Neutral Citation No. [2006] EWHC 1142 (Ch)
CASE NO. HC05CO2893

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL

Friday 19 May 2006

Before

Mr. Paul Morgan QC sitting as a Deputy Judge of the High Court
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BETWEEN:

GMD DEVELOPMENTS LIMITED
Claimant
and

LEEDS CITY COUNCIL
Defendant
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Mr. Michael Driscoll QC (instructed by DLA LLP India Buildings, Water Street, Liverpool L2 0NH) for the Claimant

Ms Sonia Rai (instructed by The Council, Legal & Democratic Services, Civic Offices, Civic Hall, Leeds, LS1 1UR) for the Defendant
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JUDGMENT
The Deputy Judge

1.	 	Leeds City Council (“the Council”) is the freehold owner of an irregularly shaped plot of land on the north east side of Woodhouse Lane, Leeds.  Woodhouse Lane is in the university area of the City of Leeds.  

2.	 	GMD Developments Limited (“GMD”) is the lessee of the land referred to above.  The lease now vested in GMD was granted on the 11th December 1981 by West Yorkshire Metropolitan County Council to the British Broadcasting Corporation (“the BBC”).  The West Yorkshire Metropolitan County Council was disbanded in 1986 when title to the land and the reversion on the lease vested in the Council.  

3.	 	On 1st June 2002, the Council and the BBC entered into a Deed of Variation of the lease.  

4.	 	In around November 2003, the Council consented to an assignment of the term of the lease to GMD and the lease was duly assigned on the 28th November 2003.  Neither the Licence to Assign nor the Assignment is in evidence but it was common ground that there was no provision in those documents which was material to the present dispute.  

5.	 	I will now summarise what has led to the present dispute.  On the 8th July 2005, Solicitors for GMD applied to the Council for approval pursuant to the terms of the lease to the erection of a building (or part of a building) on the demised premises.  On the 8th September 2005, the Council replied to that application and the burden of the reply was that GMD was not entitled under the then existing terms of the lease to carry out its proposed development on the demised premises.  However, the Council went on to state that the Council was willing to enter into a Deed of Variation of the lease so as to permit the proposed development but in circumstances where the Council would require the payment of “a proper consideration”.  

6.	 	Further correspondence between the parties did not result in the matter being resolved and on 20th October 2005, GMD commenced the present proceedings claiming a declaration that the Council had unreasonably withheld consent to its proposal and, further, a declaration that the erection and use of the building on the demised premises as proposed by GMD was a development which it was entitled to carry out under the terms of the lease.  

7.	 	Although a number of additional issues were raised in the witness statements that have been served on behalf of the parties, at the trial, the number of issues remaining for decision was reduced to two.  

8.	 	The first issue is as to the meaning of clause 4(viii) of the lease and, in particular, whether GMD’s proposal comes within what is permitted by clause 4(viii), subject only to obtaining the approval of the Council, which approval is not to be unreasonably withheld.  

9.	 	The second issue is whether the Council did unreasonably withhold approval pursuant to clause 4(viii) of the lease in response to the application made by GMD.  

10.	 	I will now refer to the relevant provisions of the lease.  The original lessor was West Yorkshire Metropolitan County Council which was described in terms which included the reversioner for the time being on the lease.  The original lessee was the BBC described as “the tenant”, which expression included its successors in title and assigns.  

11.	 	By clause 1 of the lease, in consideration of a premium of £50,000, the land in question was demised for a term of 99 years from the 11th December 1981 at a peppercorn rent.  The land was described as a plot of land containing an area of 1707 square yards.  

12.	 	By clause 2(a) of the lease, there was reserved to the lessor out of the demise a right of way with or without vehicles over a part of the demised land shown hatched blue on the plan to the lease.  This reservation can be understood when taken together with clause 3 of the lease whereby the BBC, which was the freeholder of land adjoining the demised premises, granted to the Council a right of way with or without vehicles over a strip of land which was part of the BBC’s freehold land and which ran alongside the demised premises.  The effect of the reservation and grant of these easements was that although the Council had demised the land in question, the Council had a right of way over the BBC freehold land and then a right of way over a part of the demised land to gain access to a further area of land retained by the Council.  This area of land consisted of the area of a bridge over a dual carriageway which crossed under Woodhouse Lane at one point.  The area of the bridge was used for car parking and the access to this car parking area was enjoyed pursuant to the easements referred to above.  

13.	 	By clause 4(viii) of the lease, the lessee covenanted:

“To use the demised premises for the parking thereon of motor vehicles and the erection and use of a building in accordance with Planning Permission first having been obtained from the Local Planning Authority and approved by the Council (such approval not to be unreasonably withheld) and for no other purpose whatsoever and not to use the demised premises or any part thereof or permit or suffer the same to be used for any offensive noisome noxious noisy or dangerous trade business or occupation whatsoever or so as to cause nuisance annoyance or inconvenience to the Council its tenants or occupiers of adjoining or neighbouring property.”

