England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CCRTF 97/0011 CMS2

COURT OF APPEAL (CIVIL DIVISION)

Royal Courts of Justice

Strand, London WC2

Wednesday, 8th April 1998

B e f o r e :

LORD JUSTICE NOURSE

LORD JUSTICE PILL and

LORD JUSTICE THORPE

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DOUGLAS GAFFORD

Plaintiff (Respondent)

-v-

(1) A H GRAHAM

(2) GRANDCO SECURITIES LIMITED

Defendants (Appellants)

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Handed Down Judgment prepared by

Smith Bernal Reporting Limited

180 Fleet Street London EC4A 2HD

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(Official Shorthand Writers to the Court)

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MR C TAYLOR (MR D REGAN 8.4.98) (instructed by Messrs Arnold Cooper & Tompkins, Chichester) appeared on behalf of the Appellant Defendants.

MR G ZELIN (instructed by Messrs Sherwin Oliver, Portsmouth) appeared on behalf of the Respondent Plaintiff.

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J U D G M E N T

(As Approved by the Court)

Crown Copyright

Wednesday, 8th April 1998

LORD JUSTICE NOURSE:

This appeal raises questions on (1) acquiesence and (2) the remedy of an injunction or damages in lieu in relation to breaches of restrictive covenants affecting freehold land. The principal question is whether the owner of a dominant tenement who, having, with full knowledge of his rights, omitted to seek interlocutory relief to restrain the unlawful erection of a building on the servient tenement, ought to be granted an injunction, mandatory or prohibitory, or damages in lieu; cf. Wrotham Park Estate Co Ltd. v. Parkside Homes Ltd . [1974] 1 WLR 798, and Jaggard v Sawyer [1995] 1 WLR 269.

By a conveyance made on 31st December 1971 Mr and Mrs James Conwell became the freehold owners of a rectangular area of land consisting of some 22 acres at Hunston, near Chichester in West Sussex. The rectangle ran from north to south, the southern boundary having a frontage to the road from Chichester to Hunston. At that time there was a two bedroom bungalow on the south-west corner of the land. Subsequently, Mr Conwell built some stables and a yard adjacent to the bungalow. He also built another bungalow in the central area of the southern frontage as a new home for himself and his wife.

By a conveyance made on 22nd December 1976 ("the 1976 conveyance") Mr and Mrs Conwell conveyed to Mrs Margaret Anne Mackie the western portion of the property consisting of some 12 acres and including the original bungalow, the stables and the yard. The property conveyed was described as "Littlemead Farm Stables, Hunston". The 1976 conveyance contained restrictive covenants by Mrs Mackie, whose burden was imposed on the property thereby conveyed ("the covenant land") and whose benefit was annexed to each and every part of the 10 or so acres retained by Mr and Mrs Conwell ("the retained land"), which included their new bungalow. It is with those restrictions that this case is concerned. They were duly registered as a land charge class D(ii).

The restrictions were set out in the first schedule to the 1976 conveyance, the first three paragraphs of which provided:

"1. Nothing shall be done or permitted to be done on the property hereby conveyed which shall be or may grow to be a nuisance damage or annoyance to the owner or occupier for the time being of the Vendor's Retained Property or any part or parts thereof and at no time shall the premises hereby conveyed or any part thereof be used or permitted to be used other than as a livery yard and stabling for horses and one residential bungalow

2. Not more than one caravan shall be allowed to remain on the property hereby conveyed at any one time

3. No building of any description shall be allowed on the land hereby conveyed or any part thereof until detailed plans thereof have been submitted to and approved in writing by the Vendors PROVIDED ALWAYS that this covenant shall not apply to the bungalow at present erected on the land hereby conveyed nor to any renovating or alterations necessary to make the same fit for habitation and use nor to the stables and outbuildings at present erected on the land hereby conveyed."

I will refer to the second part of the first paragraph as "the user restriction" and the first part of the third paragraph as "the building restriction".

By a conveyance made on 17th May 1978 Mr and Mrs Conwell conveyed some two acres of the retained land, together with the new bungalow (described as "Littlemead Farm") to the plaintiff, Douglas Gafford. Although the 1976 conveyance had already annexed the benefit of the restrictive covenants to each and every part of the retained land, the conveyance to the plaintiff contained an express assignment to him of the benefit of those covenants.

