England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		4 July 2006

JUDGE HODGE:

1. In the underlying proceedings, Mr and Mrs Wynn-Jones claimed, amongst other relief, a declaration that the boundary between their property and that of Mrs Bickley was in such position that there was no encroachment upon Mrs Bickley's land. They also sought rectification of the original land transfer and consequential rectification of the relevant Registers of Title at the Land Registry. Those claims failed, as did a counterclaim by Mrs Bickley for an injunction to remove that part of the extension to The Ramparts that constituted a trespass to her land.
2. In summary, in the course of an ex tempore judgment delivered on 4 and 5 November 2004, I refused Mrs Bickley's claim for an injunction to remove that part of the extension to The Ramparts that had been built on Mrs Bickley's land, and instead I ordered that Mr and Mrs Wynn-Jones do pay the defendant damages to be assessed under what was formerly known as Lord Cairn's Act, the Chancery Amendment Act. That jurisdiction is now embodied in section 50 of the Supreme Court Act 1981. That section confers a power to award damages as well as or in substitution for injunction or specific performance. It provides:

"Where the Court of Appeal or the High Court has jurisdiction to entertain an application for an injunction or specific performance, it may award damages in addition to or in substitution for an injunction or specific performance." [Quote unchecked]

3. Due to various difficulties in bringing the matter back before the court, my order embodying the terms of my ex tempore judgment was not in fact finalised until 26 July 2005 and it was entered on 1 August that year. I dismissed Mr and Mrs Wynn-Jones' claims for a declaration and rectification and made no order on their claim that Mrs Bickley do erect a good and sufficient fence demarking the boundary between the parties' respective properties. On the other hand, I refused Mrs Bickley's claim for an injunction.
4. Paragraph 4 of my order provided by consent that the parties do, within 42 days of service of the order, simultaneously complete two transfers, namely (1) Mr and Mrs Wynn-Jones were to transfer to Mrs Bickley the land marked blue on the plan attached to the order, having a total area of 63.3 square metres, or such other parcel of land as might be agreed in substitution therefor; and (2) Mrs Bickley was to transfer to Mr and Mrs Wynn-Jones the land marked green on the plan attached to the order, having a same total area and a width of no less than 1.2 metres when measured from the western flank wall of Mr and Mrs Wynn-Jones' garage, or such other parcel of land as might be agreed in substitution therefor.
5. Essentially, the parties had agreed effectively as a result of my judgment that there should be a transfer of land under which Mr and Mrs Wynn-Jones received the parcel of land on which the extension to The Ramparts had been constructed insofar as it encroached upon Mrs Bickley's land, together with a width of no less than 1.2 metres from the western flank wall of the extension. In return for that, Mrs Bickley was to receive from Mr and Mrs Wynn-Jones a corresponding area of land, the purpose of those simultaneous transfers by way of exchange being to ensure that the area of each of the parties' properties remained in excess of one acre and thus complied with the requirements of the covenants imposed by the Residents Association, regulating land on the St George's Hill Estate.
6. By paragraph 5 of my order, I directed that Mr and Mrs Wynn-Jones should pay Mrs Bickley's damages for trespass to be assessed, and reserved such assessment to myself. There was also a claim by Mr and Mrs Wynn-Jones for damages pursuant to section 3 of the Protection from Harassment Act and I directed that Mrs Bickley should pay Mr and Mrs Wynn-Jones a sum of £3,000 in respect of that claim, which was to be set off against the damages awarded to Mrs Bickley, pursuant to the enquiry.
7. There were then consequential directions regarding the conduct of the enquiry, including provision for points of claim and points of defence, and for expert valuation evidence.
8. It is that assessment of damages that comes before me now. My original order was in fact varied by consent in certain respects by Lewison J on 16 November 2005.

