Harris v Williams-Wynne [2005] EWHC 151 (CH) (11 February 2005)

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England and Wales High Court (Chancery Division) Decisions

You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Harris v Williams-Wynne [2005] EWHC 151 (CH) (11 February 2005)
URL: http://www.bailii.org/ew/cases/EWHC/Ch/2005/151.html
Cite as: [2005] EWHC 151 (CH)

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Neutral Citation Number: [2005] EWHC 151 (CH)
Claim No. HC03C01257

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

B e f o r e :

BERNARD LIVESEY QC
SITTING AS A DEPUTY HIGH COURT JUDGE

BETWEEN:

NICHOLAS ADRIAN HARRIS

Claimant
and
WILLIAM ROBERT CHARLES WILLIAMS-WYNNE

Defendant

_________________
Marc Dight, instructed by CKFT of London NW3, for the claimant
J. K. Quirke, instructed by Evans Roberts, of Machynlleth, Powys for the defendant
_________________

Judgment

Bernard Livesey QC
Deputy Judge of the High Court
11 February 2005

This is the trial of the claimant’s claim and the defendant’s counter claim for damages for breach of an Agreement dated 21st April 1988 (‘the Agreement’) for the sale of a piece of land (‘the Additional Land’). The claimant had already in April 1997 purchased from the defendant a property called Berthlwyd Farm, Bryncrug, Nr Tywyn, Gwynedd which comprised a farmhouse with a modest amount of land. The Agreement, which was specifically to provide additional amenity land adjacent to, and to be enjoyed with, the farmhouse, contained a covenant not to erect any buildings on the land the subject of the Agreement. The claimant erected a building and, when he came to sell the property comprised in both titles, the defendant required him to provide compensation for breach of the covenant before he would enable him to give good title to his purchasers. The claimant denies that the defendant is entitled to compensation on the grounds that he has expressly or impliedly consented to the building being constructed and is barred from recovering compensation by laches, acquiescence, waiver or estoppel.

The property in question is a farmhouse in the Snowdonia National Park. The defendant’s family had owned land in rural Gwynedd for years and a part of that, known as the Peniarth Estate, which comprised both agricultural and other land was owned by the defendant. Over the years various parcels of land had been sold with the houses standing on the land. The defendant usually took the farms ‘in hand’ and sold those farmhouses and buildings for which he did not have further use.

The claimant is a designer who lived and worked in London and occasionally abroad. He purchased the Berthlwyd Farmhouse in 1987 for the sum of Ј36,000 and thereafter used it for about 3 months per year for vacations for himself and his girlfriend. Very shortly after he arrived, he sought to purchase more land. The defendant was initially reluctant but eventually agreed to sell the Additional Land in circumstances which are in dispute.

The Agreement was dated 21st April 1988 and contained the following covenants:

2. The Vendor ... undertakes that if notice in writing is given to the vendor within twenty-one years from the date hereof the Vendor at the Purchaser’s expense will execute any document required to transfer the said freehold interest in such land to the Purchaser or as the purchaser may direct and use his best endeavours to obtain the concurrence of any other necessary parties

3. The Purchaser ... in view of the land being within a National Park covenants for the benefit of the Vendor’s retained land not to erect any buildings on the land the subject of this agreement.

At the request of the claimant the defendant’s then solicitors registered the Agreement at the Land Registry. It is probable that the claimant received a copy but promptly mislaid it and subsequently forgot about both the necessity for a formal transfer and registration of his own title and of the existence of the covenant. The defendant kept a copy of the Agreement in his study at his own home and retained, at the back of his mind, the terms of the covenant..

While in Berthlwyd the claimant indulged his passion for gardening and set about designing an unusual garden, which incorporated terraces, walls, other structures and follies. In 1991 he made application for planning permission for the construction of a two storey garage and studio in accordance with detailed plans which were lodged. The overall size of the building was in excess of 2000 square feet, which is the size of a modern four bedroom house. A formal consent was given, which was subject to seven planning conditions, two of which are material. The first was the requirement that the development should be commenced within five years of the date of the planning consent. The second was that “the building hereby permitted shall not be used otherwise than as an annexe to the adjacent dwellinghouse and, in particular, shall at no time be used as a separate self-contained unit of accommodation”. The reason given for this condition was that “the building is not regarded as adequate for use as a separate dwelling house having regard to the relationship of the building to the existing dwellinghouse and its curtilage”.

The claimant contends, but the defendant disputes, that prior to the application for planning permission he had discussed his intentions with the defendant and the latter had supported him, suggesting that it would assist his case for obtaining planning consent if he were to say to the authorities that he was proposing to remove an old corrugated black garage on the land, which would be an improvement. The claimant also contends that be began implementing the planning consent, albeit on an ad hoc basis, towards the end of 1995, and that the defendant stood by while the building was being constructed until it was nearly finished.

