Neutral Citation Number: [2011] EWCA Civ 607
Case No: A3/2010/1866
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR JUSTICE WYN WILLIAMS 
[2010] EWHC 1725 (Ch) 
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 18/05/2011
Before:

LORD JUSTICE THOMAS
LORD JUSTICE LLOYD
and
LORD JUSTICE RIMER
- - - - - - - - - - - - - - - - - - - - -
Between:

	EATON MANSIONS (WESTMINSTER) LTD	Claimant
Respondent	
	- and -		
	STINGER COMPANIA DE INVERSION S.A. 	Defendant
Appellant	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

James Hanham (instructed by Clifford Chance LLP) for the Appellant
Jonathan Arkush (instructed by Stockler Brunton) for the Respondent

Hearing date: 2 March 2011
- - - - - - - - - - - - - - - - - - - - -
Judgment

Lord Justice Lloyd: 
Introduction
1.	Eaton Mansions is a block of flats in Cliveden Place, London SW1.  The freehold is owned by the Grosvenor Estate.  A headlease is held by the claimant, Eaton Mansions (Westminster) Ltd, which is a management company formed to manage the block on behalf of the owners of long leases of the flats.  I will call it EMW.  At the time relevant to these proceedings the defendant and appellant, Stinger Compania de Inversion S.A., owned underleases of flats 8 and 10, which were 5 days shorter than EMW’s headlease.  I will call it Stinger.  Stinger sold each of the underleases in March 2010, while the proceedings were under way.
2.	What gave rise to this litigation was some air-conditioning apparatus placed by Stinger on the roof of the block.  EMW contends that its presence is a trespass, and brought this action in order to have it removed.  Stinger denies trespass, on grounds which I will explain later.  EMW applied for judgment under Part 24.  The application came before Mr Justice Wyn Williams, who granted the order sought.  Stinger appeals, with permission granted, as it happens, by myself, both as to the making of the order on the substantive issue, and against the judge’s order that they should pay EMW’s costs on the indemnity basis.  I will return to the appeal on costs once I have dealt with the main point.
The substantive appeal – the background
3.	In order to explain the issue I must briefly describe the pattern of ownership in relation to the block and the flats.  The headlease, dated 23 June 1978, granted the block to EMW for a term of 75.5 years from 24 June 1978.  The headlease included various covenants, of which I only need to set out part of one, in clause 2(XIII) - I will refer to it as the Headlease Covenant:
“No alteration shall … be made in the construction height elevation external or internal architectural appearance or internal arrangements of the demised premises or any part thereof or in the chimney stacks or chimney pots thereof …”
4.	The underleases are, so far as relevant, identical.  They granted the relevant flat, with various easements, rights and privileges, for a term of 75.5 years less 5 days from 24 June 1978.  It is sufficient, as regards the contents of the demise, to say that neither the flat nor the associated rights, as defined, included any right for the leaseholder in respect of the roof of the block, other than that of shelter and protection (Schedule 2 paragraph 2) and, if relevant, the right to connect to wireless or television aerials in the block provided by EMW (if any).  The tenant’s covenants included a normal obligation not to make alterations or additions without the prior written consent of the lessor and headlessor: clause 3(5). 
5.	Nothing in the underleases, therefore, gave the leaseholder any right to place anything on the roof of the block.  However, in about 1980 Stinger did place three air-conditioning units on the flat roof of the block, with the agreement of EMW, together with associated condensers, pipe work, wires, ducts and other apparatus on the flank wall of the block.  Later, Stinger went on to place further such units on the roof of the block, in these cases without seeking or obtaining the consent of EMW.  By 1995 there were five such units, and in 1997 or 1998 a sixth unit was added.  None of these is still in place, though some of the accessory apparatus for the new units, to which I will refer, may survive from the earlier period. 
6.	New units were placed on the roof in 2007 and 2008.  In brief, two new air conditioning condensers were attached to the chimney stack, and two new air conditioning units were placed on the roof in June 2007, with pipe work from the roof, via the chimney stack and flues, to the flats.  The latter two units were removed in February 2008 but not the condensers.  In December 2008 two further new units were installed, connected to the chimney stack, and thereby to the internal pipe work.  The litigation is about the two surviving condensers from June 2007 and the two units installed in December 2008, and the associated pipe work and so on.
The parties’ positions
7.	As the issues stood by the time of the hearing below, EMW contended that placing the new equipment on the roof was a trespass on the part of Stinger, since it had not been done with EMW’s consent.  Stinger contended (and EMW accepted this to be arguable, for the purposes of its application) that EMW had so conducted itself that it could not simply rely on the fact that it had not given its consent, and that it was not entitled to withhold or delay consent unreasonably to a request from Stinger to be allowed to place air conditioning apparatus on the roof if it was of reasonable quality and size and in a reasonable position.  Further, Stinger argued that it had sought EMW’s consent on 3 December 2008 and that EMW had refused to give its consent by issuing these proceedings in April 2009.  That refusal was said to be unreasonable.  EMW argued that it was entitled to refuse consent, among other things because what Stinger wanted to do (and then did, without waiting) would or might place EMW in breach of the Headlease Covenant, and that the Grosvenor Estate had not, and would not have, agreed to it.
