UK: Timing Is Everything And Patience Is Key

Last Updated: 19 July 2012
Article by Richard Flenley

A lesson in waiting for a right to crystallise rather than commencing premature and toothless proceedings was handed down by the High Court in the rights to light case of CIP Property (AIPT) Ltd -v- Transport For London, London Underground Ltd, Derwent Valley Central Ltd [2012] EWHC 259

The Facts

The Second and Third Defendants to the action, Transport for London ("TFL") and London Underground Limited ("London Underground") together owned the land on the south-west corner of Oxford Street and Charing Cross Road comprising, amongst other premises, Tottenham Court Road Underground Station ("the Station").

The Station is being redeveloped as part of the Crossrail project and it is envisaged that, once the development has been completed in 2017, there will then be oversite developments across a range of Underground stations which will include the Station. The third defendant, Derwent Valley Central Ltd ("Derwent"), may be appointed as the developer for these oversite developments.

The Claimant, CIP Property (AIPT) Ltd ("CIP"), is a limited company in the Aviva Investors Group and is the nominee of Aviva to be the trustee of its Aviva Investors Property Trust. In that capacity, CIP is the freehold owner of 20 Soho Square and 5 Falconberg Mews ("the Properties"). The Properties overlook the Station and are subject to five occupational leases. CIP claimed that the Properties benefitted from one or more of ancient rights of light, easements of light acquired by prescription and the doctrine of lost modern grant.

TFL's wholly owned subsidiary, Transport Trading Ltd, was at the relevant time the holding company for London Underground and Crossrail Limited ("Crossrail"). Crossrail is a special purpose vehicle created for the delivery of the Crossrail project.

As a consequence of the Crossrail project, various parcels of land across the South East were compulsorily acquired by Crossrail and one such parcel of land was owned by Derwent. At the time of the bill supporting the Crossrail project passing through Parliament, Derwent raised an objection to it. That objection was ultimately compromised by a compromise agreement that granted Derwent a right of pre-emption over the Station and the right to build above it.

These rights came with significant pre-conditions that included, amongst other things, demonstrating to the Secretary of State for Transport that it has the necessary financial and development expertise to acquire the site and to develop it by means of an oversite. There was also a detailed and complicated mechanism surrounding the exercise of the rights that would take a significant amount of time to fulfil and, even once the process had begun, there was no certainty that the option would be taken by Derwent.

Shortly after being granted these rights, Derwent commenced work on a scheme that involved the future oversite development of the Station, such development involving Derwent, TFL and London Underground, and the local planning authority. Drivers Jonas were appointed by Derwent as its rights to light consultants in April 2007 and, between March 2008 and January 2009, the advisers for both CIP and Derwent discussed the project in detail.

On 24 October 2008 there was a meeting between the advisers of Derwent and CIP. Consequently Derwent were advised that CIP generally supported the proposed development but were likely to claim prescriptive rights to light to the Properties and notified Derwent that they would seek to protect their position in this regard.

On 7 August 2009 Derwent's advisers suggested that, at a forthcoming meeting, Derwent might consider terms on which to buy out the rights to light that CIP claimed. Following that communication there was then a lull in open activity (potentially because there may have been without prejudice communications and negotiations) until 15 and 16 April 2011 when letters before action were issued on behalf of CIP to all three Defendants.

Notwithstanding the threat of proceedings contained within this letter (which included a threat of injunctive relief), the Defendants and Crossrail continued to want to reach an amicable solution with CIP – particularly as a consequence of the fact that any development was unlikely to be commenced prior to completion of the works being undertaken to the Station. They therefore expressed their surprise at the approach taken by CIP.

However, CIP apparently rebuffed such an approach and commenced proceedings on 27 May 2011 seeking a declaration from the Court to the effect that all three Defendants were not entitled to obstruct their light, an injunction to prevent them from doing so and damages in lieu of an injunction. The proceedings were then served on the three Defendants on 22 September 2011.

Following the filing of Acknowledgments of Service by all three Defendants, extensions to the time for filing the Defences were granted and on 19 October 2011 Crossrail and Derwent applied for planning permission for the proposed oversite development. At the same time, the local planning authority released a press release confirming that the application had been made and Derwent's solicitors wrote to CIP's solicitors in terms confirming that, whilst they considered the proceedings to be a surprise and disappointing, the proceedings "must now be dealt with" and confirming that, as CIP were0 aware, the proposed development was at least 5 years away. Derwent's solicitors also confirmed that there was no intention for any development to take place without any regard to any relevant rights to light of any third parties and that, therefore the proceedings were both misconceived and premature. Similar objections were also raised on behalf of Crossrail.

CIP though disagreed and refused to withdraw the proceedings. There was then a further exchange of correspondence between the parties' solicitors that culminated in an application on behalf of all three Defendants for summary judgment, the implication being that success in that application would strike a fatal blow to CIP's claim. The Decision The Chancellor of the High Court, Sir Andrew Morritt ("the Chancellor"), heard this application and he concurred wholeheartedly with the approach taken by the three Defendants and dismissed CIP's claim.

