Tribunal had no jurisdiction to modify that part of the covenant and for that reason, or because the two halves cannot exist side by side, the covenant should not have been modified in the way it was by the order.

The most the Tribunal had jurisdiction to do was to modify clause 3(n) so that it read:

“So long as the requisite licences could be obtained to … keep the demised premises open as a licensed victualling house during all lawful hours and conduct or cause to be conducted the business thereof in a lawful and orderly manner and so as to preserve or cause to be preserved the character of the said premises with the licensing authorities and the public”.

The Tribunal’s order purported to discharge clause 3(o) in its entirety. In my judgment the Tribunal had no jurisdiction to release the applicant from its positive obligation to use its best endeavours to obtain a renewal of all requisite licences and to appeal any refusal.

For the reasons given in paragraph 54 above, the Tribunal’s order made no modification to clause 3(p). No issue of jurisdiction therefore arises.