14.	 	By clause 4(ix), the lessee covenanted not to park motor vehicles on the part of the demised premises shown hatched blue on the lease plan so as to prevent access by the lessor with or without motor vehicles to the lessor’s car parking area on the bridge over the dual carriageway.  The purpose of this covenant is obvious; it was to prevent parking which would block the lessor’s enjoyment of the reserved right of way.  

15.	     By clause 4(x) of the lease, the lessee covenanted to comply with any Act of Parliament for the time being in force and in particular to comply with the obligations imposed upon the lessee or tenant or occupier under or by virtue of the Offices Shops and Railway Premises Act 1963 and the Factories Act 1961.  

16.	 	By clause 4(xiii), the lessee covenanted, in effect, not to commit a nuisance or annoyance or interfere with the quiet and comfort of the occupants of neighbouring or adjoining premises.  This clause was subject to the proviso that such user permitted by clause 4(ix) (sic) should not constitute such a nuisance or annoyance.  It may be that the intention was to cross-refer to clause 4(viii) rather than clause 4(ix).  

17.	 	By clause 4(xv), the lessee covenanted not to underlet the demised premises or any part of them and not to assign or part with the possession of the demised premises or any part of them. 

18.	 	By clause 4(xviii), the lessee covenanted to yield up the demised premises at the determination of the term in good and tenantable repair and condition.  There was no general repairing covenant upon the lessee during the term.  

19.	 	By clause 5(b), the lessor covenanted not to park motor vehicles on the part of the demised premises referred to in clause 3(ix)(sic).  This would seem to be a reference to clause 4(ix) which itself contained a reference to the part of the demised premises shown hatched blue on the lease plan.  Again, the purpose of clause 5(b) is obvious; it served to prevent the lessor using the land hatched blue otherwise than for passing and repassing and so that the right to pass and repass did not extend to parking.  

20.	 	By clause 6(iv) it was agreed that where the context so admitted, words in the lease importing the singular number only included the plural number, and vice versa.  

21.	 	As I have indicated, on the 1st June 2000, the Council as reversioner on the lease entered into a Deed of Variation with the BBC in whom the term of the lease remained vested.  In summary, the lease was varied so that the prohibition on underletting, parting with possession and assigning contained in clause 4(xv) was significantly relaxed.  I will not set out the full terms of the new provision as it suffices to say that the new provision allowed underletting of the whole of the demised premises or any part of them with the consent of the lessor, which consent was not to be unreasonably withheld or delayed and, further, the new provision permitted assignment of the whole of the demised premises with the consent of the lessor, which consent was not to be unreasonably withheld or delayed.  Clause 4 of the Deed of Variation stated that the agreed variation was in consideration of the payment of a premium of £10,000 by the lessee to the lessor.  

22.	 	The Council asked the Court to have regard to certain correspondence and other documents which came into existence prior to the grant of the lease and, further, certain documents which came into existence prior to the Deed of Variation.  Without pausing to decide whether that material is admissible for any purpose, I will briefly refer to it not least because the existence of that material became known to the Council at some time in the past and the existence of that material was relied upon in correspondence and in witness statements to which it is necessary to refer.  

23.	 	As regards the correspondence and other documents before the grant of the lease, it is sufficient to begin with the letter dated 24th January 1979 on behalf of the County Council to the BBC.  The County Council set out the main terms for the proposed lease and paragraph 2 of the letter referred to the land being used for the parking of motor vehicles and for no other purpose.  On the 26th February 1979, the BBC replied to that letter and referred to the parties having agreed in a discussion after the letter of 24th January 1979, to include within the lease terms a term which permitted a three storey office block on 350 square yards of the land.  On the 8th March 1979, the County Council wrote again to the BBC suggesting wording for the relevant term as to user.  The term as proposed by the County Council referred to the premises being used for the parking of motor vehicles and the erection thereon of a building in accordance with Planning Permission first having been obtained from the Local Planning Authority and approved by the Lessors and for no other purpose whatsoever.  The draft referred to the erection of the building but, unlike clause 4(viii), did not refer to the use of the building and there was no express provision in the draft that approval was not to be unreasonably withheld.  On the 14th March 1979, the BBC replied to the County Council effectively agreeing with the letter of 8th March 1979.  On the 20th August 1979, in what seems to be an internal document of the County Council, there is reference to the fact that the planning department of the Council had agreed to the erection of a three storey office block on the demised land.  The document stated that it was extremely doubtful whether the building would ever be erected but this fact had been used for valuation purposes.  

