Azhar Shah & Ors v Colvia Management Co Ltd [2008] EWCA Civ 195

[2008] EWCA Civ 195Case No A3 2008/0016
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ANTHONY ELLERAY QC sitting as a Deputy High Court Judge
HC07C01115
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 18 March 2008
Before
LORD JUSTICE PILLLORD JUSTICE MAURICE KAYLORD JUSTICE LLOYD
Between
SYED MOHAMMED AZHAR SHAH AND OTHERSClaimants / RespondentsCOLVIA MANAGEMENT CO LTDDefendant / Appellant
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Michael King (instructed by Wellers) for AppellantMartin Young (instructed by H Montlake & Co) for RespondentsHearing Hearing date: 29 February 2008
Judgment
[1]This appeal concerns an attempt to regulate the use of congested car parking areas forming part of the Barking Industrial Park. The estate comprises 87 industrial units, with areas for parking which, at the trial, were estimated to be capable of providing parking for some 350 to 370 vehicles. This space is inadequate to meet current demands.[2]The estate was developed by Barking Industrial Park Ltd, which sold off the individual units on 999 year leases in standard terms. The Appellant, Colvia Management Co Ltd, was set up to be the management company for the estate, on the basis that each leaseholder would be a shareholder and, once all the units had been sold, Colvia would be owned and controlled by the lessees themselves. That has happened, and moreover Colvia has since then taken a transfer of the freehold reversion, so that the lessees control not just the management but also the ownership of the estate.[3]It may well be better for the lessees that they, between them, own and control the freeholder and the management company than if the freeholder or the management company, or both, were a third party at arms’ length. However, in a sense this collective ownership merely transfers the consideration of conflicting demands to a different forum, namely meetings of the management and the shareholders of the company. Ultimately, if the course taken by the company, following decisions taken by the majority vote of the shareholders, is not accepted by one or some of the lessees, then, absent some issue of company law (which does not arise in the present case), the resolution of the dispute must turn on the rights and obligations of the parties under the respective leases, just as it would if the landlord or the management company were at arms’ length from the lessees.[4]In the present case two practical problems have arisen as regards the provision for car parking. One is that the local authority levied non-domestic rates on Colvia in respect of the parking areas for the first time in 2006, in the sum of £33,000 or so, which presented Colvia with the need to raise the money to pay this liability. The other is that the space available is inadequate for the demand, and that some occupiers, including the Claimants, run vehicle repair businesses and need more space in the parking areas than most other types of business.[5]The Claimants between them run six car repair businesses, and there are said to be up to another 15 such businesses on the estate. The use to which units are put is subject to planning control, and of course also to market pressures, but the landlord and the management company have no control under the lease as to the use to which any unit is put. In theory, yet more units could be devoted to car repair businesses. Car repairers have a particular need for space outside their units on which to place cars awaiting repair, which they cannot house within their units. Between them, the six Claimant businesses need up to some 75 car parking spaces in order to accommodate vehicles awaiting inspection and then repair, as well as courtesy vehicles for use by customers while a vehicle is being repaired. Other types of business are also said to have a high demand for the use of parking spaces, particularly during the day, such as shop fitters.[6]These factors lead to the car parking spaces being filled up early in the morning, so that, typically, by about 8.30 or 9 there is no vacant space to be found in the car parking areas. That creates a severe problem both for staff arriving any later than that for work at any of the units and also for visitors such as customers, couriers, suppliers and others, arriving during the day. The shortage of space leads to the use for parking of areas which are not allocated for such use, causing further congestion, and potential danger if emergency vehicles were to require access. It is common ground that something has to be done about this. The Claimants’ expert, Mr Cutting, recorded that “significant congestion existed on the site” on the occasion of his visit to the site in late July 2007. He had to wait for 10 minutes in his car while HGV’s worked out how to pass one another. His car had to be parked across the back of other cars, effectively blocking them in. It was impossible to drive down some of the intermediate service roads without asking people to move their cars. He saw no empty car parking spaces during his visit.[7]Problems are known to have existed since early in the 1980’s when the estate was new. A survey of tenants was undertaken in the late 1980’s but this cannot now be found. Later, in 2000, the car parking areas were given proper surfaces, so as to encourage their use. At that time there was already an issue with the extent of use of the car parking areas by car repairers. Particular areas were allocated to car repairers, but these were not adhered to. Then a colour coded system was introduced, to allocate space between different uses or businesses. This was difficult to police. In 2003 there was a further allocation of space to some car repairers. Also at that time yellow lines were painted on some areas, and also yellow junction boxes, to improve parking and traffic control, but this was also ignored, and could not be effectively policed. At other times, including in 2006, a system of placing stickers on cars for removal was used, but this did not work (at any rate in the early period) because the cars which were removed (at Colvia’s expense) were not always reclaimed. Some of them may not have been worth reclaiming. The Claimants’ witnesses considered that the sticker system could have worked properly if it had been properly policed, but its effect was in fact limited, for whatever reason. Colvia also introduced a car disc system in 2006, but this did not apply to vehicles under repair or courtesy cars of the car repairers. Thus, none of these systems of control worked well enough to deal with the problem of the shortage of spaces and the particularly high need for spaces on the part of some businesses, especially the car repairers.