Landlord and tenant – Restrictive covenant – Enforcement – Claimant seeking declarations that defendant covenantee had unreasonably refused approval of plans drawings or specifications for redevelopment of site under restrictive covenants – Defendant denying unreasonable refusal and cross-claiming for professional costs in evaluating claimant’s redevelopment scheme – Claim allowed in part – Cross-claim dismissed
The defendant was the owner of the freehold of 89 Holland Park, London W11 (the property). The property was a large detached Victorian building forming the end of a row of such buildings. It was divided into five flats, each held under a long lease of 999 years. The garden to the west and rear of the property formed part of the lower ground floor flat lease. Each of the flat’s long leaseholders was a shareholder in the defendant. The defendant retained possession of the common parts and external structure of the property but was otherwise interested in it only as reversioner.
The claimant was the freehold owner of an irregular quadrilaterally shaped site immediately to the south of the property. The claimant, as covenantor under covenants contained in clauses 2(b) and 3 of a deed made between the predecessors in title of the claimant and defendant (the 1968 deed), sought declarations to the effect that the defendant as covenantee had unreasonably refused its approval of her plans drawings or specifications for the redevelopment of the site under both covenants. The defendant denied that it had unreasonably refused such consent under either covenant and cross-claimed for its professional costs in evaluating the claimant’s redevelopment scheme.
Clause 2(b) of the 1968 deed provided that no applications for planning permission should be made to the appropriate planning authority without the adjoining owner’s approval of plans and drawings. Clause 3 provided that no work was to be commenced on the building site 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: see [2013] EWHC 391 (Ch); [2013] PLSCS 66.
Held: The claim was allowed. The Cross-claim was dismissed.
(1) The court construed the relevant words of a contract, in its documentary, factual and commercial context, assessed in the light of (i) the natural and ordinary meaning of the contractual provision being construed, (ii) any other relevant provisions of the contract, (iii) the overall purpose of the provision being construed and the contract in which it was contained, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions. In the present case, the 1968 deed had to be construed as at the date of its execution. When construing the covenants both clauses had to be read as a whole, together and in the context of the contents of the document containing them, read as a whole: Arnold v Britton [2015] UKSC 36; [2015] EGLR 53 applied.
(2) By the time the defendant came to consider the claimant’s application for approval, its only relevant interest in the property was in its structure and the freehold reversion. That was the only interest that the defendant was entitled to consider when deciding whether to grant or refuse approval. The defendant contended that it had a moral obligation to take account of the interests of the long leaseholders in deciding whether to give its consent under the covenants but that approach was mistaken. It had no relevance in deciding the purpose for which the covenant was imposed or whether the claimant was entitled to take account of the wishes of the occupiers when deciding whether to approve a plan submitted for approval under either clause 2(b) or 3 of the 1968 deed: Wrotham Park Estate Co. Ltd v Parkside Homes Ltd [1974] 1 WLR 798, Cryer v Scott Brothers (Sunbury) Ltd (1988) 55 P & CR 183 and Sportoffer Ltd v Erewash Borough Council [1999] 3 EGLR 136 considered.
(3) Identifying the point at which issues relevant under clause 3 were not reasonably relevant under clause 2(b) was a question of fact and degree. The defendant’s reasons for refusing approval was a question of fact that depended on what was actually in the mind of the decision maker when approval was refused. Where the covenantor alleged the covenantee’s true reasons were other than those put forward by the covenantee, the legal onus of establishing those allegations rested on the covenantor. However, the evidential burden rested on the party asserting a positive case to establish that case. The legal onus of establishing that the covenantee’s true reasons were unreasonable rested on the covenantor. The true reasons of the defendant depended on what was in the mind of those who had its management and control in relation to the act or omission in issue (in this case its directors): Tollbench Ltd v Plymouth City Council (1988) 55 P & CR 194 and El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685 followed.
(4) In relying on aesthetics, the effect or possible effect on the trees (save and so far as trees might impact on structural issues) and the disruptive effect of construction, the defendant had relied on facts and matters that it ought not to have taken into account because they were not material to the protection of the defendant’s property interest in the structure and common parts of the property and its reversionary interest. To the extent that the defendant relied on those grounds, in refusing or withholding approval under clause 2(b), it acted unreasonably. However, Clause 3 required the provision of “definitive” plans drawings and specifications. In that context, “definitive” meant the detailed plans drawings and specifications setting out definitively what the claimant intended to build and how she intended to build it. It was critical to the protection of the defendant’s property interest that structural damage was avoided. That was the true purpose of the covenants. That did not merely include the impact of what was built on the site but how it was built. The defendant was not asked for sequential approval. Had the defendant approached the application under clause 3 by reference to the structural issues relied on by the defendant, the defendant could reasonably have refused or withheld consent under clause 3 because the material supplied at the date of the decision was not definitive as required by that clause. Accordingly, provisionally the court proposed granting a declaration in the terms sought in relation to the defendant’s purported refusal or withholding of approval under clause 2(b) but not in relation to the refusal under clause 3: Braganza v BP Shipping Ltd [2015] UKSC 17; Victory Place Management Company Ltd v Kuehn [2018] EWHC 132 (Ch); [2018] PLSCS 17 and West India Quay (Residential) Ltd v East Tower Apartments Ltd [2018] EWCA Civ 250; [2018] EGLR 16 applied. Lambert v Woolworth & Co Ltd [1938] Ch 883 considered.
(5) The defendant’s counterclaim failed other than to the extent that it was entitled to succeed insofar as the parties had chosen to cap the costs recoverable in the terms set out in clause 5 of the deed: Reading Industrial Co-Operative Society Ltd v Palmer [1912] 2 Ch 42, Dong Bang Minerva (UK) Ltd v Davina Ltd [1996] 2 EGLR 31 and Marks and Spencer plc v BNP Paribas Securities Trust Company (Jersey) Ltd [2015] UKSC 72; [2016] EGLR 8 considered.
Philip Rainey QC and Mark Sefton QC (instructed by Mishcon de Reya) appeared for the claimant; Jonathan Karas QC and Stephanie Tozer QC (instructed by Taylor Wessing LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of Hicks v 89 Holland Park (Management) Ltd