What is clear is that by the autumn of 1995 the defendant had demolished the black garage, cleared the land on which it had stood and built a substantial stone wall whose function at that time was to retain a mound of earth and prevent its collapse. It appears from later photographs that this wall was incorporated into the building. The defendant lived at that time across the valley in a house known as Talybont. As a hobby he piloted light and microlight aircraft from a landing strip in his grounds, sometimes to travel long distances and sometimes just to take a tour of his estate, flying out once per fortnight on average. On one of those trips on 29th October 1995 he took an aerial photograph of the claimant’s property which shows that the corrugated garage had been demolished, the land cleared and the wall built. There was however no trace of any foundations and no sign to suggest that the works were preparatory to the construction of any sort of building, rather than another gardening project of some sort. It is relevant that it was only on the 7th December 1995 that the Technical Services Department of the local authority granted ‘full plans’ approval under the building regulations, which approval was valid for 3 years from that date.

The evidence of the claimant, supported by invoices for some of the work and the occasional photograph, demonstrates that the building work was carried out piecemeal in the following stages. The foundations were installed during the late summer of 1997. It was then not until the end of 1999 that further work began which resulted in the building rising from foundation level to first floor level by the Spring of 2000. The roof was not begun until 2002. Between April and June 2002 the rafters were installed and the roof was slated in December 2002.

In early 2002 the claimant decided to sell the property and the Additional Land and the sale was handled by local estate agents called Welsh Property Services. By October 2002 a Mr and Mrs Johnson had agreed to buy at the price of Ј280,000. However, during the conveyancing process it was discovered that the Additional Land had not been registered. The estate agents contacted the defendant by fax in November 2002 and requested his help in resolving the matter. He did not reply. In December 2002 the claimant’s solicitors formally contacted the defendant and his solicitors in an attempt to obtain a transfer. The defendant’s solicitors did not reply until March 2003 when they supplied a copy of the Agreement. They then made it clear that they would not transfer the Additional Land to the claimant without a further payment to compensate for the breach of covenant. On 2nd April 2003 the claimant instituted proceedings claiming specific performance, a declaration and damages or equitable compensation. The defendant served a Defence disputing the claim for specific performance and counterclaiming for damages for breach of covenant. Following an application for summary judgment, the defendant consented to an order for specific performance of the Agreement and executed a transfer of the Additional Land on 1st October 2003. The sale to the Johnsons proceeded and exchange and completion took place on 20th and 28th November 2003 respectively. At that time the building was watertight but the interior remained unfinished.

The claimant submits that by reason of the defendant’s refusal promptly to transfer the property he suffered financial loss which he is entitled to recover as damages for breach of the Agreement. The defendant counterclaims damages for breach of the covenant contending that the Additional Land had been sold as amenity land and that, by building on it, the claimant had made a development profit of about Ј62,000, which should be shared between them equally.

The case has been argued over 3 days. I heard evidence from the claimant and from Miss Lucy Richardson who was his girlfriend from 1993 to 2002. I heard also from the defendant and from his wife, the Honourable Veronica Williams-Wynne. Expert evidence was given by specialist expert valuers whose evidence was not agreed. Much of the factual evidence related to events which happened in 1987, 1988 and in the period 1993 to 2002. It was predictable that the clarity of the memories of the witnesses would be affected by the passage of time, as indeed they were, and also in some instances by ‘wishful recollection’. Wherever it was possible to do so I looked for documentary support, but sadly that was rather less of that than one might hope to find.

As regards the credibility of the witnesses, I much preferred the evidence of the defendant and his wife. She in particular played only a small part in relevant events and gave evidence about one conversation with the claimant in early 1988 and a social visit to the claimant’s property in the late summer of 1996. Her statement was obtained very late after her husband had spoken to her by telephone following his own cross-examination on the first day of the trial. I take this very much into account. However, I was able to judge from the manner in which she gave evidence that she had a very clear and vivid recollection particularly of the conversation about which she testified. As regards the defendant: he was a Fellow of the Royal Institution of Chartered Surveyors, though he had not ever been in private practice; he had served 5 as a Magistrate; his main activity was as a businessman, landowner and farmer. He struck me as being entirely honest, open and truthful. He readily conceded when his recollection failed him, as it did from time to time, and made other appropriate concessions. He struck me as modest and unassuming. As will be seen, I generally accepted his account of events, although there were occasions when his memory let him down and he was mistaken.

As regards Miss Lucy Richardson I do not doubt that she was intending to be truthful but it seemed to me that her evidence was inaccurate as to some of the details, and showed some sign of wishful reconstruction. Not unnaturally she had discussed matters closely with the claimant before making her statement. I think it probable that her recollection was affected by those discussions to some extent. The claimant seemed to me to be uncomfortable in certain parts of the evidence he gave and his demeanour was not as open as I felt it should have been. There were also a number of instances in his evidence about which he was clearly not truthful. I will mention just three of them.

