Paws for thought …

13 February, 2018
by: Cripps Pemberton Greenish

Victory Place Management Company Limited v Kuehn

It was, perhaps, inevitable that a case involving a High Court battle between a couple of tenants and a management company over a dog would lead to articles with titles such as this one.  But behind the humorous headline lies a decision that should not just be of interest to dog owners.  It is an indication of the way that the court may choose to interpret certain tenant covenants in leases, and it is not particularly good news for landlords.

Keeping it in the family

Mr and Mrs Kuehn purchased the lease of a flat in Victory Place, Limehouse, in September 2014.  The couple owned a young Yorkshire/Maltese terrier, named Vinnie.  They wanted Vinnie to live in the flat with them.  He was, as the court would later hear, “part of the family unit”.  But there was a looming threat to the family bond on the horizon.  It took the form of a covenant in their new lease, which read:

No dog bird cat or other animal or reptile shall be kept in the [Property] without the written consent of [Victory Place Management Company]

The Kuehns applied to the Management Company for consent to keep Vinnie at the property, as they were required to do.  But their request was refused.  The company said that it operated a strict no-pets policy within the building and intended to enforce it.  Vinnie would have to live elsewhere.

A day out in court

The Kuehns did not accept that decision.  Their lawyer wrote to the company, asking it to reconsider.  He said that in addition to being part of the family unit, Vinnie’s presence was “helping my client clinically”.  The company seemed unimpressed, however.  It noted that the couple had failed to provide medical evidence to support their position.  On that basis, it presented them with two options.  Either confirm, within a short space of time, that Vinnie had been removed from the flat or face injunction proceedings.  The Kuehns decided to defend their position in court.

After a three-day hearing in the Central London County Court, the judge found that the company’s decision was lawful and granted the injunction it had sought.  Vinnie had been given his marching orders.  Undeterred, the couple filed an appeal.  They felt that the trial judge had been wrong to find that the company’s decision was reasonable.

The appeal was heard in the High Court, before Sir Geoffrey Vos.  He agreed with the trial judge’s assessment.  The company’s decision making process was sound.  It was entitled to consider the Kuehns’ application within the context of a general no-pets policy.  The mere existence of that policy was not enough to show that it had been acting unreasonably.  The appeal was dismissed.

This outcome is unsurprising.  The terms of the lease were clear.  No pets were to be allowed in the flat without the consent of the company.  In reaching its decision on that point, the company had considered the relevant factors and had not been swayed by irrelevant ones.  Ultimately, the Kuehns failed to persuade the court that Vinnie should be an exception to a well established rule.

Listening to reason

What is surprising, though, is the way that the couple were able to question the reasonableness of the company’s decision.  Take another look at the wording of the covenant in their lease.  Nowhere does it say that the company’s decision should be reasonable.  Yet the condition of reasonableness was central to the couple’s case.  So where, exactly, did that requirement come from, if not the lease itself?

The answer to that question is the decision of the Court of Appeal in Associated Provincial Picture Houses Limited v Wednesbury Association.  This well-known case, dating from 1948, set out the basis for assessing the reasonableness of decisions made by public bodies.  But the claimant company in this case was not a public organisation.  Why then, should its decision to ban Vinnie from its building have been subjected to the “Wednesbury Test”?

Where one party has sole discretion over a decision making process mentioned in a private contract, it will have a conflict of interest.  There will be a clear temptation to decide the point in its own favour.  In such cases, the courts have shown a willingness to regulate the imbalances between the parties, by applying the Wednesbury Test.  Even if that means blurring the lines between public and private law.

So what exactly does the Wednesbury Test involve?  There are two parts, or “limbs” to it.  The first limb requires that the decision making process must be reasonable.  The second limb requires that the outcome of the process is also reasonable (i.e. the result is not one that no other decision maker could have arrived at).  On appeal in Kuehn, the parties agreed that only the first limb of the Wednesbury Test should apply.  But the court said that it would have applied the second limb as well, if it had been asked.  So the working assumption must be that any exercise of discretion by a landlord under the terms of a lease could be open to challenge in this way.

Nothing wrong with that, you might think.  But the loss of certainty in contractual agreements is never a good thing.  If, as appears likely, the Wednesbury Test is capable of applying to all discretionary consents in leases (not just pet clauses!) the potential for disputes is significant.

Conclusion

Landlords should be careful to explain the way in which they have exercised their discretion under the terms of existing leases.  Adopting a measured and logical approach is equally important.  Referring to existing policy is fine, but not if it is used to dismiss a tenant’s request out of hand.

When drafting the terms of a new lease, it would be preferable to express certain types of tenant covenants in absolute terms (i.e. remove any reference to landlord consent).  Tenants can (and should) resist that level of restriction on key subjects, such as alienation or alterations.  But it is still worth trying to minimise the potential for disputes over ‘minor’ covenants, such as pet clauses.  After all, landlords can still give personal consents to tenants without having to consider each and every request out of contractual obligation.