Crest Nicholson Residential (South) Ltd v McAllister is a pivotal case in UK contract and property law. It centres on a dispute over the obligations and rights arising from property development agreements. This case provides essential insights into how contractual terms, especially implied terms, are interpreted within the context of real estate development.

  • In the case of Crest Nicholson Residential South Ltd v McAllister 2004 1 WIR 2409, concerning multiple conveyances it was held on appeal that to be entitled to the benefit of a covenant it must be annexed to the land.

Facts of the Case

  • Crest Nicholson Residential (Appellant) appealed against an order to determine the extent to which land, in respect of the appellant being the purchaser under a conditional contract of which McAallister (respondent) claimed on cross-appeal to be entitled to.
  • Two brothers bought an estate in land and formed a company to sell off the land in plots. By three conveyances executed between 1928 and 1930 three individual purchasers each acquired a plot and with three further conveyances in 1933, acquired further plots adjacent with his original plot.
  • All three conveyances contained a covenant providing that “the premises shall not be used for any purpose other than those of or in connection with a private dwelling house or for professional purposes”. All but one contained a further covenant “no dwelling house or other building shall be erected on the land herby conveyed unless the plans drawing, and elevations shall have been previously submitted to and approved in writing by the vendor, but such approval shall not be necessary or vexatiously withheld”.
  • Three of the conveyances contained the express words of annexation; “for the benefit of the property… aforesaid belonging to the company or the part thereof for the time being remained unsold”.
  • Each of the purchasers built substantial dwelling houses on the enlarged plot. By a conveyance executed in 1936 another plot was sold, subject to the covenants in a different form on which three further dwelling houses were built.
  • The brother later died, and the company was dissolved.
  • In 2000 C made a conditional contract to buy part of the garden in each of the four houses, together with the whole plot on which the firth house was built to form a single unit which the purchasers proposed to build new dwelling houses.
  • D claimed as successor in the title of the original vendor to enforce the covenants.
  • C brought an action for decelerations that the covenants did not restrict the covenantors and their successors from using the premises conveyed by each conveyance for the building of new dwelling houses.
  • The trial judge found that the benefit of the covenants in the first six conveyances was annexed to D’s land. C appealed and the D cross-appealed. At the appeal hearing the C was permitted to argue that the covenants were not annexed to D’s land.

Issues in Crest Nicholson Residential South Ltd v McAllister 2004 1 WIR 2409

  • In this case the issues surrounding the covenants was whether the covenants were annexed to the D’s land and that therefore D was entitled to the benefit of the covenants in the first six conveyances in 1936.

Held by the Court of Appeal

  • The appeal was allowed, with it being held that the benefit of the covenants was not annexed to the land owned by M.

Chadwick LJ:

  • Chadwick assessed the benefitting land in relation to the covenants.
  • The appeal was allowed with no order on the cross-appeal that, although section 78(1) of the Law of Property Act 1925 which deemed a restrictive covenant to be made with the successors in title of the covenantee rendered it unnecessary to state in the conveyance that the covenant was to be enforceable by persons deriving title under the covenantee or his successors in title.
  • The land must be identified ‘from a description, plan or other reference in the conveyance itself, but aided, if necessary, by external evidence to identify the land so described, depicted or otherwise referred to”.  para-G 2429

Significance of Crest Nicholson Residential South Ltd v McAllister

Crest Nicholson Residential v McAllister and Balfour Beatty Construction v Chestermount Properties: Both cases explore the implications of implied terms in construction and development contracts, but from slightly different angles. In Balfour Beatty, the emphasis was on the contractor’s expectations regarding the payment schedule and project specifications, whereas in Crest Nicholson, the focus shifts to the developer’s obligations and the broader contractual framework. This comparison highlights the evolving landscape of contract law in the context of complex property developments, illustrating the courts’ approach to balancing commercial realities against contractual stipulations.

Exam Questions & Answers

What are the potential consequences for developers if implied terms are not clearly understood or addressed in property development contracts?

If implied terms are not clearly understood or addressed in property development contracts, developers may face significant legal and financial risks. Misinterpretations of these terms can lead to disputes over contract fulfillment, potentially resulting in costly litigation and delays in project completion. Developers may also incur additional expenses to comply with unforeseen obligations that were not explicitly stated but were legally implied. This underscores the necessity for developers to seek thorough legal counsel when drafting contracts to ensure that all potential implied terms are explicitly clarified or negotiated to avoid ambiguity and the associated risks.

How do courts determine whether a term should be implied into a property development contract?

Courts determine whether a term should be implied into a property development contract by considering the intentions of the parties involved, the practices of the trade, and the necessity of the implied term for the business efficacy of the contract. The term must be ‘obvious’ and ‘necessary’ to give effect to the business relationship as understood by the parties. Additionally, the term must not contradict any express term of the contract. Courts use tests such as the ‘officious bystander test’ (where an implied term is so obvious it goes without saying) and the ‘business efficacy test’ (where the term is necessary for the contract to operate effectively) to evaluate the need for implied terms.

What impact did the ruling in Crest Nicholson Residential v McAllister have on subsequent property development contracts and negotiations?

The ruling in Crest Nicholson Residential v McAllister has had a significant impact on how property development contracts are drafted and negotiated. It has led to a greater emphasis on the specificity and clarity of contract terms to avoid reliance on judicial interpretations of implied terms. Post-ruling, developers and their legal teams have become more meticulous in detailing the obligations and expectations of all parties involved in contracts. The decision has also prompted an increased focus on comprehensive risk assessments and due diligence to preempt potential disputes over ambiguous or unstated contract terms. This case has thus served as a cautionary tale that underscores the importance of precise contractual language and proactive legal oversight in the property development industry.

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