Rosslyn Estates Limited v Underwood (Civil Appeal No, 66 of 1954) [1955] EACA 286 (1 January 1955)

## COURT OF APPEAL FOR EASTERN AFRICA

# Before Sir Newnham Worley (Vice-President), Sir Enoch Jenkins, Justice of Appeal, and BRIGGS, Justice of Appeal

# ROSSLYN ESTATES LIMITED (IN LIQUIDATION), Appellant (Original Defendant) ν.

# ARTHUR JOSEPH VICTOR UNDERWOOD, Respondent (Original Plaintiff) Civil Appeal No. 66 of 1954

(Appeal from the decision of H. M. Supreme Court of Kenya, Cram, Ag. J.) Building Scheme—Injunction.

The appellant company, owners of some 270 acres of land, and being<br>desirous of disposing thereof, divided it into 20 agricultural holdings. They laid out and made a road over some of the land and provided a water supply and storage tanks. Intending purchasers were shown a printed form of agreement for sale, intended and specially prepared for use in connexion with the land, and the agreement contained, inter alia, provisions for the transfer to purchasers "in the form approved by the vendors' solicitor for transfer on sales of plots," and for prohibition of user except for residential purposes.

After some of the plots had been sold, a Miss H. agreed to purchase one of the plots, and upon her insistence, the standard form of agreement was modified to allow her to operate the business of boarding kennels.

In the meantime, the respondent bought the plot of land adjoining Miss H.'s plot under the standard form of agreement and was unaware of the modification in respect of Miss H.'s plot.

Both the respondent and Miss H. went into possession of their respective plots in expectation of title, and the respondent objected to the noise from the kennels. He, thereupon successfully sued the appellant company claiming an injunction against them to restrain them from conveying Miss H.'s plot to her on terms other than those on which he had agreed to purchase his plot.

After the date of filing the suit, but before hearing, a conveyance of the respondent's plot was executed (*inter alios*) by the appellant company and the respondent's sub-purchaser, containing this clause:—

"3. The vendor company and the development company or either of. them hereby reserve the right to modify waive or release any restrictions stipulations or conditions relating to adjoining or neighbouring land whether imposed or entered into before or at the same time as or after the date hereof and whether they are the same as the restrictions stipulations and conditions contained herein or not and notwithstanding that such adjoining or neighbouring land forms part of Lone Tree Estate including any restrictions stipulations and conditions which may become binding on the vendor company and the development company or either of them by virtue of this deed and the right to modify, waive or release hereby reserved shall be exercisable by the vendor company and the development company or either of them and those deriving title under either of them to Lone Tree Estate or any part or parts thereof, except that in the case of those so deriving title by conveyance on sale the said right shall be exercised only by those to whom it is expressly assigned." The same and the same and the same and the same and

The appellant company contended (1) that since clause 3 aforesaid is repugnant to the existence of a building or estate scheme, the court should find that no such scheme was ever intended by the vendors, (2) that, whatever the situation may have appeared to be at the time of filing the plaint, it appeared from the conveyance that the vendors had power to relax the covenant in favour of the kennel owners regardless of the wishes of the other plot holders, (3) that the court should not forbid, in favour of the respondent, the doing of an act which is permissible on the face of the document under which he claims title, and, (4) that the court below should not have issued the injunction as the vendors could convey to the kennel owners with the full restrictive covenants, and could, immediately thereafter release the restriction so as to permit operation of the kennels, viz. that, for practical purposes, the injunction was ineffective and so should not have been issued.

Held (8-3-55).—(1) In spite of the repugnant clause in the conveyance, the appellant company originally intended to set up a building scheme.

(2) The original agreement having been merged in the conveyance, the appellant company did no more than it was, or must be deemed to have been, entitled to do, and its second and third contentions must be accepted.

(3) Having regard to the powers given to the appellant company by clause 3 of the conveyance, an injunction should not have been granted as it could not be an effective remedy, the suit being in equity, having to be considered on the basis of the facts existing at the date of judgment and not at the date of filing the plaint.

### Appeal allowed.

Cases referred to: Kelly v. Battershell and another (1949) 2 A. E. 830; Tucker v. Vowles (1893) 1 Ch. 195; Spicer v. Martin (1889) 14 A. C. 12; Mackenzie v. Childers (1893) 1 Ch. 265; Spicer v. Martin (1889) 14 A. C. 12; Mackenzie v. Childers (1890) 43 Ch. D. 265; Shirlaw v. Southern Foundries (1

## Schermbrucker for appellant company.

Salter, Q. C. (Stephen with him), for respondent.