Section 2: The Hearing of the Assessment

9. This began before me yesterday, 3 July 2006. Mr Stephen Lennard of counsel appeared for Mr and Mrs Wynn-Jones, as he had done at trial, and Mr William Hansen of counsel appeared for Mrs Bickley, again as he had done at trial. Pursuant to the terms of my order as varied, points of claim had been served by Mrs Bickley on 15 November 2005 and points of defence had been served by Mr and Mrs Wynn-Jones on 16 January 2006. Each of those statements of case was supported by a valuation report from each party's valuer. In the case of Mrs Bickley, the valuation report was from Michael Harrop FRICS of Knight Frank LLP. The report was dated 4 November 2005, although in evidence Mr Harrop explained that he had signed it in early March 2006. Mr and Mrs Wynn-Jones' expert valuer was Graham Randall FRICS of Graham Randall Chartered Surveyors. His report was dated and signed 16 January 2006.
10. Again pursuant to my order for directions as varied, a joint statement was prepared by the respective valuers. That is dated 21 April 2006 and is at pages 92 to 93 of the hearing bundle. That statement recorded the extent of the agreement and disagreement between the experts. In particular, it recorded at paragraph 3 that Mr Randall was instructed and had assumed for his valuation purposes, that the footpath, that is to say of 1.2 metres, around the flank of the extension to be part of the agreed land exchange, and he had not attributed a separate value for this strip of land. Mr Harrop was instructed that the footpath land should be considered for compensation purposes and had valued the whole area extending to 63.3 square metres.
11. Paragraph 4 recorded that Mr Randall had received instructions to consider the possibility of alternative locations for the extension, whereas Mr Harrop had been instructed that for valuation purposes, the extension as built was in the only possible position. Paragraph 5 recorded that Mr Randall had been instructed to provide a valuation opinion at the date immediately preceding the construction of the extension. He considered this relevant in terms of what may have been normal market negotiations between the parties at June 2001. The significance of June 2001 was, of course, that that was the approximate date on which Mr and Mrs Wynn-Jones had commenced the construction of their extension. Mr Harrop, on the other hand, had been instructed to produce his valuation as at 26 July 2005, being the date of my formal court order.
12. Paragraph 6 recorded that Mr Randall considered that the extension had enhanced the value of The Ramparts in the region of £250,000, whereas Mr Harrop believed that £300,000 was the appropriate figure.
13. Paragraph 7 recorded that the experts agreed that the land, that is to say the land to be ceded by Mrs Bickley, had no open market value and had little value to Patrice other than maintaining the plot size of at least an acre. Finally, paragraph 8 recorded that the experts were agreed that there were two possible approaches to the valuation, namely (1) the apportionment of the net gain in the increase in value of The Ramparts by building the extension after costs and fees had been deducted; (2) valuing the area of land in question by apportioning the value of the whole plot. The experts dealt with their differing views on the methodology in their respective experts' reports.
14. As I say, the matter came before me yesterday, Monday, 3 July. I was asked to rule as a preliminary point on whether I should admit a witness statement from Mrs Wynn-Jones. That witness statement was dated 27 June 2006. My order of 26 July 2005 had made no provision for witness evidence of fact and consequently no provision for service of witness statements. For reasons that I gave in a ruling delivered immediately after lunch yesterday, I ruled that that evidence was irrelevant and thus inadmissible in the context of the assessment of damages that I was undertaking.
15. Essentially my reason was that paragraphs 1-3 of the witness statement related to the particular considerations that Mr and Mrs Wynn-Jones would have had in mind in the context of a hypothetical negotiation. I expressed the view that the court should not go behind the hypothetical negotiation to look at the positions and characteristics of the actual parties involved in the dispute, save to the extent that those positions and characteristics were inherent in the position of the hypothetical parties to the negotiation.
16. So far as the remainder of the witness statement was concerned, at paragraphs 4 through to 13, it seemed to me that, since those related solely to Mrs Bickley's behaviour since the original trial in November 2004, they were entirely irrelevant to the issues I had to decide on the assessment of damages.
17. Yesterday afternoon I heard evidence from the defendant's valuer, Mr Harrop. He gave evidence before me by way of amplification of his report, and he was then cross-examined. He was in the witness box for roughly 1 hour 15 minutes. This morning I heard from the claimants' expert valuer, Mr Randall. He was in the witness box for roughly 1 hour and 10 minutes. I then heard oral submissions, first from Mr Lennard and secondly from Mr Hansen. Both counsel had already produced written skeleton arguments which I had pre-read. Mr Hansen's written skeleton was dated 30 June 2006 and Mr Lennard's was dated 28 June 2006. Mr Hansen concluded his submissions shortly before 1.15 and I adjourned to deliver judgment at 2.15 this afternoon. This is that judgment.