[8]So far as the rates liability was concerned, the local authority first sought to charge rates on the car parking spaces to individual lessees or occupiers of units, but this failed as they pointed out that they had no right to any allocated space. After the council had charged rates to Colvia, the latter first sought to pass this on to lessees in proportion to the number of spaces which it thought each was using. This was greeted with strong protests, and the demands were withdrawn, to be replaced by a charge by reference to rateable values, which corresponds with the service charge provisions in the leases. That led to further protest because of the substantial difference between the extent of use of car parking spaces by some businesses (such as the car repairers) as compared with others.[9]The management of Colvia considered how to deal with these issues. General meetings were held in January, February and March 2007 to discuss this. In the course of these meetings a proposal was developed for the banning of overnight parking, with limited exceptions, for which payment would have to be made, in order to reduce the extent to which the car park is used on a long term basis and also to free up space first thing in the morning, so that potential users arriving in the morning should not find so many spaces already occupied by vehicles which had been there overnight. Colvia came to an arrangement with a company called ISTM Group Ltd for the management of the car parking scheme. The scheme was approved by a majority of about 64% to 36% of those voting, the car repairers forming the bulk of the minority.[10]In March 2007, Colvia gave notice to occupiers (including subtenants of the lessees) of a parking control scheme to be introduced from 1 May 2007, and ISTM gave notice of the details of the scheme. It has been modified in some respects, including during the proceedings. What is at issue is the validity of the scheme as so modified. The Claimants issued proceedings on 25 April 2007. Colvia deferred the introduction of the scheme, first by agreement and later pursuant to an interim injunction pending a speedy trial. The trial came on before Mr Anthony Elleray Q.C. sitting as a Deputy Judge of the Chancery Division on 11 to 13 December and he gave judgment for the Claimants on 14 December, declaring that the scheme was unreasonable in two respects. Since the lessees are only bound to comply with reasonable rules and regulations, the consequence is that the scheme is not valid or effective.[11]On several points I agree with the judge. Although, for reasons which I will explain, I consider that his conclusion that the scheme was unreasonable was not correct, I would pay tribute to his speed and diligence in producing a long judgment on the day after the end of the three day trial, including a full review of the extensive factual and expert evidence given during the trial.

The leases

[12]The leases were, relevantly, in standard terms. Each lease granted to the lessee, for the term, the relevant unit together with rights set out in the Second Schedule. These included the following relevant provisions:
“(i) the right to pass and repass on foot only over and along the footpaths and with or without vehicles to pass and repass only over and along the accessways roads and rights of way shown on the plan annexed hereto but only insofar as is necessary for gaining access to or egress from the demised premises and subject to compliance by all persons exercising such rights with all reasonable regulations directions and signs as may be made or erected by the Company or the landlord for controlling the free flow of traffic throughout the estate … (iii) the full right and liberty for the Tenant and all persons authorised by him (in common with all other persons entitled to the like right) to use the car parks on the Estate and the amenity land on the Estate for the purpose from time to time allocated by the Company and subject to such reasonable rules and regulations for the common enjoyment thereof as the Company may from time to time prescribe.”
That last proviso is at the heart of this case.[13]The tenant’s covenants with the landlord, the Company and the other tenants for the time being are set out in clause 3. Of these I should quote all or parts of four:
“(xvi) … not to obstruct or permit to be obstructed any roads or accessways on the Estate Provided That this shall not prevent the Tenant from loading or unloading vehicles where necessary for the carrying out of his trade or business such loading or unloading to be done as expeditiously as possible and so as to cause the minimum of inconvenience to the other owners or occupiers of units on the Estate; (xvii) Not to allow vehicles to be permanently parked in any area set aside for parking and not to allow any vehicle to be maintained or repaired on any road accessway or on any part of the other land on the Estate apart from that area demised by this Lease … (xx) To comply with and observe all regulations which the Company may from time to time make in general meeting consistent with the provisions of this deed to govern the use of the units and the common parts roads accessways and amenity land on the Estate which regulations may be restrictive of acts done on the Estate detrimental to its character and amenity or the rights of other owners or occupiers of units contained within the Estate (xxi) to contribute and pay on demand (a) the proportionate part set out in the [Fourth] Schedule hereto of all costs charges and expenses from time to time incurred or to be incurred by the Company in performing and carrying out the obligations and each of them on the part of the Company herein contained including all administrative and other expenses as set out in the Fourth Schedule hereto (b) such amount as may from time to time be required by the Company for the proper performance of its said obligations on account of the sum payable pursuant to paragraph (a) of this sub-clause …” (a) the proportionate part set out in the [Fourth] Schedule hereto of all costs charges and expenses from time to time incurred or to be incurred by the Company in performing and carrying out the obligations and each of them on the part of the Company herein contained including all administrative and other expenses as set out in the Fourth Schedule hereto (b) such amount as may from time to time be required by the Company for the proper performance of its said obligations on account of the sum payable pursuant to paragraph (a) of this sub-clause …”
[14]The Fourth Schedule provides for the division between the lessees in proportion to the rateable values of the various units of “the total cost to the Company of providing the services and performing its obligations as contained in the Fifth Schedule”. Paragraph (ix) of the Fifth Schedule deals with the payment of all rates or taxes from time to time payable in respect of the common areas.[15]Thus, if and to the extent that the rates payable on the car parking areas were part of the sums recovered by Colvia from lessees by way of the service charges, all lessees would bear a proportion corresponding to the rateable value of their respective units and thus probably, broadly speaking, according to the floor space of the relevant unit. One of the Respondents’ contentions is that the car parking regulation scheme ought not to lead to a different incidence of the burden of the rates liability from that provided for under the service charge provisions.