BRIGGS, J. A.—This is an appeal from a judgment and decree of the Supreme Court of Kenya, which granted an injunction to the respondent in the following circumstances. The appellant company, which I shall call "the vendors", were the owners of some 270 acres of land a few miles from Nairobi. They desired to dispose of this in the most advantageous manner, namely, as building sites, and would, if they had been able to do so, have sub-divided it into small plots. This was not, however, possible in law, so they arranged for subdivision into 13 minimum agricultural holdings of just over 20 acres each. They laid out and made a road over some of the land and provided a water supply by boreholes and storage tanks. They then advertised the plots for sale. Intending purchasers were shown a printed form of agreement of sale, intended and specially prepared for use in connexion with this land, which they called Lone Tree Estate, and another area of the vendors know as Rosslyn Estate, which was being similarly developed, but in plots of five acres. The agreement contained *inter alia* provisions that the transfer to the purchaser should be "in the form approved by the vendors' solicitors for transfer on sale of plots" of the estate and should contain covenants by the purchaser prohibiting transfer to, or occupation by, persons not of pure European descent, and prohibiting user for any except residential purposes. There was also to be a covenant that the purchaser should on any transfer by him require similar covenants from the new owner. In addition the agreement recited (i) that the vendors were about to form a company, which later was duly formed and which I shall call "the development company", and would transfer to it the land comprising the water installation of the estate and its road reserves; (ii) that each purchaser of a plot was to become a shareholder in the development company "to ensure that control of the (development) company eventually passes to the owners of the various plots". An agreement by the purchaser to

buy 20 one shilling shares in the development company was included in the operative part of the agreement. Purchasers were later informed in the course of negotiations that the whole of the issued share capital in the development company would, on completion of the sale of all the plots, be held by owners of plots. It was stated at the same time that certain shareholders in the vendors were buying plots and "in their capacity as plot-holders, but not otherwise", would hold shares in the development company. It was not, however, stated that they would hold no more shares than other plot-holders, or that plot-holders would have equal voting rights. The memorandum and articles and share register of the development company are not in evidence.

In November, 1949, a Miss Horwood opened negotiations for the purchase of a plot. She made it clear that she would not buy unless the standard agreement was modified in her case to permit her to run as a business boardingkennels for dogs and cats on the plot. At this date certain of the plots had already been sold in terms of the standard agreement. The vendors agreed to Miss Horwood's proposal, and on 22nd February, 1950, an agreement was signed which may be sufficiently described as the standard agreement with a proviso to the covenant for residential user permitting the purchasers, Miss Horwood and her partner Miss Shiel-Cook, to operate kennels as indicated. Their lot is known as No. 11

Meanwhile the respondent had been negotiating for an adjoining plot, No. 10. He was shown the standard agreement and raised certan queries on it but none relating to the covenant for residential user. He was aware that other plots had been sold. He was not aware that the covenant for residential user had in any case been relaxed. He signed an agreement in the standard form on 3rd March, 1950, for plot No. 10. He and the two ladies, whom I shall call "the kennel-<br>owners", went into possession in expectation of title and made preparations to build. In November, 1950, the purchaser of plot No. 12, which also adjoins No. 11, wrote to the vendors' agent pointing out that he had bought "on the understanding that all plot-holders ... would not be permitted to carry on any form of business", and complaining of noise from the kennels. The vendors' solicitors replied that his agreement with the vendors contained "no obligation on them requiring them to impose the same conditions and covenants in the sales of the other plots of the estate". The respondent later raised the same issue with the vendors and received a similar reply. The kennel-owners refused to discontinue the kennels.

In May, 1951, the respondent sued the vendors and the kennel-owners and claimed (i) against the vendors, an injunction to restrain them from conveying plot No. 11 to the kennel-owners on terms other than those upon which the respondent had agreed to buy plot No. 10; (ii) against the kennel-owners, an injunction against nuisance by noise; (iii) against all the defendants, damages. The learned trial Judge found that nuisance was not proved and dismissed the suit as against the kennel-owners. He granted the injunction prayed against the vendors with costs.

