Shebelle Enterprises Ltd v The Hampstead Garden Suburb Trust Ltd [2013] EWHC 948 (Ch)

[2013] EWHC 948 (Ch)

Case No HC12C04705

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Rolls Building, Royal Courts of Justice, Fetter Lane, London, EC4A 1NL

Date 22/04/2013

Before

MR JUSTICE HENDERSON

Between

SHEBELLE ENTERPRISES LIMITEDClaimant

THE HAMPSTEAD GARDEN SUBURB TRUST LIMITEDDefendant

Mr Jonathan Seitler QC (instructed by Berwin Leighton Paisner) for Claimant

Mr Tom Weekes (instructed by Lee Bolton Monier-Williams) for Defendant

Hearing Hearing date: 20 February 2013

Judgment

Introduction and background

[1]This case is about a proposal to build a substantial basement extension to a property which stands on the top of a hill in Hampstead Garden Suburb. The property is at 2 Green Close, London, NW11 (“2 Green Close” or “No. 2”). It is owned by Mr Scott and Mrs Melissa Franklin (“the Franklins”). They are the freehold owners, but since 2 Green Close (in common with many other properties in the area) was originally held under a long leasehold title which was enfranchised under the Leasehold Reform Act 1967, there is a scheme of management in place (“the Scheme”), made and approved by the High Court in accordance with the provisions of the 1967 Act, which regulates their rights as owners in various material respects.

[2]The Scheme was approved by the High Court on 17 January 1974, and was amended by a further order of the court dated 17 February 1983. Its stated purpose was that of “ensuring the maintenance and preservation of the character and amenities of the Hampstead Garden Suburb”, and it extended to all enfranchised properties within the area shown on the annexed plan. The rights and powers of management under the Scheme are now exercisable by the Hampstead Garden Suburb Trust Limited (“the Trust”), the defendant in the present proceedings, which is a company limited by guarantee and a registered charity. Until January 2007 the Trust was known as the New Hampstead Garden Suburb Trust, and it was therefore referred to in the Scheme under that name.

[3]By virtue of clause 3 of the Scheme, the Trust is to “be treated as the Landlord for the time being” for the purposes of the Scheme. This provision reflects section 19(7) of the 1967 Act, which says that the operation of a scheme “shall not be affected by any disposition or devolution of the landlord’s interest in the property within the area”, but that the scheme must identify “the person who is for the purposes of the scheme to be treated as the landlord for the time being”. Clause 4 of the Scheme then provides that:

“The provisions of this Scheme for regulating the use appearance and maintenance of enfranchised property and for the maintenance of property or land or roads used or enjoyed or capable of being used or enjoyed by the owners in common with others shall be as set out in the Scheme Schedule hereto.”

[4]Clauses 1 and 2 of the Scheme Schedule stipulate that:

“1. Without the prior written consent of the Trust no garden or yard or forecourt of an enfranchised property shall be built upon nor shall the general appearance thereof be substantially altered or any garden substantially paved over. 2. Without the consent as aforesaid no alteration shall be made to the external appearance of any building for the time being standing on an enfranchised property.”

By virtue of clause 10 of the Schedule, where the consent of the Trust is required the application for such consent must be made in writing to the Trust’s management office, and “such consent shall not be unreasonably withheld”.

(C) and (D) go on to provide that:

“(C) the Trust may where appropriate require the submission of proper plans and specifications in respect of any application for such consent (D) the Trust shall not as a condition of its consent require the payment of any fine or sum other than its reasonable costs and expenses incurred in considering such application (whether or not consent is given)”

[5]In accordance with these provisions, on 29 June 2011 the Franklins applied in writing to the Trust for consent to carry out extensive works on 2 Green Close. Before making the application they had informally discussed their plans with officers of the Trust, and had been advised that the construction of a basement swimming pool in the rear garden of the property might be acceptable in principle. There had also been two site visits, the second of which was attended by the Trust’s architectural adviser, Mr David Davidson. The application was for the construction of a first floor extension on both wings of the house, a basement under part of the rear garden, a new garage, and the conversion of an existing garage. The single storey basement area was intended to contain a new playroom, wine cellars, a plant room and a swimming pool.

[6]Notice of the application was sent to neighbouring properties, including 3 Green Close which is the home of Sir Victor and Lady (Sylvia) Blank and their family. Unlike 2 Green Close, the freehold title to 3 Green Close is not an enfranchised leasehold and it is currently vested in the Trust as the landlord under a 999 year lease (“the Lease”) granted on 16 January 1931 by the Trust’s predecessor body, the Hampstead Garden Suburb Trust Limited (“the Old Trust”), following construction of the property on what had previously been a vacant building plot known as 45 Wildwood Road. The lease is now vested in the claimant, Shebelle Enterprises Limited, which is a company owned and controlled by Sir Victor. He and his wife occupy 3 Green Close pursuant to a sub-lease for a term of 10 years from 1 April 2011.

[7]The Lease contains a covenant for quiet enjoyment in standard terms, as follows:

“15. The Lessees paying the yearly rent hereby reserved and performing and observing all the covenants conditions and agreements herein contained and on the Lessees’ part to be performed and observed shall and may quietly hold and enjoy the said demised premises during the said term hereby granted without any lawful interruption or disturbance from or by the Lessor or the successors or assigns of or any person claiming under the Lessor.”

It is common ground that the benefit of this covenant is currently enjoyed by the claimant, under the doctrine of privity of estate, and that the obligation to comply with it lies upon the Trust as the successor in title of the original landlord.

[8]3 Green Close is situated at the foot of the hill, immediately below and to the north west of 2 Green Close. It fronts onto Wildwood Road and the Hampstead Heath extension. In common with several of his near neighbours whose properties are on lower ground than 2 Green Close, Sir Victor was very concerned that the proposed basement development at No. 2 might affect the movement of ground water in a way that would have an adverse impact on his property. He made his concerns known to the Trust, and in early September 2011 sent a detailed letter of objection, accompanied by a report by Dr Nick Haycock of Haycock Associates Limited entitled “Green Close NW11 – Initial Hydrological Issues for Consideration”.

[9]Dr Haycock is a distinguished hydrologist and soil expert, who has for many years advised and acted for national bodies such as the National Trust, English Heritage and the Environment Agency on a range of soil and water management issues. He was assisted in the preparation of his report by Mr Drew Carthew, whose particular expertise lies in ground water issues and the management of so-called basement impact assessments.