The facts
8.	In order to see whether Stinger has a reasonably arguable defence to the trespass allegation, it is necessary to examine the exchanges between EMW, Stinger and the Grosvenor Estate, and their respective agents, about the air conditioning plant, particularly from 2006 onwards.  Previously, in 1996, there had been correspondence between Smith Waters, agents for EMW, and Stinger about the units then in place.  In February 1996 there had been a complaint from another lessee about the noise level, and it was suggested to Stinger that the units needed major overhaul or renewing.  In November 1996 it was said that they had not been correctly installed, and that they should be replaced by modern units correctly installed and mounted.  In August 1997 the same point was reiterated.  Stinger replied, denying any nuisance by way of noise to other flats and any defect in the units or their installation.  The matter rested there, so far as relevant, until 2006.
9.	In March 2006 on behalf of Stinger, Omniway Properties Ltd (Omniway) asked EMW for permission to carry out substantial internal works.  The two flats had been combined into one, and it was proposed to divide them again, in preparation for their eventual sale.  The proposals for which consent was asked at that stage did not include anything as regards the roof and the air-conditioning units.  Smith Waters passed the application on to the Grosvenor Estate, for whom Murray Birrell acted.  Murray Birrell asked Omniway to arrange an inspection.  In response to the submission of more drawings, a surveyor in the offices of the Grosvenor Estate said to Omniway in a letter dated 23 May 2006:
“With regard to the proposed AC plant I would advise not to assume approval will be automatically given as the plant of this nature often has to be located outside the demise of the property it serves and it can cause annoyance to neighbours by way of vibration, noise and heat.  I would advise information on this aspect of the proposal be sent as soon as possible for consideration.”
10.	In August 2006 Smith Waters wrote to Stinger referring to there being a number of roof level air-conditioning units located to the perimeters of the building, which they said would need to be relocated and recommissioned by Stinger.
11.	On 8 September 2006 Murray Birrell wrote to Smith Waters saying that consent would be given by the Grosvenor Estate as freeholder to the works which had been specified by Omniway in the plans submitted, subject to various conditions.  The works conditions specified, subject to compliance with which the approval was given, included two passages relevant for present purposes:
“5.	Grosvenor’s approval to these works does not give consent for the use of any external roof surface as a roof terrace, sitting out space, roof garden or for any purpose not specifically agreed in writing.  Access to such roofs is restricted to maintenance and repair purposes only.
16.	Please note the following:
…
(ii)	This approval does not include for the installation of comfort cooling / air conditioning.”
12.	On 27 September 2006 Omniway wrote to Smith Waters asking, among other things, this question:
“A/C units of roof: I have provided Murray Birrell with the details of 2 No A/C condenser units which we would like to install on the roof, same location as former condenser units.  Do we also need your approval of this matter?”
13.	The answer, on 4 October, was that EMW’s approval was needed, and details should be supplied.  On 19 October Omniway sent details of the planned units, though with some further information to follow.  On 29 November 2006 representatives of Omniway and Smith Waters met at the property.  Omniway told Stinger after the meeting that the position of the air conditioning units, in the same place as the previous units, had been approved.  On 16 February 2007 Murray Birrell wrote to Omniway to acknowledge further information about the proposed installation, and asking for a second inspection to be arranged.  That meeting took place on 7 March 2007.  Omniway then told Smith Waters, in a letter of that date, that Murray Birrell had agreed in principle the locations suggested for the units.  Although the routes for the condenser pipes remained to be designed, Mr Hall of Murray Birrell had proposed that the abandoned chimney flues might be used for connecting the pipes with the system in the flats.  
14.	Pausing there for a moment, the letters dated 16 February and 7 March 2007 were not before the judge, and they were the subject of an application for permission to rely on additional evidence on the appeal, which EMW opposed.  There is a good deal of force in EMW’s reasons for objecting to their admission, but even so it seems to me sensible to admit them because Stinger rely on them as showing the attitude of the Grosvenor Estate, and it is better, in the circumstances, to be able to refer to the complete history in this respect.
15.	In April 2007 Omniway asked both Smith Waters and Murray Birrell for their comments about two further small condenser units, at locations shown on a drawing supplied.  In May Omniway sent to Smith Waters and Murray Birrell a roof drawing showing “the final AC condenser locations”, and asking for “swift approval” as the units were to be delivered in 2 weeks’ time.  This was not forthcoming.  On 21 June 2007 Omniway wrote again to Murray Birrell with further information, reiterating their acceptance that “we … do need your written consent in order to install the units”.  The same point was made again in a letter from Omniway to Murray Birrell dated 26 June, mainly dealing with another point.  The relocation of the units was said to be imminent.  On 27 June, however, Smith Waters stated their view that the nature of the replacement was such that a full planning application would be needed as well as approval from the Grosvenor Estate, and Murray Birrell agreed as to that.
16.	On 18 July 2007 a meeting took place on site attended by representatives of Omniway and Smith Waters, the chairman of EMW and another leaseholder.  One point made at the meeting, on behalf of EMW, was that a roof drawing was required which indicated where potential future air conditioning units for the other 13 flats could be accommodated.  It seems that there were already such units on the roof for two other flats besides those of Stinger.
17.	Planning permission remained a relevant issue.  On 12 November 2007 Smith Waters wrote to Omniway after a meeting with a planning officer about the air conditioning arrangements proposed in connection with the two flats.  The officer indicated that the proposed units were too big, and consent would not be recommended.  Omniway was asked to make immediate arrangements to remove the units then in place.  Omniway’s response, acknowledging the local authority’s objections, was that they were studying the possibility of significantly smaller units, to overcome these objections.
