LANDS TRIBUNAL FOR NORTHERN IRELAND
LANDS TRIBUNAL & COMPENSATION ACT (NORTHERN IRELAND) 1964
IN THE MATTER OF AN APPLICATION
R/35/1998
BETWEEN
PAUL ROSS & LINDA ROSS - APPLICANTS
AND
MARGARET JOHNSTON - RESPONDENT
PART I
PROPERTY: 291 UPPER ROAD, GREENISLAND, CARRICKFERGUS
Lands Tribunal - Mr Michael R Curry FRICS FSVA IRRV MCI.Arb
Belfast - 1st September 1999
The late William Stewart had owned, and lived in, property at Upper Road, Greenisland,
Carrickfergus, Co Antrim. The house was on a very large site and was approached by a
long drive. In 1993, he sold Paul and Linda Ross part of the front garden, with access
over part of the drive, as a building site. The area which he retained was substantial and
capable of further development. Not long afterwards, William Stewart died, Margaret
Johnston bought his interest in the property from his estate and so Paul and Linda Ross
(‘the Rosses’) and Margaret Johnston became neighbours on a small, private cul-de-sac.
In the title granted to the Rosses, there was a restrictive covenant. One effect of that was
that it prevented Linda Ross from realising her wish to provide Bed and Breakfast (‘B&B’)
accommodation.
The Property (NI) Order 1978 gives the Tribunal power to modify such a covenant if it is
satisfied that it is unreasonable (for example, because it has become obsolete) and the
Rosses wished to apply for modification. But, in the case of leases, the Order expressly
restricts early modification: Article 5(2) provides that:
“Except with the permission of the Lands Tribunal, no application shall be made
under this Article to modify or extinguish an impediment arising under any provision
contained in a lease until the expiration of 21 years from the beginning of the term
created by the lease.”
Margaret Johnston, who now was entitled to the benefit of the restriction, opposed the
application for permission. The parties agreed that the issues that arose from that could
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conveniently be dealt with as a preliminary point. The application raised a number of
interesting questions:
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Was the grant a lease?
What were the consequences of Margaret Johnston having herself opened a B&B, the
very change that she opposed at her neighbours’ house?
What were the consequences of the covenant now protecting something quite different
from it might originally have been designed to protect?
The restriction came about in this way. When purchasing, in 1992, William Stewart and
the Rosses had agreed that the purchase be carried out by means of a Fee Farm Grant
subject to a yearly rent of 5 pence and that it would contain certain covenants and
conditions. The indenture of Fee Farm Grant was made on 8th January 1993 and
contained the covenant that was at the heart of this application:
“3.
Not to use or permit the use of the said dwelling house or buildings or any other
building which may be erected on the premises or any part thereof for the purpose of
carrying on any trade, manufacture or business or for any other purpose than as a
private dwelling house.”
There was no reciprocal arrangement impeding any use or development of the retained
land.
Ultimately, there were two issues. The first was whether the Fee Farm Grant was a lease
that fell within the ambit of Article 5(2); if not, no permission was required and the matter
could proceed to a full Hearing. The second was the merit of the application for
permission, if that was required.
Dermot Fee BL instructed J G O’Hare & Co appeared for the Applicants, the Rosses.
Stephen Shaw BL instructed by Johnston & Courtney appeared for the Respondent,
Margaret Johnston.
0The Order does not help with a definition of “lease” except that to say that it includes a
sub-lease. Mr Fee submitted that the Fee Farm Grant was of the nature of a freehold and
so the impediment did not arise under a provision contained in a “lease”. It followed that
Article 5(2) did not apply and no permission was required. Mr Shaw accepted that a Fee
Farm Grant was a distinctly Irish and unusual animal, it was a hybrid, but it contained a
commitment to pay rent and restrictions. He referred the Tribunal to Deasy’s Act - the
Landlord and Tenant Law Amendment Act Ireland 1860 - and, for the present purposes,
he invited the Tribunal to regard this Fee Farm Grant as a lease.
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A Fee Farm Grant is a hybrid, having characteristics both of a lease and a freehold, and
there are differing views about its precise legal nature. But, although there is no term of
years and the yearly rent is nominal, the vital characteristics of a lease are present: there
is an agreement by one party to hold land from another in consideration of a rent. The
Tribunal finds that this Fee Farm Grant is a “lease” within the ambit of Article 5(2) and
permission is required.
Linda Ross said that, when she bought the house, she had had no intention opening a
B&B but later she had thought that, when the children had grown up and left home, she
might like to open one. She applied for planning permission and that was granted in
September 1997. Her sister had a B&B business, she had some knowledge of the trade
as a result of helping her and she also had taken a course in health and hygiene. She
said she was not conscious of the effect of the restriction until, having obtained planning
permission, she received a solicitor’s letter from Margaret Johnston.