On 19th November 1980 Mr and Mrs Conwell conveyed the remainder of the retained land to the first defendant, Arthur Hugh Graham, to whom I will refer simply as "the defendant". The second defendant, Grandco Securities Ltd, is a company owned and controlled by the defendant which carries on the riding school business hereafter referred to. On 15th May 1981 Mrs Mackie conveyed the covenant land to Mr and Mrs P W Brittain who, on 12 July 1983, conveyed it to the defendant. So at that stage the defendant became the owner of the servient tenement. Although he owned the major part of the dominant tenement as well, the restrictions could still be enforced against him by the plaintiff, as the owner of the remainder of the dominant tenement.

Both Mr Conwell and Mr Brittain gave evidence for the defendant at the trial, each of them describing the use made of the covenant land during the period of his ownership. Mr Conwell said that his wife had run a riding school there with 50 horses and up to 20 to 30 pupils at any one time. Mr Brittain said that he and his wife had about 17 to 20 horses, of which four were their own and the remainder were in livery. He said that he would not describe their establishment as a riding school. They did not give many lessons, perhaps 30 to 40 a month, the bulk of them to children or teenagers whose parents had horses in livery. While they were there the Brittains extended the two bedroom bungalow by adding another bedroom and bathroom. It nevertheless remained a bungalow. It has been unnecessary for us to consider whether the extension was authorised by the proviso to the building restriction or not. There was hardly any evidence as to what happened during Mrs Mackie's time. Mr Brittain said that he and his wife took over her liveries.

There has been some debate as to whether there was any breach of the user restriction between May 1978, when the plaintiff acquired his property, and July 1983, when the Brittains sold the covenant land to the defendant. Had there been such a breach, it might have been material to the question of acquiescence in relation to later breaches. However, whatever might have been said about the scale of the Conwells' activities between 1972 and 1976, the evidence does not establish that there was any unlawful user of the covenant land while it was owned by Mrs Mackie or the Brittains.

The restriction is against user other than as a livery yard and stabling for horses. It is said by the plaintiff that use as a riding school, outdoors just as much as indoors, is a breach of that restriction. While I accept that that in principle is so, I do not think that either Mrs Mackie or the Brittains can, on the evidence, be said to have been running a riding school. Certainly, the Brittains did no more than give tuition as an incidental part of their livery business and, in the absence of evidence to the contrary, Mrs Mackie must be taken to have done the same. Accordingly, it is not shown that the plaintiff would have had any ground of complaint as to the use of the covenant land before it was acquired by the defendant in 1983. Henceforth I will confine myself to the period of his ownership.

The action was commenced by a specially endorsed writ issued in the Chancery Division on 29th August 1989. Subsequently, it was transferred to the Mayor's and City of London County Court. At the trial the plaintiff alleged that the defendant had committed breaches of the restrictions in six specific respects. He alleged, first, that in 1986 the bungalow standing on the covenant land had, without the submission and approval of any plans, been converted into a two-storey house with a loft above; secondly, that in 1986 a barn standing on the covenant land had, without the submission and approval of any plans, been extended; thirdly, that in 1989 an indoor riding school had, without the submission and approval of any plans, been constructed on the covenant land; fourthly, that the business of a riding school, both indoors and outdoors, had been carried on on the covenant land; fifthly, that up to three caravans had been placed on the covenant land; sixthly, that the defendant had held car boot sales on the covenant land. The defendant raised various defences, claiming that the restrictions were not enforceable against him, that he had not been in breach of them and that, if he had, the plaintiff's claims had become barred by acquiesence.

The trial of the action took place before His Honour Judge Simpson over five days in October 1996. In his reserved judgment delivered on 9 December 1996 he held that the restrictions were enforceable against the defendant and found that he had been in breach of them in all the respects alleged by the plaintiff. He found that plans had not been submitted on any of the three occasions when they ought to have been submitted and, further, that the plaintiff would not have approved them if they had been. He rejected the defence of acquiesence. Having recorded that the plaintiff did not ask for the house or the extension to the barn to be demolished, but would prefer demolition of the riding school, the judge said that he could not grant that request. Instead he granted an injunction requiring the defendant to cease operating the business of a riding school, whether indoors or outdoors, and a further injunction restraining him from causing or permitting the covenant land to be used other than as a livery yard and stabling for horses. In addition, he awarded the plaintiff damages of £250 for the defendant's breach in failing to submit plans of the riding school for approval. In regard to the extension of the barn the judge awarded damages of £750 and for the conversion of the bungalow £20,000. The total money judgment, including interest, was for £36,750. The judge recorded that the defendant's placing of additional caravans on the covenant land and allowing car boot sales to take place there had ceased and that no point was made about them. He did, however, point out that any such activity in the future would be prohibited by the second injunction he proposed to grant.

