​Shebelle Enterprises Ltd v Hampstead Garden Suburb Trust Ltd

Abstract

Landlord and tenant – Covenant. The claimant tenant issued proceedings to restrain the defendant trust from consenting to substantial development, allegedly interfering with its right to quiet enjoyment under its lease. The judge dismissed the application and the claimant appealed. The Court of Appeal, Civil Division, in dismissing the appeal, held that reasonable parties would not have thought that the proper and bona fide performance by the trust of its duties under a statutory scheme could amount to a breach of the covenant for quiet enjoyment.

Summary

The judgment is available at: [2014] EWCA Civ 305

The claimant company owned a property under the terms of a 999 year lease dated 1931, which contained a covenant for quiet enjoyment (the covenant). The defendant trust was the freehold owner and lessor under the lease. In 1974, the trust obtained the High Court’s approval for a scheme of management to maintain and preserve the character and amenities of the area (the scheme). In 2012, the trust anticipated recommending the approval of neighbouring freeholders’ proposal to undertake substantial work. The claimant sought an injunction to restrain the trust from granting consent. It contended that the development would cause substantial damage to the property and that, by granting consent, the trust would be acting in breach of the covenant. The trust contended that its powers of control over the contested development were derived from the scheme and that their proper exercise for the public good could not constitute a breach of the covenant. The judge dismissed the claimant’s application, as the parties to the lease could not have contemplated that the covenant could be used to interfere with the trust’s proper performance of its role under the scheme, under which it owed a duty to act in the public interest. The claimant appealed.

It fell to be determined whether the proper and bona fide performance by the trust of its duties and obligations under the scheme could amount to a breach of the covenant.

The appeal would be dismissed.

It was well established that the covenant for quiet enjoyment operated to secure the tenant, not merely in the possession, but also in the ordinary and lawful enjoyment of the demised premises. The covenant was broken if the landlord did anything which substantially interfered with that right. However, the landlord’s responsibility further extended to others over whom he was able to exercise control. Accordingly, a landlord who had demised two neighbouring properties to different tenants would be liable for breach of the covenant if he authorised one tenant to act in a way which would interfere with the lawful enjoyment of the neighbouring property by the other tenant (see [22], [55], [56] of the judgment).

On the facts, reasonable parties would not have thought that the proper and bona fide performance by the trust of its duties under an arrangement such as the scheme could amount to a breach of the covenant. Further, the trust was not a public body, but it was exercising powers which had been approved by the High Court under the scheme and it was doing so for the public good. Reasonable parties to the lease should not be taken to have intended, by the words of the covenant, that it could be applied to prevent or fetter the proper and bona fide exercise by the trust of its powers under the scheme (see [42], [53], [55], [56] of the judgment).

Manchester, Sheffield and Lincolnshire Rly Co v Anderson [1898] 2 Ch 394 considered; Crown Lands Comrs v Page [1960] 2 All ER 726 considered; Molton Builders Ltd v City of Westminster London Borough Council 30 P & CR 182 considered; Johnston & Sons Ltd v Holland [1988] 1 EGLR 264 considered; Southwark London Borough Council v Mills, Baxter v Camden London Borough Council (No 2) [1999] 4 All ER 449 considered; Bromarin AB v IMD Investments Ltd [1999] STC 301 considered; Zenios v Hampstead Garden Suburb Trust Ltd [2011] EWCA Civ 1645 considered.
Decision of Henderson J [2013] All ER (D) 164 (Apr) affirmed.

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