England and Wales Court of Appeal (Civil Division) Decisions

Chadwick LJ: This is an appeal, by way of case stated, from a decision of the Lands Tribunal refusing to order the discharge of certain restrictions affecting land of which the appellant, the University of Westminster, is the freehold owner. The questions raised by the appeal are of some general importance in relation to the powers of the Tribunal under section 84(1) of the Law of Property Act 1925 on a composite application seeking discharge or modification in the alternative.

The appellant, a company limited by guarantee and having charitable objects, is the owner of land known as and situate at 35 Marylebone Road, London NW1. The land is subject to covenants restricting its use to certain specified purposes relevant to the provision of further or higher education by the Greater London Council (“the GLC”), who were the appellant’s predecessors in title. On 30 November 1995 the appellant applied to the Lands Tribunal, under section 84 of the Law of Property Act 1925, for the discharge or modification of those restrictions. The Tribunal refused to discharge the restrictions; but it determined that they should be modified so as to permit the land to be used for general educational purposes as well as for the specified purposes already permitted. The President, His Honour Judge Bernard Marder QC, set out his decision in writing on 3 December 1996. That decision is annexed to and forms part of the case stated. The appeal is brought under section 3(4) of the Lands Tribunal Act 1949 and Order 61 rule 1 of the Rules of the Supreme Court 1965.

The relevant facts, as they appear from the decision of 3 December 1996, may be summarised as follows:

(1) The restrictions are imposed by two Deeds of Release and Covenant dated respectively 26 and 27 July 1996; the first made between the Trustees of the Portland Family Estates and the GLC and the second between the Howard de Walden Estate and the GLC. In each case the deed released the land from covenants contained in an earlier deed or deeds, made at the turn of the century, in consideration of the GLC’s undertaking to construct buildings in accordance with annexed plans and specifications and not to use those buildings except for the purposes specified. Those purposes were “a School of Management Studies, a College of Architecture and Advanced Building Technology, a Hall of Residence for students, an office for a District Surveyor and for housing purposes”.

(2) It was as a result of the 1966 deeds that the buildings and ancillary premises now occupied by the appellant came to be constructed.

(3) The appellant’s application under section 84 of the Law of Property Act 1925 sought an order that the restrictions might be wholly discharged; alternatively that the restriction be modified by the substitution for the words defining the specified purposes of the words “for general educational purposes and a Hall of Residence for Students and for Housing Purposes”.

(4) The application was made on the ground that the existing restrictions were too narrow for the needs of a modern-day university. It was said that the proposed modification of the restrictions would allow for alternative uses which would have no greater perceptible impact upon the owners of the benefit of the restrictions and/or those in the area surrounding the property than the current permitted uses; that the reasonable user of the land which the existing restrictions impeded was “use for general educational purposes other than and/or in addition to those specified in the restrictions”; and that the existing restrictions were contrary to the public interest “because they restrict the use of the property . . . for a full range of educational purposes”.

(5) The appellant did not admit, in the application, that any given person was entitled to the benefit of the restrictions; but a list of those who might be so entitled was provided with the application - those on the list being freehold owners of property in the vicinity of the university buildings.

(6) The Tribunal gave directions for notice of the application to be served on the original covenantees and on those who, as appeared from the appellant’s list, might be entitled to the benefit of the restrictions. The notice was in a form approved by the Tribunal. Notices were served in accordance with the directions which had been given. By way of response, the Howard de Walden Estate lodged an objection; but this was subsequently withdrawn. Accordingly the application was treated as unopposed.

(7) On 1 August 1996 the Tribunal informed the appellant that it was content to exercise its jurisdiction under section 84 of the Law of Property Act 1925 without a hearing - as permitted under rule 17(2) of the Lands Tribunal Rules 1996; but that the order that would be made without a hearing would be limited to modification of the restrictions and would not be for the discharge of the restrictions altogether. In those circumstances the appellant requested a hearing, which took place on 19 November 1996. It was following that hearing that the President made the decision which is now under appeal.