The judge later granted a stay of his order. So the riding school business is still being carried on. The defendant has appealed to this court. The judge's decision as to the enforceability of the restrictions against the defendant is not now questioned. The case against enforceability appears always to have been hopeless. The controversy before us has centred on breach, acquiesence, the form of the injunctions granted and the amount of the damages awarded. The defendant contends that no injunction ought to have been granted and that the plaintiff ought to have been awarded minimal damages in lieu. In particular, he says that the £20,000 awarded in respect of the conversion of the bungalow was grossly excessive. On the other side, the plaintiff, by way of cross-appeal, has maintained his claim for an injunction requiring the riding school to be demolished. Alternatively, he claims that the existing injunctions should be maintained and that he should be awarded additional damages in respect of the unlawful use as a riding school to date. In the further alternative, he claims damages in lieu of those injunctions.

Argument was heard in this court on 26th and 27th January last. At the conclusion of the hearing counsel were given leave to put in further written submissions on the quantum of damages to be awarded in addition to or in lieu of an injunction in respect of the indoor riding school and the current business, a process which was not completed until 23rd February. We are grateful to counsel for their submissions, both written and oral.

The judge said that the facts alleged by the plaintiff were hardly in dispute. In order to assess the merits of the rival contentions it is necessary to state them in greater detail than they were stated by the judge.

In 1984 the defendant started to call the covenant land "the Hunter's Lodge Riding Centre". He put up a sign bearing that name. In his evidence the plaintiff thought that he first complained to his solicitors about the riding school in 1984, but their file disclosed that he did not contact them until 1987. On 27 March 1985 the plaintiff wrote to the defendant complaining of three matters, one of which was damage caused to his trees and the boundary fence by the defendant's horses. He made no complaint about a riding school as such.

In 1985 the defendant obtained planning permission for the conversion of the bungalow. The judge found that the plaintiff entered an objection to the application with the local planning authority but did not write to the defendant because, as the plaintiff claimed, he did not know where the defendant lived. The judge said he could have easily found that out. The defendant made no application for planning permission in respect of the extension to the barn. As to those two matters, the judge made the following further findings:

"The plaintiff was aware of the work beginning on the bungalow and although he raised it with his own solicitors he did not complain to Mr Graham. In 1986 extension works were carried out on the barn but Mr Gafford did nothing about it because he imagined the local authority would have it removed because no planning permission had been obtained for them. He telephoned the local authority offices about the matter and mentioned it to his own solicitors. The works were finished in a week but he did not get in touch with Mr Graham at all. The plaintiff told me that he would not have got anywhere. Mr Gafford has always had a copy of his title deeds and read them in 1987 to 1988. During the whole period he was aware of their terms and therefore was aware of the restrictive covenants. At all times he had the details of the covenants in his mind. Although he complained to his solicitors about these various matters no complaint was made to Mr Graham until the correspondence above-mentioned. The riding lessons were carried on for five years without challenge."

The correspondence referred to by the judge started with a letter of 7th March 1989. Before that, on 31st March 1988, the plaintiff had written to the local planning authority recording his objection to the granting of planning permission for the construction of the indoor riding school. He said:

"The proposed building would be an enormous structure, ugly and in full view from my property. I am surrounded on all sides by this poorly managed establishment and I suffer a constant assault by this dirt, noise, smell and animals and I am therefore opposed to any extension of this enterprise in any form.

The application shows that an estimated 20 vehicles a day will be entering and leaving. The actual number is already about double that and the use of this building will certainly increase it further."

Notwithstanding the plaintiff's objection, planning permission was granted on 31st October 1988, after an appeal to the Secretary of State. The plaintiff said in evidence that in February 1989 he became aware that something was afoot, in that large quantities of concrete began arriving by lorry load, which he presumed was for the foundation work for the riding school. He wrote to the solicitors then acting for him on 22nd February and on 7th March 1989 they wrote to the defendant at his home address in Chichester. Their letter alleged that the defendant was in breach of the covenants in that:

"(1) Your activities in that area generally constitute a nuisance to our Client.

(2) You are in breach of the user clause mentioned in paragraph 1 of the First Schedule of the 1976 Conveyance.

(3) You have erected, and are in the course of erecting, buildings on the land in breach of paragraph 3 of the said Schedule."

