Azhar Shah & Ors v Colvia Management Co Ltd

A lease-based regulation is reasonable if its terms fall within the range of decisions that a reasonable landlord or management company could adopt. The party challenging the regulation bears the burden of proving unreasonableness. Private-law reasonableness is not assessed by the Wednesbury test. A failure to research market rates does not invalidate charges without evidence that the charges or scheme are themselves unreasonable. Charges may be imposed for limited parking allowed as an exception to a ban, both to ration demand and contribute to scheme costs, even where some expenditure could otherwise be recovered through service charges. Unequal effects on different occupiers do not by themselves make a regulation unreasonable.

The claimants occupied units at Barking Industrial Park under leases granting rights to use common car parks subject to reasonable rules and regulations made by the management company. Severe congestion had led Colvia Management Co Ltd to introduce a scheme prohibiting overnight parking, subject to paid and limited exceptions, including spaces needed by vehicle repair businesses.

The High Court, Chancery Division, declared the scheme unreasonable. It held that Colvia had failed to research the proper market value of overnight spaces and had improperly used the charges to recover liability for rates which should, in the judge’s view, have been borne through service charges. Colvia appealed. The central issue was whether the scheme was a reasonable regulation binding under the leases.

1. Applicable standard. The appeal was allowed. The burden lay on the claimants to prove that the scheme was unreasonable. They had to show that its basis was one which no reasonable landlord or management company could have adopted in the circumstances. The Court applied the relevant principles drawn from International Drilling Fluids Ltd v Louisville Investment (Uxbridge) Ltd [1986] Ch 513. The public-law test in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 was a misleading analogy in this private-law case and should not be applied.
2. Collective benefit and unequal impact. Regulations made for the common benefit may restrict the way in which each occupier exercises shared rights. It is not necessary that the resulting disadvantages fall evenly among the lessees. In view of the history of failed parking controls, it was within the range of reasonable decisions to introduce a more readily enforceable scheme. The fact that vehicle repairers would be particularly affected did not make the scheme disproportionate. The reasoning in Montrose Court Holdings Ltd v Shamash [2006] EWCA Civ 251 supported that conclusion.
3. Charges and service charges. There was no general rule that expenditure capable of recovery through service charges had to be recovered only in that way. It was not unreasonable in principle to charge those permitted to park overnight, as an exception to an otherwise complete ban, in order to ration demand and contribute to the scheme’s costs. The charges were not invalid merely because they might exceed the direct costs of administration and enforcement. Nor was the absence of research into local market rates sufficient without evidence that the rates charged were themselves unreasonable. The judge had reversed the burden of proof.
4. Lease rights and final order. The leases did not confer an inalienable right to occupy as many parking spaces as a lessee could use. The claimants remained subject to reasonable regulations under clause 3(xx) and paragraph (iii) of the Second Schedule. The judge’s declaration that the scheme was unreasonable was set aside, and the scheme was held to be valid and binding. The objections to the 9 pm starting time and to the use of an overnight scheme were rejected.

• Court of Appeal (Civil Division) — Appeal allowed. The High Court’s declaration was set aside and the parking scheme was held to be a reasonable regulation binding under the leases: [2008] EWCA Civ 195.
• High Court of Justice, Chancery Division — Anthony Elleray QC, sitting as a Deputy High Court Judge, declared the parking scheme unreasonable on two grounds in judgment dated 14 December 2007.