The President explained the basis on which the Tribunal had been content to make an order without a hearing in the following passage of his written decision:

When the case was thus referred to me [under rule 17(2)], I decided to order modification of the relevant restrictions as set out in the originating application so as to permit the use of the restricted land (in addition to the permitted uses) “for general educational purposes and as a hall of residence for students and for the purposes of providing housing accommodation”, being satisfied on the information provided as to the grounds (aa) and (b) in section 84(1).

He then set out the submissions which had been made to him at the oral hearing on behalf of the applicant. After referring to the statutory provisions and certain of the authorities cited to him, he observed that:

. . . the Tribunal cannot be bound in any case to grant the applicant the full extent of the relief applied for, but is entitled as a matter of discretion to limit or cut down the form of relief which the applicant has sought.

He directed himself, correctly, that the discretion to grant or refuse a discharge or modification, conferred by section 84 of the Law of Property Act 1925, was to be exercised judicially. He went on:

. . . I had regard primarily to two matters in deciding to grant a modification rather than a discharge. The first related to the form of application and the notice which was delivered to potential objectors. The recipient of such a notice would naturally and inevitably wish to know what the applicant was proposing to do on the land. On a fair reading of the notice, it would be plain that the owners proposed to continue the use of the premises as a university, albeit with a wider definition of their educational purposes. Had there been any indication beyond the bare reference to “discharge” as an alternative, that the applicants sought to remove all restrictions on user, then there might well have been objections forthcoming from nearby property owners, whom the applicants acknowledge may have the benefit of the restrictions and may be entitled to enforce them. Secondly, to discharge the relevant user restrictions wholly would deprive those who may be entitled to enforce them of any opportunity to exercise control over future use of the property.

. . . It seems to me that in considering as a matter of discretion whether or not to accede to the application, I ought to have regard to the applicant’s proposals for the use of the property, and to the interest of those whom the restrictions may have been intended to protect.

The questions upon which the decision of this Court is sought are set out by the President in the case stated:

(1) Whether I misdirected myself in law, by making findings as to the possible reaction to the originating application by persons served with notice of it, which were not supported by any evidence; and whether in doing so I failed to exercise my discretion judicially and/or took account of immaterial matters.

(2) Whether I misdirected myself in law and/or acted in breach of a legitimate expectation which the Applicants assert that in the absence of objection the Tribunal would or should grant the primary relief sought.

(3) Whether I erred in law:

(a) in failing to give any or sufficient weight to the presumption which the Applicants allege that in the absence of any evidence to the contrary the Tribunal should grant an application to discharge a restrictive covenant;

(b) in declining to give effect to the presumption without any or any sufficient evidence in rebuttal;

(c) in considering that I had a discretion to refuse the Application to discharge without any or sufficient evidence in rebuttal;

(d) by failing to grant the said discharge.

In argument before this Court the appellant did not pursue the contention that the President had acted in breach of a legitimate expectation that, in the absence of objection, the Tribunal would grant the relief sought. The appeal was put on the two grounds (i) that the President was wrong to take account of the possible effect of the notice on those upon whom it was served, and (ii) that he was wrong in failing to give effect to a presumption that, in the absence of evidence to the contrary, the Tribunal should grant an application to discharge a restriction.

Section 84(1) of the Law of Property Act 1925 is in these terms, so far as material:

84(1) The Lands Tribunal shall . . . have power from time to time, 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 on being satisfied -

(a) that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Lands Tribunal may deem material, the restriction ought to be deemed obsolete; or

(aa) that (in a case falling within subsection 1A below) the continued existence thereof would impede some reasonable user of the land for public or private purposes or, as the case may be, would unless modified so impede such user; or

(b) that the persons of full age and capacity for the time being or from time to time entitled to the benefit of the restriction, whether in respect of estates in fee simple or any lesser estates or interests in the property to which the benefit of the restriction is annexed, have agreed, either expressly or by implication, by their acts or omissions, to the same being discharged or modified; or

(c) that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction; . . .