The letter contained a request that the defendant should cease all building activities on the riding school forthwith and that he should make proposals on the matters complained of, including the conversion of the bungalow and the extension to the barn. It ended by saying that in the event that nothing had been heard from the defendant within seven days:

"we must formally put you on notice that our Client will consider himself at liberty to take whatever action seems to him necessary to preserve his position and that such action may include an injunction for damages and costs."

The judge recorded that a without prejudice reply was written by the defendant's solicitors on 15th March, two days after the work had started. On 10th April the plaintiff's solicitors wrote to the defendant's solicitors, stating their understanding that the defendant had not ceased building activities on his land. Having repeated the breaches alleged and the request that the defendant should cease all works and provide them with his proposals for rectification of the various breaches, they also repeated their threat to commence proceedings for an injunction.

On 11th April the defendant's solicitors replied asking for a precise statement of the damage suffered by the plaintiff and for a statement of the sort of consideration he would be seeking in exchange for giving his approval to the works. Meanwhile, without prejudice correspondence was being exchanged. On 28th April the plaintiff's solicitors wrote putting the defendant's solicitors on notice that:

"such correspondence or delay is not to be taken as any acquiesence on our Client's part and, further, any projects that your Client commences or continues on his land in breach of covenant are a matter for him and at his own risk."

The judge found that the construction of the riding school was completed by the end of April, at about the time that that letter would have been received.

On 12th May the plaintiff's solicitors wrote the defendant's solicitors a without prejudice letter which, with the agreement of both sides, was placed before the judge. In it they set out certain figures, on the basis of which they maintained that a reasonable amount to be paid to the plaintiff in settlement of the dispute was £100,800. The defendant's solicitors replied on 21st June stating that he had no intention of making any payment whatsoever. As I have said, the writ was issued on 29th August 1989. Notwithstanding his earlier threats, the plaintiff made no application for interlocutory relief.

I deal first with the conversion of the bungalow and the extension to the barn, the former having constituted a clear breach of both user and building restrictions and the latter a clear breach of the building restriction. The defendant claims that the plaintiff's rights to relief in respect of those breaches are barred by acquiesence. I have already read or referred to the judge's findings in respect of these two matters which, if taken in isolation, suggest that he thought that acquiesence had been made out. Although he did not make a clear distinction between the bungalow and the barn on the one hand and the other matters of complaint on the other, I think that the following further observations were directed, at least in part, to the bungalow and the barn:

"In view of the absence of complaint to Mr Graham over several years and the general inactivity in the matter, it was submitted on behalf of the defendants that by the date of the issue of the writ the plaintiff had lost any entitlement to claim equitable relief and if that is the case he has also lost his entitlement to seek damages in lieu. However, it seems to me that this argument overlooks the fact that the plaintiff also has the benefit of a legal assignment."

It appears that the judge's reference to a legal assignment was brought about by the citation to him in argument of the decision of this court in Shaw v. Applegate [1977] 1 WLR 970, where, at p 979H, Goff LJ, relying on the judgment of Farwell J. in Osborne v. Bradley [1903] 2 Ch 446, 451, expressed the view that it is easier to establish a case of acquiesence where the right is equitable only. Shaw v. Applegate was a case where it was the original covenantor who was alleged to have been in breach, so that the right of the covenantee by assignment was indeed a legal right. Here Judge Simpson was evidently impressed by the express assignment to the plaintiff of the benefit of Mrs Mackie's covenant with Mr and Mrs Conwell. That certainly gave the plaintiff a legal right as against Mrs Mackie. But he cannot now enforce the restrictions against her. He seeks to do so against one of her successors in title to the covenant land. His right against the defendant, being enforceable only because the burden of the covenant runs with the covenant land in equity, is equitable only. Accordingly, the judge was wrong to place weight on the assignment of the benefit of the covenant to the plaintiff.

For myself, I doubt whether a distinction ought any longer to be made between a legal and equitable right when considering a defence of acquiesence in a case of this kind. In Shaw v. Applegate , at p 978D, Buckley LJ said:

"The real test, I think, must be whether upon the facts of the particular case the situation has become such that it would be dishonest or unconscionable for the plaintiff, or the person having the rights sought to be enforced, to continue to seek to enforce it."

