Austerberry v Oldham Corporation

The dispute in Austerberry v Oldham Corporation (1885) 29 Ch D 750 arises from a covenant made by a predecessor in title of the plaintiff to maintain a road over the relevant land. The covenant, which was positive in character in that it required the covenantor to undertake active works and incur expenditure for the upkeep of the road, had been entered into as part of a conveyance of freehold land. The road in question served as a means of access and was of practical importance to those with an interest in the surrounding land.

Austerberry, as a successor in title to the original covenantor, acquired the land subject to the instrument which contained the covenant to maintain the road. He had not himself entered into any personal covenant to this effect, but the conveyance forming part of his chain of title contained the original undertaking. Austerberry refused to carry out the maintenance works required by the covenant, taking the position that, as a person who was not privy to the original agreement, he was not personally bound by its terms.

Oldham Corporation, as the party seeking to enforce the covenant, brought proceedings against Austerberry with a view to compelling him to discharge the maintenance obligation. The Corporation's position was that the covenant, having been made for the benefit of land and having passed with that benefit to the Corporation as successor in title to the covenantee, ought equally to bind the burdened land and therefore Austerberry as its current owner. The Corporation contended that equity, in particular the jurisdiction recognised in Tulk v Moxhay (1848) 2 Ph 774, provided a basis upon which the burden of the covenant could be said to run with the freehold.

At first instance, the court considered whether the covenant was enforceable against Austerberry as a person who had taken the land with notice of the obligation. The case was appealed to the Court of Appeal, which was composed of Cotton, Lindley, and Fry LJJ. The Court of Appeal's resolution of the matter produced one of the most enduring doctrinal rules in English land law.

The essential factual distinction upon which the case turns is the nature of the covenant in question. A covenant to maintain a road is paradigmatically positive: it requires the covenantor to do something, to expend money and effort in keeping the road in repair, rather than merely to refrain from doing something on the land. This distinction between positive covenants — which impose an active obligation — and restrictive covenants — which impose a negative restraint — becomes central to the legal analysis that follows.

The primary issue before the Court of Appeal is whether the burden of a positive covenant entered into by a predecessor in title can run with freehold land so as to bind a successor in title who was not an original party to the covenant. This breaks down into two related sub-questions: first, whether such a burden can run at common law; and second, whether equity, through the doctrine established in Tulk v Moxhay (1848) 2 Ph 774, provides any additional basis upon which a successor might be bound.

A secondary issue concerns the proper scope of the equitable doctrine applicable to covenants. Specifically, the court is required to determine whether the jurisdiction in equity to enforce the burden of a covenant against a successor who takes with notice extends to covenants of a positive character, or whether it is confined to restrictive covenants alone. This requires the court to examine both the rationale and the limits of the rule in Tulk v Moxhay.

The Court of Appeal begins its analysis from first principles of the common law position on covenants and privity. At common law, the general rule deriving from the doctrine of privity of contract is that only the parties to a contract are bound by its obligations. A covenant is a species of contract and, accordingly, a successor in title to the original covenantor does not assume the burden of the original covenant merely by taking a conveyance of the land over which the covenant was made. There is no common law mechanism by which the burden of a covenant passes automatically with the land so as to subject the successor to personal liability.

The court recognises that, as a matter of legal history and precedent, there had been some development in relation to covenants that touch and concern land. It had been established that the benefit of a covenant may, in certain circumstances, run with the land so that a successor in title to the covenantee may sue upon it. However, the Court of Appeal holds that this principle has never been extended to permit the burden of a covenant to run with the land at common law. The asymmetry between the running of the benefit and the running of the burden is a defining feature of English property law at this point.

The court then turns to consider whether the position is altered by the equitable jurisdiction established in Tulk v Moxhay (1848) 2 Ph 774. In that case, it was held that a purchaser of land who takes with notice of a restrictive covenant affecting the land will be bound by that covenant in equity. The rationale offered in Tulk v Moxhay was that it would be unconscionable for a person who purchases land knowing of the restriction to act in a manner inconsistent with the covenant, since to allow him to do so would permit him to take advantage of the very feature of the land — its restricted use — for which he presumably paid less. The jurisdiction operates so as to prevent unconscionable use of knowledge of the restriction.

The Court of Appeal is called upon to consider whether the equitable jurisdiction in Tulk v Moxhay applies to positive covenants as well as restrictive ones. The court holds that it does not. The principle in Tulk v Moxhay is confined to restrictive covenants, that is, to covenants that restrain the covenantor from using the land in a particular way. The jurisdiction is premised upon the notion that the restriction is a burden that inheres in the land itself — that it affects the value or use of the land as an asset — and that anyone dealing with the land on the basis of its restricted character takes it subject to that inherent quality.

By contrast, a positive covenant does not operate as a quality or limitation of the land itself. It imposes a personal obligation to act, to spend money, to do work. The court reasons that the obligation to maintain a road is not an attribute of the land in the same sense as a restriction on its use. A successor in title does not, by taking a conveyance of land, implicitly agree to discharge obligations that require positive expenditure. The land itself carries no inherent obligation of activity; the obligation rests upon the person who undertook it. Accordingly, the successor is not a proper object of the equitable jurisdiction identified in Tulk v Moxhay in respect of positive covenants.

