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||Neutral Citation Number:  EWCA Civ 570
||Case No: A2/2003/1119
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BIRMINGHAM DISTRICT REGISTRY
(HHJ D PERRETT QC)
||Royal Courts of Justice
London, WC2A 2LL
||13 May 2004
B e f o r e :
LORD JUSTICE POTTER
LORD JUSTICE JONATHAN PARKER
SIR SWINTON THOMAS
|| SEVERN TRENT WATER LIMITED
||- and -
(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr David Stockill (instructed by Solicitors for Severn Trent Water Ltd) for the appellant
Mr Nicholas Yell (instructed by Hargreaves Hadcroft) for the respondent
HTML VERSION OF JUDGMENT
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Lord Justice Potter :
- This is the appeal of the defendant Severn Trent Water Ltd ("Severn Trent") which is a well-known water undertaker. It has statutory powers conferred upon it to lay and maintain water mains under s.159 of the Water Industry Act 1991 ("the 1991 Act") under which there are provisions for payment of compensation either by agreement or pursuant to Schedule 12 of the 1991 Act. The appeal is against the judgment of His Honour Judge Perrett QC sitting as a judge of the High Court in the Birmingham District Registry on 12 June 2002, whereby he awarded damages for trespass to the claimant ("Mr Barnes") a private individual and landowner against Severn Trent who, without the knowledge or permission of Mr Barnes, laid part of a water main under the corner of a 2.38 acre parcel of grazing land owned by Mr Barnes and let by him under an annual grazing tenancy to a Mr Gartside who farmed the surrounding land. The sum awarded by the judge by way of damages was £2170 with interest.
- Thus, the sum awarded was not substantial. However, the issues are issues of principle in relation to claims of this kind and Severn Trent is concerned that the judge's decision, if uncorrected, may serve as a precedent in other cases.
The background facts
- The relevant facts can be shortly stated. As part of its statutory functions under the 1991 Act it became necessary for Severn Trent to lay a new water main from Bamford to Buxton in Derbyshire. Severn Trent enjoyed powers to lay and maintain water mains under s.159 (1) of the 1991 Act which provides:
"(1) Subject to the following provisions of this section, to section 162(9) below and to the provisions of Chapter III of this Part, every relevant undertaker shall, for the purpose of carrying out its functions, have power –
(a) to lay a relevant pipe (whether above or below the surface) in any land which is not in, under or over a street and to keep that pipe there;
(b) to inspect, maintain, adjust, repair or alter any relevant pipe which is in any such land;
(c) to carry out any works requisite for, or incidental to, the purposes of any works falling within paragraph (a) or (b) above.
(4) The powers conferred by this section shall be exercisable only after reasonable notice of the proposed exercise of the power has been given to the owner and to the occupier of the land where the power is to be exercised."
- In 1991 Severn Trent served statutory notices under s.159(4) to all landowners affected along the 28 kilometres of the new main with two exceptions, namely Mr Barnes and a Mrs Baldwin. Mr Barnes was not notified because Severn Trent was unaware of his land ownership. That was because Mr Barnes' land was part of a field which has no physical boundaries or other demarcation to distinguish it from the surrounding land and it was at all material times let on a grazing licence to Mr Gartside. Neither Mr Gartside, nor a Mr Oxley who was identified and notified as the owner as the whole of the parcel of land in which Mr Barnes' land was contained, informed Severn Trent that the parcel was in fact in divided ownership and that the line of the proposed main, instead of being wholly contained within Mr Oxley's land, would cross the southernmost corner of Mr Barnes' land for a distance of about 20 metres.
- Thus, Severn Trent's trespass upon the land of Mr Barnes in the course of laying the main was trivial, accidental and unintentional. It only came to light when, in February 1993 after the main had been constructed, solicitors representing the executors of Mrs Baldwin advised Severn Trent of her interest and Severn Trent's investigations in respect of her interest revealed the true position in relation to Mr Barnes' land. Severn Trent immediately informed Mr Barnes in order to apologise for not having previously contacted him and to make him aware (whereas he was previously unaware) of the existence of the main under the corner of his land. A statutory notice was served on Mr Barnes on 1 September 1995 in a belated attempt to regularise the situation but, in light of the terms of s.159(4) of the 1991 Act, it was ineffective in that respect.