[10]In his report Dr Haycock explained how a procedure for assessing the potential impact of basement developments had recently been established by the London Borough of Camden, following an incident in which actual damage had been caused to a property as a result of a basement development in unstable strata on the Hampstead Ridge. Dr Haycock said that in his experience a basement impact assessment of this type is needed anywhere within the catchment areas of any of the Hampstead Heath ponds. Wildwood Road lies within the catchment of the Heath Extension ponds. Furthermore, 2 Green Close is situated on or close to a geologically sensitive boundary between the Claygate Beds and London clay. Dr Haycock expressed the view that seepage and ground water movement at the boundary was a matter of considerable concern, and that “issues with basement developments locally to the Hampstead and Highgate chain of ponds [have] centred around the flux of water at this geological boundary”. In his “initial summary observations” he said that these geological factors, taken with evidence of the experience of local residents, led to the conclusion that the area of the proposed development at 2 Green Close should be defined as “unstable”, and that this would strengthen the case for preliminary investigations to be carried out before the application was considered by the Trust and the local planning authority (which is the London Borough of Barnet).

[11]The Franklins’ application was first considered by the Property and Plans Committee (“the PPC”) of the Trust on 6 September 2011. Details of objections by three local residents were included by Mr Davidson in his report to the committee. As Sir Victor’s letter of objection had been received only the day before, it was reported on orally. In his report Mr Davidson acknowledged the concerns which had been expressed, and recommended that a hydro-geological report should be obtained before any grant of provisional consent for the development. The minute of the meeting recorded that:

“Although the proposed extensions are significant they would be acceptable for a house in this location. Further investigation on ground water movement is required and the applicant will be asked to ensure gardens below his plot are not affected as a result of the basement.”

This minute was ratified at the meeting of the Trust’s Council on 13 September 2011.

[12]I record at this point that the governing body of the Trust is the Council, made up of four trustees elected from members of the Trust company (who must have been resident in the Suburb for at least three years) and four trustees appointed by the Royal Institute of British Architects, the Royal Town Planning Institute, the Law Society and the Victorian Society respectively. The Council meets approximately ten times a year to direct and oversee the work of the Trust’s staff in safeguarding the character and amenities of the Suburb, and to make decisions on applications under the Scheme, or under the terms of unenfranchised leases. In reaching these decisions the Council has the benefit of recommendations by the PPC and reports by the architectural adviser and his staff.

[13]In the ensuing period of approximately 15 months between September 2011 and November 2012 the Franklins’ application remained under consideration by the Trust, but no decision on it was taken. A number of site visits took place, expert reports were commissioned on both sides, and these were seen and commented on by the Trust’s consultant engineer, Mr Stuart Tappin. The matter was debated exhaustively, but inconclusively, in correspondence between the parties, their advisers and the Trust’s officers.

[14]Apart from Dr Haycock’s initial report, the main expert advice and opinion was contained in the following documents:(a) a further report from Dr Haycock dated 10 November 2011, which recommended borehole testing at a total of 12 locations (six at 2 Green Close, four in various places down the slope, and two on higher ground forming part of the Hampstead Golf Course) in order to gain a better understanding of the local movement of ground water;

(b) a report in January 2012 by the Franklins’ advisers, Geotechnical and Environmental Associates Limited (“GEA”);

(c) comments on GEA’s report by Mr Tappin on behalf of the Trust, and (in critical terms) by Dr Haycock on behalf of Sir Victor, in March and April 2012 respectively;

(d) a response to Mr Tappin dated 21 May 2012 by Mr John McSweeney of Michael Alexander Consulting Engineers, acting for the Franklins;

(e) a “Hydrological Assessment” by Chord Environmental Limited (“Chord”) dated 11 September 2012, again commissioned by the Franklins;

(f) a report dated 5 October 2012 prepared for Sir Victor by Dr Michael de Freitas (a distinguished research fellow at Imperial College, London, whose main expertise lies in geology and the prediction and control of ground water), which reviewed the evidence collected to date and the experience of local residents, concluding that the proposed development would be likely to cause varying degrees of damage to neighbouring properties over a time scale of up to ten years; and

(g) a letter from Mr Carthew of Haycock Associates on 9 October 2012 commenting on the Chord report.

[15]In the light of all this material, the Council again considered the matter at its meeting on 16 October 2012. The relevant minute of the meeting reads as follows:

“This property is on relatively high ground and neighbours below have expressed their very strong concern that the basement works would adversely affect their properties. It was noted that the Trust’s powers under the [Scheme] relate chiefly to visual amenity. It could be argued that only a clear demonstration that definite harm would occur to the visual character of the Suburb (either to the application property or to other property) would enable the Trust reasonably to withhold consent. The latest engineering and hydrological reports from the applicant are being considered by the Trust’s consultant engineer and will be made available to the objectors. If there then appears to be no clear and unambiguous reason to refuse the application on engineering or hydrology grounds it should be approved.”

[16]On 15 November 2012 Mr Tappin wrote to the Trust. He referred to the latest communications from the experts, including a proposal by Michael Alexander Consulting Engineers to allow for the introduction of a French drain during the construction of the basement if ground water was encountered. Mr Tappin continued:

“We are not hydrogeological engineers but based on our own experience of basements developments and our review of other similar proposals in the Suburb this seems a reasonable approach and we have no further comments.”

[17]Mr Davidson then wrote to Sir Victor’s solicitor (Mr Ian Trehearne of Berwin Leighton Paisner LLP) on 21 November 2012, saying that in the light of Mr Tappin’s latest advice it appeared that the Trust was “not in a position to delay issuing consent for the work, subject to various conditions”, and that the Trust had done all it reasonably could to ensure that the engineering and hydrological issues involved with the application had been addressed by the Franklins. He asked Mr Trehearne to discuss this with Sir Victor and his advisers, and let him have any further comments he wished the Trust to take into account.

