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A Victory for the principled development of the law

The Mill Wheel on the Mall Walk in Longford, via the Longford Town Council websiteIf you trespass on my land, and make a profit from that trespass, what should the measure of damages be? It is a very important question, but the answer is disputed, and it had not been directly discussed at Irish law, so far as I know, until it was recently addressed by McMahon J in Victory v Galhoy Inns [2010] IEHC 459 (16 December 2010).

Trespass is a civil wrong (a tort), and the aim of damages for such wrongs is to compensate the plaintiff for the loss caused by the wrong: to put the plaintiff “in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation” (Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, 39 (Lord Blackburn); Smith New Court Securities v Scrimgeour Vickers [1997] AC 254, [1996] UKHL 3 (21 November 1996); Carey v Independent Newspapers [2003] IEHC 67 (7 August 2003)). However, the law has recognised that where a defendant has made a profit from a civil wrong, the damages can be directed instead to stripping the profits from the defendant. For example, in Hickey v Roches Stores (High Court, unreported, 14 July 1976) (pdf) Finlay P held

Where a wrongdoer has calculated and intended by his wrongdoing to achieve a gain or profit which he could not otherwise achieve and has in that way acted mala fide then irrespective of whether the form of his wrongdoing constitutes a tort or a breach of contract the Court should in assessing damages look not only to the loss suffered by the injured party but also to the profit or gain unjustly or wrongly obtained by the wrongdoer.

So far as breach of contract is concerned, English law reached the same conclusion in AG v Blake [2001] 1 AC 268, [2000] UKHL 45 (27 July 2000). As for tort, Laffoy J in Conneran v Corbett [2006] IEHC 254 (31 May 2006) accepted the jurisdiction to award restitutionary damages, but did not need to express any view on the circumstances in which a claim for restitutionary damages would succeed, as she held that the plaintiffs had not, on the evidence, established mala fides on the part of the defendants in the sense envisaged by Finlay P in Hickey v Roches Stores. The issue is fully discussed by the Law Reform Commission in its Consultation Paper (1998; see chapter 8 ) and Report (LRC 60-2000; see chapter 6) on Aggravated, Exemplary and Restitutionary Damages.

In the context of the tort of trespass, the appropriate measure of damages is an amount of damages equivalent the fair and reasonable price which would be payable to allow the act in question (see, eg, Wrotham Park Estate Company v Parkside Homes [1974] 2 All ER 321, [1974] 1 WLR 798; Bracewell v Appleby [1975] 1 All ER 993; Swordheath Properties v Tabet [1979] 1 WLR 285; Stoke on Trent City Council v W & J Wass Ltd [1988] 1 WLR 1406; Jaggard v Sawyer [1995] 1 WLR 269, [1994] EWCA Civ 1 (18 July 1994); Experience Hendrix plc v PPX Enterprises [2003] FSR 853; Horsford v Bird [2006] UKPC 3 (17 January 2006) Lunn Poly Ltd v Liverpool & Lancashire Properties (2006) 25 EG 210, [2006] EWCA Civ 430 (15 March 2006); Field Common v Elmbridge Borough Council [2008] EWHC 2079 (Ch) (27 August 2008); Devenish Nutrition v Sanofi-Aventis [2009] 3 All ER 27, [2008] EWCA Civ 1086 (14 October 2008). The tort of conversion is similar (see Kuwait Airways Corp v Iraqi Airways Co [2002] 2 AC 883, [2002] UKHL 19 (16 May 2002) [77] (Lord Nicholls)). However, it is disputed in the authorities as to whether this measure of damages is properly characterised as compensatory, or restitutionary, or whether it stands alone (see, eg, Inverugie Investments v Hackett [1995] 1 WLR 713 (PC); Pell Frischmann Engineering v Bow Valley Iran & Ors (Rev 2) [2009] UKPC 45 (26 November 2009)).