The first concerned the location of the building ‘as built’ as compared with its position on the location plan for which the planning consent was given. In the plan the building was to be built mainly on the site of the demolished black shed and with a similar alignment; in this position it would be very much an adjunct to the main house. The ‘as built’ position was entirely on the Additional Land and on a different alignment, and both these features affected both its presentation in the landscape and seemingly its potential to be severable from the rest of the property, if only the planners would remove the planning restriction. Under cross-examination it was suggested to the claimant that he had relocated the building intending that it should be physically capable of being sold separately in due course. He denied this and suggested that the lodged plans were prepared by his architectural draftsman in that manner by mistake, that everyone including the planners knew of the mistake and that they had dispensed with the necessity to provide amended plans showing the true location and when granting permission knew that the real location of the building would differ from that shown on the plan. There was of course no documentation or other evidence to support this assertion. I do not believe for one moment that the planning authority would have behaved in this way. I do not believe that the claimant was telling me the truth on this aspect of the matter. I am satisfied that he did change the location for the reason suggested to him and did so surreptitiously so far as the planning authority was concerned.

The second related to the position of the boundary of the Additional Land. The Agreement imposed the obligation on the defendant to construct the boundary fence. The claimant drew my attention to the position of the fence on the plans and to a slight ‘kink’ in it which, he told me, had been agreed with the defendant expressly to allow room for the positioning of the building ‘as built’. There are a number of reasons which lead me to think that this was a casual untruth, including the fact that at the date both of the Agreement and the construction of the fence, there were no plans for building on the site and, even when in 1991 the building was conceived and the plans were drawn, it was intended to be built in a different position from that in which it was ultimately built, as mentioned in the preceding paragraph, and there would have been no need at all for a ‘kink’ in the boundary.

Thirdly, when a number of complaints had been made to the planners, he maintained that he had complied with the condition that the development was to be commenced within 5 years of the consent, on the basis that the work in 1995 involved the construction of the foundations when these were not constructed until 1997, outside the 5 year period. I do not accept that the fact that the new stone wall was incorporated into the building, upon the change in position of the building, meant that the building itself was commenced in 1995 when the wall was built. It was a specious argument as he must have known.

In the result, I strongly prefer the evidence given to me by the defendant to that of the claimant. This has the consequence that I do not accept a number of the assertions which were made by the claimant and on which he built his case for acquiescence.

The basis of the claimant’s case was that right at the start, when he was seeking to persuade the defendant to sell him more land, he had made it clear to him that part of the reason he wanted additional land was so that he could build on it. The defendant’s evidence was that the claimant approached him for the Additional Land to be used as a pony field. Mrs Williams-Wynne gave a similar account. She told me that the claimant had approached her saying that he wanted to buy the land as a pony field, and needed somehow to persuade Mr Williams-Wynne to sell him some land for the purpose. She said that she told her husband and persuaded him to agree to sell. He told me that he agreed a price appropriate for amenity land rather than a building plot. In his original statement the claimant said that when he raised the question of more land with the defendant, he told him that the reason he wanted it “was mainly for landscaping but I was also very keen to be able to park vehicles out of sight from the main house”. It is to be noted that his evidence went further than his original statement which did not mention the question of additional building. I am quite satisfied that the account given to me by the defendant and his wife is accurate and truthful and that the claimant latest elaboration on his original statement is untrue.

When the formal Agreement containing the covenant was presented to the claimant for signature it is clear that both men had a short discussion. The claimant says that he was told by the defendant that the covenant “was simply a covenant from the old estate and nothing to worry about” and that “he was obliged to put the clause in by the terms on which he had acquired the estate”. He purported to have a clear recollection of this even though it was his case that he completely forgot about the existence of the covenant. The defendant told me that when the question of the covenant was queried by the claimant, the latter had said that he was not intending to build on the property and the defendant responded that in that case it would not matter if the Agreement contained the covenant. I accept the defendant’s evidence. I do not accept the claimant’s assertion that the defendant told him or implied that the covenant was something which the claimant could ignore with impunity.

The claimant also asserted that after he had told the defendant that he intended to build on the land the defendant assisted him with advice as to how to present the planning application to best effect, in particular by suggesting that it should be presented as a replacement structure for the pre-existing “eyesore” shed. I do not accept this at all. I also find that the defendant was not ever shown the plans of the studio/garage. When he did see the building, he found the design was offensive to his eye and to his sense of what was appropriate for the National Park. I do not accept that he would have forgotten the experience of seeing the plans. It is accepted that he would not automatically have been sent notice of the application for planning permission. He worked a long week away from home attending to his business interests in the West Midlands and there was no reason why the planning consent would have come to his notice.

It is however clear that in late 1995 or early 1996 when he presented to the claimant the aerial photograph, there was a short conversation between them. The defendant had thought that the claimant might be ‘up to something’ but he did not know what. Both the claimant and Miss Richardson speak about this conversation in virtually identical terms. I quote from her statement:
“At this time Mr Williams-Wynne said words to the effect of:- ‘You can see all this work you are doing, I wondered what you were doing? Are you building a swimming pool’.

