IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION, BIRMINGHAM DISTRICT REGISTRY
(HIS HONOUR JUDGE NORRIS QC)
B e f o r e :
LORD JUSTICE SCOTT BAKER
LORD JUSTICE NEUBERGER
|(1) LUNN POLY LIMITED|
|(2) TUI UK LIMITED||CLAIMANT/APPELLANT|
|- v -|
|(1) LIVERPOOL & LANCASHIRE PROPERTIES LIMITED|
|(2) DERWENT HOLDINGS LIMITED||DEFENDANT/RESPONDENT|
Smith Bernal Wordwave Limited
190 Fleet Street, London EC4A 2AG
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MR S EYRE (instructed by Messrs Wright Hassall, 9 Clarendon Place, Leamington Spa, CV32 5QP) appeared on behalf of the Respondent
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a) the basis of assessment of damages in lieu of a final injunction;
b) whether the judge was entitled to refuse the defendants an inquiry as to damages on the cross-undertaking; and
c) the basis of assessment of costs.
a) a covenant by the landlords for quiet enjoyment;
b) a qualified reservation in favour of the landlords permitting alteration of the common parts of the centre;
c) a covenant by the tenant not to share occupation or possession of the unit;
d) a covenant by the tenant to comply with requirements of the fire authority and of the landlords relating to fire precautions;
e) a covenant by the tenant to pay the landlords' costs on an indemnity basis in relation to notices and proceedings concerned with forfeiture;
f) a proviso for re-entry in favour of the landlords in the event of the tenant being in breach of covenant.
a) While the tenant had not acquiesced, it had stood by while the works to the centre were carried out, knowing of the landlords intention to relocate the fire door without seeking interlocutory relief;
b) The tenant had made it clear that it was prepared to agree to the relocation of the fire door for a "financial incentive";
c) The impact of relocation of the fire door on the tenant would not be "too disruptive", whereas the impact on the landlords of not being able to relocate the fire door would be "significant";
d) The tenant would not be losing its fire escape route, as the landlords were prepared to construct a new one at a convenient location;
e) The parties had been negotiating for eight months on the basis that the fire door would be relocated.
The first issue: the approach to the assessment of damages
". to ascertain 'such a sum of money as might reasonably have been demanded by [the claimant] from [the defendant] as a quid pro quo for [permitting the breach of covenant to perpetuate]', to use (and adapt) the formulation of Brightman J. in Wrotham Park v. Parkside Homes  1 W.L.R. 798 at 815D. This basis of assessing damages was approved in Jaggard v. Sawyer  1 WLR 269, and explained further in Attorney-General v. Blake  3 WLR 625.
12. It is also common ground that the way of ascertaining what that sum is, is to consider the sum that would have been arrived at in negotiations between the parties had each been making reasonable use of their respective bargaining positions without holding out for unreasonable amounts. This requires, in turn, that the parties have regard to the cost or detriment to the claimant and the benefits for the defendant of the latter's being allowed to [breach the covenant]. .
13. The negotiation analysis is not pursued rigorously to its logical end. I do not have to imagine a negotiation in which the parties have to guess at something which events have in fact made certain. In carrying out my exercise, I can take into account the actual events that have happened, and the actual benefits accrued, as at the date of the trial. In Wrotham Park, Brightman J. held that the starting point for the calculation would have been the plaintiff asking "the developer what profit he expected to make from his operations. With the benefit of foresight [sic] the developer would, in the present case, have said about £50,000, for that is the profit which Parkside concedes it made from the development" (at p. 815H). What Brightman J. seems to have been doing there is to imagine a negotiation before the infringement, but using actual profits as evidence of what the parties would have contemplated at the time (before they actually accrued). In A.-G. v Blake, Lord Nicholls expressed himself a little differently when he said (at p. 637H): "In a suitable case damages for breach of contract may be measured by the benefit gained by the wrongdoer from the breach. The defendant must make a reasonable payment in respect of the benefit he has gained." He seems to have treated Wrotham Park as an example of that; indeed, he described it as "a solitary beacon". While he does not use the concept of a hypothetical negotiation, I think that Lord Nicholls is in effect saying the same thing as Brightman J. While an imaginary negotiation is not necessarily the appropriate supposition in all cases (and not in Blake itself) I think that it is helpful. I therefore propose to consider this case on the basis of what the evidence shows about the level of gain to [the defendant] and what a reasonable negotiation would have produced based on that evidence."
The second issue: the refusal to enforce the cross-undertaking
a) The landlords' conduct in bricking up the existing fire door had been aimed at provoking the tenant into action;
b) The fact that the landlords' conduct in that connection had been unlawful;
c) At the interlocutory stage the landlords had claimed to have the right to dictate the location of the fire door, whereas by the time of the trial the landlords had relinquished that claim;
d) "[T]he real cause of any loss occasioned to the landlords was the landlords' own attitude in refusing to accept that the tenant could choose the location of the new fire door and in refusing to acknowledge that the tenant could demand [negotiating damages]. To these conditions the landlords have been obliged to submit in order to avoid the grant of a permanent injunction".
The third issue: costs
Order: Application allowed (05/2400)
Application refused (05/2398)
Application refused (05/2397)