At p 780C, Goff LJ agreed that the test was whether, in the circumstances, it had become unconscionable for the plaintiff to rely on his legal right. If that is the correct test for a legal right, it could hardly be suggested, unconscionability being the soul of equity, that there should be some lower test for an equitable right. Moreover, in his admired judgment in Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co Ltd. [1982] QB 133 (a case of common mistake as to the registrability of an option to renew a lease) Oliver J, after an extensive review of the earlier authorities on equitable estoppel, acquiesence and the like concluded, at p 155C:

"The enquiry which I have to make therefore, as it seems to me, is simply whether, in all the circumstances of this case, it was unconscionable for the defendants to seek to take advantage of the mistake which, at the material time, everybody shared . . ."

Thus here the enquiry must be whether, in all the circumstances, it would be unconscionable for the plaintiff to continue to seek to enforce the rights which he undoubtedly had in 1986 to complain of the conversion of the bungalow and the extension to the barn. On the facts found or referred to by the judge, I am unable to answer that question except in the affirmative. The plaintiff knew what his rights were. He never made any complaint or objection to the defendant at the time. His objection to the application for planning permission in respect of the bungalow and his complaints to his solicitors can avail him nothing. He made no complaint to the plaintiff until his solicitors wrote their letter of 7th March 1989, about three years after the acts complained of. He only complained of them then because of the much more serious threat presented by the proposed construction of the riding school. Before that he had effectively treated the conversion of the bungalow and the extension to the barn as incidents which were closed.

For these reasons, I would hold that the plaintiff acquiesced in the conversion of the bungalow and the extension to the barn, his acquiesence being a bar to all relief in respect of those matters. I would discharge the judge's awards of £20,000 and £750 damages accordingly. That makes it unnecessary to consider the quantum of those awards.

I deal next with the question whether the defendant carried on a riding school business between 1984 and 1989 in breach of the user restriction. Again, had there been such a breach, it might have been material to the question of acquiesence in relation to later breaches. I have already stated my view that the carrying on of such a business, not simply as an incidental part of a livery business, would have constituted a breach. That was the view taken by the judge who, in relation to the user restriction as it affected the indoor riding school, said:

"It seems to me that the words used are clear and the true construction of this covenant admits of no doubt. The activity of a riding school does not fall within it and accordingly Mr Graham is in breach of this stipulation also."

I agree. However, the judge made no finding as to the period between 1984 and 1989, except that the construction of the riding school followed a period when riding lessons were given outside, the lessons being carried on for five years without challenge.

Clearly it would have been possible, as was the case during the period of the Brittains' ownership between 1981 and 1983, for the lessons to be given as an incidental part of the defendant's livery business. Indeed, it could be said that the lack of a positive finding in relation to the period up to 1989, coupled with his finding in relation to the period after that date, demonstrates that that was how the judge viewed it. In any event, an unlawful user between 1984 and 1989 is not satisfactorily established on the evidence. The sign put up in 1984 proves nothing. Although the conversion of the bungalow enabled more resident staff to be accommodated on the premises, it has not been shown that they were not all employed in the livery business. Further, no qualified riding instructor was employed before the erection of the indoor riding school and no licence under the Riding Establishments Acts 1964 and 1970 was obtained until 8 May 1990. The available financial information shows a very substantial increase from 1989 onwards both in the income of the business and in the number of horses stabled. The judge referred to an advertisement in the local paper at the end of 1990 which read: "Riding lessons and schooling. Seven days a week. Large floodlit indoor school." I think that Mr Zelin, for the plaintiff, was right in saying that it was not until 1989 that the scale of the business became excessive.

I therefore conclude that there was no breach of the user restriction between 1984 and 1989 and that there was nothing in which the plaintiff could have acquiesced. On any footing the question of acquiesence during that period appears to be a sterile one. It is very difficult to see how acquiesence in the business of an outdoor riding school up to 1989 could amount to acquiesence in the much larger business of an indoor and outdoor riding school after that date.

I now come to the plaintiff's real and substantial complaints, which arise out of the construction of the indoor riding school and the carrying on of the much larger business to which it has led, the former having constituted a clear breach of the user and building restrictions and the latter a clear breach of the user restriction. Again, the defendant claims that the plaintiff's rights to relief in respect of those breaches are barred by acquiesence.

A helpful introduction to this part of the case is an observation of Fry LJ in Sayers v. Collyer (1884) 28 ChD 103, 110:

"Acquiesence may either be an entire bar to all relief, or it may be a ground for inducing the Court to act under the powers of Lord Cairns' Act."