24.	 	I will next refer to the correspondence which preceded the execution of the Deed of Variation.  On the 23rd June 1998, surveyors acting for the BBC wrote to the Leeds Development Agency.  The letter was headed “Subject to Contract and Without Prejudice”.  The letter proposed the opening of discussions about the BBC’s options for their premises in Leeds and one matter identified in the letter was a possible variation to the lease “to incorporate an alienation clause”.  No doubt the author of the letter meant a modification of the original absolute prohibition on assigning, underletting and parting with possession.  On the 22nd July 1998, Leeds Development Agency replied stating that it would consider recommending to the Council that the BBC be granted a variation of the terms of the lease and stating that any variation of the terms of the lease would depend largely on the proposals for the future of the site.  A further letter from Leeds Development Agency on the 21st December 1998 referred to meetings and telephone conversations but there was no evidence as to the matters which were discussed at those meetings and in those telephone conversations.  However, the letter of 21st December 1998 refers to certain plans prepared by Halliday Clark and the author of the letter stated that he noted that the use of the land (presumably the land demised by the lease) was to remain as car parking.  The letter stated that there would have to be consideration for permitting an assignment to an approved developer and the consideration would be at market value but as the use of the land was to remain unchanged the consideration would only be at a figure to reflect the lifting of the bar to assignment, plus legal costs.  On the 4th January 1999, the surveyors for the BBC enquired as to the level of consideration required.  On the 22nd January 1999, Leeds Development Agency stated that it was prepared to recommend that the Council approve an assignment of the lease on payment of consideration of £10,000.  When the letter referred to the approval of an assignment, what seems to have been intended was a variation which would permit assignment as compared with the then existing absolute prohibition on assignment.  The letter of 22nd January 1999 again referred to the plans prepared by Halliday Clark and noted that the area of land leased from the Council was to remain in car parking use.  

25.	 	The plans prepared by Halliday Clark which had been referred to by the Leeds Development Agency were produced in evidence.  The plans show a proposal as to the redevelopment of what was described as the BBC Studios, Woodhouse Lane, Leeds.  The plans are not restricted to the demised land but show what was proposed on the freehold land then owned by the BBC.  The area of the demised land is shown primarily as laid out for car parking.  However, because of the irregular shape of the demised land, an area which is demised and which is furthest from Woodhouse Lane was an area on which the Halliday Clark plans show the construction of a block, described as having an intended use as student accommodation.  

26.	 	As indicated earlier, the Deed of Variation relaxing the alienation covenant was duly entered into on the 1st June 2000 and on the 28th November 2003, the term of the lease was assigned to GMD pursuant to an earlier Licence to Assign granted by the Council.  

27.	 	I can break off the recital of the history at this point and refer to GMD’s proposals for the use of the demised premises or at any rate those proposals which it had and which led to the present litigation.  There were references in the evidence to possible other proposals which GMD might have but I am not concerned with those.  

28.	 	GMD not only acquired the term of the lease from the BBC; it also acquired the BBC’s freehold land.  GMD wishes to carry out an extensive redevelopment of its freehold land and as part of that redevelopment, GMD wished to construct a block known as Block F.  There is some disagreement as to whether GMD intended Block F to be used for student accommodation or for residential use (other than student accommodation) or possibly a mixture of the two.  It is not necessary for the purpose of construing the lease to investigate that matter any further.  The significance of Block F for present purposes is that it is built partly on the freehold land and partly on the demised premises.  The remainder of the demised premises was intended to continue in use for car parking.  Plans which had been prepared to illustrate GMD’s proposals also showed some landscaping of the area intended to be developed.  

29.	 	I will now describe how the first issue (the issue as to the construction of clause 4(viii) of the lease) arises.  GMD says that insofar as the demised land is to continue to be used for the parking of motor vehicles, that use is expressly permitted by clause 4(viii).  That matter is not disputed by the Council.  GMD also says that the erection of Block F, so that a part of it is erected on the demised premises, involves the erection and use of a building on the demised premises within clause 4(viii) of the lease.  

30.	 	The Council has taken different stances from time to time as to the erection of a part of Block F on the demised premises.  Initially, the Council contended that the only building which could be erected on the demised premises was a building which was ancillary to the use of the land for car parking.  The Council later abandoned that contention.  The second contention of the Council, and one which it has since maintained, is that clause 4(viii) permits, in principle, the erection and use of any building on the demised premises provided that the building is not a residential building.  Before deciding whether the Council’s contention is right, I ought to refer to a third contention which it has put forward.  

