Why a recent High Court ruling could lead to a rights of light reset

The High Court case of Cooper and Powells vs Ludgate was eagerly awaited, as it represented a key opportunity to set the tone for future claims. And it did not disappoint. 

The claimants were individual owners of two flats in the high-end residential block Bankside Lofts. The defendant was Native Land, owner of a large phased development site on central London’s South Bank. 

Is Waldram dead?

The court decided that the alternative methods of assessing light loss (such as radiance or climate-based daylight modelling) were too unreliable, and it firmly endorsed the Waldram method. This therefore remains the industry standard assessment method.

When will an injunction be granted?

The High Court confirmed that the Fen Tigers case established a new approach, in which the court has a broad discretion whether to grant an injunction or award damages, taking account of all relevant factors. So the old Shelfer test, which broadly suggested that an injunction should be granted unless the injury was small and it would be oppressive to grant an injunction, is on the shelf. 

We have more clarity on the technical tests, on when an injunction will be granted, and how to assess damages 

In this case the court ultimately refused an injunction, for a number of reasons. None of the tenants of the offending building had been joined in. The harm to the developer, the tenants and the public if an injunction were awarded would be disproportionate to the harm to the claimants. The demolition and rebuilding would cost £250m, while the claimants could buy equivalent flats for perhaps £2m. All other persons had settled for money, which supported the argument that damages are an adequate remedy. 

Of course not all of these factors will be present in other cases, so a careful assessment of the injunction risk will need to be carried out. 

How are damages assessed?

The developer argued, relying on the Morris Garner case, that negotiating damages is not appropriate in any right of light case, and that the claimants should only be compensated for diminution in value (£60,000 for flat 605, and £20,000 for flat 705). The court rejected this and said that those figures were just too low.

The court also rejected an argument that damages should be assessed on the basis of market evidence of the value of the nearly 40 settlements completed with other residents. The court accepted these sums were informative but rejected these as direct evidence of what would have been agreed in the hypothetical negotiation to release rights.

Instead the court reinforced that hypothetical negotiating damages are the primary method of assessing damages in lieu of an injunction and suggested some practical guidelines:

• The hypothetical negotiation is assumed to take place post-planning but pre-construction start date. 
• The negotiations are not a ransom exercise because the claimants are deemed to be willing to sell at a reasonable price and the developer is deemed to be willing to buy at a reasonable price. 
• When assessing profit, valuers should carry out a residual valuation. 
• Any sum must be appropriately apportioned to take into account that another 40 or so residents might be in a position to demand a similar payment or try to injunct. 
• Damages of more than three times the value of an impacted property were not appropriate. 

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Applying those general principles to the facts: 

• The profit to the developer was in the region of £30m. 
• In view of the size and complexity of the development, and the high risk to the developer, only a modest share of that profit would have been agreed, probably about 12.5%. This suggested a profit pot of £3.75m.
• As the claimants were only two out of eight neighbours that could injunct, only one-quarter of that sum should be allocated to the claimants; the court uplifted that to one-third to reflect the claimants’ more entrenched positions. That then resulted in a sum of £1.25m to be shared between the Powells and Mr Cooper. 
• Splitting that to reflect the more significant cutbacks dictated by flat 605 resulted in a sum of £725,000 for the Powells and £525,000 for Mr Cooper.
• However, the court then considered the numbers in the round to assess whether they “feel right”. Having done so, the numbers were deemed to be simply too high. The court factored in that in the longer term, property values would increase.
• Ultimately the court awarded £500,000 for the Powells and £350,000 for Mr Cooper. 

So the above example illustrates that there is no simple formula to apply: one cannot simply say that a claimant will secure 12.5% of the profit. It depends on a variety of factors. 

Conclusion

So, where are we now? We have more clarity on the technical tests, on when an injunction will be granted and how to assess damages. But the critical “feel right” test continues to introduce a subjective element. 

Helpfully, the ruling is unlikely to significantly impact the insurance market. All in all, to use a phrase adopted by the court, the “ritual dance between professionals” when negotiating settlements is likely to continue, and the music goes on. 

Rashpal Soomal is a partner at Eversheds Sutherland