Trespass — Water main — Damages — Undertaker laying water main in land without serving notice under section 159 of Water Industry Act 1991 — Claim for damages — Whether damages loss of development value or restitutionary damages based on value of benefit to undertaker — Whether damages based on compensation payable under section 180 of and Schedule 12 to Water Industry Act 1991
In 1991, the appellant water undertaker served statutory entry notices, under section 159 of the Water Industry Act 1991, to all owners and occupiers believed to be affected by its proposal to lay a new 28km water main. It subsequently laid approximately 20m of the main over land owned by the respondent. Since the respondent had not been served with a notice of entry, this action constituted a trespass, for which the respondent brought proceedings. He claimed as damages loss of development value, based upon the loss of two development plots at £50,000 each and additional development costs. In the alternative, he claimed restitutionary damages representing the value to the appellant of the water main on the basis of a fair price for the benefit obtained from its wrongful use of the respondent’s land; namely 5% of £210,527, being the annual charging rate in the respect the main. In its defence, the appellant contended that the appropriate measure of damages was the compensation that would have been payable under Schedule 12 to the 1991 Act, a sum that was agreed at £110. In the court below, the respondent was awarded £2,170, consisting of the £110 compensation that would have been payable, £500 for loss of an opportunity to negotiate a higher sum and £1,560 as restitutionary damages. The restitutionary damages, which reflected the trespass of passing of water through the respondent’s land without authority, was based upon £520 pa for three years from the date upon which the trespass commenced to the date at which the matter ought to have been compromised. The appellant appealed against the second and third elements of the award of damages.
Held: The appeal was allowed in part, and the damages reduced by £1,560. The respondent was entitled to the £500 as loss of bargaining opportunity. The fair price should reflect the likely reasonable outcome of any negotiations that would have taken place had the statutory notice been served prior to the carrying out of the works. The damages totalling £610 represented the damage attributable to the trespass up to the date of the trial. There was no basis of awarding further damages, or for the figure of £1,510 chosen by the trial judge.
The following cases are referred to in this report.
Attorney-General v Blake [1998] Ch 439; [1998] 2 WLR 805; [1998] 1 All ER 833, CA
Attorney-General v Blake [2001] 1 AC 268; [2000] 3 WLR 625; [2000] 4 All ER 385, HL
Bracewell v Appelby [1975] Ch 408; [1975] 2 WLR 282; [1975] 1 All ER 993; [1976] 1 EGLR 119;(1974) 237 EG 731
Carr-Saunders v Dick McNeil Associates Ltd [1986] 1 WLR 922; [1986] 2 All ER 888; (1986) 53 P&CR 14; [1986] 2 EGLR 181; 279 EG 1359
Jaggard v Sawyer [1995] 1 WLR 269; [1995] 1 EGLR 146; [1995] 13 EG 132, CA
Jegon v Vivian (1871) LR 6 Ch App 742
Martin v Porter (1839) 5 M&W 351; 151 ER 149
Stoke-on-Trent City Council v W&J Wass Ltd (No 1) [1988] 1 WLR 1406; [1988] 3 All ER 394; (1988) 87 LGR 129, CA
Whitwham v Westminster Brymbo Coal & Coke Co [1896] 2 Ch 538
Wrotham Part Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798; [1974] 2 All ER 321; (1973) 27 P&CR 296; 229 EG 617
This was an appeal by the appellant, Severn Trent Water Ltd, against a decision of Judge Perrett QC, sitting in the High Court, Birmingham District Registry, in proceedings by the respondent for damages for trespass.
David Stockhill (instructed by the solicitor to Severn Trent Water Ltd) appeared for the appellant; Nicholas Yell (instructed by Hargreaves Hadcroft, of Birmingham) represented the respondent.
Giving the first judgment,
Introduction
[1] This is the appeal of the defendant, Severn Trent Water Ltd (Severn Trent), which is a well-known water undertaker. It has statutory powers conferred upon it to lay and maintain water mains under section 159 of the Water Industry Act 1991 (the 1991 Act), under which there are provisions for payment of compensation either by agreement or pursuant to Schedule 12 to the 1991 Act. The appeal is against the judgment of Judge Perrett QC, sitting as a judge of the High Court in the Birmingham District Registry on 12 June 2002, whereby he awarded damages for trespass to the claimant (Mr Barnes), a private individual and landowner, against Severn Trent, which, without the knowledge or permission of Mr Barnes, laid part of a water main under the corner of a 2.38 acre parcel of grazing land owned by Mr Barnes and let by him under an annual grazing tenancy to a Mr Gartside, who farmed the surrounding land. The sum awarded by the judge by way of damages was £2,170, with interest.