- Mr Barnes having issued proceedings claiming damages, the parties agreed prior to trial upon the precise line of the water main across the corner of Mr Barnes' land, and that the length of run of the main which constituted a trespass was 20 metres long with an agreed 10 metre-wide easement of access on either side.
- Mr Barnes' claim, as set out in his statement of claim served on 26 November 1997, was for "loss and damage through a diminution in the value of the land". Particulars were pleaded under heads (i) to (iii) based on the development value of the land, it being claimed that the presence of the water main had reduced from 10 to 8 the number of residential building plots capable of being created and developed on the land, such plots being valued at approximately £50,000 each with additional increased development costs. It was also pleaded under (iv) that the value of the land as agricultural land was diminished by the removal of earth, the presence of the main beneath the surface and Mr Barnes' alleged "inability to carry out normal acts of husbandry in its vicinity".
- In the alternative Mr Barnes claimed "restitutionary damages representing the value to [Severn Trent] of the water main", claimed on the basis of "a fair price for the benefit obtained by the defendant from its wrongful use" of the main, namely 5% of £210,527 which was the annual charging rate of Severn Trent for a full year in respect of the water flowing through the mains.
- By their defence, Severn Trent denied the damage alleged and pleaded that the appropriate measure of damages payable was that which Severn Trent would have had to pay under the statutory compensation scheme laid down by s.180 of the 1991 Act and Schedule 12, thereto. The relevant provisions of Schedule 12 are contained in paragraphs 2 and 3 which provide:
"2-(1) If the value of any interest in any relevant land is depreciated by virtue of the exercise, by any relevant undertaker, of any power to carry out pipe-laying works on private land, the person entitled to that interest shall be entitled to compensation from the undertaker of an amount equal to the amount of the depreciation.
3-(1) Any question of disputed compensation under paragraph 2 above shall be referred to and determined by the Lands Tribunal; and in relation to the determination of any such compensation the provisions of sections 2 and 4 of the Land Compensation Act 1961 shall apply, subject to any necessary modifications."
- The claim for restitutionary damages was denied by Severn Trent as being inappropriate.
- By trial, the parties were agreed that the usual measure for compensation under Schedule 12 to the 1991 Act, as it would be assessed by the Lands Tribunal, was one half of the agricultural value of the land under which the main was laid, together with the easement strip 10 metres wide for maintenance purposes. It was agreed that damages assessed on this basis would yield a figure of £110 by way of compensation.
The judgment below
- The judge found that Mr Barnes had failed to prove any loss based upon the development value of his land. On the expert evidence before him, he found that Mr Barnes' chances, or those of his successors in title, of obtaining planning permission were so remote as to be valueless and that, in any event, if by some remote chance such permission were obtained, the development value of the land had been in no way proved to have been diminished by the minimal trespass. He found that Mr Barnes' land had no present value over and above its agricultural value and that the land was just as useful agriculturally now as it was prior to the laying of the main.
- Nonetheless the judge made a total award of £2170. It was made up of three elements as follows. (a) £110 being the sum agreed between the parties as the appropriate measure on the supposition that, had notice been properly served and the matter proceeded to the Lands Tribunal, that is what Mr Barnes would have obtained as compensation; (b) an additional sum of £500 by way of further compensatory damages for loss of Mr Barnes' opportunity to negotiate with Severn Trent for an amount over and above that figure. He awarded that sum because he said that (i) Mr Barnes, and his father before him, believed that there was development potential in the land, albeit without foundation, (ii) Severn Trent, on the basis of 'commercial expediency' would have been prepared to treat the claim of Mr Barnes as a nuisance claim in respect of which it would have offered a moderate sum by way of enhanced compensation in order to avoid the necessity to resort to the Lands Tribunal; (c) finally, the judge awarded a further £1560 by way of 'restitutionary damages' upon the following basis.
