It does not automatically follow that a delay in objecting to a breach of restrictive covenant amounts to an acquiescence to that breach. In the case of Harris v Williams-Wynne [2006] the Court of Appeal, in upholding the decision of the High Court, decided that a landowner that delayed in objecting to a breach of covenant was nevertheless entitled to claim damages for that breach. However, as the landowner found out, the level of damages awarded will not necessarily reflect the profit made by the developer by that breach.

Background

In April 1987 Mr Harris purchased from Mr Williams-Wynne a farmhouse in the Snowdonia National Park. Shortly after arriving, Mr Harris sought to purchase more land from Mr Williams-Wynne, who entered into a contract in April 1988 (the agreement) to sell some additional amenity land adjacent to the farmhouse (the additional land) to Mr Harris, which contained the following covenants:

2. The vendor… undertakes that if notice in writing is given to the vendor within twenty one years from the date hereof the vendor at the Purchaser’s expense will execute any document required to transfer the said freehold interest in such land to the Purchaser or as the Purchaser may direct and use his best endeavours to obtain the concurrence of any necessary party.

3 The Purchaser… in view of the land being within a National Park covenants for the benefit of the vendor’s retained land not to erect any buildings on the land the subject of this agreement.

It was somewhat unusual that Mr Harris did not take a transfer of the additional land but instead relied on a contractual right to purchase.

The breach of covenant

In 1991 Mr Harris obtained a planning consent for the erection of a two-storey garage and studio on the additional land. In 1995 Mr Harris began implementing the planning consent by removing an existing garage on the additional land and commenced building works for the garage and studio with foundations being installed in 1997. Works continued in a rather ad hoc fashion. By the spring of 2000 the building had reached first-floor level and by December 2002 the roof had been installed and slated.

In 2002 Mr Harris decided to sell the farmhouse garage and studio. During the conveyancing process it was soon pointed out to Mr Harris that he did not in fact own the additional land. In December 2002 Mr Harris’s solicitors formally contacted Mr Williams- Wynne requesting the transfer of the additional land. This request was ignored. Some five months later, Mr Williams-Wynne did respond by claiming that Mr Harris had, by erecting the garage and studio, breached the absolute prohibition on building on the additional land. Mr Harris sought specific performance of the transfer claiming that he was suffering financial loss as a result of Mr Williams-Wynne’s failure to transfer the land promptly when requested In turn, Mr Williams-Wynne counterclaimed for breach of covenant and sought half the development profit.

In the proceedings that followed it was conceded that Mr Williams- Wynne would have become aware of the building work on the additional land during 2000. Mr Williams-Wynne did not live that far away from the building being erected and it could be seen from many points including the main road. Mr William-Wynne often enjoyed flying light aircraft over the area taking aerial photos! The issue at the crux of this case was whether the delay would be fatal to any attempt by Mr Williams-Wynne to enforce the restrictive covenant.

Remedies available for breach of covenant

Injunctive relief

It has generally been accepted by the courts that an injunction is the natural remedy for a breach of restrictive covenant. However, the importance of a landowner acting quickly if they wish to obtain injunctive relief is highlighted by the fact that a court is more likely to grant a prohibitory injunction restraining any anticipated breach of covenant rather than a mandatory injunction requiring the breach to be rectified (ie by the pulling down of a building erected in breach of covenant). Time is very much of the essence when seeking injunctive relief.

Damages

At common law the damages for a breach of covenant are likely to be nominal as it is difficult to establish actual damage to the land (Surrey County Council v Bredero Homes Ltd [1993]). However, in equity more substantial damages can be awarded under s2 of the Chancery Amendment Act 1858 (Lord Cairns’ Act), provided the court has jurisdiction to entertain an application for an injunction (this is regardless of whether a party actually seeks an injunction or whether the court feels an injunction is an appropriate remedy).

Thus, provided the court feels it has jurisdiction to grant an injunction, it will consider whether damages would be a more appropriate remedy. Using the principles set down in Jaggard v Sawyer [1995] the court will consider whether it can be shown that the likely injury caused to any claimant by a breach of covenant would be small, whether the breach can be assessed in monetary terms, whether a monetary payment is adequate compensation, and whether an injunction would be oppressive.