[2] Thus, the sum awarded was not substantial. However, the issues are issues of principle in relation to claims of this kind, and Severn Trent is concerned that the judge’s decision, if uncorrected, may serve as a precedent in other cases.
Background facts
[3] The relevant facts can be shortly stated. As part of its statutory functions under the 1991 Act, it became necessary for Severn Trent to lay a new water main from Bamford to Buxton in Derbyshire. Severn Trent enjoyed powers to lay and maintain water mains under section 159(1) of the 1991 Act, which provides:
(1) Subject to the following provisions of this section, to section 162(9) below and to the provisions of Chapter III of this Part, every relevant undertaker shall, for the purpose of carrying out its functions, have power |page:96|
(a) to lay a relevant pipe (whether above or below the surface) in any land which is not in, under or over a street and to keep that pipe there;
(b) to inspect, maintain, adjust, repair or alter any relevant pipe which is in any such land;
(c) to carry out any works requisite for, or incidental to, the purposes of any works falling within paragraph (a) or (b) above.
(2)…
(3)…
(4) The powers conferred by this section shall be exercisable only after reasonable notice of the proposed exercise of the power has been given to the owner and to the occupier of the land where the power is to be exercised.
[4] In 1991, Severn Trent served statutory notices, under section 159(4), to all landowners affected along the 28km of the new main, with two exceptions, namely Mr Barnes and a Mrs Baldwin. Mr Barnes was not notified because Severn Trent was unaware of his land ownership. That was because Mr Barnes’ land was part of a field that has no physical boundaries or other demarcation to distinguish it from the surrounding land, and it was, at all material times, let on a grazing licence to Mr Gartside. Neither Mr Gartside, nor a Mr Oxley, who was identified and notified as the owner as the whole of the parcel of land in which Mr Barnes’ land was contained, informed Severn Trent that the parcel was in fact in divided ownership, and that the line of the proposed main, instead of being wholly contained within Mr Oxley’s land, would cross the southernmost corner of Mr Barnes’ land for a distance of around 20m.
[5] Thus, Severn Trent’s trespass upon the land of Mr Barnes in the course of laying the main was trivial, accidental and unintentional. It came to light only when, in February 1993, after the main had been constructed, the solicitor representing the executors of Mrs Baldwin advised Severn Trent of her interest, and Severn Trent’s investigations in respect of her interest revealed the true position in relation to Mr Barnes’ land. Severn Trent immediately informed Mr Barnes, in order to apologise for not having previously contacted him and to make him aware (whereas he had previously been unaware) of the existence of the main under the corner of his land. A statutory notice was served on Mr Barnes on 1 September 1995, in a belated attempt to regularise the situation, but, in light of the terms of section 159(4) of the 1991 Act, it was ineffective in that respect.
[6] Mr Barnes having issued proceedings claiming damages, the parties agreed, prior to trial, upon the precise line of the water main across the corner of Mr Barnes’ land, and that the length of run of the main that constituted a trespass was 20m long, with an agreed 10m wide easement of access on either side.
[7] Mr Barnes’ claim, as set out in his statement of claim served on 26 November 1997, was for “loss and damage through a diminution in the value of the land”. Particulars were pleaded under heads (i) to (iii), based upon the development value of the land, it being claimed that the presence of the water main had reduced from 10 to eight the number of residential building plots capable of being created and developed on the land, such plots being valued at approximately £50,000 each, with additional increased development costs. It was also pleaded under (iv) that the value of the land as agricultural land had been diminished by the removal of earth, the presence of the main beneath the surface and Mr Barnes’ alleged “inability to carry out normal acts of husbandry in its vicinity”.
[8] In the alternative, Mr Barnes claimed “restitutionary damages representing the value to [Severn Trent] of the water main” on the basis of “a fair price for the benefit obtained by the defendant from its wrongful use” of the main, namely 5% of £210,527, which was the annual charging rate of Severn Trent for a full year in respect of the water flowing through the mains.
[9] By its defence, Severn Trent denied the damage alleged and pleaded that the appropriate measure of damages payable was that which Severn Trent would have had to pay under the statutory compensation scheme laid down by section 180 of the 1991 Act and Schedule 12 thereto. The relevant provisions of Schedule 12 are contained in paras 2 and 3, which provide:
2.—-(1) If the value of any interest in any relevant land is depreciated by virtue of the exercise, by any relevant undertaker, of any power to carry out pipe-laying works on private land, the person entitled to that interest shall be entitled to compensation from the undertaker of an amount equal to the amount of the depreciation.