The proposed scheme

[16]The scheme as proposed at the time of the trial was essentially as follows. Parking was to be prohibited anywhere in the common areas of the estate between 9pm and 5.30am, subject to four exceptions.(1) Seventy parking spaces are to be available for overnight parking, each available for rent on an annual or a quarterly basis. The charges originally applied differently to lessees and sub-tenants, but they are now uniform (and lower), at £2 per day on an annual basis or £3.50 if rented quarterly.(2) Six bays are to be available for dropping off cars for repair overnight, which must be removed by 10am. There is no charge for the use of these bays.(3) Fifteen bays are available for heavy goods vehicles or commercial vans, for rent at £1 per space for 24 hours.(4) Ten bays are to be available for short-term parking, a facility administered by Colvia, rather than by ISTM. Occupiers are to be free to load and unload outside their units for 20 minutes. Subject to that, offending vehicles are liable to be removed to a pound, with a removal charge of £265, and also storage charges, payable for the recovery of the vehicle.[17]The contract with ISTM was to last for a year at least, but could be brought to an end after one year, so that the scheme would not necessarily last any longer than 12 months. Under the contract, Colvia was to receive two thirds of the sums payable by way of parking charges, with ISTM taking the rest. Colvia stated that it intended the scheme to be reviewed after 9 months in the light of practical experience.[18]The Claimants do not dispute that some form of regulation of car parking is necessary. By an open offer made before the trial, they offered to agree to a scheme along broadly the same lines as that described above, if the controlled period were reduced so as to last only from midnight to 2am, and if all 70 overnight spaces were allocated to them, at a rental of £300 per annum per space.

The Claimants’ challenge to the scheme

[19]In the Particulars of Claim the Claimants contended that the scheme as originally proposed would not be reasonable for three reasons: i) It would affect the Claimants’ businesses disproportionately, because many vehicles brought to them for repair are damaged to the extent that they cannot be driven and have to be left overnight until repaired and collected after repair. ii) It would impose an unreasonable restriction on vehicles being left overnight in the parking area. iii) It would have the effect of producing significant income for Colvia at the expense of the Claimants whereas the effect of the service charge provisions of the leases is that Colvia should recover a proportionate part of the relevant costs from each lessee. The second of these points does not seem to be truly an independent point, rather than a different way of putting the first.[20]Each party adduced expert as well as factual evidence. The Claimants’ expert, Mr Cutting, recognised that some form of rationing of parking was necessary to reduce the congestion, and said that it should take the form either of allocation or of pricing, the latter being the easier to manage, the cost charged being increased (if necessary) to the point at which demand did not exceed supply. He doubted whether the scheme as proposed would work in practice, and said that the cost was likely to be disproportionate to the benefits, and to the cost of running and maintaining the car parking scheme. He proposed a different basis for a scheme, including possibly categorising certain areas for use by the car repairers, as external storage rather than as car parking (a proposal which would require the unanimous consent of all lessees, given the terms of the leases), and otherwise he suggested a pay and display system for all parking bays, policed effectively by day and by night, at a level of charge which reduced the demand so as broadly to match the space available. These views do not, for the most part, correspond with or support the Claimants’ contentions as set out in the Particulars of Claim. The Defendant’s expert, Mr Joseph, expressed the view that the proposed scheme was reasonable.

