Following Regan v Paul Properties DPF No 1 Ltd [2006] EWCA Civ 1319; [2006] 3 EGLR 94 and HXRUK II (CHC) Ltd v Heaney [2010] 3 EGLR 15, developers now live in fear of having to demolish or alter new buildings if they infringe their neighbours’ rights of light.
Is this concern justified and is the latter decision, in particular, open to challenge?
An interference with a right of light is actionable in the tort of nuisance. The remedies available are therefore the grant of an injunction or damages. The court is never bound to grant an injunction: it always has a discretion to award damages in lieu of an injunction.
Where such damages are awarded, they are normally calculated on the basis of what the parties would have agreed, in a hypothetical negotiation, as a fair price for the grant of permission to do the act the victim complains of: hence the term “negotiation damages”.
Usually this equates to a “cut” of the profit derived from the wrongdoer’s unlawful act (see Enfield London Borough Council v Outdoor Plus Ltd [2012] EWCA Civ 608; [2012] 29 EG 86 and cases there cited).
In rights of light cases, there is a trend towards the ready grant of a mandatory injunction, rather than damages. This is marked by Regan and HXRUK: but were these cases correctly decided?
In Regan, the defendants constructed a building opposite Mr Regan’s maisonette, the top floor of which restricted his light. At first instance, Mr Regan’s claim for an injunction to have the offending part of the developer’s building (a penthouse flat) removed was refused, but he succeeded on appeal.
Rejecting an argument that the courts should be reluctant to grant injunctions in rights of light cases, Mummery LJ considered the classic “injunction-or-damages” case of Shelfer v City of London Electric Lighting Co (No 1) [1895] 1 Ch 287. Mummery LJ reformulated the “good-working rule” in Shelfer: see box.
The court granted an injunction, because it held that the diminution in the value of Mr Regan’s maisonette was not “small”. The diminution in value was estimated at trial to be between £5,000 to £5,500: a 2%-2.5% reduction in capital value. By granting the injunction, the court obliged the developer to demolish part of the penthouse at a cost of between £12,000 and £35,000, with a consequential reduction in capital value of around £175,000. Nevertheless, Mummery LJ held that the grant of an injunction was “not oppressive”, inter alia, because the disparity between the loss suffered by the developer and that suffered by Mr Regan was not determinative.
Heaney went further. In early 2008, the developer, HXRUK, added sixth and seventh floors to a building opposite Mr Heaney’s premises. HXRUK was aware that Mr Heaney’s premises enjoyed rights to light, which its development would infringe.
HXRUK carried on its development, despite continual protests by Mr Heaney and his advisers. In late 2008, HXRUK openly accepted that the development had infringed Mr Heaney’s rights to light, but raised the issue of whether an injunction would be refused on the grounds of delay, as Mr Heaney had known of HXRUK’s plans for a year, and the losses Mr Heaney might suffer were small compared to the potential loss to HXRUK.
HXRUK completed the development in July 2009. It then began its own proceedings for a declaration that Mr Heaney’s acquiescence had lost him his rights to any remedy.
Alternatively, it sought a declaration that the injury to Mr Heaney’s interests was so small that a mandatory injunction would not be granted. Fate having been thus tempted, Mr Heaney counterclaimed for a mandatory injunction, requiring one third of the newly constructed upper two floors of the development to be removed, or alternatively, negotiation on damages in lieu. At trial HXRUK abandoned its acquiescence argument, leaving the only issues as “injunction-or-damages” and, if damages, how much?
The court ordered the partial demolition of the upper floors of HXRUK’s development. In case the Court of Appeal disagreed with him, the judge made an alternative award of damages in lieu of £225,000. It will never be known whether the Court of Appeal would have agreed: the appeal by HXRUK was compromised.
The judge’s award of damages throws into focus the disparity in loss between HXRUK and Mr Heaney.
The judge found that the difference in value of HXRUK’s development, with and without the offending parts of the upper floors was £1,408,000.
In addition, the cost of removing those parts of the building (around 4,500 feet) was between £1.1m and £2.5m and would require a tenant of the seventh floor to move out while the works were undertaken. By contrast, Mr Heaney’s premises would be devalued by between £18,755 and £80,771.25: less than 2% of their capital value (see [51]-[52]. This included an uplift factor of approximately 2.6% in accordance with Carr-Saunders v Dick McNeil Associates [1986] 1 WLR 922, which was accepted by the claimant as appropriate in calculating actual loss).
