No.1 West India Quay (Residential) Limited v East Tower Apartments Limited

The Court of Appeal held that a landlord's refusal of consent to an assignment will be lawful under the Landlord and Tenant Act 1988 where the refusal is supported by one or more independent and sufficient reasons, even if the landlord also gave another reason which was unreasonable. The court interpreted section 1 of the 1988 Act as imposing a duty to give or refuse consent reasonably and to state the reasons in writing, but not as requiring every reason relied on to be itself reasonable. The correct test is causative: if the decision to refuse consent would have been the same on the reasonable grounds alone, the existence of an additional unreasonable ground does not vitiate the refusal.

Applying that test, the court found that two of the three reasons advanced by the landlord (requiring a bank reference and a surveyor's inspection) were reasonable and independent, and the third reason (an administration fee) was unreasonable; nevertheless the refusal of consent was overall reasonable because the two good reasons were sufficient to justify it.

Background and parties: East Tower Apartments Limited (ETAL), the long lessee of a number of flats in No.1 West India Quay, applied to its landlord, No.1 West India Quay (Residential) Limited, for consent to assign under qualified covenants. ETAL sought consent to sell several underleases; the landlord imposed conditions and ultimately refused consent on three grounds: (i) payment of an administration fee (contested as excessive), (ii) requiring a surveyor's inspection of the flats, and (iii) requiring a UK bank reference to assess covenant strength.

Procedural history: At first instance HHJ Walden-Smith declared all three conditions unreasonable and ordered repayment of fees. On appeal to the High Court (Henderson J, reported at [2016] EWHC 2438 (Ch)) the judge held that the inspection and bank reference were reasonable but the administration fee was not, and concluded that the presence of the unreasonable reason vitiated the refusal. ETAL then appealed to the Court of Appeal.

Nature of the claim and relief sought: ETAL sought declarations that the landlord had unreasonably withheld consent and that the conditions were unreasonable; alternatively a declaration that the refusal was unlawful and an award of damages.

Issues framed:

• Whether each of the three reasons given by the landlord for refusing consent was reasonable for the purposes of section 1 of the Landlord and Tenant Act 1988;
• Whether a refusal of consent that is supported by a mixture of reasonable and unreasonable reasons can nevertheless be lawful, i.e. whether a bad reason vitiates good reasons;
• How the statutory duty under section 1 (including its requirement to give reasons and the reversal of burdens in section 1(6)) should be interpreted and applied.

Court’s reasoning: The court analysed the Act's text and purpose and relevant authorities. It concluded that section 1(3) requires the landlord to state all reasons in writing and that section 1(6) allocates burdens of proof, but the statute does not, on its face, require that every stated reason for refusing consent must be reasonable. The court applied the causation approach drawn from authority on multiple reasons (including public law principles applied to contractual discretions) and concluded that where the reasonable reasons are independent and sufficient to cause the decision, the decision is not invalidated by the presence of an additional unreasonable reason. Applying these principles to the facts, the Court of Appeal held that the inspection and bank reference were reasonable grounds and were not infected by the landlord’s unreasonable administration fee demand; accordingly the refusal of consent was reasonable.

Appeal allowed. The Court of Appeal held that although one of the landlord's reasons for refusing consent (the administration fee) was unreasonable, the landlord had two independent and sufficient reasons (requirement for a surveyor's inspection and a UK bank reference) that were reasonable; the unreasonable reason did not vitiate the decision. The court adopted a causation-based approach: if the decision to refuse would have been made on the reasonable grounds alone, the overall refusal is reasonable.

First instance: HHJ Walden-Smith (declared all three conditions unreasonable and ordered repayment of disputed fees). High Court (Chancery Division): Henderson J ([2016] EWHC 2438 (Ch)) held two reasons reasonable but the administration fee unreasonable and concluded the bad reason vitiated the refusal. Appeal to the Court of Appeal: [2018] EWCA Civ 250 (this judgment).