- In respect of what he called the compensatory award of £500 the judge stated:
" … if a trespassee's damages are to be compensatory (i.e. over and above 'nominal') then they have, in common sense, to reflect the injury he has or will suffer to either himself or to his interest in the land, either present or reversionary, and as the court can arrive at no tenable conclusion other than that all that Mr Barnes has in fact suffered is the loss of an opportunity, prior to the trespass, of negotiating the amount of compensation that he would have been entitled to over and above that of half the agricultural land value of the area of the easement over his land … Had Mr Barnes or someone on his behalf had an opportunity to discuss the development potential of the land prior to the trespass then I reaffirm the court's view that, if the matter had been gone into in any depth by the Water Authority, they would not have wanted to reflect in the compensation for which they were liable statutorily any very substantial sum for loss of development rights: it would have been very difficult for it to be successfully argued that clipping less than 1% off an extreme corner of the land would have in any way prejudiced the development value of the land …
I am sure that the Defendants would have successfully opposed before the Lands Tribunal any claim to enhanced compensation over and above one half of the agricultural land value of the easement but I am also sure that they would have been prepared to avoid the necessity of such proceedings. All that they would have been concerned with would have been a run of their pipeline over 20 or so yards of the Claimant's land and a total length of main of 28 kilometres.
I reiterate that if the Defendants had indeed investigated the Claimant's pre-trespass claim for compensation enhanced by some damage to the development value of his land they would have offered him nothing over and above the usual amount of compensation but I think it likely that as a commercial enterprise, with urgent main laying work to be done, they would have wished to have avoided all the extra work that such an in-depth confrontation of the Claimant's claim would have necessitated and that they would have made an offer to him over and above that which they made on a pari passu basis to the other part-owners of 06 …
I accordingly find that Mr Barnes falls to be compensated for the loss of that opportunity as being a sum equal to something less than he may have achieved had he been a bit of passing nuisance to the Defendants' quest to get on with the Bamford to Buxton main in a commercial way. I value that lost opportunity in the sum of £500 to which must be added the £110 that he would have received as representing 50% of the value of the agricultural land." (emphasis added)
- Turning to the sum claimed for 'restitutionary' damages the judge said this:
"It has to be accepted that the Defendants, by reason of their trespass which has for about the last 10 years resulted in water flowing along the Claimant's 20 yards of this 28 kilometre long main, have gained some sort of financial advantage that they should have paid for years ago at the compensation stage, but I can see no sensible way of compensating Mr Barnes by that route when it is abundantly clear that Mr Barnes, had he been sensibly advised should have, by July 1995 at the latest, have come to a sensible compromise with the defendants, meaning that the trespass would be terminated within some three years of it having commenced and which had caused him absolutely no convenience (sic) or loss whatsoever. In order however to reflect the fact that the defendants were liable, as trespassers, to pass water through the Claimant's land for 20 yards of the route from Bamford to Buxton, the Claimant is entitled to damages for some barely appreciable percentage of the Defendant's profits from the commencement of the trespass for a period of three years to the date upon which this matter should have been compromised. The Defendants must pay the sum of £520 per annum for three years making a sum of £1,560 awardable and that the court so awards." (emphasis added)
The grounds of appeal
- The grounds of appeal relate, first, to the sum of £500 awarded for the loss of Mr Barnes' opportunity to negotiate a higher sum than that which the Lands Tribunal would have awarded had notice been served upon him and had no agreement reached upon the compensation payable; second, to the award of £1560 'restitutionary' damages.
- So far as the 'loss of opportunity' award is concerned it is clear (and indeed it is not in dispute) that, despite the award being so described in the latter part of the judgment, it was in fact one made by way of damages to compensate Mr Barnes for the invasion of his rights, on the basis that it was the price which, prior to the laying of the main, he could reasonably have required or obtained for the rights gained by Severn Trent. Upon that basis, Severn Trent contend that, the test being objective, the only sum which could reasonably have been demanded was the amount which the Lands Tribunal would have awarded, namely the £110 already awarded by the judge.