The application was made under each of the four paragraphs of that subsection. It was accepted before us that the burden lay on the applicant to satisfy the Tribunal, as a matter of fact, that the one or more of those four grounds was made out. The President made no finding as to the grounds in paragraphs (a) or (c). There is no appeal in respect of his failure to do so: in particular, it has not been argued before us that he ought to have held, on the material before him, that the restrictions ought to be deemed obsolete or that a discharge of the restrictions would not injure the persons entitled to the benefit. The appellant was content to rely on the finding which the President did make - namely, that he had decided to order modification so as to permit the use of the restricted land for general educational purposes “being satisfied on the information provided as to the grounds (aa) and (b) in section 84(1)” . It is said that the effect of that finding is that the President was satisfied, as a matter of fact, that the continued existence of the restriction would impede some reasonable user of the land for public or private purposes; and that the persons entitled to the benefit of the restriction had agreed to the discharge thereof.

In my view neither of those conclusions follow from the finding which the President actually made. His jurisdiction to order modification of the restrictions on ground (aa) followed logically from a finding that the continued existence of the restriction would, unless modified , impede some reasonable user of the land for public or private purposes. A finding that the continued existence of the restriction, even if modified, would impede some reasonable user would lead (absent some good reason to the contrary) to an order for discharge, not to an order for modification - for the reason that modification would not meet the need identified by the finding itself. So, prima facie, there is good reason to think that the finding under ground (aa) was, indeed, a finding that it was the continued existence of the restriction without modification that would restrict some reasonable user. That, prima facie, view is confirmed by the particulars in respect of ground (aa) on which the appellant relied in its application - namely, that the reasonable use of the land that would be impeded by the continued existence of the covenants was use for general educational purposes other than and/or in addition to those specified in the restrictions. Modification to permit use for general educational purposes would remove the only impediment to reasonable use of the land which the applicant had identified. To make a finding, on that material, that reasonable use of the land would continue to be impeded unless the restrictions were wholly removed would have been perverse. There is no reason to attribute to the President a finding which he did not need to make, which would have been logically inconsistent with the order which he actually made and which would have been perverse on the facts. The proper conclusion on the available material is that the President made the finding under ground (aa) which he did need to make in order to exercise the jurisdiction which he did exercise - namely, that it was the continued existence of the restriction, without modification, which impeded reasonable user of the land for the purpose identified by the applicant.

Jurisdiction to order modification of the restrictions on ground (b) would follow from a finding either (i) that persons entitled to the benefit of the restrictions had agreed to the restrictions being discharged or (ii) that such persons had agreed to the restrictions being varied. Prima facie, a finding of agreement to discharge would confer jurisdiction either to order discharge or to order modification. A finding of agreement to modification would confer jurisdiction to order modification; but not to order discharge. So a decision to order modification on ground (b) is at least as consistent with a finding of agreement to modification as it is with a finding of agreement to discharge. The submission that the President had expressed himself satisfied that the persons entitled to the benefit of the restrictions had agreed to the restrictions being discharged is not well founded. All that can be said is that, at the least, he was satisfied that there was agreement to modification.

In my view, a proper analysis of the decision of 3 December 1996 leads to the conclusion that the President was not satisfied that the persons entitled to the benefit of the restrictions had agreed to the restrictions being discharged. There was no express agreement either to discharge or to modification. Whatever agreement there was had to be inferred from the failure of those to whom notice of the application had been sent to respond. It was the failure to respond, and only the failure to respond, that could lead to a finding that the persons notified had agreed, “ expressly or by implication, by their acts or omissions”, to the discharge or modification of the restrictions. The President was not willing to accept that, in the circumstances of the application before him, failure to respond justified a finding of agreement, by implication, to the discharge of the restrictions. This appears from the passage in his decision to which I have already referred:

The recipient of such a notice would naturally and inevitably wish to know what the applicant was proposing to do on the land. On a fair reading of the notice, it would be plain that the owners proposed to continue the use of the premises as a university, albeit with a wider definition of their educational purposes. Had there been any indication beyond the bare reference to “discharge” as an alternative, that the applicants sought to remove all restrictions on user, then there might well have been objections forthcoming from nearby property owners, . . .

It is reasonably clear that the President took the view that the failure of those notified to respond might well be attributable to their failure to appreciate that the appellant was seeking to remove all restrictions affecting the land. If that was a correct view, then it was open to him to decline to infer, from the lack of response, that there was agreement to the application wholly to discharge the restrictions.