18.	On 19 December 2007 a meeting of the directors of EMW was held.  No-one was present to represent Stinger.  The works to flats 8 and 10 were discussed.  Under the heading of air-cooling equipment, the minutes record a discussion as to whether EMW should demand a payment from Stinger for giving consent to the installation of units, to represent a percentage of the increase in value of each flat which the installation would create, for example on the basis of 50% of the profit, estimated at £400,000 (both flats were reported to be on the market for sale).  The directors resolved that Omniway should be required to remove the units.  That instruction was conveyed by Smith Waters to Omniway by letter dated 22 January 2008, on the basis that if it were not done, EMW would have it done and would bill Stinger for the cost.
19.	On 13 February 2008 Smith Waters sent an email to Mr Jan, representing Stinger, about a number of aspects of the current works.  The email acknowledged that the larger air cooling units had been removed, but said that two smaller units remained and the chimneys had not been made good.  It also made the point that the board of directors had considered the question of such units for all flats in the block, and they had been advised that no leaseholder had any right to install any equipment on the roof, without consent, and that the right to do so had a value.  Mr Jan then attended a meeting with Smith Waters and three of the directors.  After that meeting Smith Waters wrote to him and confirmed the requirement to remove as soon as possible the two small air-cooling units, for which planning permission had by then been refused, and to make good the wall.  He was also told that the directors were still considering the question of air-cooling and how this should be dealt with in future for Stinger and for other leaseholders. 
20.	In April 2008 Mr Jan proposed to Murray Birrell a meeting at the site to discuss the requirements of the Grosvenor Estate, in relation to the proposed location for new air conditioning condenser units.  Murray Birrell suggested that Smith Waters should also attend but Mr Jan did not wish to involve them at that stage.  Murray Birrell explained that Stinger would require consent from EMW in advance of any consent from the Grosvenor Estate, but Mr Jan nevertheless preferred to proceed without Smith Waters’ involvement at that stage.  A meeting took place on 22 April.  Mr Jan’s conclusion from the meting was that the Grosvenor Estate would approve the location of the proposed units, subject to a number of criteria imposed by the Grosvenor Estate, and subject to EMW approving as well.  The Grosvenor Estate criteria included consideration of leaving space for future potential requests by other leaseholders to add their own units.   Murray Birrell’s response (which was copied to Smith Waters) is important:
“Thanks for the note following our brief meeting.  The over-riding factor here is the fact that you need to follow the correct procedure.  That is to apply up the chain via Smith Waters.  I am unable to consider the matter formally until they approach Grosvenor having initially agreed matters with you.
In the meantime I have the following additional comments to make having read your numbered points below:
1.	You need planning consent.
2.	Any approval will be subject to a revocable licence.
3.	I do not have a copy of the drawing so I have nothing to review on paper.
4.	I recall a lot of condensers, somewhere in the region of 6No for the two flats.  I have asked you to review this because I feel this is excessive.”
21.	On 14 July 2008 the board of directors of EMW met, with Mr Jan and another representative of Stinger in attendance.  EMW had been considering appointing solicitors to act for it in relation to issues arising from the works to flats 8 and 10.  It was agreed that their instruction should be deferred by 90 days to allow for the possibility of the outstanding issues being resolved by agreement at a meeting, and also to allow Stinger to submit full technical details, proposed location etc., of the proposed condenser units for consideration by EMW.  Mr Jan claimed to have provided all necessary technical information about the condensers, which he said were the smallest available with the necessary capacity.  He would willingly provide a further report from the structural engineers and the acoustic specialist about the proposed equipment, which, he said, could not now be changed without great inconvenience and further disturbance to other occupiers.
22.	A further informal meeting took place on 1 October 2008; it was not a formal board meeting, though attended by two directors as well as by Smith Waters and a representative of Stinger.  A suggestion was discussed that each of the twelve flats at the front of the block could be allowed to have up to two units per flat, with the rear flats being allowed one each.  Omniway followed the meeting up by a letter to Smith Waters dated 16 November 2008, in which it was said that all reasonable concerns of the board and the leaseholders had been addressed, and asking for a favourable response.  By then the 90 day period agreed at the meeting in July had run out, without agreement having yet been reached, but solicitors had not yet come on the scene.
23.	On 3 December 2008 Stinger wrote an important letter to Smith Waters.  It followed up the meeting of 14 July 2008 and confirmed approval of the minutes subject to some changes.  It took up a number of other points from the minutes or later exchanges.  Dealing directly with the air conditioning units it said this:
“We have had sight of earlier correspondence regarding your suggestion to charge Stinger for the right to place new a/c condensers on the roof and would request you to clarify whether this was approved by the board or was merely a discussion.  For the avoidance of doubt there have been 6 no. air conditioning units on the roof servicing flats 8 and 10 for over 30 years which they clearly have rights to enjoy and therefore we insist that the proposed demand for payments is withdrawn.
…
We confirm that the full technical details of the new condensers, including the independent structural engineers report and acoustic reports, were supplied by [Mr Jan] to [one of the directors of EMW], and that a further pack of information including drawings and technical details of the proposed condensers including the night time quiet mode of operation and the big foot support system was forwarded to Smith Waters on 16 November 2008 for onwards transmission to the [EMW] board, kindly acknowledge receipt of these details and reports.
In view of the dispute that has arisen and in anticipation of a document being prepared to formalise the installation of the new condensers for Flats 8 and 10, we request that your solicitors prepare an initial draft of the necessary document(s) and forward it to our solicitors.
