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Case No: CHANF/1998/1656/A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
Blackburne J.
Royal Courts of Justice
Strand, London, WC2A 2LL
Friday 26 May 2000
B e f o r e :
LORD JUSTICE PETER GIBSON
LORD JUSTICE CHADWICK
and
LORD JUSTICE TUCKEY
|
SELBY
DISTRICT COUNCIL
|
Respondent
|
|
-
and -
|
|
|
SAMUEL
SMITH OLD BREWERY (TADCASTER)
|
Appellant
|
__________________________________
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
__________________________________
Mr. Michael Briggs Q.C. and Mr. John Machell (instructed by Messrs
Walker Morris of Leeds for the Respondent)
Mr. Jonathan Gaunt Q.C. (instructed by Messrs Dickinson Dees for the
Appellant)
__________________________________
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE PETER GIBSON:
1. The central issue on this appeal is a question arising from the
incorporation into a contract , created by the exercise of an option to
repurchase, of General Condition 5(3) of the Law Society's General Conditions
of Sale (1984 edition). By that Condition a vendor of part of his land is
entitled to have expressly reserved out of the conveyance such rights as would
be implied in favour of a purchaser of the retained land if the vendor had
conveyed the land to be sold and the land to be retained by simultaneous
conveyances to different purchasers. Without that Condition the vendor would
not be entitled to any implied easements (not being easements of necessity or
those required to carry out the common intentions of the parties) and s. 62 Law
of Property Act 1925, which causes certain rights to pass with a conveyance,
does not operate in favour of retained land. The issue between the parties
is as to the application of the condition in the circumstances of the case to
determine the rights reserved to the vendor over the land to be repurchased.
Are they only those rights which were established easements at the date of the
grant of the option or do they include all quasi-easements enjoyed by the
retained land over the land to be repurchased as at the date of the exercise of
the option? The Claimant, Selby District Council ("the Council"), argued for
the former. The Defendant, Samuel Smith Old Brewery (Tadcaster) ("Samuel
Smith"), argued for the latter. On 5 November 1998 Blackburne J. decided that
question in favour of the Council. Samuel Smith now appeals against that
decision. The judge also made an order requiring Samuel Smith to pay the
Council two thirds of their costs of the trial to that date and one half of the
Council's other costs of the action to that date. Samuel Smith also appeals
against the latter part of that order in any event.
2. The background to this case can be summarised like this. In the centre of
Tadcaster Kirkgate and Chapel Street are parallel streets running roughly
north-south. At their southern ends they meet High Street running roughly
east-west. In 1972 the Council compulsorily acquired just over an acre of land
at the rear of the commercial buildings fronting Kirkgate, High Street and
Chapel Street. Like the judge I will call that land "the Centre Site". I will
call those buildings "the shops". The Council cleared the buildings on the
Centre Site and in 1974 laid out a public car park with vehicular access from
Chapel Street. New retaining walls were built by the Council on the rear
boundaries of the shops and a hard standing strip delineated by kerbstones was
laid down behind those properties, with the words "No Parking" and "Keep clear
- rear access" painted on it. Following the laying out of the car park the
Council permitted and encouraged the use of the car park as a means of
obtaining access to the rear of the shops. The planning permission which had
been obtained on 12 March 1968 for the car park had included the provision of
loading and unloading areas for the shops. Openings on the rear boundary walls
were made to facilitate such rear access. But no rights were ever granted by
the Council over the car park for that purpose. Almost all of the property
surrounding the Centre Site, including the property on its northern side, is
owned by Samuel Smith.
3. Towards the end of the 1970s the Council became concerned about the
deteriorating state of the town centre and its lack of a supermarket. In 1984
the Council prepared a planning brief for the redevelopment of the Centre Site,
the focal point of which was to be a supermarket. The brief sought to secure
the provision of rear service facilities for the shops and stated expressly
that individual points of access from the new development to existing premises
should be agreed by the developer with the Council and with the owners of the
existing premises. The Council proposed to grant themselves planning
permission for such a development. Then and thereafter the Council envisaged a
development of the Centre Site which provided rear access for servicing the
shops. That was necessary because parking restrictions had been introduced at
the front of the shops.
4. In April 1986 the Council and Samuel Smith reached agreement that Samuel
Smith would pursue a more ambitious scheme known as "the Vision of Tadcaster",
including the comprehensive redevelopment of the Centre Site and Samuel Smith's
property to the north, together with associated pedestrianisation and traffic
re-routing schemes. Samuel Smith would itself be the developer and would
purchase the Centre Site. Planning permission for the Vision of Tadcaster was
granted by the Council. There then followed protracted negotiations about the
price to be paid for the Centre Site. Samuel Smith wanted the Centre Site to
be transferred to it for no monetary consideration, the price to be Samuel
Smith's covenants in a proposed agreement pursuant to s. 33 Local Government
(Miscellaneous Provisions) Act 1982 to carry out the development. The Council
insisted on a monetary purchase price. Heads of terms were finally agreed in
principle in November 1987 under which the Council were to receive £90,000
for the Centre Site plus the benefit of a watered down s. 33 agreement
requiring Samuel Smith to use its best endeavours to complete the Vision of
Tadcaster within 5 years.
