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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Nationwide Building Society v James Beauchamp (A Firm)  EWCA Civ 275 (2 March 2001)
Cite as:  3 EGLR 6,  EWCA Civ 275,  45 EG 142,  11 EGCS 172,  NPC 48
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
Strand, London, WC2A 2LL
Friday 2nd March 2001
B e f o r e :
LORD JUSTICE MUMMERY
LORD JUSTICE RIX
| NATIONWIDE BUILDING SOCIETY
|- and -
|JAMES BEAUCHAMP (A FIRM)
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr. David Hodge Q.C. (instructed by Messrs Pinsent Curtis Biddle of Birmingham for the Appellant)
Crown Copyright ©
PETER GIBSON L.J.:
(1) In March 1990 10 separate mortgage applications were made to Nationwide by the intending purchasers ("the Borrowers") of the freehold interest in 10 building plots created from part of the property known as Hunter's Lodge, Stoke Hammond, Buckinghamshire.
(2) The Borrowers were together engaged in a self-build project, under which each Borrower intended to purchase one plot and to build a dwelling-house on the plot with the assistance of a mortgage advance from Nationwide.
(3) The Borrowers formed a company registered under the Industrial and Provident Societies Act 1965, Willen Homesmiths Ltd. ("Willen"), to hold the freehold land ("the road land") over which the estate road leading to the 10 plots was to be built.
(4) The vendor of the plots and the road land was Amberdown plc ("Amberdown") which retained part of Hunter's Lodge ("the retained land") for a development of up to 5 dwelling-houses.
(5) The estate road was intended to be made up and adopted as a public highway offering access to the 10 plots and to the retained land from the public highway known as Leighton Road.
(6) Nationwide on or about 19 April 1990 retained the Defendant to act as solicitors for it in relation to the mortgage advances which it proposed to make to the Borrowers on the security of the plots.
(7) By a contract dated 30 April 1990 between Amberdown and Willen -(a) Amberdown agreed to sell to Willen the 10 plots and the road land for £1 million;(b) Amberdown agreed that if requested by Willen it would execute conveyances by way of subsale of the 10 plots with the estate road land;(c) Willen agreed that in the transfer to it it would covenant with Amberdown for the benefit of the retained land to build the estate road to a sufficient standard and specification to serve the 10 dwelling-houses to be erected on the plots and to procure the adoption of the road by the highway authority;(d) Amberdown agreed to pay on completion a contribution of £20,000 towards the cost of the construction of the road.
(8) The Defendant was retained by Willen and the Borrowers (in addition to Nationwide) to facilitate the scheme whereby the 10 plots would be sold to the Borrowers. The Defendant drafted the Transfers by which Willen completed the purchase of the 10 plots and the road land and the Borrowers completed their sub-purchases of the plots.
(9) By the Transfer ("the Road Transfer") dated 11 July 1990 between Amberdown and Willen -(a) Amberdown transferred to Willen the road land but excepted and reserved a right of way over the estate road until taken over by the local authority (clause 1); and(b) Willen covenanted with Amberdown for the benefit and protection of the retained land-(i) within 3 months from 11 July 1990 to lay the estate road on the road land to base course stage and within one year from 11 July 1990 to complete and procure the adoption of the road by the highway authority (clause 4(b));(ii) as soon as reasonably possible to enter into agreements pursuant to s. 38 Highways Act 1980 in respect of the construction, completion and adoption of the estate road and to provide a bond or bonds for the completion of the works to the adopting authority's satisfaction (clause 4(d)); and(iii) that if Willen failed to comply with any of its obligations in clause 4, Amberdown should have the right to enter on the road land to carry out those obligations, and that all costs which Amberdown incurred should be recoverable as a debt due from Willen (clause 4(f)).
(10) By each Transfer ("the Building Plot Transfer") dated 11 July 1990 between Amberdown and Willen and one of the Borrowers -(a) Amberdown by direction of Willen transferred for £100,000 a plot to the Borrower together with (i) a right of way at all times and for all purposes over the estate road constructed or to be constructed on the road land until taken over by the local authority, (ii) a right to the free passage of services, and (iii) a right to enter upon adjoining land to construct, inspect, connect with and repair the conducting media (clause 1);(b) the plot was transferred with the benefit of the rights, liabilities and easements but subject to the exceptions, reservations, covenants and wayleaves contained or referred to in the Property and Charges Registers of the title to the plot including those contained or referred to in three transfers, one being the Road Transfer (clause 3);(c) Willen covenanted with Amberdown for the benefit and protection of the retained land -(i) to develop the estate as a private residential estate of 10 dwelling-houses (clause 4(a)), and(ii) on or before 31 March 1991 to lay the estate road on the road land to a sufficient standard and specification to serve the 10 dwelling-houses to be constructed on the 10 plots and up to 5 dwelling-houses to be constructed on the retained land and to procure the adoption of the estate road by the highway authority (clause 4(b)); and(d) the Borrowers covenanted with Willen and Amberdown by way of indemnity only to perform and observe all the restrictive and other covenants and conditions contained in the Charges Register of the title to the plot and in the Road Transfer in so far as the same affect the plot (clause 5).
(11) On completion on 11 July 1990 of the purchase of a plot by each Borrower, Nationwide paid the first instalment of a mortgage advance. This was secured by a First Legal Charge also dated 11 July 1990 over the plot on mortgage conditions whereby(a) the Borrower covenanted so long as the mortgage was outstanding to observe and perform all covenants, restrictions and obligations to which the plot or the owner or occupier thereof was or might become subject and to indemnify Nationwide against the same (condition 7(d));(b) if default should be made by the Borrower in the performance of any of the covenants of the mortgage, it should be lawful but not obligatory upon Nationwide to perform the same and to pay all sums and damages occasioned by such default (condition 10(d)); and(c) all moneys expended by Nationwide under condition 10(e) and all other costs and expenses properly paid or incurred by Nationwide under the mortgage or in relation to the plot should on demand be repaid to Nationwide by the Borrower on a basis of full indemnity (condition 10(e)).
