England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
(HIS HONOUR JUDGE DIGHT)

		Royal Courts of Justice Strand, London, WC2A 2LL
		24th February 2009

Sir John Chadwick:

1. This is an appeal from an order made on 3 July 2008 by HHJ Dight in the Central London County Court in proceedings brought by Mrs Christine Guignabaudet and others against Miss Lucy Scott-Moncrieff. The issue in those proceedings, so far as now material, is as to the true meaning and effect of a covenant in the lease under which Miss Scott-Moncrieff owns the basement or garden flat of a property in Hampstead, known as No. 25 Nassington Road. Mrs Guignabaudet is the freehold owner of that property.
2. No. 25 Nassington Road and the adjoining property, No. 27 Nassington Road, are a pair of substantial semi-detached Victorian houses, each of which has been divided into four flats. The flats are let on long leases granted in 1982. Miss Scott-Moncrieff purchased the garden flat at No. 25 Nassington Road in 1998. In the following year she had the opportunity to purchase the garden flat at No. 27 Nassington Road. She did so with the intention of converting the two flats into the single residential unit which she now occupies. Mrs Guignabaudet occupies one of the upper floor flats at No. 25 Nassington Road. Each of the two properties, Nos. 25 and 27 Nassington Road, has a garden at the rear. The garden of each property has been included in the demise of the garden flat of that property.
3. The two gardens were formally separated by a fence; but most of that fence has been removed by Miss Scott-Moncrieff and she now occupies both gardens as a single unit. Shortly after her purchase of the second flat, Miss Scott-Moncrieff carried out internal works conversion to the two flats without first obtaining her landlord's consent. She also removed the fence separating the two gardens. On 26 July 2001 she entered into retrospective licences with her landlords. The purpose of those licences was to regularise the position. It is unnecessary in the context of this appeal to do more than refer to the licence, described as the "second licence", granted by Mrs Guignabaudet in relation to the garden at No. 25 Nassington Road. The effect of that licence (put shortly) was to give permission for the restoration of the boundary fence which had been removed, and thereafter -- that is to say, after restoration -- the removal of part of that fence so as to create an opening some 62 feet wide. The licence is plainly drawn on the basis that the two gardens will be restored to separation before the fence is removed, in part, to create the opening.
4. The second licence in terms grants an easement permitting Miss Scott-Moncrieff, as tenant of No. 25 Nassington Road to pass and re-pass on foot only through the opening for the purpose of the entry and egress at the garden at No. 27. The licence contains obligations to reinstate on service of a notice by the landlord: notice may be served if the tenant is in breach of any of the obligations under the licence. Clause 6.2 of the licence is in these terms:

"6.2. Nothing contained in this licence shall waive, or be deemed to waive, any breach of the obligation on the lessee's part contained in the lease which may have occurred prior to the date of this licence, or authorise, or be deemed to authorise, the execution of any further works or application for planning permission or other act or omission or thing other than those expressly authorised in clause 4."

Clause 4 permits the execution of the relevant works; that is to say, the works of restoring the fence, creating the opening and, subsequently (if notice were given), reinstating the fence.