The first Irish consideration of this line of authority came with the decision of McMahon J in Victory v Galhoy Inns. The defendants ran a nightclub, and they used an exit through a rarely-used archway on the plaintiffs’ property as an emergency exit from the nightclub. When the plaintiffs objected to this usage, the defendants argued that they had a right of way through the archway, or that the plaintiffs had acquiesced in that usage. These defences failed. McMahon J held that the defendants did not have a right of way over the plaintiffs’ property, and one could not be spelled out by extending any previous such rights. Indeed, McMahon J went further, re-iterating that when a right of way exists over private property in favour of other property, it is very restrictive on the property over which the right of way runs, and so this interference cannot be further extended without the express agreement of the owner of that property. McMahon J also held that the plaintiffs had not acquiesced in the defendants’ using the emergency exit route. Discussing Wilmot v Barber[1880] 15 ChD 96 (Fry J) and Shaw v Applegate [1977] 1 WLR 970 (CA), he held that the “level of inactivity required to deprive the person who wishes to assert his right is high and must be so reprehensible that it approaches dishonesty” (para 34). The plaintiff may have been passive, but he had limited knowledge or appreciation of what was going on, and his actions could not be “described as something approaching dishonesty” (para 35). As a consequence, the defendants were trespassing, and the plaintiffs sought an injunction or damages.

McMahon J declined to award the injunction, but relied on Wrotham Park Estate Company v Parkside Homes [1974] 2 All ER 321, [1974] 1 WLR 798 (Brightman J) and Bracewell v Appleby [1975] 1 All ER 993 (Graham J) to award €150,000:

40. … although the plaintiffs never sought to sell the right of way over their land to the defendant, their interest now seems to be more in getting compensation for the intrusion rather than restoring the status quo. Their interest in the properties affected is purely commercial, unlike the situation in Bracewell where the amenity value of the plaintiff’s house was at issue. Moreover, there was evidence before the court, which I accept, that the plaintiffs indicated to the defendant that they would have to pay for the intrusion.

41. In Conneran & O’Reilly v Corbett [2006] IEHC 254 (31 May 2006), Ms Justice Laffoy had to address the quantification of damages where the plaintiff had successfully sued the defendant for interference with an easement to receive and make deliveries over a particular route on private property. …

42. Although the absence of evidence did not give Laffoy J the opportunity to apply the approach adopted in the Snell and Prideau case [Snell & Prideau v Derton Mirrors [1995] 1 EGLR 259 (CA)], which in turn owes its origin to the Wrotham case, it is clear that it commended itself to her as an appropriate approach to adopt in a case such as that which was before her. It is the approach that I consider appropriate also in the case before this Court. …

43. With regard to the intrusion of the defendant onto the plaintiffs’ property and its entitlement to use the archway as an emergency exit passage in the event of a fire in the pub/nightclub, I am satisfied that damages for this incursion onto the plaintiffs’ property should be calculated by reference to the principles established in the English cases of Wrotham, Bracewell and AG v Blake [[2001] 1 AC 268, [2000] UKHL 45 (27 July 2000)], mentioned above, and approved in obiter dictum by Laffoy J in Conneran (supra). …

45. From the above authorities I find that the damages to be awarded in a case like this are to be measured in the following way: first, one must assess the diminution in value of the plaintiffs’ property if the defendant is now allowed to use the disputed route as a emergency fire exit: in other words I must calculate the difference in value between the plaintiffs’ property without this burden and the property with this burden. Second, the plaintiffs are entitled to an enhancement by virtue of the leverage which they are entitled to exert in a commercial situation like that before the court. The amount of this leverage may be related to the value of the exit to the defendant’s enterprise, and in particular to the profits which the enterprise generates for the defendant. …

50. Bearing this evidence in mind and the principles which I must apply, I have come to the following conclusions as to what is an appropriate sum to award the plaintiffs in the instant case. First, I accept the evidence of Mr. Quinn that the difference between the plaintiffs’ property in an open market with and without the burden is € 40,000. Clearly, the plaintiffs are entitled to this sum. Second, I am of the view that the plaintiffs are entitled to a sum by way of enhancement or leverage, bearing in mind the lucrative nature of the defendant’s operation. I think that a fair sum under this heading, bearing in mind all the above circumstances, is €110,000.

This is an interesting and important decision, in that, whatever about Conneran v Corbett, this judgment means that Irish law has unequivocally accepted the Wrotham Park measure of damages. I look forward to more discussions about whether it is compensatory, restitutionary, or at large. In the meantime, McMahon J’s judgment is certainly a victory for common sense as well as for the principled development of the law.

5 Responses to “A Victory for the principled development of the law”

  1. Eoin, I know I have a one-tracked mind, but some of the further discussions to which you look forward may occur in the Supreme Court. The High Court Search database reveals that a Notice of Appeal was lodged last Friday.

