BMR BAGSHOT LTD v DORCHESTER MANSIONS (1997) LIMITED

Lease covenants requiring consent to alterations may apply to extensive internal works even where the building’s principal structural frame is untouched. The relevant question is whether the works alter the form or structure of the demised premises, construed in the context of the lease as a whole. The court may consider established case law as part of the contractual background, while giving the words their natural meaning.

Technical defects in a company’s authorisation to commence proceedings do not automatically nullify an injunction where the defect is procedural, the company’s substantive decision is clear, and ratification remains possible. Costs remain a matter of broad discretion. An appellate court should interfere only for an error of principle, improper consideration or omission of relevant matters, or a plainly wrong conclusion.

The appeal arose from two orders made by HHJ Wood QC in the Liverpool County Court on 13 August and 9 October 2020. The respondent freeholder sought an interim injunction restraining the appellant leaseholder from carrying out extensive refurbishment works to a flat without the landlord’s consent.

The appeal concerned whether the works required consent under paragraphs 9 and 13 of Schedule 6 to the lease, whether defects in the freeholder company’s authorisation rendered the proceedings and injunction a nullity, and whether the judge had wrongly made no order as to costs.

1. Ground 1: construction of the lease. The appeal was properly concerned with the judge’s legal conclusion on construction, even though the injunction had expired. An appellate court may intervene where an injunction was granted on a misunderstanding of the law: Hadmor Productions v Hamilton [1983] 1 AC 191.
2. The proper approach was to construe the lease as a reasonable person would understand it, considering the natural and ordinary meaning of the words, the lease as a whole, its purpose, known background, commercial common sense and relevant case law: Arnold v Britton [2015] AC 1619. The background principle that parties contract against the legal context was consistent with that approach: Winter Garden Theatre (London) Limited v Millennium Productions [1948] AC 173.
3. Bickmore v Dimmer [1903] 1 Ch 158 established that “alterations” concern changes affecting the form or structure of the relevant premises. The test had to be applied to the demised premises, not necessarily to the structural frame of the whole building. Here, the demise was essentially the inner skin of the flat, including walls, floors and ceilings. The extensive removal and re-ordering of internal walls and ceilings was therefore capable of altering the form or structure of the premises and was caught by paragraph 9.
4. The surrounding covenants, including repair, redecoration, nuisance and appearance provisions, reinforced that construction. Paragraph 13 was also engaged because the works included new bathrooms and toilets and the alteration or replacement of existing water-consuming apparatus.
5. Grounds 2 and 3. Defects in the company’s authorisation did not nullify the proceedings or injunction. The defect was one of form rather than substance. The majority’s decision was clear, there was no evidence that a properly convened meeting would have produced a different result, and ratification remained possible. The judge was entitled to allow an opportunity to rectify the defect and provide that the injunction would fall away if proper authorisation was not supplied.
6. The decision to make no order as to costs was within the judge’s broad discretion. The appellate restraint applicable to costs decisions was correctly stated in Global Energy Horizons Corporation v Gray [2021] EWCA Civ 123. The appeal was dismissed. Costs were awarded to the respondent on the standard basis, summarily assessed at £35,000 inclusive of VAT.

• High Court (Chancery Division): appeal from orders of HHJ Wood QC dated 13 August and 9 October 2020; appeal dismissed and costs awarded to the respondent.
• County Court at Liverpool: interim injunction granted, subject to proper company authorisation; the injunction subsequently fell away when the required authorisation was not provided. No order as to costs.