Valuing damages for trespass and hurting the feelings of a company.
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First appeared in Informer: Real Estate Newsletter - Spring/Summer 2014
The Court of Appeal in the case of Eaton Mansions (Westminster) Ltd v Stinger Compania De Inversion SA  ("Eaton Mansions") provided rulings on two points of law:
(1) On what basis should a Court award damages for trespass to land? Should it make an award based on the actual period of trespass or should it be by reference to what the parties hypothetically would have agreed upon?
(2) Can a company/corporate body make a claim for hurt feelings (“aggravated damages”)?
The case involved Eaton Mansions (the "Landlord") and Stinger (the "Tenant") and related to a trespass committed by the Tenant who had, in breach of its lease, installed two air conditioning units on the roof of a block of mansion flats.
The Landlord brought a claim for trespass against the Tenant in which it asked to be awarded several types of damages, including compensatory 'negotiating damages' of £300,000 ( the sum it claimed the Tenant would have paid for consent to install the units on the roof) and £25,000 in aggravated damages.
It was previously settled law that a trespasser should compensate a land owner in damages for commiting a trespass (“compensatory damages”). Such damages should be based on what sum the parties would, hypotetically, have agreed for the right to use the land. Hypothetical discussions, of course, because such discussions did not actually take place. However, the Court was required to consider whether those hypothetical discussions were for the type of permission that the parties would have been negotiating before the trespass took place (e.g. a permanent right) or for a right which lasted only as long as the trespass. The problem with the latter, as the landlord was at pains to point out, is that the parties would not have known how long that period was at the (hypothetical) time they were agreeing it and therefore would not have sought to agree it.
The Landlord therefore said that the parties would logically only have been negotiating a permanent right (valued at £300,000) and the Tenant said that was a nonsense and it should only pay for when it actually trespassed.
Unsurprisingly, the Court ruled that the hypothetical right should be based upon the actual length of the trespass. In particular, it felt that the trespasser should not be liable to pay for a permanent right (of a much greater value) when it would not be able to utilise such right in the future (as the Landlord remained free to deal with the land).
The Landlord was therefore limited to recovering the amount the Tenant would have paid for the rights to install the units for the period of the actual trespass. This was calculated at £6,000, substantially lower than the £300,000 claimed.
Can a company have its feelings hurt?
A Court has the power to award aggravated damages against a trespasser. Aggravated damages provide compensation for mental distress or injury to feelings but can only be awarded where the defendant party's conduct has been high-handed, insulting or oppressive (Horsford v Bird ). However, can a company suffer such mental distress and injury to feelings?
There has been some uncertainty on this point as there has been conflicting case law and there was an instance in which the Court did previously allow such an award. However, the Court was unimpressed by the notion that a Company could be the recipient of damages which were clearly introduced to benefit individuals only. It therefore (fairly conclusively) resolved the uncertainty by ruling that this category of damages cannot be awarded to a company. Welcome clarity and (it is considered) the right result.
Naomi Campbell, Solicitor, Property Litigation Group