The High Court has given valuable guidance on how to assess the level of damages awarded instead of an injunction in rights to light cases. It concluded that eight principles could be derived from previous cases:
- an overall principle that the court should attempt to discover what would be a "fair" result of a hypothetical negotiation between the parties;
- the context including the nature and seriousness of the breach must be kept in mind;
- the right to prevent a development (or part) gives the owner of the right a significant bargaining position.;
- the owner of the right with such a bargaining position will normally be expected to receive part of the likely profit from the development (or relevant part);
- if there is no evidence of the likely size of the profit, the court can do its best by awarding a suitable multiple of the damages for loss of amenity;
- if there is evidence of the likely size of the profit the court should normally a sum that takes into account a fair percentage of that profit;
- the size of the award should not in any event be so large that the development (or relevant part) would not have taken place if such a sum has been payable; and
- after arriving at a figure that takes into consideration of all the above and any other relevant factors, the court needs to consider whether "the deal feels right".
The court ordered that the developer pay the owner of the neighbouring office building £50,000, just below 30% of the developer’s profits. The judge took the half way point between the two expert valuations, concluded the parties would have agreed a one-third split, then made a deduction for the relatively modest nature of the infringement and the need not to put the developer off completely.
Reported cases in this field do not appear often so this case is significant. Historically we have advised that 5-15% is the normal percentage of developer’s profits that might be awarded. Here a "modest" infringement sits at just below 30% - what we have previously viewed as the high end of the scale. This may mark an increase in the level of damages awarded.
Developers need to take care because even if they are not prevented from building, damages may have a significant commercial impact on the viability of their scheme. Conversely beneficiaries of a right should not give that right away too cheaply.
Our (continuing) advice - address rights of light early on and as an integral part of any development appraisal.
Further reading: Tamares (Vincent Square) Ltd -v- Fairpoint Properties (Vincent Square) Ltd, [2007] ALL ER (D) 1034 (Assessment of Damages) and [2006] 41 EG 226 (Injunction vs Damages ruling).
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 15/02/2007.
