Cosmichome Ltd v Southampton City Council
| Jurisdiction | England & Wales |
| Judge | Sir William Blackburne |
| Judgment Date | 23 May 2013 |
| Neutral Citation | [2013] EWHC 1378 (Ch) |
| Court | Chancery Division |
| Date | 23 May 2013 |
| Docket Number | Case No: HC11C03859 |
[2013] EWHC 1378 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir William Blackburne
Case No: HC11C03859
John Furber QC (instructed by Hamlins LLP) for the Claimant
Philip Coppel QC and Katie Helmore (instructed by Southampton City Council) for the Defendant
Hearing dates: 29 and 30 April and 1 May 2013
Introduction
These proceedings are concerned with the enforceability of two covenants contained in a transfer of certain land in Southampton executed in 1989. They raise questions of fact, construction and law, in particular the applicability of section 9(2) of the Perpetuities and Accumulations Act 1964 ("the 1964 Act").
The claimant ("Cosmichome") is the registered freehold proprietor of land known as the BBC Regional Broadcasting Centre, Havelock Road, Southampton ("the Site"). The BBC, which was the previous owner, acquired the Site from the defendant ("the Council") by a transfer dated 13 July 1989 ("the Transfer"). The consideration for the Transfer was £1.00.
The Site is located in the centre of Southampton. It is opposite the Civic Centre and within the main retail and commercial area of the city. It is a few minutes' walk from the main railway station. At the time of the transfer, there were various buildings on land adjoining the Site which were owned freehold by the Council. They included the Civic Centre, The Mayflower Theatre and the Gantry Arts Centre.
After acquiring the Site, the BBC arranged for the construction on it of a building to be used as a broadcasting centre ("the BBC Building"). The building was completed in approximately 1991. It comprises a purpose-built studio and administration centre for the regional programming of the BBC in both radio and television formats. Its net internal area is approximately 5,442 sq m. Since its completion in 1991, the building has been in continuous occupation and use by the BBC as a broadcasting centre. Adjacent to the BBC Building and on land owned by the Council is a 650-space multi-storey car park which the Council developed ("the Car Park"). The BBC contributed approximately £1 million towards the cost of constructing it. With effect from 9 November 1990, the Council granted the BBC a lease of the lowest two levels for a term of 99 years ("the BBC Car Park Lease"). The lowest two levels of the Car Park provide space for 141 vehicles. The rent was a peppercorn. In the years following 1989, a bus station near the Site has been redeveloped as a covered shopping centre, a new Sea City Museum has been located in the Civic Centre, and an office building with the head office for Skandia has been built nearby.
In 2004 the BBC sold the freehold of the Site to Cosmichome, taking a 25-year lease back ("the Lease"). It did so by a transfer and a lease back dated 8 October 2004. It remains in occupation of the Site under the lease. On the same date, the BBC sold and transferred the BBC Car Park Lease to Cosmichome and Cosmichome leased the same back to the BBC for a term of 25 years.
The covenants
By the Transfer the BBC (described in the document as "the Purchaser") entered into the following covenant with the Council (described in the document as either "the Council" or "the Vendor"):
"3. The Purchaser for itself and its successors in title hereby covenants with the Council pursuant to Section 33 of the Local Government (Miscellaneous Provisions) Act 1982 and for the benefit and protection of so much of the adjoining or adjacent land of the Council as is capable of being benefited thereby or any part or parts thereof with the intent of binding the Property into whosesoever hands the same may come that the Purchaser and the persons deriving title under it will at all times hereafter observe and perform the obligations stipulations and restrictions set out in the Second Schedule hereto"
The Second Schedule, entitled "Covenants to be imposed in this Transfer", set out several covenants including the following:
"1. The property is to be solely occupied by the Purchaser (being the BBC or the BBC and any wholly owned subsidiary or other licensed broadcaster to whom the BBC's franchise is in whole or part devolved by Act of Parliament) for the purpose of a Broadcasting Centre ("the permitted use") PROVIDED THAT this covenant may be removed by the written Agreement under Seal of the Council ("the Discharge") and a further covenant that where this restriction is lifted and planning permission granted for any use other than radio television studio with ancillary offices 50% of any resulting enhanced value accruing on the Property shall be paid by the owner for the time being of the property to the Vendor ("the Development Charge").