Please note that there are several holes that were drilled in to the existing chimney breast which can only be sealed once the new condensers are installed, therefore your early approval would be appreciated.”
24.	The new air conditioning units and equipment were then installed on 6 December 2008, without an answer from Smith Waters to that letter.
25.	No agreement had been or was reached between the relevant parties, so issue was joined during 2009.  On 3 March 2009 solicitors acting for EMW wrote to Stinger’s solicitors, asserting that the work carried out in 2007 and 2008 was an interference with the property rights of EMW and others without their consent.  Stinger was required to remove the units and pipe work within 14 days, failing which EMW said it would see to the removal itself and would claim the costs against Stinger.  Other solicitors instructed by Stinger responded on 9 April 2009 disputing the claim.  In the meantime, on 19 March 2009, Stinger had obtained planning permission for the units.  Proceedings followed, the Claim Form being issued on 22 April 2009.
The proceedings
26.	By the Claim Form EMW claims an injunction requiring the removal of the units and pipe work, and damages.  The installation by Stinger of air conditioning equipment in June 2007 and December 2008 was alleged, and was complained of as having been done without any right to do so and without EMW’s consent.  The defence relied originally on a case of estoppel, to the effect that EMW was precluded by the history of the dealings between the parties from objecting to the installation of the equipment.  On EMW’s first application for judgment under Part 24, this was held to be unarguable, but Stinger was given an opportunity to amend its defence.
27.	The defence now rests centrally on an allegation that EMW represented that it did not and would not object to leaseholders maintaining on the block a reasonable amount of air conditioning apparatus and that the grant of consent to this would not be unreasonably withheld or delayed in respect of air conditioning apparatus of reasonable quality and size in a reasonable position.  The letter of 3 December 2008 is relied on as a request for consent, as is a further letter dated 5 October 2009, which I will mention later.  EMW’s withholding of consent is alleged to be unreasonable, so it is said that EMW cannot rely on the absence of its consent to show that Stinger committed a trespass.
28.	For the purposes of the application before the judge, EMW accepted that it was arguable that it had conducted itself so as to represent that it would not unreasonably withhold consent, as alleged.  The judge said at his paragraph 28 that he regarded it as at least arguable that the letter of 3 December 2008 constituted a request for consent for the retention of what existed and the installation of two further units.  It was accepted that consent was refused by the bringing of proceedings in April 2009.
The judgment
29.	In his judgment Wyn Williams J reviewed the facts, and observed that there was no basis for saying that EMW had unreasonably withheld its consent to any relevant works before December 2008.  Treating it as at least arguable before him that the letter dated 3 December 2008 constituted a request for consent for what then existed and for the installation of two further units, the whole of Stinger’s case depended on the response, or what should have been the response, to that request.  In that regard, he referred to Counsel for EMW as having argued that Stinger had no prospect of showing that EMW had unreasonably withheld consent, because it had always taken the view that, if it gave its consent without knowing the attitude of the Grosvenor Estate, it would risk being in breach of the Headlease Covenant.
30.	There was no approach to the Grosvenor Estate in late 2008 or early 2009 to ascertain its attitude at that time.  However, it appears that on 5 October 2009 Stinger made a further request for consent to the retention of the relevant apparatus.  At that stage Smith Waters did approach Murray Birrell on the subject.  The outcome of that approach was reported by Smith Waters to EMW’s solicitors on 26 November.  This records that the board of EMW had decided that they should reject the request if Murray Birrell took the view that consent should not be given for the apparatus, whereas an application to replace like for like (in terms of size) the original units (four, five or six) should be treated sympathetically, subject to planning and to the attitude of the Grosvenor Estate.  Murray Birrell’s attitude was reported as being that (a) it would be difficult to install and screen sufficient units for all flats (though accepting that not all flats would want them) and (b) the two large units for flats 8 and 10 were too visible and too big, so that they would be likely to recommend to the Grosvenor Estate that consent should not be given.  He was also reported as saying that he might be prepared to consider a long-term overall plan for the roof under which a set number of units, to be installed in locations agreed in advance, could be the subject of a general consent.  The essence of this, as it related to the particular flats, was passed on to Stinger’s solicitors on 27 November 2009.
31.	The judge said that, but for this material, the absence of evidence from EMW or from Smith Waters as to why proceedings were commenced without an application to the Grosvenor Estate for consent might have been a gap in the evidence which would have led to the failure to the application for summary judgment.  In the light of the material from later in 2009 he said that it seemed to him clear that Murray Birrell would not have recommended to the Grosvenor Estate that it should consent to the retention of the air conditioning apparatus on the roof of the block, and that there was no reason to suppose that they would have made a different recommendation if it had been raised with them earlier in 2009.  He concluded that the Grosvenor Estate would have accepted Murray Birrell’s recommendations.  He then said this, to set out his conclusions:
“37.	In the light of all this evidence what emerges?  First, in my judgment, neither Grosvenor nor the Claimant has ever given consent to the erection or retention of the apparatus which exists on the roof of the building.  Second, Grosvenor has provided reasons which cannot be categorised as unreasonable for its view that consent to retention should not be given.  Third, in my judgment, it would be very difficult for a refusal of consent on the part of the Claimant to be regarded as unreasonable in the face of Grosvenor’s opposition but, in any event, it is unarguable to suggest that the refusal of consent in the face of Grosvenor’s opposition and in the light of terms of the covenant which exists in the head lease is unreasonable.  I have no doubt that the existence of the apparatus on the roof is a breach of the covenant, at least potentially.  A breach is conceded insofar as it relates to the breaking into the chimney but the point is made with some force that the breaking into the chimney is not, apparently, a particular concern of Grosvenor.  However, I am also clear in my mind that the erection of the apparatus as a whole and its retention on the roof constitutes at least a potential breach of that part of the covenant which prohibits alterations to the external architectural appearance of the building.  In my judgment the Claimant is certainly entitled to conclude that that is so and, consequently, it cannot be said that it is acting unreasonably in withholding consent for the retention of the apparatus.”
