The Supreme Court has today handed down an important judgment in Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd (2020) UKSC 45 which serves as a cautionary tale for property developers dealing with land encumbered by restrictive covenants. This is the first time the Supreme Court has been asked to decide an appeal under s.84 of the Law of Property Act 1925. It required the weighing of “public interest” in 13 affordable homes not going to waste against the sanctuary a hospice is providing to children with cancer. The Court found for the Cancer Trust, dismissing the appeal.
Millgate Developments built 13 affordable homes on a piece of land pursuant to planning permission but in breach of a restrictive covenant against building and change of use. Millgate was aware of the existence of the restrictive covenant prior to the development. After building the homes and agreeing to sell the land to a social housing provider, Housing Solutions Ltd, Millgate made a retrospective application to modify the restrictive covenant. This was objected to by the beneficiary of the covenant, the Trust, trying to protect the neighbouring children’s hospice garden from being overlooked.
At first instance, the Upper Tribunal approved Millgate’s application. While the Upper Tribunal was critical of Millgate’s conduct (knowingly breaching the restrictive covenant), it agreed with Millgate that the restrictive covenant should be discharged on the basis that it was in the public interest to allow affordable housing.
When the case came to the Court of Appeal, the decision of the Upper Tribunal was overturned. According to the Court of Appeal, the consideration of ‘public interest’ required the Upper Tribunal to give weight to the deliberately unlawful conduct by Millgate and of the public interest in protecting the Trust’s contractual rights. In fact, the Court of Appeal said that it is contrary to the public interest for a developer to knowingly carry out such a development in breach of a restrictive covenant and then “dare” the Tribunal to make a ruling with the effect that homes may have to be torn down.
Housing Solutions appealed to the Supreme Court which unanimously dismissed the appeal today and refused the application to modify the restrictive covenant. Importantly, the reasons for the Supreme Court’s decision differ to those of the Court of Appeal. According to the Supreme Court, the deliberate and cynical breach of the restrictive covenant by Millgate is not relevant when deciding the question of ‘public interest’. The question of the ‘public interest’ is focused, on the one hand, on the interest of having affordable housing and, on the other hand, on the interest of the Trust being able to maintain the benefit of its restrictive covenant to safeguard a hospice for children. The Supreme Court held that the Upper Tribunal failed to consider two crucial factors – that Millgate could have built the affordable houses on land unencumbered by the restrictive covenant and still satisfied the planning permission, and that Millgate would have been unlikely to satisfy the public interest ground had it applied to modify the restrictive covenant before building the homes.