Before then, Margaret Johnston had taken a LEDU course and, in 1995, opened a B&B at
her house. More recently, she had obtained planning permission to build a number of self
catering chalets. She was actively involved in promoting tourism and B&Bs through the
Carrickfergus Enterprise Agency but it would not make commercial sense for her to
support the use of the house in front of hers, and sharing her drive, as a B&B. Apart from
a nuisance factor of having to deal with extra wear and tear to the shared drive, the only
practical benefit that the covenant secured to Margaret Johnston was that it prevented the
Rosses from competing with her business at that site.
There were difficulties in the parties’ relationship as neighbours: there had been a dispute
about a boundary fence, Linda Ross thought Margaret Johnston had pinched her idea to
open a B&B, and Margaret Johnston was not happy about evidence that had been given
by Paul Ross at a Planning Appeal.
Mr Fee submitted that the restriction was designed as a residential protection and
accepted that it was entirely appropriate to the original relationship between contiguous
residential occupiers. But the opening of the B&B, and proposed development of self
catering chalets, by Margaret Johnston, had created a sea-change that opened the door to
modification being considered on its merits. Now there was clearly commercial interest at
heart. Mr Shaw submitted that, although one might infer that the original purpose was to
protect the grantor’s residential use of his property, one could not say that with certainty.
Mr Fee focused on the situation as seen from the viewpoint of his clients: the question was
whether the impediment was now unreasonable from the point of view of the Rosses.
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He accepted that the text books referred to the heavy burden on an applicant seeking to
alter a recent covenant but submitted that there were adequate grounds to give the
applicants the opportunity to make their case at a full hearing. It would be unfair and
unjust to refuse. Mr Shaw submitted that, although there was a safety valve to the 21 year
rule in the form of the possibility of the Lands Tribunal granting permission, before doing
so, the Tribunal ought to look for compelling and meritorious reasons. He submitted that
the Applicants had a heavy burden and the Applicants had failed to discharge that burden.
Mr Shaw submitted that if, as was the case, the relationship between neighbours had
broken down then that was one factor that the Tribunal ought to take into account.
The 1978 Order was based on earlier, broadly equivalent English legislation - the Law of
Property Act 1925 - that contains an absolute bar on leasehold applications before 25
years have elapsed and no jurisdiction at all in the case of leases for 40 years or less.
There was no bar on early applications, in the case of freeholds. In contrast, in Scotland,
again under earlier legislation - the Conveyancing and Feudal Reform (Scotland) Act 1970
- an application may be brought after only 2 years from the date of creation of a land
obligation.
The passage of time is an important factor. The most common application of the
legislation lies in dealing with obsolete impediments that retain only a nuisance value and
that, of course, usually comes about because of social change as a result of the passage
of time. There has been speculation about the reason for the time bar in the case of
leaseholds only, including a suggestion that its purpose was to protect the landlord’s
reversion, but that would appear academic in the case of a long lease, and no satisfactory
explanation has emerged.
The scheme of the 1978 Order differs from the English legislation. In the latter, an
applicant must first establish the facts necessary to found the Tribunal’s jurisdiction under
one of four grounds set out in Section 84. In general terms, these are:
 the covenant is obsolete,
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it is an unreasonable impediment,
there has been an express or implied discharge, or
modification will not injure the person entitled to the benefit.
“In very broad terms, the effect of section 84 is to enable the Tribunal to modify or
discharge restrictions to the extent that they fail to serve a significant, practical
purpose”.
“Restrictive Covenants” 9th Ed. Preston & Newsom
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But, if one or more of these grounds is established, the English Tribunal then has a
discretion which it may or may not exercise in favour of the Applicant. Factors that have
come into play, and which are very relevant to this application, have included whether it
was an early application and whether the applicant was an original covenantor. It will be
remembered that the Rosses were original covenantors and the covenant was only some
5 years old.
The argument, that the Court should not intervene, except in exceptional circumstances, to
permit a breach of a covenant freely and recently into, became known as the ‘sanctity-ofcontract’ argument. Prior to 1978, this sanctity-of-contact issue was one of the few issues
that had been before the English Court of Appeal.
In Ridley v Taylor [1965] 2 All E.R.51, Russell and Harmann L.JJ held that, by analogy
with leasehold applications, even if the grounds were proved, the Tribunal ought to be very
slow to grant modification to an original covenantor until 25 years had elapsed. In
Cresswell v Proctor [1968] 2 All E.R. 682, the Court of Appeal, on grounds of sanctity-ofcontact, robustly endorsed a decision of the Tribunal to refuse modification, on application
of the original covenantor, of a covenant within a few years of its imposition. Later, in
Jones v Rhys-Jones (1974) 234 E.G. 987,C.A., Stephenson L.J. found the Tribunal had
applied the, somewhat strongly expressed, views in Cresswell too rigidly: there was no
general principle that any early application must be refused, without consideration of any
other matters. The court, finding that another issue was the real issue remitted it to the
Tribunal, where that issue had not been raised.
The Tribunal concludes that, in England, the relevant principle was that, in exercising its
discretion, a balance must be struck between preserving sanctity-of-contract and the
Section 84 merits of the case. The 25 year time bar, that applies in leasehold cases only,
provided a yardstick and an application after the lapse of only a few years, by an original
covenantor, was unlikely to succeed, unless there were compelling other reasons.
