HKRUK II (CHC) Limited v Heaney (2010)
Recent case-law relating to rights of light has shown that a developer who ignores them does so at his peril. The decision in Regan v Paul Properties Limited (2006) was a particular wake-up call, when the Court of Appeal pointed out that the primary remedy for a rights of light infringement should be an injunction. It was hoped by some that this decision might only have implications where a development affects residential property. However, the recent case of HKRUK has shown that the Court is willing to follow the same principle where commercial property is affected. Here, the developer's decision to proceed with its building without first resolving its neighbour's potential rights of light claim will mean estimated costs of £1-2 million for the works required to adjust the redeveloped building, on top of the costs of the case itself. Further details are set out below.
Facts
This claim was, rather unusually, issued against – rather than by – the party with the benefit of a right to light; the Claimant developer sought declarations that it was free from any liability to the Defendant neighbouring owner. The parties were agreed that the Claimant's redevelopment of its building had interfered with the rights of light enjoyed by the Defendant's building. However, they disagreed as to the appropriate relief for the Defendant by way of remedy. The Defendant requested an injunction to require the Claimant to remove the relevant parts of its redeveloped building which were infringing the light to the Defendant's building, whereas the Claimant submitted that damages (at most) were an appropriate substitute. The parties also disagreed as to how any damages should be calculated.
Decision
The Court confirmed the Defendant's primary entitlement to an injunction in accordance with Regan, despite the fact that the property affected by the development in this case was used for commercial, rather than residential, purposes. However, the judge acknowledged that damages may be substituted for an injunction where all four of the following criteria (as set out in Shelfer v City of London Electric Lighting Company (1895)), are satisfied:
- if the injury to the complainant's legal rights is small;
- if the injury is capable of being estimated in money;
- if the injury can be adequately compensated by a small money payment; and
- if it would be oppressive to the infringing party to grant an injunction.
In assessing the level of injury to the Defendant's legal rights, the judge noted that this was a borderline case. However, he felt that the level of injury could not properly be regarded as "small". The judge was particularly persuaded by the character of the Defendant's building and his commitment to investing in the restoration of the property, together with the extent to which the Claimant's redevelopment had reduced the light to the Defendant's building. Taking these factors together, the judge considered that they constituted "real damage of a kind for which the Defendant should not be expected to content himself with a money payment. In other words, the injury is not small."
The judge noted that his decision on this issue should determine the case, since it meant that the Claimant had failed one of the hurdles set out in Shelfer. However, to assist any review by an appeal Court, he also gave his views on the other Shelfer hurdles and on the question of the appropriate level of damages in this case.
On damages, the judge felt that the Claimant developer would have had in mind the following figures during any hypothetical negotiations:
- the anticipated profit from the overall development was just under £7 million;
- the difference in value between the development with and without the "problem area" was around £1.4 million;
- the Claimant had reduced the price paid for the building by £350,000 in order to take account of the potential light issues; and
- the Claimant had budgeted £200,000 for settling all light issues.
In view of the reduction in the purchase price, the judge felt that the Claimant could be expected to go beyond the budgeted figure for settlement in order to obtain certainty before starting work, commenting that:
"Reasonable people want to know at an early date where they stand, and a reasonable developer does not risk his money on works which he may be ordered to pull down."
Having considered the Claimant's likely approach to negotiations, the judge then considered the fact that the Defendant had been reluctant to issue Court proceedings, indicating a lack of any serious intention to push hard in the negotiations. Accordingly, he felt that any uplift on the figure of £200,000 should be mosssdest. Following this analysis, the judge arrived at a likely settlement figure of £225,000.
Although this meant that the injury to the Defendant was capable of being estimated in money (as required by the Shelfer hurdles), the judge found that the level of damages would not be regarded as "small", even bearing in mind the likely costs of around £1-2 million required to cut back the relevant floors of the development and/or the significant value of the properties involved.
On the issue of any oppressiveness caused to the Claimant by granting an injunction, the judge did not level any particular criticism at the Defendant's delay in dealing with correspondence concerning this matter and/or in bringing any claim to protect his rights. Moreover, he was not persuaded by the Claimant's concerns about the significant costs of carrying out the work to remove the infringing parts of the building, given that the total cost of the redevelopment exceeded £35 million. The judge therefore concluded that there would be no real oppression caused to the Claimant by granting an injunction to require it to adjust the redeveloped building. In his view, this conclusion was supported by the fact that the infringement of light by the Claimant was not trivial or inadvertent and was committed with a view to profit.
Comment
This case is a severe blow for developers, as it emphasises that any party who proceeds with a redevelopment without first securing appropriate agreements with neighbours concerning rights of light does so at its peril. It is certainly no longer sensible to assume that a developer will be able to sort out damages "after the event" and/or that any neighbour who fails to take action quickly will have lost its ability to obtain an injunction.
The decision also has implications for those seeking to invest in buildings, the banks funding such investments and the potential tenants who look to take space there. Here, one of the floors to be adjusted as a result of the Court Order had already been let and the owner of the building will now have to make arrangements to relocate its tenant whilst the remedial works are carried out.
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