The law

[21]Provisions in a lease under which the landlord can exercise some control over what the tenant does, subject to a requirement of reasonableness on the part of the landlord, are very familiar, especially in the context of assignment and underletting, and alterations. This is not quite the same, since Colvia, in promulgating the scheme, is acting as management company, not as landlord. Nevertheless, and despite the ownership of the management company by the lessees, it seems to me that cases about assignment or alterations provide a useful analogy.[22]In International Drilling Fluids Ltd v Louisville Investment (Uxbridge) Ltd [1986] Ch 513, at 519 to 521, which was about assignment and change of use, Balcombe LJ drew together seven principles from previous cases. Not all of them are relevant to the present situation, above all because Colvia has no other position or interest than as management company, unlike many landlords. The full passage is as follows: “During the course of argument many cases were cited to us, as they were to the judge. I do not propose to set them out in detail here; many of the older cases were considered in the full judgment of the Court of Appeal in Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547. From the authorities I deduce the following propositions of law.(1) The purpose of a covenant against assignment without the consent of the landlord, such consent not to be unreasonably withheld, is to protect the lessor from having his premises used or occupied in an undesirable way, or by an undesirable tenant or assignee: see per A L Smith LJ in Bates v Donaldson [1896] 2 QB 241 at 247 approved by all the members of the Court of Appeal in Re Gibbs & Houlder Bros & Co Ltd’s Lease [1925] Ch 575.(2) As a corollary to the first proposition, a landlord is not entitled to refuse his consent to an assignment on grounds which have nothing whatever to do with the relationship of landlord and tenant in regard to the subject matter of the lease: see Re Gibbs & Houlder Bros & Co Ltd’s Lease, a decision which (despite some criticism) is binding on this court: see Bickel v Duke of Westminster [1977] QB 517. A recent example of a case where the landlord’s consent was unreasonably withheld because the refusal was designed to achieve a collateral purpose unconnected with the terms of the lease is Bromley Park Garden Estates Ltd v Moss [1982] 1 WLR 1019.(3) The onus of proving that consent has been unreasonably withheld is on the tenant: see Shanley v Ward (1913) 29 TLR 714 and Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547 at 564.(4) It is not necessary for the landlord to prove that the conclusions which led him to refuse consent were justified, if they were conclusions which might be reached by a reasonable man in the circumstances: see Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547 at 564.(5) It may be reasonable for the landlord to refuse his consent to an assignment on the ground of the purpose for which the proposed assignee intends to use the premises, even though that purpose is not forbidden by the lease: see Bates v Donaldson [1896] 2 QB 241 at 244.(6) There is a divergence of authority on the question, in considering whether the landlord’s refusal of consent is reasonable, whether it is permissible to have regard to the consequences to the tenant if consent to the proposed assignment is withheld. In an early case at first instance, Sheppard v Hongkong and Shanghai Banking Corp (1872) 20 WR 459 at 460 Malins V-C said that by withholding their consent the lessors threw a very heavy burden on the lessees, and they therefore ought to show good grounds for refusing it. In Re Gibbs & Houlder Bros & Co Ltd’s Lease [1925] Ch 575 at 584 Warrington LJ said: ‘An act must be regarded as reasonable or unreasonable in reference to the circumstances under which it is committed, and when the question arises on the construction of a contract, the outstanding circumstances to be considered are the nature of the contract to be construed and the relations between the parties resulting from it.’ In a recent decision of this court, Leeward Securities Ltd v Lilyheath Properties Ltd (1984) 271 EG 279, a case concerning a subletting which would attract the protection of the Rent Act, both Oliver and O’Connor LJJ made it clear in their judgments that they could envisage circumstances in which it might be unreasonable to refuse consent to an underletting, if the result would be that there was no way in which the tenant (the sub-landlord) could reasonably exploit the premises except by creating a tenancy to which the Rent Act protection would apply, and which inevitably would affect the value of the landlord’s reversion. O’Connor LJ said (at 283): ‘It must not be thought that, because the introduction of a Rent Act tenant inevitably has an adverse effect upon the value of the reversion, that that is a sufficient ground for the landlords to say that they can withhold consent and that the court will hold that that is reasonable.’ To the opposite effect are the dicta, obiter but nevertheless weighty, of Viscount Dunedin and Lord Phillimore in Viscount Tredegar v Harwood [1929] AC 72 at 78, 82. There are numerous other dicta to the effect that a landlord need consider only his own interests: see, for example, West Layton Ltd v Ford [1979] QB 593 at 605 and Bromley Park Garden Estates Ltd v Moss [1982] 1 WLR 1019 at 1027. Those dicta must be qualified, since a landlord’s interests, collateral to the purposes of the lease, are in any event ineligible for consideration: see paragraph (2) above. But in my judgment a proper reconciliation of those two streams of authority can be achieved by saying that while a landlord need usually only consider his own relevant interests, there may be cases where there is such a disproportion between the benefit to the landlord and the detriment to the tenant if the landlord withholds his consent to an assignment, that it is unreasonable for the landlord to refuse consent.