Section 3: the defendant's arguments

18. Mr Hansen submitted that the legal framework which governs the jurisdiction to award damages in lieu of an injunction is to be found in the well-known Court of Appeal decision in Jaggard v Sawyer [1995] 1 WLR 269. The relevant principles were summarised in Snell's Equity, 31^st Edition published in 2005 at paragraph 18-11. Mr Hansen submitted that the measure of damages in this area is now conventionally analysed in terms of the loss of a bargaining opportunity, or the price payable for the compulsory acquisition of a right or interest in land. He referred me to Attorney General v Blake [2001] 1 AC 268, to AMEC Developments Limited v Juries Hotel Management (UK) Limited [2001] 1 EGLR 81 and to WWF World Wide Fund for Nature v World Wrestling Federation Entertainment Inc [2006] EWHC 184 (Ch).
19. The proper approach was that taken by Mr Anthony Mann QC (as he then was) in the AMEC case, which was 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. However, it was important that the court should not be transfixed by the concept of a hypothetical negotiation. Ultimately science and rationality only got one so far. At the end of the day, the deal had to feel right.
20. Mr Hansen wished to emphasise a number of facts and matters as being relevant to the assessment of damages in the particular case. First, in any hypothetical negotiation, the defendant was assumed to be a willing seller at a proper price. However, he submitted it was clear from the evidence that the court had heard that Mrs Bickley would have been a sceptical and reluctant seller and that this would have been reflected in the negotiations. Secondly, he submitted that the extension would have been 25 per cent smaller without the encroachment, resulting in a double garage and a smaller flat above in circumstances where it would conventionally be expected that a house of this kind would have a triple garage. Thirdly, the present location of the extension was, he submitted, self-evidently the obvious and logical place for the extension, with the result that the claimants would have been keen to build it in its present location.
21. Fourth, he submitted that the claimants' costs figures had not been properly proved. That was a reference to the costs figures set out in an appendix to the report of Mr Randall at page 87 of the hearing bundle. The cost figure there given was £165,585.84 to which building finance for eight months at 7.5 per cent in the sum of £8,200 had been added, making a total cost including finance of £173,785 which was rounded up to £174,000. Mr Hansen contrasted that schedule with that which had been supplied under cover of a letter from the claimants', Burkill Govier, to the defendant's then solicitors John May Law. That schedule was sent under cover of a letter of 17 October 2005 which expressly enclosed by way of service our client's best estimate to date of the costs they have incurred in respect of the works carried out for the extension to their property. That schedule totalled £131,248.16.
22. The principal differences were (1) that the fee for the building contractors had increased from the earlier schedule figure of £105,208.34 to £133,291.19. Secondly, there were additional items for Magnet Kitchens in the sum of £2,150.93 and for carpets in the sum of £3,200. Thirdly, a figure for building finance had been added in the sum of £8,200. There were certain other minor increases from the October 2005 schedule to that which appeared as an appendix to Mr Randall's report.
23. Mr Hansen submitted that the court should proceed on the basis of the figures given in October 2005 and utilised without question by Mr Harrop. In the course of his cross-examination it became clear that, when the original figures had been supplied to Mr Randall, he had queried them as appearing to him to be inadequate, and it was as a result of his queries that the figure had increased from £131,000 to £174,000.
24. Fifthly, Mr Hansen submitted that ultimately the high level of values on St George's Hill and the high net worth of the individuals that lived there, including the parties before the court, militated in favour of Mr Harrop's figure. He submitted that the figure suggested by Mr Randall simply did not feel right.
25. The figure put forward by Mr Harrop was £45,000 whilst the figure put forward by Mr Randall would be no more than £14,440 but subject to further adjustment. What Mr Randall meant by "further adjustment" was that Mr Randall's figure attributed all the value of the encroachment upon Mrs Bickley's land to her. His view was that, rather than attributing all of the value of the encroachment to Mrs Bickley, only a proportion of that value should be attributed to her. However, in the course of cross-examination, Mr Randall expressly recognised that the apportionment of that net gain was a matter of law for the court and not a matter of expert valuation evidence. It is for that reason that in his report Mr Randall simply said that the figure should be no more than £14,440.
26. Mr Hansen went on to identify the principal differences between the experts. These seemed to him to be (1) the valuation date; (2) the significance, if true, of the fact that the claimants would and/or could have accommodated the desired extension elsewhere within the boundaries of their own property; (3) the building costs of the extension; (4) the enhancement in value of the property as a result of the extension; and (5) the precise area of the land under consideration.
27. As to those five points, Mr Hansen submitted (1) as to the valuation date, there as no rule that damages were to be assessed as at the date of breach or immediately preceding any transgression. That was held to be the correct date on the facts of the AMEC case, but there was no invariable rule to that effect. Damages were being awarded in substitution for an injunction, and in such circumstances, damages should be assessed as at the date on which that remedy became aborted, which in this case was the date of my judgment in November 2004. On Mr Harrop's evidence, there was no material difference between that date and the date he had taken in July 2005.
28. In support of that submission, Mr Hansen referred me to the decision of the House of Lords in the well known case of Johnson v Agnew [1980] AC 367. That was a case where damages for breach of a contract for the purchase of land were assessed as at the date when specific performance became impossible, otherwise than through the default of the vendor. Mr Hansen submitted that that principle was equally applicable where injunctive relief was refused. He went on to submit that the other feature of the cases where the date of breach was taken as the date of assessment, was that the breach in question was a once and for all breach, as opposed to the present case which involved a continuing trespass. In that connection in particular he referred me to passages in the judgment of Miller J in the case of Jaggard v Sawyer at page 291A-B.
29. Secondly, and as to the significance, if true, of the fact that Mr and Mrs Wynn-Jones would and/or could have accommodated the desired extension elsewhere within the boundaries of their own property, Mr Hansen submitted that the claimants were attempting to go behind one of the cardinal assumptions that underpinned the hypothetical negotiation, namely that the Wynn-Jones were willing buyers. In any event, he did not accept that they had any realistic or desirable alternative location which would have materially strengthened their bargaining positions.
30. Thirdly, and as to the point as to the building costs of the extension, Mr Hansen submitted that these should be distinctly and properly proved and, in the absence of proper proof, the claimants should not be permitted to resile form the figure of £131,000 which they provided to Mr Harrop. In the course of his oral closing submissions, Mr Hansen also adopted a point that I had made in the course of Mr Lennard's submissions, that the £131,000 figure was that which the claimants themselves had perceived as the best estimate of the cost of the works and that figure should therefore be adopted for the purpose of the hypothetical negotiation, rather than the analytical and more questioning approach adopted by Mr Randall in order to arrive at a higher figure.
31. Fourthly, as to the enhancement in value of the property as a result of the extension, Mr Hansen submitted that Mr Harrop's valuation was preferable, based as it was on access to more comparables. Fifthly, as to the precise area of the land under consideration, Mr Hansen submitted that Mr Randall had ignored the 1.2 metre strip of land immediately adjacent to the flank wall of the garage on the basis that the encroachment did not physically stand on this land. However, Mr Hansen submitted, it clearly formed part of the curtilage of the extension and should be included in the area calculations. In addition, Mr Randall relied on measurements prepared by another expert for which no permission had been given. In the course of his cross-examination, the force of that latter point disappeared when Mr Randall indicated that he himself had measured the area in question and that the measurements prepared by CD Surveys Limited at page 83 of the hearing bundle, were merely supportive and corroborative of Mr Randall's own measurements.
32. Those then, in summary, were Mr Hansen's submissions, although he elaborated and expanded upon them in his oral submissions before me.

Section 4: the claimants' submissions

33. Mr Lennard submitted that the court was not limited to any specific basis for assessing damages in lieu of an injunction under Lord Cairn's Act. He referred me to a passage in the judgment of Neuberger LJ at paragraph 22 of his judgment in the case of Lunn Poly Limited v Liverpool & Lancashire Properties Limited [2006] EWCA (Civ) 430. In that paragraph Neuberger LJ said:

"The court is not limited to any specific basis for assessing damages in lieu of an injunction under the Act. However, principle and practice suggest that the normal three bases are (a) traditional compensatory damages – i.e. a sum which compensates the claimant for past present and future losses as a result of the breach but not for the loss of the covenant; (b) negotiating damages – i.e. a sum based on what reasonable people in the position of the parties would negotiate for a release of the right which has been, is being, and will be breached; and (c) an account – i.e. a sum based on an account, that is, on the profit the defendant has made, is making and will make as a result of the breach."

