Eaton Mansions (Westminster) Ltd v Stinger Compania De Inversion S.A. [2013] EWCA Civ 1308 (30 October 2013)

Introduction
Anis Waiz solicitor and head of Commercial litigation at Curtis Law Solicitors, continues his critical review of current case law.  In this case the Court of Appeal considered two important points of law arising from a landlord and tenant dispute.
1. The assessment of damages for trespass to parts of the landlord’s premises on the so called “negotiating basis”.
2. Whether the court can (or should) make an award of aggravated damages in favour of a company.
Background
The reader is referred to the judgment for full details but in essence Eaton Mansions (“EML”) was the head lessee of a number of flats in London.  Stinger was the tenant of two flats. The demise did not include part of the roof. 
The headlease of the property contained   a covenant by Eaton not to make external alterations to the building without the consent of the Landlord which extended to any air conditioning equipment placed on the roof for the benefit of the tenants of individual flats.
 In 1980 Stinger, with EML’s consent, placed three air conditioning units with associated pipe work on the roof. By 1998 these had increased to six units. EML did not consent to the additional units. The evidence was that they remained there until 2006 without objection. 
In 2006 EML needed to carry out repairs to the roof and told Stinger and the other tenants that the units would have to be re-located. By this time Stinger had decided to turn the two flats back into separate units and to refurbish them. At first instance the judge found that this was a major project (involving expenditure of about £1m on each flat) which commenced in 2006. The existing air conditioning units were removed from the roof as requested but Stinger anticipated replacing them with new equipment.
In June 2007 the first act of trespass complained of occurred. Two condenser units were placed on the roof. These were large units installed in breach of planning control.
By February 2008 the units (but not the associated pipework) were removed and discussions continued with EML about what could be placed on the roof.  Stinger’s plans had changed and it had been decided to sell the flats once refurbished. In December 2008 Stinger instructed contractors to enter on to the roof and to install two new units which they attached to the condensers which had been put in place in 2007 but not subsequently removed. The result was to give each flat a functioning air conditioning system.
The Proceedings
EML issued proceedings in April 2009 seeking an injunction and damages for trespass. On 11th March 2010 Stinger completed the sale of the two flats and the claim continued as one for damages 
In July 2010 Wyn Williams J granted judgment for EML for damages to be assessed [2010] EWHC 1725 (Ch).  Stinger’s appeal against the judgment on liability was dismissed by the Court of Appeal on 18th May 2011: [2011] EWCA Civ 607.
Damages were assessed in July 2012 with judgment being handed down in November 2012. It was common ground that the trespass continued until completion of the sale of the flats on 11th March 2010 being the end of the period in respect of which EML was awarded damages.
The Appeal
As noted above the two issues for consideration by the Court of Appeal concerned the assessment of damages and whether the court could grant aggravated damages to a company. 
Damages
The question for the Court of Appeal was whether a court would award substantial damages for an infringement of a property right when no financial loss flows from the infringement and whether the court will assess the damages by reference to the defendant’s profit obtained from the infringement. 
EML accepted it has suffered no direct loss from the trespass except for the cost of removing the trespassing equipment from the roof at a cost of circa £1,716. However it sought damages for trespass calculated by reference to what the Court assesses that Stinger would have agreed to pay at the commencement of the period of trespass for permission to place the air conditioning equipment on the roof. The so called negotiating damages. 
The Court of Appeal reviewed the authorities and noted:
1. A useful starting point was Lord Nicholls in Attorney-General v Blake [2001] 1 AC 268 which contains a useful summary of the circumstances in which the court will assess damages either in tort or in contract. 
2. Lord Nicholls’ survey of the different contexts in which the court has departed from a purely compensatory measure of damages includes claims in trespass and awards of damages under s.2 of the Chancery Amendment Act 1858 (the “Act”) in lieu of an injunction.
3. The Act had a further effect. The common law courts’ jurisdiction to award damages was confined to loss or injury flowing from a cause of action which had accrued before the proceedings were issued. In the case of a continuing wrong i.e overhanging eaves and gutters, damages were limited to the loss suffered up to the commencement of the action. The Act liberated the courts from the fetter. Thus the Court could assess damages to include losses likely to follow from the anticipated future continuance of the wrong as well as losses already suffered.
4. Lord Nichols in Attorney-General v Blake [2001] 1 AC 268  noted that a trespasser who enters another’s land may cause the landowner no financial loss. In such a case damages are measured by the benefit received by the trespasser, i.e. his use of the land. The same principle is applied where the wrong consists of use of another’s land for depositing waste, or by using a path across the land. In this type of case the damages recoverable will be the price a reasonable person would pay for the right of user. A recent example was the non-removal of a floating dock, in Penarth Dock Engineering Co Ltd v Pounds [1963] 1 Lloyd’s Rep 359.