…
3.—-(1) Any question of disputed compensation under paragraph 2 above shall be referred to and determined by the Lands Tribunal; and in relation to the determination of any such compensation the provisions of sections 2 and 4 of the Land Compensation Act 1961 shall apply, subject to any necessary modifications.
[10] The claim for restitutionary damages was denied by Severn Trent as being inappropriate.
[11] By trial, the parties were agreed that the usual measure for compensation under Schedule 12 to the 1991 Act, as it would be assessed by the Lands Tribunal, was one-half of the agricultural value of the land under which the main had been laid, together with the easement strip 10m wide for maintenance purposes. It was agreed that damages assessed upon this basis would yield a figure of £110 by way of compensation.
Judgment below
[12] The judge found that Mr Barnes had failed to prove any loss based upon the development value of his land. On the expert evidence before him, he found that Mr Barnes’ chances, or those of his successors in title, of obtaining planning permission were so remote as to be valueless, and that, in any event, if, by some remote chance, such permission were obtained, the development value of the land would in no way have been proved to have been diminished by the minimal trespass. He found that Mr Barnes’ land had no present value over and above its agricultural value, and that the land was just as useful agriculturally now as it had been prior to the laying of the main.
[13] None the less, the judge made a total award of £2,170. It was made up of three elements, as follows:
(a) £110, being the sum agreed between the parties as the appropriate measure upon the supposition that, had notice been properly served and the matter proceeded to the Lands Tribunal, that is what Mr Barnes would have obtained as compensation;
(b) an additional sum of £500 by way of further compensatory damages for loss of Mr Barnes’ opportunity to negotiate with Severn Trent for an amount over and above that figure. He awarded that sum because he said that: (i) Mr Barnes, and his father before him, believed that there was development potential in the land, albeit without foundation; and (ii) Severn Trent, on the basis of “commercial expediency” would have been prepared to treat the claim of Mr Barnes as a nuisance claim, in respect of which it would have offered a moderate sum by way of enhanced compensation in order to avoid the necessity to resort to the Lands Tribunal; and
(c) finally, the judge awarded a further £1,560 by of “restitutionary damages” upon the following basis.
[14] In respect of what he called the compensatory award of £500, the judge stated:
if a trespassee’s damages are to be compensatory (ie over and above “nominal”) then they have, in common sense, to reflect the injury he has or will suffer to either himself or to his interest in the land, either present or reversionary, and as the court can arrive at no tenable conclusion other than that all that Mr Barnes has in fact suffered is the loss of an opportunity, prior to the trespass, of negotiating the amount of compensation that he would have been entitled to over and above that of half the agricultural land value of the area of the easement over his land… Had Mr Barnes or someone on his behalf had an opportunity to discuss the development potential of the land prior to the trespass then I reaffirm the court’s view that, if the matter had been gone into in any depth by the Water Authority, they would not have wanted to reflect in the compensation for which they were liable statutorily any very substantial sum for loss of development rights: it would have been very difficult for it to be successfully argued that clipping less than 1% off an extreme corner of the land would have in any way prejudiced the development value of the land…
I am sure that the Defendants would have successfully opposed before the Lands Tribunal any claim to enhanced compensation over and above one half of the agricultural land value of the easement but I am also sure that |page:97| they would have been prepared to avoid the necessity of such proceedings. All that they would have been concerned with would have been a run of their pipeline over 20 or so yards of the Claimant’s land and a total length of main of 28 kilometres.
I reiterate that if the Defendants had indeed investigated the Claimant’s pre-trespass claim for compensation enhanced by some damage to the development value of his land they would have offered him nothing over and above the usual amount of compensation but I think it likely that as a commercial enterprise, with urgent main laying work to be done, they would have wished to have avoided all the extra work that such an in-depth confrontation of the Claimant’s claim would have necessitated and that they would have made an offer to him over and above that which they made on a pari passu basis to the other part-owners of 06…
I accordingly find that Mr Barnes falls to be compensated for the loss of that opportunity as being a sum equal to something less than he may have achieved had he been a bit of passing nuisance to the Defendants’ quest to get on with the Bamford to Buxton main in a commercial way. I value that lost opportunity in the sum of £500 to which must be added the £110 that he would have received as representing 50% of the value of the agricultural land.
(Judge’s emphasis.)
