Stadium Capital Holdings (No 2) Ltd v St Marylebone Property Company Plc Clear Channel UK Ltd

This is an appeal against the decision of Sir Donald Rattee, sitting as a judge of the Chancery Division, when, on 15 October 2009, he ordered the first defendant to pay £313,972.70 as damages for trespass and costs. The first defendant initially sought permission to appeal on six grounds, but my Lord, Patten LJ on 18 March this year gave permission to appeal on two grounds only, namely 1) that it was properly arguable that the judge had been wrong to address the burden of proof in relation to the operation of Section 62 of the Law of Property Act 1925, and 2) that the judge's assessment for the damages was arguably excessive even on a restitutionary basis. The first defendant in supplemental skeleton argument has abandoned the first submission and the only issue before us is the question of damages.

The background is as follows. The respondent is the current freeholder of a cleared development site to the west side of Finchley Road known as the Midland Crescent site. The appellant has, since 1975, been the lessee of the premises immediately abutting the crescent known as 279A Finchley Road. It holds those premises under a lease for a term of 99 years from 10 July 1931. The appellant owns a wall on those premises which immediately abut the Midland Crescent site.

Until April 1994 the freehold of both properties had a common owner. In 1994, however, the freehold to 279A was transferred by the British Railways Board to Railtrack Plc. British Railways Board retained the freehold of the Crescent.

In 1976 an advertising hoarding was erected by the appellant's licensee in airspace that was part of the Midland Crescent site. The hoarding was secured to the appellant's wall on its land. In 1986 a platform was erected in front of the hoarding. From that date until the dispute arose the hoarding and the advertising had changed position over the years and was operated by various licences in favour of the appellant, and the latest occupier was most recently the second defendant. The claim against it has been stayed. The respondents claim that the hoarding was erected pursuant to permission granted in 1956 which was terminated in 2005. The defendant asserted various claims to challenge that entitlement, but none of those arise because it only appeals on the question of damages.

Damages were claimed by the respondent for the period 2005 to 2008 when the hoarding was removed. The judge at the trial assessed the damages in the precise figure which I have set out earlier in this judgment. That was based on the entire fee income obtained by the respondent for the period in question.

The trial took an unusual course of events. The most striking one is that after the judge had reserved judgment and was about to deliver it, counsel then instructed by the appellant (not Ms Bignell, who appears before us today) made an application to adjourn the question of quantum. The judge rejected that because, as he correctly summarised in the exchange asking for the adjournment, the defendants argued damages only in two bases: 1) that it should be reduced because it had a possessing title (it lost on that and there is no challenge); and 2) that the damages should be reduced because the judge should take into account the fact that the hoarding was fastened to the appellant's wall and therefore could not be based entirely on the income. The judge rejected that application for an adjournment and, in respect of the second basis for arguing damages, he said that he had already indicated what his view would be.

The appellants did not adduce any evidence to challenge the headline figure for damages for trespass claimed by the respondent, namely the entirety of the income earned by the appellants on operating the advertising hoarding.

The first matter to consider is the issue of the split trial in my view. We were referred by Ms Bignell, and Mr Furber QC who appears for the respondents, to parts of the transcript which address the issue as to a split trial. It is fair to say that the issue was raised initially by Mr Furber QC on day one but because of various difficulties, but it was not pursued; and during the course of the trial on differing days exchanges took place between the learned judge and counsel who then appeared for the appellants as to how he put his case on damages. Two things appeared from that on my reading of the transcript; the first was that he nailed his colours firmly to the two bases of damages which I have already referred to, and, second, that he did not challenge the figures. It might be said that that was only on an arithmetical basis, but of course the appellant, if it sought to reduce the damages on some basis from the headline, ought to have put some material before the judge as to how the headline figures should be reduced in some way. No evidence however was led at the trial, and the judge was given no assistance as to how, for example, one would apportion the damages by reference to the use of the wall and the use of the trespassing airspace. Nor was any assistance derived from the pleadings; the claimant sought damages based on the profits and the defendant simply denied it was liable. It was a bare denial and there was nothing in the pleading that suggested in the alternative that, if it was found to be a trespasser, the damages should be assessed on some other kind of basis.

There was no issue in particular put before the judge that the damages ought to be reduced to take into account, for example, expenses that might be occurred by the appellant in securing the headline income, and there is of course still no evidence sought to be put before us justifying the reduction of the headline damages by reference to those kinds of expenses.

In the supplemental skeleton put forward on behalf of the appellant it is submitted that damages ought to be assessed to take into account a deduction of expenses. The authority referred is the well known case in the House of Lords in Boardman v Phipps [1966] UKHL 2, and also on the basis that there was a joint contribution towards the generation of the profits with the appellant's wall being married with the respondent's land.

