Trespass to land - Quantum - First defendant company guilty of trespass to claimant company's airspace

Stadium Capital Holdings (No.2) Ltd v St Marylebone Property Company plc and another company: Chancery Division (Mr Justice Vos): 8 November 2011

Following a trial in the Chancery Division, (see [2009] All ER (D) 166 (Oct)) the first defendant company was found guilty of trespass to the claimant company's airspace by the erection of a commercial advertising hoarding (the hoarding) without permission. The claimant was awarded damages in the sum of £313,972. That was the entirety of the licence fee received by the first defendant from the second defendant for the use of the hoarding for advertisement purposes between 23 January 2005 and 2 October 2008.

The Court of Appeal allowed the first defendant's appeal against the assessment of damages and held that the trial judge should have acceded to its late application for an adjournment of the issue of quantum (see [2010] All ER (D) 83 (Nov)). It was also held that the trial judge did not have sufficient material before him to reach an appropriate conclusion on quantum and that he had made an award that was 'at the very top end of the basis of awarding damages on a restitutional basis'. The Court of Appeal remitted the case back to the Chancery Division in order that there be argument and evidence directed specifically at the assessment of damages.

The situation raised the question of how damages for trespass should be assessed where the first defendant had made a profit from his trespass and where, in any hypothetical negotiation that might have taken place as to an appropriate payment for such usage, the claimant landowner held the trump card of being able to refuse permission and thereby prevent any money at all being made from the trespass.

It was accepted that damages should be assessed on the basis of a hypothetical negotiation of the fee that would have been paid for the grant of a notional licence to use the airspace having regard to relevant factors. It was the claimant's submission that the relevant factors were, inter alia; (i) that it held the 'trump' card in that it could stop the first defendant from obtaining revenue from the licence granted to the second defendant (the licence); and (ii) that the site was a cleared site with established use for advertising purposes and that the claimant had established a relationship with an advertising contractor.

The first defendant submitted, inter alia, that it was bringing to the party a valuable established flank wall site, which was likely to benefit from deemed planning consent, and a valuable contract with the second defendant that was worth far more than the claimant had been able to negotiate for a hoarding double the size on the same site.

The licence was easy money for the claimant on stream immediately, and whilst the claimant might threaten to put up its own free-standing hoarding, it would be practically difficult and unattractive. It might take ten months to obtain planning permission on appeal, and large amounts of income would be lost in the meantime.

The court ruled: In a trespass where the defendant had made a profit from his trespass and where, in any hypothetical negotiation that might have taken place as to an appropriate payment for such usage, the claimant landowner held the trump card of being able to refuse permission and thereby prevent any money at all being made from the trespass, 'hypothetical negotiation damages' were appropriate. That negotiation was taken to be one between a willing buyer and a willing seller at an appropriate time.

Events after the valuation date were generally ignored. The fact that one party might have refused to agree was irrelevant. However, the fact that one party held a trump card and could have stopped the defendant obtaining any benefit was a relevant matter. The value of the benefit of the trespass to a reasonable person in the position of the particular defendant was what was being sought.

In other words, the price which a reasonable person would pay for the right of user, or the sum of money which might reasonably have been demanded as a quid pro quo for permitting the trespass. The personal characteristics of the parties were to be disregarded in the postulated hypothetical negotiation (see [69], [71] of the judgment).

In the instant case, weighing all the relevant factors that would have affected a hypothetical negotiation between the claimant and the first defendant in late 2004 and the weeks leading up to 23rd January 2005, and taking full account of the trump card held by the claimant, the required hypothetical negotiation would have resulted in the negotiation of a licence fee payable to the claimant amounting to 50% of the expected net revenue from the licence.

On the evidence, both sides would have had strong pressures to reach a reasonable compromise, and none of the factors on either side would have pushed the ultimate conclusion very far from the 50% mark (see [82]-[84] of the judgment). The sum awarded by way of damages would be 50% of the sum of £313,972, amounting to £156,986 (see [84] of the judgment).

Field Common Ltd v Elmbridge Borough Council [2008] All ER (D) 141 (Aug) applied; Pell Frischmann Engineering Ltd v Bow Valley Iran Ltd [2011] Bus LR D1 applied; Swordheath Properties Ltd v Tabet [1979] 1 All ER 240 considered; Penarth Dock Engineering Co Ltd v Pounds [1963] 1 Lloyd's Rep 359 considered; Amec Developments Ltd v Jury's Hotel Management (UK) Ltd [2000] All ER (D) 1866 considered; Lunn Poly Ltd v Liverpool & Lancashire Properties Ltd [2006] All ER (D) 264 (Mar) considered.

John Furber QC (instructed by Thrings LLP) for the claimant; Janet Bignell (instructed by Mills & Reeve LLP) for the first defendant; The second defendant did not appear and was not represented.