Hope for developers: injunctions less likely, really?

Developers will recall the horror story of the Heaney case:  the Developer was ordered to demolish their then recently built 6th & 7th floors of its office block, Toronto Square, in Leeds because it infringed neighbouring Rights to Light notwithstanding that:

• the initial build and then the demolition costs were in the £ millions as against the possible damage to the Right to Light owner assessed at £225,000;
• the Developer had let out the floors in question on commercial leases; and
• perhaps starkly, the Rights to Light owner had not taken action to stop the development and indeed it was the developer who eventually issued proceedings to bring matters to a head.

What has happened since that case?
Since then, in the case of Coventry v Lawrence [2014] All ER (D) 245 (Feb), and in a departure from previous authority, the Supreme Court has stressed that courts should be more flexible when considering whether to award damages in nuisance (including Rights to Light) claims and that courts should not just mechanically apply ‘out of date’ tests to award an injunction against building if it is not an appropriate remedy.

What did the Supreme Court say in the Coventry case?
The Supreme Court acknowledged that first and foremost, an injunction should still be granted where a nuisance is established and that the burden of proof is still on the Developer to show why it should not.

However, it criticised the strict application of the test established in Shelfer v City of London Electric Lighting Co [1895], applied in the Heaney case, which made an injunction the default position in nuisance claims unless the four criteria below could be met:

• the injury to the owner’s legal right is small;
• the injury is capable of being estimated in money;
• the injury can be adequately compensated by a small money payment; and
• it would be oppressive to the developer to grant an injunction.

Although there were differences in the views of the Supreme Court justices in the Coventry case, in the leading judgment it was advocated that the four criteria must not be applied so as to “be a fetter on the exercise of the court’s discretion”.

It was observed that the court should have wide discretion to consider all the circumstances of the case when deciding whether to award an injunction or damages and in particular, the conduct of the parties and the consequences of granting an injunction should be considered.

Examples of relevant factors that could be considered when refusing an injunction and awarding damages in lieu include:

• the existence of planning permission which has been influenced by the public benefit of the proposed development; or
• the Developer having to close down his business and the fact that a number of his employees might lose their livelihoods if an injunction were granted.

What does this mean for Developers?
The ruling by the Supreme Court is expected to bring about some changes in how future nuisance claims, including infringements of Rights to Light, are decided and when damages should be awarded instead of an injunction.

Perhaps more importantly for Developers wanting to steer clear of litigation, this decision will play a major role in negotiating more advantageous terms to settle Rights to Light claims.

Is a change in the law likely?
Given the uncertainty created by previous Rights to Light decisions, the Law Commission has recently published a report setting out its recommendations for reform of Rights to Light disputes.

One key recommendation was for a statutory test which clarifies when courts may order damages to be paid in lieu of an injunction.

This test would take into account the factors mentioned in Coventry v Lawrence, as well as other relevant circumstances, including:

• the Right to Light owner’s interest in their land;
• the loss of amenity attributable to the infringement;
• whether damages would be adequate compensation;
• the conduct of both parties;
• whether the Rights to Light owner delayed unreasonably in claiming an injunction;
• the impact of an injunction on the developer;
• and the public interest.

How can I find out more?
For further details on how these latest court rulings could affect your development proposals, please get in touch.