Victory Place Management Co Ltd v Kuehn [2018] EWHC 132 (Ch)

The management company’s decision to withhold its consent for the lesees of a flat to keep a dog in their property had not been pre-determined nor had its consent been unreasonably withheld.

Facts

VPMC was the management company for a gated residential development of 146 flats, each held under a long lease. There was a covenant in the leases prohibiting the keeping of pets in the lesees’ flats without the written consent of VPMC. Further, the management committee operated a strict “no dogs” policy in the absence of special circumstances. The policy was supported by the majority of residents.

In 2014, Mr and Mrs Kuehn (“the Appellants”) took the lease to one of the flats. It was held at first instance that that the Appellants were aware of the covenant and VPMC’s policy and this was unchallenged on appeal.

In September 2015, the Appellants met with VPMC to discuss alterations to the property prior to moving in. Vinnie (a young Yorkshire/Maltese terrier) was also discussed at this meeting. VPMC admitted that the board had met prior to the September 2015 meeting and discussed the fact that the new purchasers had a dog.

In or around 2015, the Appellants wrote to the lessor of the development to seek consent for Vinnie to live in the property. This consent was given. In October 2015, the Appellants wrote to VPMC to seek the same consent. In refusing consent, VPMC referred to its “no pets” policy and to the absence of special circumstances which would justify a departure from that policy.

On 30 October 2015, one of the Appellants sent a voicemail to VPMC informing them that the dog had therapeutic value. However, no medical evidence was ultimately supplied.

In November 2015 and in breach of covenant, the Appellants moved into the property with Vinnie. VPMC succeeded in securing an injunction against the Appellants requiring them to remove Vinnie from the property.

Issues

Was VPMC’s decision not to grant consent for Vinnie to live in the property Wednesbury unreasonable?

First Instance

In granting the injunction, HHJ Cryan held that:

1. Wednesbury principles applied in that VPMC was required to take relevant matters into account and to refrain from taking irrelevant matters into account.
2. VPMC’s policy did not violate these principles. The no dogs policy was capable of rational justification and was no more than a “legitimate predisposition to a particular point of view”.
3. The policy was not exercised in such a way as to violate Wednesbury principles. VPMC was willing to consider exceptional circumstances. The Appellants had provided no medical evidence and affection for Vinnie furnished nothing exceptional.
4. VPMC did not defeat its right to equitable relief. The policy was clear and the Appellants were aware of it prior to moving in.

Decision on Appeal

The application of Wednesbury principles was not challenged on appeal. However, Sir Geoffrey Vos (Chancellor) held that, had it been so challenged, he would have held that both the process and outcome limbs of the Wednesbury test were engaged in this case.

The only issue for determination was therefore whether VPMC had acted unreasonably. It did not matter that there had been several iterations of the policy since it had been introduced. It was made clear to the Appellants on at least two occasions that no pets would be allowed in the absence of special circumstances.

The Judge rejected the Appellants’ contention that VPMC had already resolved to refuse consent before a formal request was made in October 2015.

In the ultimate analysis, VPMC was held to have acted reasonably in taking the views of the majority that pets ought to be prohibited into account. Particular emphasis was placed upon the Appellants’ failure to adduce medical evidence, which may of course have succeeded in demonstrating the necessary exceptionality under the policy. The decision was not a predetermination but a proper exercise of a discretion.

Comment

While it must be conceded that this appeal was both ambitious and fact-specific, the decision demonstrates that Wednesbury principles (both of “process” and “outcome”) will be implied into leasehold covenants which require the exercise of an unfettered discretion. The test for whether a contractual discretion has been properly exercised encompasses both limbs of Wednesbury reasonableness pursuant to Braganza v BP Shipping Ltd & anr [2015] UKSC 17. Management companies must show that they have exercised their discretion reasonably and that the outcome of the decision-making process was also reasonable.