It follows, in my view, that the true position was that the appellant had failed to satisfy the Tribunal either (i) that some reasonable user of the land for public or private purposes would be impeded unless the restrictions were wholly discharged - indeed, as it seems to me, the applicant never attempted to satisfy the Tribunal that that would be so - or (ii) that the persons entitled to the benefit of the restrictions must be taken to have agreed that the restrictions should be wholly discharged. On that basis it must follow, also, that the Tribunal had no jurisdiction under either grounds (aa) or (b) of section 84(1) of the Law of Property Act 1925 to make an order for the discharge of the restrictions. The only jurisdiction under those grounds, on the facts as found by the Tribunal, was to order modification. It is not suggested on this appeal that the Tribunal ought to have founded jurisdiction under either grounds (a) or (c) of the subsection. In these circumstances the opportunity to choose, as a matter of discretion, whether to order discharge or modification never arose. The only order that could be made was an order for modification.

The appellant’s complaint, although advanced by way of challenge to the reasons which the President gave for purporting to exercise his discretion in the way that he did, is that the President was wrong to take the view that persons receiving notice of the application might have failed to understand that what was been sought was an order that the restrictions be wholly discharged; and so wrong to take the view that that might be the reason for the absence of objection. There are, I think, two elements in that complaint: (i) that the terms of the notice were so clear that there was no room for misunderstanding and (ii) that there was no evidence that any potential objector did misunderstand the position.

The notice sent to those who might be entitled to the benefit of the covenants was settled by the Lands Tribunal itself on the basis of the application which had been made to it. It is the notice, and not the application, that must be examined in order to ascertain what potential objectors were told. The notice is in these terms, so far as material:

TAKE NOTICE that an Application for discharge alternatively modification of restrictive covenants imposed by the following Deeds [describing them] affecting the property known as 35 Marylebone Road, London NW1 has been made to the Lands Tribunal pursuant to Section 84 of the Law of Property Act 1925 . . . by the University of Westminster . . . to permit the discharge (wholly) of the Restrictions contained in the above-mentioned Deeds or alternatively the modification of the restrictions by

1. The deletion of the words “a School of Management Studies, a College of Architecture and Advanced Building Technology, a Hall of Residence for students, an office for a District Surveyor and for housing purposes” and

2. The substitution therefor of the words “and for General Educational purposes and a Hall of Residence for students and for Housing Purposes”.

. . .

The restrictions affecting the above property are as follows:-

The said property is to be used only for the purposes of a School of Management Studies, a College of Architecture and Advanced Building Technology, a Hall of Residence for students, an office for a District Surveyor and for Housing purposes.

The grounds of the Application fall within paragraph (a) (aa) (b) and (c) of subsection (1) of Section 84 of the Law of Property Act 1925 namely:-

1. Under Paragraph (1)(a):

1.1 The following are brief particulars of the changes in the character of the property or the neighbourhood or other material circumstances relied upon in rendering the covenant obsolete:

. . .

1.1.3 a local government body, such as the Applicant’s predecessors in title, might have used the Property for alternative uses which could have had a perceptible impact upon the owners of the benefit of the Restrictions and/or those in the area surrounding the Property. The Applicant University’s proposed modification of the Restrictions will allow for alternative uses which have no greater impact upon the owners of the benefit of the Restrictions and/or those in the area surrounding the Property than the current permitted uses.

2. Under Paragraph (1)(aa):

2.1 the reasonable use of the land, which would be impeded by the continued existence of the covenants, is the use of the Property for general educational purposes, other than and/or in addition to those specified in the Restrictions.

2.2 the Restrictions, in impeding reasonable use, do not secure to the persons entitled to the benefit of it any practical benefits of substantial value or advantage to them.

2.3 the Restrictions are contrary to the public interest because they restrict the use of the Property by the Applicant University for a full range of educational purposes, which purposes are in the public interest, other than and/or in addition to those specified in the Restrictions.