[15] Turning to the sum claimed for “restitutionary” damages, the judge said:
It has to be accepted that the Defendants, by reason of their trespass which has for about the last 10 years resulted in water flowing along the Claimant’s 20 yards of this 28 kilometre long main, have gained some sort of financial advantage that they should have paid for years ago at the compensation stage, but I can see no sensible way of compensating Mr Barnes by that route when it is abundantly clear that Mr Barnes, had he been sensibly advised should have, by July 1995 at the latest, have come to a sensible compromise with the defendants, meaning that the trespass would be terminated within some three years of it having commenced and which had caused him absolutely no convenience (sic) or loss whatsoever. In order however to reflect the fact that the defendants were liable, as trespassers, to pass water through the Claimant’s land for 20 yards of the route from Bamford to Buxton, the Claimant is entitled to damages for some barely appreciable percentage of the Defendant’s profits from the commencement of the trespass for a period of three years to the date upon which this matter should have been compromised. The Defendants must pay the sum of £520 per annum for three years making a sum of £1,560 awardable and that the court so awards.
(Judge’s emphasis.)
Grounds of appeal
[16] The grounds of appeal relate, first, to the sum of £500 awarded for the loss of Mr Barnes’ opportunity to negotiate a higher sum than that which the Lands Tribunal would have awarded had notice been served upon him and had no agreement reached upon the compensation payable, and, second, to the award of £1,560 “restitutionary” damages.
[17] So far as the “loss of opportunity” award is concerned, it is clear (and, indeed, it is not in dispute) that, despite the award being so described in the latter part of the judgment, it was in fact one made by way of damages to compensate Mr Barnes for the invasion of his rights, on the basis that it was the price that, prior to the laying of the main, he could reasonably have required or obtained for the rights gained by Severn Trent. Upon that basis, Severn Trent contends that, the test being objective, the only sum that could reasonably have been demanded was the amount that the Lands Tribunal would have awarded, namely the £110 already awarded by the judge.
[18] As to the award of £1,560, it is submitted that the judge erred in principle in making an additional “restitutionary” award at all, upon a basis that was rightly claimed only in the alternative to his compensatory claim. It is also submitted that such an award was logically inconsistent with the basis of calculation of loss earlier adopted by the judge. Having rightly found that the loss on a “compensatory” basis was that sum that the parties (or reasonable parties) would have negotiated on the basis of a notice notionally given prior to trespass, which ex hypothesi related to the installation and future use of the main by Severn Trent, it was logically wrong (and effectively gives rise to double-counting) for the judge to make an additional “restitutionary” award based upon the assumption of the parties reaching a notional compromise agreement three years after the commencement of the trespass. It is also submitted that, in any event, the judge had had no evidence or other substantial basis for calculating the damages at a rate of £10 per week/£520 pa.
[19] In resisting the appeal, Mr Nicholas Yell, who appears for Mr Barnes, has not sought to challenge the judge’s findings that there was no loss of a chance in respect of any development value of the land, nor any loss of agricultural use. He is thus obliged to accept that, on a purely compensatory basis (that is to say, compensation for loss actually suffered), Mr Barnes has failed to establish any claim above the agreed figure of £110. None the less, he asserts that the judge had jurisdiction to award damages: (a) as if in lieu of an injunction under Lord Cairns’ Act, even though no claim for an injunction had been made; and (b) as a species of “restitutionary” damages long employed in the field of proprietary torts, and, more recently, in the field of contract, in a situation where the benefit to the defendant through his wrongful act has far outstripped any loss that the claimant has suffered. He submits that on either, or a combination, of those two approaches, the judge had been entitled to give both: (i) damages based upon, or related to, the price that might reasonably have been demanded by the plaintiff as a quid pro quo for licensing or permitting the acts complained of; and (ii) a sum calculated as the capitalised value of three years’ continuing wrongful use made by the defendant of the claimant’s property. He invites the court not to be overly analytical in relation to the steps by which the judge had reached what Mr Yell submits what was, on any view, a reasonable and moderate award.
[20] Whereas that invitation has attractions for reasons of pragmatism and proportionality, it would not be right to do other than consider carefully the steps in the judge’s reasoning in the light of the wider implications for Severn Trent and other authorities.
Discussion
[21] By way of preliminary, it should be noted that, on this appeal, Severn Trent does not take a point argued before the judge below that it had been necessary for Mr Barnes to have claimed an injunction in the proceedings in order for the court to exercise its jurisdiction on the basis originally provided for in Lord Cairns’ Act, and since preserved despite its repeal. He limits his appeal to the grounds already set out in [16] to [18] above.