[The claimant] said words to the effect of:- ‘No, I am building a new building, you remember when I applied for planning permission you suggested that I should say that I was going to replace the black garage as they were more likely to grant planning if they thought something ugly was going to go?’”
Both of them assert that the defendant was shown the plans on this visit.

The defendant said that he had no recollection of this alleged conversation. He explained why he thought it could not have taken place. He said
I only went to deliver a photograph. I asked the question ‘are you building a tennis court or a swimming pool’ and my recollection is that they were undecided. I have a firm recollection that the specific answer put to me was not given. If they had said that they were going to build that would have generated a conversation. I would have been interested in what they were going to do. It was a substantial area - which is why I thought it was going to be a tennis court. I have never seen Mr Harris’ plans.
I reject the contention that a conversation took place in the terms in which the claimant and Miss Richardson speak. As I have pointed out, it is clear that the presentation of the building in the plans was one which the defendant did not like at all and he would have remembered seeing them if he had been shown them. I reject the suggestion that he would have lied on oath about seeing the plans and about this or any other conversation.

It is agreed by each of the witnesses that there was a further occasion in about the summer of 1996 when the defendant and his wife visited the property for a social drink and that they were both shown around. The claimant and Miss Richardson allege that the defendant and his wife were told about the intention to build and they contend that they were not. It is to my mind likely that the truth lies someway between these two extremes. The fact is that it was now over 5 years since the planning consent had been obtained; the foundations were not yet installed and the claimant did not have the funds to do the work. I think that it is quite possible that the claimant mentioned that he aspired one day seek to build a garage/studio in the area but in terms that were sufficiently imprecise and uncertain as not to convey a definite intention to build. The claimant says that the defendant did not point out that this would be a breach of covenant. Nor would I think he would do. It was after all a social event and I believe that in the circumstances the defendant would feel that it was inappropriate to make such a point on such an occasion, particularly in view of the unspecific nature of the intention. He would in any event not have thought it necessary to remind the claimant. I do not accept the assertion that the failure to make mention of the covenant was of any relevance to the question of acquiescence.

The claimant also relied on an exchange of correspondence between September and November 1997 in which the claimant sought an easement for the construction of a septic tank overflow on the defendant’s field. However, the claimant did not proceed with the arrangement and the defendant thought no more about it. I do not regard these events as a matter of significance in the context of the arguments about acquiescence.

By the end of 1999 or early 2000 it must have been quite apparent to the defendant that the claimant was engaging in some form of building work. That year saw the construction rise from the foundations to first floor level. The building work would have been visible across the valley and from the air. The defendant however took no action at all at that time. It was early 2002 before the construction of the house rose to eaves level and it was in May or June of that year that the defendant first expressed his concerns to his solicitor Martineau Johnson, although he did not at any time speak to the defendant about them. I will consider this period in a little greater detail later in this judgment. The questions for me to decide are whether, on the findings which I make, there was such acquiescence on the part of the defendant as will deprive him of all entitlement to damages for breach of covenant. If he is not prevented from making a recovery of damages, the question will then arise as to the measure of damages.
The Law:

I have been referred to a number of cases from which I draw the following principles.

First, damages for breach of contract at common law are likely to be only nominal where the breach is of a negative covenant, such as the present, having regard to the difficulty of establishing actual damage to the land for the benefit of which the covenant was provided: Surrey County Council v Bredero Homes Ltd [1993] 1 WLR 1361.

Secondly, more substantial damages may be awarded for the same breach under s 2 of the Chancery Amendment Act 1858 (“Lord Cairns’s Act”), subject only to the proviso that the court “has jurisdiction to entertain an application for an injunction against a breach of ... covenant ...”.

Thirdly, the court has such jurisdiction if at the date of the institution of proceedings it would then have had jurisdiction to grant an injunction, whether or not it would have been prepared to do so on the facts. Since the question is one of jurisdiction, it is not necessary for the claimant to include a claim for an injunction in order to found a claim for damages under the Act: see generally per Millett LJ in Jaggard v Sawyer [1995] 1 WLR at 284-5.

Fourthly, the claimant may lose his entitlement to claim damages if he has been guilty of such acquiescence as to make it in all the circumstances unconscionable for him to rely upon his legal right: see e.g. Gafford v Graham [1999] 41 EG 159.

Fifthly, damages should be awarded in such a sum as the claimants might reasonably have demanded as a quid pro quo for relaxing the covenant had the defendants applied to them for relaxation: see Wrotham Park v Parkside Homes [1974] 1 WLR

The assessment assumes a hypothetical negotiation on the basis that each party is willing to agree a proper and not a ransom price. The proper price will have regard to the amount of profit which will predictably result to the person bound by the covenant as a consequence of its release.

Sixthly, the correct date for assessing damages is normally the date before the building works in question are started: see Amec Developments Ltd v Jury’s Hotel Management (UK) Ltd per Anthony Mann QC 2000 Unreported; and Lane v. O’Brien Homes [2004] EWHC 303 (QB) per David Clarke J.

