Rights of light injunctions sent to Coventry?

The recent Supreme Court decision in Coventry v Lawrence, is likely to have a significant impact on the appropriate remedy that may be awarded in rights of light cases and may go some way to tipping the balance of power at the negotiating table back in favour of developers.

Injunction or damages?

A series of recent high-profile rights of light cases have determined that the appropriate remedy for the applicant in each case was the award of an injunction preventing development rather than payment of damages to compensate the claimant’s loss.  These cases have been determined having regard to the Shelfer test, being the test set out in the 19th-century case of the same name.

Shelfer Test

The Shelfer test requires each of the following four tests to be satisfied before damages (rather than an injunction) may be awarded. (1) The injury to the claimant must be small  (2) The value of the injury must be capable of being estimated in money (3) The injured party must be capable of being compensated by a small financial payment (4) It must be oppressive to the developer to grant an injunction.

However, in the Supreme Court case of Coventry, a noise nuisance claim brought by local residents hoping for an injunction against a speedway track, the Supreme Court criticised the “slavish” observation of the “out of date” Shelfer test by the courts.  Lord Neuberger stated that, in the future, the courts should adopt a more flexible stance, and consider damages as a remedy even where one or more of the tests in Shelfer had not been met and that other factors, such as the public interest, should be taken into account.

Looking forward post-Coventry

As a result of the Supreme Court judgment in Coventry, the courts will now have the discretion to award damages in lieu of an injunction where to do so would be more appropriate.  Where all four of the Shelfer tests are met, Lord Neuberger stated that it would usually be correct to refuse an injunction, but crucially stated further that the failure to meet all of the Shelfer tests should not mean that an injunction should automatically be granted.

The exercise of discretion by the courts may now include taking into account matters of public interest for example in a rights of light dispute where a proposed development may ease housing or other constraints.  It is not difficult to appreciate that the 19th Century world that formed the backdrop to Shelfer may no longer be appropriate to modern-day cities where land and development potential are at a premium.

It may be that in this judgment the courts have anticipated the direction the Law Commission may take in its Rights to Light consultation to be published later this year and this decision has certainly made it simpler for the Law Commission to encourage greater use of damages in lieu of an injunction should they wish to do so.

The Coventry case also included a comment on the weight to be given to the existence of planning permission for a development. Whilst it was agreed that the onus of determining the appropriate remedy should be determined by the courts rather than the planning authority, the award of planning permission may be viewed as a further indication that an injunction might be disproportionate.

Basis of damages

Lord Neuberger indicated that damages should not necessarily be limited to the reduction in the value of the claimant’s property as a result of the nuisance or injury, but instead, it ought to be possible for damages additionally to include compensation for the loss of the claimant’s ability to enforce his or her property rights – which could include the benefit to the defendant in not suffering an injunction.  It will therefore be interesting to see how damages are assessed post Coventry.

Final comment

This Supreme Court decision should be of great assistance to developers, as it seems less likely that in the future an injunction will be awarded where it would be disproportionate to do so, and in particular where planning permission has already been granted or the proposed development is clearly in the public interest or both.

Landowners who stand to suffer a loss of access to light will, of course, remain able to claim damages and/or seek an injunction, but the knowledge that a court will not automatically grant an injunction should both make it easier for the parties to negotiate a release fee with greater certainty and also flush out any potential claims earlier in the process than was previously the case. In short, the balance of power at the negotiating table may be seen to be shifting in favour of developers.