How willing are the courts to order an interim injunction to restrain a possible breach of a restrictive covenant? Hicks v 89 Holland Park (Management) Ltd (2014) Ch D 18 July involved an application for a declaration that approvals under certain covenants had been unreasonably withheld by 89 Holland Park (Management) Ltd, and a counter application by the management company for an interim injunction to restrain the applicant from applying for planning permission in the first place.
The case is the second piece of reported litigation between its protagonists. In 89 Holland Park (Management) Ltd & Ors v Hicks [2013] EWHC 391 (Ch), the High Court had been called upon to determine the enforceability and effect of certain restrictive covenants, first imposed in 1965, which affected land adjacent to a London house owned by 89 Holland Park (Management) Ltd and divided into leasehold flats. The adjacent land had originally been sold as a building plot. Covenants imposed at the time, and varied by a 1968 deed, prevented the owner of the land from making any planning applications unless the application had been approved by the “Adjoining Owner” (who was defined by the 1968 deed to include “executors, administrators and assigns”), and from commencing any works on the land unless the plans, drawings and specifications had also been approved. The court held that these covenants were clearly enforceable by the management company under section 78 of the Law of Property Act 1925 as a successor in title to the original Adjoining Owner (there being nothing in the drafting to suggest that only the original Adjoining Owner and/or express assignees of the benefit was to benefit from them). However, it was to be implied into the covenants that the consent of the Adjoining Owner was not to be unreasonably withheld. It was clear from the circumstances surrounding the imposition of the covenants that the land had been sold for building purposes and therefore, to give business efficacy to the covenants, and to conform to the reasonable expectations of the parties at the time the covenants were imposed, it was sensible that consent was not to be unreasonably withheld. Interestingly, on enforcement, although the lessees of each flat could enjoy the benefit of enforceability by virtue of annexation under section 78 LPA 1925, as a matter of contract it was only the management company (as a freehold “assign” from the original Adjoining Owner) whose consent was required.
On to the present litigation: Hicks had applied to the management company for its approval of her proposed construction of a house, but the management company refused consent on the basis that the proposal was unattractive and out of keeping with its own house. In its cross-application, the management company sought an injunction to prevent Hicks from making her application for planning. However, the court held that it was not appropriate to grant an interim injunction to restrain her from applying. The court applied the “balance of convenience” test. On an application for an interim injunction, the court exercises a wide discretion. First, it will need to be satisfied that the applicant for the injunction has a good arguable case, and that there is a sufficiently good reason to restrict the respondent’s activities before a full trial in the case. Secondly, in deciding whether or not to award the injunction, the court will have regard to the likely inconvenience or damage which would be suffered by the applicant if the injunction is not granted, and set it against the likely inconvenience or cost to the respondent if it is. Here, the court felt that the greater inconvenience lay with Hicks. If the injunction was granted, there was a real risk that, due to planned changes in planning policy, a planning application would be much less likely to be granted in the future, so that Hicks could suffer a substantial, unquantifiable loss. However, if the injunction was not granted, the benefit of the covenant was not entirely lost since the benefit was preserved by various undertakings offered by Hicks in the proceedings. The balance of convenience therefore pointed firmly in favour of not granting the injunction.