34. Mr Lennard submitted that damages should compensate the defendant for any loss she proves she has sustained by reason of the trespass by the claimants, and that the award is not restitutionary in nature. As the land on which the extension was partially constructed had absolutely no amenity or other value for Mrs Bickley, apart from making up the one acre, on being given an equivalent plot in exchange, he submitted that the defendant had suffered no loss. Therefore, damages should be nil on the basis that the parties had consented to an exchange of similar sized plots of land of 63.3 square metres in area.
35. He submitted that conduct was relevant. The claimants had been blameless in building over the defendant's land, whilst she had stood by whilst the extension was constructed and then had started and was still continuing a campaign of harassment and abuse in April 2003. If the assessment of damages was to be on a negotiating basis, then they should be quantified by reference to such a sum of money as might reasonably have been demanded by Mrs Bickley from Mr and Mrs Wynn-Jones as a quid pro quo for permitting the trespass. In submitting that, Mr Lennard founded himself upon a passage in the judgment of Mr Anthony Mann QC in the AMEC Developments case.
36. In summary, the claimants contended that a reasonable neighbour/vendor in the position of Mrs Bickley, acting reasonably, would have demanded and expected to receive as a quid pro quo no more than one transfer of land of the equivalent size; (2) payment of all legal and surveying costs; and (3) perhaps a nominal payment of £1,000.
37. The grounds for that contention were set out at paragraph 6 of the Defence to the points of claim. I quote:

"1. The land belonging to Mrs Bickley on which the extension would be required to be built is situated on a higher level than the house and surrounding area occupied by Mrs Bickley.

2. It was accessible only by ascending a steep slope.

3. The finding in my earlier judgment was that Mrs Bickley had no real use for the land had that it had only been retained when she sold off half the land she owned in order to satisfy the covenant that she must retain one acre of land.

4. The land held no amenity value for Mrs Bickley.

5. The proposal to build the extension was not motivated by any commercial decision to profit from development, but only to add to the amenity value of Mr and Mrs Wynn-Jones in the better enjoyment of their home.

6. The overriding and non-negotiable concern of any reasonable neighbour would have been the retention of one acre of land.

7. Once that was satisfied, a reasonable neighbour would have been content to exchange one piece of land of no value or use to her for another piece of land of no value or use to her with no view to profit so long as no costs were incurred." [Quote unchecked]

38. Mr Lennard went on to submit that negotiations of the type contemplated in the AMEC case were wholly improbable in the context of the construction of a residential extension. Commercial calculations of profit and/or the increase in the value to be made from land used, were complex and sophisticated, that they were simply not relevant in the present context. That was said to apply to both expert opinions.
39. A reasonable negotiation in the present case would not, on these facts, have produced a figure based on level of gain. The correct date for postulating the negotiations was before the building started, that is to say, pre-June 2001, whilst factors to be taken into account in commercial cases was set out in AMEC, of application in all situations was Mr Mann's statement that the deal had to feel right.
40. Mr Lennard submitted that Mr Harrop, the defendant's expert, said that £45,000 was the correct sum, but the claimants would never had paid that amount, ie, 7 per cent, for 63 square metres of land, when they had paid only £625,000 for the entire plot, including the house itself. In terms of area, 63 square metres of land was 1.55 per cent of the total.
41. Finally, Mr Lennard submitted that, if contrary to his primary contention the court found that the assessment of damages should involve the payment of a substantial sum to the defendant, calculated by reference to the gain in value accruing to the claimants by virtue of the trespass, then (1) taking into account the costs of building, including financing, and (2) the percentage of the building area effecting a trespass (19 per cent) and (3) that reasonable neighbours who negotiated reasonably would have agreed to divide 50/50 the gain in value produced by that part of the building causing a trespass, the sum to be awarded by way of compensation should be no more than £7,220, ie, 50 per cent of the amount spoken to by Mr Randall as the proper sum of no more than £14,440.
42. Those then were Mr Lennard's submissions which he again elaborated and expanded upon in his oral submissions before me.

Section 5: the applicable law

43. As I have stated, the jurisdiction to award damages in lieu of an injunction is now found in section 50 of the Supreme Court Act. The jurisdiction has been considered most recently by the Court of Appeal in the Lunn Poly case cited above in a judgment delivered by Neuberger LJ. I have already referred to paragraph 22 where Neuberger LJ identified three possible bases for the assessment of damages in lieu of an injunction. For present purposes it is the second of those categories, namely negotiating damages which falls to be considered. At paragraph 25 Neuberger LJ referred to Mr Anthony Mann QC's judgment in the AMEC case as describing the proper approach to negotiating damages under the Act as being "to ascertain 'such a sum of money as might reasonably have been demanded by [in this case the defendant] from [the claimants] as a quid pro quo for [permitting the encroachment…". Earlier in his judgment at paragraph 17, Neuberger LJ had identified the first question as whether it was right to proceed on the assumption that the hypothetical negotiations take place at the date of breach. In that connection, it seemed to him that both authority and principle did indeed suggestion that in a case where a injunction to enforce a contractual terms was refused on the basis that the claimant should be satisfied by an award of damages under the Act, the normal date on which such damages should be assessed was the date of breach. In that connection he referred to paragraph 18-18 of Snell's Equity, to which I will return.
44. At paragraph 18 Neuberger LJ was prepared to assume that the date by reference to which damages under the Act should be assessed in the present case is the date when the breach could be said to have occurred. However, he recognised that it was only fair to say that that assumption might not be correct. There was only a presumption that damages under the Act would be assessed as at the date of the breach and that was a presumption which would sometimes not be applied in the same way as a similar presumption is often not applied in cases where common law damages for breach of contract were to be assessed.
45. At paragraph 23 Neuberger LJ stated that in relation to all the three types of assessment he had identified in paragraph 22, one would generally expect the normal approach adopted by the courts to be applied. Thus, one would normally expect that damages under (a) traditional compensatory damages, and (b) negotiating damages, would be assessed at the date of breach, that any such damages would not be punitive and that damages under (b) negotiating damages, would be assessed by reference to facts as they were at the valuation date.
46. However, at paragraph 24 he went on to recognise that there were not absolute rules. Plus, as at present advised, he could see no reason why, when applying the Act, the court should not be able to order the defendant simply to pay over to the claimant a proportion of a capital sum that it made as a result of selling its interest with the benefit, as it were, of the breach of the claimant's rights. In a sense, that could be characterised as a form of account, but it served to emphasise that there was no absolute rule that damages in a case such as the present could not be assessed on the basis of events which arose after the breach occurred, or even after the injunction was refused.
47. Having cited extensively from Mr Anthony Mann QC's judgment in the AMEC case and having referred to a passage in the judgment of Peter Smith J referring to the flexibility of the court as to the calculation of damages under the Wrotham principle when applied to the facts of the case, Neuberger LJ continued at paragraph 27 as follows:

"It is obviously unwise to try and lay down any firm general guidance as to the circumstances in which, and the degree to which, it is possible to take into account facts and events which have taken place after the date of the hypothetical negotiations, when deciding the figure at which those negotiations would arrive. Quite apart from anything else, it is almost inevitable that each case will turn on its own particular facts..."

