Claim in Birmingham District Registry
The Court of Appeal's recent judgment in Ramzan v Brookwide Ltd ( EWCA Civ 985) is a useful reminder of the principle that a claimant cannot recover more than once in respect of the same wrong, and that even the most culpable conduct may result in only a modest award of exemplary damages.
Mr Ramzan owned the freehold of the Jewel in the Crown curry house in Moseley, Birmingham from 1992 until its transfer to his son in 2001. The restaurant occupied the ground floor of the building; a first-floor function room, which was directly above it, was regularly hired for special events. Adjoining the function room was a storeroom in which Ramzan kept tools. It had clearly been included in the 1992 transfer to him, but unusually, it projected over the boundary with the neighbouring property. Thus, Ramzan owned the first-floor storeroom, but not the floor beneath it or the roof above it - hence, it was a flying freehold. Brookwide owned the property next door.
The storeroom was important to Ramzan because it allowed access to a fire escape, which was necessary to allow Ramzan to use the function room. Unfortunately, and unbeknown to Ramzan, the Land Registry plan was incorrect and showed the storeroom as part of the neighbouring property, although there was no access to it from there.
In 1999, builders acting on Brookwide's instructions broke into the storeroom, removed the wall which had prevented their access, bricked up the wall on Ramzan's side, disposed of his tools, cut through his alarm cables and destroyed the part of the fire escape which gave him access. This was part of Brookwide's plan to convert its property into flats. Brookwide proceeded to rent out the first floor, including Ramzan's expropriated storeroom in the demise.
Claim in Birmingham District Registry
Some years later, Ramzan issued proceedings in conversion to recover his stolen belongings. His son began proceedings for trespass and rectification of the register to show the true boundary. Although the judge accepted that Brookwide's title was subject to an overriding interest, entitling Ramzan to call for rectification (as the physical configuration took precedence over the incorrect plan), the delay had been so long that damages were awarded in lieu of rectification. The subsequent appeal concerned the damages and the proper method of calculation.
The judge awarded Ramzan junior:
- damages for past and continuing trespass, breach of trust and denial of title from the date on which he had purchased the property in 2001 (not from 1999, when the incident had occurred);
- damages representing all profits obtained by Brookwide from leasing the storeroom as part of its demise; and
- exemplary damages.
It was also made clear that Ramzan had not chosen any particular head of damage over another, perhaps because no careful consideration had been given at that stage as to which head of damage would yield the best result.
When damages came to be assessed under the first head, Brookwide was ordered to pay "the diminution in value" of Ramzan's property due to the loss of the storeroom. Significantly, the parties agreed to characterise this as the capital value of the storeroom, including the fire escape, in the sum of £50,000. Mesne profits for the wrongful occupation of the space occupied by the storeroom were ordered at an annual rate of 4.5% of the previously agreed capital value. The judge also awarded over £72,000 for the reinstatement of the fire escape on the basis that "damages in tort are designed to put the injured party in the position in which he would have been if the wrong had not been committed". In addition, more than £220,000 was awarded on the basis that the function room, had it been available for use as such, would have earned the Ramzans a profit of £24,000 a year during the relevant period.
Under the second head, Brookwide was ordered to pay just over £19,000. It had held the storeroom on trust for Ramzan and, as a result, had to disgorge the profits that it had obtained. However, this sum was to be offset against the mesne profits figure in order to avoid double recovery.
The judge also awarded £60,000 in "exemplary damages" to deter Brookwide from "repeating its objectionable behaviour", although she also expressed the view that Brookwide was unlikely to be so deterred.
Brookwide appealed, arguing that the award contained a number of elements of double counting or that it was excessive. Lady Justice Arden, delivering the leading judgment, largely agreed and gave a careful review of the authorities relating to the doctrine of election (ie, choosing which remedy to pursue) and the way in which exemplary damages should be calculated. She held that no damages for breach of trust should be payable if damages were awarded for loss of profits. She found that the respondent had suffered a single wrong: the misappropriation of his storeroom. Finding his claims for damages to be inconsistent, the judge held that "he must make an election between the two causes of action because they are for the same wrong and he can only recover once".
As to the timing of this election, the judge cited Lord Nicholls,(1) stating that:
"Faced with alternative and inconsistent remedies, a plaintiff must choose or elect between them. He cannot have both. The basic principle governing when... is simple and clear... when, but not before, judgment is given in his favour and the judge is asked to make orders against the defendant. He must make up his mind when judgment is being entered against the defendant."
The loss of the fire escape had been included in the £55,000 agreed capital value of the storeroom; therefore, no sum could be allowed for its reinstatement.
Finally, the judge reduced the exemplary damages award to £20,000, commenting that it was rare to award exemplary damages, and that in many cases the fact of making such an award should largely be sufficient. It was also incorrect for an exemplary award to be linked to a claim for loss of profits if the victim had elected to accept a compensatory award. All that could be said was that the sum should be "principled and proportionate". In this case the claim was being brought by Ramzan's son and the trespass and conversion had been complete before the 2001 transfer. However, Brookwide's conduct in contesting and prolonging the proceedings had had a significant and continuing effect on both father and son's health, justifying an award.
The judgment also contains instructive commentary on the circumstances in which damages can be awarded even if no loss has been suffered,(2) and on the risks of failing to produce an expert report until the last minute. For tactical reasons, Brookwide did not submit its expert accountancy evidence until one month before trial. The evidence was disallowed and Brookwide was left with no basis for challenging the Ramzans' figure of £24,000 a year, despite the fact that the figure was based on assumptions, rather than receipts. It was found that the Birmingham District Registry judge "had made the best assessment that she could" on the basis of the material before her, and that this award - which was the most substantial - could not be challenged on appeal.
For further information on this topic please contact Abigail Silver at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected]).
(1) Tan Man Sit v Capacious Investments Ltd  AC518.
(2) See Devenish Nutrition Limited v Sanofi–Aventis SA  EWCA Civ 1086 (eg, in user damages for breach of confidence or breach of fiduciary duty cases).