5. Although the expectation was that the development work would start early
in 1988, negotiations on the details dragged on throughout 1988 and 1989.
Samuel Smith experienced difficulties in negotiating the surrender of a lease
of a narrow strip of land called the bowling club strip needed for a road
widening which was an essential part of the Vision of Tadcaster and it was also
facing opposition over the pedestrianisation proposals. On 30 January 1990 the
Council's policy and finance committee passed a motion to the effect that the
Council should withdraw from the agreement in principle unless the sale of the
Centre Site was completed and the price paid within 28 days.
6. This ultimatum led to a meeting the next day at which an accord was
reached. The Council would sell the Centre Site to Samuel Smith for
£90,000 to be completed before 31 March 1990 but the Council would have an
option to repurchase the Centre Site "at cost" if Samuel Smith did not within
18 months enter into a s. 33 agreement committing itself to the development.
In correspondence in early February the meaning of "at cost" was agreed to be
£90,000 indexed by reference to the retail price index ("the RPI").
7. On 30 March 1990 8 documents were executed to give effect to the new
bargain. Among the documents was an agreement for the sale by the Council to
Samuel Smith of the Centre Site and the bowling club strip for £90,000.
The property agreed to be sold included the residue of a term of 21 years,
which commenced on 1 January 1975 and was granted by Samuel Smith to the
Council on 12 September 1975, of a strip of land ("the yellow strip") no more
than 12 or so feet in width running along the backs of 12-22 High Street. It
also included the 5 years unexpired residue of a term of 21 years which
commenced on 1 April 1974 and was granted by Courage Brewery Ltd. to the
Council on 22 August 1977 of two strips of land ("the purple strips") on either
side of, and in effect being a continuation of, the yellow strip. The purple
strips adjoined the backs of 10, 24 and 26 High Street.
8. Clause 4 of the agreement also provided that on completion Samuel Smith
should grant the Council a 21-month lease of the car park at a peppercorn rent
from 30 March 1990. The lease was to contain a covenant by the Council to keep
the area thereby demised available for its existing purposes as a market, as a
public car park and as public conveniences. Clause 5 provided for a similar
lease by Samuel Smith to the Council of 43 Kirkgate, where the Council had
their office premises. The Council covenanted to use those premises as
offices.
9. The crucial document entered into on 30 March 1990 was an option
agreement. By it Samuel Smith granted the Council the option, conditional on
Samuel Smith failing to enter into a s. 33 agreement by 31 October 1991 or such
other date as the parties might agree, to repurchase the Centre Site (but not
the bowling club strip) and to take leases of the yellow and purple strips in
identical form to the leases of 12 September 1975 and 22 August 1977
respectively and to expire on the expiry dates of the original leases. Clause
5 of the option agreement provided that the proper service of the option notice
should create a contract which would be subject to the 1984 edition of the Law
Society's General Conditions of Sale so far as the same were not varied by or
inconsistent with the option agreement. Para. (1) of clause 5 contained a
number of variations including a variation to Condition 5 (1), but Condition 5
(3) was left unvaried. It was in these terms:
"(a) In this subsection "the retained land" means land retained by the vendor -
(i) adjoining the property, or
(ii) near to the property and designated as retained land in a special
condition.
(b) The conveyance of the property shall contain such reservations in favour of
the retained land and the grant of such rights over the retained land as would
have been implied had the vendor conveyed both the property and the material
land by simultaneous conveyances to different purchasers."
The price for the property to be repurchased on exercise of the option was to
be £90,000 plus the RPI increase.
10. Completion took place on the same day. With the conveyance of the Centre
Site to Samuel Smith the leasehold interests merged in the reversions owned by
Samuel Smith and all cross-boundary rights between the Centre Site and the
shops were extinguished. Thereafter a more attractive development outside the
centre of Tadcaster presented itself to Samuel Smith, the Vision of Tadcaster
was never carried out and Samuel Smith never entered into a s. 33 agreement to
do so. By letter dated 1 November 1991 the Council exercised its option by
serving the option notice.
11. Following that service, there was correspondence between the parties
concerning the terms of the reconveyance of the Centre Site. The parties were
unable to reach agreement as to what rights should be reserved in favour of the
shops retained by Samuel Smith. On 19 June 1992 the Council served on Samuel
Smith a notice to complete on 13 July 1992 and, when that did not take place,
on 10 August 1992 issued a writ seeking specific performance.
