REFUSAL WITHOUT A CAUSE?

15 / 06 / 2022

When Party A transfers land to Party B but retains land that could be impacted by what is done on the sold land it can be convenient to limit the use of such land by requiring Party B to obtain Party A’s consent to uses or alterations before any changes are made. Frequently, to make the limitation less unappealing, Party B will have ensured that Party A’s consent is ‘not to be unreasonably withheld’. This arrangement is most frequently found in leases granted by Party A to Party B as tenant. However, it can also be found in restrictive covenants within freehold land transfers from Party A to Party B.

As with any arrangement involving the concept of  reasonableness, there is the potential for uncertainty about how to measure what is reasonable.  The recent judgment in the High Court case of Davies-Gilbert v Goacher and Chester has provided some useful guidance.

Mr Davies-Gilbert (Claimant) was the owner of a significant estate in East Sussex and Mr Goacher and Mr Chester (Defendants) each owned a parcel of land subject to restrictive covenants in favour of the Claimant’s neighbouring land (but not his whole estate) including one in the following terms:

(B) NOT to erect upon any part of the property hereby conveyed any other messuage erection building or wall whatsoever without such previous written licence as aforesaid such licence not to be unreasonably withheld.”

Each of the Defendants obtained planning permission to build a dwelling on their parcel of land and applied to the Claimant for his consent to erect the proposed buildings.  The Claimant refused to give his consent on the basis of:

  • The positive or negative impact of the proposal(s) on his neighbouring land;
  • The impact on the future anticipated use and value of his neighbouring land;
  • The impact on the amenity value of the estate land in the locality as a whole; and
  • The effect on boundary treatment and long-term maintenance.

Notwithstanding the refusal to consent, the Defendants started works in relation to their proposed development so the Claimant issued court proceedings to restrain the Defendants from carrying out their works.  The Defendants argued that the Claimant’s reasons lacked detail, the burden of proof was in their favour, the Claimant took into account considerations that went beyond the terms of the covenant, and the Claimant wrongly took into account aesthetic considerations.

The judge identified the following principles from case law:

  • The burden of proof is on the covenantor (in this case the Defendants) to prove that consent has been unreasonably refused;
  • The covenantee (in this case the Claimant) is not confined to the reasons expressly stated to the covenantor for refusing consent when giving his reasons in court;
  • If the covenantee has not given any reasons for refusing consent (which he does not have to do unless there is an express requirement) then the court may more readily imply that the refusal was unreasonable;
  • It is the covenantor (not the covenantee) who should offer conditions in the proposal which would obviate any grounds for refusal raised by the covenantee;
  • If an objection to an application for consent is based on aesthetic grounds, then it is not enough merely to say that the proposed building/alterations were not to the taste of the covenantee (or others entitled);
  • Simply because a ‘consideration’ has been taken into account by a covenantor does not mean it contributed to the ‘reason’ stated for the decision; and
  • Where the covenantee has refused consent for a mixture of good and bad reasons then the result will remain reasonable and will not be vitiated by the bad reasons.

Applying these principles, the judge found that the Defendants had not established that the Claimant had unreasonably refused to give consent notwithstanding that the Claimant had taken irrelevant considerations into account and relied on bad reasons as well as good reasons. 

The judge decided consent was refused because the development would have a detrimental impact on the amenity value of the wider estate and could threaten the future use and commercial value of the neighbouring land.  The first reason was a bad one as it related to land that did not benefit from the covenant.  The second reason was, however, found to be a good reason.

Key points

  • The relevant principles referred to by the judge indicate that the covenantor’s task in demonstrating that consent has been unreasonably withheld may not be an easy one.
  • The covenantor may have to address arguments raised by the covenantee for the first time in the court proceedings.
  • Each and every such reason put forward by the covenantee for refusing consent has to be a bad reason for consent to have been unreasonably withheld.