5. That was the position up until 2006. In 2006 Miss Scott-Moncrieff obtained planning permission for the installation of a naturalised swimming pool: or, as it is described in the plans on which planning permission was obtained, a swimming pond. The swimming pond was designed to occupy part of each of the two gardens, reflecting Miss Scott-Moncrieff's de facto occupation of the whole as a single unit. Her contractors commenced the works of installation at the beginning of December 2006.
6. These proceedings were commenced on 8 December 2006. On that day, the claimants sought and obtained an injunction restraining the works. On 22 December 2006 the restraint was continued, by way of undertaking, until trial or further order. The basis upon which the injunction was sought and obtained was that, in carrying out the works proposed, Miss Scott-Moncrieff was acting in contravention of her covenants as tenant both under the lease under which she held the garden flat of No. 25 Nassington Road and under the lease under which she held the garden flat of No. 27 Nassington Road. As I have said, Mrs Guignabaudet was the landlord of No. 25. Her co-claimants were, with Miss Scott-Moncrieff herself, the landlords of No. 27.
7. The covenants in the two leases were not in the same terms; but each restrained the tenant from making alterations to the demised premises without first having obtained the consent of the landlord. At the time when she commenced the works in December 2006, Miss Scott-Moncrieff had not obtained consent from her landlords. In her defence, dated 2 February 2007, Miss Scott-Moncrieff asserted, as her primary contention, that consent to the installation of the swimming pond was not required under either lease. Subsequently, however, she sought consent to what was described as "the final scheme of works" as set out in drawings dated May 2007. She negotiated terms upon which the other individuals who were landlords of No. 27 Nassington Road were willing in principle to give such consent. Those terms were set out in a draft licence. On 4 September 2007 solicitors for Mrs Guignabaudet indicated that she would withhold consent. By counterclaim dated 25 March 2008, Miss Scott-Moncrieff sought a declaration against Mrs Guignabaudet that she was entitled, without any further consent, to carry out the scheme of works at the garden of No. 25 upon terms similar to those set out in the draft licence which she had negotiated in relation to No. 27.
8. The action and counterclaim came on for trial on 2 July 2008. The court was invited to make, and did make, an order by consent staying all proceedings between the landlords of No. 27 Nassington Road and Miss Scott-Moncrieff upon terms that they entered into a licence on the terms of the draft. The court then proceeded to hear as a preliminary issue the question whether Mrs Guignabaudet's consent to the scheme was required under the covenant in the lease of No. 25 Nassington Road. The judge decided that question in the negative. In those circumstances the question raised by the counterclaim – whether consent had been unreasonably withheld – did not arise. Accordingly, the judge dismissed Mrs Guignabaudet's claim in the action.
9. The lease under which Miss Scott-Moncrieff holds the garden flat of No. 25 Nassington Road as tenant was dated 18 July 1982. The term granted by that lease is 99 years from 31 July 1982. The demised premises are described as:

"…all those the premises more particularly described in the First Schedule hereto, and which premises are hereinafter called the 'demised premises' as the same form, part of the lessor's freehold property, known as No. 25 Nassington Road, London N3 in the County of Greater London registered at Her Majesty's Land Registry under Title No. LN92097, hereinafter called "the said building" as the same is identification only delineated and edged red on the plan annexed hereto."

The First Schedule to the lease is in these terms:

"All that the basement flat in the property known as 25 Nassington Road aforesaid from the level of the joists upon which the floors of such flat rest up to the level immediately below the joists upon which the floors of the ground floor flat above rest."

There is nothing in that description which suggests that the garden at No. 25 is included in the demise. Nevertheless, the plan annexed to the lease shows the garden within the area delineated and edged red. It has been common ground between the parties that the garden is included within the demise of the basement or garden flat. And, on that basis, it has been common ground also that the defined expression in the lease, "the demised premises", must be taken to include the garden; notwithstanding that the description in the first schedule might, at first sight, suggest that the premises demised were wholly within the building at No. 25 Nassington Road.

10. The covenant on which Mrs Guignabaudat relies is that contained in clause 2(4) of the lease:

"The lessee hereby covenants with the lessor as follows:

…

(4) Not without [the] previous consent in writing of the lessor, such consent not to be unreasonably withheld, to make or permit or suffer to be made any alteration in the construction or arrangements of the demised premises, nor to [be] cut, alter or injure any of the walls, timbers, ceilings, doors, door supports, or windows."

The word "be" where it appears for the third time appears to be wholly superfluous. No explanation can be found for its inclusion.

11. The judge approached his task on the basis that the gardens of Nos. 25 and 27 Nassington Road were "ordinary London gardens". He described them in these terms, at paragraph 3 of his judgment:

"3. I have been provided with a number of coloured photographs which show very clearly the layout of the two gardens. They are attached to the expert report of Mr Clive Morley dated 6^th May 2008, and they show the general layout of the gardens and that beyond the bottom of the gardens -- which appear to be the southern boundaries of the two plots -- there is a railway line, which is the North London railway line. In the garden at the back of number 25 there is in the far corner an ash tree. In the far corner of the garden to number 27 there is an oak tree. There is a large ceonothus bush in front of a conservatory which is constructed at the rear of number 27. The photographs also show that in essence these are ordinary London gardens with no special features to distinguish them significantly from other suburban back gardens to be found in London. They have not, in my judgment, been arranged in any particular way. They simply run from the back of the houses down to the railway lines. Although they have plants in them, and trees, they have not been landscaped in any particular way; they are not terraced. I find that they do not have any unusual features which would distinguish them from the average London garden."

