It was only a few months ago that the Upper Tribunal handed down the decision in Kay v Cunningham [2023] UKUT 251 (LC). In that case (in which the writer appeared for the successful applicant) the Tribunal established a number of novel points in relation to modification and discharge of restrictive covenants under s.84 of the Law of Property Act 1925 (see the Brew on this here). On 8 May 2024, a differently constituted panel gave a decision in Medley v Mackenzie and others [2024] UKUT 112 (LC), which provides further guidance as to the Upper Tribunal's approach to the discretion stage in s.84 applications.
This article briefly sets out the factual and legal background, it then considers the important procedural point which came out of this case. Finally, the writer considers the medley of substantive points that are dealt with in the decision.
In Medley, the previous owner of a large country manor in Hainault had sold 15 acres of its parkland in 1967 for the construction of around 12 houses. Set on a hill, and enjoying views of the London skyline, by 2021 urban development had resulted in “London” expanding almost to the doorstep of these properties. Perhaps it was this urbanisation that led Mr Medley to seek planning permission to demolish the bungalow that he owned on the 1960s estate, and build two three-storey houses in its place.
Planning permission for Mr Medley's scheme was granted on 28 May 2021, but strict covenants had been put in place in 1967 to control development of the estate. The first of those covenants was an obligation to submit plans for approval to “High Elms Properties Limited”, the original vendor of the estate. That company was long-dissolved, and the Tribunal found that the covenant had been discharged on dissolution of the company, but the Tribunal in any event discharged that covenant.
The real battle lines were drawn in relation to a “one house per lot” covenant, i.e. a prohibition on building more than one house within the curtilage of Mr Medley's bungalow. Mr Medley sought to discharge that covenant on the ground set out in s.84(1)(aa) of the Law of Property Act 1925. This is often referred to as the “reasonable user” ground. It is, as the Tribunal described it “a complicated provision”, but the ground has been simplified by a series of questions known as the “Re Bass questions”. The applicable questions in Medley were:
- Is the applicant's use reasonable?
- Do the covenants impede the proposed use?
- Does impeding the proposed use secure practical benefits to the person objecting to discharge of the covenant?
- If the answer to question 3 is “yes”, are those benefits of substantial value or advantage?
- If the answer to question 4 is “no”, would money be adequate compensation?
The power to modify or discharge covenants under s.84 is discretionary. The process therefore has two stages. Firstly, has the applicant satisfied one of the grounds in s.84(1) (often called the “jurisdiction” stage)? Secondly, if one of the grounds is met, should the Tribunal exercise its discretion to modify the covenant (or the “discretion” stage)? It is important to note that where objectors argue that the Tribunal does not have “jurisdiction”, litigants sometimes panic, asking whether we have issued in the wrong Tribunal, or should have initiated court proceedings. However, all objectors are saying by this is that, on their case, none of the grounds in s.84(1) are met.
The fight between jurisdiction and discretion
An interesting procedural point arose in relation to question 1 of Bass and discretion. The objectors sought, at the trial, to strike out the application on the basis that Mr Medley did not own all of the land that he sought to redevelop – effectively raising a boundary dispute within the context of a s.84 application. The Tribunal refused this on two grounds. Firstly, the application was made too late and without notice. Secondly, the appropriate way to deal with the issue would have been to adjourn the application to enable Mr Medley to prove that he did in fact own the disputed areas. In the end, this was not necessary as the application was refused on other grounds. The important point here, however, is that the Tribunal adopted this decide-then-adjourn approach because it found the question of ownership of the land was a matter of discretion.
Effectively, the Tribunal proceeded on the basis that that whether use of land is reasonable doesn't depend on who owns that land. Ownership is therefore not relevant to Bass question 1 (“is the applicant's use reasonable?”). But the Tribunal will not make an order which is futile, so if Mr Medley was eventually found not to own the disputed land, they would not have exercised their discretion to allow the covenant to be modified.
The writer's anecdotal experience is that the jurisdiction/discretion argument is increasingly pursued by objectors. This is because the jurisdiction stage – i.e. the various grounds under s.84(1) – is fundamentally a binary issue. Either the ground is satisfied or it is not. The discretionary stage is less predictable and is weighed in favour of the applicant. This is because the Tribunal will usually exercise their discretion in favour of the applicant if a jurisdictional ground has been met, unless there are fairly compelling reasons not to do so. The most common example is redeveloping land in breach of covenant, in the hope that nobody will complain or that an injunction will be refused on the basis that the development is at too advanced a stage. The Tribunal's approach to the disputed land in Medley shows two things: Firstly, the Tribunal will not allow a round discretionary peg to be hammered into a square jurisdictional hole; and secondly, properly argued points on discretion do succeed.
Interesting substantial points from Medley
There were a number of other interesting points that arose.
The first is something that is often uncertain in applications where there has been intensification of development in the surrounding area. Does this meant that the development won't affect the neighbours with the benefit of the covenant, because the surrounding area has become more urbanised anyway? Or does it mean that the amenity of space and openness is even more precious, such that its removal will have a significant detrimental effect on those with the benefit of the covenant? There is no single answer to this as it is very fact-dependent and often requires a site visit to really appreciate. In this case, the Upper Tribunal decided that the covenants helped “to preserve a sense of openness and space which is an important amenity so close to central London”. If Mr Medley's scheme were allowed, it would “make the estate feel enclosed and over-developed”.
The second was that the Tribunal will not accept at face value the effect of matters such as traffic management and rules that will be imposed on subsequent occupiers to prevent nuisance or annoyance. Mr Medley's scheme involved underground parking accessed by a car lift, and the Tribunal appears to have accepted the argument that “the residents of the new houses will find [using the car lift] bothersome and will inevitably take to parking on the paths and verges, causing congestion and contributing to the sense of over development.” The Tribunal also took account of the risk to a listed wall that added significantly to the character of the estate. Even if Mr Medley adopted best practice to prevent that wall being damaged, the Tribunal found there was a “significant risk” of serious damage or collapse.
The third was that overlooking and obstruction of views was to be considered realistically, rather than from the perspective of an overly-sensitive neighbour. The estate had probably been intentionally designed with bungalows nearer to the original manor house, and taller houses on lower ground further away. Although this reduced the visual impact of the houses from the manor house (and mainly hid them behind trees and the listed wall), the fact that Mr Medley's proposed houses could be seen was not enough to prevent development. Similarly, whilst there would be overlooking into other houses on the estate, it was not significant and, in any event the overlooked windows were kitchen windows as opposed to bedrooms or living spaces.
Conclusion
The Tribunal's approach to jurisdiction and discretion regarding the disputed land is to be welcomed, as a clear example of how the Tribunal will resist blurring the lines between the two distinct stages of s.84 applications. The remainder of the substantive points add to examples for future cases, but also demonstrate just how sensitive these applications are to the facts and location in each case.
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