Seventhly, in a suitable case damages may be measured by the benefit gained by the wrongdoer from breach, that is to say on a restitutionary rather than compensatory basis: see esp Attorney-General v Blake [2001] 1 AC 268 Awards of this kind will be made when they are “the just response to a breach of contract”: ibid at 284F.

As regards the last point, if damages are to be awarded, I do not believe that this is an appropriate case for damages to be awarded on a restitutionary basis since the claimant himself has not been guilty of the sort of underhand dealings vis a vis the defendant which would be required before an award on that basis would constitute a ‘just response’.

As regards the date of quantification, if damages are to be awarded, damages should in my judgment be assessed on the basis of values prevailing at about the end of July 1997. This is because it was just shortly after that date that the construction of the building commenced with the construction of the foundations. Any breach, for which damages are to be awarded, was constituted not by the application for, or grant of, either planning consent or building regulation approval or the clearing of the land. It was constituted only by the works of construction and the middle of 1997 was the date when they commenced.
Acquiescence:

In the light of my findings, the claimant argued that the defendant had clearly acquiesced in the construction of the building and that he is therefore entitled neither to an injunction nor to damages under Lord Cairns’s Act. He drew my attention to the cases which lay down the modern test, beginning with the observation of Oliver LJ in Habib Bank Ltd v Habib Bank A.G. [1981] 1 WLR at 1285, who said that the test requires a much broader approach which is directed at ascertaining whether, in particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly or unknowingly, he has allowed or encouraged another to assume to his detriment ...

He argued that the test is supported by observations in similar terms by Buckley LJ in Shaw v Applegate [at p. 978D] who said
The real test, I think, must be whether upon the facts of the particular case the situation has become such that it would be dishonest or unconscionable for the plaintiff, or the person having the rights sought to be enforced, to continue to seek to enforce it.
and was applied by Nourse LJ in Gafford v Graham who said
Thus here the enquiry must be whether, in all the circumstances, it would be unconscionable for the plaintiff to continue to seek to enforce the rights that he undoubtedly had in 1986 to complain of the conversion of the bungalow and the extension of the barn.

Indeed he submitted that the facts of Gafford v Graham, were on all fours with the present case. Nourse LJ there said [at p 78H]
The plaintiff knew what his rights were, He never made any complaint or objection to the defendant at the time. His objection to the application for planning permission in respect of the bungalow and his complaints to his solicitors can avail him nothing. He made no complaint to the plaintiff until his solicitors wrote their letter of 7 March 1989, about thee years after the acts complained of. He only complained of them then because of the much more serious threat presented by the proposed construction of the riding school. Before that he had effectively treated the conversion of the bungalow and the extension to the barn as incidents that were closed.
The court therefore concluded that there had been such acquiescence on the part of the person who had the benefit of the covenant that he was barred from all relief, including damages for breach of the covenant. The claimant argued that the words of Nourse LJ could be applied verbatim to describe the behaviour of the defendant in the present case and should have the same result, that is to say that the defendant here should be held to have lost his right to relief of any sort, as was the case in Gafford v Graham.

Counsel for the defendant however contends that it is still the case that at the heart of the defence of estoppel or acquiescence lies the necessity for an encouragement or allowance of the other party to believe something to his detriment and that it was simply not sufficient merely to establish delay in making a complaint: see Jones v Stones [1999] 1 WLR 1749 esp per Aldous LJ at 1745 A-B; see also Blackburn & Wall v David Alston (Suffolk) Ltd and Others Chancery Division 20th November 2001 (unreported) esp. at paragraph [35]. He argues that the delay did not have any effect on the claimant and in any event he has not suffered any detriment.

In my judgment, counsel for the parties are arguing merely different sides of the same test. It seems to me that a person’s behaviour will not usually be regarded as having been unconscionable unless it has had also an effect on the other person and caused him to act to his detriment. It therefore is relevant for me to determine the extent to which any delay on the part of the defendant has caused the claimant to act to his detriment.

Of importance also is the question whether acquiescence has the effect of preventing the defendant from obtaining all relief, that is to say not merely an injunction but damages as well. There is no question that the delay in the instant case has deprived the defendant of any possibility of obtaining injunctive relief. He has realistically not sought it. But has he lost also the right to damages?

It seems to me the answer to this question will depend not merely on the nature of the conduct of the defendant and its effect on the claimant but also on the wording of the covenant. The covenant in the instant case differs from the covenant in Gafford v Graham which provided
No building of any description shall be allowed on the land hereby conveyed or any part thereof until detailed plans thereof have been submitted to and approved in writing by the Vendors ...
This contrasts with the covenant in the instant case that
The Purchaser ... covenants ... not to erect any buildings on the land the subject of this agreement.
That means that Mr Gafford was entitled to have an influence on the design but could not prohibit the building. The breach by Mr Graham was committed when he failed to submit the plans to Mr Gafford for approval. Had he done so and had they been approved he would not have had to pay for the release of the covenant. Mr Gafford knew what was contained in the plans and made an objection to the Local Authority but not to Mr Graham. By failing to express his disapproval before the building was built he lost his chance of disapproving the design.

