The judgment of HHJ Russen QC (sitting as a High Court Judge) in Ray v Windrush Riverside Properties Ltd [2022] EWHC 2210 (TCC) gives two examples relevant to the “Proving Things” series. Firstly the claimant failed to prove a nuisance. Secondly the claim for damages that had been made failed to take into account reality.
“… the claim is essentially one for loss of profits and that involves making proper deductions, not additions, for the expenses that would have been incurred in generating the lost income.”
THE CASE
The claimant brought an action alleging that an air extraction fan on the defendant’s premises caused a nuisance. The claimant let out a neighbouring property to the defendant’s restaurant as a holiday let. She claimed for damages in nuisance on the basis that she could not let out the property to holidaymakers as a result of the defendant’s activities, which led to smells of cooking in the garden of her property.
FAILING TO PROVE NUISANCE
The principles relating to private nuisance are considered in detail. The judge found that there was no nuisance.
83. Nevertheless, I have concluded that Mrs Ray has failed to establish the nuisance alleged against Windrush.
184. My decision that the cause of action in private nuisance has not been made out rests upon two related points. The first is my decision on the first issue, as to the character of the locality, and the second is based upon Mrs Ray’s ability to let Kevinscot under the AST. Together, these point to the conclusion that Windrush did not during the nuisance period violate Mrs Ray’s ownership rights in a way that supports her claim.
185. As to the first point, it is clear from the evidence adduced by Mrs Ray that her plans for the holiday letting of Kevinscot were built upon the previous tranquillity of its garden situated sufficiently close to the centre of Bourton-on-the-Water as to provide ease of access to the village’s attractions for disabled guests. However, I accept Ms Jabbari’s submission that, for the purposes of testing whether there was undue interference with Mrs Ray’s property rights, it was not reasonable for her to expect that a tranquil eco-retreat could exist in that location free from any impact of DLHR’s commercial operations. The character of the neighbourhood was inconsistent with the calm and meditative location which she wished to provide for her guests. Looking at her ownership position in isolation from neighbouring activity, clearly it was not objectively unreasonable for Mrs Ray to contemplate using Kevinscot in that way but, for the purposes of applying the law of nuisance and adopting the language in Walter v Selfe, the standards she had created for her the holiday let business mean that the allegation of nuisance has been presented from a position of “delicacy or fastidiousness”.
186. The question is one of degree and dependent upon the circumstances of the case. In contrast with the position in Vanderpant v Mayfair Hotel the evidence shows that Kevinscot is located in what for many years before 2018 was a busy tourist spot. As the owner of Kevinscot in the years prior to 2018, Mrs Ray had built her own business benefiting from the substantial footfall of tourists. The fact is that tourists require food outlets. Although I accept her case that DLHR’s activities resulted in an intensification of odours, Mrs Ray herself said in evidence that she would sometimes smell the cooking of chips at the Windrush Restaurant run by the company’s predecessor. I accept Les De La Haye’s evidence that those fumes would have exited through the big and noisy extractor that was previously in use.
187. The conclusion that DLHR’s operations during the nuisance period are not actionable by Mrs Ray is also supported by the fact that for 16 of the 21 months in question Kevinscot was occupied (as a second home) by Mr Tongue and his family. Testing this second point using the approach in the authorities, they are to be taken to be average occupiers for the purposes of assessing whether or not there was a material interference with the standard of comfort ordinarily to be enjoyed by the occupier of the neighbouring property. Again, I recognise that Mrs Ray’s claim is predicated upon the longer-term letting to the Tongue family as being very much a second best option and indeed an act of mitigation of the loss of her holiday let business. However, at the liability stage, what is required to be shown is a material interference with the amenity of Kevinscot to be enjoyed by her. In circumstances where Mrs Ray was able to let the property having drawn the issues over DLHR’s operations to their attention, the Tongue family’s occupation provides reliable insight as to the standard of comfort reasonably to be expected by any other part-time occupiers of Kevinscot according to the “plain and sober and simple notions” to be adopted for that purpose.
188. Mr Tongue’s evidence was to the effect that he and his family could live and work around the noise and smell. Standing back, Mr Tongue’s evidence can be said to encapsulate the concept of “live and let live.”