12. The pleadings underwent numerous changes over a period of some four years
and included a Re-amended Reply and an Amended Rejoinder. Until shortly before
the trial, three main issues were raised by the pleadings. (1) Had the Council
properly authorised the commencement of the proceedings? (2) Had the Council
validly exercised the option? (3) Was the Council entitled to specific
performance? In the week before the trial began on 12 October 1998 Samuel
Smith conceded those issues. The issue between the parties then became whether
Samuel Smith was entitled to have certain rights over the car park reserved for
the benefit of the shops. Those rights were said to be (a) easements of
necessity, (b) intended easements, (c) easements arising under the rule in
Wheeldon v Burrows (1879) 12 Ch D 31, and (d) those rights and
privileges which are deemed to be conveyed under s. 62 Law of Property Act
1925. A number of rights claimed by Samuel Smith in favour of specific shops
were conceded by the Council. The rights remaining in issue were access and
car parking rights and rights of light.
13. At the trial the judge was only asked to determine the limited question
whether Samuel Smith was entitled by virtue of Condition 5 (3)
(i) only to those rights which were established easements either by reason of
express grant or by prescription at 30 March 1990, when the option was granted,
as the Council contended, or
(ii) to all quasi-easements enjoyed by the shops at 1 November 1991, when the
option was exercised, as Samuel Smith contended.
14. The significance of the difference between the two does not lie in the
dates, because none of the rights claimed by Samuel Smith first began to be
exercised after 30 March 1990. In all cases the use relied on has been
carried on at least since the car park was laid out and it makes no difference
whether the relevant date is 30 March 1990 or 1 November 1991. In either case
the use has been for less than the prescription period. The significance of
the difference lies in the applicability (claimed by Samuel Smith but denied by
the Council) of (a) the rule in Wheeldon v Burrows and (b) s. 62 Law of
Property Act 1925. By that rule the rights to be implied in favour of the
grantee of part of a holding against the owner of the remainder are those
rights which are needed for the proper enjoyment of the land granted but which
could not have been easements because of the common ownership prior to the
grant (and so are called quasi-easements). They are in the words of Thesiger
L.J. in Wheeldon v Burrows (12 Ch. D. at p. 49) "all those continuous
and apparent easements (by which, of course, I mean quasi easements) or, in
other words, all those easements which are necessary to the reasonable
enjoyment of the property granted, and which have been and are at the time of
the grant used by the owners of the property for the benefit of the part
granted." By s. 62 every conveyance, in the absence of a contrary intention in
the conveyance, passes with it "all .... liberties, privileges, easements,
rights, and advantages whatsoever, appertaining or reputed to appertain to the
land or any part thereof, or, at the time of conveyance, .... enjoyed with ....
the land or any part thereof".
15. It was common ground before the judge that by virtue of Condition 5 (3)
Samuel Smith was entitled to have reserved out of the reconveyance to the
Council such rights as would be implied in favour of a fictitious purchaser of
the shops if Samuel Smith had conveyed the Centre Site and the shops by
simultaneous conveyances to different purchasers. The judge accepted that
where Condition 5 (3) applies the rights to be implied and to which the
conveyances should give effect would ordinarily depend on the circumstances at
the date of the contract. But the judge said of that condition that it did not
define by what process the implied rights and reservations were to be
ascertained, much less did it require the application, as at the contract date,
of the rule in Wheeldon v Burrows or s. 62 to determine what those
rights were, the matter being left at large. He pointed out that the principle
of non-derogation from grant which underlay the implication of rights on a
conveyance of land was based upon the presumed intention of the parties to the
conveyance, and that the grant of rights under the rule in Wheeldon v
Burrows no less than the grant of rights under s. 62 yielded to the
parties' intentions. He regarded the obvious purpose of the option as being
to enable the Council to restore the landholding position and the position of
the parties to what it had been on 30 March 1990 immediately before the
transaction was entered into. He treated as de minimis two differences between
what had been conveyed on 30 March 1990 and what was to be reconveyed on the
exercise of the option (the fact that the new lease of the purple strips
included an area of land not demised by the lease of 22 August 1977 and the
fact that the bowling club strip was not included in the property to be
reconveyed). He said that no consideration was given in March 1990 to the
pattern of cross-boundary rights and liabilities if and when the option was
exercised and that in the option agreement the need to recreate a pattern of
cross-boundary rights was not addressed. He expressed the view that there was
nothing in the language of Condition 5 (3) which required that the matter be
looked at by reference to the pattern of use as at the date of exercise of the
option rather than as at the date of the option itself. He therefore rejected
Samuel Smith's contention and accepted the Council's submission that Samuel
Smith was entitled only to easements which were established at 30 March
1990.