[18]A few days later Mr Trehearne spoke with the Manager of the Trust, Ms Jane Blackburn, and was informed by her that the application was due to be considered again by the Council on 4 December 2012, when the executive team would be recommending its approval. In the light of this information, Sir Victor wrote a vigorous letter of complaint on 29 November to the chairman of the Trust, Mr Angus Walker, expressing concerns about the alleged inadequacy of Mr Tappin’s advice to the Trust and the alleged failure of the Trust to provide adequate disclosure in advance of all relevant material and of the reasons for its stance, in breach of an agreement reached at a meeting in January 2012 and recorded in a letter from Sir Victor to Mr Walker, the purpose of which had been to give adequate forewarning to Sir Victor and other concerned neighbours so that they would have an opportunity, should it be appropriate, to seek injunctive relief before any decision was taken by the Trust. Sir Victor accused the Trust of acting in bad faith, and sought immediate confirmation that the matter would not be considered at the meeting on 4 December.

[19]Further discussion ensued, but Sir Victor and his advisers were unable to obtain assurances which they regarded as sufficiently clear-cut, and on 3 December 2012 the claim form in the present action was issued, together with an application for an interim injunction to restrain the Trust from granting consent for the excavation of soil or the consequent building of a basement at 2 Green Close unless and until certain steps had been taken, including the receipt of a basement impact assessment and the receipt of suitable proposals to address the concerns which might be raised in such an assessment about the effect of the proposed works on 3 Green Close. The application was supported by a witness statement by Sir Victor, in which he set out his version of the history of the dispute and exhibited much of the relevant documentary material.

[20]The initial hearing of the application took place before Newey J on 6 December 2012, when it was adjourned by consent to be heard as an application by order upon suitable undertakings to maintain the status quo in the meantime. The date fixed for the substantive hearing of the application was 20 February 2013. By that stage, the Trust had filed its defence to the particulars of claim on 19 December 2012, accompanied by a witness statement of Jane Blackburn setting out the evidence on which the Trust wished to rely. Sir Victor replied to this evidence in a further statement of his own dated 22 January 2013.

[21]At the hearing on 20 February 2013 I was also shown, without objection from either party, a further letter from Chord dated 24 October 2012, responding to the comments made by Haycock Associates on 9 October 2012, and comments in answer to this document (which had not previously been disclosed) by Dr Haycock in a letter dated 19 February 2013. Dr Haycock’s letter concluded as follows:

“We remain concerned that the Developer and the Trust’s advisors have an incomplete understanding of the impact of the proposed development on the groundwater and surface regime of the local area. We believe that the data gathered does not enable the Developer to demonstrate no adverse impact. The analysis offered [is] weighed down with so many assumptions that do not hold true for this site, even based on the limited data available. It still remains our view that the proposed basement development represents a significant risk to neighbouring properties which could manifest as a significant change in the wetness of ground locally to adjoining properties with the resultant implications for their foundations. The proposed use of French drains to divert ground water could also be problematic resulting in unnaturally dry, desiccated ground which could also destabilise the structural integrity of surrounding properties and impact upon gardens. This highlights the sensitivities of this site when groundwater conditions are altered and careful planning and design tailored to the relevant conditions is essential.”

[22]At the hearing I had the benefit of clear and concise submissions, both written and oral, from Mr Jonathan Seitler QC on behalf of the claimant and Mr Tom Weekes on behalf of the Trust.

The issues, and the Trust’s cross-application for summary judgment

[23]The claimant’s application for an injunction is based, and based only, on the contention that the grant of permission by the Trust to the Franklins to carry out the proposed works at No. 2 would potentially breach the covenant for quiet enjoyment in clause 15 of the Lease. It is accepted that no such breach has yet occurred, but a quia timet interim injunction is sought on the ground that the claimant can show at least a good arguable case that the feared breach of covenant will in fact happen.

[24]The nature of the covenant for quiet enjoyment was considered by the House of Lords in Southwark London Borough Council v Mills

[2001] 1 AC 1

, where tenants of council flats with ineffective sound insulation argued that the landlord council was in breach of the covenant for quiet enjoyment in their tenancy agreements. The claims were rejected by the House, essentially because the covenant is prospective in its operation and therefore did not extend to interference with the use and enjoyment of the premises by the tenants which was occasioned by the defective condition of the property before the grant of the tenancy. For present purposes, the relevance of the case lies in the analysis of the nature of the covenant in the speeches of Lord Hoffmann and Lord Millett, with both of which the remaining members of the court (Lord Slynn of Hadley, Lord Steyn and Lord Clyde) agreed.

[25]Lord Hoffmann said this at 10B:

“The covenant has a very long history. It has been expressed or implied in conveyances and leases of English land for centuries. It comes from a time when, in a conveyancing context, the words “quiet enjoyment” had a technical meaning different from what they would today signify to a non-lawyer who was unacquainted with their history. So in Jenkins v Jackson (1888) 40 Ch D 71, 74 Kekewich J felt obliged to point out that the word “quietly” in the covenant: “does not mean undisturbed by noise. When a man is quietly in possession it has nothing whatever to do with noise … “Peaceably and quietly” means without interference – without interruption of the possession”

. Likewise in Kenny v Preen

[1963] 1 QB 499

, 511 Pearson LJ explained that:

“the word “enjoy” used in this connection is a translation of the Latin word “fruor” and refers to the exercise and use of the right and having the full benefit of it, rather than to deriving pleasure from it.”

The covenant for quiet enjoyment is therefore a covenant that the tenant’s lawful possession of the land will not be substantially interfered with by the acts of the lessor or those lawfully claiming under him. For present purposes, two points about the covenant should be noticed. First, there must be a substantial interference with the tenant’s possession. This means his ability to use it in an ordinary lawful way. The covenant cannot be elevated into a warranty that the land is fit to be used for some special purposes: see Dennett v Atherton (1872) LR 7 QB 316. On the other hand, it is a question of fact and degree whether the tenant’s ordinary use of the premises has been substantially interfered with. In Sanderson v Berwick- upon-Tweed Corpn

(1884) 13 QBD 547

the flooding of a substantial area of agricultural land by water discharged from neighbouring land occupied by another tenant of the same landlord was held to be a breach the covenant.” “does not mean undisturbed by noise. When a man is quietly in possession it has nothing whatever to do with noise … “Peaceably and quietly” means without interference – without interruption of the possession”. “the word “enjoy” used in this connection is a translation of the Latin word “fruor” and refers to the exercise and use of the right and having the full benefit of it, rather than to deriving pleasure from it.”

