Landlord and tenant – Restrictive covenant – Enforcement – Respondent wishing to develop land – Appellant owner of adjoining property divided into flats refusing approval of plans and specifications for redevelopment of site under restrictive covenants – High Court declaring consent unreasonably withheld – Appellant appealing – Whether appellant entitled to take account of interests of leaseholders – Whether aesthetic grounds for refusal relevant – Appeal allowed
The appellant owned the freehold of 89 Holland Park, London W11, a large detached Victorian building at the end of a row. It was divided into five flats, held under 999-year leases. Each of the long leaseholders was a shareholder in the appellant, which retained possession of the common parts and external structure of the property but was otherwise interested only as reversioner.
The respondent owned a plot of land at the rear of the property on which she wished to build a house. The respondent, as covenantor under covenants contained in clauses 2(b) and 3 of a deed made between the parties’ predecessors in title (the 1968 deed), sought declarations that the appellant had unreasonably refused its approval of her plans, drawings or specifications for the redevelopment of the site. The appellant denied that it had unreasonably refused such consent under either covenant.
Clause 2(b) of the 1968 deed provided that no applications for planning permission should be made without the adjoining owner’s approval of plans and drawings. Clause 3 provided that no work was to be commenced before definitive plans, drawings and specifications of the proposed buildings had been approved by the adjoining owner or its surveyor. In an earlier judgment, the court had implied a requirement of reasonableness into those restrictive covenants: [2013] EWHC 391 (Ch); [2013] PLSCS 66.
Although each of the leaseholders was entitled to enforce the covenant, the only person whose consent to plans, etc was relevant was the appellant. The High Court held that, in deciding whether or not to give consent, the appellant was not entitled to take into account the views or interests of the leaseholders; or to raise objections to the respondent’s proposal on aesthetic or environmental grounds, because there was no evidence that the structure or value of the freehold reversion would be affected by the aesthetics or environmental concerns: [2019] EWHC 1301 (Ch); [2019] EGLR 39. The appellant appealed.
Held: The appeal was allowed.
(1) The starting point was to identify the land for the benefit of which the covenant was given. The 1968 deed was supplemental to a 1965 transfer. The covenants in the 1965 transfer were given to benefit the whole building as a physical entity, not the vendor’s property interest in it. The leaseholders were among those who benefited from the covenant. In addition, section 78 of the Law of Property Act 1925 deemed a covenant to be made with the covenantee and his successors in title and the persons deriving title under him. Furthermore, the covenant had effect as if those words were expressed. The expression “successors in title” included the owners and occupiers for the time being of the land of the covenantee intended to be benefited.
If one added together the general purpose of the covenants and the class of person entitled to their benefit and with whom the covenant was deemed to have been made, the inescapable conclusion was that the decision-maker considering whether or not to approve plans was entitled to take into account the interests of those with the benefit of the covenant. Those persons included both the owners and the occupiers of the land. Accordingly, the appellant was entitled to take into account the interests of the leaseholders: Cryer v Scott Brothers (Sunbury) Ltd (1988) 55 P & CR 183 distinguished. Crest Nicholson Residential (South) Ltd v McAllister [2002] EWHC 2443 (Ch); [2003] 1 EGLR 165 considered.
(2) In some contexts, a decision-maker asked to give consent to works might refuse on aesthetic grounds. The covenant in the present case related to the approval of plans, drawings and specifications, one of the purposes of which was to demonstrate what a proposed building would look like. The covenant was between neighbours, and a neighbour had a legitimate interest in the appearance of what was built next door to him. Approval under clause 2(b) had to be obtained before making an application for planning permission. Clause 5 of the 1968 deed contemplated that the building owner might engage an architect in connection with the approval of plans and drawings, which also suggested that aesthetics were at least potentially contemplated as being within the scope of the covenant: Lambert v FW Woolworth & Co Ltd (No 2) [1938] Ch 883 and Crest Nicholson considered.
(3) The judge had fallen into the trap of approaching the question of reasonableness by reference to the original purpose of the covenant (as he perceived it), and by formulating rigid rules for what the covenantee could or could not take into account. Accordingly, the matter had to be remitted to the judge to decide whether or not the aesthetic and environmental objections were or were not reasonable.
The letter of refusal presented a rational case, but rational was not necessarily the same as reasonable. Merely to say that the proposed building was not to the taste of the appellant or the leaseholders would be entirely subjective, and would not be enough. On the other hand, to limit aesthetic objections to a case in which there was an effect on capital or rental value was too narrow. An objection that a proposal was out of keeping or that it would have a potential adverse effect upon the amenities of the land with the benefit of the covenant might be enough. The current state of the land might also be relevant. If necessary, expert evidence might be adduced. The judge would also be able to take into account the fact that the 1968 deed contained a positive covenant to build, and an express approval of a particular design. Whether against that background (and any other relevant consideration) the refusal of consent was reasonable on the facts would be for the judge to decide: No 1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2018] EWCA Civ 250, [2018] EGLR 16 applied. Mosley v Cooper [1990] 1 EGLR 124 and Sequent Nominees Ltd v Hautford Ltd [2019] UKSC 47, [2020] EGLR 52 considered.
John McGhee QC and Tim Calland (instructed by Gowling WLG LLP) appeared for the appellant; Philip Rainey QC and Mark Sefton QC (instructed by Mishcon de Reya LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Hicks v 89 Holland Park (Management) Ltd