31.	 	The third contention which the Council put forward is that clause 4(viii) refers to “the erection and use of a building” and that phrase does not permit the erection and use of a part of a building on the demised land.  Because Block F is intended to be built so that part of Block F is on the freehold land and part of it is on the demised land, the Council at one time wished to say that this state of affairs did not conform to clause 4(viii).  This contention as to a part of a building did not feature in any of the correspondence between the parties before the trial.  Further, this contention was not mentioned in any of the witness statements served on behalf of the Council.  Further, the contention did not appear in the Skeleton Argument prepared by Ms Rai on behalf of The Council.  After the evidence closed, I invited Ms Rai to address the Court before I invited submissions from Mr Driscoll QC for GMD.  In the course of her submissions, Ms Rai raised for the first time the argument that clause 4(viii) did not permit the erection of a part of a building on the demised land.  Mr Driscoll objected to this new point and submitted that I ought not to permit the Council to argue that point.  There was then discussion as to the form of the declaration which GMD sought and what the effect of making such a declaration would be if I did not permit the Council to raise this new point.  There was further discussion as to whether the Council’s point about a part of a building on the demised land could be put forward in later proceedings by way of objection to GMD building Block F.  There was further discussion as to whether, if I did not permit the Council to take the part of a building point at this trial, the Council would be disabled from taking a similar point in relation to another proposal as to a development which involved the erection of a part of a building on the demised land.  Before I ruled on the submissions made to me as to the procedural way forward, Ms Rai indicated that if the Council was free to take this point in relation to any proposal as to any future development which involved the erection of a part of a building on the demised land (save for the proposed Block F) then the Council was content to have the issues in the current trial determined, and the declarations sought by GMD considered, without the Council relying upon the part of a building point. Mr Driscoll indicated that GMD was prepared to agree that the part of a building point would be available to the Council in relation to a future proposed development which involved the erection of a part of a building on the demised land save that the point could not be taken as a ground of objection to the development of Block F as described.  In this way, the parties were ultimately agreed on how I should proceed and, accordingly, I will say nothing about the submissions I heard on the part of a building point.  

32.	 	In these circumstances, the only live issue as to the true construction of clause 4(viii) of the lease is whether a building which is intended to be used for residential purposes (whether for student accommodation or more generally) is within clause 4(viii) of the lease.  

33.	 	In my judgment, there is no possible way in which clause 4(viii) of the lease could be construed so that the words “a building” excluded a building which was intended to be used for residential purposes.  In my judgment, the position is absolutely clear.  There are no words of limitation in clause 4(viii) which have the effect contended for by the Council.  The words “a building” are perfectly general.  The parties have referred not only to the erection of a building but also to the “use” of a building.  The use of any building which the lessee wishes to erect is something which is to be approved by the lessor.  The possible uses which could be put forward by the lessee in an application for such approval are not defined or restricted.  Accordingly, the lessee could put forward a residential use and seek the lessor’s approval to it.  If the lessee does so, the lessor’s approval is not to be unreasonably withheld.  

34.	 	Although, at the request of the Council, I read the correspondence and other documents which came into existence before the lease was granted, it seems to me that there is nothing in those documents which affects the true interpretation of clause 4(viii) of the lease.  Whilst it is right that the parties negotiating the lease may have had a particular type of building in mind as the type of building which might be proposed by the lessee in the period following the grant of the lease, the fact that one particular type of building was in prospect does not begin to justify a conclusion that that type of building becomes the only type of building that could ever be put forward for the lessor’s approval pursuant to clause 4(viii) of the lease.  In these circumstances, it does not seem to me to be necessary to discuss any issue of law as to whether that correspondence and those other documents were admissible in evidence as an aid to the construction of the lease.   

35.	 	Ms Rai drew attention to other provisions in the lease which were said to throw light upon the meaning of “a building” in clause 4(viii).  In particular, it was suggested that clauses 4(ix), 4(xv), 4(xviii) and clause 5(b) of the lease showed that the parties did not intend that the demised premises could be used for a residential building.  In my judgment, none of the provisions relied upon by the Council provides any basis whatever for reading into clause 4(viii) such a limitation.  It was also suggested that the fact that the tenant was the BBC justified reading into clause 4(viii) the limitation on any residential building.  I can see no basis for that submission whatsoever.  

36.	 	In those circumstances, in the light of the parties’ agreement as recorded above as to the part of a building point, I hold that GMD is entitled to a declaration that the erection and use of a building on the premises as proposed by them is a development which GMD is entitled to carry out under the terms of the lease subject, of course, to obtaining the approval of the Council under clause 4(viii) of the lease, which approval is not to be unreasonably withheld.

37.	 	I can now turn to the second issue as to whether the Council has unreasonably withheld consent to the application made to it by GMD for such consent.  