After the suit was filed, but before the hearing, the vendors pressed the respondent to complete the purchase of plot No. 10. On 13th September, 1951, their solicitors wrote to his-

$\ddot{\cdot}$

"We have now received the Deed Plan in respect of the purchase by your client covering 20 acres and enclose the same herewith.

We have prepared a draft conveyance to cover generally the sales by Rosslyn Estates Ltd., and enclose two copies which you may find useful in drawing your conveyance.

We await to hear from you with draft conveyance in due course."

There is no earlier reference to any draft conveyance and it seems probable that, in spite of the provision in the standard agreement, this draft was only prepared after receipt of the deed plan. It does not appear that any intending purchaser asked to see a draft conveyance before executing his agreement, but I am prepared to assume in favour of the respondent that, if that had occurred, he would have been told that no draft then existed. There was considerable delay, and the vendors, who by February, 1952, had gone into liquidation, in July required the respondent to complete within 15 days on pain of cancellation and forfeiture. By this time the respondent had built a house on his plot. He desired to take the conveyance in the name of a company which he had formed under the name of Brookside Ltd. I shall call it "the sub-purchaser". On 18th September, 1952, the balance of the purchase price was paid, and on 23rd October the respondent's solicitors sent to the vendors' a draft conveyance, based, no doubt, on the earlier draft sent to them. This was approved and the conveyance was duly executed by the vendors, their liquidator, the development company, and the sub-purchasers. It was not, however, signed by the respondent, who was in England. It was put in evidence at the trial by consent and it was agreed that it was the standard form of conveyance used for all plots. No conveyance of plot No. 11 has been effected, but it would, if the vendors had their way, differ only in permitting the operation of kennels on that plot. The conveyance contains in clause 3 the following provision:

"3. The vendor company and the development company or either of them hereby reserve the right to modify waive or release any restrictions stipulations or conditions relating to adjoining or neighbouring land whether imposed or entered into before or at the same time as or after the date hereof and whether they are the same as the restrictions stipulations and conditions contained herein or not and notwithstanding that such adjoining or neighbouring land forms part of Lone Tree Estate including any restrictions stipulations and conditions which may become binding on the vendor company and the development company or either of them by virtue of this deed and the right to modify waive or release hereby reserved shall be exercisable by the vendor company and the development company or either of them and those deriving title under either of them to Lone Tree Estate or any part or parts thereof, except that in the case of those so deriving title by conveyance on sale the said right shall be exercised only by those to whom it is expressly assigned."

The respondent bases his title on this conveyance, and it was never disputed that, in equity at least, he is bound by its provisions for all purposes.

The trial began on 2nd March, 1954, and judgment was given on 6th May. Apart from questions relating to the kennel-owners, which are not now material, the primary issue was whether the facts did or did not show that a building scheme or estate scheme had been set up in respect of Lone Tree Estate. The learned trial Judge examined this question at length and found that a scheme was established. On this footing he held that the vendors, having sold some plots in terms of the scheme, had impliedly agreed with all purchasers not to sell or convey any plot on terms less restrictive than those applicable to the remaining plots. There was considerable argument as to the propriety of granting an injunction against conveyance, based principally on the fact that the sale to the respondent was subsequent to the sale to the kennel-owners. The learned Judge held, and I think rightly, that this was no obstacle.

Some argument was addressed to the court below on the effect of the conveyance to the respondent, and particularly of clause 3 thereof, but the learned trial Judge evidently considered this point of no importance, since in his long judgment he does not refer to it, save in the most oblique and incidental way. He does not even explain why he considered it unimportant. I think, with respect, that it is of overriding importance and that this appeal turns entirely on it, The matter is put in more than one way. It is contended for the appellant, first. that the conveyance is a conveyance in accordance with the true intention of the original agreement for sale, and that it is not open to the respondent, who submitted the draft, to contend otherwise. Although I think this was not seriously disputed, I wish to make some comment on it. I am inclnied to think, though I find it unnecessary to decide, that, at the date when the suit was brought and on the facts as they then appeared, any court must have held that a building or estate scheme had been brought into being, and that the vendors, on a true construction of their agreement with the respondent, had no right to relax the restrictive covenants in favour of another purchaser without the unanimous consent of the plot-holders, or at least without their general consent and approval, to be given, it may be, in some special manner. If that be so, and if clause 3 has the meaning which on a first reading it appears to have (a point to which I shall return), the right reserved thereby to the vendors to relax a covenant was repugnant to the true intention of the agreement. If the respondents' solicitors had raised this contention as soon as the vendors' solicitors submitted their draft conveyance, I think they would have been able, if necessary, by bringing a vendor and purchaser summons, to show that, in spite of the provision in the agreement that the conveyance should be as approved by the vendors' solicitors, the provision was improper and could not be insisted on. I distinguish the provision that the development company should have power to relax covenants. It represented, at least in some sense, and was apparently intended to represent properly, the whole body of plot-holders, and could presumably be trusted to act in their joint interest. The vendors, however, were in this case acting in no one's interest but their own. I think also that their reservation of a right to assign their powers under clause 3 indicates that they wished to be able to put one or more plotholders in a privileged position vis-à-vis the others. Such a power might have been exercised in favour of one of their own shareholders who had bought a plot. But, as I have said, I think this position could never have arisen if more thought had been devoted to the question, in what form the conveyance to the respondent should be made.