32.	For Stinger, Mr Hanham submitted that the judge had wrongly failed to apply by analogy the law relating to qualified covenants as between landlord and tenant, and that it had not been open to him to conclude that there were no factual issues requiring investigation and decision at a trial.  He argued that EMW’s reliance on the attitude of the Grosvenor Estate could only justify its refusal of consent if it was established that, at the time when consent was refused (i.e. the issue of the proceedings), EMW reasonably understood the position of the Grosvenor Estate to be that all or some aspects of that for which consent was sought did or would amount to a breach of the Headlease Covenant, and that the Grosvenor Estate had refused to consent to the work being done despite the terms of that covenant.  He relied first on the proposition, well established in relation to leasehold covenants, that the party whose consent is required can only justify refusal by reference to reasons which it did rely on at the time of the refusal of consent, and secondly on the fact that there is no evidence of what was, at the relevant time, in the mind of those who took the decision to start proceedings rather than to consent to the request by Stinger.  He also argued that it was by no means clear that Stinger’s request was for something that would be a breach of the Headlease Covenant.  That, he said, should have been left to be decided at the trial.
Discussion
33.	The underleases formerly held by Stinger do not confer any right on the tenant to place anything on the roof, even with EMW’s consent, qualified or not.  The fact that some equipment had been placed there with EMW’s consent in 1980 may have given the lessee certain rights as regards that particular equipment, but that is of no avail as regards different equipment placed there in different circumstances, as is now at issue.  Therefore Stinger has to rely on a collateral right of some kind, not a right under the underleases.  In its nature, the right alleged is based on principles of proprietary estoppel, and on reliance by Stinger on representations by EMW, as pleaded in paragraph 15 and 16 of the Defence.
34.	That being so, it is appropriate to bear in mind the principles of proprietary estoppel, including the proposition that, if an estoppel is established, it gives rise to an equity which can moderate the effect of the parties’ strict legal rights, but it is up to the court to determine the scope and nature of the equity, and it should not interfere with the parties’ legal rights to a greater extent than is necessary to give proper effect to the representation on which the estoppel is based.
35.	It seems to me that it would be artificial, inappropriate and unjust to determine the position between EMW and Stinger in late 2008 and 2009 in exactly the same way as would be correct if there had been a right in the underlease for Stinger to place relevant equipment on the roof subject to a qualified right for EMW to refuse its consent.  If there had been such a right, then it may have been appropriate to proceed by analogy with the developed law in relation to a tenant’s covenant not to make alterations without the landlord’s consent, that consent not to be unreasonably withheld.  At the time of the request for consent and of its refusal neither party had identified the basis on which the case now proceeds.  In those circumstances, in particular, it is right to consider the matter more broadly.  
36.	One consequence is that I would reject Mr Hanham’s argument that the only grounds for refusal that can be taken into account are those that were present to the mind of EMW at the time of the refusal.  Since Stinger had not asserted that EMW was obliged to consider its request as if it were a request for consent under a qualified covenant, and since EMW had not analysed the position in that way either, it would be unrealistic to examine EMW’s conduct in a way which did not appear to be relevant at that time, and which up to that time no-one had suggested should be followed.
37.	It seems to me that EMW was entitled to take a cautious line as regards the attitude of the Grosvenor Estate.  If the Grosvenor Estate had declined to commit itself to the proposition that what was proposed was not a breach of the Headlease Covenant, or that if it was, the Grosvenor Estate would not object to it being done, EMW could not be expected either to force the issue or to put itself at risk by giving consent to something that might expose it to a claim for breach of covenant.  I do not accept Mr Hanham’s argument for Stinger that, in order to justify a refusal of consent on this ground, EMW would have to be able to show that the works proposed would give rise to a breach of the Headlease Covenant.
38.	As the case was argued before us, the reasonableness of EMW’s refusal was sought to be justified by reference to the attitude of the Grosvenor Estate, not on any other grounds.  That being so, it seems to me that the appropriate way in which to approach the issues raised, on Stinger’s contention, by the estoppel alleged is to consider what the attitude of the Grosvenor Estate would have been to the proposal by Stinger, if it had been asked by EMW in April 2009, after the grant of planning permission.  If the Grosvenor Estate would have confirmed that implementing the proposal would not amount to a breach of the Headlease Covenant, or that if it were a breach nevertheless the Grosvenor Estate would waive such breach, then (absent any other relevant reason for refusing consent) it would have been unreasonable for EMW to withhold its consent to Stinger’s request.  In any other situation it would not have been unreasonable to do so.
39.	Looking at the situation as it was at the end of 2008 and early in 2009, the position can be summarised as follows.  
40.	Stinger had had air conditioning equipment on the roof since 1980, some of it put up with EMW’s consent and some not but without later objection from EMW over the years.  The exchange in 1996 to 1997 mentioned above was not an objection in principle.  Stinger installed new equipment in 2007-8 in place of the older equipment.  It did not have consent for this, though it was aware that consent was required, both from EMW (because it would otherwise be a trespass) and, in practice, from the Grosvenor Estate (because of the possibility that the installation would cause EMW to be in breach of the Headlease Covenant).  Stinger also needed planning permission, which it did get but not until March 2009.