[22] As observed in McGregor on Damages (17th ed), at paras 12-002 to 12-006, use of the term “restitutionary” damages as an appropriate extension of the basic rule that damages are compensation for loss actually suffered by the claimant has enjoyed a mixed judicial reception. Whereas in Attorney-General v Blake [1998] Ch 439, (breach of a contractual obligation of confidence) Lord Woolf MR, giving the judgment of the court, was content, at pp456B-459B, to adopt that term in respect of cases where the benefit to the wrongdoer far exceeds the loss (if any) to the person wronged, Lord Nicholls, in the House of Lords, preferred to avoid it as an “unhappy” expression (see [2001] 1 AC 268, at p284H), while at the same time recognising, at p285B-C, that:
Even when awarding damages, the law does not adhere slavishly to the concept of compensation for financially measurable loss. When the circumstances require, damages are measured by reference to the benefit obtained by the wrongdoer. This applies to interference with property rights. Recently, the like approach has been adopted to breach of contract.
[23] Within the law of tort and interference with the use of land, this method of measuring damages has been accommodated within the basic compensatory rule upon the basis of the “user” principle articulated by Nicholls LJ in Stoke-on-Trent City Council v W&J Wass Ltd (No 1) [1988] 1 WLR 1406, at p1416a-d:
It is an established principle concerning the assessment of damages that a person who has wrongfully used another’s property without causing the latter any pecuniary loss may still be liable to that other for more than nominal damages. In general, he is liable to pay, as damages, a reasonable sum for the wrongful use he has made of the other’s property. The law has reached this conclusion by giving to the concept of loss or damage in such a case a wider meaning than merely financial loss calculated by comparing the property owner’s financial position after the wrongdoing with what it would have been had the wrongdoing never occurred. Furthermore, in such a case it is no answer for the |page:98| wrongdoer to show that the property owner would probably not have used the property himself had the wrongdoer not done so. In The Mediana [1900] AC 113, 117, Earl of Halsbury LC made the famous observation that a defendant who had deprived the plaintiff of one of the chairs in his room for 12 months could not diminish the damages by showing that the plaintiff did not usually sit upon that chair or that there were plenty of other chairs in the room.
[24] The principle has largely been developed in relation to trespass to land, beginning with the 19th century cases of unauthorised mining (the wayleave cases): see, for instance, Martin v Porter (1839) 5 M&W 351 and Jegon v Vivian (1871) LR 6 Ch App 742; see also Whitwham v Westminster Brymbo Coal Co [1896] 2 Ch 538 (trespass by tipping of refuse).
[25] In Blake, in reviewing the position in relation to trespass to land, Lord Nicholls said, at p278F-G:
A trespasser who enters another’s land may cause the landowner no financial loss. In such a case damages are measured by the benefit received by the trespasser, namely, by his use of the land. The same principle is applied where the wrong consists of the use of another’s land for depositing waste, or by using a path across the land or using passages in an underground mine. In this type of case the damages recoverable will be, in short, the price a reasonable person would pay for the right of user…
[26] That principle has been applied in relation to wrongful interference involving easements. In Bracewell v Appelby [1975] Ch 408*, the defendant had wrongly used and asserted a right of way over a private road to a house that he had built. The court (Graham J) refused an injunction on the grounds of the plaintiff’s delay in commencing proceedings, and, following the decision of Brightman J in Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798† (a restrictive covenant case — see further below), held the defendant, at p419D:
liable to pay an amount of damages which in so far as it can be estimated is equivalent to a proper and fair price which would be payable for the acquisition of the right of way in question.
—————————————————————————————————-
* Editor’s note: Also reported at [1976] 1 EGLR 119
† Editor’s note: Also reported at [(1973) 229 EG 617
—————————————————————————————————-
Graham J observed, at p420A:
The circumstances here are very different from those in the Wrotham Park case and I think that the proper approach is to endeavour to arrive at a fair figure which, on the assumption made, the parties would have arrived at as one which the plaintiffs would accept as compensating them for loss of amenity and increased user, and which at the same time, whilst making the blue land a viable building plot, would not be so high as to deter the defendant from building at all.
[27] In that case, and in the subsequent case of Carr-Saunders v Dick McNeil Associates Ltd [1986] 1 WLR 922‡ (interference with the plaintiff’s right to light), the court made it clear that, in deciding upon an appropriate award in relation to the notional “reasonable sum” or “fair figure” for the defendant to pay, regard was to be had to the bargaining position of the parties in order to arrive at a price that would have been likely to have been negotiated as the reasonable price of a licence for the action taken by the defendant that constituted the invasion of the claimant’s rights.