189. More general support for the conclusion that the occupation of Kevinscot under the AST demonstrates that there was not an unreasonable interference with the amenity of the property during the nuisance period comes from the fact that Mrs Ray has decided not to terminate the AST after the period came to an end (as I address further below in the context of her damages claim). This point has its limitations in the context of liability but Mrs Ray’s decision to continue letting Kevinscot under the AST, in the reasonable exercise of her property rights, provides an indication that those rights were not unduly interfered with in the period before. This is particularly so when (as I find below in connection with the relief claimed by Mrs Ray) the mere presence of the now inoperative Mechanical Plant does not create a sufficient threat that the alleged nuisance will resume to justify a mandatory injunction.
190. It follows in my judgment that Mrs Ray has failed to establish liability for nuisance.
THE SPECIAL DAMAGES CLAIMED
The claimant sought damages. Although the claim was not successful the judge commented on the claim for special damages.
The special damages sought by Mrs Ray are particularised in the Particulars of Claim as follows:
i) £20,960 in lost rental for the period February 2018 to November 2018;
ii) £8,400 in lost rent from November 2018 (being the monthly difference over a year between the value of the current letting and the use of Kevinscot as a holiday let at £400 per calendar month), continuing after the date of the Particulars of Claim at £400 per month;
iii) £3,950 representing the loss caused by initial advertising (being £3,220 for the contract to create and operate a website by which to market the property, with the remainder for hosting of the website, registration of the URL and the subscription charge for the electronic booking calendar, advertising via Yell and locally at the visitor information centre);
iv) £4,266.20 in business rates which Mrs Ray was required to pay from February 2018 to November 2018, prior to the occupancy of Kevinscot by her tenants; and
v) £3,567.94 in additional expenditure by Mrs Ray from February 2018 to November 2018 (being £174.24 in electricity bills, £423.44 in gas bills, £276.83 for water rates, £136.31 for a waste disposal contract, £352.62 for phone bills, £150.50 in television licensing, and £2,054 in insurance).
38. The Prayer for relief is expressed in language which does not confine the claim to damages to those special damages. In his closing submissions Mr Wignall suggested that general damages should be awarded in respect of the nuisance period. He suggested the sum of £1,000 per month for the period from April to November 2018 and at a higher rate (recognising that the tenants of Kevinscot had not made their own claim for damages) for the remainder of the period.
THE JUDGE’S CONSIDERATION OF THE CLAIM FOR DAMAGES
The judge observed that there were considerable difficulties with the way in which damages were framed. There was a failure to take into account expenses and overheads that would been incurred. The claimant failed to recognise that Covid restrictions would lead to an extensive period where the property could not be subject to a holiday let.
192. My conclusion that Mrs Ray has not established her claim in nuisance means that it is not strictly necessary to address the relief sought by the Particulars of Claim but I do so in the interests of completeness.
Damages
193. Mrs Ray’s first head of special damages is for the loss of rental income from holiday lets in the sum of £20,960 for the period February 2018 to November 2018 (and the entry into the AST). In her evidence Mrs Ray accepted that this claim would have to be reduced to reflect the point that the nuisance period did not commence until 1st April 2018.
194. The second head of damages is said to reflect a continuing loss of £400 per month from her entry into AST in November 2018. That was said to be the difference between the rent payable under the AST and what she says she would have obtained from more profitable short-term holiday lets. As already noted, her entry into the AST was said to be an act of mitigation of the loss of the higher income she would otherwise have received. Mr Wignall identified the relevant figure for the net loss as being £17,600 down to the date of trial.
195. The third head of loss is made up of the marketing costs incurred by Mrs Ray in promoting the abandoned holiday let business. Paragraph 23(3) of the Particulars of Claim identified the relevant sum as £3,220 which Mr Wignall, by reference to the relevant invoices, corrected to £4,030.
196. The fourth head of loss was the sum of £4,266.20 being the amount of business rates paid by her in respect of Kevinscot for the period between February 2018 and the entry into the AST. Again, the period should be corrected to reflect the start of the nuisance period on 1 April 2018.
197. The fifth and last element of special damages reflected utility bills and other outgoings, including an insurance premium, in the period between February 2018 (which again falls to be corrected) and November 2018. Allowing for the fact that a couple of the bills related or partly related to a period preceding the commencement of the nuisance period, Mr Wignall drew my attention to the invoices (and one bank statement) in support of a claim for £3,567.94.
198. Mrs Ray’s approach to loss raises a number of significant questions.
199. Her first witness statement explained how in, March 2016, Sykes Holiday Cottages had indicated that a gross rental income of between £20,425 and £27,670 might have achieved from the letting of Kevinscot for 37 weeks a year, with additional short breaks, depending upon whether it slept 4 or 7 people. In May 2018, Sykes indicated an expected income range of between £23,819 to £26,327 based upon 34 weeks of occupancy, rising to £27,580 with short breaks.