- As to the award of £1560, it is submitted that the judge erred in principle in making an additional 'restitutionary' award at all, upon a basis which was rightly claimed only in the alternative to his compensatory claim. It is also submitted that such an award was logically inconsistent with the basis of calculation of loss earlier adopted by the judge. Having rightly found that the loss on a 'compensatory' basis was that sum which the parties (or reasonable parties) would have negotiated on the basis of a notice notionally given prior to trespass, which ex hypothesi related to the installation and future use of the main by Severn Trent, it was logically wrong (and effectively gives rise to double counting) for the judge to make an additional 'restitutionary' award based on the assumption of the parties' reaching a notional compromise agreement three years after the commencement of the trespass. It is also submitted that, in any event, the judge had no evidence or other substantial basis for calculating the damages at a rate of £10 per week / £520 per year.
- In resisting the appeal, Mr Yell who appears for Mr Barnes has not sought to challenge the judge's findings that there was no loss of a chance in respect of any development value of the land, nor any loss of agricultural use. He is thus obliged to accept that, on a purely compensatory basis (that is to say compensation for loss actually suffered), Mr Barnes failed to establish any claim above the agreed figure of £110. Nonetheless, he asserts that the judge had jurisdiction to award damages (1) as if in lieu of an injunction under Lord Cairns' Act even though no claim for an injunction had been made. (2) as a species of 'restitutionary' damages long employed in the field of proprietary torts, and more recently in the field of contract, in a situation where the benefit to the defendant through his wrongful act has far outstripped any loss which the claimant has suffered. He submits that on either, or a combination, of those two approaches the judge was entitled to give both (i) damages based upon or related to the price which might reasonably have been demanded by the plaintiff as a quid pro quo for licensing or permitting the acts complained of and (ii) a sum calculated as the capitalised value of three years' continuing wrongful use made by the defendant of the claimant's property. He invites the court not to be overly analytical in relation to the steps by which the judge reached what Mr Yell submits what was on any view a reasonable and moderate award.
- Whereas that invitation has attractions for reasons of pragmatism and proportionality, it would not be right to do other than consider carefully the steps in the judge's reasoning in the light of the wider implications for Severn Trent and other authorities.
- By way of preliminary, it should be noted that, on this appeal, Severn Trent does not take a point argued before the judge below that it was necessary for Mr Barnes to have claimed an injunction in the proceedings in order for the court to exercise its jurisdiction on the basis originally provided for in Lord Cairns' Act and since preserved despite its repeal. He limits his appeal to the grounds already set out at paragraph 16-18 above.
- As observed in McGregor on Damages (17th ed) at paras 12-002 to 12-006, use of the term 'restitutionary' damages as an appropriate extension of the basic rule that damages are compensation for loss actually suffered by the claimant has enjoyed a mixed judicial reception. Whereas, in Attorney General v Blake  Ch 439, (breach of a contractual obligation of confidence) Lord Woolf MR giving the judgment of the court was content at 456b-459b to adopt that term in respect of cases where the benefit to the wrongdoer far exceeds the loss (if any) to the person wronged, Lord Nicholls in the House of Lords preferred to avoid it as an 'unhappy' expression (see  1 AC 268 at 284H), while at the same time recognising that:
"Even when awarding damages, the law does not adhere slavishly to the concept of compensation for financially measurable loss. When the circumstances require, damages are measured by reference to the benefit obtained by the wrongdoer. This applies to interference with property rights. Recently the approach has been applied to breach of contract." (285B-C)
- Within the law of tort and interference with the use of land this method of measuring damages has been accommodated within the basic compensatory rule on the basis of the 'user' principle articulated by Nicholls LJ in Stoke City Council v W & J Wass  1 WLR 1406 at 1416a-d:
"It is an established principle concerning the assessment of damages that a person who has wrongfully used another's property without causing the latter any pecuniary loss may still be liable to that other for more than nominal damages. In general, he is liable to pay, as damages, a reasonable sum for the wrongful use he has made of the other's property. The law has reached this conclusion by giving to the concept of loss or damage in such a case a wider meaning than merely financial loss calculated by comparing the property owner's financial position after the wrongdoing with what it would have been had the wrongdoing never occurred. Furthermore, in such a case it is no answer for the wrongdoer to show that the property owner would probably not have used the property himself had the wrongdoer not done so. In The Mediana  AC 113, 117, Earl of Halsbury L.C. made the famous observation that a defendant who had deprived the plaintiff of one of the chairs in his room for 12 months could not diminish the damages by showing that the plaintiff did not usually sit upon that chair or that there were plenty of other chairs in the room."