38.	 	For the purpose of deciding the second issue I need to refer to some further matters of fact.  In September 2004, GMD (under the name Downing Developments) applied for planning permission and also for conservation area consent and listed building consent to enable it to carry out its intended development.  It will be remembered that the intended development was principally upon the freehold land owned by GMD but that one of the intended blocks, Block F, was to be constructed in a way so that part of it would be built on the demised land.  On the 15th June 2005, the Council (as local planning authority) granted to GMD listed building consent in relation to a part of the proposal which required listed building consent.  This part of the development included alterations to a listed building to convert it into flats.  On the 20th June 2005, the Council (as local planning authority) granted GMD conservation area consent for a part of its proposed development.  This conservation area consent was for a part of the proposed development which is not material to the present issues.  On the 21st June 2005, the Council (as local planning authority) granted GMD planning permission for its proposed development.  The permitted development was described as:

“Part demolition and erection of seven blocks up to 18 storeys (116 studio flats, 538 cluster rooms), 1800 square metres of A3 use.”

I say in passing that Mr. Jeffreys, a surveyor employed by the Council who gave evidence at the trial was not clear as to what was meant by “cluster rooms”.  Condition 10 of the planning permission required a minimum of 50% of the total number of bedrooms to be provided by the proposal to be let to full time students during term time.  The reason for this condition was to help meet the need for student accommodation and to comply with the Council’s planning policies.  Condition 30 of the planning permission referred to the extent to which the development might be occupied by conference delegates.  

39.	 	The applications for planning permission and the other consents were made in September 2004.  On the 7th October 2004 the Council wrote to GMD a letter with the heading “Proposed development of land at Woodhouse Lane, Leeds LS2”.  It is not clear whether this letter was prompted by the applications for planning permission and the other consents or whether there had been any communication between GMD and the Council apart from the planning and other applications.  The letter of 7th October 2004 referred to the lease of 11th December 1981 and stated that a development “for wholly residential purposes” was in breach of the provisions of the lease.  The letter stated that the building permitted by clause 4(viii) should be ancillary to car parking use.  The letter was written on the basis that there would be two buildings erected on the demised land although, as I have pointed out, the proposals which were discussed at the trial showed only a part of Block F being erected on the demised land.  The letter concluded by referring to the possibility of the Council seeking an injunction if works were carried out on the demised premises in breach of the provisions of the lease.  The letter was signed by a Mr. McKenna who was said to be in the property and finance department of the Council.  Mr. Jeffreys, a surveyor employed by the Council, who gave evidence at the trial said that Mr. McKenna worked in the legal department although Mr. Jeffreys was not certain whether or not Mr. McKenna was a solicitor.  

40.	 	On the 13th October 2004, GMD’s solicitors responded to the letter of 7th October 2004 strongly disagreeing with the view that the development would involve a breach of the lease.  The letter explained the reasons for this stance and further stated that the Council was not entitled unreasonably to withhold consent to a building which had planning permission.  

41.	 	On the 7th March 2005, Mr. McKenna wrote to GMD’s Solicitors maintaining the position of the Council that the development which was the subject of the planning permission was in breach of the provisions of the lease.  It was suggested that GMD should reopen discussions with Mr. Jeffreys so that a breach would not arise potentially resulting in litigation.  

42.	 	On the 16th March 2005, GMD’s Solicitors replied and quoted advice they had received from Mr Driscoll to the effect that the proposed redevelopment would not involve a breach of the lease.  

43.	 	On the 8th July 2005, following the grant of the planning permission and other consents, GMD’s Solicitors wrote to the Council making what they described as a formal application for the lessor’s approval of GMD’s plans to erect a building on the land demised by the lease in accordance with the planning permission which GMD had obtained from the local planning authority.  The approval was expressly said to be sought pursuant to clause 4(viii) of the lease.  The letter enclosed a copy of a planning permission and the other consents issued by the Council.  Further, the letter enclosed a copy of the ground floor layout plan of the proposed development showing the area demised by the lease suitably coloured.  The letter pointed out that on the demised land there would be car parking and part of Block F, which would be used for lettings to full time students and/or other residential accommodation, in accordance with the planning permissions.  The letter stated that GMD expected approval to be forthcoming and asked for approval to be given by 4pm on 29th July 2005 pointing out that the Council had been aware for a considerable amount of time of GMD’s plans so that in the circumstances this was not an unreasonable period of time within which to expect approval to be given.  The letter stated that if approval was not given then GMD reserved the right to issue proceedings after this deadline for an appropriate declaration that approval had been unreasonably withheld.  The letter was stated to be a formal letter before action in such a case.  

44.	 	The next communication between the parties which I have seen is a letter from the Council dated 8th September 2005 to GMD’s solicitors.  This letter does not refer in terms to the application of 8th July 2005 nor does it say in terms that the Council had received such an application and was now responding to it.  However, the letter of 8th September 2005 appears to be the only kind of response that was made to the application of 8th July 2005.  The letter of 8th September 2005 was again signed by Mr. McKenna.  He enclosed copies of six letters that preceded the entering into the Deed of Variation.  I have referred to those letters earlier in this judgment.  Mr. McKenna asserted that the letters effectively amounted to a representation made on behalf of the BBC and that the representation was one on which the Council was entitled to rely and the Deed of Variation was entered into “accordingly”.  The precise representation referred to is not spelt out but Mr. McKenna appears to have been saying that the BBC represented that the demised land would be used for car parking purposes after the completion of the assignment which was made possible by the Deed of Variation.  