Looked at in this way, one can see why it is that acquiescence in those circumstances caused the court to rule that Mr Gafford’s acquiescence caused him to lose his right to any and all forms of relief. The covenant in the instant case is different. It is an absolute bar to any building. By standing by while the building was being erected the claimant loses his right to a mandatory injunction requiring it to be pulled down. He has realistically not asked for that form of relief. However, that in my judgment does not mean that he will necessarily have been guilty of such acquiescence as to lose his right to damages.

It is implicit in my findings that the defendant must have been aware that there was some form of building being constructed at some time between the Autumn of 1999 and the middle part of 2000. At that time the foundations of the building were installed and it grew to first floor level. The defendant had in 1998 moved to Peniarth, a distance of about 3 miles from the Berthlwyd. There was not a direct view from Peniarth to Berthlwyd, but the building would have been visible from many points - including the main road and, of course, from the air. This was some 2 years before the claimant spoke to his solicitor about the problem. It is clear that he spoke to his solicitor at Martineau Johnson a number of times shortly prior to June 2002 and on 22nd June 2002 he wrote stating
Berthlwyd: The new building is on the land that N. Harris purchased after he bought the house. I hope that this does not complicate matters ! It is quite close to my fence if it is meant to be a garage!

By now the building had reached eaves level. The defendant took no action because, he told me, he recollected an earlier conversation with the claimant, after he had moved into Berth Lwyn, when the latter had said that he enjoyed litigation and made money out of it; he was so afraid of this professed love of litigation that he decided that ‘it was not worth the candle’ to complain or take action against him.

I do not accept that the defendant’s memory is accurate as to this conversation. In any event, I do not accept that even if it were, it would give any grounds for justifying the failure to take action. However, in my judgment the inactivity of the defendant is not fatal to his entitlement to damages. It is quite clear that the claimant did not at any material time think that he was bound by a restrictive covenant; it has not been said by him that the failure by the defendant to take any active steps to draw this to his attention encouraged him to believe that he could breach the covenant with impunity. Had the defendant raised the point in correspondence or by action at an earlier stage, it is most unlikely that there would have been any result other than a payment of a proper sum for the release of the covenant. Finally, I accept the submission of the defendant that the claimant has profited from the construction of the building since this has enhanced the value of his land significantly and to an extent greater than the sum he would have to have paid for the release of the covenant. In circumstances such as these, it is not in my judgment appropriate to regard the obligation to pay a proper sum for this breach of covenant as a ‘detriment’ of the sort that would make it unconscionable for the defendant to raise the issue at the stage at which he did so..

In these circumstances, applying what I perceive to be the appropriate test, I do not accept that the delay (and other actions) of the defendant are such as to make it unconscionable for him to seek to pursue his right to claim damages for this breach of this covenant.
Damages:

Each party has adduced the expert evidence of a valuer in order to assist me in quantifying the amount of any damages to be awarded. I will summarise the case of each.

The defendant relies on the evidence of Mr Roger Stone FRICS FAAV of Birmingham who carried out an inspection of the property in February 2004. His valuation assumes that the date of valuation is immediately before the breach took place ‘in April 2002 when the building works seriously commenced’. He has reached his valuation figure by two different methods. Each assumes that it is possible to regard the whole property comprised in the title as capable of division, at least notionally, into two separate plots with separate buildings capable of separate valuation, despite the planning restriction that the building “shall at no time be used otherwise as an annexe to the adjacent dwellinghouse and, in particular, shall at no time be used as a separate self-contained unit of accommodation”.

By Method 1 he compares the value [Ј200,000]that the finished building would have, if it stood on a plot without the restriction, with the value that it would have subject to the restriction [Ј140,000] and by a series of deductions arrives at the residual value of the land, which in the former case would be Ј122,500 as compared with Ј62,500. However, he asserts that there needs to be added to the latter figure the sum of Ј20,000 to represent the ‘hope value that the planning restrictions might be lifted one day’. The resulting figure of Ј82,500 is, he says, the sum representing the value in 2004 terms to be apportioned by the court between the claimant and the defendant. This should finally be discounted to 2002 prices by reducing it by 20%, to reflect the rise in property market values between 2002 and the date of his inspection, giving a figure of Ј62,500.

By Method 2 he reaches the same result by starting from the value of a building plot with no planning restrictions [Ј125,000] and reducing it by ‘say 1/3rd’ because of the planning restriction. This happens also to provide a figure of Ј82,500 which should be discounted to achieve a 2002 value.