[26]To similar effect, Lord Millett said at 22F:

“The covenant for quiet enjoyment is one of the covenants of title formally found in a conveyance of land, and the only such covenant found in a lease of land. It has long been understood that the word “quiet” in such a covenant does not refer to the absence of noise. It means without interference. The covenant for quiet enjoyment was originally regarded as a covenant to secure title or possession. It warranted freedom from disturbance by adverse claimants to the property … But its scope was extended to cover any substantial interference with the ordinary and lawful enjoyment of the land, although neither the title to the land nor possession of the land was affected: Sanderson v Berwick-upon-Tweed Corpn (1884) 13 QBD 547, 551.”

[27]The primary way in which the claimant puts its case on the law is that the effect of clause 3 of the Scheme (see paragraph 3 above) is to constitute the Trust as akin to a landlord of 2 Green Close. On that footing, it is argued that the present case in on all fours with Sanderson v Berwick upon Tweed Corpn, loc. cit, which is said to be authority for the proposition that if a common landlord A demises land to B and also demises neighbouring land to C, A will be liable to B for breach of the covenant if it authorises C to act in a way which will interfere with B’s quiet enjoyment. In that case the corporation let a farm to Sanderson. It reserved in favour of Cairns, another tenant farmer, the rights to use a drain across one of Sanderson’s fields and to enter and repair it. Water discharged by Cairns leaked through the drain and flooded Sanderson’s land. He sued the landlord on the covenant for quiet enjoyment. The claim succeeded in respect of flooding caused by one of the drains which had been improperly constructed by Cairns, because there had been within the meaning of the covenant a substantial interruption by a person who lawfully claimed through the landlord corporation.

[28]The claimant also relies on the extension of the principle in Sanderson to the grant of a consent by the landlord to alterations carried out by a neighbouring tenant in Matania v National Provincial Bank Ltd [1935] All ER Rep 923 (reversed by the Court of Appeal on other grounds at

[1936] 2 All ER 633

). In that case the plaintiff was a professor of singing who had taken a lease of the second floor of a building for the purpose of carrying on his profession on the demised premises. After he had gone into possession and begun to give singing lessons, the landlord (who knew of his use of the premises) granted a lease of the first floor of the building to a different tenant and authorised him, under the terms of his lease, to execute various structural alterations. The effect of the works was to make it impossible for the plaintiff to carry on his profession for a period of three months. It was held by Charles J that in consenting to the works on the first floor the landlord had breached the covenant for quiet enjoyment under the lease of the second floor. Having referred to Sanderson, Charles J said at 929:

“The alterations in the present case continued from March to July, and during that time … the premises were rendered uninhabitable and the physical enjoyment of those premises was completely destroyed. I find that under these circumstances the landlords have been guilty of a breach of the covenant for quiet enjoyment.”

[29]The secondary way in which the claimant puts its case is that, even if for some reason clause 3 of the Scheme does not put the Trust into a position equivalent to that of a landlord in relation to the Franklins, the rationale of the decisions in Sanderson and Matania does not depend on the existence of any privity of estate as between A and C, but rather on the control which, on the facts in those cases, A was able to exercise over C by virtue of privity of contract. Mr Seitler QC submits that there is no difference in principle between the control which the Trust is able to exert over the Franklins under the Scheme on the one hand, and the control which the landlords were able to exercise over their tenants under the relevant leases in Sanderson and Matania on the other hand.

[30]In its defence the Trust takes two preliminary points, either of which would at least arguably provide a complete answer to the application. The first point (paragraph 4 of the defence) is that the object of clauses 1 and 2 of the Schedule to the Scheme is to enable the Trust to control the “appearance” of enfranchised properties, with the result (it is said) that the Trust:

“is (broadly speaking) entitled to withhold consent under those provisions only for reasons associated with the visual amenity of the Suburb (or, at least, of that part of the Suburb in which the applicant’s property is situated).”

[31]The second point, pleaded in paragraphs 3 and 7(iii) of the defence, starts from the proposition that when the Trust determines applications made by freehold proprietors of enfranchised properties under the Scheme for consent for alterations, it owes a duty to act in the public interest and, in particular, in the interests of the maintenance and preservation of the character and amenities of the Suburb. Accordingly, it is denied that clause 15 of the Lease is capable of providing the claimant, or any other lessee holding under a lease with a similar covenant, with a cause of action arising from a determination by the Trust under the Scheme of an application for alterations to an enfranchised property. It is averred that:

“Amongst other things, the parties to the Lease cannot have contemplated that the covenant for quiet enjoyment could be used to interfere with (and/or subvert) the performance by the landlord, in its capacity as a “custodian of the public interest”, of a role under a statutory scheme under which the landlord owes a duty to act in the public interest.”

[32]Subject to the above contentions, the Trust denies that it would be acting in breach of the covenant for quiet enjoyment if it were to grant consent for the works without having received a basement impact assessment and taken the other steps pleaded in the particulars of claim. In support of this denial the defence pleads, among other matters, that pursuant to clause 10(C) of the Scheme Schedule the Trust is only empowered to require an applicant for consent for alterations to submit “proper plans and specifications”, which would not include either a basement impact assessment or “engineering or other proposals”. It is further alleged that the claimant would have no right to prescribe the way in which the Trust made any determination, including the material that it chose to have regard to. Finally, even if a threatened intention to breach clause 15 of the Lease were to be made out, the Trust says that it would be inappropriate for the court to exercise its discretion by granting an injunction. The claimant would have a cause of action against the Franklins arising from any works likely to occasion a nuisance; any injunction would undermine and subvert the proper performance by the Trust of its role under the Scheme, even if that role did not by itself provide a complete answer to the application; and, in view of the existence of a remedy against the Franklins, an award of damages would be an adequate remedy for any breach of covenant by the Trust.

[33]In reliance on these arguments, and the evidence of Ms Blackburn, the Trust issued a cross-application for summary judgment under CPR Part 24 on 19 December 2012, alleging that the claimant has no real prospect of success on the claim and that there is no other reason why the claim should go to trial. The cross-application was listed for hearing at the same time as the application for an injunction, and I heard argument on both of them together.

[34]Since they are potentially determinative of both applications in the Trust’s favour, I will begin by considering the two preliminary points taken by the Trust.