Here there can be no question of acquiesence being an entire bar to all relief in respect of the riding school and the current business. In contrast to his inaction over the conversion of the bungalow and the extension to the barn, the plaintiff acted promptly at the end of February 1989 when he first became aware that something was afoot, and his solicitors' letter of 7th March was received by the defendant before the construction works began. Further, their letter of 28th April demonstrated that the plaintiff would continue to assert whatever rights he had. The criticism which can be made of him is that he made no application for interlocutory relief. Had he carried out the threat made in the letter of 7th March, there could have been little doubt that he would have been granted an injunction restraining further execution of the works. There could have been no doubt as to the enforceability of the restrictions or their prohibitive effect and an interlocutory injunction would have followed almost as of course. Accordingly, the plaintiff's omission to apply for interlocutory relief was an important factor to be taken into account by the judge when considering whether he ought to grant a mandatory injunction at trial for the demolition of the building.

In refusing to grant such an injunction whilst holding the defendant to the terms of the user restriction, the judge said:

"By failing to issue a writ and motion for an interlocutory injunction at the outset, he or his advisers took the risk that the building would be completed before the trial of the action could take place. Moreover, it has been in existence for seven and a half years. It would not be right to compel its destruction now when it could be used, or adapted for use, in a way which would not violate the covenant. No reason has been advanced why it could not be used for stabling horses, which is an activity allowed by the stipulations."

Later, having referred to some observations of Sir Thomas Bingham MR in Jaggard v. Sawyer [1995] 1 WLR 269, 283, and to the defendant's submission that the grant of any injunction would be oppressive and disproportionate, the judge said:

"As against that, it seems to me that Mr Graham, who was aware of the covenants and knew that use of his land was limited, disregarded the plaintiff's rights and, even after he was challenged, proceeded to complete the building work without stopping while the matter was investigated. He was determined to press ahead in the face of the complaint and saw the riding school as an opportunity for profit; hence the advertisement mentioned above. Knowing that the action had commenced he started up the business. This tells me much about his attitude and reflects little credit upon him. He has demonstrated that he does not care much about Mr Gafford or his rights and reasonable concerns. The decisions not to submit plans for approval were taken deliberately. In these circumstances it would not be oppressive to grant an injunction."

In regard to that reasoning, Mr Taylor, for the defendant, has contended that the adaptation of the riding school for the stabling of horses could only be achieved, if at all, at exorbitant expense. That may well be so, although it must at once be said that the evidence did not address that point. Mr Taylor submits that the injunctions granted by the judge, if they are allowed to stand, will sterilise the use of the building. On the other side, Mr Zelin has submitted that if the building cannot sensibly be adapted for any permissible use it is serving no useful purpose and should be demolished. He contrasts the facts here with those of the Wrotham Park case, where, at p 711B, Brightman J evidently gave great weight to the unpardonable waste of much needed houses which would be the consequence of his directing that they should be pulled down.

The principles on which judges should act when deciding whether to grant injunctions or to award damages in lieu under Lord Cairns' Act were recently considered by this court in Jaggard v. Sawyer (supra), where the earlier authorities are fully discussed. They need not be discussed again. While many of them might suggest that a judge's function in granting relief under that Act is more circumscribed than is the norm, it is important to emphasise that the principles, being principles of discretion, must always remain adaptable to the facts of individual cases. Such indeed was the view of Millett LJ who, in a passage I entirely and gratefully adopt, said at p 288A:

"Reported cases are merely illustrations of circumstances in which particular judges have exercised their discretion, in some cases by granting an injunction, and in others by awarding damages instead. Since they are all cases on the exercise of a discretion, none of them is a binding authority on how the discretion should be exercised. The most that any of them can demonstrate is that in similar circumstances it would not be wrong to exercise the discretion in the same way. But it does not follow that it would be wrong to exercise it differently."

In the present case I start from this position. Although the judge may have underestimated the cost and the practical difficulties of adapting the riding school for the stabling of horses, it would not be right for this court to interfere with his decision not to grant a mandatory injunction for its demolition. Without that part of his reasoning, a powerful case was still made out for the refusal of such a drastic order. As a general rule, someone who, with the knowledge that he has clearly enforceable rights and the ability to enforce them, stands by whilst a permanent and substantial structure is unlawfully erected, ought not to be granted an injunction to have it pulled down.

So what is to be done? There may be force in Mr Taylor's contention that the adaptation of the riding school would be a costly and impracticable exercise. Further, it may be realistic to suppose that the defendant would thus be left with far more stabling than would be needed for the purposes of a livery business. Equally, the court would be reluctant to force a building constructed for one purpose to be adapted to another unless no other solution was fair and reasonable.