I can say at once that I did not find Mr Stones evidence helped me in any way. First of all, it was plain that, coming as he did from Birmingham, he was unfamiliar with the market in the Gwynedd area. To gain sufficient local knowledge for the purposes of this case he had spent a day in Wales, looking at estate agents’ windows and later obtained and studied particulars of properties exhibited for sale. Secondly, as I have indicated, the date for the assessment of value is 1997 and not 2002. There was no means offered by Mr Stone whereby anyone might convert his 2002 figures to values prevailing in 1997. Quite apart from this, in my judgment his whole approach is inappropriate to the property and the valuation issues which are raised in this litigation, because it proceeds on the assumption that it is possible to value the additional land and property as an independent freestanding unit, whereas the land simply cannot be divided owing to the conditions of planning. Finally, whenever pressed in cross examination he responded by saying in effect that valuation was not a science but an art and that ultimately he was right because he had great experience. I am quite prepared to accept that valuation is an art but it is not totally devoid of science and I do not find it acceptable to justify an expression of value only by reliance on ‘experience’.

Mr Jones gave evidence for the claimant. He had the immediate advantage that he practised locally, had premises in Tywyn Gwynedd, had experience of relevant comparable figures from transactions over many years and had in 1994 provided an open market value of the whole property for the claimant for reasons which were not discussed in evidence. He approached the valuation in two different ways. He first sought to assess the estimated profit resulting from the development, having regard to the expected costs of the construction of the building. It was his view that there was not any profit attendant on the development in 1995 and only Ј5,000 in April 2002.

Secondly, after offering the information that the price agreed by the defendant (for lifting a similar covenant on a farmhouse known as Ty Mawr) was Ј4,000 (a transaction in which he had himself been involved) and the ‘rebate’ on a second farmhouse called ‘Crynllwyn’ was Ј3,500, he proposed that ‘the value of lifting the covenant on Berthlwyd is fairly limited’. He assessed it at 2.4% of the value of the entire property: making a figure rounded down to Ј6,000 in all, that being the figure at April 2002. A cross- check of this figure was made with reference to the ‘horse trading’ figures achieved by the defendant in the two examples which he quoted as set out above.

I found the approach of Mr Jones to be helpful, but in the end it seemed to me that it did not take proper account of four important factors. The first is that the appropriate date for the valuation is mid 1997. The second is that his method of valuation undervalued the benefit of the construction of the Additional Building because the method was always valuing an incomplete building, at all stages in the exercise. The third is that the true figure for the release of the covenant binding Crynllwyn was in fact Ј10,000 and not Ј3,500. And fourthly, the choice of 2.4% as the appropriate percentage for valuing the release of the covenant was purely arbitrary and unsupported in any valid manner. There is a final point, that it is clear to me that the presumed negotiation would have been carried out by the two men simply on a ‘horse-trading’ basis.

The conclusion to which I have come is that the appropriate approach to valuation comes from considering how the two parties would have approached the presumed negotiation had it taken place in the middle of 1997. The best evidence of the sort of level that might have been properly paid for a relaxation of the covenant comes from the evidence given by the defendant as to the prices which he had himself agreed with others for the relaxation of an identical covenant on other farmhouse properties which he had sold out of the estate. In July 2001 the defendant had agreed to accept the sum of Ј4,000 for the relaxation of a covenant not to make any alterations of additions to a property known as Ty Mawr, LLanegryn. A conservatory had been added after planning permission to do so had been obtained in 1992. The conservatory had been constructed and the breach of covenant came to light only years later when a sale was about to take place. There was also the sum of Ј10,000 paid by the owners of Crynllwyn (Mr Jones was in error when he deduced, in paragraph 5.4 of his report, that the price was only Ј3,500). The owner of Crynllwyn had been in breach by the conversion of a number of existing outbuildings which had the effect of approximately doubling the area of accommodation. The breach was discovered when they were seeking to give title on sale. Factors influencing the different prices charged include the nature of the building, its size and the proportion by which the accommodation is thereby increased. The defendant told me that he assessed the price as about 50% of the increase in value to the property which he judged to result from the development. I do not however think that this was other than a rough and ready and fairly non-scientific exercise on his part and that, at the end of the day, the negotiation would come down to ‘horse trading’.

I take into account that neither party would have been likely to have carried out the sort of calculations used by each expert valuer in this case. Nor would they have obtained expert professional assistance. Although the defendant was a qualified surveyor he had not been in private practice and I therefore regard him as an enlightened layman, rather than a professional for these purposes. He could be generous to his friends but I think would be more inflexible where, as here, there was not an underlying friendship, where the planned building was one which he genuinely thought to be unsympathetic to its surroundings and was located in a too prominent position overlooking the countryside. The claimant for his part would, I suspect, approach the transaction without much money, and could, I suspect, be equally difficult in negotiations. The characteristics of each man broadly cancel themselves out. If they did not, I would not in any event judge it to be appropriate give them much attention. At the end of the day the assessment of a proper price in the hypothetical negotiation should be carried out on a fairly objective basis and should be blind to the special personal characteristics of each party. I must bear in mind that the date for assessment is 1997 and that the notional price in the hypothetical negotiations should assume that each party is a willing negotiator at a proper price for the building which was eventually constructed in the actual location in which it was built.

