Double-edged sword

Positive covenants do not normally bind successors in title. However, where a burden is related to a benefit, a successor in title may only be allowed to take the benefit of an agreement if it is also prepared to accept the related burden. This exception to the normal rule is known as the doctrine of benefit and burden. In the case of Davies & Ors v Jones and anor [2009] All ER (D) 104 (Nov), the Court of Appeal considered whether a party who had taken an assignment of a contract for the sale of land was bound to perform a positive covenant contained in that contract. The court held that the doctrine of benefit and burden did not apply on the facts of this particular case but, in coming to this conclusion, it provided some useful guidance on the doctrine.

Facts

The second defendants, Lidl, entered into a contract (the Jones-Lidl contract) to buy a site from Mr Jones (who was named as the first defendant on the basis that he had acted as Lidl’s agent but the claim against him was summarily dismissed). It appears that, at the time of the Jones-Lidl contract, Mr Jones did not own the site and he subsequently entered into a contract (the Jones-Trustee contract) to purchase part of the site from the claimants, who owned the property as trustees of a retirement benefit scheme.
The Jones-Trustee contract included a clause, at clause 18, allowing Mr Jones to retain £100,000 from the purchase price until he had carried out certain works. Once those works had been carried out, Mr Jones could retain half of the proper cost of the works, but was obliged to return the balance of the £100,000 to the claimants.

By a deed of assignment (the Deed of Assignment) Mr Jones later assigned his interest in the Jones-Trustee contract to Lidl and the Jones-Lidl contract was determined. Lidl paid the purchase price directly to the claimants, who transferred their part of the site to Lidl. Lidl, who had retained the £100,000, carried out the works and refused to return the £100,000 to the claimants. The claimants issued proceedings for the return of the £100,000.

The judge at first instance found that Lidl was bound by the terms of clause 18 of the Jones-Trustee contract “as a burden appurtenant to the benefit it took under the same contract”. Lidl appealed.

The Court of Appeal decision

The classic example of the doctrine of benefit and burden is the case of Halsall v Brizell [1957] Ch 169. In that case, a conveyance gave a right to travel over private roads to and from a property and contained a duty to pay a contribution towards the maintenance cost of those roads. The court found that the purchaser was not entitled to exercise the right to drive over the roads unless it accepted the corresponding obligation to pay for their upkeep.

In Davies v Jones, the chancellor reviewed this and a number of subsequent cases, from which he derived the following principles:
(i) The benefit and burden must be transferred in or by the same transaction. In the case of benefits and burdens in relation to land, it is almost inevitable that the transaction in question will be effected by one or more deeds or other documents.
(ii) The enjoyment of the benefit must be relevant to the imposition of the burden in the sense that the former must be reciprocal to or conditional on the latter. This will be a question of construction of the deeds or other documents or the terms of the transaction. It will depend on the express terms of the transaction and any implications to be derived from them.
(iii) The person on whom the burden is alleged to have been imposed must have or have had the opportunity of rejecting or disclaiming the benefit, not merely the right to receive the benefit.

Comment

While the Court of Appeal found that the doctrine of benefit and burden did not apply on the facts of this particular case, it is also worth noting that the chancellor commented that Mr Jones remained liable to the claimants for the covenants contained in clause 18 of the Jones-Trustee contract and implied that the claimants should have sued Mr Jones in his own right rather than as agent for Lidl. This is an important reminder to those selling or assigning interests in land to ensure that they properly bind their purchasers or assignees to comply with any covenants that they are required to perform.

Eleanor Morgan is a solicitor, & Jonathan Pratt is professional support lawyer, in Macfarlanes LLP’s litigation and dispute resolution department
 

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