The recent High Court decision of Beaumont Business Centres Limited v Florala Properties Limited serves as a reminder that a developer who proceeds with a development in the face of objections does so at real risk.
On Friday 13 March, the High Court granted an injunction against a developer, Florala Properties, to cut back an apart-hotel in the face of relatively small losses even though the development was already complete and let out.
The injunction cannot be enforced unless the tenant of the development site is joined to the proceedings by the claimant, the adjoining property owner Beaumont Business Centres. This would result in what will effectively be a repeat of the same litigation for Beaumont. If Beaumont chooses not to join the tenant, then it can take the damages specified by the court instead.
The case reinforces that while the court does have a wide discretion to award damages in rights of light cases, the primary remedy for interference with a neighbour's property right is an injunction.
The novel arguments put forward by Florala were largely given short shrift by the judge, and ultimately the actual losses suffered by Beaumont and the conduct of Florala seem to have carried the most weight. The conduct of both parties will be scrutinised, and even where proceedings are not issued for some months, an injunction can be granted at any time.
The case relates to a claim brought by Beaumont Business Centres against Florala Properties.
The Beaumont property was sold by Beaumont London in April 2015 to a third party and at the same time a lease was granted to Beaumont Business Centres. Prior to the sale, the buyer and the two Beaumont entities entered into a tri-partite rights to light deed to give Beaumont London control of any rights of light claims within certain parameters.
Florala obtained planning permission to convert its property into an apart-hotel in May 2015, and in February 2017 entered into an agreement to grant a 15 year lease of the property to the tenant. Despite occupying the Florala property, the tenant was not joined as a party to these proceedings.
Over the following years a number of meetings took place between Beaumont and Florala in relation to the proposed development without agreement being reached. Settlement figures were discussed but Beaumont maintained that it was not prepared to give up its light and proposed a cutback that would remedy the issue. Nonetheless Florala proceeded with the development without incorporating the cutback and it was substantially complete by June 2018.
Beaumont issued proceedings for an injunction in February 2018. In April 2018, Florala applied unsuccessfully for reverse summary judgment seeking a dismissal of Beaumont's claim.
In declaring that Beaumont was entitled to an injunction and that it may join the tenant to the proceedings the following points of note arose:
- The court reinforced that the test for whether there was an actionable nuisance giving rise to an injunction was whether the loss of light made the premises substantially less comfortable and convenient than before, regardless of how much light it had started with. The court rejected Florala's contention that interference which causes a small loss of rental or capital value should not be regarded as sufficiently substantial.
- In practice, this test would be satisfied if it could be shown that the adjoining property would suffer a more than a trifling loss of income or capital value which Beaumont was able to prove (albeit that the losses were relatively low).
- The court dismissed Florala's assertion that Beaumont's motivation was to extract a ransom payment, disentitling it to an injunction on the facts and in general. That the rights of light deed moved the damages away from the claimant entity was deemed irrelevant.
- If a nuisance can be established the burden remains with the developer to show why an injunction should not be granted – the court should have no inclination to damages or injunction prior to hearing the evidence in full.
- Where damages are payable, there is no reason why negotiating damages should not be awarded over compensatory damages. An award of one third of the profit from the offending part of the building was the appropriate starting point and awarded to Beaumont in the final amount of £350,000, should they decline to join the tenant to the proceedings. The 50% sought by Beaumont was too high, and would have a deterrent effect on developers.
- The 'book value' method of valuation was explained in the expert evidence but not put forward by either side or addressed by the court.
- There was some discussion of the appropriate method of analysis of loss of light (the traditional Waldram approach as opposed to radiance studies) but no real conclusion as to the 'best' one. The court determined that there was a perceptible reduction in light on either view but was keen to point out that a reduction alone would not necessarily amount to nuisance without some other loss.
- The court acknowledged the general criticisms of the Waldram and 50/50 method of assessing loss. It did not need to address these in any detail as none of the rooms started off 'well lit' but did consider that Waldram nonetheless provides a useful starting point for the analysis.
- While the court disagreed that a knowing and deliberate breach was required for an injunction it is clear that the conduct of the developer remains highly relevant: a significant factor appears to be that Florala had knowingly progressed the development in light of objections.
- While much was made of the impact on Beaumont, with the court concluding that the injury it would sustain from the development was neither small nor quantifiable, very little was made of the impact on Florala. The development was complete and let to a third party, but Florala did not contend that it would be oppressive to order a cutback or provide any evidence as to the costs of carrying out the works or the impact of the business.
- There was little dispute that Beaumont's case was not undermined by its failure to seek an interim injunction, especially where a partial cutback was all that was required to remedy the issue rather than the full demolition of a building.