Land owned by local authorities — Development of land as housing estate — Planning permission with covenant as to method of development — Breach of covenant — Whether local authority is entitled to substantial damages for breach — Nominal damages awarded
Two councils owned two parcels of land known as The Ridgeway, Fetcham, Leatherhead, Surrey, a total area of 12.33 acres. Acting together they offered the entire site for development as a housing estate. Bredero’s offer was accepted at a purchase price of £1.52m. The transfers contained covenants relating to the way in which the development should proceed. Planning permission was granted for 72 detached bungalows and houses in six different designs. But later, fresh planning permission was granted raising the total number of dwellings to 77.
Bredero accepted that it was in breach of covenant. The councils sought damages equal to the payment that might have been extracted from Bredero in return for agreed modifications of its covenants in such a way as to permit the development which was in fact carried out. The councils did not allege that they had suffered any other loss. Bredero denied that the councils were entitled to recover anything more than nominal damages. The court was asked to decide whether the councils were entitled to nominal damages only or to substantial damages equivalent to the sum that they should have obtained if Bredero had sought a modification of its covenants entitling it to vary its development.
Held The councils were entitled to no more than nominal damages.
1. The general rule of common law was that where a party sustained a loss by reason of a breach of contract he was, so far as money could do it, to be placed in the same situation as if the contract had been performed: see Robinson v Harman (1848) 1 Exch 850.
2. In Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798, it was held that the court had power to award damages in substitution for an injunction which it could have granted against the same defendant under the jurisdiction conferred by Lord Cairns’ Act (now section 50 of the Supreme Court Act 1981). The court concluded that a just substitute for a mandatory injunction would be such a sum of money as might reasonably have been demanded by the plaintiffs as a quid pro quo for relaxing the covenant.
3. The Wrotham Park case was an award of damages in lieu of an injunction which could and would have been granted but for social and economic reasons. There was nothing in that case taken with Johnson v Agnew (1979) 251 EG 1167, which prescribed a new rule for the assessment of damages at common law. Wrotham Park was a decision on the award of damages under Lord Cairns’ Act and nothing else and had not been transmuted into a decision on common law damages. In the light of those cases, on the claim for damages at common law, substantial as distinct from nominal damages were not recoverable by the councils: see also Tito v Waddell (No 2) [1977] Ch 106 and Stoke-on-Trent City Council v W & J Wass Ltd [1988] 1 WLR 1406.
4. Furthermore, there was no jurisdiction to award damages in equity. All the houses had been sold and Bredero could not comply with a mandatory injunction requiring the estate to be redeveloped in accordance with the original planning permission, even if the court would otherwise have been prepared to grant an injunction. Where specific performance had become impossible because the land had been sold to a third party, damages in lieu of specific performance were not available in equity either: see Hipgrave v Case (1885) 28 ChD 356. Correspondingly, where there was no case for an injunction a court of equity could not award damages in substitution for an injunction: see Proctor v Bayley (1889) 42 ChD 390.
Sir William Goodhart QC and Bernard Weatherill (instructed by Howell-Jones & Partners, of Kingston) appeared for the plaintiffs; and Colin Rimer QC and Nicholas Peacock (instructed by Turner Kenneth Brown) appeared for the defendant.