During the course of the argument before us the question was raised as to whether or not, in a case like this, one basis of assessing damages could have been on the basis of a reasonable license fee negotiated between the parties on a hypothetical basis. This principle derives from the well-known case, Wrotham Park v Parkside Homes [1974] 1 WLR 798, and a number of other cases where, instead of granting damages for an injunction, the court thinks it is appropriate to give damages based by reference to what would be a reasonably negotiated fee. Those cases culminated in other decisions, such as my decision in WWF World Wide Fund for Nature (Formerly World Wildlife Fund) & Anr v World Wrestling Federation Entertainment Inc [2007] EWCA Civ 286 and the Court of Appeal in Experience Hendrix LLC v Purple Haze Records Ltd & Anr [2007] EWCA Civ 501. The difficulty was that not only was this argument not put forward before the judge; he was given no material from which such a case could embark.

We come to the position before us, however, that, for one reason or another which I do not think it is appropriate for us to go into, the judge was not clearly given enough material to come to an appropriate conclusion. It is, my view, that when one looks at the judgment awarded it is at the very top end of the basis of awarding damages on a restitutional basis. In other words, to attract this kind of award it would have to be regarded as the most serious justification for restitutional damages.

It seems to us that the judge perhaps ought to have considered the application for an adjournment in the light of the paucity of the material before him, and he ought to have thought it more appropriate for the arguments to be properly deployed on the very difficult question of assessing damages to trespass. I do not think it is appropriate to go into the different bases, but trespass is an unusual tort in that, first of all, it is accepted that it is actionable per se without damage and, second, there has been a development over a series of cases of awarding damages not on the basis of the land to be used by the plaintiff but the basis upon which the defendant has used the land, and this starts basically with the decision in Penarth Dock Engineering Co Ltd v Pounds [1963] 1, where Lord Denning MR says precisely that. The test of the measure of damages is not what the plaintiff had lost but what benefit the defendant obtained by having the use of the berth. This introduces a flexible basis for assessment because it requires the court to look at the use that was made. It is fair to say, in the case that we have been taken through, that the vast majority of those resolve it by charging a reasonable fee for the occupation of the land by the trespasser; but, in the light of these authorities, which end up in Attorney General v Blake [2001] 1 AC 268, my view is that this area is flexible, and in an appropriate case it is possibly arguable that the measure of damages can represent 100%. It is equally possible that the measure of damages could be debated by the amount of expenditure the wrongdoer incurs in obtaining the benefit, and in between it is possible that damages could be assessed by a license fee that would be artificially negotiated by the parties in the lines of Wrotham Park above and succeeding authorities.

In my view, although the judge, as I say, was bereft of any great assistance on this, it is possible that he ought nevertheless, despite the fact that he had experienced leading counsel in front of him have considered whether in the case on material before him the appropriate award was the largest award that he could possibly have awarded for trespass in this case. Regretfully, I think that despite the lack of material before him the judge should have hesitated, and in my view the judge, although I accept that this is done with the benefit of hindsight, he ought to have acceded to the application and directed a split trial, even though the application was made as late as the time when he was delivering his judgment.

It seems to me, therefore, that we should allow the appeal on that basis. I do not think it is appropriate to decide upon what basis the damages should be assessed. It seems to me that that should be entirely open, and it is open to the appellant to seek to argue a deduction or a fee based on reasonable negotiations. Those negotiations, hypothetically, of course might lead, with the appropriate evidence, to a share in the profits as the basis for the fee; equally, it is still open in my view to the respondent, if it can do so, to suggest that the appropriate level of damages for trespassing ought to be taken entirely out of the headline profits from the appellants.

All of these things to me are open, and I do not think that I for my part think it is appropriate at this stage (or necessary) for us to become involved in what is a changing and complicated area of the law of restitution; but nevertheless for those reasons I would allow the appeal. It is therefore unnecessary for us to deal with the appellant's other argument based on the fixing to the wall. I should say, for my part, that I think that is an extremely weak argument and I would have supported the judge on that if it were necessary. So in conclusion, therefore, I would allow the appeal.

I agree with the judgment which has been delivered. The judge awarded the claimant in this case what he believed was, on the evidence before him, the totality of the defendant's profit from the use of the claimant's airspace. Although awarded as damages, an order in that sum appears to me to be indistinguishable from the result of an account of profits, which Lord Nichols in his speech in Attorney General v Blake regarded as an exceptional remedy and one which could not be made at common law in the form of an award of damages. All the deciding cases to which we have been referred in the area of trespass, which proceed to award damages on what can generally be described as a restitutionary basis, proceed on the footing of the so-called user principle, ie a hypothetical license fee, which by definition will not produce a figure equal to 100% of the profits of the unlawful venture. The judge was therefore, in my judgment, wrong in principle simply to have accepted the headline figure which he did.

I agree with both judgments and have nothing to add.