- The principle has largely been developed in relation to trespass to land, beginning with the 19th century cases of unauthorised mining (the 'wayleave' cases): see for instance Martin v Porter (1839) 5 M&W 351 and Jegon v Vivian (1871) LR 6 Ch App 742; see also Whitwham v Westminster Brymbo Coal Co  2 Ch 538 (trespass by tipping of refuse).
- In Attorney General v Blake, in reviewing the position in relation to trespass to land, Lord Nicholls said at 278 F-C:
"A trespasser who enters another's land may cause the landowner no financial loss. In such a case damages are measured by the benefit received by the trespasser, namely, by his use of the land. The same principle is applied where the wrong consists of the use of another's land for depositing waste, or by using a path across the land or using passages in an underground mine. In this type of case the damages recoverable will be, in short, the price a reasonable person would pay for the right of user …"
- That principle has been applied in relation to wrongful interference involving easements. In Bracewell v Appelby  Ch 408, the defendant wrongly used and asserted a right of way over a private road to a house which he had built. The court (Graham J) refused an injunction on the grounds of the plaintiff's delay in commencing proceedings and, following the decision of Brightman J in Wrotham Park Estate Co Ltd v Parkside Homes Ltd  1 WLR 798 (a restrictive covenant case - see further below), held the defendant
"… liable to pay an amount of damages which so far as it can be estimated is equivalent to a proper and fair price which would be payable for the acquisition of the right of way in question."
Graham J observed:
"The circumstances here are very different from those in the Wrotham Park case and I think that the proper approach is to endeavour to arrive at a fair figure which, on the assumption made, the parties would have arrived at as one which the plaintiffs would accept as compensating them for loss of amenity and increased user, and which at the same time, whilst making the blue land a viable building plot, would not be so high as to deter the defendant from building at all."
- In that case and in the subsequent case of Carr-Saunders v Dick McNeil Associates  1 WLR 922 (interference with the plaintiff's right to light) the court made clear that, in deciding upon an appropriate award in relation to the notional 'reasonable sum' or 'fair figure' for the defendant to pay, regard was to be had to the bargaining position of the parties in order to arrive at a price which would have been likely to have been negotiated as the reasonable price of a licence for the action taken by the defendant which constituted the invasion of the claimant's rights.
- The relevance of that bargaining position is of course because, in most cases, without the approval of the claimant, the defendant is in no position to proceed: see the position as explained by Millett J in the Carr-Saunders case at 895. That was a case involving obstruction of a right enjoyed by virtue of a prescriptive easement. However, Millett J, by reference to Bracewell v Appelby and the Wrotham Park case, made clear that, as between claims in contract or in tort, there is no reason for any difference of approach when awarding damages in respect of wrongful interference by a defendant with the use and enjoyment of the claimant's land.
