Jones and another v Oven and another

Land – Transfer – Restrictive covenant – Defendants’ predecessors constructing residential property on land transferred subject to restrictive covenants – Defendant undertaking to transfer strip of land to claimant neighbours in event of demolition of barn – Claimants seeking specific performance of covenant by defendant to transfer strip and  damages for breach of contract to perform covenant – Whether restrictive covenants applying to strip transferred back to claimants – Whether order for specific performance  being appropriate of covenant originally entered into by defendants’ predecessors – Whether specific performance only ordered on terms that claimants use strip in accordance with restrictive covenants – Whether defendants in breach of contract by failing to transfer strip after barn demolished – Whether claimants suffering recoverable loss – Claim allowed in part A dispute arose between the claimants and the defendants who were neighbours at Little Baddow, near Chelmsford in Essex. It concerned a strip of land about four metres wide which was part of a parcel of land sold and transferred by the claimants in 2003 to the defendants’ predecessors in title for the purposes of residential development. Both the contract and the transfer provided that, if a barn on the land transferred were to be demolished, the defendants’ predecessors would retransfer the strip to the claimants. The claimants also entered into restrictive covenants to bind part of the land they retained by prohibiting the carrying on of activities which would be normal in an agricultural or rural setting, but would be a nuisance to residential estate neighbours. The defendants’ predecessors in title used part of the land transferred to construct a residential property which they sold to the defendants in 2005. The transfer required the defendants to transfer the strip to the claimants in the event of demolition of the barn. In 2009, the defendants demolished the barn but the parties were unable to agree whether a transfer of the strip should involve the imposition of the same restrictive covenants on the strip as applied to part of the rest of the land which the claimants retained in 2003. The claimants sought specific performance of the covenant to transfer the strip and damages for breach of contract in failing to perform that covenant. Issues arose whether: (i) the restrictive covenants entered into in 2003 applied to the strip once transferred back to the claimants; (ii) the court should order specific performance of the covenant to retransfer the strip; (iii) if so, specific performance should only be ordered on terms that the claimants agreed to use the strip in accordance with the 2003 restrictive covenants; (iv) the defendants were in breach of contract in failing to transfer the strip after the barn was demolished; and (v) the claimants had suffered any recoverable loss. Held: The claim was allowed in part. (1) If the words of the covenant were read literally, the strip could not be part of the retained land as defined. However, the consequences of the literal reading meant that the claimants were restrained from carrying on certain activities on the retained land which would be a nuisance to the defendants, but were not restrained in relation to the strip, for whose benefit the covenants had been entered into. That made no sense and negated the purpose of entering into the covenants in the first place. It was plain that the intention of the parties was that the land which the claimants retained in the vicinity of the defendants’ land was to be burdened by covenants in order to enhance its value to the defendants’ predecessors in title and to make it viable to undertake the residential development. The phrase “retained land” in the 2003 restrictive covenants was to be construed as including the land which was subsequently retransferred to the claimants pursuant to the terms of the transfer itself. If that was wrong, a term was necessarily to be implied in order to give business efficacy to the transaction. (2) This was a covenant entered into for valuable consideration, as part of a property development transaction, to transfer a piece of land from one party to another. There had been no suggestion that damages would be an adequate remedy and there was no reason in principle not to grant specific performance of the covenant. (3) In the light of the decision on construction and implied terms, the issue of whether specific performance should only be ordered on terms that the claimants agreed to use the strip in accordance with the restrictive covenants fell away. In any event, the court would not have made such an order. The jurisdiction to impose terms when ordering specific performance was not related to some kind of general appreciation of the overall fairness of the situation. Specific performance was ordered because the parties had contracted that a thing be done. On the hypothesis that the phrase “retained land” did not include the strip, and that there was no implied term, the mere fact that that would leave the defendants vulnerable to activities by the claimants on the strip, which would be inconsistent with the restrictive covenants binding the retained land, would not be a reason to invoke the jurisdiction to order specific performance on terms. (4) The defendants were in breach of contract and should have transferred the strip to the claimant at least from February 2012 when the claimants complained. The claimants were entitled to £2 nominal damages in respect of the failure to transfer the land. (5) The claimants had not suffered any recoverable loss as a result of the breach entitling them to substantive damages. They could not prove that they had intended to establish a commercial livery business using the strip, in respect of which they claimed loss of profits. If that were wrong, an issue of remoteness of loss would arise. The range of possible uses of land was so wide, and so many regulatory and other hurdles had to be jumped before they could be undertaken, that there had to be something particular to show that a party undertaking a liability to transfer land was aware that the proposed recipient intended to use it in any particular way. Tim Calland (instructed by Birketts LLP, of Chelmsford) appeared for the claimants; Andrew Butler (instructed by Birkett Long LLP, of Chelmsford) appeared for the defendants. Eileen O’Grady, barrister Click here to read a transcript of Jones and another v Oven and another