Meaning and Construction of Certain Restrictive Covenants which Impact on the Development and Commercial Use of Land
| Author | William Webster/Robert Weatherley |
| Pages | 275-293 |
OVERVIEW IN RELATION TO CONTRACTUAL INTERPRETATION
28.1 The starting point in the modern law in relation to the interpretation of contracts is the speech of Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society,
(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the ‘matrix of fact,’ but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used
International SA v Ali and Others [2001] UKHL 8, [2002] 1 AC 251 and by Moore-Bick LJ in Reilly v National Insurance & Guarantee Corporation Ltd [2008] EWCA Civ 1460, [2009] 1 All ER (Comm) 1166.
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the wrong words or syntax: see Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749.
(5) The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v Salen Rederierna A.B. [1985] AC 191, 201:
‘If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must yield to business commonsense.’
28.2 Accordingly, in construing a contract, the overriding requirement is to gather the intention of the parties from the words used in light of the overall purpose of the document and the facts known or assumed by the parties at the time that the document was executed, but ignoring subjective evidence of the parties’ intentions.
IMPLYING TERMS
28.3 Sometimes, of course, terms may have to be implied (and the burden of showing this is always a heavy one) in order to give business efficacy to the terms of the covenant.
Council) at [16]–[27] (Lord Hoffmann), applied in Fitzhugh v Fitzhugh [2012] 2 P & CR 14.
& Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; The Moorcock (1889) 14 PD 64.
UKSC 72.
SPECIFIC COVENANTS
Covenants involving the submission of plans and not building without consent
28.4 A covenant requiring the covenantor to submit plans is negative in nature and means that no building may be erected until plans have been submitted to, and approved by, the covenantee. A failure to submit plans (without more) would only give rise to nominal damages.
28.5 Where a building is erected in breach of such covenant it is broken at that time (i.e. it is not a continuing breach).
28.6 It has also been held that where a developer built a number of properties in breach of covenant, those purchasers who aided and abetted the developers’ breach by paying their deposits and entering into contracts to purchase and building contracts while the development was still in progress, were also liable to the covenantee for damages since they now owned the houses built in breach of covenant.
28.7 It is important to appreciate from whom consent is required. In Mahon v Sims,
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Ltd v Ten Trinity Square Ltd,
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