16. In a separate judgment on costs the judge referred to the course of the
proceedings and made the order that the Council should recover two thirds of
their costs of the trial. He then said that he ought to make some order as to
the general costs of the action so far incurred. He bore in mind that Samuel
Smith had abandoned its defence based on specific performance and that costs
had been incurred in relation to issues on which the Council had succeeded. He
ordered that the Council should have half of their costs up to the date of the
trial.
17. The effect of the judge's ruling on the question of construction was that
there remained, and still remains, for decision what established easements
should be expressly reserved in the reconveyance, the position to be assessed
as at 30 March 1990. Samuel Smith had not even pleaded what its case was on
this. That question awaits the outcome of this appeal and, if the appeal is
dismissed, in default of agreement between the parties that issue will have to
be tried.
18. On this appeal we have had the benefit of excellent argument from Mr.
Gaunt Q.C. for Samuel Smith and Mr. Briggs Q.C. for the Council.
19. On the main issue Mr. Gaunt submitted that, giving Condition 5 (3) its
ordinary and natural meaning, Samuel Smith was entitled to the reservation as
easements of those rights existing at 1 November 1991 which are to be implied
under the rule in Wheeldon v Burrows and which pass under s. 62. He
accepted that in relation to an actual transaction the rule in Wheeldon v
Burrows may be held not to apply to particular easements which the parties
did not intend to be granted. He also accepted that s. 62 applied only if and
in so far as a contrary intention was not expressed in the conveyance and had
effect subject to the conveyance. But he submitted that those limitations
could not apply to the fictional conveyance of the retained land to a fictional
purchaser. The intention attributed to the parties to a different transaction,
between Samuel Smith and the Council, can hardly be attributed, he said, to the
parties to the fictional conveyance, nor can a contrary intention be found in
the fictional conveyance to exclude s. 62. He pointed to the fact that
Condition 5 (3) had not been modified. He stressed that the effect of the
Council's submissions was to leave Samuel Smith in a worse position, because as
of 31 March 1990 it had 16 years or so of prescriptive user, which was lost
when it took the conveyance of the car park, and on reconveyance to the Council
the prescription period started from scratch. Whilst he accepted that prior to
31 March 1990 Samuel Smith's use was precarious, he submitted that it was quite
likely to have ripened into easements acquired by prescription but for the
conveyance in 1990. He said that it was most unlikely that the parties' common
intention would have been for Samuel Smith to be left worse off on the exercise
of the option. He contended that if, contrary to his submissions, the parties
to the fictional conveyance had the knowledge of the Council and Samuel Smith
at 30 March 1990 the inference to be drawn was that they intended that the
retained properties should have the rights of access and parking over the
Centre Site.
20. Mr. Briggs submitted that the judge was right for the reasons which he
gave. He said that rights will only be implied to the extent that they are
consistent with the actual or presumed intentions of the parties and that the
general rules as to what implied rights pass on a conveyance are no more than
presumptions based upon the principle of non-derogation from grant. The
exercise, he argued, was to ascertain the actual or presumed intentions of the
parties, having regard to the terms of the transaction and the relevant
surrounding circumstances. He emphasised that the present case was one
involving a repurchase, unlike the ordinary case to which Condition 5 (3)
applies of a purchase of part of a single holding. The land to be repurchased
had been in separate ownership prior to 1990 and was then sold to the
neighbouring owner solely to facilitate a proposed development which had then
entirely failed. He said that the obvious commercial purpose of the option,
viewed as part of the transaction entered into in March 1990, was to enable the
Council to restore the parties to the status quo ante 30 March 1990, including
the pre-March 1990 pattern of rights and liabilities, benefits and burdens
across the re-established ownership boundary between the Centre Site and the
shops. To convert the quasi-easements into easements by express reservation
ran counter to the obvious intention that the Centre Site, once recovered by
the Council, should be no more heavily encumbered than it had been in March
1990.
21. I start with Condition 5 (3). By including that Condition in the option
agreement the Council and Samuel Smith did address the question of what rights
over the Centre Site should be reserved in favour of the retained properties
(as well as the rights over the retained properties in favour of the Centre
Site). The obvious purpose of Condition 5 (3) is, as the judge put it, to
level the playing field as between the grant and the reservation of implied
rights by supposing simultaneous grants of the land which the vendor has agreed
to convey and the land which he is retaining. It is well-established that
where there are simultaneous grants by the grantor of different parts of a
single piece of land, each grantee obtains the same easements over the land of
the other as he would have obtained if the grantor had retained it
(Swansborough v Coventry (1832) 2 Moo. & Sc. 362, Megarry & Wade
The Law of Real Property, 6th ed. (2000) para. 18 - 106). Thus I do
not think that the judge was right to say that Condition 5 (3) did not define
how the implied rights and reservations were to be ascertained. They were to
be ascertained by the mechanism provided for in the Condition, that is to say
by reference to the general law on the deemed footing of simultaneous
grants.