Counsel for Stinger submitted that the court had to have regard to the actual period of trespass and to treat the parties as having negotiated on that basis because to do otherwise would disconnect the licence fee and therefore the damages from the legal wrong for which they are intended to provide compensation. In this case, Stinger would be required to pay for rights which their trespass never gave them and for a loss which EML never suffered. 
Lord Justice Patten in this case noted the hypothetical negotiations for a licence fee have been adopted as a convenient means of valuing the benefit to the trespasser (and, in that sense, the loss to the claimant) which results from the defendant’s tortuous conduct.   Its accuracy depends upon the negotiations centering on the period and extent of the trespass which actually occurred. 
The valuation construct is that the parties must be treated as having negotiated for a licence which covered the acts of trespass that actually occurred. The defendant is not required to pay damages for anything else.
Lord Justice Patten noted that damages awarded should be compensation for the loss suffered in the sense of what the tortfeasor has gained from his trespass. That point was clearly recognised by the Court of Appeal in its judgment in Enfield LBC v Outdoor Plus Ltd & Anor [2012] EWCA Civ 608.
Accordingly the Court of Appeal found that the judge at first instance was right in the award of damages which he made.
Aggravated damages
The issue was whether aggravated damages could be awarded to a company.  As a general proposition aggravated damages may be awarded in cases of trespass where the defendant’s conduct has been high-handed, insulting or oppressive (as per Horsford v Bird [2006] UKPC 3.)
At first instance the judge refused to award aggravated damages to EML on the basis that an award of aggravated damages is designed to compensate the successful claimant for distress and injury to feelings caused by the defendant’s conduct which, in the case of a company, was not a possibility.
However, in Messenger Newspapers Group Ltd v National Graphical Association (1982) [1984] IRLR 397, Caulfield J awarded both aggravated and exemplary damages to a company whose premises were unlawfully picketed by the defendant union.
Caulfield J noted “Certainly exemplary and aggravated damages can be awarded against inanimate legal entities like limited companies, and I cannot see any reason why the same legal entities cannot be awarded aggravated and exemplary damages.”
I see no reason why a limited company should not be awarded aggravated damages just like a human being. There is no reason why the present plaintiff should not recover. Of course, that aggravated damages can be awarded on the facts of this case is my main finding on this item, but I am not including any damages for injured feelings. I have approached the question on the manner of the doing of the injury and on the basis which I think is right, that the compensatory award which I have earlier made is not adequate. The figure I award the plaintiff for aggravated damages is the sum of £10,000, and I have approached this figure with moderation, as I shall approach the final heading of exemplary damages, to which I now turn."
Lord Justice Patten noted that although the judge was obviously concerned to compensate the company for losses caused by what he regarded as an aggravated form of unlawful conduct by the union, he failed, properly to grapple with the essential objection to an award to a company of compensatory damages for injured feelings.
It was observed that the decision in Messenger on aggravated damages has not been followed by other judges at first instance; most notably by Gray J in Collins Stewart Ltd v The Financial Times Ltd (No. 2) [2006] EMLR 5 at [30]-[32] and by Tugendhat J in Hays plc v Hartley [2010] EWHC 1068 (QB).
Lord Justice Patten held that the Court should take the opportunity to hold that Messenger was wrongly decided. Aggravated damages are not recoverable by a limited company for the reasons stated. 
Conclusion 
This case provided a very useful resume of the award of damages for trespass and reaffirmed the stated law that aggravated damages cannot be awarded to a company on the basis that distress and injury to feelings was not possible. 
By way of summary the following is clearly material when considering the issue of damages for trespass:
1. A property right has value to the extent only that the court will enforce it or award damages for its infringement.
2. A trespasser who enters another’s land may cause the landowner no financial loss. In such a case damages are measured by the benefit received by the trespasser, namely, by his use of the land
3. In this type of case the damages recoverable will be, in short, the price a reasonable person would pay for the right of user. 
4. Damages should be compensation for the loss suffered in the sense of what the tortfeasor has gained from his trespass. See Enfield LBC v Outdoor Plus Ltd & Anor [2012] EWCA Civ 608.
5. Vos J held in Stadium Capital Holdings at [69], the value of that benefit is "the price which a reasonable person would pay for the right of user or the sum of money which might reasonably have been demanded as a quid pro quo for permitting the trespass". For that purpose, it has to be assumed that the hypothetical negotiation would have resulted in an agreement, even if the parties might in fact have refused or been unwilling to agree. It also has to be assumed that the actual trespass which has occurred would in fact take place, because the whole point of the exercise is to reach a reasonable measure of compensation to the claimant for that trespass."
It is worth observing that in Messenger Newspapers Group Ltd v National Graphical Association (1982) [1984] IRLR 397, Caulfield J did not include any damages for injured feelings.  
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