Rights of light: The risk of an injunction is a real risk to developers
It is sometimes thought that the risk of the courts awarding an injunction for breach of property owners’ rights is more theoretical than real and such breaches will more readily be remedied by an award of damages.
However, in the recent case of Beaumont Business Centres Limited v. Florala Properties Limited the judge (Peter Knox QC) granted an injunction in favour of the claimant Beaumont whereby the court ordered the defendant Florala to cut back its now completed apart-hotel development in the City of London. This was in accordance with a cutback proposal accepted in evidence which would remove the interference with Beaumont’s rights of light enjoyed by its adjoining building used for letting as serviced offices.
Various issues arose in the case but perhaps the more significant were:
What is the legal position when a property which is not well lit becomes even less well lit, in particular in a busy urban environment such as the City of London? Can a claim in nuisance arise at all and if so to what extent?
The judge in this case usefully summarised the relevant law relating to nuisance so far as it relates to rights of light.
In essence, the owner of a building was in entitled to the uninterrupted access through his windows of a quantity of light, the measure of which is what is required for the ordinary purposes of business carried on in that building according to the ordinary notions of mankind.
The concept of the ordinary notions of mankind is not static and is a question of fact in each case.
It is also clear the judge said that the availability of artificial light does not affect the amount of light required to satisfy such notions and the enquiry will not be concerned with the amount of light taken, but with the amount of light left.
Therefore, the judge rejected submissions to the effect that a de minimis loss of light could not amount to a nuisance or that a nuisance could not arise if a room, which is already badly lit, becomes darker by virtue of a neighbouring development.
Relying on the case of Colls v. Home and Colonial Stores Limited (1904), the judge said:
‘I accordingly reject the suggestion that in the case of a building that is not well lit or even badly lit, a further reduction in light can give rise to no cause of action even where there has been nothing unusual in the claimant’s use of the dominant tenement. The question remains, has the reduction in light, from whatever level it may have started, caused a substantial interference with the claimant’s reasonable enjoyment of the property?’
More particularly, the judge concluded that to establish its claim to a nuisance Beaumont needed to prove that by virtue of the reduction in light its premises had been made substantially less comfortable and convenient than before. In practice, this meant it must show that by virtue of the reduction it was likely to suffer a loss of rental income over the balance of its 26 year term in an amount which is more than trifling or de minimis.
In this case the judge found on the evidence that Florala had caused a nuisance and Beaumont had suffered a substantial reduction in light and that such reduction would lead to a loss of income to Beaumont in respect of the building’s serviced office use.
If on the evidence Beaumont had established a nuisance, what compensatory damages would it be entitled to?
After analysing the extensive valuation evidence before the court, the judge concluded that the annual loss of income arising from the reduction in light was £20,000. It was common ground that this loss of income would be capitalised by applying a multiplier of 12 and therefore the judge calculated Beaumont’s total compensatory damages as £240,000.
What was the proper test for deciding whether to award an injunction or damages in lieu of such an injunction?
In answering this question the judge referred to the case of Coventry and others v. Lawrence and another (2014) (known as the Fen Tigers case) where the Supreme Court, albeit obiter, discussed what should be the test for granting an injunction.
The Supreme Court disapproved the proposition (arising from the case of Shelfer v. City of London Electric Lighting Co (1895)) that as a rule a court should not allow a wrongdoer to purchase his neighbour’s rights leaving him with a nuisance unless four requirements (known as the Shelfer criteria) are met. These are:
- the injury is small;
- it is capable of being estimated in money;
- it can be adequately compensated by a small payment; and
- the grant of an injunction would be oppressive.
Instead these requirements should not be a fetter on the court’s discretion. Although if they were all satisfied it would normally be right to refuse an injunction, but the fact that those tests are not all satisfied does not mean that an injunction should be granted.
In addition, the judge relied on the statement of Lord Neuberger in the Fen Tigers case where he stated that the prima facie position is that an injunction should be granted so the legal burden is on the defendant to show why it should not be.
In making that statement Lord Neuberger approved the observations of Lord McNaughton in Colls where he said:
‘In some cases, of course, an injunction is necessary – if, for instance, the injury cannot be compensated by money – if the defendant has acted in a high handed manner – if he has endeavoured to steal a march upon the plaintiff or to evade the jurisdiction of the court. In all these cases an injunction is necessary, in order to do justice to the plaintiff and as a warning to others. But if there is really a question as to whether the obstruction is legal or not, and if the defendant has acted fairly and not in on unneighbourly spirit, I am disposed to think that the court ought to incline to damages rather than to an injunction’.
On the facts in this case the judge held that it was appropriate to grant an injunction ordering Florala to cut back its development in accordance with the cutback plan.
The judge found that Florala had acted in a high-handed or at least unfair and unneighbourly manner as it went ahead with the development knowing the risk it was taking and ignoring the offer to develop with a cut back. Further, the judge found applying the Shelfer criteria that the injury that Beaumont will sustain is not small nor is it easily quantifiable.
Further Florala did not contend that it would be oppressive to order a cut back nor did it adduce evidence of the amount of expenditure it would be put to if it were to carry it out. The judge commented that:
‘No doubt, if it has to cut back, it will lose some of the profit from letting out the hotel which it has gained by interfering with Beaumont’s rights of light but there is nothing oppressive in that. But there was no evidence that the costs of rebuilding in accordance with the cutback will be so great as to make the order oppressive’.
If an injunction was not the appropriate remedy how would damages be assessed in lieu (being damages as an alternative and not in addition to compensatory damages as mentioned above) under section 50 of the Senior Courts Act 1981?
The judge referred to the possibility of damages in lieu of an injunction being assessed either as diminution in value damages or negotiating damages.
Counsel for Florala submitted that diminution in value damages was the correct measure in nuisance cases relying on the obiter statements of Lord Neuberger in the Fen Tigers case.
However the judge rejected those submissions on the basis of the judgement in Morris-Garner v. One Step (Support) Limited (2019). Here, the Supreme Court made it clear (albeit in relation to trespass rather than nuisance) that the correct measure of damages was negotiating damages so that where a claimant has lost a right because the court has declined to enforce it by injunction it can, where appropriate, compensate for that loss by awarding the sum which could reasonably have been exacted as a condition of giving it up.
In assessing such negotiating damages the judge found in this case that the likely uplift in profit which would accrue to Florala by building its hotel without any cutback was at least £1.1 million.
The judge also held that Florala and Beaumont, acting reasonably, would have agreed that Beaumont should receive one third of that profit for giving up its rights to light and therefore the judge awarded the sum of £350,000 by way of negotiating damages.
(The calculation of negotiating damages was relevant, notwithstanding that the judge was willing to grant an injunction, as Beaumont had not joined Florala’s tenant to the proceedings. The judge found that procedurally Beaumont would need to do so before the injunction could be effective. If Beaumont were unable to join the tenant then Beaumont are to receive the above sum by way of negotiating damages).
This case illustrates the risks to a developer in proceeding with its development where an adjoining owner maintains that its rights of light will be infringed and takes proceedings during construction to protect those rights. The case also usefully summarises the law of nuisance and how compensatory and negotiating damages will be assessed.
The judgement is the subject of an application by Florala for permission to appeal to the Court of Appeal and therefore this may not be the end of this particular litigation.