He continued at paragraph 28 to say that, although he could see the force of what Mr Mann had said as to not having to guess at something which events had in fact made certain, it should not, in Neuberger LJ's opinion, be treated as being generally applicable to events after the date of breach where the court decided to award damages in lieu on a negotiating basis as at the date of breach. Neuberger LJ continued:

"After all, once the court has decided on a particular valuation date for assessing negotiating damages, consistency, fairness, and principle can be said to suggest that a judge should be careful before agreeing that a factor which existed at that date should be ignored, or that a factor which occurred after that date should be taken into account, as affecting the negotiating stance of the parties when deciding the figure at which they would arrive.

In my view, the proper analysis is as follows. Given that negotiating damages under the Act are meant to be compensatory, and are normally to be assessed or valued at the date of breach, principle and consistency indicate that post-valuation events are normally irrelevant; but, given the quasi-equitable nature of such damages, the judge may, where there are good reasons, direct a departure from the norm either by selecting a different valuation date or by directing that a specific post-valuation date event be taken into account."

48. It is also important to bear in mind certain observations of Mr Anthony Mann QC in the AMEC case. At page 86 between letters F and H he said:

"Of course, there is no reason to suppose that upon the facts, the parties would have agreed at all and to that extent the exercise is an artificial one. But that does not mean it should not be performed." [Quote unchecked]

Later at page 87 beginning just below letter D, Mr Mann considered the effect of the hypothetical negotiation. Amongst the features that he identified at subparagraph (e) he said that "the basis of the negotiation would be a split of the perceived gain. That gain would not be obvious and would be the subject of debate within the sort of variations that I have described." At subparagraph (l) he indicated that the cost figures, while perhaps generally in the right area, had not been proved as cleanly and as clearly as one would expect. Finally, at subparagraph (n) he said:

"As important as any of the above factors, is this. In any negotiations, science and rationality gets one only so far. At the end of the day, the deal has to feel right. Some of the numbers that have been suggested by AMEC in the course of this litigation, while perhaps intellectually justifiable, seem to me to be way over the top of what Jury would be prepared to pay when set out in the context of the rest of the cost of this hotel." [Quote unchecked]

At page 87 between letters K and L, Mr Mann expressed his conclusion.

"The sort of damages questions involved in cases like the present are matters of judgment that are incapable of strict rational and logical exposition from beginning to end. I have sought to set out the principle factors that have operated in my mind and which would have operated in the minds of the parties to the hypothetical negotiation. I have in mind that the principal point is how much of Jury's gain should be paid to AMEC, while at the same time saying that it is unnecessary to put a definite figure on the gain in this case." [Quote unchecked]

49. There is a useful enumeration of the factors to be taken into account at paragraph 18-18 of Snell's Equity, the passage referred to by Neuberger LJ in the Lunn Poly case to which I said that I would return. Where the defendant's obligation is not to do a thing, the value of the claimant's right to performance is the value of being able to stop the defendant from doing that thing. The thing must be identified with precision before it can be valued. In the present case the thing is the ability to prevent an encroachment in the form of an extension to the Wynn-Jones' garage, trespassing upon Mrs Bickley's land.
50. The learned editors go on to say that the market value of a right in that nature will not normally be readily identifiable, but even so, the value of the thing is essentially a matter of fact and is therefore to be determined upon the evidence. The learned editors continue:

"There are few cases in which the process of valuation has been considered, but it is suggested that the following principles are of general application in way leave cases:

1. The correct valuation date will normally be the date when the breach is committed or, if the breach has not been committed at the date of trial, the trial date.

2. The actual conduct of the parties is irrelevant.

3. The valuer proceeds on the assumption that the price has been negotiated between a willing grantor and a willing grantee, each of whom is looking to agree a proper price for the grant but not a large ransom.

4. It is to be assumed that the hypothetical parties would put forward their best points in the negotiations.

5. Those negotiations would have taken place before the transgression occurred.

6. The basis of negotiation would be a split of the defendant's gain, although that gain would not have been obvious and would have been the subject of debate.

7. The negotiating parties are to be assumed to know all such things as real people in their position would have been able to discover.