—————————————————————————————————-
‡ Editor’s note: Also reported at [1986] 2 EGLR 181
—————————————————————————————————-
[28] The relevance of that bargaining position is, of course, because, in most cases, without the approval of the claimant, the defendant is in no position to proceed: see the position as explained by Millett J in Carr-Saunders, at p895. That was a case involving obstruction of a right enjoyed by virtue of a prescriptive easement. However, Millett J, by reference to Bracewell and Wrotham Park, made it clear that, as between claims in contract or in tort, there is no reason for any difference of approach when awarding damages in respect of wrongful interference by a defendant with the use and enjoyment of the claimant’s land.
[29] In Wrotham Park, 55 houses had been built by the defendant, in knowing breach of a restrictive covenant, in the face of objections by the claimant. Brightman J held that, on its natural construction, the covenant was a prohibition against development without obtaining prior approval from the claimant as estate owner. The claimant had sought an injunction to restrain building on the land and a mandatory injunction for the demolition of buildings already erected in breach of covenant, but had not applied for a interlocutory injunction, and, by the time of the trial, the houses were complete. Acting under the jurisdiction that originated in Lord Cairns’ Act, Brightman J made an award of damages in the sum that the plaintiff might reasonably have demanded as a quid pro quo for relaxing the covenant had the defendant first applied to them for relaxation. In the circumstances of the case, he found that, faced with a request from the developer, which the plaintiff had felt reluctantly obliged to grant, a sum would have been negotiated on the basis of the profit that the developer expected to make from its operations, and would then reasonably have required a certain percentage of that anticipated profit as a price for the relaxation of the covenant. Upon that basis, he made an award in a sum equal to 5% of the defendant’s anticipated profit as being fair in all the circumstances.
[30] That decision was approved and applied in Jaggard v Sawyer [1995] 1 WLR 269*. In the latter case, Sir Thomas Bingham MR stated, at p281G:
I cannot, however, accept that Brightman J’s assessment of damages in the Wrotham Park case was based on other than compensatory principles. The defendants had committed a breach of covenant, the effects of which continued. The judge was not willing to order the defendants to undo the continuing effects of that breach. He had therefore to assess the damages necessary to compensate the plaintiffs for this continuing invasion of their right. He paid attention to the profits earned by the defendants, as it seemed to me, not in order to strip the defendants of their unjust gains, but because of the obvious relationship between the profits earned by the defendants and the sum which the defendants could reasonably have been willing to pay to secure a release from the covenant. I am reassured to find that this is the view taken of the Wrotham Park case by Sir Robert Megarry V-C in Tito v Waddell (No 2) [1977] Ch 106, 335…
—————————————————————————————————-
* Editor’s note: Also reported at [1995] 1 EGLR 146
—————————————————————————————————-
[31] The decisions referred to in [26] to [30] above were all concerned with awards under the Lord Cairns’ Act jurisdiction. In reviewing the relevant authorities at length in Jaggard, Millett LJ made it clear that the power to award damages on the basis of the jurisdiction originating under Lord Cairns’ Act fell to be determined as at the date of issue of the writ and that if the court would then have had jurisdiction to grant an injunction, it had jurisdiction to award damages instead. He made it clear that, to found the jurisdiction, the question was whether, at the date of the writ, the court could have granted an injunction, not whether it would have done, and that it was not necessary for the plaintiff to include a claim for damages in the writ. He continued, at p285E:
By a parity of reasoning it is not in my opinion necessary for a plaintiff to include a claim for an injunction in order to found a claim for damages under the Act. It would be absurd to require him to include a claim for an injunction if he is sufficiently realistic to recognise that in the circumstances he is unlikely to obtain one and intends from the first to ask the court for damages instead. But he ought to make it clear whether he is claiming damages for past injury at common law or under the Act in substitution for an injunction.
(Judge’s emphasis.)
