Eaton Mansions (Westminster) Ltd v Stinger Compania De Inversion SA [2011] EWCA Civ 607

We’re a bit late with this one, sorry. There was a bit of a debate about whether it was an NL case or not, but I found it interesting and it concerns residential leases, so here we are.

This was Stinger’s appeal of a High Court decision that it was trespassing on the roof of the building (Eaton Mansions, obviously). Stinger held leases of 2 flats in the building. Eaton Mansions (Westminster) Ltd were the head lessee, being a management company owned by all the lessees of flats.

Stinger had placed some air conditioning units on the roof of the building, serving its flats. In fact, between 1980 and 2008, there had been quite a number of units, with associated pipework and condensers, added to the roof by Stinger, or replacing earlier units. Eaton Mansions apparently knew about the first three units added in 1980 and had agreed them. No consent or approval was sought by Stinger in relation to the later units until new units were to be fitted in 2008.

The head lease – Eaton Mansions’ – contained a covenant as follows:

No alteration shall … be made in the construction height elevation external or internal architectural appearance or internal arrangements of the demised premises or any part thereof or in the chimney stacks or chimney pots thereof …

Each of the subleases contained a similar provision.

In 2006, through 2007 and into 2008, there was correspondence and site visits involving the freeholder, Eaton Mansions and Stinger concerning installation of new air conditioning units as Stinger carried out works on the flats. There were also planning permission issues on proposed new air con units. At no point was permission granted for the air con units and by February 2008, Stinger were told to remove the two remaining units and make good walls and chimneys. Condensing untis remained in situ.

There were further discussions, and in late 2008, without any express permission, Stinger installed two new air con units and refused to remove them. Eaton Mansions brought a claim for an injunction requiring the removal of units and pipework and damages, a trespass claim. Stinger initially defended on the basis of estoppel, that the course of dealing and the history precluded Eaton Mansions from objecting to the installation of the equipment, in view of the previous 30 years in which installations had been in place. This was amended to a defence that

EMW represented that it did not and would not object to leaseholders maintaining on the block a reasonable amount of air conditioning apparatus and that the grant of consent to this would not be unreasonably withheld or delayed in respect of air conditioning apparatus of reasonable quality and size in a reasonable position.

The alleged withholding of consent by Eaton Mansions was therefore unreasonable and could not be held to support a claim in trespass.

At first instance, on Eaton Mansion’s application for summary judgment, Wyn Williams J held that there was no basis for saying that Eaton Mansions had unreasonably refused consent before December 2008 as Eaton Mansions had always taken the view that the headlease meant that it ran the risk of being in breach of covenant if it gave consent without previously knowing the position of the freeholder, the Grovesnor Estate. In the light of discussions between Stinger, Eaton Mansion and agents for the freeholder in late 2009, it was clear that the freeholder would not have consented to the proposed air con units in 2008.

Stinger appealed. They argued that
i) the Judge had wrongly failed to apply by analogy the law relating to qualified covenants as between landlord and tenant, and that it had not been open to him to conclude that there were no factual issues requiring investigation and decision at a trial.
ii) Eaton Mansions’ reliance on the attitude of the freeholder could only justify its refusal of consent if it was established that, at the time when consent was refused (i.e. the issue of the proceedings), Eaton Mansions reasonably understood the position of the freeholder to be that all or some aspects of that for which consent was sought did or would amount to a breach of the headlease Covenant, and that the freeholder had refused to consent to the work being done despite the terms of that covenant.
iii) that the party whose consent is required can only justify refusal by reference to reasons which it did rely on at the time of the refusal of consent, and secondly on the fact that there is no evidence of what was, at the relevant time, in the mind of those who took the decision to start proceedings rather than to consent to the request by Stinger.
iv) that it was by no means clear that Stinger’s request was for something that would be a breach of the headlease Covenant.

The Court of Appeal held that Stinger’s underleases gave no right to place anything on the roof, even with Eaton Mansions’ consent, qualified or not. The 1980 agreement gave no rights in relation to the later equipment.

The estoppel reliance went nowhere. It would be “artificial, inappropriate and unjust” to say that the position between Eaton Mansions and Stinger in 2008 and 2009 should be considered in the same way as if there was a right in the underlease to place the equipment subject to Eaton’s qualified right to refuse its consent.

It followed that the argument that the only grounds for refusal that fell to be considered were those in the mind of Eaton Mansions at the time of refusal must be rejected. Neither Stinger not Eaton approached the matter as if it was an issue of qualified consent at the time.

Eaton were entitled to take a cautious view of the attitude of the freeholder. ” If the Grosvenor Estate had declined to commit itself to the proposition that what was proposed was not a breach of the Headlease Covenant, or that if it was, the Grosvenor Estate would not object to it being done, EMW could not be expected either to force the issue or to put itself at risk by giving consent to something that might expose it to a claim for breach of covenant.”

It would not have been unreasonable for Eaton Mansions to refuse consent unless the freeholder had confirmed that the proposals did not amount to a breach of the head lease, or that it would waive the breach.

Stinger were aware that the freeholder had not given any such confirmation, but still demanded Eaton Mansions’ consent in December 2008, then went ahead anyway.

On the available evidence, it appeared that while the freeholder was prepared to engage with Stinger over its proposals, a cautious approach was taken. Even any prospective consent was only mentioned as a revocable licence. There was no reason to assume that consent would be forthcoming from the freeholder.

Accordingly, the Judge below was well entitled to find that “there is no realistic possibility that the Defendant can show that the Claimant has unreasonably refused its consent for the retention of the apparatus” and so no prospect of Springer defending the claim. Appeal dismissed.

On the issue of indemnity costs, awarded against the Defendant at first instance, Stingers’ conduct of the litigation was unreasonable, both in the lack of proportion of its approach (for instance a costs schedule of £150,000 for the application for permission to appeal and a one day appeal hearing, or £47,000 for an application to adduce further evidence), and in its high handed conduct before litigation. Although the Judge below was wrong to include Stingers’ application to amend its defence in its unreasonable conduct – this being hardly uncommon – the other two factors did indeed justify indemnity costs against them.