Regency Villas Title Ltd & Ors v Diamond Resorts (Europe) Ltd & Ors [2018] UKSC 57

Owners of timeshare units at Regency Villas claimed easements over sporting and recreational facilities at the adjacent Broome Park estate, including a golf course, swimming pool, tennis and squash courts. The Supreme Court held, by majority, that such recreational rights could validly exist as easements.

Facts

Broome Park, a country estate near Canterbury, was developed by Gulf Investments Ltd from 1979 as a timeshare and leisure complex centred on the Mansion House, with sporting and recreational facilities including an 18-hole golf course, swimming pool, tennis and squash courts, and gardens laid out across the surrounding parkland. A first timeshare scheme used a leasehold structure for units in the Mansion House (the BPOC).

In 1981, a second timeshare development was undertaken at Elham House, situated within the Park. By a transfer dated 11 November 1981 (“the 1981 Transfer”), Elham House was conveyed off, the transfer including a grant (“the Facilities Grant”) of the right for the transferee, its successors, lessees and occupiers “to use the swimming pool, golf course, squash courts, tennis courts, the ground and basement floor of the Broome Park Mansion House, gardens and any other sporting or recreational facilities … on the Transferor’s adjoining estate.” A separate personal covenant by Gulf Investments to maintain the facilities was given, but its burden did not bind successors in title.

Over time, certain facilities deteriorated or were removed; the original outdoor pool was filled in and a new indoor pool was built in the basement of the Mansion House. The current owners of the Park (the appellants) disputed the timeshare owners’ right to free use of the facilities. The claimants sought a declaration that they enjoyed easements, and recovery of payments made.

Issues

• Whether the Facilities Grant in the 1981 Transfer was capable of taking effect as one or more easements, in particular whether it satisfied the requirements that (i) it accommodated the dominant tenement and (ii) it was capable of forming the subject matter of a grant (including issues of ouster and mere passivity).
• Whether the grant extended to facilities created or replaced after 1981 (including the new indoor swimming pool and the indoor facilities in the Mansion House), or was confined to facilities existing at the date of grant.
• Whether the grant offended the rule against perpetuities.

Arguments

Appellants (Diamond Resorts)

The Facilities Grant could not constitute an easement because: (i) the rights did not accommodate Elham House, but were enjoyed for their own sake; (ii) the timeshare owners’ use, particularly of a championship golf course, would amount to ouster of the servient owner from possession or control; and (iii) enjoyment depended on substantial expenditure and active management by the servient owner, contrary to the principle that an easement requires only passivity. They further submitted that the grant was confined to facilities existing in 1981, and that any wider construction would offend the rule against perpetuities.

Respondents (Regency Villas)

The grant satisfied the four classic conditions for easements set out in In re Ellenborough Park [1956] Ch 131. The recreational and sporting facilities accommodated the timeshare apartments, whose normal use was for holidays and recreation. Step-in rights, if needed, would not amount to ouster, and the courts below had found that meaningful use of the facilities could continue without active provision by the servient owner.

Judgment

The Supreme Court, by a majority (Lady Hale, Lord Kerr, Lord Sumption and Lord Briggs; Lord Carnwath dissenting), dismissed the appeal and allowed the cross-appeal.

Construction of the Facilities Grant

Lord Briggs held that the Facilities Grant was, in substance, a single comprehensive grant of rights to use the recreational and sporting facilities of the leisure complex within the Park as those facilities existed from time to time. Although the grant lacked express words of futurity, the inherent nature of a leisure complex, which would inevitably change over time, supplied the necessary breadth. The grant did not offend the rule against perpetuities, since it was an immediately effective grant over a complex already in existence; cases such as Dunn v Blackdown Properties Ltd [1961] Ch 433 and Adam v Shrewsbury [2005] EWCA Civ 1006 were distinguishable as concerning grants of rights that could only be exercised after future works.

Accommodation of the dominant tenement

Applying the four conditions set out in In re Ellenborough Park, the recreational rights accommodated the dominant tenement because the actual and contemplated use of Elham House was for timeshare holiday occupation, which is quintessentially recreational. Lord Briggs held that Ellenborough Park was dispositive of the issue that recreational and sporting rights, enjoyed for their own sake on the servient land, can amount to easements provided they accommodate the dominant tenement. Hill v Tupper (1863) 2 H & C 121 was not authority that a right which dominates the enjoyment of the dominant tenement cannot be an easement.