2. In the event that the property or any part becomes surplus to the requirements of the Purchaser and/or it ceases to require the property for the permitted use the Purchaser shall notify the Vendor in writing. The Vendor may thereupon within three months of the date of such written notification serve formal written notice on the Purchaser requesting the Purchaser to convey the freehold interest of the property or the relevant part and the rights appurtenant thereto to the Vendor with vacant possession within 6 months of the Vendor so demanding. The purchase price shall be the open market value of the property and the buildings thereon or the relevant part free of the restrictive covenants in clause 1 and calculated on the basis of a deemed general permitted use as radio/television studios with ancillary offices (not restricted to sole Purchaser use) with the deemed benefit (or relevant apportioned benefit) of the car park lease hereinafter described at the date upon which the Vendor serves notice the value to be agreed within 3 months of such date or failing agreement between the parties, shall be settled by arbitration provided in the event that the Purchaser conveys the freehold interest in the property or the relevant part and the rights appurtenant thereto to the Vendor the consideration for the surrender of the car park lease or relevant part shall be one pound. For the purposes of this paragraph time shall be of the essence.
3. In the event that the Vendor does not serve notice as aforesaid the Purchaser is free to dispose of the property and the buildings thereon or the relevant part and the rights appurtenant thereto subject to the following restrictions:
(1) In the event of a sale for use as radio/television studios with ancillary offices ("the general permitted use") The Vendor shall execute the Discharge and impose a similar obligation on a Purchaser
(2) In the event of a sale for use other than the general permitted use the Vendor shall in the event of a sale of the whole
(i) execute the Discharge
(ii) on recovery of the Development Charge remove the restriction on the property relating to the same
and in the event of sale of part (i) execute the Discharge in relation to that part only and make available a proportionate part of the car parking (ii) on recovery of the Development charge relating to the enhanced value of that part remove the restriction on that part of the Property hereby transferred Provided that the Vendor's reasonable legal fees incurred under clauses 3.3(1) and (2) shall be met by the Purchaser.
4. Notwithstanding the provisions of clause 1 the Vendor agrees the Purchaser may lease, sub-let, share-use, or hire out any part of the property provided the total amount of any land so leased or hired as aforesaid shall not exceed 25% of the lettable floor space and provided no legal estate or interest greater than a lease for a term of 20 years is created and any planning permission obtained in connection with the same shall not give rise to the Development Charge."
By paragraph 5, the BBC agreed that it would at its own expense carry out the development of the BBC Building in accordance with a planning permission which had been granted by the Council. The BBC took advantage of paragraph 4 by letting approximately 10.4% of the lettable floor space. Currently, I understand, the first floor, comprising approximately 16.2% of the lettable floor space, has been let. The lettings have not been in connection with what paragraph 3 describes as the general permitted use.
I refer to the covenant set out in paragraph 1 of the second schedule as "the restrictive covenant" and to the right conferred by paragraph 2 of that schedule as "the right of pre-emption."
The claim
By its claim form dated 7 November 2011 Cosmichome, which has appeared by John Furber QC, seeks (1) a declaration that the restrictive covenant is not enforceable against it or any successor in title to it and (2) a declaration that the right of pre-emption, in the event of any transfer of the freehold of the property by the BBC, is not enforceable against it or any successor in title to it. The Council, which has appeared by Philip Coppel QC and Katie Helmore, resists the making of those declarations.
The restrictive covenant
The restrictive covenant seeks to subject the use of the Site to very narrow limits. It is confined to a broadcasting centre which may only be used by the BBC or by some body exercising the BBC "franchise." The restriction is not absolute. There are three let-outs. First, under paragraph 4 of the second schedule it is open to the BBC to allow up to 25% of the lettable floor space for a wholly different use (provided the requisite planning permission is obtained). Second, paragraph 1 envisages that the restriction may be lifted and the Site used for some other purpose for which planning permission has been obtained provided a payment is made (the so-called "Development Charge"), calculated by reference to the increase in value which may result from the...
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Table of Cases
...[1982] 3 WLR 849, [1982] 3 All ER 995, CA 24 Corsellis v London CC [1907] 1 Ch 704 149, 158 Cosmichome Ltd v Southampton City Council [2013] EWHC 1378 (Ch), [2013] 1 WLR 2436, [2013] All ER (D) 306 (May) 252 Cotswold District Council v Secretary of State for Communities and Local Government......
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Enforceability of the Burden of a Freehold Covenant
...would be precluded from selling parts of the service road to frontagers. See, however, Cosmichome Ltd v Southampton City Council [2013] EWHC 1378 (Ch), where the user covenant confined the use of the land to broadcasting by the BBC. The claimant was a successor in title of the BBC (there ha......