89 Holland Park Management Ltd v Hicks

Under a restrictive covenant requiring approval of plans, drawings or specifications, the decision-maker may consider the interests of all persons entitled to the benefit of the covenant, including owners and occupiers of the benefited land. Relevant property interests are not confined to the structure or capital and rental value: amenity and, where appropriate, neighbouring trading interests may matter. Aesthetic objections may in principle be relevant, and a corporate decision-maker is not barred from making aesthetic judgments. The grounds of refusal must be assessed as a question of fact and degree at the date consent is sought, without rigid rules based solely on the covenant’s original purpose. In staged covenants, structural issues capable of resolution through detailed design and management may be reserved for the later construction-approval stage. Where good and bad reasons are combined, the decision survives if the good reason would independently have produced the same result.

The respondent acquired land adjoining a building whose freeholder was the appellant company. Earlier litigation established that the restrictive covenants governing development were enforceable and that consent could not be unreasonably withheld: [2013] EWHC 391 (Ch). The respondent later sought approval for a revised house design under two covenants. The company refused consent on aesthetic, environmental, amenity and construction grounds.

The High Court held that the company could consider only its own reversionary and structural interests. It held that aesthetic and environmental objections were unavailable, declared consent under clause 2(b) unreasonably withheld, and declined to make a similar declaration under clause 3: [2019] EWHC 1301 (Ch). The appeal concerned the permissible interests and grounds relevant to consent, the distinction between the two approval stages, and the effect of a decision based on both good and bad reasons.

Disposition. Lord Justice Lewison gave the judgment, with Flaux LJ and Holroyde LJ agreeing. Ground 1 succeeded and the declaration was set aside. Ground 3 failed. The matter was remitted to the Chancery Division to determine whether the aesthetic and environmental objections were reasonable.

1. The judge had adopted too narrow a view of the interests protected by the covenants. The covenants benefited the building as a physical entity, and section 78 of the Law of Property Act 1925 treated them as made with successors in title and persons deriving title under the covenantee, including owners and occupiers for the time being. The company was therefore entitled to take the leaseholders’ interests into account.
2. Relevant property interests were not confined to the structure, or to capital and rental value. They could include amenity value and trading interests connected with the enjoyment of the benefited property. Aesthetic objections could therefore be relevant. Lambert v FW Woolworth & Co Ltd (No 2) [1938] Ch 883 and Cryer v Scott Brothers (Sunbury) Ltd (1988) 55 P & CR 183 demonstrated that objections based on appearance, being out of keeping, or adverse effects on amenities could in principle be considered. A company was not incapable of making aesthetic judgments.
3. The question whether such objections were reasonable remained one of fact and degree, measured at the date consent was sought. The court should not impose rigid rules by over-refined reference to the original purpose of the covenant. The approach in Sequent Nominees Ltd v Hautford Ltd [2019] UKSC 47, [2020] AC 28, including its discussion of Bickel v Duke of Westminster [1977] QB 517, supported that conclusion.
4. The distinction between clauses 2(b) and 3 was upheld. Clause 2(b) preceded the planning application, whereas clause 3 required definitive plans and specifications before construction. Structural concerns could justify refusal under clause 2(b) where movement and resulting damage were considered probable and could not practically be avoided through detailed engineering design and management. Issues capable of resolution in that way were relevant to clause 3. On the judge’s findings, the construction concerns did not justify refusal under clause 2(b).
5. Where consent is refused for a mixture of good and bad reasons, the decision remains effective if it would have been the same without reliance on the bad reason. Since the aesthetic reasons were the most important and were potentially valid, the judge had to determine their reasonableness rather than grant the declaration.

1. Court of Appeal (Civil Division): The appeal was allowed in part. The declaration under clause 2(b) was set aside and the issue of reasonableness of the aesthetic and environmental objections was remitted. [2020] EWCA Civ 758.
2. High Court of Justice, Business and Property Courts: The court declared that consent under clause 2(b) had been unreasonably withheld, but declined a similar declaration under clause 3. [2019] EWHC 1301 (Ch).