Restrictive Covenants: Transfer Of Benefit And Burden

Goodman & Ors v Elwood [2013] EWCA Civ 1103

Facts

This dispute centred on the Defendants' liability to contribute to the cost of maintaining an estate road used to access their industrial units.

Prior to 1986, the estate - including its roads - was owned by Dobson Park Properties Limited ("D") and there were negotiations for the Defendants to purchase the freehold of their units (which they occupied as tenants). At the same time, D was negotiating with Mr Elwood ("E") to sell part of the estate to him, including the estate roads. The Defendants were aware of this and were informed that E would grant them the necessary rights of way over the estate roads and that E would be responsible for maintaining the road, provided that the Defendants contributed to the cost of doing so.

In September 1986, D sold part of the estate to E. The Transfer reserved a right of way over the road in favour of D, its successors and their tenants and licensees. In return for E's covenant to maintain the road, D covenanted that D and its successors in title would contribute a fair and reasonable proportion of the expenses. Subsequent to this, in December 1986, D sold the freehold interests in the industrial units to the Defendants and granted them the right to use the estate road. In return, they covenanted to contribute to the expenses "incurred by the Vendor and its successors" in maintaining the road.

The Defendants initially challenged E's method of assessing their contribution to the costs incurred in maintaining the road, but subsequently disputed any contractual liability at all. There were two key bases for the challenge, both resulting from the fact that - at the time of the transfers to the Defendants - the road had already been transferred by D to E: (1) E did not have any contractual relationship with D under either of the transfers so as to enable him to force the Defendants to pay the contribution; and (2) E was not D's "successor" so the costs incurred by him in maintaining the road did not fall within the costs recoverable via the contribution covenant contained in the December Transfers to the Defendants.

Following this challenge, D assigned to E the benefit of the contribution covenant given by the Defendants in the December Transfers of their units. The effectiveness of this assignment was not challenged and it therefore dealt with the first of the Defendants' arguments. However, the Court was asked to consider the construction of the...