(7) Subject to the propositions set out above, it is, in each case, a question of fact, depending on all the circumstances, whether the landlord’s consent to an assignment is being unreasonably withheld: see Bickel v Duke of Westminster [1977] QB 517 at 524 and West Layton Ltd v Ford [1979] QB 593 at 604, 606.” ‘An act must be regarded as reasonable or unreasonable in reference to the circumstances under which it is committed, and when the question arises on the construction of a contract, the outstanding circumstances to be considered are the nature of the contract to be construed and the relations between the parties resulting from it.’ ‘It must not be thought that, because the introduction of a Rent Act tenant inevitably has an adverse effect upon the value of the reversion, that that is a sufficient ground for the landlords to say that they can withhold consent and that the court will hold that that is reasonable.’[23]Of those seven propositions, the third and the fourth have particular relevance to the present case. Above all, it is for those who assert that the scheme is unreasonable to prove that it is. In order to prove this, it has to be shown that the basis on which the decision to promulgate the scheme was founded was not one which a reasonable landlord (or, here, management company) could have adopted in the circumstances.[24]That proposition has something in common with aspects of the familiar public law test of unreasonableness: see Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223. Counsel mentioned that case in their written submissions to us. However, it seems to me that this is a misleading and potentially confusing analogy, to which resort should not be had in a private law case such as the present.[25]The tension in the present case is not between an individual tenant and a landlord at arms’ length with its own independent interests, which might include the ownership of adjoining property. However, it is between, on the one hand, one or more tenants who are differently affected by a regulation as compared with others and, on the other hand the general body of tenants including those who are less unfavourably affected by the proposed regulation, but are affected by the problem to which the regulation is intended as a solution. The mechanism for regulation requires action by the Company, of which all lessees are members, so that they can vote at a general meeting called to consider the proposal to make the regulation.[26]As the judge put it, the Claimants’ primary challenge to the scheme was that it would make those who require significant overnight parking, that is to say the vehicle repairers, pay the rates bill on the car parking areas through the charges for overnight parking, leaving other occupiers to use the parking facilities both free in terms of car parking charges and without having to contribute through the service charge to the rates on the parking areas. The basis on which he held the scheme to be unreasonable was, first, that Colvia had not researched or considered the proper local market rate for overnight parking spaces. At paragraph 118 of his judgment he said this:
“I have heard no evidence that the company considered or researched a proper overnight space rental figure. It is true that neither Mr Cutting nor Mr Joseph suggests that the particular figures of which notice had been given in reference to the overnight scheme were unreasonable, but the evidence before me is that the figures given in that notice and indeed the reduced figures since offered by the company have been calculated simply in reference to the need to generate sufficient income for the company to meet the rates.”
[27]Following this up, at paragraph 132 to 133 he said this:
“132. It is not on this point contended, and I do not consider it unreasonable, to introduce the overnight ban. A criticism of earlier allocation of bays to, for example, vehicle repairers was that it was not properly policed. The current scheme seeks, by the employment of outside agents, in particular ISTM, such proper policing. In my view, the scheme might not have been unreasonable if the company had considered or researched the proper Barking market value for such overnight spaces, in the circumstances that members have, up to now, never needed to pay for parking on the estate and, further, the relatively limited margins in a car repair business and the fact that, properly policed, the use of some bays overnight might raise some useful income but does not, in fact, affect the vast majority of unit-holders who do not want to park overnight. In reference to proper demand, it may have been necessary, and in my judgment would have been quite proper, to ration these overnight bays by price. 133. The exercise under that consideration, including the consideration and research I have mentioned, was not, as I find, carried out. The price was only seized upon, including in its later reductions on offer, by reference to meeting the ISTM costs of the scheme and the annual rates bill for the car park. Those two items are inherently matters to be raised from all tenants or sub-tenants from the service charges, not from particular tenants or a group of tenants. It may be, for example, in due course or time of consideration by the company as to daytime policing to properly ensure accessways are kept free of cars, that it may decide ultimately, in connection with the proper policing of the area, to raise car parking charges and in consequence have to employ, either directly or indirectly, the equivalent of parking attendants. It will doubtless seek, by way of service charge, to recover relevant costs from all the tenants. As a matter of principle, in my judgment, the essential approach in relation to the overnight charges of ISTM and the rates should have been to charge all tenants, but that is not to render unreasonable whether, as part of the overnight ban more generally, the charging of a proper price, having regard to the market, the needs and the value of spaces, for use by those who apply to and take the overnight bays now being allocated, which, in all likelihood and probability, are going to be vehicle repairers such as the Claimants, since they have the need for the overnight parking.”