Millett LJ went on to state, at p291D:
It is plain from his judgment in the Wrotham Park case that Brightman J’s approach was compensatory, not restitutionary. He sought to measure the damages by a reference to what the plaintiff had lost, not by reference to what the defendant had gained. He did not award the plaintiff the profit which the defendant had made by the breach, but the amount which he judged the plaintiff might have obtained as the price of giving its consent. The amount of the profit which the defendant expected to make was a relevant factor in that assessment, but that was all. |page:99|
His judgment concluded, at p292C:
In the present case the plaintiff brought proceedings at a time when her rights were still capable of being protected by injunction. She has accordingly been able to invoke the court’s jurisdiction to award in substitution for an injunction damages which take account of the future as well as the past. In my view there is no reason why compensatory damages for future trespasses and continuing breaches of covenant should not reflect the value of the rights which she has lost, or why such damages should not be measured by the amount which she could reasonably have expected to receive for their release.
[32] In Blake, Lord Nicholls stated, at p281E:
in the same way as damages at common law for violations of a property right may be measured by reference to the benefits wrongfully obtained by a defendant, so under Lord Cairns’ Act damages may include damages measured by reference to the benefits likely to be obtained in future by the defendant. This approach has been adopted on many occasions. Recent examples are Bracewell v Appelby [1975] Ch 408 and Jaggard v Sawyer [1995] 1 WLR 269, both cases concerned with access to a newly-built house over another’s land.
The measure of damages awarded in this type of case is often analysed as damages for loss of a bargaining opportunity or, which comes to the same, the price payable for the compulsory acquisition of a right. This analysis is correct.
[33] In this case, Mr Barnes did not claim damages in lieu of an injunction under the Lord Cairns’ Act jurisdiction, but simply damages for past injury at common law on the basis set out in the pleading; that is, loss of (development) value, or, alternatively, damages that, although described as “restitutionary”, were expressly based upon the “fair price” principle assessed by reference to Thames Water’s tariff charges for water passed through the main.
(a) The £110 element
[34] It is not in dispute between the parties that £110 was rightly awarded as the statutory compensation payable had notice been served. It clearly represented the minimum value of the right wrongfully obtained by Severn Trent by proceeding to lay the main without notice having been given.
(b) The £500 element
[35] In the circumstances of this case, as it seems to me, the judge had plainly been correct not to limit the damages awarded to the sum of £110. No notice having been given before the works had been carried out, the continuing trespass could not be reversed, and the judge had been right to approach matters upon the basis succinctly described by Lord Nicholls as “loss of a bargaining opportunity or, which comes to the same, the price payable for the compulsory acquisition of a right”. In this case, Severn Water had, by its actions, effectively compulsorily acquired the right to run its water main under Mr Barnes’ land without complying with the statutory procedures that would have limited the compensation to £110. Accordingly, the judge had been right to go through the exercise that he had in treating as the fair price the likely reasonable outcome of any negotiations that would have taken place had notice been served prior to the works being done. In this respect, however, he had been equally right to have regard to the fact that had notice been served, upon its expiry Mr Barnes would have had no power to prevent or hold up the doing of the works until compensation had been agreed or assessed. On that basis, Mr Barnes would have had some (but very limited) nuisance value to Severn Trent, which the judge had been entitled to quantify in the manner he had in the passage from his judgment quoted in [14] above. I thus would not interfere with that aspect of his award.
(c) The additional element of £1,560
[36] It appears to me, however, that the judge had been in error when he went on to make the additional award of £1,560. It seems, from the passages of his judgment highlighted in italics in [14] and [15] above, that the exercise that the judge had sought to perform by awarding the additional sum of £1,560 was to compensate for the financial advantage to Severn Trent of using the main without having paid an appropriate sum by way of compensation during a period of three years up to the time (July 1995) when the judge considered that the matter would have been settled had Mr Barnes been properly advised. This reasoning is difficult to follow. The judge had held that £610 was the total sum that represented Mr Barnes’ lost opportunity to negotiate compensation prior to the trespass. Because of Severn Trent’s power to serve notice upon Mr Barnes had it been aware of his interest, the financial advantage to Severn Trent in proceeding without payment was no more than the mirror image of the financial disadvantage to Mr Barnes of being kept out of money properly payable to him as from the date upon which it fell due. In that respect, the appropriate award was an award of interest on £610 (which was indeed made).
[37] By doing what he did, the judge, having rightly applied the approach to compensation taken from the authorities and upon which the parties based their argument, reached his figure of £610 as the fair price that would or could have been negotiated prior to trespass; however, he then “topped up” his award with three years’ notional rent charge of £520 pa, which he had already found that Mr Barnes would not have obtained either from the Lands Tribunal or in negotiation with Severn Trent.