[35]I begin by observing that this contention is one which appears to have occurred to the Trust and its advisers only quite recently. It is not reflected in the detailed Design Guidance issued jointly by the Trust and Barnet Council. In section 6.2 of the Design Guidance there is a detailed discussion of basement development which includes the following passages:

“The Suburb was specifically designed without basements and they are not part of the established character of the area. That character is not confined to external appearance but also to the scale of the accommodation created and its balance with neighbouring properties. Basements can change the character of houses and gardens, extending the accommodation in a way that was not anticipated and is potentially damaging to trees and hedges. Skylights, lightwells and other visible manifestations of basements can harm the setting of a house and its relationship with its garden. Each case will be considered on its individual merits. Both Barnet Council and the Trust will carefully control all external changes associated with basement development to protect the character and appearance of the Suburb and the setting of individual houses and groups. If you are considering adding a basement to an existing house, please refer to the checklist below: … • the trust and Barnet Council may require a hydro-geological report to be submitted for some basements where there is a danger that groundwater would be diverted by the proposed development • applicants should provide a full engineers report to provide evidence that the structural stability of the application property and neighbouring properties will not be put at risk” • the trust and Barnet Council may require a hydro-geological report to be submitted for some basements where there is a danger that groundwater would be diverted by the proposed development • applicants should provide a full engineers report to provide evidence that the structural stability of the application property and neighbouring properties will not be put at risk”

[36]This guidance appears to have been followed when Mr Davidson made his initial report to the PPC in September 2011 (see paragraph 11 above), and much of the expert evidence commissioned on both sides was of course directed to the issue of ground water movement. Furthermore, even at the meeting of the Trust’s Council on 16 October 2012, there was only a tentative reference to the contention that is now being advanced (“It could be argued that only a clear demonstration that definite harm would occur to the visual character of the Suburb … would enable the Trust reasonably to withhold consent”). Nevertheless, as the point has now been taken, and as it raises a question of law about the true construction of the Scheme, it is necessary for me to deal with it.

[37]The issue is one about the scope of the Scheme, and in my view it must be answered by construing the provisions of the Scheme in the light of its stated purpose. The purpose of the Scheme is stated in clause 1:

“This Scheme is made for the purpose of ensuring the maintenance and preservation of the character and amenities of the Hampstead Garden Suburb and shall extend to all enfranchised property within the areas coloured pink on the plan annexed hereto … ”

This wording reflects the primary object of the Trust as stated in clause 3 of its memorandum of association dated 8 March 1968:

“The objects for which the Company is established are:- (1) To do all things possible in order to maintain and preserve the present character and amenities of that area situate in the Greater London Borough of Barnet and known as the Hampstead Garden Suburb …”

In my judgment it is clear that all the provisions of the Scheme are to be read and interpreted in the light of the stated purpose of the Scheme, and I would reject the submission of Mr Weekes for the Trust that the only relevance of clause 1 is to the power to vary the Scheme contained in clause 11.

[38]The Trust’s argument is founded in particular on the provisions of clause 4, and the regulations about the use, appearance and maintenance of enfranchised properties, and the maintenance of property, land or roads used or enjoyed therewith, as set out in the Schedule. It is said that all of the regulations in the Schedule are directed towards the achievement of one or more of these aims, and that clauses 1 and 2 of the Schedule (quoted in paragraph 4 above), which are the only ones engaged in the present case, are concerned only with the appearance of enfranchised properties. The Trust is therefore not entitled to withhold consent to the Franklins’ application on the ground that the basement might create a risk of flooding to a non-enfranchised property.

[39]Mr Weekes goes on to argue that, if this were not so, the Scheme would operate illogically in respect of basement developments. The ability of the Trust to control basement developments, on the ground that they might give rise to a risk of flooding, would depend, for no good reason, on the accident of whether the excavation and construction of the basement would involve building upon a garden, altering the external appearance of a building, or doing one of the other specific things for which consent is required under the Schedule. The question whether the development in the present case should be prevented on the ground that it might create a risk of flooding to 3 Green Close, submits Mr Weekes, is something to be determined by the local planning authority when it considers the Franklins’ application for planning permission, and not by the Trust. Furthermore, given the resources and expertise available to it, Barnet Council is better placed to determine that issue than the Trust would be. Mr Weekes pointed out in this connection that the four trustees of the Trust appointed by external bodies (see paragraph 12 above) can be expected to contribute expertise in matters relating to the history, character and appearance of the Suburb, but not in engineering.

[40]I accept that there is some force in these points, both singly and collectively, but overall I am not persuaded that the scope of the Scheme is as narrow as Mr Weekes submits. It is true that a requirement for the Trust’s consent will be triggered only if one or more of the regulations in the Schedule to the Scheme are engaged. Once that happens, however, I consider that it is then the duty of the Trust to consider the application in the light of the wider purposes stated in clause 1 of the Scheme, and not to confine its attention to issues which relate solely to the use, appearance and maintenance of the relevant enfranchised property. This wider focus does in my view enable the Trust, in an appropriate case, to consider the effect of the proposed works on the character and amenities of other parts of the Suburb, including neighbouring properties whose character and amenities might be adversely affected. It seems to me that issues relating to the movement of ground water occasioned by the construction of a basement fall comfortably within this wider area of consideration, and that the Trust would be failing in its duty if it refused, on principle, to take them into account. Nor do I accept that the only conditions which the Trust may impose in relation to an application are ones relating to the submission of proper plans and specifications for the proposed works within clause 10(C) of the Schedule. It is implicit in clause 10(D) that the Trust also has power to impose other types of condition, and I see no reason why, in an appropriate case, there should not be a requirement for a basement impact assessment.

[41]It follows, in my judgment, that Mr Davidson was fully entitled to make the initial recommendation which he did to the PPC, and that the Trust Council was fully entitled to endorse that recommendation at its meeting in September 2011. I also see no reason to disagree with the relevant guidance on basements in the Design Guidance jointly issued by the Trust and Barnet Council. I emphasise, however, that the Trust has a broad discretion in how it decides to deal with applications for consent under the Scheme, and all I am concerned with at this stage is the question whether the Trust is by law precluded from taking account of issues relating to the movement of ground water when considering an application for consent under clauses 1 or 2 of the Scheme Schedule. For the reasons which I have given, I consider that the argument now advanced by the Trust is too narrow, and that its previous practice, as reflected in the Design Guidance, is correct.