- In the Wrotham Park case, 55 houses had been built by the defendant in knowing breach of a restrictive covenant, in the face of objections by the claimant. Brightman J held that on its natural construction the covenant was a prohibition against development without obtaining prior approval from the claimant as estate owner. The claimant sought an injunction to restrain building on the land and a mandatory injunction for the demolition of buildings already erected in breach of covenant but did not apply for a interlocutory injunction and by trial the houses were complete. Acting under the jurisdiction which originated in Lord Cairns' Act, Brightman J made an award of damages in the sum which the plaintiff might reasonably have demanded as a quid pro quo for relaxing the covenant had the defendants first applied to them for relaxation. In the circumstances of the case he found that faced with a request from the developer which the plaintiff felt reluctantly obliged to grant, a sum would have been negotiated on the basis of the profit which the developer expected to make from his operations and would then reasonably have required a certain percentage of that anticipated profit as a price for the relaxation of the covenant. Upon that basis he made an award in a sum equal to 5% of the defendant's anticipated profit as being fair in all the circumstances.
- That decision was approved and applied in Jaggard v Sawyer  1 WLR 269. In the latter case, Sir Thomas Bingham MR stated at 281:
"I cannot, however, accept that Brightman J's assessment of damages in the Wrotham Park case was based on other than compensatory principles. The defendants had committed a breach of covenant, the effects of which continued. The judge was not willing to order the defendants to undo the continuing effects of that breach. He had therefore to assess the damages necessary to compensate the plaintiffs for this continuing invasion of their right. He paid attention to the profits earned by the defendants, as it seemed to me, not in order to strip the defendants of their unjust gains, but because of the obvious relationship between the profits earned by the defendants and the sum which the defendants could reasonably have been willing to pay to secure a release from the covenant. I am reassured to find that this is the view taken of the Wrotham Park case by Sir Robert Megarry V-C in Tito v Waddell (No.2)  Ch 106, 335 … "
- The decisions referred to in paragraphs 26 to 30 above were all concerned with awards under the Lord Cairns' Act jurisdiction. In reviewing the relevant authorities at length in Jaggard v Sawyer, Millett LJ made clear that the power to award damages on the basis of the jurisdiction originating under Lord Cairns' Act fell to be determined as at the date of issue of the writ and that, if the court would then have had jurisdiction to grant an injunction, it had jurisdiction to award damages instead. He made clear that to found the jurisdiction the question was whether at the date of the writ the court could have granted an injunction, not whether it would have done, and that it was not necessary for the plaintiff to include a claim for damages in the writ. He continued at 285e:
"By a parity of reasoning it is not in my opinion necessary for a plaintiff to include a claim for an injunction in order to found a claim for damages under the Act. It would be absurd to require him to include a claim for an injunction if he is sufficiently realistic to recognise that in the circumstances he is unlikely to obtain one and intends from the first to ask the court for damages instead. But he ought to make it clear whether he is claiming damages for past injury at common law or under the Act in substitution for an injunction." (emphasis added)
Millett LJ went on to state:
"It is plain from his judgment in the Wrotham Park case that Brightman J's approach was compensatory, not restitutionary. He sought to measure the damages by a reference to what the plaintiff had lost, not by reference to what the defendant had gained. He did not award the plaintiff the profit which the defendant had made by the breach, but the amount which he judged the plaintiff might have obtained as the price of giving its consent. The amount of the profit which the defendant expected to make was a relevant factor in that assessment, but that was all."
His judgment concluded at 292d:
"In the present case the plaintiff brought proceedings at a time when her rights were still capable of being protected by injunction. She has accordingly been able to invoke the court's jurisdiction to award in substitution for an injunction damages which take account of the future as well as the past. In my view there is no reason why compensatory damages for future trespasses and continuing breaches of covenant should not reflect the value of the rights which she has lost, or why such damages should not be measured by the amount which she could reasonably have expected to receive for their release."
- In Attorney-General v Blake Lord Nicholls stated at 281:
"… in the same way as damages at common law for violations of a property right may be measured by reference to the benefits wrongfully obtained by a defendant, so under Lord Cairns' Act damages may include damages measured by reference to the benefits likely to be obtained in future by the defendant. This approach has been adopted on many occasions. Recent examples are Bracewell v Appelby  Ch 408 and Jaggard v Sawyer  1 WLR 269, both cases concerned with access to a newly-built house over another's land.