22. In the ordinary case of a conveyance of part of the land of the vendor not
involving a repurchase, in the absence of evidence of a different intention,
the ascertainment of the rights and reservations would be by reference to the
position at the date of the contract for sale. But this is not the ordinary
case of a sale of part of a previous entire holding, but one of repurchase
pursuant to the terms of the agreement in March 1990, of land which prior to
March 1990 had already been in separate ownership and which had then been sold
to facilitate a development that subsequently failed. Further, although
Condition 5 (3) requires a fictional conveyance of the retained properties, the
Condition is a term of the actual agreement between the Council and Samuel
Smith and its meaning must be what the parties intended it to mean. The
knowledge to be attributed to the hypothetical purchaser cannot sensibly be
different from the actual knowledge of Samuel and the Council, as the parties
to the option agreement and the actual conveyance, simultaneously with which
the fictional conveyance is deemed to occur. Further, Samuel Smith is the
vendor in the hypothetical conveyance. For the purpose of determining the
rights over the retained properties in favour of the Centre Site the actual
knowledge and intentions of the actual parties at 30 March 1990 when the
conditions for the repurchase were laid down must be considered. It would be
anomalous if Condition 5 (3) were to be interpreted as requiring a different
state of knowledge to be attributed to the fictional purchaser in the
simultaneous fictional conveyance. As Mr. Briggs said, it cannot be right that
if there was a clear understanding between Samuel Smith and the Council
inconsistent with the reservation of a right in favour of the shops over the
Centre Site, Condition 5 (3) would require that reservation merely because of
the presence of a hypothetical purchaser in the hypothetical conveyance of the
shops.
23. The rule in Wheeldon v Burrows only operates to the extent that it
is not inconsistent with the intention of the parties which may be inferred
from the circumstances. Similarly s. 62 will not apply where a contrary
intention is apparent from the conveyance or contract. Mr. Gaunt accepted that
it is appropriate to look at the actual contract between the Council and Samuel
Smith for this purpose even though the conveyance envisaged by Condition 5 (3)
is a fiction. In applying the Condition by reference to the general law, it is
appropriate to take account of how the parties' intentions may affect the
implication of rights. In Birmingham, Dudley and District Banking Co. v
Ross (1888) 38 Ch. D. 295 the lessee of a new building was held not
entitled to a right of light to an extent inconsistent with the grantor's
intention to be implied from the circumstances existing at the time of the
lease and known to the grantee. As Cotton L.J. said at pp. 308-9:
"But when the question is as to an implied obligation we must have regard to
all the circumstances which existed at the time when the conveyance was
executed which brought the parties into that relation from which the implied
obligation results."
From the circumstances an intention inconsistent with what otherwise would be
implied rights may be deemed inferred. But to exclude the right that intention
must be clearly inconsistent. For example to exclude a grantee's right to
light it is not sufficient that the retained land should be shown in the
conveyance to the grantee as "building land" (Broomfield v Williams
[1897] 1 Ch 602). Each case must turn on its own particular circumstances.
24. The circumstances of the present case clearly demonstrate the intention of
the parties by the transaction of 30 March 1990 that if Samuel Smith did not
enter into the s. 33 agreement within the period allowed, the Council, should
they exercise the option, would restore the position to what it was prior to
that date. There are several pointers to this being the mutual intention.
First, the short leases granted to the Council by Samuel Smith of the car park
and 43 Kirkgate on 30 March 1990 were plainly intended to preserve the status
quo during the period of the option agreement. Second, there is the exact
correspondence (save for the minor variations which on the judge's
unchallenged view were de minimis) between the property which was conveyed and
the property which was repurchased. Third, there is the repurchase price "at
cost", the agreement on indexation indicating that the parties intended that
Samuel Smith would be repaid on the repurchase in real terms precisely what it
had paid on 30 March 1990, regardless of any changes in the market value of the
property between the sale and the repurchase. Fourth, there is the recreation
of the exact terms of the leases of the yellow and purple strips in the new
leases for what would have been the residues of the terms of the original
leases if they had not merged on 30 March 1990 in the reversions belonging to
Samuel Smith.
25. To treat Condition 5 (3) as requiring the conversion of precarious
quasi-easements, dependent on whatever happened to be the user which could be
established at the date of the exercise of the option, would be to alter the
property from that which was sold on 30 March 1990 through the conferring of
valuable rights in perpetuity on Samuel Smith. This change is not reflected
in, and would be inconsistent with, the repurchase price exactly matching the
purchase price. It would go far beyond the mere restoration of the
position of the parties as it was at 30 March 1990 and would permanently
encumber the Centre Site with easements over it.