It was against this background that the 1978 Order was formulated. Here, the scheme is
different and more flexible. There is no first step of founding a ground for exercising the
Tribunal’s discretion: the section 84 grounds are modified, expanded, a catchall is added
and they become, in Article 5(5)(a) to (h), matters (‘the Article 5(5) matters’) which the
Tribunal must take into account in exercising its discretion. There is no absolute bar on
early applications but, in the case of leases less than 21 years old, permission is required.
So, what factors should the Tribunal take into account in deciding this application, which, it
must be remembered, was one only for permission to go to a hearing at which the merits
of the Article 5(5) matters could be fully considered?
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The sanctity-of-contract consideration was and still is clearly relevant in this jurisdiction.
Contracting parties must expect that restrictions, freely entered into, are to be honoured
for, at least, a reasonable period and clearly, it was not the intention of the 1978 Order that
the Tribunal should readily disturb that expectation. The 21 year rule provides the Tribunal
with a yardstick, reflecting that policy, without closing the door on exceptional cases and
there may be cases in which other considerations outweigh the practical private benefits.
In the view of the Tribunal, the question of whether the Application has any real prospect
of success on the Article 5(5) merits is a factor that must normally be relevant but the
approach to assessing that must be proportionate. In the case of a covenant of an age
close to the time limit, parties have found it convenient to combine the application for
permission with a full hearing on the Article 5(5) merits. But, it would make a nonsense of
the requirement for permission if every application resulted in a full assessment of the
merits. Although, on one view, an applicant should be given the opportunity of a full
hearing on the merits of any reasonably arguable case, justice also requires that
consideration be given to a respondent. Regard must be had to the anxieties,
inconvenience and expense (not withstanding the prospect of eventual recovery of costs)
that may be caused by permitting the matter to proceed further and it would be quite unjust
to grant permission to an applicant to take a hopeless case to a full hearing.
No applications previously heard by the Tribunal have been anything like as early as this,
and, in this case, the parties agreed that the discretion afforded to the Tribunal in deciding
whether to grant permission for the application was different from the Article 5(5) matters.
It was submitted that the latter were essentially matters for a full hearing and the Tribunal
should concentrate on whether there were adequate or substantial grounds for going to a
full hearing. However, they did address, in outline, a number of the Article 5(5) matters.
There were conflicting views on whether there had been a material change, since 1993, in
the number of B&B’s, beyond the cul-de-sac, but within what might be considered to be
the neighbourhood. On the evidence before the Tribunal, the only change was Margaret
Johnston’s B&B. Applying what has been called ‘the estate agent’s test’, on a pragmatic
approach, the Tribunal is not persuaded that estate agents would say that this one
additional B&B had changed the character of the neighbourhood.
The planning consents, granted to both the Rosses and Margaret Johnston, showed an
acceptance by the Planning authorities that the area should not be restricted to private
residences but one of the features of restrictive covenants is that they allow private
considerations to outweigh public considerations.
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The import of the restrictive covenant had changed but its new commercial significance
was that it prevented competition from a more prominent location. If anything, it was likely
to be of more, rather than less, practical benefit to Margaret Johnston.
In the circumstances, it is not a matter for this Tribunal to decide who had been right and
who had been wrong in the disputes as neighbours, but, in this case, the Tribunal finds
nothing in that factor, for or against granting permission.
In exercising its discretion, the Tribunal must consider the Article 5(5) matters in the
context of Article 5(1) i.e. broadly whether the impediment was unreasonable. There were
two unusual circumstances - the effect of the covenant now included protecting something
possibly quite different from what the late William Stewart was likely to have been wishing
to protect and a change in the private cul-de-sac had been brought about by Margaret
Johnston having herself opened a B&B, the very change that she opposed. Although
these unusual circumstances would warrant careful consideration at a full hearing, taking
into account that this application was made only 5 years after the Rosses, the original
covenantees, entered into the covenant, and having regard to the poor prospects of
success, at present, at a full hearing on the Article 5(5) merits, the Tribunal finds that the
burden that lies on them has not been discharged.
Significantly, although planning consent had been granted for holiday chalets, those had
not yet been built and it was not inevitable that they would be built. The Tribunal cannot
anticipate future applications, but, if the chalets were actually built, or perhaps even about
to be built, the matter might require further consideration. Such circumstances might lead
to a different conclusion, tipping the balance in favour of granting permission for the
application to go to a full hearing.
Having carefully considered the interests of both parties, the Tribunal refuses permission
for an Application for modification to be made.
ORDERS ACCORDINGLY
18th October 1999
M R Curry FRICS FSVA IRRV MCI.Arb
LANDS TRIBUNAL FOR NORTHERN IRELAND
Appearances:Mr Dermot Fee of Counsel instructed by J G O’Hare & Co for the Applicants.
Mr Stephen Shaw of Counsel instructed by Johnston & Courtney for the
Respondent.
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