  2. Eoin says:

    Thanks for this, Paul. I’m a little surprised that the defendants are appealing: McMahon J’s decision is entirely convincing to me. Anyway, I’ll keep my eyes open for the appeal, and write about it in due course.

  3. Eoin says:

    In Bunnings Group v Chep Australia [2011] NSWCA 342 (10 November 2011) the New South Wales Court of Appeal awarded substantial compensatory damages for trespass to goods. Allsop P (Macfarlan JA concurring) provides a long discussion of the tort of conversion, and of the remedies available after Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246 and Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd (1991) 32 NSWLR 175:

    173. In Gaba Formwork at 184-188, Giles J, as his Honour then was, examined Strand Electric and its reception in England and Australia up to 1991. I respectfully agree with the analysis of Giles J in Gaba Formwork (referred to by the learned authors of Clerk & Lindsell [A M Dugdale et al (eds) Clerk & Lindsell on Torts (19 th Ed, Sweet & Maxwell, 2006)] 1060 [17-104] ftnt 81 as a “careful and instructive” judgment, a description with which I respectfully concur). As the opinion of Giles J in Gaba Formwork reveals, Strand Electric has been accepted in Australia, though not without some reservation: … The legitimacy of assessing compensation or damages in conversion and detinue for interference with proprietary or possessory rights by use of property that earns or is capable of earning a profit, by reference to a hiring fee that is appropriate in all the circumstances, was confirmed by the Privy Council in Inverugie Investments Ltd v Hackett [1995] 1 WLR 713 at 717-718 and by the House of Lords in Attorney-General v Blake [2000] UKHL 45; [2001] 1 AC 268 at 278-279. …

    174. Stability of approach, especially in a field directly related to commercial law should be maintained. It is unnecessary to discuss the extent to which a degree of re-adjustment in taxonomy is required by reference to notions of restitutionary damages (cf McGregor [Damages (18 th Ed, Sweet & Maxwell, 2010)] Ch 12). Rules of compensatory damages, sensibly and flexibly applied, are adequate to explain the theoretical and practical positions, without any extension of principle involving the award of the wrongdoer’s profit as a remedial consequence of the commission of a tort.

    175. The fundamental principle of damages for tort is compensation for loss caused: … The damage or loss caused to the plaintiff with rights of ownership and possession who is in the business of hiring goods of the kind converted or detained is not limited to the consequences of stock depletion or to cost of replacement, but incudes the denial and infringement of its rights. Those rights have been denied to the plaintiff by the commission of a tort involving the use of the goods by the tortfeasor. It is entirely logical and in accordance with justice and commonsense that a wrongdoer should pay a price for using the goods of another as a matter of compensation for the denial of the right concerned. I do not see this as contrary to, or undermining of, the principle of compensation. …

    177. … if a property right has been invaded by wrongful user, the law should and does provide a remedy for the wrong, compensatory in character in the broad sense, focusing on the interference with the right in question. Recompense is given to the wronged property owner that requires the wrong to be seen as righted, by requiring a price or hiring charge to be paid for the wrongful use. What is being compensated for is the wrongful denial of property rights, not merely the injured party’s financial position analysed subjectively: see Experience Hendrix LLC v PPX Enterprises Inc [2003] EWCA (Civ) 323; [2003] 1 All ER (Comm) 830 at [26] per Mance LJ. Essential to the notion of compensation here is the use by the wrongdoer that gives reality and content to the denial of, or interference with, the plaintiff’s rights. So to say is not to transform damages into restitution; rather it is to set a practical limit to the principle based on the feature of the wrong (the wrongful use) which calls for the law’s response to award damages for the denial or interference with the right.

    178. Though only Denning LJ in Strand Electric expressly based his judgment on restitutionary principles, Somervell LJ and Romer LJ expressing the matter in terms of compensation, each of their Lordships included as an element in his reasoning use by the converter/detainer. This element of suit for the use of the chattel was a suggestion of Lord Mansfield in Hambly v Trott [1776] EngR 20; (1776) 1 Cowp 371 at 375; [1776] EngR 20; 98 ER 1136 at 1138. … The element of use can be seen in the analogue of mesne profits and like cases: …

    179. If use is required for the legitimate employment of a hiring charge to assess damages or compensation or monetary relief, it is necessary to consider what kind of use will suffice. Conversion or detinue has been found. If the wrong is the mere non-return of goods that lie idle and contribute not at all to the life, work or business of the wrongdoer it may be difficult to justify conceptually, in the absence of proof of actual loss or damage, the awarding of a hiring fee. Hire is, after all, in its nature, a payment for use. Nevertheless, one need not be overly precise about the nature of the use. For instance, in Strand Electric, the switchboards were not actively operated. There was use in the relevant sense, however, because without the equipment the theatre could not be let or sold – it made the theatre more attractive and readily disposable.

