Dulwich Estate v Baptiste

On an appeal under the Arbitration Act 1996, the question was whether refusal of consent under a scheme of management was within the range of reasonable decisions open to the estate manager. The arbitrator must not decide whether consent ought to have been granted. The applicant’s interests become relevant only where there is such a disproportion between the benefit to the estate and the detriment to the applicant that withholding consent is unreasonable. A balancing exercise is not justified merely because the applicant would suffer significant inconvenience. The court may extend time and grant leave where the statutory criteria are met, including substantial error of law and wider local importance. The appeal was allowed, but the matter was remitted because the proper application of the test might produce either result.

The claimant managed the Dulwich College Estates under a scheme approved under section 19 of the Leasehold Reform Act 1967. The defendant owned a house subject to the scheme and sought consent for a loft conversion involving a side dormer. Planning permission had been granted, but the claimant refused consent under the scheme. An arbitrator found for the defendant after applying what he regarded as three tests of reasonableness and balancing the parties’ interests.

The claimant applied under the Arbitration Act 1996 for an extension of time, leave to appeal on a point of law, and relief on the appeal. The central issues were the correct test governing the manager’s decision, whether the arbitrator had made an error of law, and whether the award should be varied or remitted.

1. Extension of time and leave. The 21-day delay was neither insignificant nor inordinate. The claimant had acted reasonably after receiving the award, the defendant had suffered no irremediable prejudice, and the merits and wider impact favoured an extension. The issue had significant local importance because the scheme covered more than 3,700 properties. The requirements of sections 69(3)(c)(i), 69(3)(c)(ii) and 69(3)(d) of the Arbitration Act 1996 were satisfied.
2. Correct reasonableness test. Under Estates Governors of Alleyn’s College of God’s Gift at Dulwich v Williams [1994] 1 E.G.L.R.112, the question was whether the refusal was within the range of reasonable decisions open to a reasonable estate manager. The arbitrator was not to decide whether consent should have been granted.
3. Relevant interests. An estate manager may generally have regard only to the interests of the estate. The applicant’s interests become relevant where there is such a disproportion between the benefit to the estate and the detriment to the applicant that withholding approval is unreasonable. This was the approach in International Drilling Fluids Ltd. v Louisville Investments (Uxbridge) Ltd. [1986] 1 Ch.513.
4. Error in the award. The arbitrator treated Mosley v Cooper [1991] E.G.L.R.124 as establishing three separate tests. Properly understood, that case did not establish separate tests. The arbitrator then conducted his own balance between the applicant’s disadvantage and the estate’s interests, despite having found that the refusal fell within a general band of reasonableness. He therefore applied the wrong legal approach and made an error of law.
5. The court rejected the further arguments that the applicant’s prejudice had to exceed the ordinary disadvantage caused by refusal, or that it had to involve a public interest. Personal interests could be balanced against the wider interests of the estate where the proper test required it.
6. The Article 1 First Protocol issue under the Human Rights Act 1998 did not require further argument. The property had been acquired subject to the scheme. In any event, the scheme supplied a lawful basis, section 19 of the Leasehold Reform Act 1967 supplied a legitimate objective, and proportionality was addressed by the scheme-based test.
7. Relief and costs. The appeal was allowed, but the award was remitted to the arbitrator because it was unclear what result would have followed from applying the correct test. No order was made as to the costs of the application.

This was a first-instance appeal under section 69 of the Arbitration Act 1996 from an arbitrator’s award. The award was remitted to the arbitrator for reconsideration under the correct legal test.