(12) Nationwide made mortgage advances totalling £212,000 in respect of one plot and £184,000 in respect of each of the 9 other plots.
(13) The estate road was built to base course standard only and was never adopted.
(14) By July 1991 all the Borrowers had defaulted on their loans from Nationwide and thereafter Willen went into insolvent liquidation and Amberdown into administrative receivership.
(15) The Administrative Receivers of Amberdown, which had a charge over the road land, sold it (but not the retained land) to another company, which in turn sold the road land to Genesis Homes Ltd. ("Genesis").
(16) Nationwide took possession of the 10 plots with a view to selling them. But because of what it perceived to be the difficulties over its rights in respect of the estate road, it only obtained £555,000 from the sale of the plots to Genesis.
"The grantee of a right of way has a right to enter upon the grantor's land over which the way extends for the purpose of making the grant effective. Thus, if a right of way for carriages is granted over a field to the grantee's house, the grantee may enter the field and make over it a formed roadway suitable for supporting the ordinary traffic of a carriageway, but the grantee may only construct such a way as is suitable to the right granted him."
He also referred to Newcomen v Coulson (1877) 5 Ch. D. 133, on which the statement in Halsbury was based. The judge said:
"In my judgment there is a clear distinction between the common law right of a grantee of a right of way to enter land and construct a way suitable to its ordinary usage and a right arising from an indemnity arising from a contractual obligation. The distinction is crucial in two aspects. First, when a grantee constructs a way so that he may exercise his right of way, he does so at his own expense. There is no right at common law for him to recover the cost against the grantor.
Second, whereas a contract may and usually will specify the standard to which the carriageway must be built, the right of the grantee at common law is to make a carriage-way "such that it can be used for the purpose for which it is granted." It is a right to make an effective carriage way and no more.
Mr. Smith [counsel then appearing for the Defendant] seeks to persuade the Court that the common law "effective carriage-way" is to be equated with the contractual undertaking given by Willen Homesmiths. That is to create estate roads to adoption standard. In my judgment there is no basis for such a submission. What is 'an effective carriage-way' would be a matter [of] expert evidence but on the face of it, what was actually done, that is to sub-base level, would appear to provide 'effective carriage-way'.
(1) The Borrowers had a right to enter onto the road land but only to achieve an effective carriage way, and did not have the right to complete the construction of the road to adoption standard;
(2) the Borrowers had an obligation to indemnify Amberdown against Willen's failure to complete the estate road, but that obligation could only be triggered by Amberdown;
(3) Nationwide had no greater rights than the Borrowers;
(4) In the circumstances that(a) neither Willen nor Amberdown constructed the estate road to adoption standard, and(b) Amberdown sought an indemnity from the Borrowers in respect of the cost of the construction of the estate road to that standard,
the Borrowers had the right to recover that cost from Willen; Willen's only asset was the road land and once adoption had taken place Willen would have no assets. If Nationwide chose to exercise its rights under condition 10(d) of the mortgage conditions it could either exercise its rights against the Borrowers under condition 10(e) or claim against Willen.
(5) On completion of the purchase of the plots by the Borrowers Nationwide's security did not include the road land.
(6) Nationwide's security did not include any right enforceable by it upon recovery of possession of the plots to construct or require the construction of the estate road.
(7) Willen was the only person obliged to construct the estate road and had no assets or other means to comply with its obligations in the event that the Borrowers were unable or unwilling to complete the development of the plot.
Common law right
"I mean [the Defendants] to have the fullest right of metalling the road and making it the best road they can to meet the circumstances."
"Then it was said, admitting the owner of each house to have a right of way, still the grantees have no right to enter upon the allotments over which the right of way is granted for the purpose of laying down a metalled road. Now it was conceded to be the principle of law that the grantee of a right of way has a right to enter upon the land of the grantor over which the way extends for the purpose of making the grant effective, that is, to enable him to exercise the right granted to him. That includes not only keeping the road in repair but the right of making a road. If you grant to me over a field a right of carriage-way to my house, I may enter upon your field and make over it a carriage-way sufficient to support the ordinary traffic of a carriage-way, otherwise the grant is of no use to me, because my carriage would sink up to the naves of the wheels in a week or two of wet weather. It cannot be contended that the word "repair" in such a case is limited to making good the defects in the original soil by subsidence or washing away, it must include the right of making the road such that it can be used for the purpose for which it is granted. Therefore I think the Defendants have a right to make an effective carriage-way going, as they are going, by the shortest route, and not interfering with the land to a greater extent in width that the width of the street pointed out by the deed itself."
"In the second place if the first and second defendants or their predecessors had been expressly granted a right of way for all purposes with or without vehicles over the disputed track that would have entitled them not merely to repair the disputed track but to improve it to make it suitable for the accommodation of the dominant tenement even if the dominant tenement was to be used for some purpose not in contemplation at the time of the grant: see Newcomen v Coulson (1878) 7 Ch. D. 764. This is founded on the presumed intention of the grant. In the simplest case, if a general right of way is granted with or without vehicles, which is to be the principal access to a house, it is permissible for the grantee to improve it by making it up as a carriageway: see for instance Gerrard v Cooke (1806) 2 Bos. & Pul. 109"
(The reference given for Newcomen is an obvious error for (1877) 5 Ch. D. 133, being a reference to a report on another point in subsequent proceedings in the same action.)