The core of the judge’s reasoning in Heaney was that the infringement was neither trivial nor inadvertent: see [85]. HXRUK continued building, aware of the actionable nuisance, because it wanted to make a profit. It could easily, if less profitably, have reduced the dimensions of the sixth and seventh floors.
Thus, the judge concluded, at [85], that: “it would be wholly wrong for the court effectively to sanction what has been done by compelling the defendant to take monetary compensation which he does not want”.
Was Heaney a wrong turn?
The narrow view of Heaney is that it does no more than restate established law: an injunction will be granted unless all the Shelfer guidelines are satisfied, including the requirement that it would be oppressive to grant an injunction. If so, Heaney is consistent with earlier decisions such as Jacklin v Chief Constable of West Yorkshire [2007] EWCA Civ 181 and later ones, such as Watson v Croft Promo-Sport [2009] EWCA Civ 15; [2009] 2 EGLR 57.
The wider view is that Heaney has substantially increased the threat of mandatory injunctions. We adopt this wider view, albeit with regret, because we believe Heaney and Regan misunderstand and so misapply the Shelfer guidelines.
The correctness of the Shelfer guidelines – as guidelines – is not in doubt. It is right that where there is a small injury to the claimant and a disproportionate harm to the defendant, an injunction will usually be appropriate.
However, this balance is being wrongly applied, because the courts are applying Shelfer in cases where the hardship caused to the defendant by an injunction being granted significantly outweighs the value of the relief that the claimant will obtain. The courts are requiring a disproportionate degree of damage to the defendant before it is oppressive to grant the injunction. It is feared that, in part, this is because Shelfer is being followed too rigidly.
The “injunction-or-damages” discretion depends on the court weighing the balance of justice between the parties on the particular facts of each case. The courts should look again at cases that stress that not every one of the Shelfer guidelines has to be present before one refuses an injunction, such as Gafford v Graham [1999] 41 EG 159; [1999] 3 EGLR 75.
By treating the guidelines as tickboxes, the courts appear to be overlooking the most important issue: would the grant of an injunction be oppressive? Oppression was rightly put at the forefront of the questions the court should ask itself when exercising its “injunction-or-damages” discretion in Gafford and Jaggard v Sawyer [1995] 13 EG 132; [1995] 1 EGLR 146 a r p151, per Sir Thomas Bingham MR and at p153, per Millet LJ. Kennedy LJ agreed. The courts in both Heaney and HXRUK failed to give proper weight to the question of oppression, thereby subjecting the developers to losses out of all proportion to those that would be suffered by the victim in each case, were the injunction refused.
The courts in both cases should have considered delay when assessing the degree of oppression: in neither case had the victims promptly issued a claim to protect their rights. More weight should have been given to the well-established principle that a mandatory injunction should not normally be granted where the claimant has delayed while building proceeds: see Bracewell v Appleby [1976] 1 EGLR 119, Gafford and, most recently, Pilford v Greenmanor Ltd [2012] EWCA Civ 756.
A victim’s failure to apply for an interim injunction should continue to be relevant to whether a final injunction should be granted, as it was, for example, in Gafford and Mortimer v Bailey [2004] EWCA Civ 1514; [2005] 1 EGLR 75.
This is more obviously the case where the victim is asking the court to order the demolition, or partial demolition of what could be new, high-quality buildings, providing beneficial employment. In those cases, such an injunction might not be in the public interest as in Wrotham Park Estate Co Ltd v Parkside Homes [1974] 1 WLR 798, at p811. See also Greenwich Healthcare NHS Trust v London and Quadrant Housing Trust [1998] 1 WLR 1749. We more than agree with the suggestion by Peter Smith J in Midtown Ltd v City of London Real Property Co Ltd [2005] EWHC 33 (Ch); [2005] 1 EGLR 65, at [74] that it might count against the grant of an injunction if the development was “worthwhile and beneficial”.
The losses in both Heaney and HXRUK show that the court misunderstood what is meant by a “small injury” to the victim, which can “be adequately compensated by a small money payment”.
On any reasonable view, the injury to Mr Heaney’s property was “small”, as it was less than 2% of the capital value of his premises.
Property lawyers for justice?
The take-home message on the current state of the law is this: provided that the victim asserts his rights and (at least in open correspondence) does not say he will take a financial settlement, he is in a very strong position.
The victim is likely to obtain an injunction, even if the injury to his property is objectively trivial and the effect of a mandatory injunction is financially punitive to the wrongdoer.
However, it is arguable that there are excellent arguments for overruling the approach adopted in both Heaney and HXRUK as being inconsistent with earlier authority and simply unfair.
Stephen Bickford-Smith and Nicholas Taggart are barristers at Landmark Chambers