12. The judge then went on to describe the proposed works which, in December 2006 and at the date of the trial July 2008, Miss Scott-Moncrieff intended to carry out. He said this at paragraph 7 of his judgment:

"7. The works are to be carried out at the foot of the gardens, the southern ends of the gardens, across the two plots of land, creating a swimming pond, which is a naturalistic appearing swimming pool, if I can call it that, with a depth of two metres and a length of 27 metres. It has the appearance of an irregular oval. The sides slope down so that there is no sharp edge around the swimming area, with the higher level, as it were, of the swimming pond, surrounded by sandbanks. Between the sandbanks and the level of the garden there is to be shingle and other material which will keep in place a number of plants -- aquatic and other plants. On one edge of the swimming pond there is to be a jetty and a board with steps to enable a swimmer to get down to the swimming pond. The pond itself is to be serviced by a pipe and filtration system. The whole appearance is intended to be more like a pond than a swimming pool, and naturalistic in outlook. Certainly a relatively substantial part of the garden will be taken up by the pond, both by the swimming area and the surrounded planted area, and there will be, as I understand it, a freestanding shed on the southern boundary of the garden against the fence by the railway line in which the machinery will be housed."

That description can be amplified by reference to the May 2007 plans, which formed the basis of the proposal as it was before the judge.

13. The judge erred when describing the pond as having a length of 27 metres. The true position is that it has a swimming area of 27 square metres. The dimensions of the pond are such that the swimming area of 27 metres, with a depth throughout that area of two metres, comprises a volume of 54 cubic metres. The remaining area – being the edges of the swimming area and the portion occupied, or to be occupied, by aquatic and other plants covers some 36 square metres and slopes from ground level down to 0.7 metres, comprising a further volume of some 12.5 cubic metres. The total volume to be excavated is of the order of 66 cubic metres. On the basis that a little over half of that volume falls within the garden of No. 25 Nassington Road, there is some 34 cubic metres of soil to be removed which must either be redistributed elsewhere in the garden of No. 25 or, in part, in the garden of No. 27 or be removed from the premises altogether. Mr Crampin QC, who appears for Miss Scott-Moncrieff, accepted, as he was bound to do, that some 34 cubic metres of earth is "quite a bit of earth". In practical terms, it represents three or four large lorry loads. The gardens of Nos. 25 and 27 Nassington Road are now integrated, in the sense that there is a 62 foot opening in the fence which formally separated them: the width of the swimming pond across the line of that fence is some 6.45 metres. So, on any basis, those are substantial works.
14. The judge directed himself that the question which he had to consider was whether the works necessary to create the swimming pond gave rise to a breach of the terms of the lease of the basement flat at No. 25 Nassington Road. He approached that question by recognising that the terms of the restrictive covenant in clause 2(4) restricted any alteration without the prior written consent of the lessor in the construction or arrangements of the demised premises. He asked himself first, whether what was proposed would involve an alteration in the construction of the demised premises. He identified two features. First, that (as I have said) the demised premises had to be given a meaning which included both the building and the garden; but secondly, that the clause had clearly been drawn with the building, rather than the garden, primarily in mind. The judge thought that the covenant had been lifted from a lease of one of the upper flats. Nevertheless, he approached his task on the basis that it was necessary to give the covenant some effect in relation to the garden: that being part of the demised premises, which was a defined term in the lease.
15. The judge was satisfied that, for there to be an alteration in the construction of the garden, it was necessary "first" to find something which could be identified as a "construction". It was not enough simply to find that the garden had been altered. He thought it inappropriate to refer to the garden as a "construction". He took the view that, on the true construction of the lease, "the construction of the demised premises" was a reference to a built object. So, he asked himself, was there anything in the garden which could be regarded as a construction which would be altered by the carrying out of the proposed works? He answered that questions in these terms:

"The thing that is already in existence and which has to be altered is 'the construction … of the demised premises'. In those circumstances, and viewing the clause in that way, it seems to me quite impossible to say that the garden is a 'construction' and that the creation in the garden of something that did not previously exist is an 'alteration in [that] construction'. The fact that the works themselves might amount to a construction or works of construction does not of itself satisfy the provisions of the clause, and in my judgment for those reasons the works do not fall foul of the first part of this limb of the clause."

