Source: https://www.cearta.ie/2011/02/a-victory-for-the-principled-development-of-the-law/
Timestamp: 2019-04-22 08:51:43+00:00

Document:
If 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  IEHC 459 (16 December 2010).
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  1 AC 268,  UKHL 45 (27 July 2000). As for tort, Laffoy J in Conneran v Corbett  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  2 All ER 321,  1 WLR 798; Bracewell v Appleby  1 All ER 993; Swordheath Properties v Tabet  1 WLR 285; Stoke on Trent City Council v W & J Wass Ltd  1 WLR 1406; Jaggard v Sawyer  1 WLR 269,  EWCA Civ 1 (18 July 1994); Experience Hendrix plc v PPX Enterprises  FSR 853; Horsford v Bird  UKPC 3 (17 January 2006) Lunn Poly Ltd v Liverpool & Lancashire Properties (2006) 25 EG 210,  EWCA Civ 430 (15 March 2006); Field Common v Elmbridge Borough Council  EWHC 2079 (Ch) (27 August 2008); Devenish Nutrition v Sanofi-Aventis  3 All ER 27,  EWCA Civ 1086 (14 October 2008). The tort of conversion is similar (see Kuwait Airways Corp v Iraqi Airways Co  2 AC 883,  UKHL 19 (16 May 2002)  (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  1 WLR 713 (PC); Pell Frischmann Engineering v Bow Valley Iran & Ors (Rev 2)  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 15 ChD 96 (Fry J) and Shaw v Applegate  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.
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.
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.
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.
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.
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.
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  EWCA (Civ) 323;  1 All ER (Comm) 830 at  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.
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.
182. In my view, it is appropriate to apply a hiring fee on the authority of Strand Electric.
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  UKHL 34; (2008) 1 AC 651 at  called restitution for wrongdoing and Tipping J in Stevens v Premium Real Estate Ltd  NZSC 15 at  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  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.
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.
… 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.

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