The court also addresses the question of notice. The Corporation argued that because Austerberry had taken the land with actual or constructive notice of the covenant, he ought to be bound by it in conscience. The Court of Appeal rejects this argument as it applies to positive covenants. Notice is a necessary condition for the application of the equitable jurisdiction in respect of restrictive covenants, but it is not a sufficient basis for binding a successor in title to a positive obligation. To hold otherwise would be to create by notice alone a species of personal liability running with land that has no foundation in either common law principle or equitable doctrine properly understood.

There is a further dimension to the court's reasoning rooted in the nature of property rights and the alienability of land. The court recognises that to allow positive obligations to run with freehold land would create significant uncertainty in conveyancing and would impose potentially onerous financial burdens upon successive owners of land who had no opportunity to negotiate the terms of their obligations. The policy underlying the rule against positive covenants running with freehold land is, therefore, partly one of preserving the free alienability of land and ensuring that the burdens attached to freehold ownership are clear and defined by positive legal rules rather than by potentially unlimited chains of covenant obligations.

The court explicitly distinguishes the position in equity between positive and restrictive covenants, making clear that the line drawn in Tulk v Moxhay is not simply between legal and equitable enforcement but between obligations of restraint on the one hand and obligations of active performance on the other. This distinction is treated as principled and not merely technical. The equitable jurisdiction to enforce restrictive covenants against successors is said to derive from the nature of the obligation as one touching the land itself, whereas positive covenants touch the person of the covenantor.

The Court of Appeal therefore holds that neither at law nor in equity is Austerberry bound by the covenant to maintain the road entered into by his predecessor. The Corporation's claim fails. The decision is reached by all three judges, though the precise reasoning of each varies in emphasis. The combined effect is a clear and authoritative statement of the rule that the burden of positive covenants does not run with freehold land.

By way of obiter observation, the court acknowledges the practical inconvenience that flows from this rule. Where parties to a conveyance of freehold land wish to impose maintenance obligations upon future owners, they cannot achieve this result through the medium of a covenant alone. The court notes that the distinction between positive and restrictive covenants in this context is firmly established as a rule of law and that any reform of the position is a matter for Parliament rather than for judicial development. This obiter observation has proved prescient, given that the rule has attracted sustained criticism from law reform bodies over the following century.

The Court of Appeal holds that the burden of the positive covenant to maintain the road does not run with the freehold land so as to bind Austerberry as successor in title to the original covenantor. Austerberry is not personally liable under the covenant, having not entered into any such obligation himself. The Corporation's action against him accordingly fails.

The court further holds that the doctrine in Tulk v Moxhay (1848) 2 Ph 774 does not extend to positive covenants. The equitable jurisdiction to enforce the burden of a covenant against a successor in title who takes with notice is confined to restrictive covenants and does not apply where the covenant requires the performance of a positive act or the expenditure of money. Notice of a positive covenant, however clear, does not of itself render the successor liable in equity for its performance.

Austerberry v Oldham Corporation is one of the foundational authorities in English land law, establishing with conclusive authority the rule that the burden of positive covenants cannot run with freehold land. The rule, sometimes described as the rule in Austerberry, has been affirmed at the highest judicial level and most notably by the House of Lords in Rhone v Stephens [1994] 2 AC 310, where Lord Templeman expressly approved and applied the principle. In Rhone v Stephens, the House of Lords declined the invitation to overrule or modify Austerberry, holding that any change to a rule of this vintage and practical importance was a matter for Parliament.

The practical significance of the rule is considerable. In the context of modern land development — particularly in relation to the maintenance of shared facilities such as roads, drains, and communal areas on residential estates — the inability to impose positive maintenance obligations on successors in title creates a persistent problem for conveyancers and developers. A variety of mechanisms have been developed in practice to circumvent the rule, including the use of estate rentcharges under the Rentcharges Act 1977, the device of a chain of indemnity covenants, the use of long leasehold rather than freehold tenure, and the creation of commonhold under the Commonhold and Leasehold Reform Act 2002. None of these workarounds is wholly satisfactory, and they collectively attest to the enduring practical difficulty created by the rule in Austerberry.

From a doctrinal perspective, the case performs the important function of defining the outer limit of the equitable jurisdiction in Tulk v Moxhay. By confining that jurisdiction to restrictive covenants, the Court of Appeal in Austerberry ensures that the law of freehold covenants maintains a coherent internal structure. The distinction between positive and restrictive covenants becomes one of the organising principles of the subject and shapes the analysis of all subsequent cases dealing with the running of covenants. The case is therefore indispensable to any understanding of the law of covenants affecting freehold land.

The Law Commission has on several occasions recommended reform of the rule, most recently in its 2011 report Making Land Work: Easements, Covenants and Profits à Prendre (Law Com No 327), which proposed the introduction of a new statutory scheme of land obligations under which positive as well as restrictive obligations could be made to run with freehold land. To date, these recommendations have not been implemented, and the rule in Austerberry, as confirmed in Rhone v Stephens [1994] 2 AC 310, remains the law of England and Wales. The case therefore continues to occupy a central place in the study of land law and in the daily practice of conveyancing.