The measure of damages awarded in this type of case is often analysed as damages for loss of a bargaining opportunity or, which comes to the same, the price payable for the compulsory acquisition of a right. This analysis is correct."
- In this case, Mr Barnes did not claim damages in lieu of an injunction under the Lord Cairns' Act jurisdiction but simply damages for past injury at common law on the basis set out in the pleading i.e. loss of (development) value, alternatively damages which, though described as 'restitutionary', were expressly based on the 'fair price' principle assessed by reference to Thames Water's tariff charges for water passed through the main.
(a) The £110 element
- It is not in dispute between the parties that £110 was rightly awarded as the statutory compensation payable had notice been served. It clearly represented the minimum value of the right wrongfully obtained by Severn Trent by proceeding to lay the main without notice having been given.
(b) The £500 element
- In the circumstances of this case, as it seems to me, the judge was plainly correct not to limit the damages awarded to the sum of £110. No notice having been given before the works were carried out, the continuing trespass could not be reversed and the judge was right to approach matters on the basis succinctly described by Lord Nicholls as "loss of a bargaining opportunity or, which comes to the same, the price payable for the compulsory acquisition of a right". In this case Severn Water had by its actions effectively compulsorily acquired the right to run its water main under Mr Barnes' land without complying with the statutory procedures which would have limited the compensation to £110. Accordingly, the judge was right to go through the exercise which he did in treating as the fair price the likely reasonable outcome of any negotiations which would have taken place had notice been served prior to the works being done. In this respect, however, he was equally right to have regard to the fact that, had notice been served, upon its expiry Mr Barnes would have had no power to prevent or hold up the doing of the works until compensation had been agreed or assessed . On that basis, Mr Barnes would have had some (but very limited) nuisance value to Severn Trent which the judge was entitled to quantify in the manner he did in the passage from his judgment quoted at paragraph 14 above. I thus would not interfere with that aspect of his award.
(c) The additional element of £1560
- It appears to me however that the judge was in error when he went on to make the additional award of £1560. It seems from the passages of his judgment highlighted in italics at paragraphs 14 and 15 above that the exercise the judge sought to perform by awarding the additional sum of £1560 was to compensate for the financial advantage to Severn Trent of using the main without having paid an appropriate sum by way of compensation during a period of 3 years up to the time (July 1995) when the judge considered that the matter would have been settled had Mr Barnes been properly advised. This reasoning is difficult to follow. The judge had held that £610 was the total sum which represented Mr Barnes' lost opportunity to negotiate compensation prior to the trespass. Because of Severn Trent's power to serve notice upon Mr Barnes had it been aware of his interest, the financial advantage to Severn Trent in proceeding without payment was no more than the mirror image of the financial disadvantage to Mr Barnes of being kept out of money properly payable to him as from the date when it fell due. In that respect the appropriate award was an award of interest on £610 (which was indeed made).
- By doing what he did the judge, having rightly applied the approach to compensation taken from the authorities and on which the parties based their argument, reached his figure of £610 as the fair price which would or could have been negotiated prior to trespass; however, he then 'topped up' his award with three years' notional rent charge of £520 per annum which he had already found that Mr Barnes would not have obtained either from the Lands Tribunal or in negotiation with Severn Trent.
- It is worth observing that we were informed that, in doing the further calculation which he did, the judge was effecting an exercise of his own, which had neither been advanced in the pleadings (see paragraphs 7 and 8 above), nor argued by the parties. The judge based his reasoning on the fact that, if Mr Barnes had been properly advised, he would have agreed the proper compensatory figure of £610 some three years after the main had been laid and the trespass effected. That may well be true, but the figure of £610 earlier found by the judge related to the entire period of the trespass. Mr Barnes and Severn Trent never in fact reached agreement on compensation at any stage and the original trespass continued up to trial, at which stage the task of the judge was to assess the appropriate figure for the entire period calculated on the basis of a fair price notionally negotiated prior to trespass. Such calculation yielded an award of £610.