[28]So he appears to rely on two points: first, there was no assessment of the local market rate for overnight parking charges, and secondly, even though it would be proper to ration the use of overnight bays by price, inherently the rates bill for the parking area should be borne by the lessees as a whole. The second of these points is one of the points taken by the Claimants in the Particulars of Claim, but the first is not, and no evidence was put in to suggest that the proposed rates were out of line with other local charges or were otherwise unreasonable in themselves. However, it seems to me, looking at those passages closely, that although he does refer to the lack of research as to the local market, the main point he is making is a different one, namely that, instead of considering local market rates, Colvia merely worked out rates which would enable it, from the net amount payable to it under the ISTM contract, to cover the rates bill on the car park. Taken with his comments about what should be borne from the service charge, it seems to me that the judge’s main point is not the negative factor of the failure to carry out research by itself but the corresponding positive factor, that Colvia was looking to meet the rates bill, and that this was an improper purpose, which tainted the scheme, even if it would otherwise have been reasonable in itself.[29]The judge considered and rejected other challenges to the scheme, such as that it would not be effective, and that 9pm is too early a starting time for the overnight parking ban. To give effect to his decision that the scheme was unreasonable, his order contains a declaration as to two grounds of unreasonableness:
“The parking scheme proposed by the Defendant for implementation at Barking Industrial Park is declared unreasonable on the grounds that (a) in determining the amount of the charges for parking in allocated bays provided for under the said scheme the Defendant failed to carry out any research as to the proper market value to be charged for such parking; and (b) in determining the amount of the charges for overnight parking provided for under the said scheme the Defendant took into account matters which were not relevant to the exercise of its power to make regulations to regulate parking contained in the various leases of units on the said Barking Industrial Park.” (a) in determining the amount of the charges for parking in allocated bays provided for under the said scheme the Defendant failed to carry out any research as to the proper market value to be charged for such parking; and (b) in determining the amount of the charges for overnight parking provided for under the said scheme the Defendant took into account matters which were not relevant to the exercise of its power to make regulations to regulate parking contained in the various leases of units on the said Barking Industrial Park.”
[30]The second of those declarations is presumably intended to cover the point that the rates liability ought to be recovered by way of service charge, not by car parking charges.[31]Colvia appeals, complaining of the judge’s reliance on its failure to research the local rates of charge, there being no evidence that the rates charged were unreasonable, and of his rejection of the scheme despite having accepted that in its main features (that is to say, an overnight ban, and rationing by price, by way of parking charges) it was reasonable.[32]For their part the Claimants contend, by a Respondent’s Notice, that the judge should have rejected the scheme on other grounds as well:(a) the scheme would not work better than other methods, including the proper enforcement of covenants in the leases,(b) the cost to those needing to park overnight is disproportionate to the benefit to be gained, and(c) it was unreasonable to start the ban at 9pm rather than at midnight. Neither the first nor the third of these points was taken in the Particulars of Claim.

Discussion

[33]So far as the Respondent’s Notice is concerned, I would reject the first and third grounds taken, even if, despite lack of mention in the Particulars of Claim, it is proper for the Respondents to take them at all. The judge rejected the third point specifically, and it seems to me that it cannot be said that an overnight ban is reasonable in principle, but that one starting at 9pm rather than at midnight is unreasonable. That sort of detail is one on which a variety of views might reasonably be held. One essential point would be that the ban should apply for long enough during night time hours for ISTM to have the time it needs to apply its policing and enforcement procedures each night.[34]As to whether the scheme would or would not work better than alternative approaches might, it is clearly relevant that several different approaches have been tried unsuccessfully, because occupiers and their staff and visitors will not comply. It seems to me plainly within the range of reasonable views that something different and more easily enforced should be attempted at this stage.[35]As to the second point in the Respondent’s Notice, which is within the generality of the points taken in the Particulars of Claim, I take the view in this respect as well that it is not outside the range of possible reasonable attitudes to take the view that, in the light of history, this new scheme should be put in place and tried out, and that the benefits as regards parking generally would not be out of proportion to the disadvantages to car repairers. Some parties, after all, are bound to suffer disadvantages from any scheme of regulation, and it cannot be supposed that the pattern of disadvantage would be evenly distributed among lessees or occupiers.[36]In this context, we were shown a recent decision of the Court of Appeal, Montrose Court Holdings Ltd v Shamash [2006] EWCA Civ 251, also a case about the regulation of parking, though in a domestic context, in the course of which Chadwick LJ said, at paragraph 27:
“It is important to appreciate that the regulations are intended to operate for the benefit of all who have the right to park. It is a common feature of regulations of this nature that a regulation which is intended to operate for the benefit of members of a group as a whole may have the effect of restricting the way in which each member of that group is able to enjoy his rights. The restriction of each individual in the exercise of the common right operates for the benefit of all the individuals in the group. That, plainly, is what regulations made or determined by the estate owners under this power may properly seek to achieve.”