If the court feels that damages would be a more appropriate remedy it will begin its assessment of the level of damages as being such a sum as the landowner may have reasonably demanded as a quid pro quo for releasing/ varying the covenants had the developer applied for them to be released/varied (Wrotham Park v Parkside Homes [1974]). In Amec Developments Ltd v Jury Hotel Management (UK) Plc [2001] the court held that damages should be calculated on the basis of a sum that would have been negotiated between the parties making reasonable use of their bargaining positions at the time prior to the breach of covenant, although it did caveat this by stating that the ‘deal has to feel right’. However, the courts are also at liberty to award restitutionary damages rather than compensatory damages where such a reward would be a ‘just response to a breach of contract’ (Attorney General v Blake [2001]).

Remedies available where there has been delay

In some circumstances the courts have ruled that injunctive relief is simply not available. In Gafford v Graham [1999] the court stated that a claimant who stands by while a permanent and substantial structure is erected in breach of covenant loses the right to seek an injunction to have that structure pulled down. In addition, a landowner seeking damages for breach of covenant may lose its entitlement to claim damages where it has been guilty of such acquiescence as to make it, in all the circumstances, unconscionable for it to rely upon this legal right (Gafford v Graham).

It was therefore clear from the beginning that in the case of Harris v Williams-Wynne, the delay in seeking to enforce the breach of covenant cost Mr Williams-Wynne any chance of obtaining a mandatory injunction. An injunction so late in the day would simply have been oppressive. To be fair, Mr Williams-Wynne never really asked for injunctive relief. The question for the court was whether the delay meant that Mr Williams-Wynne lost his right to seek damages from Mr Harris.

The decision

Counsel for Mr Harris argued that the delay was clearly an acquiescence to the breach and, following Gafford v Graham, argued that, in all the circumstances, it would be unconscionable for Mr Williams-Wynn to rely upon the right to damages. Counsel for Mr Williams-Wynne countered, arguing that acquiescence required an encouragement or allowance by Mr Williams- Wynne and it was not sufficient merely to establish a delay in making a complaint.

Bernard Livesey QC, sitting in the High Court, decided that it was relevant to determine the extent to which any delay on the part of Mr Williams-Wynne had caused Mr Harris to act to his detriment. The answer to this question depended first on the conduct of Mr Williams-Wynne, and secondly on the wording of the covenant. In Mr Williams- Wynne’s favour was the fact that the covenant was an absolute prohibition on building on the land. Counting against him was, of course, his delay.

The judge concluded that the inactivity of Mr Williams-Wynne was not fatal to his claim for damages. Mr Harris had profited from the construction of the building, which had enhanced the value of his land significantly and to an extent greater than he would have paid for the release of the covenant. Thus payment of a proper sum for the breach of covenant was not a ‘detriment’ that was unconscionable for Mr Williams-Wynne to raise at the stage at which he did.

The High Court awarded damages to Mr Williams-Wynne, though it was not the half of the development profit sought, but instead £8,000. This was something of a hollow victory as Mr Harris was awarded damages for Mr Williams- Wynne’s breach of contract for failing to transfer the land when requested.

The appeal

Mr Harris appealed the High Court decision, arguing that the award for damages was incorrect in law as Mr Williams-Wynne had acquiesced to the construction of the building on the additional land and was therefore not entitled to damages. The Court of Appeal upheld the decision and the reasoning of the High Court in every respect.

Conclusion

Whilst in the circumstances of this case Mr Williams-Wynne’s delay was not seen as an acquiescence and thus he was entitled to damages, the court was conservative in the award made. Certainly, the award was not the amount claimed by Mr Williams-Wynne and developers should take continued cheer from the fact that the courts have, to a large extent, ignored the precedent set by Attorney General v Blake when dealing with damages for breaches of restrictive covenants. Finally, it is worth practitioners remembering the purpose of the imposition of restrictive covenants, especially in the drafting of the same in sale contracts and transfers. If the purpose of a covenant is to secure amenity then it is worth pointing out to the landowner benefiting from the covenant that prompt action on their part is vital if there is to be any chance of securing that amenity. If, on the other hand, the purpose of the restrictive covenant is to secure future development profit, practitioners are well advised that such future profit may well be better secured by a form of specified overage as opposed to relying on the benefit of a restrictive covenant.