Mr Charles Beresford Davies-Gilbert v Mr Henry James Goacher, Mr Steven Adrian Chester  [2022] EWHC 969

Restrictive Covenants – Refusal of Consent – Burden of proof – Reasonableness

The facts

The Claimant was the owner and/or estate manager of land known as the Gilbert Estate. The Defendants were both freehold owners of land subject to restrictive covenants in favour of land owned by the Claimant.  The relevant covenant prohibited any construction without a written licence, "such licence not to be unreasonably withheld."

Following planning permission, the Defendants applied for consent under the covenant. Consent was refused. The refusal letter stated:

"In short, if the development were to proceed: (a) it 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... due consideration has been given to, amongst other matters, the following:

  • The positive or negative impact of the proposal on my neighbouring land
  • Its impact on the future anticipated use and value of that land
  • Its impact on the amenity value of the Gilbert Estate in the locality as a whole; and
  • The effect on boundary treatment and long-term maintenance"

The Defendants considered the refusal of consent unreasonable. They commenced work on the site. The Claimant issued proceedings, seeking a declaration that consent had not been unreasonably refused and an injunction.  The Defendants Counterclaimed seeking declarations that the Claimant unreasonably withheld consent. The Defendants argued, amongst other things, that the Claimant's true reasons were not as set out in the Refusal Letter such that the refusal fell foul of both limbs of Braganza v BP Shipping Ltd [2015] 1 WLR 1661 or alternatively that if the reasons stated were the real reasons, that they were bad reasons because the Claimant had taken into account irrelevant considerations or had adopted an unreasonable process.

The Decision

HHJ Jackson gave a long and careful decision. It helpfully sets out the applicable legal principles when a covenantor has refused consent (the decision also appends a statement of the agreed legal principles approved by the judge). On the principles in dispute HHJ Jackson held that:-

  1. The burden of proof lies on the covenantor to prove, on the balance of probabilities, that the covenantee's refusal of consent was unreasonable, and not on the covenantee to prove that their refusal was reasonable.
  2. An outright refusal cannot be said to be unreasonable by reference to a factor or circumstance that could have been neutralised by a condition. HHJ Pelling QC's proposition to this effect in Hicks v 89 Holland Park (Management) Ltd [2021] EWHC 930 (Comm) was wrong as it was contrary to Iqbal v Thakrar [2004] EWCA Civ 592.
  3. if an objection to an application for consent is based on aesthetic grounds, then it would not be enough merely to say that the proposed building/alterations were not to the taste of the covenantee (or others entitled to the benefit of the covenant) as this would be entirely subjective.

When considering the "Wednesbury unreasonableness" challenge, HHJ Jackson held that the court's should approach these as follows:

  1. a) The primary finding of fact the Court must make in such a case is what were the reason or reasons which resulted in the refusal of permission;
  2. b) This requires the Court to find the reason or reasons that influenced the mind of the covenantee at the relevant time and not later;
  3. c) There is no magic in the use of the word 'reasons' in case law. The Courts when seeking to establish why a covenantee has refused consent have used several different terms for what is to be established;
  4. d) The process by which the reason was come to, and the reason itself, must be reasonable, requiring consideration of both limbs of the Wednesbury;
  5. e) It will be unreasonable for a covenantee to refuse consent for the purpose of achieving a collateral or uncovenanted advantage;
  6. f) A decision maker as part of a reasonable decision-making process must in reaching their reason exclude extraneous considerations whilst taking into account those considerations which are obviously relevant to the decision in question;
  7. g) Not all considerations which are in the mind of the covenantee will influence the mind of the covenantee. Therefore, simply because a consideration has been taken into account it does not mean it contributed to the reason as a consideration can be given a zero weighting in the decision-making process;
  8. h) Where approval is not to be unreasonably withheld and the covenantee refuses consent for a mixture of reasons, some good and some bad, where the result would still have been a refusal without the bad reasons then the result will remain reasonable and will not be vitiated. This requires the Court to consider if there is a connection between the reasons or if the reasons are free-standing and the good reason, which is more than a makeweight, is not dependent on the bad.

HHJ held that it followed that considerations (ie the things taken into account by the covenantee) and reasons (ie the justification for the refusal) are not the same thing. Nor is it enough to say a consideration was taken into account, it must be a consideration which contributes to the reason.

The judge carefully analysed the evidence of the Claimant. She found that he had taken into account the effect of the proposed development on land which did not benefit from the covenant. He was not entitled to do so. It followed that one of the Claimant's reasons for refusing consent was a bad reason. However, the Claimant's second reason was not a bad reason and the Claimant had followed a reasonable decision-making process in relation to the second issue. Further, he had reached a reasonable outcome when refusing permission on that basis. It followed that his refusal was not unreasonable.

Both parties had relied on expert evidence at trial. The judge was however scathing of their evidence, holding that both experts in this case failed to comply with their duties to the Court, failed to follow their instructions and were partisan in formulating both their reports and their evidence to the Court.

Conclusion

The decision is an excellent summary of the legal principles applicable to qualified covenants and how the court will approach a challenge a refusal to grant consent.

Case summary by Lina Mattsson. First published in Gatehouse Chambers' Property Newsletter in May 2022.

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