It is a striking reflection of the importance of the motor car that the present appeal is the third to reach the Court of Appeal in seven years about steps taken to control parking, the first having been Saeed v Plustrade Ltd [2001] EWCA Civ 2011.[37]The point made by Chadwick LJ is further emphasised in the present case by clause 3(xx), quoted above at paragraph [13]. I would therefore reject the arguments put forward in the Respondent’s Notice.[38]As for the grounds of appeal in the Appellant’s Notice, I confess that I am puzzled by the judge’s reliance on Colvia’s failure to research local levels of charge, if this is relied on as a separate ground of unreasonableness, rather than as part of the challenge based on shifting the burden of the rates liability away from the service charge provisions. The fact that it is a separate point is confirmed by it being the subject of a separate declaration in the judge’s order. It seems to me that a scheme of regulation is either reasonable or it is not, and this will depend on its terms, not on how those terms were arrived at by the party putting forward the scheme. If the charging rates are unreasonable, then it matters not how they were arrived at. Conversely, if they are not unreasonable, it does not matter whether the promoter of the scheme arrived at the charges by lucky chance, or as a result of the most extensive research and consultation, or through an irrational process. Thus, I cannot see how this scheme could be regarded as unreasonable, and therefore not binding on lessees, because the charges are unreasonable, without evidence to that effect, which was conspicuously absent from this case. I should add that, even if the level of the charges as such was not the subject of research or advice, it seems clear that Colvia took expert advice about possible regulation of the parking situation, as well as consulting with the parties concerned, before promulgating its scheme of regulation.[39]Quite apart from this, it seems to me that the judge reversed the burden of proof on this aspect of the case. It was for the Claimants to prove that the scheme was unreasonable, not for Colvia to prove that it was reasonable. In the absence of evidence on behalf of the Claimants that the level of charges was unreasonable, I do not think it was open to the judge to strike the scheme down on this ground.[40]I therefore come back to the Claimants’ main point, which is that it is wrong to divert the burden of the rates away from the service charge provisions, so that it is borne entirely, or disproportionately, by the car repairers and any others who need to rent overnight parking spaces. As Mr Young, for the Respondents, put it, the only legitimate starting point for charges under a parking regulation scheme would be that the charges should be set at such a level that the foreseeable receipts by Colvia from the scheme should cover the direct costs of implementing and running the scheme itself as regards administration and enforcement. He contended that Colvia could only properly raise the charges if it turned out that this level of charge would not be sufficient to achieve the desired rationing by price. Except in that situation, he submitted, Colvia had no business making a profit out of parking charges.[41]A provision for the management company to recover its outlay by way of contributions from lessees is normal and necessary, especially where the management company has no other assets. In general, this does not preclude the management company from recovering particular items of expense from individuals, whether lessees or third parties. The company might have to take proceedings against a lessee for breach of covenant, or against a third party for trespass or some other tort. Even if the proceedings are successful, to the extent of an order for costs, not all of the company’s outlay will be recovered from the defendant to the proceedings, and if that party is impecunious or recalcitrant, there may be a large shortfall. That shortfall would be part of the expense incurred by the company in the course of discharging its functions under the leases, and therefore part of what the lessees between them have to contribute by way of service charge.[42]To take a specific example, the company might serve notice on a lessee under clause 3(ii), which requires the lessee to permit the landlord and the company to enter the premises and inspect them, to serve notice of disrepair and, if the lessee does not remedy the disrepair, to go in and carry out the work, the lessee being liable to pay the expenses of such repair, on demand, to the landlord or the company as the case may be. If that process were followed through in respect of a particular unit, then if and to the extent that the lessee pays the company pursuant to the covenant, the expense incurred by the company would not have to be recovered pursuant to the service charge provisions, but if and insofar as the lessee did not pay, then that expense would have to be borne by the lessees as a whole. Thus it cannot be said that everything which the company lays out in performing and carrying out its obligations in the lease, and which could be recovered by way of service charge, has to be so recovered. There are other obligations under clause 3 to which the same proposition could be applied, such as clause 3(vii), (xi), and (xv)(a).[43]Those cases might be said to be reasonably clear, since the lease itself throws the primary burden on the individual lessee, and leaves the service charge as the fallback provision if the lessee defaults in its obligations. But the examples show that it cannot be said that, just because a particular expense can be reimbursed to the company by way of the service charge, it must be, rather than by any other means.[44]The Claimants, moreover, do not necessarily object to the imposition of charges for parking altogether. Part of their objection is that the use of charges for overnight parking is an incorrect and indirect way of achieving an improvement as regards daytime parking, and that this ought to be achieved directly, rather than indirectly, if necessary by a system of charges for the use of the car park in daytime – that being, as they point out, the period during which demand for parking space exceeds supply. Mr Young suggested to us that if there were a study of local market rates for overnight parking of this kind in the Barking area, the general level might well be found to be low, since there is unlikely to be any shortage of supply.[45]That is not a point to which the judge referred. It has a superficial attraction, but in my judgment it is based on a fallacious view of the scheme under consideration. The point of the scheme was that, in order to alleviate the problem of parking in the day, and especially in the morning, overnight parking should be prohibited. If there were no overnight parking at all, the position in the morning might well be a good deal easier. However, a complete prohibition would be too substantial an interference with the particular needs of car repairers, and maybe of some others. Accordingly, the prohibition was to be qualified, with some parking allowed overnight, even though this would reduce the advantage to be secured as regards the availability of parking space in the morning. The judge himself said, at paragraph 104:
“The overnight scheme is intended to free up spaces for the morning, and I accept the company has been balancing general car parking needs with a need for overnight provision in particular for the vehicle repairers.”