For my part, I see much force in the judge's conclusion in relation to the "construction" limb of the covenant. The difficulty, as the judge identified, is that it is necessary to find that there has been, or is proposed, some alteration to the construction of the demised premises. It is difficult to see what could be said to satisfy that requirement.

16. But it is not, in my view, necessary to decide that question, because I take the view that the position is clear under the second limb of the covenant in clause 2(4) -- that is, the covenant regarding the alteration of the "arrangements" of the demised premises. The judge addressed that question at paragraphs 15 and following of his judgment. At paragraph 20 he directed himself in these terms:

"20. The question which I think I have to ask myself in respect of the garden is whether there are arrangements or whether there is an arrangement of the garden which would be altered by the works. That, in my judgment, means either a physical arrangement of the garden which would be altered by the works or a use of the garden which would be altered by the works."

He went on to say this:

"21. So far as the physical arrangement is concerned, I accept that had this garden been laid out in terraces or had there been -- and I add, at the time of the grant of the lease -- a specific structure to the garden which would be interfered with by the creation of a swimming pond, then it would be arguable that the works would amount to an alteration in that arrangement, the terraces or the structure being an arrangement of the garden. As I have already said, from my view of the photographs of the garden there is nothing unusual about this garden which would enable me to describe it as "arranged" in any particular way."

"22. So far as user is concerned, using the terms in the estate agents' sense to which I have already referred, the demised premises are 'arranged' in such a way that the garden is to be used as a garden. The creation of a swimming pond will not, in my judgment, alter or alter sufficiently or significantly the user of the garden as a garden and for those reasons it seems to me that the proposed works do not fall within the second part of this limb of the covenant either."

17. It seems to me important to have in mind two features of the works which, as at July 2008, were proposed and which have subsequently been carried out – following the judge's order of 3 July 2008. The first feature, as it seems to me, is that the creation of this swimming pond requires the displacement of a substantial quantity of earth. As I have said, on any view, there is at least some 34 cubic metres of soil to be moved. That earth must either be redistributed throughout the garden or must be removed from it. There is some indication in the plans of May 2007 that some redistribution was proposed. In particular, in building up, in the form of a raised terrace, that portion of the garden which lay to the south of the swimming pond: that is, between the swimming pond and the wooden fence separating the garden from the railway line. We were told - and for my part it comes as little surprise – that nevertheless some of the earth had to be removed from site. The question, as it seems to me therefore, is whether the digging of a substantial hole, the removal of substantial quantities of earth from that hole, the redistribution of that earth within the garden so as to create a new terrace, and the removal of part of that earth from the garden altogether, does come within the phrase "alteration to the arrangement of the demised premises". There is simply less of the demised premises after the earth has been removed than there was before removal.
18. Mr Crampin sought to meet that point by explaining that it would be no breach of the covenant to remove all of the topsoil in the garden and take it away: save that perhaps, then it might be said that there was no longer a garden at all. But it seems to me that the removal and redistribution in this case is of such a scale that it is impossible to reach the conclusion that there has been no alteration to the arrangements or layout of the garden.
19. The second feature which seems to me important in this particular case is that the works that are proposed, and have now been carried out, extend across the common boundary. The position therefore is that there was intended to be, and now is, an alteration to the physical features on the common boundary. As I have explained, the effect of the licence granted in 2001 was to require the fence to be reinstated before it was removed to create an opening. The position now is that the ground on which the fence could be reinstated is no longer there. In its place there is a length of some 6.45 metres of water; and for a substantial part of that length the water is two metres deep. This is a boundary which, for a substantial part of its length, is no longer formed by earth but is formed by water. That seems to me to involve an alteration to the arrangements of the garden.
20. A garden which has as one of its boundaries a water feature – in place of a continuous earth boundary – is, as it seems to me, a garden whose arrangements have been altered within the meaning of this covenant.
21. For those reasons – and notwithstanding the forceful arguments advanced by Mr Crampin on his client's behalf – I would allow this appeal.