[42]It by no means follows, however, that in every case where it would in principle be open to the Trust to require a basement impact assessment, it should necessarily do so. In deciding how best to proceed, in the circumstances of a particular case, I think the Trust could legitimately decide, for example, that such issues would be better left for consideration by Barnet Council as the local planning authority, or that only certain aspects of them should be considered by the Trust. Considerations of expense, resources and the availability of suitable expertise to the Trust would in my view all be relevant matters for the Trust to have in mind, as would the simple point that the main focus of the Scheme Schedule is indeed on the use, appearance and maintenance of enfranchised properties. In the extreme form in which it is now advanced, however, the Trust’s argument must in my judgment be rejected.

[43]The starting point for this argument is the proposition that, in performing its functions under the Scheme, the Trust acts as a custodian of the public interest. As authority for this proposition Mr Weekes relies on the decision of the Court of Appeal in Zenios v Hampstead Garden Suburb Trust Ltd

[2011] EWCA Civ 1645

, unreported (“Zenios”). In that case, the Trust had refused its consent under the Scheme to an application to allow the appellants to construct a first floor extension over their garage. There was also a restriction in materially identical terms contained in the transfer of the freehold interest in the property. The appellants applied to the Lands Chamber of the Upper Tribunal under section 84(1) of the Law of Property Act 1925, as amended, for the modification of the restrictions contained in the transfer and the Scheme. By virtue of section 84(1)(aa) of the 1925 Act, the Tribunal had power to discharge or modify the restriction if it was satisfied that, in a case falling within subsection (1A), its continued existence would impede some reasonable user of the land for public or private purposes.

(b) is contrary to the public interest;

[44]It appears to have been common ground that the continued existence of the restrictions would impede a reasonable user of the property for private purposes within the meaning of section 84(1)(aa), so the critical issue was whether the case fell within subsection (1A). The President of the Lands Chamber held that it did not, with the result that the application failed. His decision was upheld by the Court of Appeal, where the leading judgment was delivered by Laws LJ with whom Toulson and Black LJJ agreed.

[45]One of the issues was whether money would be an adequate compensation to the Trust for any loss or disadvantage which it would suffer from the discharge or modification of the restriction in the Scheme. In this context it was argued for the appellants that the Trust was not a public body, and that it was therefore not capable as a matter of public law of being a guardian of the public interest. The source of its legal power was essentially contractual. The relevance of this point was that in Re Martin [1998] 57 P & C R 119 (CA) Fox LJ had held at 126, in relation to a similar legislative scheme, that money would not be an adequate compensation to the corporation for the discharge of the covenant, saying:

“If the covenant is of value to the corporation for the protection of the public interest in the preservation of the amenities, it is difficult to see how a money payment could be adequate compensation.”

[46]This argument was rejected by Laws LJ who said at [34]:

“I am unable to accept Ms Foster’s argument. First, the question is not whether the Trust is a public body such that it might be amenable to the judicial review jurisdiction. It seems to me plain that, as a matter of fact, the Trust’s powers of control over applications to set aside restrictions such as here in play exist for the preservation [and] maintenance of the amenities of the suburb. So much is stated at paragraph [3(1)] of the Trust’s Memorandum of Association, which Ms Foster showed us. Ms Foster accepted, so far as it went, that this was so, but in my judgment that amounts to an acceptance also that the Trust’s duty was to consider and act for the promotion of the public interest, not in some sense the general public interest, obviously and not the national public interest; not even perhaps the London wide public interest, but certainly the public interest in the amenities of this area.”

[47]To similar effect, Laws LJ said at [37]:

“Loss of an amenity such as a view or a vista may perhaps be compensatable in money where the loss is that of an individual, but it is quite another thing to postulate an award of compensation to a representative body guarding the public interest, as I have held the Trust may properly be described.”

[48]In my judgment the decision of the Court of Appeal in Zenios makes good the proposition that the Trust is indeed acting as a custodian of the public interest, in the sense of the public interest in the amenities of the Suburb, when it decides whether or not to grant consent for an application under the Scheme. Mr Seitler QC submitted that this could not be correct, if only because of the Trust’s refusal to accept that its decisions were amenable to judicial review. The Trust’s position on that point may or may not be correct – I express no view one way or the other – but I am satisfied that in the present context the question is irrelevant. As Laws LJ said, “the question is not whether the Trust is a public body such that it might be amenable to the judicial review jurisdiction”. The Trust is, however, “a representative body guarding the public interest” (paragraph [37] of his judgment), and for that reason a money payment could not adequately compensate the Trust for a discharge or modification of the restriction.

[49]The next stage in the argument was helpfully formulated by Mr Weekes in his skeleton argument as follows:

“[T]he parties to a lease do not contemplate that the original (or any future) landlord will breach the covenant for quiet enjoyment or the covenant not to derogate from grant (or any other covenant) by performing a duty to exercise statutory powers (or the like) in the public interest; and, even if such a thing was contemplated by the parties, the landlord would, in performing such powers, have a defence that it was acting with statutory authority.”

[50]In support of this proposition, Mr Weekes principally relies upon three decisions of the Court of Appeal: Commissioners of Crown Lands v Page

[1960] 2 QB 274

(“Page”); Molton Builders Ltd v City of Westminster LBC [1975] 30 P & C R 182 (“Molton Builders”); and Manchester, Sheffield and Lincolnshire Railway Co v Anderson

[1898] 2 Ch 394

(“Anderson”). I will review these cases in chronological order.

[51]The facts in Anderson were briefly these. A statute empowered a railway company to acquire property compulsorily to build a railway. When the company acquired the property, it was subject to a lease containing the usual covenant for quiet enjoyment. The company then proceeded to carry out works on adjoining land to build the railway. These works caused structural damage to the property, and the carrying out of the work also impeded the tenant’s access to it. The tenant alleged that the company had breached the covenant for quiet enjoyment in the lease, but this contention was rejected by the Court of Appeal. At 400 Lindley MR said this:

“Let us see what is the effect of the covenant for quiet enjoyment upon the railway company. They have bought the reversion, and, like other assignees of a reversion, they are bound by the covenant, for it runs with the land. I do not see any reason for holding that the covenant has gone, or in any way been extinguished. The company must be bound like any other assignee of a reversion – it is not a question of obligation on the company, but a question of remedy. When we consider the remedy I fail to see the answer to the contention of the railway company. They say “You cannot bring an action against us on the covenant or otherwise for anything we are doing lawfully under our statutory authority.”

