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Amsprop Trading Ltd v Harris Distribution Ltd and Another

(1996) Times, 13 November

Non-party cannot take benefit of covenant



CHANCERY DIVISION

Published 13 November, 1996


Before Mr Justice Neuberger


Judgment November 6, 1996

A person who was not a party to a contract could not take the benefit of a covenant contained in it under section 56 of the Law of Property Act 1925 even when he was named in the covenant as a person for whose benefit the covenant was made unless the contract purported to be made with him.

Mr Justice Neuberger so held on a preliminary issue in a reserved judgment in the Chancery Division dismissing the action brought by Amsprop Trading Ltd against Harris Distribution Ltd and TDG Ltd.

Mr Christopher Cant for the plaintiff; Miss Judith Jackson, QC, for the defendant.



MR JUSTICE NEUBERGER

said that by clause 3 of an underlease the first defendant, the subtenant, covenanted with the tenant to repair the premises, to permit the superior landlord, the plaintiff's predecessor in title, to enter the premises to inspect the repairs and to recover the cost of any repairs not properly executed by the subtenant.

Clause 3(8) of the underlease between the tenant and the subtenant provided:

"... and if the (subtenant) shall fail to comply with the requirements of such notice as aforesaid (it) shall be lawful for the superior landlords and the landlords ... or their (agents) to enter upon the ... premises to execute such works as may be necessary to comply with the same and in the event of the superior landlords or the landlords so entering the ... premises and carrying out such works to pay their costs and expenses of executing such works..."

There was no privity of estate between a superior landlord and a subtenant. The plaintiff landlord could not therefore recover the cost of repairs directly from the subtenant as there was no privity of contract or estate between them.

The plaintiff sought to overcome that obstacle by relying on section 56(1) of the Law of Property Act 1925 which provided:

"A person may take an immediate or other interest in land or other property, or the benefit of any condition, right of re-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."

The plaintiff contended that it was entitled to enforce the covenants contained in the underlease against the subtenant because of the specific reference to "the superior landlords" in it and the fact that the benefits of the covenants were clearly meant to be for the benefit of the superior landlord.

His Lordship considered the facts and the precise wording of the underlease and head lease in question, and the authorities, in particular White v Bijou Mansions Ltd ((1937) Ch 610, 625), Drive Yourself Hire Co (London) Ltd v Strutt ((1954) 1 QB 250, 274) and Beswick v Beswick ((1968) AC 58) and declined to accede to the plaintiff's contention.

He considered that the ambit of section 56 was accurately summarised in Megarry and Wade, The Law of Real Property (5th edition (1984) p 763): "The true aim of section 56 seems not to allow the third party to sue on a contract merely because it is made for his benefit; the contract must purport to be made with him. Just as, under the first part of the section, a person cannot benefit by conveyance unless it purports to made to him (as grantee), so he cannot benefit by a covenant which does not purport to made with him (as covenantee)": see also the notes to section 56(1) in volume 1 of Wolstenholme and Cherry's Conveyancing Statutes (13th edition (1972) p 133).

Quite apart from that, his Lordship agreed with Miss Jackson that the observations of Mr Justice Dillon in Lyus v Prowsa ((1982) 1 WLR 1044, 1049C-E) were consistent with that view. Indeed, if he were to decide the point in favour of the plaintiff it would be inconsistent with the conclusion of Mr Justice Dillon.

His Lordship therefore considered that it would not be open to the plaintiff to enforce the covenant contained in clause 3(7) and (8) directly against the subtenant even though there was express reference to "the superior landlords" in those two sub-clauses.

From that it followed that it would not be open to the plaintiff to enforce the covenants contained in clause 3(4) and (33) of the underlease, because there was not even any reference to "the superior landlords" in those two sub-clauses.

Accordingly, the plaintiff could not enforce any of the covenants in these proceedings.

Solicitors: Montlake & Co, Ilford; Burges Salmon, Bristol.

Copyright © Times Newspapers Ltd 1996