Assignment of Benefit

AuthorChristopher Jessel

Chapter 13

Assignment of Benefit


If the dominant land changes hands the new owner will wish to have the benefit of any positive covenants over the servient land. Sometimes the benefit passes automatically but that is not invariable and, if it does not, it will need to be assigned expressly.

A covenant is a form of contract. The common law took the view that it was personal to the original parties and only they could enforce it or be liable on it. The law has maintained the view that a person should not owe an obligation to someone he or she has not chosen but the same logic does not apply to benefit. Equity therefore developed a jurisdiction to allow an assignee to take it, subject to safeguards so that a defendant was not prejudiced and could raise against the assignee any defences that would have been available against the assignor. That might be by allowing the assignee to compel the original covenantee either to take proceedings or to authorise the assignee to sue on the covenantee’s behalf. Subsequently, in certain instances, the assignee was allowed to proceed directly and personally, but as the claim was equitable the normal principles applied so that the defendant could still use any defence, such as set-off1or misrepresentation, which was available against the original covenantee.

Some of the rules apply to any sort of contract including for goods or services while some apply only to land. As discussed in Chapter 8, there are special rules for leaseholds. Freehold positive covenants can benefit land and some benefits can be invoked by the owner of an incorporeal hereditament such as a rentcharge.

1But see Edlington Properties Ltd v JH Fenner & Co Ltd [2006] EWCA Civ 403, [2006] 1

WLR 1583.

154 Positive Covenants and Freehold Land


At common law an enforceable contract can be made in one of two ways. First it may be supported by consideration, that is some value (which may be nominal such as a peppercorn) given as part of a bargain. Many such contracts may be wholly informal: they may be verbal or, if in writing, could be set out on the back of an envelope; a contract for a disposition of an interest in land must be in writing.2Secondly, it may be made as a deed, usually expressed as a covenant, where formalities take the place of consideration and demonstrate to the parties that they are entering into a legally binding arrangement.

A legally enforceable right is known as a chose in action, as contrasted with a chose in possession where a person already has property. In Investors Compensation Scheme Ltd v West Bromwich Building Society3Lord Hoffmann said:

a chose in action is property, something capable of being turned into money. Snell’s Equity 29th ed. (1990), p. 71 defines choses in action as ‘all personal rights of property which can only be claimed or enforced by action, and not by taking physical possession’ ...

The right to have a contract performed in the future is therefore a chose in action. The contract creates a right and if that right is capable of sale it can itself be seen as a form of property. That is distinct from the underlying subject matter of the contract, which may (or may not) also be property. For example the benefit of a contract to buy land can be sold and bought separately from the land itself. Thus in principle a positive covenant relating to land might in some instances be assignable separately from the land although it would be unusual.

The rules have been partly modified by statute. The rigours of the common law were relaxed, firstly by the Real Property Act 1845, now in the LPA 1925, s 56, secondly by the Judicature Act 1875 now in the LPA 1925, s 136 and thirdly by the LPA 1925, s 78 which implied wording in certain contexts where previously the parties might have included (but did not always include) it expressly. A more recent reform in the Contracts (Rights of Third Parties) Act 1999 has yet to gain a widespread support.

An assignment may be legal, taking effect at common law by virtue of the LPA 1925, s 136. Otherwise it may be equitable. That may be because the chose itself is equitable. It may also be where the chose is legal but the assignee needs the assistance of equity either to secure an equitable remedy or because the formal

2Law of Property (Miscellaneous Provisions) Act 1929, s 2.

3[1998] 1 WLR 896 at 915.

assignment of the chose is defective. The positive covenant between the original parties is a normal contract enforceable at common law by the remedy of damages if the covenantee can demonstrate a loss by reason of the breach of the covenant. Some covenants can also be enforced by the equitable remedy of injunction. A restrictive covenant operates in equity. That is partly because initially it depended on a successor to the covenantor having notice of it, now replaced by registration, and partly because it is normally enforceable by injunction although there is jurisdiction to award equitable damages in lieu.4

13.3 SECTION 56

The LPA 1925, s 56(1) reads:

A person may take an immediate or other interest in land or other property, or the benefit of any condition, right of entry, covenant or agreement over or respecting land or other property, although he may not be named as a party to the conveyance or other instrument.

This re-enacted in different wording the Real Property Act 1845. That Act was intended to remove a rule of the common law that in order to sue on a deed a person had to be named as a party. The operation of the Real Property Act 1845, as its title indicates, was limited to real property.

In Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board,5 discussed below, the majority, Tucker LJ and Somervell LJ, held that the benefit of a positive covenant would pass under LPA 1925, s 78 and limited their decisions to that point. Denning LJ agreed but also briefly referred to s 56 and suggested a wider view of that section that it enabled persons to sue on a contract even if they were not parties. His views were obiter and were subsequently disapproved by the House of Lords in Beswick v Beswick,6a case which did not involve land. In 1962 Mr Beswick agreed to transfer his coal business to his nephew in return for annual payments to himself for the rent of his life and further payments to his widow. After his death the nephew refused to pay the widow and the House of Lords upheld this as she was not a party.

4See para 16.6.

5[1949] 2 KB 500.

6[1967] UKHL 2, [1968] AC 58.

156 Positive Covenants and Freehold Land

Lord Reid said:7

I can now return to consider the meaning and scope of section 56. It refers to any ‘agreement over or respecting land or other property.’ If ‘land or other property’ means the same thing as ‘tenements or hereditaments’ in the Act of 1845 then this section simply continues the law as it was before the Act of 1925 was passed, for I do not think that the other differences in phraseology can be regarded as making any substantial change. So any obscurities in section 56 are obscurities which originated in 1845. But if its scope is wider, then two points must be considered. The section refers to agreements ‘over or respecting land or other property.’ The land is something which existed before and independently of the agreement and the same must apply to the other property. So an agreement between A and B that A will use certain personal property for the benefit of X would be within the scope of the section, but an agreement that if A performs certain services for B, B will pay a sum to X would not be within the scope of the section. Such a capricious distinction would alone throw doubt on this interpretation.

Lord Hodson said:8

Section 56 had as long ago as 1937 received consideration by the Law Revision Committee presided over by Lord Wright, then Master of the Rolls, and containing a number of illustrious lawyers. The committee was called upon to report specially on consideration, including the attitude of the common law towards the jus quaesitum tertio. It had available to it and considered the decision of Luxmoore J. in In re Ecclesiastical Commissioners for England’s Conveyance9, which gave the orthodox view of the section. By its Report it impliedly rejected the revolutionary view, for it recommended, Cmd. 5449 para. 50 (a), pp. 31–32:

That where a contract by its express terms purports to confer a benefit directly on a third party, it shall be enforceable by the third party in his own name.

The narrow view which I take of...

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