Lord Justice Wilson:

22. I agree.

Lord Justice Lloyd:

23. I would also allow the appeal and, like my Lord, Sir John Chadwick, I would not rest my decision on the first part of the cause, concerned with alteration of the construction of the demised premises. There is a great deal to be said for the learned judge's judgment point. But, like him, I would not accept the second judge's analysis or approach to the second part of the clause concerning the alteration of the arrangements of the demised premises. That part of the clause uses a very general and rather flexible word which must be seen, of course, in its context, used in a residential long lease of a flat plus a garden. One would expect to find in such a clause a concern on the part of the parties that the landlord should have a degree of protection for its -- or, I should say, in this case, her -- freehold interest in respect of matters significantly affecting, or potentially affecting, on the one hand the user of all the flats in the building and on the other hand, more particularly, the freehold reversion to the particular lease. It is, of course, correct that the covenant is qualified by the requirement of consent and the requirement not unreasonably to withhold consent, but equally Mr Crampin is perfectly entitled to say that this is not a covenant that one would expect to require tenants to go to the landlord for consent in respect of minimal matters affecting, on a potentially ephemeral basis, the way in which the flat or the garden is laid out or arranged.
24. Mr Crampin's submission is that the way in which one should read the word "arrangements" is so that it can be understood by rewriting it as the way in which the demised premises are laid out, concerned with such matters as the physical arrangements, the services, the fact of (originally, of course) a fenced garden, and the use, or possible use, of the rooms and areas shown on the lease plan in the way in which they are marked on that plan. He submits that the demised premises consisted of a three-bedroom flat with kitchen, bathroom and living room and its own garden. That position was altered by the 2001 licences to the effect that there was a internal interconnection with the next flat and there was an external interconnection with the garden of number 27. Subject to the fact that in particular the garden was capable of being used as part of a shared garden, he submitted that there had been no alteration in the arrangements and there was no such change as a result of the construction of the swimming pond. In particular, he submitted that the arguments in favour of the appeal on the part of Mr Pearce produced a situation it accepted in which the most minimal alteration affecting anything other than, in practical terms, the placing of moveable items within the demised premises would amount to an alteration of the arrangement and would therefore require consent, even if, so far as minor items were concerned, no landlord could reasonably withhold consent.
25. Mr Crampin's submissions were that the judge was right in what he said at paragraph 22, although he criticised in certain respects what the judge had said at paragraph 21, both of which my Lord has read. For my part, I would respectfully disagree with what the judge said at paragraph 21. He there said that the garden before the creation of the swimming pond -- which is of course how the judge looked at it -- was a garden that had no arrangement. It was not arranged in any way; there was no arrangement of the garden. There were no arrangements of the demised premises that applied to, or affected, the garden. That seems to me to be an incorrect approach to the matter and neither counsel supported it. As it seems to me, the answer to Mr Crampin's submission that there has to be a dividing line and that Mr Pearce's submissions would not allow for one is that the dividing line is to be taken from the context of this long lease and of the need to protect the landlord only in respect of significant matters which could affect the freehold reversion. As Mr Pearce pointed out, the third limb of the clause, on the face of it, would require consent before the tenant has a nail or other fitting put into the wall in order to hang a picture or something of the kind, but no-one would suppose that that is within the scope of the covenant.
26. There is in the covenant itself, particularly as regards the general and flexible word arrangements, an implication that what one is concerned with is something which is significant or substantial in the layout or the arrangement of the relevant part of the premises one might use. I do not need to consider how that word might affect internal matters inside the building, but it seems to me that, considering that part of the demised premises which consists of the garden, one cannot look at the work which was to be done, and which now has been done since the judgment below, without coming to the conclusion that a substantial difference has been effected to the layout of the arrangement of the garden now that a large part of it is occupied by the swimming pond. Mr Crampin submitted that it was not a question of scale, but that goes to his submission that any change at all on the appellant's argument would require consent. In my judgment, that is not a correct submission. What requires consent is an alteration of something which is in itself substantial or significant, because only substantial or significant matters, of whatever kind they are, constitute or comprise the arrangements of the demised premises. I agree with my Lord that the originally proposed creation, and now the actual creation, of that part of the swimming pond which lies within the curtilage of number 25 has constituted an alteration in the arrangements of the premises demised by the lease of the basement flat of number 25, and for that reason I would allow the appeal, leaving it for the parties next to address the question of whether the withholding of consent was unreasonable.

Order: Appeal allowed