It may well be that if those had been the only relevant considerations, the defendant would have shown insufficient grounds for the injunctions to be discharged, especially when account is taken of the judge's strictures on the conduct and attitude of the defendant, which amount to saying that he acted in blatant and calculated disregard of the plaintiff's rights. There is, however, a further factor which tips the balance in favour of an award of damages. By his solicitors' letter of 12th May 1989 the plaintiff made it clear that he would be prepared to accept a cash sum in settlement of the dispute. The suggested figure of £100,800 was obviously excessive and it would in any event have had to be reduced in order to leave the bungalow and the barn out of account. But the plaintiff's position was made clear. He would have been prepared to settle the dispute on payment of a cash sum. Why should he not be held to that position and granted damages in lieu of an injunction?

It is said that an insurmountable obstacle to such an award is presented by the observations of Lindley and A L Smith LJJ in Shelfer v. City of London Electric Lighting Co [1895] 1 Ch 287. At p 315 Lindley LJ said:

"But in exercising the jurisdiction thus given attention ought to be paid to well settled principles; and ever since Lord Cairn's Act was passed the Court of Chancery has repudiated the notion that the Legislature intended to turn that Court into a tribunal for legalising wrongful acts; or in other words the Court has always protested against the notion that it ought to allow a wrong to continue simply because the wrongdoer is able and willing to pay for the injury he may inflict."

At p 322, A L Smith LJ said:

"Many Judges have stated, and I emphatically agree with them, that a person by committing a wrongful act (whether it be a public company for public purposes or a private individual) is not thereby entitled to ask the Court to sanction his doing so by purchasing his neighbour's rights, by assessing damages in that behalf, leaving his neighbour with the nuisance, or his lights dimmed, as the case may be . . .

In my opinion, it may be stated as a good working rule that -

(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."

It is said that an award of sizable damages in this case would disregard those observations, and in particular A L Smith LJ's good working rule.

In Jaggard v. Sawyer Sir Thomas Bingham MR, having read those and an intervening passage from the judgment of A L Smith LJ, said at p 278B:

"Many later cases have turned on the application of this good working rule to the particular facts of the case before the court. This case may be said to do the same."

At p 286D Millett LJ, having read the observations of Lindley LJ and A L Smith LJ's good working rule, said:

"Laid down just one hundred years ago, A L Smith L.J.'s check-list has stood the test of time; but it needs to be remembered that it is only a working rule and does not purport to be an exhaustive statement of the circumstances in which damages may be awarded instead of an injunction."

Then followed the passage I have already read. In the result, this court applied the good working rule and affirmed the judge's decision to make a small award of damages.

Both Shelfer v. City of London Electric Lighting Co and Jaggard v. Sawyer were cases where the suggestion that the plaintiff's rights should be bought out for a cash sum was strongly resisted. Thus in Jaggard v. Sawyer , at p 286G, Millett LJ referred to Mrs Jaggard's understandable complaint that what the judge had in effect done was to grant Mr and Mrs Sawyer a right of way in perpetuity over her land for a once and for all payment. Here the plaintiff can make no such complaint. His willingness to settle the dispute on payment of a cash sum can properly be reflected by an award of damages. Nor, once that is established, can it be an objection that the amount of damages may be large. The injury to the plaintiff's legal rights must be adequately compensated. In such a case the first and third conditions of the good working rule do not apply.

I summarise the position as follows. The essential prerequisite of an award of damages is that it should be oppressive to the defendant to grant an injunction. Here that prerequisite is satisfied. It would be oppressive and therefore unfair to the defendant to allow the judge's injunctions to stand. The plaintiff should receive an award of damages instead. It would be unfair to him for them not adequately to compensate him for the injury to his legal rights. It is to the quantification of those damages that I finally turn.

Since the judge did not consider the quantum of damages in respect of the indoor riding school and the current business, either side could have asked for that question to be remitted to him. It was because they were both content that we should decide it ourselves that we gave counsel leave to put in further written submissions.