[46]It does not seem to me that it can be regarded as unreasonable in principle that those for whom this benefit is allowed, by way of exception from an otherwise total ban, should pay charges for the privilege, so as to ration the demand and contribute to the cost of running the scheme, even though this has the result that part of the company’s expenditure, which would otherwise be recovered by way of service charge, is met in a different way and therefore does not have to be passed on to the generality of the lessees.[47]If that is so, then the Claimants’ main argument of principle, and the judge’s reasoning as expressed in paragraph 133 of his judgment, fall away, because there is no general rule that expenditure such as the rates liability in respect of the car parking must be recovered by service charges and not in any other way. Moreover, since none of the various different elements of the company’s income is hypothecated or earmarked for particular expenditure, it is wrong to regard the prospective receipt by way of parking charges as paying for the rates liability rather than for any other aspect of the company’s expenditure. It seems to me that the real issue is as to the intrinsic reasonableness of the scheme as proposed, not whether the rates liability should be covered by some other system of contribution. As the chairman is reported to have said at the first shareholders’ meeting on this point, in January (to which the judge referred at paragraph 116), the need to alleviate the current parking situation arose independently of the rates liability, and the two points are separate.[48]Mr Young also pointed out that clause 3(xvii) imposes a specific and limited constraint on lessees as regards the use of the common areas for purposes including the repair of vehicles, and submitted that the scheme of regulation laid down by the lease should be understood as recognising that a lessee such as each of his clients was to be allowed to use the common areas in other ways for the purposes of its business, so long as it complied with that covenant. That argument was advanced to support his clients’ proposition that the correct approach would be to regulate and police daytime use of the car park, rather than overnight use. That argument can only be taken so far, because the lessee is also obliged to respect regulations made by the company under clause 3(xx), so that it cannot be said that a lessee has an inalienable right under the lease to use as many car parking spaces as it can occupy, so long as it complies with clause 3(xvii). Looking at the matter from a different perspective, Mr King, for the Appellant, pointed out that car repairers have no right to use the car parking areas to any greater extent than any other type of lessee, and suggested that what has happened is that some of the car repairing businesses have grown beyond the capacity of their premises, and therefore have been driven to take over parts of the car parking areas as, in effect, long term annexes for the premises held under their respective leases.

Conclusion

[49]I would allow the appeal and set aside the judge’s declaration that the scheme was unreasonable. In my judgment, neither of the two different points on which the judge relied for striking down the scheme provides a justification for doing so. The failure of Colvia to investigate local rates of charging for overnight parking is irrelevant by itself, besides not being one of the points taken by the Claimants in the Particulars of Claim. Nor does it follow, from the fact that the rates liability in respect of the car park is part of the expenditure that falls to be passed on to lessees by way of service charge, that it is not legitimate for Colvia to recover parking charges for overnight parking, or charges at a rate exceeding that required to cover the direct costs of running the scheme itself. The judge accepted that the car parking situation on the estate needs regulation, as do the Claimants, and he did not consider an overnight ban unreasonable as such. The Claimants’ open offer as regards the terms of an overnight restriction which they would accept suggests that they take the same stance.[50]In my judgment the judge rightly rejected the Respondents’ criticisms of the judgment which are set out in the Respondent’s Notice. In particular the precise timing of the overnight ban cannot be regarded as unreasonable. Mr King told us that this was a point on which Colvia is willing to enter into discussions, so as to consider, for example, a starting time later than 9 pm, so long as ISTM can be satisfied that the duration of the overnight prohibition will give them enough time in which to undertake such enforcement as they need each night. It may be that the details of the charges to be levied can be the subject of further negotiation, though of course the contractor, ISTM, is also interested in that point.[51]We were told that the parties have continued their attempts to reach agreement as to the best method of regulating parking at the estate. That is welcome, and to be encouraged. However, it seems to me that negotiations should be continued on the footing that, whatever variations to the present scheme might be proposed or agreed, that scheme is not itself invalid or ineffective. In my judgment the Claimants have not been able to show that the scheme was not a reasonable regulation, binding on them under clause 3(xx), and under paragraph (iii) of the Second Schedule to the Leases.[52]I hope that, now that the issues have been further considered by virtue of this appeal, the parties, and others concerned as lessees or sub-tenants on the estate, will be able to approach the challenge of alleviating the difficulties as regards parking on the estate in a constructive way, whether by way of this scheme, with or without modifications agreed in the light of further discussions or practical experience or both, or by way of some other scheme yet to be formulated.[53]I entirely agree and have nothing to add.[54]I also agree.