The decision in Midtown v City of London Real Property [2005] was welcomed by many developers as a step towards achieving a balance between the right to develop and a neighbour’s right to light. However, the Court of Appeal, in Dennis Regan v Paul Properties Ltd & ors [2006], has now emphasised that there is a limit to how far the courts will go in allowing developers to infringe rights to light. In particular, the Court of Appeal has affirmed that the primary remedy for an interference with property rights is that of the injunction. The burden is firmly on a defendant to persuade the court otherwise.

The background

The claim was issued by Mr Regan in respect of the defendants’ incomplete development in Brighton. Mr Regan’s home was a maisonette on the first and second floors of a building, parts of which faced onto two and three-storey properties owned by the defendants. The defendants decided to redevelop their properties and construct a five storey building, containing residential flats and commercial units. They submitted an application for planning consent, which was approved.

Mr Regan only learned of the defendants’ intentions when they started demolition work on one of the properties in March 2005. He then made enquiries with the local authority and was given a copy of a report prepared by the defendants’ surveyor. This report did not comment on the effect of the redevelopment on light to Mr Regan’s property because the surveyor had not been instructed to advise on this. However, this was unclear from the report and Mr Regan initially concluded that he could not complain about the development.

It was not until September 2005 that Mr Regan sought advice from his own surveyor as to the potential impact of the development on his property. The parties’ rights of light advisers corresponded. It emerged that there would be loss of light to Mr Regan’s first floor living room. The advisers calculated that the living room was 65-67% well-lit at the time, but that this would be reduced to around 42-45% following the redevelopment. The defendant’s surveyor initially advised that there was ‘no actionable injury’ to Mr Regan’s light. After further analysis, he concluded that any ‘marginal’ injury was a matter for compensation rather than the alteration of the development, estimating such compensation to be between £3,000 and £8,000.

The claim

The parties failed to reach an agreement on how to deal with the situation. By March 2006 the defendants had started work on constructing the fifth floor of their new building. Mr Regan issued proceedings against the defendants on 22 March 2006. In addition to the injunction sought he also claimed damages. Following Mr Regan’s application for an interim injunction, the defendants gave undertakings not to continue their work on the fifth floor. They also offered Mr Regan the sum of £15,000 to settle his claim. Mr Regan insisted that he wanted his right to light enforced by injunction rather than compensation.

The expert evidence concerning the loss of light to Mr Regan’s living room, indicated that the adequately lit area within the living room would be reduced by about one third after the completion of the development. Thus less than half of the room (estimated to be around 42-45%) would be adequately lit. The experts agreed that the value of Mr Regan’s property with such a level of light would be reduced by around £5,500, or 2.5% of its value prior to the redevelopment.

Mr Regan’s claim sought to cut back only one of the units being built by the defendants: a penthouse flat, unit 16. Mr Regan’s primary position was that the defendants should alter part of unit 16 by removing one of of its three bedrooms and bathrooms, as well as part of its lounge. This suggested design allowed 53% of Mr Regan’s living room to receive adequate light, but reduced the value of unit 16 to around £300,000. Mr Regan’s ‘fallback’ position allowed around 48-50% of his sitting room to receive adequate light by removing less of unit 16. The estimated value of unit 16 with these alterations was £325,000- £350,000 – a reduction of around £100,000 in the value of unit 16 as planned.

The first instance decision

As part of their defence against Mr Regan’s claim the defendants sought to challenge the conventional approach to assessing whether an interference with light is actionable – the so-called ‘50:50 rule’. This rule assumes that there is an actionable nuisance once less than 50% of a room’s floor area receives the available adequate light. The judge commented that the 50:50 rule was never intended to be rigidly applied, but he considered that it remained a useful guide in most cases. He was reluctant to ‘introduce a measure of further uncertainty into an area where greater certainty would be advantageous’. The Court of Appeal made no comment on this, but it seems this will remain the approach for the foreseeable future.

The judge (who viewed the properties) was satisfied that Mr Regan’s enjoyment of his living room would suffer significant interference as a result of the development and therefore held that an actionable nuisance would be committed by the defendants. In considering whether or not to grant the injunction sought he took account of the guidance offered by the Court of Appeal in Shelfer v City of London Electric Lighting Company [1895] and by the House of Lords in Colls v Home and Colonial Stores Ltd [1904], as well as the application of this guidance in subsequent cases.

Following analysis of these cases, the judge concluded that it was unexceptional in rights of light cases to order damages instead of an injunction, stating that ‘the onus is plainly on a claimant to persuade the court that he should not be left to a remedy in damages’. He rejected Mr Regan’s suggestion that there was ‘abundant evidence of the defendants stealing a march on the claimant and acting in a less than frank manner’, and concluded that his decision on whether to grant an injunction to Mr Regan should not be affected by the defendants’ conduct.

Using the guidance in Shelfer, the judge concluded that Mr Regan’s proposed alterations to unit 16 would be disproportionate to the amount of harm caused to Mr Regan by allowing it to remain as originally designed – particularly given the availability of damages to Mr Regan. He held that the right course would be for Mr Regan to be awarded damages instead of an injunction.

The appeal decision

In August 2006 Mr Regan was granted permission to appeal. The primary ground of appeal was based on his contention that the judge had misdirected himself in ruling that granting damages in lieu of an injunction was an unexceptional course in rights of light cases. In putting the burden of proof on the claimant to persuade the court that he should not just be left with a remedy in damages, Mr Regan also challenged the judge’s application of the principles in Shelfer.