45.	 	I should deal with the allegation of a representation and a possible estoppel at this stage.  At one time in these proceedings, the Council did contend that the effect of the correspondence which preceded the Deed of Variation and the terms of the Deed of Variation were such that the lessee and any assignee were not able to use the land otherwise than for car parking purposes.  At the start of the hearing before me, Ms Rai accepted that there was no relevant estoppel which could be relied upon.  

46.	 	The last paragraph of the letter of 8th September 2005 reads as follows:

“It was certainly my understanding from the meeting that was held that the Council were willing to consent to the use that your clients intended to put the demised premises to and were willing to enter into a Deed of Variation to change the user provisions.  This considerably increases the value of the lease and it is reasonable to request a proper consideration for such a change.”

47.	 	There was no detailed evidence at the trial as to what transpired at the meeting referred to in the letter of 8th September 2005.  However, I was told that the representatives of the Council who attended the meeting with GMD were Mr. McKenna and Mr. Jeffreys.  

48.	 	On the 15th September 2005, the solicitors for GMD replied to the letter of 8th September 2005.  The solicitors stated that the correspondence produced with the letter of 8th September 2005 did not affect the correct interpretation of clause 4(viii) of the lease.  The solicitors extended the deadline for the Council to grant its consent pursuant to clause 4(viii) until 4pm 21st September 2005.  Nothing was heard from the Council by the 21st September 2005 and on the 29th September 2005, GMD’s Solicitors wrote again to the Council stating that the Council was asking for a variation of the lease but a variation was not required because all that was required was for lessor’s approval under the lease.  The letter also sought to rebut the argument as to an estoppel.  

49.	 	On the 20th October 2005, GMD issued the present proceedings claiming a declaration that the Council had unreasonably withheld approval under clause 4(viii) of the lease to the erection and use of a building by GMD in accordance with the planning permission.  In response to these proceedings, the Council has served three witness statements, all made by a Mr. Stephen Jeffreys.  Mr. Jeffreys is a senior surveyor employed by the Council.  In his first witness statement he referred to the terms of the lease and he explained his view that the only building which might be erected on the demised land was a building ancillary to car parking use.  He exhibited the correspondence passing between the parties before the Deed of Variation.  He explained that the consideration for the Deed of Variation was £10,000 whereas if the parties had intended that the land could be developed for high density residential use he would have expected that a consideration in excess of £1m. would have been appropriate at today’s valuations.  He then stated that the BBC had represented that the land would continue to be used as a car park and that the Council had acted to its detriment on the basis of those representations in agreeing to a Deed of Variation for a consideration of only £10,000.  The last two paragraphs of the first witness statement read as follows:

“The Defendant has withheld consent to the development which is required under clause 4(viii) of the lease on the basis that the proposed development is in breach of the terms of the lease because the permitted use is limited to use as a car park and erection of one building ancillary to that use and the BBC and their representatives made representations to the Council during the course of negotiations to vary the lease that this use would continue on which the Defendant has relied to its detriment.

The Defendant occupies adjoining land which is used as a car park for Council officers.  The proposed development may have a detrimental affect (sic) on the use of this land.”

50.	 	Mr. Jeffreys signed a second witness statement which raised an issue which is no longer pursued and I need say nothing about it.  

51.	 	Mr. Jeffreys’ third witness statement exhibited, and discussed, certain correspondence and other documents which came into existence before the lease was granted.  I have already referred to much of that material earlier in this judgment.  Mr. Jeffreys appears to have changed his position in that he no longer contended that a building on the demised land had to be a building ancillary to car parking but instead, as I understand it, he contended that the only building permitted was the building which was actually contemplated by the BBC before it entered into the lease.  In particular he said that a residential use on the site was never contemplated or intended under the lease.  He repeated his case as to the representations made by the BBC before the Deed of Variation.  Paragraphs 15 and 16 of this third witness statement read as follows:

“Further the erection of a 17 storey student residential building on part of this site will dominate this site and create noise, disturbance and numerous pedestrian journeys over adjoining land which has been retained by the Council.  

The development will adversely affect the Council’s freehold reversion.  Looking at the legislation in force at the time such as the Leasehold Reform Act 1967 and the current legislation, the Leasehold Reform Housing & Urban Development Act 1993, if consent was to be given The Council could lose its interest in the land and this was never the intention.”