In formulating his decision, the Chancellor noted in particular the content of witness statements of Paul Williams (on behalf of Derwent) and Colin Smith (on behalf of the TFL and London Underground) in which they confirmed that:

  • Derwent's proposed development was still embryonic;
  • The process for obtaining planning permission was long and provided ample opportunity for the scheme to be altered;
  • CIP's claim had been made prematurely;
  • The oversite development could not being until 2017 at the earliest;
  • There was no guarantee that Derwent would exercise its right of pre-emption; and
  • It was not possible at that early stage to predicate that the proposed development would substantially impact on the right to light of third parties.

The Chancellor also took guidance from the general principles on both declaratory and injunctive relief.

He summarised this by stating that, as far as declaratory relief was concerned, he needed to ask himself (1) whether or not the claim was premature, (2) whether or not the declaration sought would serve a useful purpose, and (3) whether or not the issues were sufficiently clearly defined to be properly jusiticiable.

When it came to injunctive relief, the Chancellor considered that, if he was to grant such relief, he needed to be satisfied that there was an immediate threat to do something which required the intervention of the court to prevent it.

The Chancellor therefore decided that there could be no liability on either TFL or London Underground on the basis that, whilst the owned the Station (and therefore the land subject to the pre-emption right), they did not apply for the planning permission for any oversite development in respect of the Station after completion of the Crossrail project.

Further, there was no evidence that either of them had any proposals for such a development nor was there anything within the pre-emption agreement to suggest that they had done anything by way of encouragement or acceptance so as to make themselves liable for the consequences of any development undertaken by Derwent with regard to any right of light enjoyed by CIP.

Further, they had made no threat to infringe any right of light that CIP may enjoy. The claim was therefore dismissed against both TFL and London Underground.

In terms of the claim against Derwent, the Chancellor confirmed that it was quite clear that there was no immediate threat that Derwent would infringe CIP's right to light on the following bases: " Derwent did not, at that point, own the Property and its future ownership depended on it satisfying various pre-conditions as provided for in the pre-emption agreement and on it deciding to exercise the pre-emption right. In any event satisfaction of those pre-conditions and the completion of the pre-emption procedure could not take place before 2017.

  • There as not, at that time, a planning permission for any oversite development. The Chancellor was in little doubt that it would take time to obtain such permission and to satisfy any planning conditions that may be stipulated.
  • Derwent had made it clear on several occasions that it would not proceed with any oversite development without regard to the rights of third parties.
  • The simple fact that Derwent did not make explicit reference to the proceedings being premature until 6 months after the letter of claim did not create an immediate threat of infringement. CIP could not, by its own actions, create a threat by Derwent that did not exist and a delay of 6 months was of little consequence to a minimum of 5 years before any actual infringement could occur.
  • The fact that, notwithstanding CIP's representations, Derwent's proposals had not changed did not of its self give rise to an immediate threat to infringe the rights claimed by CIP, particularly where such development could not take place in less than 5 years' time.

Therefore, in the light of all of the above factors, the Chancellor decided that the claim for a declaration against Derwent was misconceived because it was premature and would serve no useful purpose at that point. In addition, the Chancellor had considerable doubts as to the possibility of any meaningful definition of the relevant issues given that the development did not have the benefit of any planning permission and could change substantially in the following 5 years anyway.

Further, the Chancellor decided that the claim for an injunction against Derwent was also misconceived. The Chancellor considered that there was not then and could not be for at least 5 years an immediate threat by Derwent to infringe the rights to light claimed by CIP. Nothing that was put forward by CIP could ever change the undisputable fact that it was impossible for Derwent to infringe the rights to light CIP claimed before 2017 at the earliest.

The entire action was therefore dismissed.

Charles Russell Comment

At a time when many developers are looking strategically at land options and future development plans, this case provides a timely reminder that, when protecting your rights, it is vital to ensure that enforcement action is not commenced prematurely but that there is a genuine and crystallised right that can be protected.

No doubt CIP were concerned that failure to take action may give rise to criticism that they acquiesced in the face of the threats to the security of their rights. However, the Court will not heed such criticism in circumstances where the rights are continually protected in correspondence and litigation only commenced once there is a clear and imminent threat to such rights.

As the Chancellor commented in this case:

"If I conclude, as I do, that this action is premature, the fear of [CIP] is no reason to withhold the order that [Derwent] seeks. It will be up to [CIP] through its solicitors to ensure that [Derwent] is aware at all material times of [CIP]'s concerns. If [Derwent] then proceeds with its development plans, thereby incurring significant costs, that is a matter for [Derwent]. But they could hardly then complain that they had been encouraged to do so by any inaction on the part of [CIP]".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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