Bath Rugby scores a try in the Court of Appeal!
We previously reported here on the case of Bath Rugby Ltd v Greenwood and others  when Bath Rugby was unsuccessful in its application for a declaration that a 1922 restrictive covenant was unenforceable. As an early Christmas present on 21 December 2021, the Court of Appeal reversed the High Court ruling and held that the covenant was not binding which would enable the Club to carry out its plans for redevelopment.
In this alert we will look at why the Court of Appeal took a different view and highlight the learning points in relation to the interpretation of similar covenants.
Court of Appeal decision
The main issue in the case was whether a covenant imposed by a 1922 conveyance was annexed to the adjoining land or the neighbourhood which would effectively prevent the Recreation Ground in Bath from being developed further. The adjoining owners argued that it was annexed to their land enabling them to enforce the covenant.
The relevant drafting in the conveyance referred to the covenant being for the benefit of the “buildings and land of the vendor…adjoining or near to” the conveyed land. In addition the covenant was expressed to be for the benefit of the covenantee (the original vendor) and “his successors in title”. This wording convinced the High Court that the benefit of the covenant was annexed to the adjoining land, even though that land could not be easily ascertained.
The Court of Appeal disagreed with the High Court’s interpretation and held that there must be a “sufficient indication” of the land intended to be benefited by the covenant, either expressly or by necessary implication. The court took the view that the words “adjoining or near to” the land in question or the “neighbourhood’ were not sufficient to identify the land which had the benefit of the covenant. Although the covenant was imposed to prevent nuisance and annoyance to the adjoining owners, the wording could not be construed as a description of the benefited land as it referred to a local area and did not identify specific properties - in other words, it was too vague and the restrictive covenant was not binding on the Club.
Apart from pleasing Bath Rugby Club’s legion of fans who will be excited at the prospect of improved facilities, the decision also provides helpful clarification as to how the courts will interpret the annexation of both pre and post 1925 Law of Property Act covenants. One point which the learned judges of the Court of Appeal could not agree on, was whether a condition of annexation for such covenants, is that the land intended to be benefited had to be “easily ascertainable”. The High Court took the view that this did not matter as long as the land could be identified, but as the Court of Appeal did not rule on this point, it remains unanswered for now.
In practice, indemnity insurance is frequently used as a quicker and less expensive alternative to court proceedings for a declaration that a covenant is unenforceable. However, where an approach has been made to a possible beneficiary of the covenant then it is unlikely that cover will be available. It is important to take legal advice to weigh up the risks of going ahead with court action or before approaching anyone to see if they will agree to release or modify a covenant.
When imposing new covenants, the lesson is clear - it is vital to accurately identify the land which is intended to benefit from restrictive covenants, preferably by showing the extent of the land on a plan and not relying on wording such as “neighbourhood” or “vicinity”. Otherwise there is a risk of not being able to enforce the covenants in the future and having to rely on the courts to interpret the drafting – a costly business for all concerned which can be easily avoided.