In the circumstances I have come to the conclusion that the figure which the parties would probably have agreed as a proper price for a release of the covenant in June 1997 so as to enable the claimant to build the property ‘as built’ thereafter is a figure of Ј8,000.

The Claim:

The claimant argues that by reason of the defendant’s delay in complying with the covenant to execute any document required to transfer the freehold interest in the Additional Land, the defendant has been guilty of breach of the Agreement and has caused loss, that is to say, loss of use of the money he would have received earlier had there not been the delay.

By clause 2 of the Agreement the defendant had undertaken that he would execute any document required to transfer the freehold, if notice in writing was given to him. It is of necessary implication that would execute the transfer within a reasonable time of the request.

The history of this matter is as follows. The first notice to the defendant that there any sort of problem was given by the vendor’s estate agents who sent to the defendant a fax in November 2002 stating that the claimant had not registered the land and that this was causing problems with the sale of the property; she added “I don’t know the history behind all this and quite frankly it s nothing to do with me I just want to get this sale back on track. Your kind co-operation would be greatly appreciated”. The defendant said he telephoned but the documents show that he did not otherwise reply.

A facsimile letter dated 19th December 2002 was sent by the claimant’s solicitors to the defendant’s solicitor enclosing a plan of the Additional Land, setting out the history and stating “My client is anxious to formalise the transaction with all haste, as he is in the process of seeking to sell the property, and the buyer requires a title to the additional land. I should be grateful if you would seek instructions and come back to me as soon as possible”. There was no reply.

On 9th January 2003 the claimant’s solicitor again wrote stating inter alia “I should be grateful if you would confirm that you hold the deeds to the surrounding land, in order that when the extent of the land to be conveyed is agreed, a transfer of part may be executed in my client’s favour”. Again there was no reply.

The claimant’s solicitor tried to contact the defendant’s solicitor a number of times by telephone and by letters dated 17th February 2003, 5th, 10th, and 13th March 2003 (in which he made an open offer of Ј1,500 to speed up matters) and 17th March 2003, in the last of which he threatened legal proceedings.

On 18th March 2003 the defendant’s solicitors responded saying “we have finally located the agreement dated 21st April 1988 and hasten to enclose a copy”.

On 2nd April 2003 the claimant issued proceedings claiming, inter alia, specific performance of the Agreement. There were further exchanges of correspondence between the parties on mainly procedural issues. In a letter dated 6th June 2003 the defendant’s solicitors stated “Whilst our client is willing to proceed with the transfer of the land to your client, we do not consider that he should do so in isolation, and we expect to receive a realistic proposal from your client in relation to the continuing breach of covenant. ..... We consider that your client should pay to our client a sum equivalent to the value of the relaxation of the covenant based upon the ultimate value of the redevelopment. ... Your client may wish to make a realistic offer at this stage...” And by letter dated 8th July 2003 they made it clear that “... we shall not be submitting a draft Transfer of [the land] to our client [for execution] until every aspect of this dispute is resolved.”

As I have earlier indicated, after an order for specific performance had been granted, the defendant executed a transfer of the Additional Land on 1st October 2003 and the sale to the Johnsons proceeded with an exchange of contracts and completion on the 20th and 28th November 2003 respectively.

In my judgment the letter dated 19th December 2002 constituted a sufficient request pursuant to clause 2 of the Agreement. The defendant was entitled to a reasonable time for compliance with his obligations. A reasonable time for compliance, considering the extended holiday period, was up to the last day of January 2003. No reason has been advanced for the failure of the defendant’s solicitors to respond to the correspondence addressed to them until their first letter dated 18th April 2003. It is clear that until compelled to do so by the court the defendant’s solicitors were insisting on linking compliance with clause 2 with payment of damages for breach of the covenant in clause 3. In my judgment this was a stance which the defendant was not entitled to take on the terms of the Agreement. It follows that in my judgment he was in breach of the Agreement. It is clear that he must have known or foreseen that his delay would delay completion and that this was likely to cause loss to the claimant.

The claimant contends that but for the breach, the purchasers were likely to have exchanged in December 2002 and completed in May 2003. I have heard the evidence and read the relevant documents. It seems to me that the contention is made out, but the defendant is in breach only from the last day of January 2003 until the 1St October 2003. It is clear that the defendant was not liable for any delay which took place thereafter.

In these circumstances, the loss which the claimant has established is the loss of use of the money he would have had in hand (i) on the deposit from the 1st January 2003 to the end of May 2003 and (ii) on the whole purchase price from the end of May 2003 until 8th October 2003. The evidence shows that he would have applied these sums in the reduction and discharge of borrowings from a mortgagee and his bank. He is entitled to recover the actual cost of interest paid by him to those lenders in respect of the sums and during the periods specified in (i) and (ii) above. In my judgment he is also entitled to recover the costs of insurance and water rates incurred by him in respect of the same period.

I should be grateful to counsel if the appropriate calculations can be made and agreed if possible.

Bernard Livesey QC
Deputy Judge of the High Court
11 February 2005

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