Shelfer gets shelved17th March 2014
Property Litigation partner Kate Andrews discusses Coventry v Lawerence, Shelfer and the right to light
The recent decision of the Supreme Court in Coventry v Lawrence (2014) will be welcome news for developers. The resounding decision of all of the Law Lords (presided over by Lord Neuberger) heralds a more flexible approach to the previously rigid case law when determining the appropriate remedy for interference with a right to light.
In recent years, developers have had to think long and hard about rights of light issues given the fears of an inunction being awarded against them, preventing their proposed scheme or requiring them to knock down a building already built. No one could blame a developer for such fears given the cases of Regan v Paul and HKRUK II (CHC) Limited v Heaney, in which the respective courts refused to award the claimant damages, instead of an injunction, mainly due to a strict adherence of the test in Shelfer v City of London Electric Lighting Co.
The four conditions, according to the test in Shelfer, when damages in lieu of an injunction may be awarded are (1) the injury to the claimant’s legal right is small; (2) it is capable of being estimated in money; (3) the injury can be adequately compensated by a small amount of money; and (4) it would be oppressive to the defendant to grant an injunction. In Regan v Paul Properties DPF No 1 Ltd  and HKRUK II (CHC) Limited v Heaney , the Shelfer test was applied rigidly, and the Courts refused to exercise their discretion where all four parts of the Shelfer test were not met.
In Coventry v Lawrence, the Supreme Court criticised the “slavish” adherence to the Shelfer test, signalling a more flexible approach to the question of whether the court should exercise its discretion to grant damages instead of an injunction. Lord Neuberger said an almost mechanical application of the four conditions in Shelfer, together with an approach which involves damages being awarded only in ‘very exceptional circumstances’, are wrong in principle, and give rise to a serious risk of going wrong in practice, adding that the exercise by a judge of his discretion should not be fettered. When looking at whether an injunction should be granted in lieu of an injunction:
1. the prima facie position is that an injunction should be granted;
2. the legal burden is on the defendant to show why an injunction should not be granted
3. in the absence of additional relevant circumstances pointing the other way, it would normally be right to refuse an injunction if all four limbs of the Shelfer test were satisfied;
4. but even if all four limbs are not satisfied, this does not mean that an injunction should be granted.
Lord Neuberger observed that where public interest arose, it was hard to foresee any circumstances in which it could not be a relevant factor. The existence of a planning permission, he indicated, may provide strong support for the contention that the activity is for the public benefit and, therefore, relevant to the question of whether to award damages.
Lord Neuberger commented that where a court decides to grant damages in lieu of an injunction, those damages should not always be limited to the diminution in value of the property, but could extend to include damages for loss of the ability to enforce rights.
This decision will be welcomed by developers faced with an adjoining landowner threatening injunctive relief. Not only will there now be a more flexible approach taken by the lower courts in relation to the question of the appropriate remedy for breach of a right to light, the comments from the Law Lords should mean it will be harder to obtain an injunction where the development is of public benefit and has planning permission.