The defendants submitted that the Court should not interfere with the judge’s exercise of discretion, contending that he had considered all relevant circumstances and struck a proper balance. The defendants emphasised that the injury was to a very small, narrow strip of the living room without any loss of light in the most valuable part of the room. Emphasising this low level of inconvenience and its small effect on the value of Mr Regan’s property, the defendants highlighted the significant and disproportionate financial losses they would suffer from an injunction.

The Court of Appeal acknowledged that the choice of whether or not to grant an injunction is a matter for the court’s discretion, confirming that such discretion would not be interfered with unless there had been an error of principle, or there was some other reason why the decision was plainly wrong. The Court reviewed the authorities addressing the question of the exercise of this discretion, in particular Shelfer and Colls, and noted the comments made by Lord Macnaghten in Colls concerning the difficulties of balancing the parties’ interests when deciding whether to grant damages in lieu of an injunction. Lord Macnaghten had recognised that an injunction would sometimes be necessary to do justice to a claimant and to act as a warning to others, although he had also commented that damages might be more appropriate where:

… there is really a question as to whether the obstruction is legal or not, and if the defendant has acted fairly and not in an unneighbourly spirit.

Mummery LJ observed in Regan that some subsequent cases had regarded Colls as suggesting that the court should lean against granting injunctions. However, Mummery LJ emphasised that the ‘practical suggestions’ put forward by Lord Macnaghten in Colls were merely suggestions and no more than that; they were never intended to create a tendency against injunctions.

Mummery LJ concluded that Colls did not represent any departure from Shelfer. In summarising some of the principles put forward in Shelfer, he highlighted Lindley LJ’s comment in that case that ordering damages should not be used to deprive a claimant of their ‘prima facie right’ except in ‘very exceptional’ circumstances. He added that the reported cases considered by the judge at first instance were merely illustrations of particular exercises of judicial discretion, emphasising that all the circumstances of a case have to be considered before deciding whether to grant an injunction.

In light of these observations, the Court of Appeal decided that the judge was wrong in principle to place the onus on the claimant to persuade the court that he should not be left to a remedy in damages. It therefore held that there was sufficient ground to interfere with his discretion. In reviewing the judge’s application of the Shelfer principles to the case, the Court agreed with the judge’s conclusion that Mr Regan would suffer a ‘substantial interference’ with the light to his living room and that the injury to his rights was not small. The Court observed that the relevant issue is the amount of light that is left following an infringement, rather than the amount of light taken. The Court took note of the fact that the main area of Mr Regan’s property suffering the loss of light was the centre of the living room, forcing Mr Regan and his family to use artificial light or to move closer to the window in order to carry out normal activities in the room.

The Court disagreed with the judge’s conclusion that the estimated reduced value of Mr Regan’s property (around £5,500) was small, pointing out that comparing this figure with the defendants’ level of loss was incorrect. It noted the evidence from Mr Regan’s expert that there was a reduction of £11,000 when compared with the value of the property prior to the development. The Court acknowledged that any injunction would have a serious effect on the defendants’ plans and lead to substantial losses. However, the Court felt that these circumstances were ‘not determinative of the issue of oppressiveness and of the choice of remedy’, emphasising that the Court must consider all circumstances of the case and the conduct of the parties.

Mummery LJ stated that the judge had wrongly directed himself on the relevance of the parties’ conduct on the exercise of his discretion. He commented on the defendants’ failure to delay the construction of unit 16 once they became aware of Mr Regan’s claim and the potential impact on his property, until after Mr Regan applied for an interim injunction. He also noted that no attempt had been made to try to redesign the scheme. In his view, the defendants had taken a calculated risk in proceeding with their redevelopment in the face of Mr Regan’s opposition. Their reliance on incorrect advice should not be allowed to prejudice Mr Regan’s position:

The defendants who took and acted on the wrong advice must take the consequences and not throw them on to Mr Regan in order to deny him his prima facie right to protect his property by injunction.

The Court concluded that it was not oppressive or unreasonable to grant an injunction to Mr Regan, commenting that it would not be justified in forcing him to accept compensation for losing his light.

Comment

The lessons to be learned from the Court of Appeal’s decision in Regan may be summarised as follows:

(1) The default setting where property rights are being infringed (in rights of light cases and more generally) is that of the injunction.

(2) A developer cannot expect to avoid an injunction by a willingness to purchase the injured party’s rights.

(3) A developer will have to take into account at the earliest stages the property rights of neighbours who could be affected by the redevelopment.

(4) The burden is firmly on the infringing party to establish that the case is one for damages and this will require exceptional circumstances.

(5) The ‘orthodoxy’ of Shelfer is established.

(6) No express distinction is made between residential and nonresidential user which is infringed.

The ‘general sense of wellbeing’ felt by many developers after Midtown has probably now evaporated, although it is a matter of debate whether the strict approach applied by the Court of Appeal in Regan is just. Following the decision in Regan and notwithstanding the first instance decisions in Midtown and Fairpoint (Vincent Square Ltd) v Tamares [2006] (both of which were cited to the Court of Appeal), great care must be taken by developers to deal with rights of light issues, both where residential and commercial buildings are affected. This will require accuracy in assessing levels of loss.

As the balance struck in Midtown has now swung in favour of the injured party, this should give greater urgency to the Law Commission’s current examination of the law of easements and covenants. A statutory scheme is urgently needed to create a fair balance between those with the benefit of property rights and developers with planning consent, who have a legitimate expectation of carrying out their redevelopment and are willing to compensate those whose rights are infringed. For the time being, however, Regan is a useful marker and a timely reminder that property rights are, in the eyes of the court, to be given the highest protection.  © Property Law Journal