Shopping centre — Redevelopment — Tenancy of retail unit — Fire door bricked up by landlords in breach of covenant — Court refusing permanent injunction — Assessment of damages in lieu of injunction — Whether judge assessing hypothetical negotiations on proper basis — Whether special circumstances entitling judge to refuse inquiry as to damages — Appeal dismissed
The appellants were the freeholders of a shopping centre that comprised a number of retail units, one of which was let to the respondent tenants under a 25-year lease from 1993. A dispute arose out of the appellants’ wish to relocate a fire door on the demised premises as part of the redevelopment of the shopping centre.
The respondents were willing to agree to the relocation for a suitable financial incentive, but the parties were unable to agree terms. The appellants eventually notified the respondents and bricked up the existing fire door. The respondents obtained an interlocutory injunction entitling them to reinstate the existing fire door. This was never acted upon but, at the hearing of their application for a permanent injunction, the appellants applied for forfeiture of the lease on the basis that the first respondent had parted with possession of the premises to the second respondent in breach of covenant. The respondents subsequently sought relief from forfeiture.
The county court held that the breach of covenant was made out and that the appellants were therefore entitled to an order for possession, but that the respondents should be accorded relief from forfeiture. However, in his discretion, he refused the respondents an injunction, concluding that damages in lieu were appropriate under Lord Cairns’s Act (that is, the Chancery Amendment Act 1858).
He ruled that damages should be fixed at a figure determined as a result of hypothetical negotiations between willing parties in the position of the appellants and the respondents for the “sale” of the respondents’ right to prevent the appellants from blocking up the existing fire door and relocating it elsewhere.
The appellants appealed, contending, inter alia, that the judge had been wrong to: (i) conclude that, in hypothetical negotiations, the parties should not be assumed to have taken into account that the tenant risked losing the lease owing to the breach of covenant before the appellants bricked up the fire door; and (ii) refuse to order an inquiry as to damages.
Held: The appeal was dismissed.
(1) In all the circumstances, the judge had been entitled to decide that damages for the permanent relocation of the fire door should be assessed on the basis that the respondents had effectively seen off any risk of forfeiture.
Since each case turned on its own facts, it was unwise to lay down any firm general guidance as to the circumstances in which, and the degree to which, it was possible to take into account facts and events that took place after the date of the hypothetical negotiations when deciding the figure at which those negotiations would arrive.
Since damages under the 1858 Act were meant to be compensatory, and should normally be assessed or valued at the date of the breach, principle and consistency indicated that post-valuation events would normally be irrelevant. However, given the quasi-equitable nature of such damages, the judge might direct a departure from the norm where there were good reasons for doing so, either by selecting a different valuation date or by directing that a specific post-valuation date event be taken into account. There was no sensible or directly relevant relationship between the possible forfeiture and the attempts to relocate the fire door: Wrotham Park Estate Co Ltd v Parkside Homes Ltd (1973) 229 EG 617, Peninsular Maritime Ltd v Padseal Ltd [1981] 2 EGLR 43; (1981) 259 EG 860, AMEC Developments Ltd v Jury’s Hotel Management (UK) Ltd [2001] 1 EGLR 81; [2001] 07 EG 163 and World Wide Fund for Nature (formerly World Wildlife Fund) v World Wrestling Federation Entertainment Inc [2006] EWHC 184 (Ch) considered.
(2) Furthermore, there were special circumstances, on the unusual and regrettable facts of this case, entitling the judge, in his discretion, to refuse to order an inquiry as to damages. The appellants had brought the interlocutory injunction upon themselves by adopting an attitude in negotiations that was wrong, and from which they had significantly resiled by the date of the trial.
Edward Bartley Jones QC (instructed by Wacks Caller, of Manchester) appeared for the appellants; Stephen Eyre (instructed by Wright Hassall, of Leamington Spa) appeared for the respondents.
Eileen O’Grady, barrister