It is said that then the covenant is of no use to the defendant; but it is of very considerable use to him, for it may give him rights of compensation which otherwise he might not have.”

[52]Chitty LJ agreed, saying at 403:

“What the railway company have done is in execution of the powers conferred on them by their Act. There is no question of their having acted in excess of their powers – there is no question of negligence on their part; and consequently in point of law all their acts are justified. That is a complete answer to the claim for damages.”

[53]In Page the Commissioners of Crown Lands let premises under a lease for a term of 25 years in 1937. In 1945, the Minister of Works, acting on behalf of the Crown and in exercise of powers conferred by the Defence (General) Regulations 1939, requisitioned the demised premises. The premises were de-requisitioned some ten years later, in 1955. The tenant paid no rent during the period of requisition, and the landlords then brought proceedings claiming the arrears. One of the tenant’s defences to this claim was that in requisitioning the premises the Crown, in its capacity as requisitioning authority, had breached the implied covenant for quiet enjoyment given by it in its capacity as lessor. The Court of Appeal held, affirming the decision of Gorman J, that there had been no breach of the covenant, but for differing reasons. Lord Evershed MR left open the position had there been an express covenant for quiet enjoyment, and held at 287 “that no covenant for quiet enjoyment should be implied which would limit the Crown’s future proper exercise of its powers and duties under statute”. On that basis, there was no “wrongfulness” in the Crown’s requisition. The judgment of Ormerod LJ was to similar effect: see 289-90.

[54]The third member of the court was Devlin LJ, who began his discussion of the subject at 291 by saying that he found it simpler to answer the question “not by reference to any special limitation on the covenant of quiet enjoyment affecting all landlords, but by reference to the general limitation that affects all contracts or covenants entered into by the Crown, or for that matter by any other public authority”. He continued:

“When the Crown, or any other person, is entrusted, whether by virtue of the prerogative or by statute, with discretionary powers to be exercised for the public good, it does not, when making a private contract in general terms, undertake (and it may be that it could not even with the use of specific language validly undertake) to fetter itself in the use of those powers, and in the exercise of its discretion. This principle has been accepted in a number of authorities; it is sufficient to mention Ayr Harbour Trustees v Oswald (1883) 8 App. Cas. 623, H.L.; Rederiaktiebolaget Amphitrite v The King [1921] 3 KB 500; Board of Trade v Temperley Steam Shipping Co Ltd (1926) 26 Ll.L.R. 76, affirmed (1927) 27 Ll.L.R. 230, C.A.; and William Cory & Sons Ltd v City of London Corporation [1951] 2 KB 476, C.A. The covenant for quiet enjoyment in the present case is implied, and is not dissimilar to the contractual provision considered in the two cases last cited, which were both concerned with the implied obligation on one party to a contract not to interfere with the performance by the other party of his obligations under it. In Board of Trade v Temperley Steam Shipping Co Ltd, the Board were the charterers of the defendant’s ship, and it was contended that they had prevented the defendants from making their ship efficient for her service under the charterparty because one of the Board’s surveyors had refused a licence to do certain repairs. In William Cory & Sons Ltd v City of London Corporation, the city corporation had a contract with the plaintiffs whereunder the plaintiffs undertook to remove refuse by means of lighters and barges. Some time later the city corporation passed a by-law concerning the fitment of vessels transporting refuse which it was agreed was such as to make the performance of the contract impossible. It was held by the Court of Appeal that the corporation was not in breach of the implied term. I do not, however, rest my decision in the present case simply on the fact that the covenant for quiet enjoyment has to be implied. For reasons which I think will appear sufficiently in the next paragraph, I should reach the same conclusion if the ordinary covenant was expressed. In some of the cases in which public authorities have been defendants, the judgments have been put on the ground that it would be ultra vires for them to bind themselves not to exercise their powers; and it has also been said that a promise to do so would be contrary to public policy. It may perhaps be difficult to apply this reasoning to the Crown, but it seems to me to be unnecessary to delve into the constitutional position. When the Crown, in dealing with one of its subjects, is dealing as if it too were a private person, and is granting leases or buying and selling as ordinary persons do, it is absurd to suppose that it is making any promise about the way in which it will conduct the affairs of the nation. No one can imagine, for example, that when the Crown makes a contract which could not be fulfilled in time of war, it is pledging itself not to declare war for so long as the contract lasts. Even if, therefore, there was an express covenant for quiet enjoyment, or an express promise by the Crown that it would not do any act which might hinder the other party to the contract in the performance of his obligations, the covenant or promise must by necessary implication be read to exclude those measures affecting the nation as a whole which the Crown takes for the public good.”

[55]I can deal with the third case, Molton Builders, much more briefly. It concerned the grant of a lease of a block of flats in 1931 by the Crown Estate Commissioners, subject to a restrictive user covenant “… for private dwelling houses, first class clubs or residential or professional chambers or offices only …”. As a result of various intermediate transactions, permission was granted by a sub-tenant of part of the block to an occupier to use as offices a suite which had previously been used as a private residence. No planning permission was applied for in respect of the change of use, and the local planning authority, as it was obliged to by statute, sought the consent of the Crown Estate Commissioners to the service of an enforcement notice. The Commissioners gave their consent, and an enforcement notice was duly served. The sub-tenant then brought an action against the local authority seeking a declaration that the enforcement notice was void, because the consent given by the Commissioners to the service of the notice was a derogation from their original grant of 1931 which had expressly permitted use of the demised premises as offices. The action was dismissed by Willis J, and the plaintiff’s appeal to the Court of Appeal was likewise dismissed.

[56]The leading judgment was delivered by Lord Denning MR, who rested his decision on the short point that neither a buyer of land nor a tenant under a lease “can pray in aid the doctrine of derogation from grant so as to enable him to do something which is unlawful”: see his judgment at 187. He then referred to what he termed “a further point” at 188, saying “The Crown cannot contract itself out of its public duty”. After citing the judgment of Devlin LJ in Page at

[1960] 2 QB 274

, 291, he continued:

“So it can be said that the doctrine of derogation from grant cannot be so applied as to fetter the Crown Estate Commissioners in the use of the powers which they have to exercise for the public good. But I prefer not to go into this point …”

It is clear, therefore, that this part of the judgment of Lord Denning MR was obiter, and neither of the two other members of the Court (Browne and Geoffrey Lane LJJ) found it necessary to deal with this aspect of the case.

