Developers in detention: lessons learned
Last month saw the first rights of light case reach the Court of Appeal since the decision of the Supreme Court in Coventry v Lawrence  UKSC 46, which emphasised that injunctions should not automatically be the primary remedy for dealing with light infringements. Ottercroft Limited v Scandia Care Limited & Anr has seen the Court of Appeal unanimously uphold the first instance decision to award an injunction in respect of a minor infringement of light. So, has the Court of Appeal returned to the form seen in Regan v Paul Properties DPF No.1 Ltd, which started the rights of light injunction trend of the past decade?
The rights of light infringement in Ottercroft arose from the development of a café and residential flats above it in High Wycombe. The parties’ experts agreed that the value of the loss of light for the claimant amounted to £886 and the infringement was described as “minor”. The costs of removing the offending staircase and installing a replacement were estimated to be no more than £6,000, but therefore significantly more than the level of damages to which Ottercroft was entitled. Nonetheless, the county court awarded an injunction requiring the removal of the staircase.
At first glance, this decision might have seemed surprising given the guidance from the Supreme Court in Coventry. However, the judge in Ottercroft was highly critical of the developer’s conduct, at one point commenting that “the defendants’ word cannot be trusted”.
Court of Appeal Decision
The defendants’ appeal against the award of the injunction was always going to be a challenge given the findings of fact made at first instance, not to mention the discretionary nature of a court’s decision to award an injunction.
The defendants tried to show that certain conclusions reached by the judge were unsound, including the characterisation of the defendants’ conduct and the question of whether planning permission had been granted for the staircase. They also questioned the feasibility of removing and replacing the staircase. However, the arguments were met with robust interrogation by the Court of Appeal and did not find favour. Indeed, the court did not even call on Ottercroft’s legal team to put forward their client’s case before judgment was delivered and the appeal rejected.
Given the particular circumstances in Ottercroft, the case does not offer any real illustration of how the courts are now likely to approach the question of whether to award an injunction for a rights of light infringement in the post-Coventry world. However, it is a stark warning to developers who act in a "high-handed manner" and offers some lessons to be learned.
Lesson 1: Never breach an undertaking
A fundamental difficulty for the defendants in Ottercroft was the fact that they had breached undertakings given to the claimant to confirm that they would not interfere with its rights of light. In accordance with usual practice, these contractually binding promises were accepted by the claimant instead of seeking an interim injunction from the court. However, the defendants subsequently proceeded – without notice to the claimant - to construct the staircase which actionably interfered with the claimant’s light.
The Court of Appeal agreed with the judge at first instance that the operation of voluntary undertakings in place of court orders is a vital part of avoiding the courts from being “clogged” with applications for interim relief. The court also agreed that the defendants should not be permitted to benefit from their breach of undertakings, noting that upholding the injunction did no more than require the defendants to comply with the promises they had given.
Lesson 2: Be neighbourly
The injunction awarded in Ottercroft reflects the courts' willingness to penalise parties who act in an “un-neighbourly” way, particularly where there is an attempt to "steal a march" on an unwitting neighbour. The first instance judge in this case commented that: "I find that [the defendant] hoped his plans would not come to the attention of the freehold owners because he was aware they were likely to object to them." Anyone thinking of following a similar approach to the developer in this case should take note and think again.
The Court of Appeal commented that the conduct of the defendants in this case mirrored almost exactly the example given by Lord MacNaghten in Colls v Home & Colonial Stores Ltd  UKHL 1, when he sought to demonstrate the circumstances in which the award of an injunction is likely to be appropriate:
“In some cases, of course, an injunction is necessary - if, for instance, the injury cannot fairly be compensated by money - if the defendant has acted in a high-handed manner - if he has endeavoured to steal a march upon the plaintiff or to evade the jurisdiction of the Court. In all these cases an injunction is necessary, in order to do justice to the plaintiff and as a warning to others.”
Had the defendants been more forthcoming about their plans with the neighbouring claimant (and not breached their undertakings), then they would probably have faced less of an uphill battle to persuade the court against awarding an injunction.
Lesson 3: Do not assume you can avoid personal liability
The two defendants in this case comprised the development company and one of the company’s directors, Dr Rahimian. The judge at first instance found that Dr Rahimian’s role was “decisive in driving the project through” and that he wished the claimant to remain in ignorance of his plans. He concluded that the acts under the court’s consideration had been carried out by Dr Rahimian just as much as by the company. However, his judgment made it clear that the decision to impose personal liability on Dr Rahimian was not one which pierced the corporate veil; Dr Rahimian’s liability was as a joint tortfeasor.
Dr Rahimian challenged this liability on appeal but again failed to persuade the court. In addition to the findings of fact made at first instance concerning Dr Rahimian’s role in the project, the court noted that the undertakings given to the claimant had been given by Dr Rahimian in his personal capacity (as well as by the company). It was also noted that the defendants had failed to produce any document at trial which evidenced the company’s internal workings and decision-making processes.
Whilst this imposition of personal liability may come as a shock to some, it is clear from decisions such as MCA Records v Charly Records  EWCA Civ 1441 that a director or controlling shareholder of a company can be liable with the company as joint tortfeasor. As explained by Chadwick LJ in that case, this liability arises where an individual participates or is involved in the wrongful acts which are the subject of complaint “in ways which go beyond the exercise of constitutional control”. The fact that the same wrongful acts could have been achieved simply through the exercise of control over the company does not allow an individual to escape personal liability for them.
As we have noted, the decision to uphold the injunction in this case reflects the defendants’ behaviour and demonstrates the importance of conduct when dealing with a neighbour who is likely to be affected by a development. It is also a helpful reminder that the judgment of Lord MacNaghten in Colls – which was referred to by Lord Neuberger in Coventry – contains some very sensible observations on the question of balancing the interests of the parties in rights of light disputes. In particular, he commented:
“It is quite true that a man ought not to be compelled to part with his property against his will, or to have the value of his property diminished, without an Act of Parliament. On the other hand, the Court ought to be very careful not to allow an action for the protection of ancient lights to be used as a means of extorting money… there is quite as much oppression on the part of those who invoke the assistance of the Court to protect some ancient lights, which they have never before considered of any great value, as there is on the part of those who are improving the neighbourhood by the erection of buildings that must necessarily to some extent interfere with the light of adjoining premises.”
This article was written by Emma Humphreys and James Souter. For more information please contact Emma Humphreys on +44 (0)20 7203 5326 or email@example.com or James Souter on +44 (0)20 7427 6716 or firstname.lastname@example.org
This article first appeared in Estates Gazette on 22nd August 2016
News & Insights
Rich pickings for HMRC? The new UK tax rules on “property-rich companies”
The scope of UK tax for non-residents has been extended to catch gains on disposals of interests in “property-rich companies”.
Is it the end of the road for residential leasehold?
With the form of tenure under attack from various quarters, can it survive?