41.	One issue, raised by both EMW and the Grosvenor Estate, was whether to consent to Stinger’s proposals would be compatible with allowing other leaseholders within the block to install their own air conditioning equipment if they wished to do so later.  Stinger was aware that this was an issue from June 2007 onwards, it being reiterated in February, April and October 2008.
42.	EMW had formally demanded that Stinger should remove the equipment then in place in January 2008, and pointed out in February 2008 that Stinger had no right to place any such equipment on the roof.  Stinger had obtained favourable indications on a limited and qualified basis from Murray Birrell, for the Grosvenor Estate, in April 2008, but was told in the clearest terms that it had to apply for consent to EMW first, and that the Grosvenor Estate would only then consider whether to give its agreement.
43.	Notwithstanding that, Stinger asked EMW to consent in its letter of 3 December, though in far from clear terms, and did not wait for an answer, not even for the position of the Grosvenor Estate to be discovered, before proceeding with the work.
44.	In December 2008, and up to March 2009, it would have been possible to reject the application on the ground that planning permission had not been obtained.  However, by the time of the issue of proceedings that obstacle was out of the way.  By that time the issue was whether, in the situation then prevailing, consent should be given to Stinger to retain the apparatus in place, which was no longer objectionable as a breach of the planning legislation.
45.	The Grosvenor Estate had been willing, by its agents Murray Birrell, to enter into discussion with Stinger about the latter’s proposals, but it was made clear (especially in May 2008) that it was at one remove from Stinger, and would only formally consider a proposal or request from EMW.  It made it clear in May and in September 2006 that its consent, indicated at that time to internal works, did not extend to air conditioning units on the roof, or to any use of the roof not specifically agreed in writing.  Murray Birrell’s willingness to discuss the location for the units in March 2007 led only to agreement in principle.  Similarly in May 2008 no formal statement was or could be made, and even the informal indication that was then given as to the position of the new condenser units was heavily qualified.
46.	The issues which had been raised (apart from the need for planning permission) were, first, whether the Grosvenor Estate would agree to the proposed works, so as to prevent any argument that there would be a breach of the Headlease Covenant, and secondly whether Stinger’s proposals were compatible with allowing other flats in the block to do the same sort of thing in future, if desired.  That was clearly a matter to which EMW ought to have regard, albeit that it could be foreseen that not every leaseholder would want to install such equipment in the near or even the less near future.
47.	The argument in favour of allowing retention was that Stinger had had air conditioning apparatus on the roof since 1980 without any objection, that the new equipment was said to be smaller, and the smallest available, and was reported to be more efficient, than the old, and that all requests by EMW for information and analysis about the new equipment had been met as and when made.
48.	Mr Hanham correctly pointed out that we do not have any evidence as to the position of the Grosvenor Estate in April 2009.  Accordingly it is necessary to proceed by inference from other evidence of its attitude, both beforehand and afterwards.  The available evidence has been referred to in the course of my review of the history.  In summary the position taken by or on behalf of the Grosvenor Estate was as follows:
i)	A cautious approach to the placing of air conditioning plant is shown by the letter dated 23 May 2006 (see paragraph [9] above) and also by Murray Birrell’s letter and attached conditions dated 8 September 2006 (see paragraph [11] above).
ii)	The letter from Omniway dated 7 March 2007 shows a constructive approach on the part of Murray Birrell to the specific issue of routing the connections for the condensers, and agreement in principle as to the location of units: see paragraph [13] above.
iii)	Exchanges in June 2007 about the need for planning permission confirmed Stinger’s acceptance that the consent of the Grosvenor Estate was needed: see paragraph [15] above.
iv)	As a result of a meeting between Omniway and Murray Birrell in April 2008, Murray Birrell’s position was careful and non-committal, without drawings for the sake of the detail, suggesting that there might be too many units, stating that approval would be by way of a revocable licence, as well as raising issues including visibility and space for units for other flats: see paragraph [20] above.
v)	According to the evidence, that is where the matter rested as regards the involvement of the Grosvenor Estate, until later in 2009.
vi)	By the autumn of 2009, even though planning permission had been given (as Murray Birrell knew) the indicated attitude was still that the larger units were too large and too visible, and that they presented a problem as regards leaving space for other flats to have their own air conditioning units if desired: see paragraph [30] above.
49.	This seems to me to show a willingness on the part of the Grosvenor Estate, within limits, to engage with Stinger’s proposals, and to take a constructive attitude on practical aspects, but overall a significant degree of caution.  Since Omniway explicitly accepted that Stinger needed consent from the Grosvenor Estate, the question whether the proposed works would involve something which would not be consistent with the Headlease Covenant was not addressed.  The proposition that if consent was given, it would be by way of a revocable licence, mentioned in April 2008, is interesting as showing the unwillingness of the Grosvenor Estate to give too much away even if it were willing to give its consent.  It makes it plain that, if there had been a specific request by EMW to the Grosvenor Estate in relation to Stinger’s proposals, it would have been by no means a formality either as to whether to grant consent at all or, if it was to be given, in what way and on what terms.  Moreover the substance of the points mentioned at that stage is fully consistent with what was said later in 2009, with concerns about the size and visibility of the apparatus proposed (in 2008) and installed (by 2009) and about the impact of consent to these proposals in relation to future proposals that might be advanced in respect of other flats.