The conveyance having been made, it is not, I think open to the respondent in these proceedings to contend that it is improper, or that it does not carry out the contract of sale, and in fact he has not so contended. The appellants' case has then four branches. They say, first, that since clause 3 is repugnant to the existence of a building or estate scheme, the Court should find that no such scheme was ever intended by the vendors. They say, secondly, that whatever the situation may have appeared to be at the time of filing the plaint, it now appears from the conveyance that the vendors had power to relax the covenant in favour of the kennel-owners, regardless of the wishes of other plot-holders. They say, thirdly, that the Court should not forbid in favour of the respondent the doing of an act which is permissible on the face of the document under which he claims title. And they say, fourthly, that the court below should not have issued the injunction, on the rather special ground that, in spite of it, the vendors could convey to the kennel-owners with the full restrictive covenants, and could immediately thereafter release the restriction so as to permit operation of the kennels; the injunction is therefore ineffective for practical purposes, and so should not have issued.

The respondent meets all these arguments in the same way. He says that on a true construction clause 3 does not bear what I allow myself to call its

primary meaning, but means either that the vendors have the powers indicated. and must exercise them, exclusively for the benefit of the general body of plotholders, or alternatively, that the power to relax or modify covenants cannot be exercised in favour of one or some only of the plot-holders, but must be exercised in favour of all alike and simultaneously, or else not exercised at all. I think the second submission fails to meet the fourth argument of the vendors. It is a matter of indifference now to the vendors, who have sold all the plots and have no longer any interest in any part of the estate, whether there are restrictions on user or not. There is no reason why they should not convey under restriction to the kennel-owners and immediately release the restrictions in favour of all plot-holders. The purpose of the injunction would thus still be defeated. The other argument of the respondent is more attractive, and I should be very ready to accept it if there were the slightest indication in the wording of the clause that that was the intention. I think the vendors ought, in fairness and in the proper performance of the sale agreements, to have taken these powers, if at all, only for the benefit of the plot-holders; but I do not think they have done so. I think that on the plain wording of the clause the vendors can exercise the powers for their own benefit, and can do so in individual cases. The wording clearly suggests that the plot-holders may *inter se* be subject to different terms and covenants. I think it quite possible that this clause was drafted with an eye to this litigation. If so, the stratagem was in my view successful, though it need not have been.

Of the vendors' four arguments which I have set out I reject the first. In spite of the repugnant clause in the conveyance, I think the vendors originally intended to set up a building scheme. I accept with reluctance the second, third and fourth. The original agreement has merged in the conveyance, and on the wording of the conveyance I think the vendors did no more than they were, or must be deemed to have been, entitled to do. I think also that the injunction should not have been granted because, having regard to the powers given to the vendors by clause 3, it could not be an effective remedy. This being a suit in equity, the relief which the Court could grant had to be considered on the basis of the facts as they were at the date of judgment, not as they were at the date of filing the plaint.

I am driven, with more than a little regret, to the conclusion (1) that this appeal must be allowed, (2) that the judgment and decree of the Supreme Court must be varied by setting aside the order for an injunction and the order that the vendors should pay the respondents' costs, (3) that the injunction must be discharged. (4) that the suit as against the vendors must stand dismissed with costs, and (5) that the respondent must pay the costs of this appeal.

SIR NEWNHAM WORLEY (Vice-President).—I have had the advantage of reading beforehand the judgment which has just been read. I entirely agree with it and cannot usefully add anything.

SIR ENOCH JENKINS, J. A.-I concur.