- It may be that the judge was concerned that £610 was a low figure by way of damages. I do not think he need have felt so concerned. The reason why application of the 'fair price' principle was apt to produce substantial sums by way of compensation in the line of authority referred to above, but only an insubstantial sum in this case, is twofold. First, because in the cases cited the court was concerned to calculate a theoretical price or licence fee in a situation in which the parties, if negotiating prior to trespass, would have been constrained only by market forces, the defendant being unable to proceed at all in the absence of the claimant owner's permission. The position of Severn Trent on the other hand was that of a statutory undertaker entitled to enter onto the land and to do the work subject only to service of notice and (later) payment of compensation as assessed by the Lands Tribunal in the absence of agreement. This it would plainly have done, had it been aware of Mr Barnes' interest. The parties accepted that such assessment would have yielded no more than £110. Second, whether the damages were assessed on the basis of the loss or detriment to Mr Barnes, or on the basis of the 'benefits wrongly obtained' by Severn Trent (c.f. Lord Nicholls in Attorney General v Blake at paragraph 32 above), they were insignificant.
- So far as Mr Barnes was concerned, he had by reason of Severn Trent's actions lost no opportunity to develop or exploit his land which was and remained at all material times let to Mr Gartside under a grazing licence which was in no way affected. Nor, if the parties had been aware of the position, with the result that notice was served by Severn Trent, did Mr Barnes have any power to prevent the works being done. The measure of Mr Barnes' loss was in reality not the loss of any valuable right to charge Severn Trent an annual charge in respect of the installation and use of the main, but simply loss of the right or opportunity to seek by negotiation to obtain a higher sum than that which could be expected from the Lands Tribunal in the absence of agreement. That higher sum was assessed by the judge at £500.
- Finally, it is to be noted that the judge appears to have taken the view that some additional award was necessary on the basis that "to reflect the fact that the defendants were liable, as trespassers … the claimant is entitled to damages for some barely appreciable percentage of the defendant's profits" (see the second italicised passage from the judgment quoted at paragraph 15 above). In this respect I consider that he misunderstood the authorities. It is of course the position that in cases of trespass of this kind there is no right to a share in, or account of, profits in any conventional sense. The only relevance of the defendant's profits is that they are likely to be a helpful reference point for the court when seeking to fix upon a fair price for a notional licence. However, while it will generally be appropriate for the judge in such cases to 'pay attention' to the profits made by the defendants as a result of their trespass (see per Sir Thomas Bingham MR as quoted at paragraph 30 above) he is not obliged to do so and there may well be cases where such an approach is inappropriate, for instance where the profits made are negligible or are impossible to assess.
- That was of course the position in this case. There was no practical or sensible way of assessing the profits accruing to Severn Trent from its use of no more than 20 metres of a water main which ran for 28 kilometres. The claim of Mr Barnes as advanced by his expert at trial (and very considerably reduced from the amount claimed in the pleading) was almost £200,000, the sum calculated as representing 1% of Severn Trent's tariff charges for the water passed through the entire main between 1992 and 2001. The defendant's final argument was that any claim based on the benefit to Severn Trent derived from the 20 metre section of main should be calculated on the basis of Severn Trent's profits per metre of water main which gave a figure for damages of less than £50. In requiring Severn Trent to pay the sum of £520 per annum over a 3 year period, the judge plainly (and rightly in my view) regarded the approach of Severn Trent as more realistic. However, the figure chosen by the judge appears to have been plucked from the air with no explanation as to the manner in which it was calculated. In my view, there was no proper basis for the judge's 'top-up' award of £1560 and no reason either in justice or in logic for him to make an award based on the 'user' principle beyond that already made under the second element of his award.
- I would allow the appeal to the extent of reducing the sum awarded by £1560 and the amount of the interest awarded thereon.
Lord Justice Jonathan Parker:
- I agree.
Sir Swinton Thomas:
- I also agree.
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