3. Under paragraph (1)(b):

3.1 the Applicant will rely on paragraph (1)(b) of section 84 of the said Act in respect of:

. . .

3.1.2 all persons who do not object [to this Application], and

3.1.3 all persons who, having objected, withdraw their objections before, during or following the hearing.

4. Under paragraph (1)(c):

4.1 the discharge or modification of the Restrictions will not injure any person entitled to the benefit of it because the proposed changes will not cause any change or changes to the use of the Property and/or to the area surrounding the Property, which will be perceptible generally and/or to those persons entitled to the benefit of the Restrictions.

Any person claiming to be LEGALLY ENTITLED TO THE BENEFIT OF THE RESTRICTIONS and who wishes to object to the discharge alternatively the modification thereof or claim compensation in respect of the same is required to send a Notice of Objection (including quantification of Compensation if claimed) to the Registrar of the Lands Tribunal . . . and to the Applicant’s Solicitors WITHIN 28 DAYS FROM THE DATE OF THIS NOTICE . . .

I accept, of course, that a careful reading of the notice would alert the recipient to the fact that the applicant was seeking the discharge (wholly) of the restrictions; and to the fact that the applicant would seek to rely on the absence of objection as evidence of agreement to discharge. But, as it seems to me, the President was correct when he observed that “from the foregoing details it is evident that the express purpose of the application was to enable the University to widen its educational activities whilst retaining the use of the property for what it described as general educational purposes”. He was entitled to take the view that the overall impression conveyed by the notice was that the applicant was doing no more than proposing a relaxation of the restrictions. He was entitled to take the view that the notice was intended to reassure those who might be otherwise object that the applicant was not proposing anything which could affect them adversely. There is nothing in the particulars set out under the four grounds relied upon which would suggest to the reader of the notice that the effect of an order discharging the restrictions would be that (subject to planning constraints) the applicant (or any successor in title) could use the property for purposes that were wholly unconnected with education. In my view, the President was entitled to reach the conclusion that there was room for misunderstanding; and that recipients of the notice might not appreciate the true effect of an order for discharge - as distinct from an order for modification.

I reject, also, the submission that, in the absence of evidence that any potential objector was actually misled by the notice, the President was bound to hold that the absence of objection was sufficient evidence of agreement. Whether or not, on the material which was before the Tribunal, the President could properly reach the conclusion that recipients of the notice had agreed to the restrictions being discharged or modified (or either) is a question of law; but the question whether or not ground (b) in section 84(1) of the Law of Property Act 1925 is made out is, ultimately, a question of fact. It is not enough to show that there was sufficient material to justify a conclusion in the applicant’s favour; It is necessary to show that any other conclusion would be perverse. Once the President had reached the conclusion that there was room for misunderstanding as to the true effect of an order for discharge, he was bound to ask himself whether the possibility that a potential objector had, in fact, been misled by the notice could be ruled out. He was not satisfied that that possibility could be disregarded. In those circumstances he was entitled to conclude that he could not be satisfied that it was right to infer agreement from the absence of objection.

It follows that I would dismiss this appeal. The findings of fact which (on a proper analysis) were actually made by the President in relation to grounds (aa) and (b) under section 84(1) of the Law of Property Act 1925 are not open to challenge; and, on the basis of those findings, there was no jurisdiction to make an order for the discharge of the restrictions.

The questions posed by the case stated are put on the premise - which, as I think, is a false premise - that the President was entitled to choose, as a matter of discretion, whether to order discharge as an alternative to modification of the restrictions. In those circumstances I do not think it appropriate to answer the questions in the form in which they are put. But the thrust of the questions suggests that the following observations may be of future assistance to the Tribunal:

(1) The jurisdiction to order discharge of a restriction is not necessarily co-extensive with the jurisdiction to order modification of that restriction. Whether either jurisdiction exists will depend on the findings of fact made in relation to whichever of the statutory grounds (a), (aa), (b) or (c) are relied upon. By way of example, a finding that by reason of the changes in the character of the property the restriction ought to be deemed obsolete would normally give jurisdiction to discharge under ground (a) - but would not normally provide grounds for modification. But a finding that (in a case falling within sub-section (1A) of section 84) the continued existence of the restriction would, unless modified, impede some reasonable user of the land for public or private purposes would give jurisdiction to order modification (to the extent necessary to remove the impediment) under ground (aa) - but would not permit discharge. Discharge could only be ordered under ground (aa) on the basis of a finding that the continued existence of the restriction would, despite modification, impede reasonable user.

