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Blackhorse Investments (Borough) Limited v The London Borough of Southwark [2024] UKUT 33 (LC)

Date of Judgment: 05.02.24 | Area of Law: Property

Jonathan Upton has successfully resisted an application to set aside the whole of a final order modifying covenants in a lease of a public house. 

A final order was made in February 2022 under section 84(1) of the Law of Property Act 1925 modifying covenants in the lease of The Black Horse, a public house in Southwark.  The modifications were in respect of covenants prohibiting the making of alterations without consent, restricting assignment and subletting, and requiring that the premises be kept open and used as a public house.  Jonathan did not act in the initial application. 

The application was served by hand at Southwark’s principal office but it did not come to the attention of the correct department.  Southwark did not file a notice of objection and the final order was made on the papers without a hearing.  The Applicant subsequently incurred significant expenditure converting the premises into 2 flats, granted a long lease of each flat and started proceedings to acquire the freehold under the 1993 Act.  

In November 2023, having been made aware in around June 2023 of the final order in the course of the enfranchisement claim, Southwark applied under rule 54 of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 to set aside the whole of the final order.  The application was made on 4 grounds: non-service of the application on Southwark; that the Tribunal had been misled by the form of the application; that the order lacked coherence; and that because the order varied positive covenants it was outside the Tribunal’s jurisdiction under section 84.

Rule 54 gives the Tribunal power to set aside a decision which disposes of proceedings, or part of such a decision, and to remake it if the Tribunal considers that it is in the interests of justice to do so and if one or more of the conditions in paragraph (2) of the rule is satisfied.  Those conditions are as follows:

(a) that a document relating to the proceedings was not sent or delivered to or was not received at an appropriate time by, a party or a party’s representative;

(b) a document relating to the proceedings was not sent or delivered to the Tribunal at an appropriate time;

(c) a party or a party’s representative, was not present at a hearing related to the proceedings; or

(d) there has been some other procedural irregularity in the proceedings.

The Deputy President held that service had been validly effected and rejected arguments that the application was misleading or that the final order was incoherent.  Further, (as service was valid) the other matters did not amount to a procedural irregularity for the purposes of rule 54(2)(d). 

Of wider significance, the Deputy President held that a covenant which prohibits the assignment of “any part or parts (as opposed to the whole) of the demised premises”, is not a restriction as to the user of the land.  As a result, the tribunal did not have jurisdiction to modify that covenant. 

Southwark’s ground of objection to the modification of the covenants requiring the demised premises to be used as a licensed victualling house only and to be kept open as such so long as the necessary licences could be obtained (clause 3(n)), to use its best endeavours to obtain a renewal of all licences (clause 3(o)), and for so long as the demised premises shall be licensed, to use them as a bona fide refreshment house for supplying food and liquor to the public (clause 3(p)(i)), was on the basis that each of these stipulations imposes a positive obligation on the lessee. 

On behalf of the Applicant, it was submitted that the substance of clause 3(n) was the restriction that the premises were to be used as a “licensed victualling house only”, which was plainly negative, and that the remainder of the restrictions were “parasitic” on the opening words of clause 3(n) and should be considered as part of a single composite prohibition on any use other than as licensed premises.  The Deputy President rejected this submission and held that covenants were positive.  As such, the Tribunal had no jurisdiction to modify the covenants under s.84.

As a result, the final order purported to change the parties’ relationship to a greater extent than Parliament has allowed.  Applying Nicholls v Kinsey [1994] QB 600, the order was “inherently invalid”; it “bore the brand of invalidity on its forehead” and was therefore “always a nullity”.  Those parts of the order which the Tribunal did not have jurisdiction to make were set aside but the remainder remained as modified by the final order.  

You can read a copy of the judgment here.