A welcome consequence of Jaggard v. Sawyer is that it has firmly established the Wrotham Park basis of assessing damages as the basis appropriate to cases such as this. There have been some differences of opinion as to the correct analysis of that decision, the difficulty being, as the plaintiffs there conceded, that the defendants' breaches of covenant had caused no diminution in the value of the land to which the benefit of the covenant was annexed; see [1974] 1 WLR at p 182F-G. No doubt it was for that reason that in Surrey County Council v. Bredero Homes Ltd [1993] 1 WLR 1361, 1369, Steyn LJ expressed the view that the Wrotham Park damages were defensible only on the basis that they were restitutionary in nature. However, that view was rejected in Jaggard v. Sawyer by both Sir Thomas Bingham MR and Millett LJ who, agreeing with Megarry VC in Tito v. Waddell (No. 2) [1977] Ch 106, 335, thought that Brightman J's approach had been compensatory, in that the damages awarded were intended to compensate the plaintiffs for not having obtained the price they would have been able to obtain for giving their consent, had they been asked to give it.

The compensatory analysis, if accompanied by a recognition that it was not a diminution in value of the dominant tenement that was compensated, is perfectly acceptable. Equally, in a case where there has been such a diminution, there seems to be no reason why it should not be taken into account in assessing the sum which might reasonably have been demanded as a quid pro quo for relaxing the covenant. Whatever the correct analysis may be, Jaggard v. Sawyer , as both sides agree, is clear authority for the adoption of the Wrotham Park basis of assessing damages in this case. I therefore proceed to assess them by reference to the sum which the plaintiff might reasonably have demanded as a quid pro quo for relaxing the restrictions in perpetuity, so as to permit the construction of the indoor riding school and the carrying on of an indoor and outdoor riding school business.

This question was fully dealt with in evidence and argument before the judge on the footing that he would either grant a mandatory injunction for the demolition of the riding school or damages in lieu. Expert evidence was given for the plaintiff by Mr T E James, a chartered accountant, and Mr S J Lush, a chartered surveyor. On the defendant's side evidence was given by Mr J Walters, a chartered accountant who had taken on the defendant as a client after the death of his previous accountant in March 1996. Each expert put in written evidence and gave oral evidence at the trial. There was also documentary evidence, much of it relating to the second defendant's business. The judge, having decided to grant a prohibitory injunction, did not consider the evidence pertaining to this head of damages and made no findings on it.

We have been supplied with transcripts of the evidence of all the witnesses and with copies of the trial bundles of documents. In agreeing that we should decide the question of damages ourselves, the parties have shown themselves to be content that we should do so without having had the advantage of seeing and hearing the witnesses give their evidence. We have, however, had the advantage of considering the detailed sequential written submissions of counsel, in which many references to the evidence have been made.

In the circumstances stated, it would not be profitable for the evidence to be examined and the submissions discussed. In the end, as with many questions of damages, it is a matter of judgment. Mr Zelin has submitted that the correct figure is £26,500, being the approximate mean between two valuations of the relaxation of the covenant made by Mr Lush, the first based on the income assumed to have been generated by the business and the second on the marriage value between the land and the facility afforded by having the riding school. Mr Taylor has submitted that the correct figure is £5,000, being 5% of the approximate cost of constructing the riding school. I am in no doubt that Mr Lush's valuations represent a far more realistic guide to the amount which the plaintiff might reasonably have demanded for a relaxation of the restrictions in the spring of 1989. I think that he might reasonably have demanded a round sum of £25,000 and I would award damages in that amount.

We have also received written submissions on interest. On the damages he awarded in respect of the conversion of the bungalow and the extension of the barn in 1986 the judge only allowed interest for the six years up to 1992. That was because he thought that the plaintiff was largely responsible for the action not having come to trial, as it ought to have done, in 1992. By the same token, Mr Zelin accepts that interest on the damages now to be awarded should only run for the three years between 1989 and 1992. Each side is content with simple interest at 12.5%, the rate awarded by the judge. That produces a figure of £9,375 and a total award of £34,375.

I would allow the appeal, dismiss the cross-appeal, discharge the injunctions granted by the judge and reduce the amount of the damages from £36,750 to £34,375. No doubt it will be desirable to make a declaration as to the defendant's rights, the form of which can be discussed with counsel after judgment.

LORD JUSTICE PILL: I agree.

LORD JUSTICE THORPE: I also agree.

Order: appeal allowed; cross-appeal dismissed; injunctions granted by the judge discharged; amount of damages reduced from £36,750 to £34,375; judge's order for costs below in favour of the plaintiff to stand; the defendant to have two-thirds of his costs of the appeal; counsel to agree a form of declaration as to the defendant's rights, to be incorporated into an agreed minute of order (to be signed by Mr Zelin and approved by Mr Regan) and lodged with the court.