The fourth condition: capable of forming the subject matter of a grant

The grant was sufficiently certain and not precarious. On ouster, the question was to be judged by reference to the parties’ ordinary expectations at the time of grant, when the management of the leisure complex was plainly to remain with the owners of the Park. Step-in rights to undertake necessary maintenance would not amount to taking possession or control. On mere passivity, the law required only that the servient owner be under no legal obligation to act; the fact that, in commercial reality, the servient owner was expected to bear the cost of management and maintenance did not disqualify the grant. The courts below had found, as a matter of fact, that some meaningful use of the facilities could be made by the dominant owners exercising step-in rights, even if the servient owner ceased operations.

Wider question

Considering whether to recognise this new species of easement, Lord Briggs noted the common law’s tendency to accommodate new forms of land use, the wide acceptance of recreational easements in other common law jurisdictions (citing Riley v Penttila [1974] VR 547, Dukart v Corpn of the District of Surrey [1978] 2 SCR 1039, Blankstein v Walsh [1989] 1 WWR 277 and City Developments Pty Ltd v Registrar General of the Northern Territory [2000] NTSC 33), and the social utility of recreational and sporting activity. Although such easements are an imperfect conveyancing vehicle compared with leasehold structures, the court should affirm the principled lead given in In re Ellenborough Park.

The cross-appeal

The Court of Appeal had erred in treating the Facilities Grant as a series of separate easements over each individual facility. The judge’s holistic construction was preferred. The new indoor swimming pool, although built in a different location, fell within the grant. The communal areas of the ground floor and basement of the Mansion House (including the restaurant, billiard room, gymnasium and TV room) likewise fell within the recreational easement, since the use of chattels and fixtures on servient land does not preclude an easement.

Lord Carnwath (dissenting)

Lord Carnwath agreed with the majority on most points but dissented on the central issue. An easement is a right to do something, or to prevent something, on another’s land, not a right to have something done. The intended enjoyment of facilities such as the golf course and swimming pool could not be achieved without active provision, maintenance and management by the servient owner. He relied on Lord Scott’s observations in Moncrieff v Jamieson [2007] 1 WLR 2620 (especially para 47) that a grant requiring some positive action by the servient owner could not be a servitude. He doubted that the courts below had any proper evidential basis for finding that worthwhile use could be made of the facilities by step-in alone. Dowty Boulton Paul Ltd v Wolverhampton Corpn (No 2) [1976] Ch 13 was distinguishable. He would have allowed the appeal.

Implications

The decision is the first by the Supreme Court on the scope of recreational easements and represents an important development of the law established in In re Ellenborough Park. The principle emerging from the judgment, cautiously stated, is that the grant of purely recreational and sporting rights over land which genuinely accommodate adjacent land is capable of taking effect as an easement, provided the four well-settled conditions are satisfied. Where the actual or intended use of the dominant tenement is itself recreational, as with holiday timeshare developments, the accommodation requirement will generally be met.

The decision matters principally to developers, owners and occupiers of timeshare and similar holiday or leisure-based developments where free use of adjacent recreational facilities is offered. It confirms that such arrangements may be secured by easement, although Lord Briggs himself observed that easements are not an ideal conveyancing vehicle for this purpose, since the burden of positive maintenance covenants does not run with the servient land. A leasehold structure, as used for the Mansion House timeshare units, remains more effective where there is to be a binding obligation to maintain.

The decision should be read with care as to its limits. The court emphasised that whether the conditions for an easement are satisfied in any case will be fact-sensitive, particularly the question whether meaningful enjoyment of the right can continue if the servient owner ceases to manage or operate the facility. Lord Briggs gave examples of facilities (a miniature steam railway, a covered ski slope, theme park rides) which would probably fall on the wrong side of the line. Lord Carnwath’s powerful dissent highlights the unresolved tension between such rights and the traditional requirement of mere passivity, and his concerns about evidential foundations and the limits of the majority’s reasoning may be relevant in future cases. The court did not decide the future extent of the grant beyond the existing leisure complex, and questions of how far developments on hitherto agricultural parts of the estate might be covered remain open.

Verdict: Appeal dismissed and cross-appeal allowed (by a majority, Lord Carnwath dissenting). The Facilities Grant in the 1981 Transfer took effect as an easement (or composite easement) entitling the Regency Villas timeshare owners to the free use of the sporting and recreational facilities within the Broome Park leisure complex, including the new indoor swimming pool and the communal facilities on the ground floor and basement of the Mansion House. The trial judge’s orders, including the order for monetary compensation in respect of payments made under protest from 2012 onwards, were restored.

Source: Regency Villas Title Ltd & Ors v Diamond Resorts (Europe) Ltd & Ors [2018] UKSC 57