    180. Here some of the use was possession, for display and storage. Possession for these purposes was after a demand to return. In a sensible commercial sense, it was the deployment of the pallets in the business of Bunnings, even to the extent that they were recirculating pallets for returns. The refusal to return enabled the continued smooth operation of the Bunnings business to take place, without the inconvenience (and hence business cost) of doing that which they were legally obliged to do – return all pallets to Chep. This, in my view, is use enough for the Strand Electric principle. …

    182. In my view, it is appropriate to apply a hiring fee on the authority of Strand Electric.

    Giles JA agreed with Allsop P “save for abstaining in part from [173] and otherwise saying a little more on the application of Strand Electric“. He acknowledged that the jurisprudential basis for the award of damages in Strand Electric is open to debate, and has been debated ([194]), that sometimes it has been treated as within mainstream compensatory principles ([195)], and that, in other cases

    196. … a restitutionary element has been indicated, whereby the defendant pays damages representing the benefit received by the defendant through having the use of the chattel without paying for it. On this approach the benefit is measured by what the defendant would have had to pay for the use of the chattel. It is what Lord Nicholls in Sempra Metals Ltd v Inland Revenue Commissioners [2007] UKHL 34; (2008) 1 AC 651 at [116] called restitution for wrongdoing and Tipping J in Stevens v Premium Real Estate Ltd [2009] NZSC 15 at [102] called restorative damages … It was the approach of Denning LJ in Strand Electric, which may have been approved in the Privy Council in BBMB Finance (Hong Kong) Ltd v EDA Holdings Ltd [1990] 1 WLR 409 at 412. In compensatory terms, it is the plaintiff’s loss of the value of the use of the chattel by hiring it to the defendant.

    197. Apart from Gaba Formwork, the restitutionary element can be seen in the “user principle” … founded in particular in cases on the use of land. Allsop P has referred to a number of those cases. …

    198. Once there is departure from strict compensatory principles in some circumstances, as the law undoubtedly permits, a restitutionary element for conversion or detinue in damages representing what the defendant would have had to pay for the use of the chattel can readily enough be accepted.

    199. I respectfully prefer that view of Strand Electric. On strict compensatory principles, the tortfeasor’s use of the chattel once conversion or detinue has been found would not matter for damages.

  4. Eoin says:

    See now also London Borough of Enfield v Outdoor Plus Ltd [2012] EWCA Civ 608 (09 May 2012), discussing Field Common Ltd v Elmbridge Borough Council [2008] EWHC 2079 (Ch) (27 August 2008) and Stadium Capital Holdings Ltd v St Marylebone Property Co [2011] EWHC 2856 (Ch) (08 November 2011). Henderson J held that Outdoor Plus Ltd was

    … not a suitable case for the award of mesne profits, for the simple reason that there is no established market rate for the letting of part of a hoarding which straddles the land of two owners. Nor is it a suitable case for an award of restitutionary damages consisting of, or akin to, an account of profits. Although the circumstances of the case are unusual, it has no exceptional features which could justify going beyond the usual measure of damage in cases of this type, as elucidated by the House of Lords in Attorney General v Blake. Indeed, I am a little surprised that it was not common ground from the outset … that the hypothetical negotiation measure should be applied.

    Secondly, we have the benefit of the unchallenged evidence … about the hypothetical licence fees which would have been agreed between two properly advised commercial parties for the two hoardings, on the assumption that they were in single ownership. … [This] seems to me to be the only solid evidence the court has to go upon. I would therefore hold that the result of the hypothetical negotiation would have been an agreement by the defendants to pay the Council one half of the notional licence fees …

  5. […] made a profit from a civil wrong such as a breach of contract or a tort, damages can be directed to stripping the profit from the defendant. For example, in Hickey v Roches Stores (High Court, unreported, 14 July 1976) (pdf) Finlay P held […]

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Me in a hatHi there! Thanks for dropping by. I'm Eoin O'Dell, and this is my blog: Cearta.ie - the Irish for rights.

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