8. The price so identified must feel right." [Quote unchecked]

51. In my judgment, that is an accurate, albeit not exhaustive, statement of general principle.
52. In the course of the first morning of the hearing of this assessment of damages, I indicated to the parties that a recent authority not included within their bundle of authorities might be relevant to the issues I had to determine. The case was that of Horsford v Bird an appeal from the Court of Appeal of Antigua and Barbuda [2006] UKPC 3, reported so far as I am aware, only at [2006] 15 EG 136. That was a decision of the Privy Council delivered by Lord Scott-Foscott. The case had begun life as a boundary dispute, but by the time the litigation had wound its way through the courts in Antigua and Barbuda, the issue between the parties had become the approach that should be adopted for quantification of damages. By the time the matter reached the Privy Council, there was no longer any substantial dispute about the lie of the boundary.
53. It was by then accepted that the boundary wall and fence constructed for the respondent by contractors, did encroach upon the appellant's plot of land and, in effect, had added some 455 square feet of the appellant's land to the respondent's garden.
54. The appellant's claim for a mandatory injunction for the removal of the offending wall and fence had been refused by the trial judge, Madam Justice Olivetti and was not renewed on appeal. She instead ordered the respondent to pay damages in the sum of Eastern Caribbean $75,000. It was clear from her judgment that that sum included a substantial, although unspecified amount, in respect of aggravated damages. The Court of Appeal took the view that no case for aggravated damages had been established, and reduced the damages to $13,650, ie, 450 square feet of land at $30 per square foot.
55. The Privy Council concluded that, although in agreement with the Court of Appeal, no award of aggravated damages should be made. Nonetheless, an award limited to the bare value of the expropriated land, did not represent due compensation to the appellant. In the Court of Appeal, Mr Justice of Appeal Redhead had said that the basis for awarding aggravated damages did not exist because the respondent had not established that there was a wilful and deliberate encroachment on the boundary. The Court of Appeal then assessed damages simply on the basis of the value of the appellant's undeveloped land. There was no mention or discussion of the extent to which the encroached upon piece of land had enhanced the amenities of the respondent's new house. This was the second of the three matters that Madam Justice Olivetti had taken into account in deciding the amount of damages to be awarded. They had been (1) the value of the land encroached upon; (2) the value of the land to the respondent; and (3) the manner in which the respondent had dealt with the appellant's claim.
56. Neither the first instance judge nor the Court of Appeal had taken into account that ever since 1990 when the wall had been completed, the respondent had had the exclusive use and benefit of the encroached upon piece of the appellant's land. The trial judge's refusal of the mandatory injunction and her decision to award damages in lieu had had the consequence of, in effect, expropriating that piece of land from the appellant and enabling it to become thenceforth de jure as well as de facto part of the respondent's garden. At paragraph 11 of their opinion, the Privy Council said:

"This expropriation could not in their Lordship's opinion be regarded as having a retrospective effect." [Quote unchecked]

57. At paragraph 13, Lord Scott went on to deal with Wrotham Park Estate Company Limited v Parkside Homes Limited [1974] 1 WLR 798. There, damages in lieu of an injunction to remove a number of dwelling houses which had been built in breach of a restrictive covenant had been assessed as a proportion of the profit the developer defendant had made out of the development. Brightman J (as he then was) had asked himself what sum the plaintiff might reasonably have sought from the developer as his price for waiving the restrictive covenants. At paragraph 13 Lord Scott said that:

"In the present case, the comparable question would have been how much the appellant could reasonably have sought from the respondent in November 2000 as the price of the appellant's land that the respondent had incorporated into his garden." [Quote unchecked]

58. I must confess that I find that passage in Lord Scott's opinion difficult to follow. The reason is this. In the Wrotham Park case, damages were assessed on the basis of a hypothetical negotiation conducted immediately before the breach of the relevant covenants. This means that the comparable question in the Horsford v Bird case would have involved asking how much the appellant could reasonably have sought from the respondent, not in November 2000 when the proceedings had been commenced, but in 1989 when the work on the wall had commenced, or alternatively and at the latest 1990 when that work had been completed: see paragraph 8.
59. The Privy Council took the view that, in addition to the value of the piece of land as part of an undeveloped plot which had been quantified in the sum of $13,650, its value to the respondent as part of the garden of his new house, should also have been reflected in an addition award of damages. The Privy Council took the view that it should have been at least double the base figure and therefore they substituted the sum of $27,300 for the sum of $13,650 as the value of the land. That additional award reflected the value of the land to the respondent, which was said to be double the value of the land encroached upon.
