Rights of light: one step forward, two steps back?

rights of light
On Friday, 13 March 2020, the High Court handed down judgment in Beaumont Business Centres Limited -v- Florala Properties Limited.

In a judgment that runs to 74 pages and over 350 numbered paragraphs, Mr Peter Knox QC (sitting as a deputy High Court judge) granted a declaration that the claimant is entitled to an injunction obliging its neighbour to cut back a building in the City of London that has already been built and tenanted. The enforcement of the injunction will not however proceed until the tenant is joined to the proceedings and has been heard.

 

The facts
As always, the case is fact sensitive and the facts in this case go back to 2012.

Florala owns premises on the corner of Moorgate and London Wall in the City of London. Beaumont owns the adjoining premises immediately to the south.

Beaumont refurbished its property in 2011/2012 and added a new sixth storey. Florala completed the purchase of its property in January 2013, by which time it had already expressed concern at the loss of light to its property resulting from the Beaumont development. Meetings were held to discuss a possible reciprocal agreement dealing with the effect of Beaumont’s now-completed development and Florala’s intended development of its newly acquired property.

In 2015, one Beaumont company sold its freehold to an overseas investor for £27 million, with a leaseback granted to another Beaumont company. It was agreed that rights of light claims up to 11.25 metres would remain with the selling company, with claims for development above that height belonging to the investor.

Meetings continued but, crucially, no agreement was entered into. Florala was prepared in 2016 to settle any rights of light claim for £155,000, but changed its stance once it became aware of the rights of light agreement between Beaumont and its investor purchaser. Florala now argued that the rights of light claim vested in a company that no longer held any interest in the property; this would prevent the availability of an injunction and demonstrated that Beaumont was only concerned with obtaining a ransom payment rather than preserving light to its building.

Florala subsequently obtained planning permission to develop its property into an aparthotel. Between July 2017 and June 2018, Florala built an extension into a lightwell that it owns, and also increased the height of its building overlooking the lightwell. Beaumont objected once works began and subsequently commenced proceedings for an injunction, but it did not apply for an interim injunction to halt the works.

Florala sought summary judgment in 2018, on the grounds that Beaumont had no reasonable prospect of securing an injunction, but HHJ Hodge QC dismissed that application. Beaumont’s proceedings then reached the High Court in October 2019 and ran for six days.

 

Judgment
The judge concluded that Beaumont satisfied the basic requirements to bring claim, including the fundamental requirement that a right had been acquired by prescription through 20 years’ enjoyment of light to the relevant window apertures on Beaumont’s property.Establishing the loss to Beaumont was complicated by several other potentially causative factors, including another development nearby and changes to the office market after the Brexit referendum. However, the judge concluded that the reduction in light resulting from the Florala development had sufficiently suppressed rents and interfered with the reasonable enjoyment of the Beaumont property so as to constitute nuisance.

Despite the difficulties of quantifying Beaumont’s loss and Florala’s profit arising from the nuisance, the judge embarked on an impressive mathematical exercise to reach potential damages figures of £240,000 (on a compensatory basis) and £350,000 (based on what Florala could reasonably have been expected to pay in a hypothetical negotiation). The judge found that he would have awarded the latter, higher figure as damages in lieu if the injunction had been refused.

However, the judge did decide to award Beaumont a declaration that as between itself and Florala, Beaumont was entitled to an injunction to cut back the development rather than damages. The judge justified the injunction because Florala had acted in a ‘high-handed’ and ‘unneighbourly’ manner, that Beaumont’s loss was not small, and that the loss of one or two rooms in Florala’s aparthotel was not oppressive.

But that is not the end of the matter. Because the injunction would also affect the operator of the aparthotel to whom Florala has granted a lease and who was not a party to the proceedings, Beaumont will need to join the operator into the proceedings if it wishes the injunction to bind them too. If Beaumont chooses not do so, or if the operator persuades the court not to extend the injunction to bind them, Beaumont are entitled to the negotiating damages of £350,000.

 

Comment
There are two aspects of the judgment that will cause concern to developers and their professional advisers.

First, the decision to grant an injunction instead of awarding damages in lieu. While the traditional starting point for nuisance claims is an injunction, Shelfer -v- City of London Electric Lighting Co [1895] established a working rule that damages could be awarded in lieu of an injunction where the injury is small and can be adequately compensated by a small monetary payment and where awarding an injunction would be oppressive. 

In more recent times, the courts have seemed more reluctant to award an injunction where the loss can be adequately compensated in money, especially where the premises affected are commercial rather than residential in nature. The landmark case of Coventry -v- Lawrence [2014] rejected the rigid application of the Shelfer test. Led by Lord Neuberger, the Supreme Court decided in that case that the court should have an unfettered discretion to award damages in lieu of an injunction where the facts of the case merited it, although the burden remains on the guilty party to justify why an injunction would not be appropriate.

Despite the judge’s detailed explanation of his reasoning for choosing to grant the injunction and in particular observing that this was a case involving an injunction to protect  property rights and ‘absent binding authority to the contrary’, many of us will feel that this is a case where damages for Beaumont’s relatively modest losses would have been more appropriate than requiring the physical demolition of premises that have been built and leased out. Even more so in circumstances where Beaumont had also infringed Florala’s rights to light.

Second, the judge’s decision to award damages based on a hypothetical negotiation (traditionally called Wrotham Park damages and now rebranded as ‘negotiating damages’) appears to fly in the face of Lord Neuberger’s comments in Coventry -v- Lawrence that compensatory damages should be the norm in nuisance cases and that negotiating damages should only rarely be awarded. The judge preferred instead to follow Lord Reed’s guidance in Morris-Garner -v- One Step (Support) Limited [2019] that where a claimant had lost a right because the court had declined to enforce it by injunction, it can where appropriate, compensate him for the loss by awarding the sum that he could have reasonably demanded as a condition of giving it up. This is even though that case concerned very different subject matter and the Supreme Court ultimately decided that the lower courts had been wrong to award negotiating damages.

Finally, of interest to rights of light practitioners was the attempt to consign the Waldram method and the 50/50 rule to the dustbin of history in place of alternative methodologies, primarily radiance based analyses. Percy Waldram’s 1920’s ‘candle in a room’ has come in for some harsh treatment of late. See for example Jonathan Karas QC’s own theoretical analysis in his book The Law of Rights of Light, as well as from the authors of Gale on Easements. Nevertheless, the judge refused to ignore the Waldram method, finding that it had ‘stood the test of time’ and that its results, at the very least, provide ‘a starting point in the enquiry as to whether there has been an actionable interference’.

An application for permission to appeal seems inevitable. In the meantime, developers will (as always) build at risk in the absence of formal releases.

 

Kevin Lee | Partner
Hill Dickinson

T:    +44 (0)161 817 7259
E:     kevin.lee@hilldickinson.com

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