[38] It is worth observing that we were informed that, in doing the further calculation that he did, the judge had been effecting an exercise of his own, which had neither been advanced in the pleadings (see [7] and [8] above), nor argued by the parties. The judge based his reasoning upon the fact that had Mr Barnes been properly advised, he would have agreed the proper compensatory figure of £610 some three years after the main had been laid and the trespass effected. That may well be true, but the figure of £610 earlier found by the judge related to the entire period of the trespass. Mr Barnes and Severn Trent never in fact reached agreement on compensation at any stage, and the original trespass continued up to trial, at which stage the task of the judge had been to assess the appropriate figure for the entire period, calculated on the basis of a fair price notionally negotiated prior to trespass. Such calculation yielded an award of £610.
[39] It may be that the judge had been concerned that £610 was a low figure by way of damages. I do not think that he needed to have felt so concerned. The reason why application of the “fair price” principle was apt to produce substantial sums by way of compensation in the line of authority referred to above, but only an insubstantial sum in this case, is twofold. First, because in the cases cited the court was concerned to calculate a theoretical price or licence fee in a situation in which the parties, if negotiating prior to trespass, would have been constrained only by market forces, the defendant being unable to proceed at all in the absence of the claimant owner’s permission. The position of Severn Trent, on the other hand, was that of a statutory undertaker entitled to enter onto the land and to do the work subject only to service of notice and (later) payment of compensation as assessed by the Lands Tribunal in the absence of agreement. This it would plainly have done, had it been aware of Mr Barnes’ interest. The parties accepted that such assessment would have yielded no more than £110. Second, whether the damages were assessed upon the basis of the loss or detriment to Mr Barnes, or upon the basis of the “benefits wrongly obtained” by Severn Trent (cf Lord Nicholls in Blake in [32] above), they were insignificant.
[40] So far as Mr Barnes was concerned, he had, by reason of Severn Trent’s actions, lost no opportunity to develop or exploit his land, which was, and remained at all material times, let to Mr Gartside under a grazing licence that was in no way affected. Nor, if the parties had been aware of the position, with the result that notice had been served by Severn Trent, did Mr Barnes have any power to prevent the works from being done. The measure of Mr Barnes’ loss was, in reality, not the loss of any valuable right to charge Severn Trent an annual charge in respect of the installation and use of the main, but simply loss of the right or opportunity to seek, by negotiation, to obtain a higher sum than that which could be expected from the Lands Tribunal in the absence of agreement. That higher sum had been assessed by the judge at £500.
[41] Finally, it is to be noted that the judge appears to have taken the view that some additional award was necessary on the basis that “to reflect the fact that the defendants were liable, as trespassers… the claimant is entitled to damages for some barely appreciable percentage of the defendant’s profits”: see the second italicised passage from the |page:100| judgment, quoted in [15] above. In this respect, I consider that he had misunderstood the authorities. It is, of course, the position that in cases of trespass of this kind there is no right to a share in, or account of, profits in any conventional sense. The only relevance of the defendant’s profits is that they are likely to be a helpful reference point for the court when seeking to fix upon a fair price for a notional licence. However, although it will generally be appropriate for the judge in such cases to “pay attention” to the profits made by the defendants as a result of their trespass (see per Sir Thomas Bingham MR, as quoted in [30] above), he is not obliged to do so, and there may well be cases where such an approach would be inappropriate; for instance, where the profits made are negligible or are impossible to assess.
[42] That was of course the position in this case. There was no practical or sensible way of assessing the profits accruing to Severn Trent from its use of no more than 20m of a water main that ran for 28km. The claim of Mr Barnes, as advanced by his expert at trial (and very considerably reduced from the amount claimed in the pleading), was almost £200,000, the sum calculated as representing 1% of Severn Trent’s tariff charges for the water passed through the entire main between 1992 and 2001. The defendant’s final argument was that any claim based upon the benefit to Severn Trent derived from the 20m section of main should be calculated on the basis of Severn Trent’s profits per metre of water main, which gave a figure for damages of less than £50. In requiring Severn Trent to pay the sum of £520 pa over a three-year period, the judge plainly (and rightly in my view) regarded the approach of Severn Trent as more realistic. However, the figure chosen by the judge appears to have been plucked from the air, with no explanation as to the manner in which it had been calculated. In my view, there was no proper basis for the judge’s “top-up” award of £1,560, and no reason, either in justice or in logic, for him to have made an award based upon the “user” principle beyond that already made under the second element of his award.
Conclusion
[43] I would allow the appeal to the extent of reducing the sum awarded by £1,560 and the amount of the interest awarded thereon.
[44] I agree.
[45] I also agree.
Appeal allowed in part.