(2) It is because jurisdiction depends on the findings of fact made by the Tribunal in relation to the statutory grounds that those findings ought to be specific. For example, in making a finding under ground (c) in the context of a composite application for discharge or modification it is necessary for the Tribunal to specify whether it is the proposed discharge or the proposed modification (or both) which will cause no injury to the persons entitled to the benefit of the restriction. And, in making a finding under ground (b), it is necessary for the Tribunal to specify whether the persons entitled to the benefit have agreed to the discharge or to the modification (or both).

(3) It is a question of fact whether or not ground (b) is made out in circumstances in which the only material from which agreement can be established is the failure of persons to whom notice of application has been sent to respond to that notice. There is no presumption that failure to respond is sufficient evidence of agreement. The Tribunal must ask itself whether, in the particular circumstances before it, it is appropriate to draw the inference that the absence of response is the result of agreement rather than inertia or misunderstanding. The Tribunal is bound to consider how a person served with the notice would be likely to react. It is only if the Tribunal is satisfied, on the balance of probabilities, (i) that every person of full age and capacity for the time being or from time to time entitled to the benefit of the restriction, whether in respect of estates in fee simple or any lesser interests in the property to which the benefit of the restriction is annexed, has been served with notice, or has otherwise become aware, of the application and (ii) that any such person who was not in agreement with the proposal to discharge or to modify the restriction (as the case may be) would think it necessary to object in order to protect his interest that the Tribunal can exercise jurisdiction under ground (b) in a case where there is no other evidence of agreement. The facts in the present case illustrate that the Tribunal may find it impossible, in respect of a composite application, to be satisfied that the absence of response signifies agreement with the proposal to discharge rather than with the proposal to modify. If an applicant intends to place reliance, under ground (b), on a failure to respond to notice of a composite application, the notice will need to be drawn so as to make the distinction between discharge and modification, and the respective consequences of each, clear beyond the possibility of misunderstanding.

(4) Once jurisdiction is established by a finding that the facts fall within one or more of the statutory grounds, the decision whether or not to make an order requires an exercise of discretion. But the discretion can only be exercised in respect of the order which the Tribunal has jurisdiction to make. So, if the finding under ground (aa) is that reasonable user will be impeded unless the restriction is wholly discharged, there is no jurisdiction to order modification; and the Tribunal cannot, as an exercise of discretion, order modification in lieu of discharge. It is only where there is jurisdiction to order both discharge and modification - where, for example, on a proper understanding of the facts, the persons of full age and capacity have agreed to whichever order the Tribunal thinks fit to make - that the Tribunal will have a discretion to choose between discharge and modification.

(5) The discretion must be exercised judicially. A finding of fact that one or more of the statutory grounds exists is likely, of itself and without more, to provide a good reason or reasons for making an order - particularly in a case falling within grounds (a) or (aa). If there is a good reason for making an order then, in the absence of some reason to the contrary, an order ought to be made in the proper exercise of the Tribunal’s discretion. This is not to recognise some presumption or legitimate expectation. It is simply to recognise that the exercise of a discretion requires a weighing of reasons for and against the course proposed; and that if there are good reasons for the course proposed and no reason against it then a proper exercise of discretion will lead to that course being adopted. I do not, myself, find anything in the decision of this Court in Gee v The National Trust [1966] 1 WLR 170, or in the other cases to which we were referred, which is inconsistent with that analysis.

On a proper understanding of the Tribunal’s findings of fact in the present case there was no jurisdiction to order the discharge of the restrictions. There was no basis upon which the President could exercise a discretion to choose between discharge and modification. There was no reason to refuse the order for modification which had been sought. That was the only order which the Tribunal could properly make on the material before it.

Waller LJ: I agree.

Swinton Thomas LJ: I also agree.