Louise Clark analyses a case involving restrictive covenants and the decision-making process of covenantees.
Key points
- The decision-making process and the decision must be reasonable
- Decision-makers must disregard irrelevant considerations when reaching their decision
In Davies-Gilbert v Goacher and another [2022] EWHC 969 (Ch); [2022] PLSCS 70 the court has considered the enforceability of a restrictive covenant and, for the first time, the concept of irrelevant considerations in the covenantee’s decision-making process. A decision-maker must distinguish between the reasons for refusing consent and underlying considerations which have a bearing on their decision and ensure that only relevant considerations are taken into account.
The background
The claimant owned a significant area of land in the village of East Dean, within the South Downs National Park, an estate which he acquired in 2003. Parts of the land had been sold off by the claimant’s predecessors in title: the contracts of sale included restrictive covenants in favour of the vendor’s retained land.
In 2019, the defendants acquired land in the village which had previously been in common ownership with the claimant’s land and which was subject to a restrictive covenant, imposed in July 1960. The covenant, which benefited part but not all of the estate, prohibited the construction of any erection, building or wall on the land without the claimant’s written consent, which was not to be unreasonably withheld.
The defendants each wished to construct a detached residential property for themselves on their parcel of land. In early 2020 they obtained planning permission for the erection of two dwellings on the land and then sought the claimant’s consent under the covenant.
The claimant refused consent by letter of 18 March 2020, stating that:
(a) the scheme would have a detrimental impact on the amenity value of the estate; and
(b) it could threaten the future use and commercial value of the neighbouring land.
In the same letter he referred to a number of other matters to which he had given “due consideration” in reaching his decision. These included the impact of the proposal on his neighbouring land; on the amenity value of the estate as a whole; and the effect on boundary treatment and long-term maintenance of his adjoining land.
The defendants commenced works on site and the claimant sought an injunction to restrain the works. The defendants argued that the claimant’s reasons for refusing consent to the scheme were unreasonable and that since, on his own case, he had taken into account factors which he should not have done, his entire decision was invalidated.
The law
The judge identified the following legal principles:
a) The court must identify the actual reason(s) which resulted in the refusal of consent so the court must find the reason(s) which influenced the claimant’s mind at the relevant time and not later.
b) Reasons are the justification for refusal; considerations are the things taken into account. They are not the same thing.
c) The process by which the reason was come to and the reason itself must be reasonable (Braganza v BP Shipping Ltd [2015] UKSC 17).
d) The decision-maker must, as part of a reasonable process, exclude irrelevant considerations while taking into account relevant ones (Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223).
e) The West India Quay principle is a sound one, whereby if a covenantee makes a decision for a number of reasons, some “good”, others “bad”, the overall decision will remain reasonable provided that there remains at least one “freestanding” good reason (No 1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2021] EWCA Civ 1119; [2021] EGLR 37).
The evidence
The claimant was clearly passionate about the heritage aspect of East Dean and maintaining the estate as a functioning and profitable enterprise, but the court found him confused as to what land benefited from the covenant. He had sought to rewrite his decision-making process, the weight he gave to factors within that process and the reasons he refused consent at the time.
This was illustrated by his admission immediately before trial – and at trial – that the covenant did not benefit all of the land in the estate, even though his pleaded case and witness statement stated that he took account of how the views from the unbenefited land would be impacted by the defendants’ scheme as part of his decision-making process. He was not a credible witness as to his own decision-making process. The court determined that his reasons for refusing permission were as stated in his refusal letter.
The decision
The claimant’s first reason for refusing consent – that the scheme would have a detrimental impact on the amenity value of the estate – had been affected by an irrelevant consideration: the impact of the scheme on land which did not benefit from the covenant. Consequently, the reason was a “bad” one. Had the claimant determined to disregard the estate and focus on the land benefiting from the covenant when forming his reasons, his decision would not necessarily have been vitiated.
However, the claimant’s second reason – the effect of the scheme on the future use and commercial value of his neighbouring land, fields to the south and east of the defendants’ land which did benefit from the covenant – had been arrived at without being influenced by any irrelevant consideration. There was a risk of overlooking which would affect the value of the claimant’s land and practical difficulties in maintaining a native hedge on the narrow access track: these were relevant considerations for the claimant to take into account. The second reason was freestanding of the first reason and one that a reasonable decision-maker in the claimant’s position could have given for refusing consent to the scheme.
Louise Clark is a property law consultant and mediator