50.	Given this material it seems to me that there is no reason at all to suppose that, if Stinger’s rather oblique request in December 2008 had been passed on by EMW to the Grosvenor Estate for its approval or otherwise in early 2009, say after the grant of planning permission in March 2009, the attitude of the Grosvenor Estate would have been any different.  It would have said that the units were too large and too visible, and that to approve of them would risk presenting problems if similar requests were made in respect of other flats.  The latter point might not relate specifically to the terms of the Headlease Covenant, being perhaps a point more appropriate for EMW to take than for the Grosvenor Estate.  (EMW had, of course, taken this point itself as well.)  But the first point – size and visibility – is directly relevant to the Headlease Covenant.  If the Grosvenor Estate had objected on those grounds, it would have been saying, explicitly or not, that the installation of this apparatus amounted to an alteration in the external architectural appearance of the demised premises, so as to be in breach of the covenant.
51.	In the light of that it seems to me that the judge was well entitled to say what he did in paragraph 37 of his judgment, quoted at paragraph [31] above, and from that to proceed to the conclusion at paragraph 38 that “there is no realistic possibility that the Defendant can show that the Claimant has unreasonably refused its consent for the retention of the apparatus” and therefore, at paragraph 40, that Stinger has no real prospect of successfully defending the claim.  
52.	I would not place any reliance (any more than the judge did) on the fact that Stinger did not allow EMW a reasonable time after its request before it went ahead and installed the two new units.  It did so at its own risk, so that if it did not obtain consent it would be obliged to remove the units.  On the other hand I can see why this conduct contributed to the judge forming the view that Stinger had “behaved in a high-handed manner and has resorted to trespass when it has been unable to achieve its aims lawfully”: see paragraph 38.
53.	Mr Hanham reminded the court that in relation to the summary judgment application by EMW, it was not open to the court to determine the entire dispute unless there could be no relevant dispute of fact requiring investigation at trial.  I have rejected, as a matter of law, his proposition that the reasonableness of EMW’s position must be determined by reference to the factors present to EMW’s mind in April 2009.  On that basis, it is pertinent to look at the evidence more widely, as to what the attitude of the Grosvenor Estate was at other times, earlier and later, and what it would have been at that time if the question had been asked.  I have also rejected his argument that the reasonableness of reliance on opposition by the Grosvenor Estate would have depended on showing that the proposed course of action (or the actual installation, after 6 December 2008) was in fact a breach of the covenant.  It seems to me, as I have said at paragraph [38] above, that the correct legal test requires a focus on what the attitude of the Grosvenor Estate would have been if it had been asked in April 2009 whether it would consent to the retention of the apparatus, for which by then planning permission had been given.  For the reasons that I have given above it seems to me, as it did to the judge, that there is no reasonable doubt that the Grosvenor Estate would have put forward the same objections then as its agents, Murray Birrell, had done in April 2008 and as they mentioned later in 2009, and that therefore it would not have been willing to agree to that retention.
54.	For those reasons I would dismiss the main appeal.
The appeal against the award of costs on the indemnity basis
55.	The judge ordered Stinger to pay EMW’s costs of the claim and counterclaim, to be assessed on the indemnity basis.  He gave a separate judgment on this point, which he opened by saying that there were features of Stinger’s conduct which he could properly categorise as unreasonable and outwith the norm of the conduct of normal litigants in litigation of this type.  He went on to identify particular points, which I will summarise.
i)	First, there was Stinger’s conduct before the proceedings, showing that Stinger was intent on the course of conduct it undertook regardless of the views expressed by EMW and by the Grosvenor Estate.  I have mentioned at paragraph [52] what he said in his main judgment about this.
ii)	Stinger warded off the first application for summary judgment by amending its Defence and Counterclaim, and then relied on the amended pleading in seeking to resist the second application for summary judgment.
iii)	He had the strong impression that Stinger had been behaving unreasonably, and unusually so, in the conduct of the litigation.  He had referred in paragraph 40 of his main judgment to the costs generated by the claim being already very substantially disproportionate to what was at stake.
56.	Mr Hanham submitted that none of these factors justified the award of indemnity costs to EMW.
57.	So far as conduct before the commencement of the proceedings is concerned, he argued that Stinger was not unreasonable in taking the position that it had, given that it had had air conditioning equipment on the roof since 1980 or before, with consent, or without objection, from EMW or from the Grosvenor Estate, and all it wanted to do was to replace the old equipment (to the continued presence of which EMW accepted that it could not object) with newer, better and more efficient equipment.  That was not in itself unreasonable, and the length of time that was taken over dealing with Stinger’s requests was such that it was understandable for Stinger to have acted as it did.  He argued that Stinger had tried to engage with EMW and the Grosvenor Estate over a lengthy period, but had been faced with a notable lack of co-operation, at least from EMW.  In any event, the issue was, in the end, whether Stinger should be entitled to retain the equipment in place, once it had obtained the necessary planning permission, and conduct before that was of little, if any, relevance, certainly to the basis of assessment of costs of the litigation.
