Damages in lieu of injunction

A useful insight into how the courts will assess damages in the post-Lawrence world I redevelop my office building, adding a couple of extra floors. In so doing, I obstruct the light through some windows into your building, but to a minor extent: the only interference is with the light to a staircase giving access into your basement. I think that the loss of amenity is only worth about £600; you say £3,000. We are not poles apart. However, you have a right to light – an important real property right in this country – and you ask the court to grant you an injunction requiring my building to be altered to restore the light to the staircase. The court refuses, for a number of perfectly sensible reasons, but goes on to consider what damages should be awarded instead of an injunction. We are now in wild-card territory: the usual basis for such an award depends on what the court would consider to be the most likely outcome of a hypothetical negotiation between the two of us.     The judge adopts the orthodox view that the owner of such a right would normally expect to receive some part of the likely profit from the development or the relevant part of it; and that the court should award a sum that takes into account a fair percentage of that profit. Our experts’ view of the profit is pretty close: between £163,000 and £186,000. The judge takes one-third of the average (£58,000), but then decides that that feels a bit high, and opts instead for £50,000, which “feels right”. Net result: my infringement of your right, which actually causes you a maximum loss of amenity of £3,000, nets you a considerable windfall. What’s new pussycat? The facts above detail what happened in Tamares (Vincent Square) Ltd v Fairpoint Properties (Vincent Square) Ltd [2007] EWHC 212 (Ch); [2007] 1 EGLR 26. Since then, though, the Supreme Court justices have ridden into town and set about them: see Lawrence v Coventry (t/a RDC Promotions) and others [2014] UKSC 13; [2014] 1 EGLR 147. Readers will recollect that the test for when injunctions will be granted in cases of nuisance (and the same is likely to apply to infringements of real property rights such as easements and restrictive covenants) has been freed from the rigid shackles imposed by a series of Court of Appeal decisions. Although the starting point is still an injunction, judges in future will be rather more likely to use their discretion to refuse injunctions in appropriate cases. So far so good, but an injunction was refused in Tamares anyway. So what is new? Well, what their Lordships said in relation to damages in lieu of an injunction is intriguing. Lord Neuberger (whose earlier judgment in Lunn Poly Ltd v Liverpool & Lancashire Properties Ltd [2006] EWCA Civ 430; [2006] 2 EGLR 29 had endorsed the orthodox hypothetical negotiations approach to the assessment of damages in lieu of an injunction) expressed the view that such damages: “are conventionally based on the reduction in the value of the claimant’s property as a result of the continuation of the nuisance”. Then again, he also said that it was “at least arguable” that damages “should not always be limited to the value of the consequent reduction in the value of the claimant’s property”, but could “also include the loss of the claimant’s ability to enforce her rights, which may often be assessed by reference to the benefit to the defendant of not suffering an injunction”. Their other Lordships took divergent views, with Lord Sumption suggesting that the claimant should simply be compensated for the loss of the amenity and the diminished value of his property. Ultimately, the law on damages in lieu of an injunction was left in a rather less settled position than it has been for some time. Happy days are here again Faced with such judicial diversity, how are judges flexing their new discretionary muscles? A useful decision from the estimable recorder Edward Cole in Central London County Court this February provides substantial illumination. The Scotts claimed that the Aimiuwus had infringed the rights of light enjoyed by their house by constructing a substantial rear extension to their neighbouring property. The Scotts sought an injunction requiring the extension to be cut back so as to restore the status quo, and alternatively damages in lieu of an injunction. The judge refused an injunction, primarily because the adverse effect of a mandatory injunction on the defendants would be much greater than its beneficial effect on the claimants (whose claim would perhaps have been more viable had they applied prior to the commencement of construction). The judge then turned to the assessment of damages in lieu of an injunction. He rejected the Tamares share of development profit as the correct approach (which in that case might have yielded damages of £65,000); considered that an approach based simply on diminution in value yielded too low a figure (in the region of £11,000); and opted instead for a more nuanced approach based on the decision of Millett J in Carr-Saunders v Dick McNeil Associates Ltd [1986] 2 EGLR 181. This took into account a variety of factors, including loss of amenity, and the advantage to the other party of securing a surrender of the right. He considered £30,000 as the appropriate figure to award. With a little help from my (learned) friends The penetrating analysis in Scott offers us an early glimpse of the post-Coventry world of damages in lieu. It shows that what is called for is a holistic approach that weighs up diminution in value, loss of amenity, the behaviour of the parties and only partly (but perhaps more obviously in a commercial rather than a domestic context) an assessment of the increase in value gained by the transgressing party. We have only just begun – but at least we are no longer left in the dark. Guy Fetherstonhaugh QC is a barrister at Falcon Chambers