A warning to developers

On 6 November 2020 the Supreme Court handed down their decision in Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd [2020] UKSC 45. They were considering an appeal by Housing Solutions Ltd against the Court of Appeal’s decision to reverse the decision of the Upper Tribunal. The appeal was unanimously dismissed.

Upper Tribunal

Land in Berkshire adjoining a children’s hospice run by the Alexander Devine Children’s Cancer Trust (the ‘Trust’) was subject to restrictive covenants that prohibited the use of the land for building, with the aim that the grounds would be kept private for the use of terminally ill children to enjoy without being overlooked. Nevertheless, and with knowledge of the restrictive covenants, Millgate Developments Ltd (‘Millgate’) built 13 affordable houses on the adjoining land. Millgate then retrospectively applied to the Upper Tribunal for the modification of the restrictive covenants. The application was granted, and the restrictive covenants were modified under the public interest limb of ground (aa) of section 84 of the Law of Property Act 1925 (‘Section 84’) so as to facilitate a social housing development. As a condition of the ruling, Millgate was ordered to pay £150,000 by way of compensation to the Trust.

Court of Appeal

The Trust appealed and the Court of Appeal reversed the decision of the Upper Tribunal on four points.

Supreme Court

Housing Solutions Limited (Millgate’s successor in title) appealed to the Supreme Court which unanimously dismissed the appeal, albeit for different reasons to those given by the Court of Appeal. The Supreme Court also refused the application to modify the restrictive covenants. The appeal was primarily dismissed for two reasons, however four points were fully argued.

First Reason

The Supreme Court found that Millgate’s cynical breach of the jurisdictional phase of the Upper Tribunal’s decision, in which it had to establish one of five grounds on which to discharge or modify restrictive covenants, was not relevant.

In contrast, the Court of Appeal had found that the applicable ground in this matter (i.e. whether the restrictive covenants, by impeding a reasonable user of land, were contrary to the public interest: sections 84(1)(aa) and 84(1A)(b)) were relevant. The Supreme Court found that the Court of Appeal had interpreted this ground too widely, when in fact it required narrow interpretation: i.e. ‘whether that impediment, by continuation of the restrictive covenant, is contrary to the public interest’ rather than ‘whether in all the circumstances it would be contrary to the public interest to maintain the restrictive covenant’. In making this decision the Supreme Court weighed up the public interest in not letting 13 affordable housing units be demolished against the public interest in the hospice providing a respite for terminally ill children.

Second Reason

The Supreme Court found that the Upper Tribunal failed to properly consider Millgate’s conduct at the discretionary stage of the decision-making process (i.e. following the jurisdictional stage, when the Upper Tribunal decides if it should exercise its discretion to discharge or modify the restrictive covenants). Although the Court of Appeal came to the same conclusion, the Supreme Court made their decision based on different reasoning; the Upper Tribunal had made an error of law as it had failed to consider two relevant factors at the discretionary stage:

  1. the developer could have built on land not bound by restrictive covenants, rather than the application land; and
  2. if the developer had applied to modify the restrictive covenants prior to beginning building it would have been unlikely to satisfy the ‘contrary to the public interest’ ground.

Two further points were fully argued:

Third Reason

The Supreme Court briefly considered the comments made by Lord Sumption in Coventry v Lawrence [2014] UKSC 13, however as the Upper Tribunal did not rely on these comments, there was no debate as to whether or not it had been correct to do so.

Fourth Reason

The Supreme Court also considered at both stages the fact that Millgate had built on the application land in order to fulfil its affordable housing planning obligations.

A full copy of the judgment can be found here.



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