58.	In terms of the conduct of the proceedings, he contended that it was by no means unusual for a Defendant to resist an application for summary judgment by amending its defence.  Having done so in relation to the first application, it was logical for Stinger to rely on the amended pleading in opposition to the second application by EMW.  EMW only identified the relevance of the Headlease Covenant to the issue as between EMW and Stinger shortly before the hearing before the judge.  Even if the defence of a claim, or an application, is thought to have been hopeless, this would not justify assessment on the indemnity basis, he submitted; so much the less could it be justified in the present case when the point, even if unsuccessful, was arguable and sufficiently so to justify giving permission to appeal.  Nor did the judge identify any other aspects of Stinger’s behaviour in the litigation which could be said to be unreasonable.
59.	For EMW Mr Arkush submitted that the judge was right to castigate Stinger for the manner of its conduct of the litigation.  He mentioned that the judge had a wider view of the relevant matters than we have or could have, not least because several other applications had been before him for decision at the same time.  He said that, on Stinger’s behalf, it had been said that its costs to trial could easily exceed £800,000, which he characterised as utterly disproportionate.  In essence, he supported the judge’s exercise of his discretion as to costs by pointing to the intensity of Stinger’s contest and the lack of proportion in its preparation and conduct of the case.
60.	I readily accept Mr Arkush’s argument that Stinger’s presentation of the case shows a notable lack of proportion.  This is apparent even by reference only to the documentation for the appeal.  The appellant’s statement of costs for summary assessment purposes, in relation to the application to adduce further evidence (two letters of one page each, it will be remembered), amounted to over £47,000, and its summary in respect of the application for permission to appeal and the appeal, for a one day hearing, (not including the issue of additional evidence) showed costs exceeding £150,000.  
61.	As Mr Arkush reminded us, the question what order for costs should be made at any relevant stage of proceedings is very much a matter for the discretion of the judge, and the exercise of that discretion is not to be interfered with by an appellate court unless the judge has misdirected himself, either in some manner identifiable from the terms of his judgment or, by implication, because the order is plainly wrong.
62.	I would respectfully disagree with the judge on one of the points which he gave as a reason for an award of indemnity costs.  The fact that Stinger resisted successfully the first application for summary judgment by obtaining permission to amend and, having amended, then relied on the new material in the pleading to resist (unsuccessfully) the second application for summary judgment does not seem to me to be out of the ordinary as regards the conduct of litigation.
63.	That leaves two other factors: Stinger’s conduct before the litigation, which he had castigated as high-handed, and its conduct of the litigation which he said was disproportionate.  Both of those are matters which can properly be regarded as relevant on this point.
64.	Accordingly the question in respect of each of these aspects is whether the judge was plainly wrong in stigmatising Stinger’s conduct as so unreasonable and out of the norm for such litigation as to justify the award of indemnity costs.  
65.	Mr Hanham can fairly say that this is not like an appeal from an order made at trial.  We have seen, if not all, at any rate much of the material that was before the judge.  Even so, it is the judge who has to exercise the discretion as to costs, and he has to do so by reference to the whole of the relevant material as it appears to him.  It does not seem to me that Mr Hanham can successfully challenge what the judge said at paragraph 38 (quoted at paragraph [52] above) as to the high-handed and unreasonable nature of the way Stinger behaved before the litigation.  To describe it as Stinger seeking to engage with EMW and the Grosvenor Estate seems to me to lack plausibility.  Such an assessment of pre-litigation conduct can provide a justification for an award of indemnity costs.
66.	Equally, if a litigant appears to be conducting litigation entirely without regard to any sense of proportion as regards the costs incurred, that too could be relevant to the issue of the basis of assessment of costs ordered.  Mr Hanham made the point that, if the costs order were the other way, Stinger’s costs payable by EMW would be limited to what was proportionate.  That is true, but the manner of a party’s conduct of a case has, or is likely to have, a direct bearing on the costs incurred by the opposing party as well.
67.	Accordingly, I conclude that the judge was entitled to have regard to two of the three matters to which he referred as justifying the award of indemnity costs, but not to the third.  It follows that, as there was a misdirection, his exercise of the discretion was flawed.  It is therefore for us to reconsider the exercise of the discretion.
68.	In that respect it seems to me that the two legitimate matters which the judge took into account were much more substantial and important than the one to which he ought not to have had regard.  I would come to the same conclusion as he did on the basis that his decision was amply justified by his assessment of the attitude and conduct of Stinger both before and during the proceedings, even if he had said nothing about the one irrelevant element.
69.	I would therefore dismiss the appeal as to costs as well.
Lord Justice Rimer
70.	I agree.
Lord Justice Thomas
71.	I also agree.

Appeal Court Ref: A3/2010/1866
Claim No. HC09C01375
IN THE COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
B E T W E E N :
EATON MANSIONS (WESTMINSTER) LIMITED
Claimant/Respondent
- and -
STINGER COMPANIA DE INVERSION S.A.
Defendant/Appellant

UPON THE APPEAL coming on for hearing on 2 March 2011 
AND UPON hearing Counsel for the Appellant and for the Respondent
IT IS ORDERED THAT:
1.	The appeal is dismissed.
2.	The Appellant shall pay the Respondent’s costs of and occasioned by the appeal, including those of the Appellant’s application to adduce additional evidence on the appeal
3.	The costs payable by the Appellant are assessed summarily in the amount of £33,000 including VAT
4.	The sum of £30,000 lodged by the Appellant as security for the costs of the appeal shall be paid out to the Respondent on account of the Appellant’s said liability forthwith.
5. 	The balance of the costs payable by the Appellant shall be paid to the Respondent no later than 4pm on 1 June 2011

6.	The parties have permission to apply to the Master for further directions in relation to the assessment of damages.