The Court of Appeal has today handed down Judgment in the case of Duchess of Bedford House RTM Co Ltd and others v Campden Hill Gate Ltd  EWCA Civ in which the court considered the proper interpretation of a reservation of rights clause in a head lease and whether this operates to exclude the right to park for residents of a block of flats in Holland Park in relation to a private road immediately outside the front of their block.
It has been held that a clause which excluded rights which “might restrict or prejudicially affect the future rebuilding alteration or development…” ought to be construed narrowly. Lady Justice Asplin emphasised that a practical and realistic approach must be adopted and the alteration or development against which the exclusion clause is tested must be grounded in reality.
The Court of Appeal also affirmed the scope and effect of a 1982 decision of Sir Robert Megarry V-C in Newman v Jones that a settled practice of parking by residents of a block of flats could be converted into a legal easement and that it was not necessary for every resident to have parked in order to demonstrate a settled practice in favour of a block as a whole.
The successful Appellants are the owners of long leases of flats in a mansion block in Holland Park called Duchess of Bedford House, built in the 1930s and fronting onto the eastern side of a private road called Sheldrake Place (“Sheldrake Place East”). The Respondent, Campden Hill Gate Limited, is the head lessee of the neighbouring block of flats called Campden Hill Gate and of the whole of Sheldrake Place itself.
Although it was established at trial that a substantial number of residents of Duchess of Bedford House had parked in Sheldrake Place East since the Second World War, from the 1980s the Respondent has waged a battle to prevent Duchess of Bedford House residents from parking in this private roadway onto which their block fronts.
The case concerned whether the practice of parking was converted into a legal easement on the grant of a 1969 Headlease of Campden Hill Gate and Sheldrake Place to the Respondent’s predecessor-in-title, under which rights were expressly reserved to the headlessor including “any other easements quasi-easements and rights belonging to or enjoyed by any adjoining or neighbouring land”; and whether that right was then passed on to the headlessee of Duchess of Bedford House on the grant of a 1974 Headlease of that block, or whether its transmission was prevented by the terms of an exclusion clause in the 1974 Headlease. The exclusion clause was badly drafted and the essential issue was whether in the context of this case it was intended on a broad construction of the clause that the lease should exclude the transmission of subsisting rights which may be essential or desirable for the enjoyment of the block as residential flats, or whether the exclusion clause should be construed more restrictively.
The case is most helpful in considering how rights can be converted to easements, the operation of section 62 of the Law of Property Act 1925 and the approach to be adopted when faced with lease clauses that do not make sense on their plain reading.
The 1969 Headlease
At all material times, the freehold title to Duchess of Bedford House, Campden Hill Gate and Sheldrake Place East had been held by the trustees of the Phillimore Kensington Estate (the “Phillimore Estate”).
In August 1969 the Phillimore Estate granted a long headlease of Campden Hill Gate and the surrounding gardens, garages and roads, including Sheldrake Place East, to Campden Hill Gate’s predecessor in title (the “1969 Headlease”).
The 1969 Headlease contained a reservation by the Phillimore Estate which included “…all other easements quasi-easements and rights belonging to or enjoyed by any adjoining or neighbouring premises.”
The Appellants asserted that the settled practice of parking was a quasi-easement or de facto right as it had hitherto been enjoyed, which was accordingly reserved to the Phillimore Estate as a legal right pursuant to this clause, and could therefore be passed on by the Phillimore Estate upon the grant of a further leases or underleases.
The 1974 Headlease
In 1974 the Phillimore Estate granted a headlease of Duchess of Bedford House for a term of 99 years (the “1974 Headlease”). The 1974 Headlease granted an express right of way over Sheldrake Place East, and would also have passed on the benefit of the right to park reserved by the 1969 Headlease but for the terms of the exclusion clause, whether under the general law or by operation of section 62 (2) of the Law of Property Act 1925 (“LPA 1925”).
However, the 1974 Headlease also contained an exclusion clause, which provided that the demise shall not be deemed to include, “…any ways watercourses sewers drains lights liberties privileges easements rights or advantages whatsoever in through over or upon any land of the Lessors or forming part of the Phillimore Kensington Estate aforesaid except those now subsisting or which might restrict or prejudicially affect the future rebuilding alteration or development or redevelopment thereof or of any other adjoining or neighbouring property.”
The Respondent contended that such an exclusion clause could operate to disapply the transmission of the right to park under the general law and under section 62 (2), where, under section 62 (4) “a contrary intention” was expressed . However It is well established that such contrary intention must be expressed in clear words.