60. In addition, whilst agreeing that this was not a case in which a claim for aggravated damages for the building of the wall along the incorrect line could succeed, the Privy Council held that the Court of Appeal had been in error in not making an additional award of damages in the form of mesne profits for the use made of the appellant's land by the respondent. Any such claim for a period more than six years before the commencement of the proceedings was statute-barred, so the claim could only lie for the period starting on 20 November 1994 and terminating with the judgment of Madam Justice Joseph Olivetti on 21 February 2003. Thus, on the view of the Privy Council, the use by the respondent of the appellant's land for which the appellant was entitled to compensation, should have been eight years and three months. That was to be assessed on a yearly basis as a percentage of the capital value of the piece of land in question. That capital value was taken as $27,300 and an annual rate of 7.5 per cent of that capital value was said to represent reasonable mesne profits. That led to an annual mesne profits figure of $2,047.50, which after eight years would produce $16,380, for three months $512, thus a total figure of $16,892. It was on that basis that a total of $44,192 was awarded.
61. I have there summarised the Privy Council's decision in the Horsford v Bird case. How does that decision affect the principles which are set out in the passage I have cited in paragraph 18-18 of Snell's Equity? In the light of my findings at trial, the basis for an award of aggravated damages does not exist. The trespass by encroachment upon Mrs Bickley's land in the present case was neither deliberate nor wilful nor cynical. Therefore, I should focus in my award on two matters: the value of the land encroached upon and secondly the value of that land to the claimants.
62. So far as the former parcel is concerned, at paragraph 10.2 of his report at page 44 of the hearing bundle, Mr Harrop had concluded that the land in question was a small piece of land and that, ignoring for the moment the fact that its loss took the plot size of Patrice to under an acre, it had only a marginal effect on Patrice's value. That was because it was right at the top of a very steep slope and really of very little use. At paragraph 7 of their joint statement, the experts were agreed that the land had no open market value and had little value to Patrice other than maintaining the plot size of at least an acre.
63. In my judgment, the first element, the value of the land encroached upon, is entirely satisfied by the exchange for that land of a parcel of land belonging to the Wynn-Jones of a corresponding area. That does, however, still leave the second element, the value of the land to the Wynn-Jones. That is to be assessed on what Neuberger LJ at paragraph 22 of the Lunn Poly case described as a sum based on what reasonable people in the position of the parties would negotiate for a release of the right which had been, was being and would be breached.
64. The Horsford v Bird case, however, suggests two modifications to the principles that I have already set out from paragraph 18-18 of Snell's Equity. The first is that the date of the assessment should perhaps not be the date of breach but rather the date of the proceedings. Secondly, that there should in addition be an entitlement to mesne profits, starting, subject to any question of limitation, from the date of the trespass and ending with the date of the refusal of the injunction.
65. As I have said, I do not follow the terms of paragraph 13 of Lord Scott's opinion. As I have said, the comparable question in Horsford v Bird should not have been how much the appellant could reasonably have sought from the respondent in November 2000, but rather how much he could have sought at the time work on the wall commenced in 1989. Lord Scott gives no reason for departing from the approach of Brightman J and, indeed, he does not appear to recognise that there is any such departure because of his use of the phrase "the comparable question". It therefore seems to me that I cannot regard Horsford v Bird as justifying an invariable departure from the general date of assessment that has been established in the cases as being the date of the relevant breach for trespass.
66. Even if the Privy Council intended to make such a conscious departure, it seems to me that that would be inconsistent with the Lunn Poly case. The Privy Council's decision was handed down on 17 January 2006; the decision of the Court of Appeal in the Lunn Poly case was handed down on 15 March 2006. It is not clear from the report of the Court of Appeal's decision whether Horsford v Bird had been cited to the Court of Appeal. It seems to me that if there is any inconsistency in approach, then I should follow the decision of the Court of Appeal rather than that of the Privy Council. In any event, as I say, I am far from satisfied that the Privy Council intended to make a conscious departure from the date of breach as the usual correct valuation date.
67. In my judgment, therefore, I should take the relevant valuation date in the present case as being June 2001.
68. So far as Mr Hansen's further argument founded on Johnson v Agnew is concerned, in my judgment that case is clearly distinguishable. In that case, a decree of specific performance had been obtained and had subsequently been discharged by reason of the vendor's failure to comply with the order. In those circumstances, and given that the underlying claim was one in contract for breach of the purchaser's expectation that he would obtain the property, I can well see that the proper date for valuation should be that on which the remedy was aborted. It seems to me that that has no application to a case of the present kind, where one is concerned not with an award of damages in lieu of specific performance, but an award of damages instead of the grant of an injunction.
69. Further, acceptance of Mr Hansen's approach would, it seems to me, have potentially undesirable consequences. If one took the date of any judgment as being the relevant date of assessment, then it would give a premium for delay on the part of an applicant for injunctive relief. In a rising market, an applicant for injunctive relief could simply sit back and wait to commence proceedings, such delay would inevitably have a consequential impact on the date of judgment, yet on Mr Hansen's submission, the effect in a rising market would be to enable the applicant for injunctive relief, albeit unsuccessful in obtaining such relief, would be able to obtain a higher award of damages.
70. In my judgment, whilst recognising that the rule is not an invariable one, in the present case there are no circumstances which would justify me in departing from the normal valuation date, that is to say in the present case, June 2001.

