Dispensation for restrictive covenants futile: the dispenser had no power to dispense

There is no point negotiating a dispensation for restrictive covenants on land if the dispenser has no powers to dispense.

In the Upper Tribunal (Lands Chamber) case of Derreb Ltd v White & Ors Re The Huntsman [2015] the property was subject to the following covenant in a 1956 Conveyance:

“The property … shall not be used for any purpose other than as a Sports Ground or for the erection of detached houses for use as private residen[ces] only such buildings to be erected in such a position and in accordance with such plans and elevations including general layout and development plans as shall first be submitted to and approved …. by the Vendor’s surveyor …”

However Clause 2 of the 1956 Conveyance contained a power of release (“power of release”):

“… it shall be lawful for the Vendor (which expression shall be taken to include the estate owner or owners for the time being of property for the time being remaining subject to the trusts of the present settlement or any future re-settlement of the Cator Estate at Blackheath) … [within the current time period] to release any property which has already been sold from all or any of the stipulations or regulations to which it is now subject.”

Derreb relied on a deed dated 27th September 2013 (“the Deed of Release”) whereby the executors of the Vendor described in the 1956 Conveyance tried to release Derreb from the burden of that restriction. The respondents contended that the restriction had not been validly released.

The Tribunal cited the Supreme Court in Arnold v Britton & Others (2015). When interpreting a written contract the court had to infer “what a reasonable person having all the background knowledge which would have been available to the parties would have understood them … to mean” by using that language in the context. The court could only take into account factual circumstances which existed at the time that the contract was made, and which were known or reasonably available to both the parties. The Court must ascertain what a reasonable person, with all the background knowledge then reasonably available to the parties would have understood the parties to have meant. If there are two possible interpretations, the court was entitled favour the interpretation which was consistent with business commonsense.

The key words were those which defined “the Vendor” in the restriction in the 1956 Conveyance. It was an inclusive definition, and not an exhaustive one. In this case, anything falling within the natural meaning of the term “Vendor” in the relevant context could also fall within that definition.

The words “for the time being” in the power of release pointed to the future. The Tribunal interpreted “for the time being” to mean “from time to time”. However the many plot owners deriving title from the Vendor clearly could not exercise the power of release.

“Vendor” did not include the personal representatives who had tried to give the Deed of Release. The express words of the power of release made it clear that the parties to the 1956 Conveyance only intended the power of release to be exerciseable for as long as the trusts of the then current settlement of the Cator Estate (or any successor re-settlement of them) remained in existence. That purpose had ceased to be effective when the Trust ended.

So the restriction remained in place and enforceable by the respondents despite the personal representatives entering into the Deed of Release.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.