Key points

  • A covenant not to do something will generally not be broken if the prohibited thing is done by a third party
  • A wider form of covenant might include an obligation not to permit or suffer the thing to be done
  • A covenant expressed in the passive voice, e.g. "the premises shall not be used for the parking of cars", creates an absolute prohibition  

Facts

In Roadside Group Limited v Zara Commercial Limited, Zara let a petrol station and car showroom to Roadside. Roadside sub-let part of the premises to Triple Eight.

Triple Eight parked cars for sale around the perimeter of the site, with the permission of Roadside. Zara brought an action against Roadside, alleging that Roadside was in breach of a covenant in its lease:

"Not to use the demised premises for the parking of motor vehicles for sale on any forecourt".

Roadside argued that, on the true construction of its lease, it was not liable for the actions of its tenant, Triple Eight. Triple Eight was not a party to the proceedings.

Decision

The High Court agreed with Roadside and found that it was not liable for the activity of its sub-tenant.

The court held that there is a clear difference between a covenant in the active voice: "not to use the premises...", and a covenant in the passive voice: "the premises shall not be used...".

A covenant not to do something is generally not broken if the prohibited thing is done, not by the covenantor, but by a third party. Although this is the general rule, it will depend on the facts of each case.

The lease to Roadside contained a list of tenant's covenants. All the other covenants in the list were worded to include an obligation on the tenant not to do the forbidden thing, nor to permit it to be done. This was in contrast with the parking covenant, which did not contain the "not to permit" wording. This suggested that the parking covenant was intended to be narrower than the other covenants.

Zara had also relied on section 79 of the Law of Property Act 1925. This provides that a covenant shall be deemed to be made by the covenantor on behalf of himself, his successors in title and anyone deriving title under the covenantor.

The court noted that section 79 only applies insofar as no contrary intention is expressed. It found that the contrast with the wording in the other covenants was such as to amount to a contrary intention, with the result that section 79 did not apply.

The court therefore declared that Roadside was not in breach of the covenant in its lease.

Things to consider

Although Roadside was not liable, the court commented that, since the covenant bound Triple Eight in equity, Zara would therefore be able to take action against Triple Eight directly.