Hkruk II (CHC) Limited v Marcus Alexander Heaney [2010] EWHC 2245 (Ch) is about a land owner who obtains an injunction against a developer to protect his rights to light. It revolves around two well-known buildings in Leeds city centre; the old Yorkshire Penny Bank building owned by Mr Heaney and a new building known as Toronto Square owned by Highcross (the developers). The case was due to be heard by the Court of Appeal this year but it has now settled so the first instance decision of Judge Langan QC stands as the current law in this area. It has surprised many industry professionals and has even spearheaded a consultation by the Law Commission on the issue which runs from 18 February 2013 to 16 May 2013 but has anything really changed? And what lessons should developers take from Heaney?

Background

Highcross acquired the site on which Toronto Square now stands in 2007 for £18,750,000 (which was reduced from a previously higher figure by £350,000 to allow for any potential rights to light claims) with a view to re-developing the site. Highcross planned to construct a sixth and seventh floor to the building and they had been informed that these plans amounted to an actionable loss of light in relation to the Yorkshire Penny Bank building.

Correspondence was exchanged between the parties during late 2007 and 2008 with a view to reaching a commercial settlement. However, these discussions were not successful and Mr Heaney instructed Pinsent Masons in late 2008 who, on their client's behalf, threatened to obtain a High Court injunction. Shoosmiths, acting for Highcross, queried whether an injunction would be available in this scenario. Silence descended for almost eight months (save for a brief exchange in February 2009) and the building work continued at a pace.

The building works were completed on 10 July 2009 following which Shoosmiths on 19 August 2009, rather unusually, issued proceedings to seek a declaration:

  1. that Mr Heaney had waived his right to obtain an injunction; and
  2. as to what the amount of damages payable to Mr Heaney should be.

Mr Heaney counterclaimed for an injunction.

The Law

The general rule is that the remedy for the infringement of a right to light is an injunction. This rule is, however, not without exception and the court has discretion in deciding whether or not to grant an injunction. The key case, notwithstanding Heaney, remains Shelfer v City of London Electric Lighting Company [1895] 1 Ch 287 which was decided by the Court of Appeal in 1894 and has remained good law to the present day. L Smith LJ in Shelfer sets out a 'good working rule' as to whether to grant an injunction or make an order for damages instead.

This rule is:

  1. If the injury to the plaintiff's legal rights is small;
  2. And is one which is capable of being estimated in money;
  3. And is one which can be adequately compensated by a small money payment;
  4. 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.

Prior to Heaney, Shelfer has been applied in numerous cases and in the modern case of Jacklin v The Chief Constable of West Yorkshire [2007] EWCA Civ 181 the court emphasised that ALL of the limbs of the Shelfer 'good working rule' need to be satisfied for the court to award damages in substitution for an injunction. This represents a difficult hurdle for a developer to overcome and as such due care should be given to rights to light issues when they arise.

The Decision

Judge Langan granted an injunction requiring that the additional floors be pulled down but he recognised that it was a borderline case. Taking each of the limbs of the Shelfer test in turn, the Judge found that:

  1. on a technical analysis of the injury, the reduction in book value was around 2% of the value of the building and the loss of adequately lit space was around 1% but the decision as to what is small is subjective and dependent on impression as much as analysis. Given (i) the character of the building, (ii) the commitment that Mr Heaney had demonstrated in restoring the property and (iii) the extent to which Highcross's actions had reduced the flow of light, the injury was not small and therefore fell foul of point 1 of the test;
  2. the damage could manifestly be compensated in money so point 2 was satisfied but as mentioned above all of the limbs need to be satisfied for a claim to succeed;
  3. an estimate of common law damages would be £225,000 and that this is not in absolute terms or relevant terms a small money payment and therefore fell foul of point 3 of the test; and
  4. the costs to Highcross of removing the infringing development would be somewhere in the region of £1,100,000 and £2,500,000 (plus consequential loss of prime office space which had already been let) which most people would probably consider to be 'oppressive'. However the Judge found that, since Highcross had developed in full knowledge that the infringement gave rise to an actionable loss of light and continued nevertheless in pursuit of profit, an injunction would not be 'oppressive' to Highcross in law.

This case has attracted a lot of attention but Heaney does not represent a change in the law. It was simply a restatement of the Shelfer 'good working rule' but it was the first time that the rule had resulted in a court order that part of a commercial building be pulled down. This case has attracted a lot of attention because of unusual facts but it is simply applying the law which has remained unchanged since the nineteenth century.

A Word of Caution!

This case highlights that, in spite of a nineteenth century judicial decision which is accepted as good law, the courts will refer back to the overriding principal that a wrongdoer will not be entitled to sanction his acts by making a payment of damages. Judge Langan said that 'it would be wholly wrong for the court to effectively sanction what has been done by compelling Mr Heaney to take monetary compensation which he does not want'.

The very serious risk of an injunction which compels a developer to do (or not to do) something when infringing upon rights to light should be given proper consideration. Developers should not simply make an allowance for compensation for infringements on rights to light in a project appraisal and then carry on.