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Damages in lieu of injunction

Shelfar test

Continuing effect?

Rogers v Humphrey
[2017] EWHC 3681 (QB)

Summary

Slade J held that the judge at first instance had not erred in his approach when deciding whether to grant an injunction to restrain a breach of covenant or damages in lieu.

Facts

The claimants purchased a rural house and surrounding land from the defendants in 2011, who retained significant land around the purchased property. As part of the transfer the defendants contracted to:
    "not erect or cause to be erected on the retained land any building or development without the consent of the transferee, save for the conversion and rebuilding of the cottage and a conversion of one of the barns to a second dwelling with the remaining farm buildings being removed and the land being returned to gardens and paddock surrounding the two houses."
In (an apparently blatant) breach of the covenant, in 2012 the defendants erected a new agricultural barn on the retained land. The parties entered into negotiations in the effort to agree revised restricted covenants, but no agreement was forthcoming. Then in 2015, in further breach of covenant, the defendants began to convert the new barn into three new residential dwellings. The claimants commenced injunction proceedings. As the breach was eventually admitted before trial, the sole issue for the Judge was whether to grant an injunction or damages in lieu. An injunction was granted.

First Instance

The Judge had awarded the Claimants their injunction, concluding that:
    "Standing back and taking all the circumstances into consideration, I conclude that this is an exceptional case in this sense: that the case for granting injunctive relief is exceptionally clear and there are no factors of sufficient weight to persuade me to a contrary conclusion.”
Chief amongst the factors leading to the grant of the injunction were the deliberate nature of the Defendants’ actions and the evidence of the Claimants, accepted by the Court, that they had moved to the countryside for a quiet life as far away from human contact as possible and the loss of this benefit could not be adequately compensated by damages.

Issues

The basis of the appeal was:
  • The Court applied the wrong test – namely that the Judge had based his decision on the test identified by the Court of Appeal in the case of Shelfar v City of London Electric Lighting Co. [1895] 1 Ch. 287, despite such an approach having been strongly criticised obiter by the Supreme Court in Lawrence v Fen Tigers Ltd [2014] AC 822.
  • The Judge erred by taking the wealth of the Claimants into account as a factor.
  • The Judge had erred by finding that a sum of damages for the breach could not be computed, but then assessing a sum of damages as a contingency, should he be wrong on the primary question.
  • Generally, the Judge had exceeded his discretion by awarding an injunction in all the circumstances of the case, particularly as "both parties would be better off" if damages in lieu had been awarded.
Decision on appeal

Slade J upheld the decision of the trial judge. The Judge had directed himself properly and had not slavishly followed the Shelfar test, but also weighed in the balance the relevant comments of the justices of the Supreme Court in Fen Tigers. The question of wealth had not in reality been a factor in his decision - considering his comments in context, he was merely pointing out that the aim of the Claimants had been to acquire a rural property and that they had secured the restrictive covenant not to extract money from the defendants, but in order to enjoy a quiet life.

Generally, the Judge had weighed the potential detriment to the Defendants in the balance and it could not be said that his discretion had exceeded the generous ambit within which reasonable disagreement was possible. The Judge had not erred in finding a figure for damages in the alternative.

Comments

The appeal judgment makes clear that judges are expected to pay significant regard to the extensive comments of the Supreme Court in Fen Tigers when approaching the Shelfar criteria in order to decide whether to grant an injunction or damages in lieu.

Any judge who confines themselves to the Shelfar test which in summary is:
  • If the injury to the plaintiff's legal rights is small, and
  • is one which is capable of being estimated in money, and
  • and is one which can be adequately compensated by a small money payment, and
  • the case is one in which it would be oppressive to the defendant to grant an injunction then damages in substitution for an injunction may be given [and often will be given bar in exceptional cases])
  • is likely to be appealed.
Following Fen Tigers the Judge will need to consider all the factual findings and circumstances of the case in order to do justice between the parties. "Unneighbourly conduct" had been one particular example of a relevant factor identified by Lord Neuberger in Fen Tigers, but a court may take a wide range of factors into account.

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