26. Further, the position of the Council as owing a duty of care to its
ratepayers is in my view to be borne in mind. True it is that on the
unchallenged findings of the judge, there was no discussion between the Council
and Samuel Smith at the meeting on 31 January 1990 of what the Council would do
with the Centre Site if the Council exercised the option and nobody gave any
consideration to identifying what established easements existed over the car
park in favour of the shops or whether any development of the car park would be
inhibited by any easements that were found to exist. It cannot be said that
there was a common understanding that the Council would be free to develop the
car park and that for that reason the quasi-easements would not become
easements. But the wide rights claimed as easements by Samuel Smith, such as
the right for itself and its authorised visitors to the shops to have not only
access over the car park but also the right to park anywhere in the car park
free would, in effect, prevent the use of the site other than for its existing
use in perpetuity. That is a result hardly likely to have been intended by the
Council on entering into the option agreement on 30 March 1990, conditionally
giving the Council the right to restore the landholding position as at that
date.
27. I accept that on the Council's argument the position at 30 March 1990
would not be restored precisely on the repurchase because the 16 years' user by
Samuel Smith would be lost and time would have to start running again. But
there can be no doubt which of the two rival approaches would more closely
implement the intention of a restoration to the status quo ante. That user
gave Samuel Smith no rights at 30 March 1990 and was truly precarious, liable
to be interrupted at any time by the Council, even by notice without
necessarily stopping the user. By contrast, if Samuel Smith's contentions were
correct it will have acquired easements in perpetuity.
28. On the Council's argument, the restoration of the position at 30 March
1990 requires the reservation of rights which existed as fully constituted
easements at that date. Condition 5 (3) is apt to achieve that purpose, and we
have heard no argument to the contrary.
29. For these reasons I prefer the arguments made on behalf of the Council. I
would dismiss the appeal on the main issue.
30. I turn next to the appeal on costs. Mr. Gaunt submitted that the judge
was wrong to have made any order as to the costs of the action as distinct from
the costs of the trial. He said that it was still possible that on the
construction favoured by the judge Samuel Smith would prove to be successful.
He argued that the judge's order was premature.
31. I cannot accept that submission. In my judgment the judge was well within
the proper scope of the exercise of his discretion to make the order which he
did. At the time when he made his order Samuel Smith had conceded the three
main issues on which it had resisted the Council's claim and had no pleaded
case in respect of the rights which it had on the construction favoured by the
judge. In these circumstances it was entirely proper for the judge to make an
order in respect of the costs incurred thus far. It might be thought that the
judge was somewhat generous to Samuel Smith in requiring it to pay the Council
only half their costs of the action. However the Council took no point on
that. I would therefore dismiss the appeal on costs also.
LORD JUSTICE CHADWICK:
32. I agree that this appeal should be dismissed for the
reasons given by Lord Justice Peter Gibson. I add some observations of my own
out of deference to the careful and helpful submissions addressed to us by
counsel for both parties.
33. The issue for decision by the judge turned on the effect to be given to
condition 5(3)(b) in the 1984 edition of the Law Society's General Conditions
of Sale on a re-conveyance by Samuel Smith to the Council of what has been
called the Centre Site, Tadcaster. The circumstances in which it had been
agreed, in March 1990, that the Centre Site would be reconveyed to the Council
in the event that Samuel Smith did not proceed with development under the
Vision of Tadcaster proposals were set out fully by the judge. They have been
described by Lord Justice Peter Gibson in his judgment. It is unnecessary for
me to rehearse them in any detail.
34. Those circumstances demonstrate, as clearly as may be, that the intention
of the parties was that, if Samuel Smith did not enter into an agreement with
the Council pursuant to section 33 of the Local Government (Miscellaneous
Provisions) Act 1982 by 31 October 1991 - the position should be restored to
the status quo ante. The property which was to be conveyed by the
Council to Samuel Smith on 30 March 1990 would be reconveyed by Samuel Smith to
the Council without variation (save to some very minor extent which, as was
accepted, was de minimis). The payment to be made by the Council to
Samuel Smith in consideration for the reconveyance would be the same (subject
to indexation) as the payment which Samuel Smith was to make on 30 March 1990
in consideration for the conveyance.