The Court of Appeal was tasked with interpreting the exclusion clause, including whether or not it was sufficiently clear as to exclude s.62 LPA 1925.
First Instance Decision
At first instance, HHJ Gerald held that:-
- Based on the evidence of residents parking and the application of Newman v Jones (unreported), there was a settled practice of parking by residents of Duchess of Bedford House on Sheldrake Place East at the time of the grant of the1969 Headlease;
- The effect of the reservation in the 1969 Headlease was to convert this settled practice from what had been a de facto right or quasi-easement into a legal easement in favour of the Phillimore Estate as freehold owner of Duchess of Bedford House;
- The right to park passed to the headlessee of Duchess of Bedford House on the grant of the 1974 Headlease.
- The exclusion clause applied to rights already subsisting if they “might restrict or prejudicially affect the future rebuilding alteration or development or redevelopment of the Phillimore Estate or any other adjoining or neighbouring property”. However, given that a right of way had been granted over Sheldrake Place East, it could not be redeveloped in any event. Moreover the proposal to install locked parking bays in 1973 would not have interfered with the right to park.
- For those rights etc. which might restrict future developments, any such alteration or development must be one which was “grounded in reality such that a practical and realistic approach has to be adopted”.
- It was common ground that the rights of the head lessee passed down to the underleases of individual flats and therefore the Appellants had the right to park on Sheldrake Place East.
The High Court Decision
On appeal to the High Court, Adam Johnson J held that HHJ Gerald’s interpretation of the exclusion clause was too restrictive, with the intention of the clause being broad in scope “capturing any form of rebuilding or alteration”. Had HHJ Gerald given the words their natural meaning, he would have found that the right to park did fall within the exclusion clause and was excluded from the 1974 Headlease.
He found that it would be possible to develop Sheldrake Place East in ways that would not interfere with the right of way but would interfere with the right to park and felt HHJ Gerald was wrong to dismiss the proposal to install locked parking bays.
He therefore accepted Campden Hill Gate’s assertion that the right of parking might restrict future alterations or development to Sheldrake Place.
Court of Appeal Decision
The residents of Duchess of Bedford House appealed to the Court of Appeal on the following grounds:-
- Both HHJ Gerald and Adam Johnson J interpreted the carve-out clause incorrectly and should have found that the carve-out clause only operated to exclude the creation of new rights where such new rights might so restrict or prejudicially affect future rebuilding etc but did not exclude the transmission of any subsisting rights already appurtenant to the block regardless of their impact.
- In any event, Adam Johnson J erred in his construction of the second limb of the exclusion clause in holding that the words were intended to have a broad scope.
- Adam Johnson J wrongly interfered with the findings and evaluative judgment of HHJ Gerald as to whether the right of parking would interfere with the future alteration or development of Sheldrake Place.
Campden Hill Gate argued that even if the Appellant was right in relation to their first ground of appeal, HHJ Gerald and Adam Johnson J were wrong to hold that a right to park was a subsisting right within the language of the exclusion clause. It also argued that both judges had been wrong to find that a right to park had been reserved by the 1969 Headlease in the first place, on a proper understanding or application of the decision in Newman v Jones.
The Court of Appeal, generally reverting to HHJ Gerald’s judgment at first instance, found as follows:
- The right to park set out in the 1969 Headlease was communal, relating to the Duchess of Bedford House block as a whole. It is not necessary to establish that every leaseholder exercised their right to park for this to be the case. This was confirmation that the principles applied in Newman v Jones was correct.
- Adam Johnson J’s interpretation of the carve-out clause was too broad, in that the weight he attributed to the word “might” did not make commercial common sense. The Court of Appeal could not see how, if this interpretation stood, how any right would remain given that it would always be possible to think of developments or alterations which could be restricted by the rights set out in the carve-out. As HHJ Gerald held at first instance, any alteration or development considered must be “grounded in reality”.
- Therefore, the carve-out clause was not sufficiently clear to exclude s.62 LPA 1925 and HHJ Gerald’s approach was adhered to by the Court of Appeal.
This decision means that at long last the residents of Duchess of Bedford House can now exercise their right to park after outside their property, which has been unfairly curtailed for such an extended period. The court has also made an order that CHG should now pay the Appellants £645,000 by 4 January 2024 pending a full determination of costs.
If you would like to discuss this decision in more detail or would like advice regarding any of the issues raised, please contact Joanna Osborne, Emma Gregory or any member of our Property and Trusts Litigation team.
Joanna Osborne and Emma Gregory of Edwin Coe LLP, and Edward Francis of Enterprise Chambers acted for the successful Appellants.
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