Eaton Mansions (Westminster) Ltd v Stinger Compania De Inversion SA

A leaseholder with no express right under an underlease to place equipment on a roof cannot establish such a right merely by invoking the law on qualified covenants. Where a collateral right is alleged through proprietary estoppel, the court must assess the equity and the parties’ position broadly. In deciding whether consent was unreasonably withheld, it may consider what the freeholder would have said if properly approached after any planning obstacle was removed. The management company need not prove that the proposed works would actually breach the headlease covenant: genuine freeholder opposition or refusal to commit may reasonably justify withholding consent. A summary judgment and indemnity costs order may stand where a lower court’s costs misdirection is immaterial after the appellate court re-exercises its discretion.

The claimant management company held the headlease of a block of flats. The defendant held underleases of two flats, but those underleases conferred no right to place equipment on the roof. The defendant installed and retained air-conditioning apparatus without the claimant’s consent.

The claimant sought an injunction requiring removal of the apparatus and damages. The defendant relied on alleged representations that consent to reasonable air-conditioning equipment would not be unreasonably withheld or delayed, giving rise to a collateral right based on proprietary estoppel.

The High Court granted the claimant judgment under Part 24, holding that the defendant had no real prospect of establishing that consent had been unreasonably withheld: [2010] EWHC 1725 (Ch). The appeal concerned both the substantive order and the award of indemnity costs.

Disposition. Lord Justice Lloyd delivered the judgment, with Lord Justices Rimer and Thomas agreeing. The substantive appeal and the appeal against indemnity costs were dismissed.

1. The underleases did not confer any right to place equipment on the roof. Earlier consent to particular equipment did not establish a right to install different equipment in different circumstances. Any collateral right therefore had to arise, if at all, through principles of proprietary estoppel.
2. Proprietary estoppel may create an equity which moderates strict legal rights. The court determines the scope and nature of that equity and should interfere with legal rights only to the extent necessary to give effect to the relevant representation.
3. It would be artificial to apply the developed law governing a qualified covenant exactly, because there was no corresponding right in the underleases. The assessment had to be broader. The claimant was not confined to grounds actually present in its mind when proceedings were issued, particularly as neither party had then analysed the matter as a qualified-covenant case.
4. The correct inquiry was what attitude the freeholder would have taken if asked by the claimant, after planning permission had been obtained, whether it would consent to retention of the apparatus. If the freeholder would have confirmed that the works were not a breach of the headlease covenant, or would have waived any breach, withholding consent would ordinarily have been unreasonable, absent another relevant reason. Otherwise, refusal would not be unreasonable.
5. The claimant was entitled to take a cautious position where freeholder consent was uncertain. It was not required to prove that the works would in fact breach the headlease covenant. The evidence justified the inference that the freeholder would have objected to the apparatus because of its size and visibility and its implications for other flats. The defendant therefore had no realistic prospect of establishing unreasonable refusal, and summary judgment was appropriate.
6. Resistance to the first summary judgment application by amending the defence was ordinary litigation conduct and should not have been relied upon in awarding indemnity costs. However, the defendant’s high-handed pre-litigation conduct and disproportionate conduct of the litigation were relevant. Although the judge had misdirected himself by considering one irrelevant factor, the Court of Appeal re-exercised its discretion and concluded that indemnity costs remained justified. The formal order included the respondent’s appeal costs, summarily assessed at £33,000 including VAT.

• Court of Appeal (Civil Division) dismissed the appeal, upheld the summary judgment on the trespass claim, and upheld the indemnity costs outcome after re-exercising the costs discretion.
• High Court of Justice, Chancery Division granted judgment under Part 24 for removal of the air-conditioning apparatus and awarded indemnity costs: [2010] EWHC 1725 (Ch).