52.	 	There was no witness statement from Mr. McKenna nor, indeed, from any other officer of the Council.  

53.	 	Mr. Jeffreys gave oral evidence and was cross-examined and   re-examined.  It emerged that he did not have authority to grant or to refuse consent to the application made on the 8th July 2005.  Although he was aware that the letter of 8th July 2005 had been received by the Council, he was not shown a copy of it and it was not reported to him in any memorandum.  He had discussions with Mr. McKenna over a period of some 18 months about the proposed development but he was not able to state precisely at what stages during that 18 months different matters were considered.  It was not clearly established by the evidence whether Mr. McKenna had authority to grant or withhold consent under clause 4(viii) of the lease in response to the request of 8th July 2005.  However, Mr. Jeffreys expected that if consent under the lease was to be given or withheld, any decision on that matter would be dealt with at a higher level within the Council.  What Mr. McKenna and Mr. Jeffreys appeared to have authority to do was to negotiate with GMD with a view to agreeing in principle a package under which GMD would accept that it needed a variation of the terms of the lease and would be prepared to pay for that Deed of Variation.  Mr. Jeffreys had authority to negotiate an appropriate price and when he felt satisfied with the price on offer, he would then have prepared a report to someone higher in the Council with a recommendation as to how to proceed. 

54.	 	This evidence explains the correspondence to which I have referred.  The letter of 7th October 2004 was written so as to persuade GMD that the proposed development would involve a breach of the lease.  The reference to seeking an injunction was plainly included for the purpose of persuading GMD to negotiate a suitable price for a variation of the lease.  The letter of 7th March 2005 was written by Mr. McKenna with the same object.  The letter of 8th September 2005 did not even refer to the fact that an application had been made for consent under clause 4(viii) of the lease but concentrated on putting forward the case that the proposed development would involve a breach of the lease, although the Council were willing to enter into a Deed of Variation for a proper consideration.  As regards the comments made by Mr. Jeffreys in his witness statements about the effect of the development on the Council’s use of its adjoining car park, Mr. Jeffreys confirmed when he gave evidence that that point was really only considered in the context of defending this litigation.  For the purpose of preparing witness statements, Mr. Jeffreys was asked to consider what the effect of the development would be on the Council’s property interests and the reference to the effect on the adjoining car park was then identified.  The first reference to this point in the first witness statement is somewhat tentative stating that the development “may have” a detrimental effect.  The reference to this point in the third witness statement is much more firm in the assertion that the development will cause identified problems.  

55.	 	In these circumstances, I find as a fact that the matters identified in Mr. Jeffreys’ witness statements as to the effect of the development on the Council’s retained land were not reasons which the Council had for refusing approval under clause 4(viii) of the lease when Mr. McKenna wrote his letter on the 8th September 2005.  Not only did Mr. McKenna wholly fail to include any reference to such a matter, he said the opposite because he indicated that the Council was willing to consent if there was a Deed of Variation for a proper consideration.  In my view, that is not compatible with the Council wishing to refuse consent under clause 4(viii) of the lease because of a perceived adverse effect on their retained land.  

56.	 	I also find as a fact that the Council did not have in its mind as a ground for refusal, when Mr. McKenna wrote the letter of 8th September 2005, any perceived difficulty under the Leasehold Reform Act 1967 or the Leasehold Reform, Housing & Urban Development Act 1993.  Mr. Jeffreys was extremely vague in his evidence as to when he first was told of a possible difficulty of this kind.  He made it clear that he did not himself think of this idea but rather that it was an idea put to him by Mr. McKenna.  However, Mr. Jeffreys was not able to say that this point had been identified by Mr. McKenna by the 8th September 2005.  On the basis of that evidence, I am not able to make a finding in favour of the Council on the balance of probabilities that this issue was a matter of concern for Mr. McKenna or anyone else at the Council by the 8th September 2005.  But even if the point had come into Mr. McKenna’s mind by the 8th September 2005, it was not a ground which anyone at the Council wished to put forward as a ground for refusal of an application under clause 4(viii) of the lease.  Not only is there no mention of this ground in the letter of 8th September 2005, that letter states that the Council was willing to permit the development if there was a Deed of Variation and a proper consideration paid.  

57.	 	Having made appropriate findings of fact as to the way the Council approached this matter, it is now possible to address the question whether the Council unreasonably withheld consent under clause 4(viii) of the lease.  As was explained in Tollbench Limited v. Plymouth City Council [1988] 1 EGLR 79, in a case like the present, there are two questions for the Court.  The first question is: what reasons did the lessor actually have for refusing consent that is to say upon what reasons did it act in refusing that consent.  That is a subjective inquiry in the sense that one has to discover what was in the mind of the lessor at the time when it refused consent.  The second question is: whether the reasons in the lessor’s mind were reasonable or unreasonable.  The first question which focuses on the real reasons in the lessor’s mind for refusing consent is identified in the Tollbench case on the basis of the earlier authorities of Lovelock v. Margo [1963] 3 QB 786 at 789 and Bromley Park Gardens Estates Limited v. Moss [1982] 1 WLR 1019 at 1034E.  Although the Tollbench case was not cited in argument, the Bromley Park decision was cited, together with a number of first instance decisions which followed it.  Indeed, the proposition was not in the end in dispute.  