35. It was in that context that the parties needed to make provision, in the
option agreement of 30 March 1990, for the grant and reservation of easements
in the event that there were a reconveyance of the Centre Site by Samuel Smith
to the Council following the exercise of the option. The need for provision is
self evident. The easements enjoyed by Samuel Smith over the Centre Site and
the easements enjoyed by the Council over Samuel Smith's adjoining land
immediately before the conveyance of the Centre Site by the Council to Samuel
Smith on 30 March 1990, whatever those easements might be, would merge and be
extinguished on that conveyance. So there was a need to address the position
which would arise if and when the Centre Site was reconveyed by Samuel
Smith.
36. In the absence of some provision in the option agreement (or in any
subsequent agreement or in the reconveyance itself) the position on a
reconveyance of the Centre Site to the Council would be that the Council, as
purchaser of the land conveyed by the reconveyance, would, as a matter of law,
become the grantee of easements over the adjoining land retained by Samuel
Smith. Those easements would not be limited to easements of necessity and
intended easements; they would include easements arising under the rule in
Wheeldon v Burrows (1879) 12 ChD 31 and rights and privileges deemed to
be conveyed under section 62 of the Law of Property Act 1925. But Samuel Smith,
as vendor of the land conveyed by the reconveyance, would not become entitled
by way of reservation to any easements over the Centre Site other than
easements of necessity and intended easements; in particular, it would not
enjoy easements arising under the rule in Wheeldon v Burrows or the
benefit of section 62. The position is explained at pages 1105-1115 in
Megarry & Wade: The Law of Real Property (sixth edition, 2000, paras
18-097 to 18-115).
37. The purpose of condition 5(3)(b) in the Law Society's General Conditions
of Sale (1984 edition) is to redress the imbalance as between vendor and
purchaser that would otherwise exist under the general law. The condition seeks
to achieve that object by putting the vendor, in the relation to the adjoining
land which he retains, in the position of a purchaser of that retained land
under a conveyance of the retained land executed at the same time as the actual
conveyance of the land transferred. The condition is in these terms:
The conveyance of the property shall contain such reservations in favour of the
retained land and the grant of such rights over the retained land as would have
been implied had the vendor conveyed both the property and the retained land by
simultaneous conveyances to different purchasers.
38. The effect may be illustrated by an example. Suppose A to be the owner of
adjoining plots, Blackacre and Whiteacre. If A, by conveyances executed at the
same time, were to convey Blackacre to B and Whiteacre to C, then each of B and
C would obtain the same easements over the land conveyed to the other as they
would have obtained if the land conveyed to the other had been retained by A -
see Swansborough v Coventry (1832) 2 Moo & Sc 362, cited in
Megarry & Wade: the Law of Real Property at page 1110 (para 18-106).
In particular, C will obtain the same easements over Blackacre as he would have
obtained under the rule in Wheeldon v Burrows and section 62 if A had
retained Blackacre. But suppose that, instead of conveying Whiteacre to C, A
retains Whiteacre. He conveys Blackacre to B, as in the previous example, but
under a contract which contains condition 5(3). B obtains easements over
Whiteacre under the rule in Wheeldon v Burrows and section
62 in the usual way. A obtains the easements over Blackacre which C would have
obtained if Whiteacre had been conveyed to C - because that is what condition
5(3) requires.
39. In the example which I have just given, the easements over Whiteacre
which are the subject of an implied grant to B, as purchaser of Blackacre,
under the rule in Wheeldon v Burrows and section 62, will be determined
by the circumstances which actually exist at the time of the conveyance of
Blackacre by A to B - or, in a case such as the present, at the time of the
agreement, or option, under which B becomes the purchaser of Blackacre. So,
relating the example to the facts in the present case, the easements to which
the Council will become entitled on the reconveyance of the Centre Site over
the adjoining land retained by Samuel Smith are determined by the circumstances
in which the parties entered into the transaction on 30 March 1990. Those
circumstances point, plainly, to an intention that the easements which were to
be granted to the Council on a reconveyance of the Centre Site were to be the
easements which had been enjoyed by the Council as owner of the Centre Site
before the conveyance to Samuel Smith on 30 March 1990. Any other conclusion
would be contrary to the underlying purpose of the option arrangement. I did
not understand Mr Gaunt QC, counsel for Samuel Smith, to suggest otherwise. In
particular, I did not understand him to suggest that the Council should be
entitled to any easements over the land retained by Samuel Smith which went
beyond those which had been enjoyed by the Council before 30 March 1990.
