High Court interprets 1958 Covenant in Karen Reeve v Aidan Gregory McDonagh & Anor, emphasizing restrictive covenant interpretation, estoppel, and cost rules.

Citation: [2024] EWHC 439 (Ch)
Judgment on

Introduction

In the case of Karen Reeve v Aidan Gregory McDonagh & Anor [2024] EWHC 439 (Ch), the High Court of Justice was asked to interpret a restrictive covenant pertaining to a property transfer completed in 1958. The key legal topics discussed included the interpretation of restrictive covenants, the concept of estoppel, and the application of cost rules in section 84(2) Law of Property Act 1925 applications. This article details the legal principles applied in the judgment and links them to specific parts of the case summary.

Key Facts

The dispute centered around the “1958 Covenant” that was initially instated to protect the sea views for the property known as Barnwood and to limit developmental density on the adjoining plot where Rose Cottage stood. The Respondents wished to replace Rose Cottage with a larger development, leading to contention over whether the covenant barred such actions. Previous 1988 agreements seemingly modified the covenant, sparking debate on whether those alterations established an estoppel preventing the Respondents from denying the covenant’s original intent.

Interpretation of Restrictive Covenants

The court reaffirmed the principles set forth in Arnold v Britton [2015] UKSC 36 regarding the interpretation of contractual provisions. The emphasis was on considering what reasonable persons privy to the contract’s context would deem the covenant language to mean, with a preference for a narrow interpretation of restrictive covenants, as suggested in GLN (Copenhagen) Southern Ltd v Tunbridge Wells Borough Council [2004] EWCA Civ 1279.

Estoppel by Deed and Contract

The concept of estoppel by deed and contractual estoppel was scrutinized, with the requirement of a clear, certain, and unambiguous statement to work an estoppel (PW&Co v Milton Gate Investments Ltd [2004] Ch 142). The judgment reiterates that estoppel by deed is based on deed assertion and does not require subsequent reliance or conduct by the invoking party.

Costs in Section 84(2) Applications

The Master’s decision on costs was evaluated against the discretionary jurisdiction to award costs under section 203(5) LPA and the rule of practice described in In re Jeffkins’ Indentures [1965] 1 WLR 375 and adopted post-CPR in University of East London Higher Education Corpn v Barking and Dagenham London Borough Council [2005] Ch 354. However, the court acknowledged that this rule is a guideline for the exercise of discretion and allows for flexible application depending on the case context.

Outcomes

The court upheld the Respondents’ interpretation of the 1958 Covenant, judging that it did not prevent the replacement of Rose Cottage in accordance with the planning permission. The Appellant’s contention of estoppel was rejected due to the lack of a clear, unambiguous agreement or assumption about the covenant’s reach in the 1988 Deed. Furthermore, the Master’s decision on the awarding of costs was deemed within the “generous ambit within which reasonable disagreement is possible,” leading to the verification that the Respondents should pay the Appellant’s costs, as hostile litigation was identified.

Conclusion

The case of Karen Reeve v Aidan Gregory McDonagh & Anor illustrates the imperative of clear language in legal covenants and solidifies the restrained approach in interpreting restrictive covenants. It cements the constrained contextual operation of estoppel by deed. Additionally, the case showcases the court’s discretion in applying costs guidelines beyond the general rule, especially in situations perceived as ‘hostile litigation’. The outcomes reiterate courts’ reluctance to deviate from plain contractual language unless absolutely necessary, endorsing the primacy of apparent contractual intentions at the time of agreement.

Related Summaries