58.	 	I can now attempt to answer the first question as to the reasons in the lessor’s mind for withholding consent to the application made by the lessee on the 8th July 2005.  Although Mr. Jeffreys’ third witness statement refers to the possible effect of the development on the Council’s retained land and to the question of a possible acquisition of the freehold under the Leasehold Reform Act 1967 or the Leasehold Reform Housing & Urban Development Act 1993, my findings of fact as set out above are to the effect that these were not reasons for refusal in the lessor’s mind in response to the application for consent.  Although these matters were relied on in Mr. Jeffreys’ witness statements and in the Skeleton Argument put forward on behalf of the Council, the Council appears to have completely overlooked the fact that it can only rely on reasons which actually influenced it as reasons for refusal at the relevant time.  In these circumstances, it is not necessary for me to assess whether these reasons would have been proper reasons if they had been genuinely held at the relevant time.  However, I can indicate that the reason based on an alleged harmful effect on the Council’s retained land appears distinctly thin and the reason based on the Leasehold Reform Act 1967 and the Leasehold Reform Housing & Urban Development Act 1993 was unlikely to have been a good reason for refusing consent to the development but may (at most) have been a justification for requiring some safeguard for the Council against the operation of that legislation, alternatively, it might have been the case that the Council was already adequately protected by the covenant against underletting without consent, so that it did not need any further safeguard.  

59.	 	The matters which may have been in the Council’s mind at the relevant time related to the assertion that the proposed development would be a breach of the lease and/or that the proposed development was contrary to a representation made before the Deed of Variation and/or that the Council would wish to be paid a substantial consideration in return for permitting the development.  None of those matters is a good reason for withholding consent pursuant to clause 4(viii).  As regards the alleged breach of the lease, on my interpretation of clause 4(viii) of the lease, the development is not contrary to clause 4(viii), if it obtains the approval of the Council and such approval is not to be unreasonably withheld.  As regards the alleged estoppel, the Council’s argument as to estoppel was not pursued at the trial.  Finally, as regards the Council’s wish to be paid a substantial consideration as the price for permitting the development, it was not open to the Council to use its power to withhold approval under clause 4(viii) of the lease to extract a payment from the lessee.  It follows, in my judgment, that the Council’s withholding of consent in response to the application made by letter of 8th July 2005 was unreasonable.  The result is that GMD is entitled to implement the proposal as described in the letter of 8th July 2005 even in the absence of an approval from the Council.  

60.	 	There is one final matter with which I ought to deal.  Although this final point was not raised in any correspondence between the parties or in any witness statement or indeed in the Skeleton Argument for the Council, Ms Rai submitted at the hearing that the letter of 8th July 2005 lacked clarity in a number of respects with the result that it could not be treated as an application for approval under clause 4(viii) with the result that the letter had no legal effect and was a nullity.  This is a bad point.  I have referred earlier in this Judgment to the essential terms of the letter.  The letter identifies the proposal by reference to a plan and by reference to the planning permissions and the other consents issued by the Council.  The intended use of the part of Block F to be built on the demised land was described as use for lettings to full time students and/or other residential accommodation in accordance with the planning permissions.  Although it was suggested at the trial that Block F would in fact only be used for student accommodation, that does not affect the interpretation of the application which was made by the letter of 8th July 2005 and the scope of the consent that was sought.  In my judgment, the letter is entirely clear.  There was no suggestion from the Council when it received the letter of any lack of clarity or confusion on the Council’s part and the Council did not ask for any clarification.  It was also suggested by Ms Rai that the application for consent was fatally flawed because the plan attached to the letter showed some landscaping which might have created an obstruction to the Council in the use of the rights of way granted or reserved to it by the lease. There is nothing in this point either. GMD did not ask for any alteration in relation to the Council’s rights to enjoy its rights of way. I do not think that the Council needed to say anything in respect of its rights of way when it responded to the letter. But if the Council had been concerned about the way the plan showed landscaping in the vicinity of the rights of way, it was open to the Council to make clear that it was not giving up or altering its rights to enjoy its rights of way. The presence of landscaping in the vicinity of the rights of way was not a ground which would have permitted the Council to refuse the consent which was sought. Further, there is no evidence that it ever occurred to the Council that the plan had any implications for its enjoyment of its rights of way. In any case, this point does not produce the remarkable result contended for by Ms Rai that the letter requesting approval was of no legal effect. My conclusion is that GMD is now entitled to implement the proposal described in the letter and there does not appear to me to be any scope for argument as to precisely what that proposal was.  Accordingly, I will make an appropriate declaration to this effect.