40. Condition 5(3) of the Law Society's Conditions of Sale (1984 edition)
requires that the easements over Blackacre reserved to A as owner of Whiteacre
- to return to the example - are ascertained by reference to a hypothetical,
and simultaneous, conveyance of Whiteacre by A to C. What easements over
Blackacre would be the subject of an implied grant to C, as purchaser of
Whiteacre, on such a conveyance? As Lord Justice Peter Gibson has pointed out,
the grant of implied easements under the rule in Wheeldon v Burrows and
the operation of section 62 of the Law of Property Act 1925 are limited by the
circumstances which exist at the time of the contract or the conveyance. Those
circumstances may show that the intention which would otherwise be implied on a
conveyance of land by one party to another is inconsistent with the true
intention of the parties; in which case the effect of the rule and the
operation of the section will be cut down. The question is what further
hypothesis (if any) is required as to the circumstances in which A is deemed to
convey Whiteacre to C in order to ascertain what easements over Blackacre would
be the subject of an implied grant by A to C in such a conveyance. Relating the
example to the facts of the present case, the question is what further
hypothesis (if any) is required as to the circumstances in which Samuel Smith
(as owner of the Centre Site) is deemed to convey its adjoining land to the
fictional purchaser.
41. Mr Gaunt's answer to that question is, in effect, that no further
hypothesis is required as to the circumstances in which Samuel Smith is deemed
to convey its adjoining land to the fictional purchaser. All that condition
5(3) requires is that it be assumed that there is a conveyance by Samuel Smith
of its adjoining land - that is to say, of the land which it is, in fact, going
to retain - to a fictional purchaser at the same time as the actual
reconveyance of the Centre Site to the Council. Nothing else is to be assumed.
In particular, it is not to be assumed that there is any connection between the
conveyance of the adjoining land to the fictional purchaser and the
circumstances which have given rise to the reconveyance of the Centre site to
the Council. It is said that that is the effect of the bargain which was made
when the parties agreed to the inclusion of condition 5(3) in the option
agreement.
42. I reject that submission. The effect of the bargain made when the parties
agreed to the inclusion of condition 5(3) in the option agreement has to be
determined by construing condition 5(3) in the context of the option agreement
itself; and, for that purpose, it is necessary to have regard to the fact that
the option agreement was part of a larger transaction effected on 30 March
1990. In the circumstances of the present case it would, to my mind, be wholly
inconsistent with the intention of the parties in March 1990 to hold that they
had agreed that condition 5(3) was to have effect on the basis that it was not
to be assumed that there was any connection between the conveyance of the
adjoining land to the fictional purchaser and the circumstances which had given
rise to the reconveyance of the Centre site to the Council. The obvious purpose
of condition 5(3) was to assist in restoring the position of Samuel Smith and
the Council to the status quo ante in circumstances which had, in fact,
given rise to the need for a reconveyance of the Centre Site.
43. To return to the example. The question is what further hypothesis (if
any) is required as to the circumstances in which A is deemed to convey
Whiteacre to C in a case where that is, notionally, part of a larger
transaction giving effect to a bargain under which A has agreed to reconvey
Blackacre to B in order to restore the status quo ante. In my view, the
answer is not open to doubt. The hypothesis required is that A's obligation to
convey Whiteacre to C arose under the original bargain between A and B. On that
basis, A is deemed to have agreed with B (and, if necessary, with C) at the
time of the original bargain that, if circumstances arose under which A were
required to reconvey Blackacre to B, then A would, at the same time, convey
Whiteacre to C. I have already pointed out that the easements over Whiteacre
which would be the subject of an implied grant to B, as purchaser of Blackacre,
would be determined by the circumstances existing at the time of the original
bargain. So, also, the easements over Blackacre which would be the subject of
an implied grant to C, as purchaser of Whiteacre, would be determined by the
circumstances existing at the time of the original bargain. In both cases, the
easements to be subject of implied grant and reservation are such easements as
would, as between Blackacre and Whiteacre, restore the position to that which
existed before those easements merged and were extinguished by the conveyance
which had brought Blackacre and Whiteacre into the same ownership.
44. It follows that the hypothesis to be made in the present case is that the
fictional conveyance of the adjoining land - that is to say, of the land which
Samuel Smith is to retain - is a conveyance to a purchaser pursuant to an
obligation arising as part of the bargain made between Samuel Smith and the
Council on 30 March 1990; and that, in the light of that bargain, the intention
to be attributed to Samuel Smith and the fictional purchaser - for the purpose
of ascertaining the implied easements and other rights which are to be granted
to the fictional purchaser under the rule in Wheeldon Burrows and
section 62 of the Law of Property Act 1925 - is that the position as between
the Centre Site and the adjoining land is to be as it was immediately before
the conveyance of the Centre Site on 30 March 1990.
45. There is nothing that I wish to add to the observations of Lord Justice
Peter Gibson in relation to the judge's order as to costs. I agree that the
judge was entitled to make the order which he did.
LORD JUSTICE TUCKEY:
46. I agree that this appeal should be dismissed for the reasons given in
both judgments.
Order: Appeal dismissed with costs to be summarily assessed at
£20,0000. Permission to appeal refused.
(Order does not form part of the approved judgment)
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