[57]For completeness, I should note that Mr Weekes also referred me to the decision of the Court of Appeal in Jones v Cleanthi

[2006] EWCA Civ 1712

[2007] 1 WLR 1604

, at [91] to [95] per Jonathan Parker LJ.

[58]In the light of these authorities, Mr Weekes submitted that the parties to the Lease in 1931 must be taken to have intended that, should any future landlord be subject to a duty to exercise powers under a statutory scheme in the public interest, the exercise of those powers would not constitute a breach of the covenant for quiet enjoyment in the Lease. Thus, for example, if the reversion to the Lease were now vested in a planning authority as landlord, the landlord would not breach the covenant for quiet enjoyment by granting planning permission for a development on neighbouring land even if the development would substantially interfere with the claimant’s enjoyment of its property.

[59]Mr Weekes further submits that, if the claimant were correct in saying that the bona fide exercise by the Trust of its powers under the Scheme were capable of giving rise to claims by leaseholders under the covenant for quiet enjoyment, the way in which the Scheme would operate would be undermined in an arbitrary fashion. Whereas the Trust would still be required to determine applications for consent by freeholders in the Suburb purely in the public interest, similar applications by leaseholders would be subject to a “trump card” in the hands of the applicant. Regardless of whether the proposed development was in the wider public interest, the Trust would be precluded from granting any consent for works that would substantially interfere with the leaseholder’s enjoyment of his property.

[60]In response to these submissions, Mr Seitler QC submits that the authorities relied on by the Trust are distinguishable, and in any event cannot affect the construction of the covenant for quiet enjoyment in the present case, which was entered into in 1931 long before the Trust (in its present form) and the Scheme had come into existence. It is true that the landlord under the Lease was the Old Trust, but its memorandum and articles of association are not in evidence, and Mr Seitler submitted that it would be wrong for me to speculate about what they might have contained, or whether the parties to the Lease could reasonably have envisaged the Old Trust as having any public role. He pointed out in this connection that one can infer from the terms of the Lease itself that it was granted after the house at 3 Green Close had been constructed on a previously vacant building plot, at a time when public planning control was virtually non-existent.

[61]Mr Seitler argues that in 1931 the parties to the Lease could not reasonably have envisaged that the freehold reversion would ever become vested in a public body which had public duties to perform in relation to the development of neighbouring properties. The only forms of control which the parties would have envisaged were ones imposed as a matter of private law, for example through covenants in leases and the law relating to restrictive covenants. Against this background, there is nothing unfair or capricious in the Trust being constrained by a covenant which its predecessor in title as the landlord of 3 Green Close freely entered into when the Lease was granted, and there is nothing in the Scheme itself which deprives the tenant for the time being under the Lease of the benefit of that covenant.

[62]These submissions were attractively presented by Mr Seitler, but I do not find them convincing. The covenant for quiet enjoyment in clause 15 of the Lease is in standard form, and in my view the parties to it must be taken to have envisaged that it could not be relied upon so as to prevent or hinder the proper exercise of public duties in the public interest by a landlord in whom the freehold reversion might subsequently become vested. Such a proposition appears to me to be correct in principle, and it gains substantial support from the cases relied upon by the Trust, even though (as I accept) none of them is directly on all fours with the present case. The Scheme was made with statutory authority, and I cannot see any sensible distinction in the present context between its operation and, for example, the statutory powers conferred on the railway company in Anderson or the powers of requisitioning property conferred on the Crown in Page.

[63]The public interest which is engaged in the present case is, admittedly, one of a local rather than a national nature, but (as the Court of Appeal has held in Zenios) it is nonetheless a public interest, and the Trust is its guardian. If the Trust were now to grant a lease of a property in the Suburb containing a covenant for quiet enjoyment, I would have little difficulty in holding that (in the absence of express provision to the contrary) the covenant should be construed as intended to take effect subject to the proper exercise by the Trust of its public duties. Does it then make any difference that the covenant in the present case was given in 1931, before the formation of the Trust, the enactment of the Leasehold Reform Act 1967 and the establishment of the Scheme? In my judgment the answer to this question must be no. The freehold reversion to the Lease was always freely assignable, and the parties must be taken to have contemplated that it might at some date become vested in a body which had duties of a public nature to perform. If the proper performance of those public duties impinged on the normal use and enjoyment of the demised premises by the tenant, it must in my view have been envisaged that the tenant would to that extent be deprived of a remedy under the covenant. Alternatively, I would accept the submission of Mr Weekes that the proper exercise by the Trust of its powers under the Scheme would provide the Trust with a defence that it was acting with statutory authority, since the Scheme was itself made in accordance with the provisions of the 1967 Act and approved by the High Court.

[64]It is important to remember at this point that the claimant’s case for an injunction, whether interim or final, is based only on the covenant for quiet enjoyment in the Lease. Despite the threatening noises made by Sir Victor, or on his behalf, in the correspondence, it is not pleaded that the Trust either has acted, or is about to act, in breach of its duties under the Scheme.

[65]I therefore conclude that the second preliminary point taken by the Trust is sound in law, and that the claim must therefore be dismissed. I would only add that, in reaching this conclusion, I do not in any way wish to question or belittle the very real concerns felt by Sir Victor and other neighbours of the Franklins whose properties may be affected by the construction of the proposed basement. Whether there is substance to those concerns is a matter that could only be resolved at trial, after detailed consideration of the expert evidence on both sides. Had I been satisfied that the claimant could at least arguably rely on the covenant for quiet enjoyment, I would probably have been minded to direct a speedy trial of the action, and to grant an injunction in the meantime restraining the Trust from reaching any final decision on the Franklins’ application. As it is, however, I consider that the present action is not the proper means by which to resolve the dispute, and that no grounds have been shown for interfering with the decision-making process of the Trust.

Conclusion

[66]For the reasons which I have given, the claimant’s application for an injunction will be dismissed and the Trust’s cross-application for summary judgment on the claim succeeds.