89 Holland Park Management Ltd v Sophie Louise Hicks (2020)
A company with the benefit of a restrictive covenant was entitled to refuse consent to development of a neighbouring plot on aesthetic grounds. Company shareholders, who were leaseholders of flats in the property of which the company was the freeholder, were also entitled to enforce the covenant.
A management company with the benefit of a restrictive covenant appealed against a decision that it could not withhold consent to an application for planning permission for residential development of a neighbouring plot by the respondent owner, an architect.
The company was the owner of the freehold of 89 Holland Park, London (89HP). The property was divided into five flats, each of the leaseholders being shareholders in the company. The company was interested in the property only as reversioner. In 1965, the owner (R) of 89HP and the neighbouring plot had transferred the plot to a third party, who entered into a deed whereby she covenanted to complete the development of the plot within 18 months. Clause 2(b) of that deed required R's consent to the plans before any application for planning permission and clause 3 required his further consent before work could commence. The plot remained undeveloped. The architect acquired the freehold in 2012. In earlier proceedings, the court held that both the company and the lessees were entitled to the benefit of the covenants by which the architect was bound and the company was entitled to withhold consent but could not do so unreasonably. The architect's applications for consent under both clauses were refused. Her proposed design incorporated a glazed cube entrance at ground level giving access to subterranean floors. The company's refusal was based on aesthetics, disruption caused by construction, the risk of damage to trees, and concern over subsidence. The court held that only the company was entitled to enforce the covenant, not the leaseholders, and it was only entitled to consider its own reversionary interest so could not object on aesthetic or environmental grounds.
The leaseholders' interests - The judge's conclusion had been based largely on the decision in Cryer v Scott Bros (Sunbury) Ltd  12 WLUK 236 but in Cryer, the land in question had been regarded as existing only in three dimensions, whereas in the instant case there was another dimension: that of time. There were concurrent interests in the land to which the benefit of the covenant was annexed. The essential point in Cryer was that the covenantee was only entitled to take into account matters that affected the land with the benefit of the covenant. If the company was not entitled to take into account the position of the leaseholders, then their entitlement to the benefit of the covenants was almost worthless. The starting point was to identify the land for the benefit of which the covenant had been given. The covenants in the 1965 Transfer were given to benefit 89HP. In addition, the effect of the Law of Property Act 1925 s.78 was to deem a covenant to be made with the covenantee and his successors in title and the persons deriving title under him. The company was therefore entitled to take into account the leaseholders' interests, Cryer distinguished and Marquess of Zetland v Driver  Ch. 1 considered (see paras 27-29, 31-34 of judgment).
Relevance of aesthetics - A decision-maker could refuse consent on aesthetic grounds. It would be extraordinary if a decision-maker could not take into account what a proposed building would look like. The judge had not been entitled to distinguish Lambert v FW Woolworth & Co Ltd (No.2)  Ch. 883 on the basis that it involved a different kind of covenant and an individual rather than a company, Lambert followed. The covenant was between neighbours and a neighbour had a legitimate interest in the appearance of what was built next door to him. In any event, the judge appeared to have forgotten that the original covenantee had been an individual. Detriment to a landlord's trading interests in his capacity as a neighbour were potentially relevant grounds for refusal of consent. Property interests in connection with a covenant went further than the capital or rental value of property and as well as trading interests, they could include the amenity value of the right to enjoy the property, Sargeant v Macepark (Whittlebury) Ltd  EWHC 1333 (Ch) applied (paras 36, 39-41, 46-49).
Loss of trees and disturbance - The judge had fallen into the trap of approaching the question of reasonableness by reference to the original purpose of the covenant and by formulating rigid rules for what the covenantee could not take into account, Sequent Nominees Ltd (formerly Rotrust Nominees Ltd) v Hautford Ltd  UKSC 47 and Bickel v Duke of Westminster  Q.B. 517 followed (paras 52-54).
Were the structural concerns insufficient to refuse consent under clause 2(b)? - The mere fact that a single application was made for consent under both covenants based on the same material did not entail that the outcome of each application would be the same. The company's consent was required at both stages and the judge had been correct to approach the question of whether sufficient information had been given as a question of fact and degree (paras 57-61).
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16 Jun 2020
Court of Appeal (Civ Div)
Lewison LJ, Flaux LJ, Holroyde LJ
LTL 17/6/2020 :  6 WLUK 198
John McGhee QC