In February 2007, in the High Court of Justice, Chancery Division, The Dulwich Estate, as Managers of the Scheme of Management, was successful in appealing an Arbitrator's Award which had ruled the Manager's actions in refusing consent for a side dormer window, as part of a loft conversion, to be unreasonable.

The owners of an end of terrace house on the periphery of the Estate had made an application to the Managers under the Scheme of Management to convert a loft on their property but including a side dormer window. From the outset the owners were advised that a side dormer window in such a property was contrary to the Managers' Policy Guidelines and was therefore unlikely to be approved.

The freeholders, who had received planning consent from the Local Authority, insisted on making a formal application for a loft conversion including a side dormer window and this was subsequently refused by the Managers. The freeholders then exercised their rights under the terms of the Scheme of Management to refer the matter to arbitration.

The Arbitrator, Mr Richard Inniss received representations from both the freeholder and the Managers and made his award, declaring:

  • The Managers had followed the proper procedures and their decision was consistent with their guidelines;
  • The applicant was fully aware of the Scheme and its provisions; but
  • The circumstances of the owner's application for consent rendered unreasonable what otherwise would have been a reasonable decision.

The Award was therefore made in favour of the applicant.

The Managers were surprised by the Arbitrator's Award since the test which an arbitrator is to apply had been previously established by case law - Estates Governors of Alleyn's College of God's Gift at Dulwich v Williams in 1994. This followed on from an earlier decided case concerning a Scheme of Management - Mosley v Cooper in 1990. The Williams case had established that the jurisdiction of the arbitrator only extends to determining whether the managers acted reasonably and not as to whether consent should or should not have been given.

The Managers were most concerned by Mr Inniss introducing a further test requiring them to have regard to the circumstances of the applicant and therefore application was made to the Court for leave to appeal the Arbitrator's Award. The Judge, Mr Jonathon Crow QC, found that Mr Inniss had made an error of law in applying the additional test - taking into consideration the circumstances of the applicant.

Counsel for the Managers has asked that the Court vary the Award to determine that approval from the Managers was reasonably withheld. However, the Judge declined to do so and remitted the matter back to the Arbitrator for Mr Inniss to apply the correct test in law in order to reach his decision.

The Judge in deciding the Appeal also considered as part of his judgement the impact of the Human Rights Act 1998 on the grounds that it involved an interference with the peaceful enjoyment of the freeholder's position under Article 1 of the First Protocol of the European Convention on Human Rights. The Judge left open the question as to whether the Dulwich Estate is a Public Authority for the purpose of Section 6 of the Human Rights Act. Although Article 1 of the First Protocol merely protects the peaceful enjoyment of possessions, the property owners had acquired the freehold subject to the Scheme of Management and a restriction on the ability to convert the loft is an incident of their property rights and not an interference with them. Even if this analysis was incorrect, under Article 1 of the First Protocol, this allowed interference with property rights if three conditions were satisfied:

  1. The interference is in accordance with the law and that test is satisfied by the Scheme which has received Court approval;
  2. There must be a legitimate objective and that is satisfied by the provisions of section 19 of the Leasehold Reform Act 1967;
  3. The interference must be proportionate.

The Judge's conclusion was therefore that any consideration under the Human Rights Act would produce the same result as under the Scheme and the Arbitration Act.

Disappointingly for the Managers, the Judge refused to make any order for costs against the Defendant but stated his decision "is in no way prompted by any suggesting that proceedings were in any way inappropriately brought. They were entirely reasonable and in a large measure they have been successful in a sense that the key issue in the case was whether or not the Arbitrator's decision was wrong in law and, in my view, it was and it is entirely reasonable for the Estate to have proceeded as it did and it has been successful on that crucial point."

The Dulwich Estate believes the judgment is mutually beneficial to freeholders and the Managers in clearly defining the role of an arbitrator appointed under the Scheme of Management and the question of whether the Scheme conflicts with the Human Rights Act has been addressed. The Managers seek to continue to exercise the rights and powers conferred on them by the Scheme for the purpose of enabling them to preserve the amenities of the Estate for the common benefit.

The Dulwich Society fully supports the actions of the Managers over this issue and joins with them in their surprise and regret that costs were not awarded to the Estate. Unfortunately, as a consequence, all freeholders subject to the Scheme of Management will be required to share these costs, estimated at £5 per household.

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