Court of Appeal overturns judgment - Bath Rugby expansion to proceed

Bath Rugby Ltd were given an early Christmas gift on 21 December 2021 when the Court of Appeal handed down judgment in this case, allowing the appeal and subsequently overturning the decision made in the High Court in October 2020. A welcome surprise after a series of losses on the pitch, the appeal concerned the enforceability of a restrictive covenant which pre-dated the Law of Property Act 1925 (“the 1925 Act”). Whilst the Club welcomes this decision in light of their plans for a new stadium at the Rec, the case also provides clarification in respect of the annexation of covenants.

Background

Bath Rugby has a lease of part of the Rec, which has been the home of Bath Rugby since around 1896. The club has plans to develop a stadium larger than its current venue, which is one of the smaller stadiums in the English Premiership. The club sought a declaration pursuant to section 84(2) of the 1925 Act that a covenant affecting the land, which provided that nothing should be erected, placed, built or done on it which could be or become a nuisance, annoyance or disturbance to or otherwise prejudicially affect “the adjoining premises or the neighbourhood”, was not enforceable.

The main thrust of the club’s argument was that there was no one who could claim to have the benefit of the covenant.

The claim was challenged by local residents whose properties overlooked the Rec. These residents claimed to have the benefit of the covenant by annexation on the basis that their land was “the neighbourhood” as described in the covenant.

At first instance, the High Court found that the local residents were entitled to the benefit of the covenant. Bath Rugby appealed.

The Appeal

The appeal concerned whether the residents were entitled to the benefit of the covenant where the conveyance in question did not sufficiently identify the land intended to be benefitted.

There are three established methods whereby the benefit of a covenant may pass: (a) by annexation, (b) by express assignment or (c) pursuant to a scheme of development. In this case, there was no direct assignment of the benefit of the covenants to the residents and no building scheme in place. The Court of Appeal therefore had to decide whether the conveyance particularised the residents’ properties with sufficient clarity, whether expressly or by necessary implication in the conveyance, such that the covenant was “annexed”.

The Court found that the words used in the covenant did not identify the lands to which the benefit of the covenant should have been annexed, as there was not “conceptual certainty”. The word “neighbourhood” in particular was not a description of land and did not identify precise parcels. Further, while it is common for covenants against nuisance to refer to a "neighbourhood", that term did not identify the property to which the benefit of the covenant was intended to be annexed. This meant that the benefit of the covenant had not been annexed to the land in question.

Whilst not critical to the overall outcome, the Court looked at the views of previous courts as to whether land must be “easily ascertainable” in order to be capable of annexure. Lord Justice Nugee considered that had the conveyance in this case been expressed to be “for the benefit of the lands which then comprised the Bathwick Estate”, for example, it would be difficult to say that the land was not “easily ascertainable”. However, Lord Justice Newey and Lady Justice King doubted whether the “easily ascertainable” test was the same as considering whether the land is sufficiently identified.

Practical implication

For the benefit of a covenant to be annexed to land, it must be for the protection of clearly defined property so that it remains enforceable even after the land is sold on. In making that assessment it is crucial that the deed imposing the covenant demonstrates an intention to benefit specific land, albeit no particular form of words has to be used.

To ensure that land is clearly identified it should be fully defined, ideally with the use of a demarked plan, so as to achieve “conceptual certainty”.

Bath Rugby Ltd v Greenwood and others: click here for the Court of Appeal judgment.