553   6 December 2002   

And when the Times Law Reports last week carried this Court of Appeal judgment, my eyes popped out of my head. Because it relates to a small local shopping centre in Swansea East.  I know it well - we always meet at CKs carpark, when gathering to go canvassing for the Labour Party in Cwmbwrla. Yet the point at issue was an important one, for all businesses.  Let me explain.

• English law ordinarily allows a contract to be enforced only by the parties to it, namely those who freely gave their consent to be bound by its terms.  The very rationale of contract law is that the Courts are merely holding the parties to the promises which they knowingly made themselves. That simple principle has been given the pompous label privity of contract. 

But the complexities of modern life have required that principle to be adapted.  Even before WW1, cases were arising of new housing estates where the purchasers, each buying his own house from the housebuilder, entered into common covenants to govern life on the estate, regulating noise, rubbish, tree heights and so on.  And in later years the Courts allowed such covenants (i.e. promises) to be enforced by the purchasers directly against each other even though the housebuilder might have disappeared, or failed, or simply lost interest...  There was no contract between one house-owner and any other, but the Courts recognised that they had all taken on the obligations of the "scheme" on the same terms, and that it would be unjust not to enforce the common covenants.  That was Elliston v Reacher, of legal textbook fame...

In Cwmbwrla, in Swansea, the same question arose in a quite different context.  In 1963, Swansea City Council built a small local five-shop shopping-centre in Cwmbwrla, and John and Hetty Williams took the newsagents/tobacconist/confectionery shop - other tenants were also limited by their leases to specific trades.  Subsequently Mr Kiley bought up two of the shops, and converted them into a "supermarket" - mainly for groceries, but also selling cigarettes, confectionery and stationery.  The Williams' complained, but Swansea City Council, as landlord, did nothing, refusing to get involved.

• Finally, after many years of dispute, this matter has come to Court.  Mr Kiley argued that Mr Williams could not sue him, because there was no contract between them (and given the Landlord's position, that gave him a free hand...)   And there were no precedents, for the application of this principle to business covenants of this kind - although it affects every shopping-centre in the country!
• The three senior Judges of the Court of Appeal upheld John and Hetty Williams.  A "building scheme" of this kind, they held, entitled individual tenants to take direct action to enforce the restrictive covenants, without going through the Landlord.  There are still other questions to be decided, as to whether the covenants constitute a "reasonable restraint of trade" - but that will be Round Two.

Round One goes to John and Hetty Williams.  Will the parties be able to afford to enter the ring for Round Two?  Swansea City Council will no doubt be congratulating themselves that they were entitled to stay out of the matter, and avoid risking their Council taxpayers scarce funds...