Section 6: conclusions

71. I have already set out my reason for taking June 2001 as the appropriate valuation date. So far as the precise area of land under consideration is concerned, it seems to me that I should accept Mr Hansen's submission. Although the encroachment in the form of the garage does not physically stand on the 1.2 metre strip of land, that strip clearly forms part of the curtilage of the extension and should, in my judgment, be included in the area calculations. There are a number of reasons for that. The first is that, if one disregarded the curtilage, then it would have been necessary for the Wynn-Jones, in addition to negotiating the purchase of the land on which the building stands, in addition to have negotiated the grant of easements enabling them to have access to the flank wall in order to carry out repairs and maintenance to that wall and any drainage apparatus on it.
72. Secondly, and in any event, as Mr Hansen submitted, and as it seems to me the experts accepted, any reasonable house owner contemplating an extension, would not wish to build all the way up to the actual boundary. Any reasonable house owner would want an area to pass from the front of the property to the rear without having to go all the way round the existing house. That being so, inevitably there would have been an area that could not have been built upon, and that in itself would have reduced the area of the extension by an amount equal to the 1.2 metre width.
73. For all those reasons, it does seem to me that that area should be included.
74. It was made apparent by Mr Randall in cross-examination and also in Mr Lennard's brief re-examination, that his instructions had been on a different basis to those of Mr Harrop, namely to consider the encroachment of the building alone, and he therefore was not in any position to comment upon or contradict Mr Harrop's figures as to the area occupied both by the extension and the 1.2 metre strip. In those circumstances, it seems to me that I am constrained to accept Mr Harrop's evidence that of the total area of the encroachment, including the 1.2 metre strip, that part which represented Mrs Bickley's land, formed 25 per cent of the total.
75. Once those two matters had been resolved, it seems to me that matters become much clearer. There seem to me by the end of the expert valuation evidence, to be no real difference between the valuers as to the base value to be adopted as at June 2001, namely £250,000. So far as the building costs were concerned, it does seem to me that the best evidence of what the parties in the course of a negotiation would have conceived the building costs to have been, is the figure of £131,000 first put forward in October 2005 by the solicitors acting for Mr and Mrs Wynn-Jones. That figure was described in the accompanying letter of 17 October at page 115 as "our client's best estimate to date of the costs they have incurred in respect of the works carried out for the extension to their property". Had one been looking at the position in June 2001, one might well have found that the parties would not even have contemplated a figure as high as £131,000. But nevertheless, it seems to me that that is the figure that should be taken, rather than the later figure produced after Mr Randall's intervention of £174,000.
76. So far as that £174,000 figure is concerned in any event, it does seem to me that certain items could properly have been the subject of challenge. It does not seem to me necessarily appropriate to include the cost of the kitchen, but more particularly, it seems to me inappropriate to include the cost of carpets. Also it seems to me inappropriate to include the cost of building finance. How the construction was to be financed was a matter dependent upon the individual financial circumstances of the Wynn-Jones and it does not seem to me that, in the context of a residential extension of this kind, that it is a figure that should properly have entered into any negotiation. Be that as it may, however, it does seem to me that the appropriate figure to take is the one that was first put forward by the claimants' themselves.
77. When I put that to Mr Lennard in the course of his closing submissions, his answer was that whilst the final figure was not known until the money had actually been expended, the court does need to know the best estimate of the amount actually spent. The fact that the building owner has been asked to provide a list of costs but has omitted certain items, should not dispose the court against looking at the actual evidence of what in fact had been expended. The actual expenditure was a reasonable starting point and the conclusion should be that the parties in any hypothetical negotiation would have arrived at that figure. The parties using competent valuers would have come up with a figure in the area of the actual figure rather than the incomplete figure that had been advised in error in October 2005.
78. It does not seem to me that that really does properly reflect the position that would have been adopted in the hypothetical negotiation. The figure that was put forward through solicitors on behalf of the claimant was the £131,000 figure. That figure was accepted without question by the valuer, Mr Harrop, acting for Mrs Bickley, and it seems to me that that is the figure that should be adopted for the purpose of the hypothetical negotiation.
79. Thus, the position that is reached is that one starts with a figure of £250,000 and then one deducts the anticipated building costs of £130,000 so as to arrive at a figure of £120,000 as representing the gain to the Wynn-Jones from the construction of the extension. One then applies a percentage of 25 per cent to that in order to arrive at the percentage that is properly attributable to Mr Bickley's land. That produces a figure of £30,000.
80. It is at this point that the matter really enters into the area of negotiation. It is at this point that, as it seems to me, arguments can begin to be deployed as to whether there is an alternative location for the desired extension. I am quite satisfied, after hearing the expert evidence from both valuers, that the location actually adopted is undoubtedly the most sensible and would have been from the Wynn-Jones' point of view the preferred location for the extension, had Mrs Bickley pushed the matter too far, the Wynn-Jones would always have had an alternative location to fall back on, nevertheless it would not have been their preferred location.
81. It is also relevant to bear in mind that we are concerned with high net worth individuals and high value properties. As Mr Hansen put it in his closing, people on the St George's Hill Estate do not engage in land swaps of this kind for, in his words "small change". It is at this point also that I endorse the approach that seemed to me to be common ground from both counsel that the experts' calculations only take the matter so far. Ultimately the deal has to feel right. It is at this point also that there comes into play the point made by Mr Anthony Mann at subparagraph (e) on page 87 between letters E and F that the basis of the negotiation would be a split of the perceived gain to, in this case, the Wynn-Jones. I am also conscious that one is not dealing with a commercial property but with an extension to a home which was intended to be lived in.
82. I endorse the observations of Mr Anthony Mann that in any negotiation science and rationality gets one only so far; at the end of the day the deal has to feel right. The sort of damages questions involved in a case such as the present is a matter of judgment that is incapable of strict rational, logical exposition from beginning to end.
83. In my judgment, looking at the matter with all of those considerations in mind, and having reached a figure of £30,000, it seems to me that the most likely outcome of any negotiation would have been that the Wynn-Jones and Mrs Bickley would essentially have split that figure 50/50, resulting in a payment from the Wynn-Jones to Mrs Bickley of £15,000.
84. That is the result of adopting the first of the two alternative approaches identified at paragraph 8 of the joint statement, namely the apportionment of the net gain in the increase in value of The Ramparts by building the extension after costs and fees have been deducted. There is an alternative method, namely valuing the area of land in question by apportioning the value of the whole plot. Having heard the expert evidence, it does seem to me that there is force in the point made by Mr Randall that this is a less precise way of approaching the matter, less precise because, of course, each element of the plot does not necessarily have equal value because a straight pro rata approach ignores the fact that there is a valuable house, The Ramparts, standing on the property and there is no sufficient evidence that that property would necessarily have been demolished by any prospective purchaser of the land on which The Ramparts stands.
85. At most it seems to me that the alternative approach would have been used as a cross-check. As I understand Mr Harrop's figures, taking a valuation date of 6 June 2001, and a £2.5 million capital value a pro rata approach along the basis of the second alternative would have produced a figure of £34,242. Mr Harrop sought to round that up to £40,000. In my judgment, any rounding up would have taken it to £35,000 rather than £40,000. The corresponding figure on my preferred approach is £30,000. The figure of £35,000 is not out of line with that, and in my judgment, would have been seen as support for the £30,000 figure which, as I have said, would then have been split equally between the Wynn-Jones and Mrs Bickley. Thus, the alternative approach would, in my judgment, have provided support for the £30,000 figure which would have bee split 50/50. It does not lead me to differ from or change the figure of £15,000 at which I have arrived.
86. Should I then in addition award mesne profits? There is no support for that approach in any case other than that of the Privy Council in the recent case of Horsford v Bird. In my judgment, rather than awarding mesne profits, the proper approach, if one is to take a hypothetical negotiation as at June 2001, is to award interest on the £15,000 figure from the date of the hypothetical negotiation up until the date of the award. In round terms in the present case that is 5 years. Looking at the rate of interest on special account set out at pages 263 to 264 of volume 1 of Civil Procedure (2006 edition) I note that the rate of interest on special account from 1 February 2002 was 6 per cent, having dropped from 7 per cent which had applied as from 1 August 1999. In my judgment, the appropriate rate of interest to apply here would be 6 per cent on the £15,000 figure for six years. That produces an additional £5,400.
87. From that must be deducted the £3,000 award under the Prevention of Harassment Act: see paragraph 6 of my previous order. That sum has been outstanding for roughly a year, and at 6 per cent would have attracted interest itself at £180. It therefore seems to me that the figure including interest of £20,400, ie £15,000 plus £5,400, should be reduced by £3,180, ie £3,000 plus £180 interest, resulting in a net award, inclusive of interest to Mrs Bickley of £17,220.
88. I have calculated those figures without the assistance of counsel. If they can see any arithmetical error in them, then I invite them to draw it to my attention.
89. The result is that in my judgment the appropriate net award to Mrs Bickley, inclusive of interest, should be £17,220.
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