200. The claim to the specific sum £20,960 under the first head of loss was not explained further in Mrs Ray’s witness statement. Indeed, her first statement approached the lost rental income on a different basis. This was that her experience as a landlord of rental properties since 1976 (including under other current assured shorthold tenancies of properties within the Cotswolds AONB) led her to have a strong grasp of a reasonable and achievable rent for Kevinscot under an assured shorthold tenancy where the property was not affected by the activities of DLHR. Her evidence was that in those circumstances Kevinscot could have been let for at least £1,400 per month rather than the £1,000 (ignoring the charge for broadband) agreed with Mr Tongue. This led Mrs Ray to say: “I therefore lost at least £1,400 per calendar month between April 2018 and November 2018 and at least £400 per calendar month since on the basis of assured shorthold tenancies.” The monthly figure of £400 marries with the quantification though not the expressed basis of the second head of loss.
201. As Ms Jabbari correctly observed, the way Mrs Ray expresses it is not the pleaded basis of the claim to lost rental income. The £20,960 figure broke down to a figure of £2,328.88 per month, not £1,400 per month. Ms Jabbari also made the point that the language of the two advertisements from 2018 and 2021 for the unfurnished letting (at £1,495 per month and £1,650 per month respectively) of two 4 bedroomed properties in Bourton-on-the-Water, relied upon by Mrs Ray, raised doubts about whether they were true comparables for Kevinscot.
202. In his closing submissions, Mr Wignall said that the £20,960 figure was justified by taking the Sykes’ figure of £27,580, deducting 11 weeks of rental (from the notional 34) and adding back a week for a Christmas letting. He also referred to a Rate Card which Mrs Ray had prepared in November 2017 and which, he submitted, supported a claim to approximately £20,000 under the first head of loss on the basis that Kevinscot could have been let at a rate (fluctuating according to the holiday season and time of year) which averaged out at £1,000 per week over 20 weeks. In her witness statement Mrs Ray said she could have expected to earn between £24,975 and £48,544 per year from the holiday let business based upon a conservative estimate of 37 weeks per year occupancy.
203. Despite Mrs Ray’s confirmation in re-examination that she intended to rely upon her Rate Card and its weekly holiday let rates of between a low of £675 and a high of £1,312, the substantially different notional letting figures behind the first and second heads of loss and the limitations upon (and different presentations within) the evidence in support of the claim create real doubt over the true measure of any loss suffered as a result of the (presumed) nuisance created by Windrush.
204. For example, the figures in Mrs Ray’s Rate Card (and Mr Wignall’s analysis of the £20,960 figure) were based upon the Sykes’ figures for 7 guests at Kevinscot. Yet, in explaining her aspirations for Kevinscot as a luxury holiday let, she volunteered that “if you go for higher numbers you get the wrong type of people”. Mrs Ray also accepted that, as at April 2018 and the start of the nuisance period, she had not secured any holiday let bookings. She had received an inquiry in late April 2018 from one person who had previously stayed at Kevinscot and who was interesting in taking one room for 5 nights in June but felt honour bound to draw attention the problems created by DLHR’s operations.
205. I address below the further point that Mrs Ray’s first and second heads of loss are predicated upon a loss of gross holiday let income when she would have had ownership expenses to pay out of that income. For the period after November 2018 the expenses which Mrs Ray would have to had to meet out of the holiday let income (in particular business rates and utility bills) are to be compared with those that have been passed on to Mr Tongue and his wife under the AST. For the purposes of any calculation of loss over that period, Windrush would be entitled to seek a credit for expenditure (or, in the case of the business rates, the comparable expenditure) which Mrs Ray has been spared as a result of entering into the AST.
206. That period, for the purposes of second head of loss, is a continuing one which is said to have carried a loss of £8,400 down to March 2021 (when the Particulars of Claim were drafted) rising to £17,600 by the time of trial. On the logic of Mrs Ray’s case, it will continue at the rate of £400 per month until the Mechanical Plant is removed.
207. As Ms Jabbari observed, the calculation of loss takes no account of the fact that from 23 March 2020 (the Prime Minister had warned against non-essential travel one week earlier) Mrs Ray’s holiday let business would have been blighted by the various restrictions and measures imposed as a result of the coronavirus pandemic. Judicial notice can be taken of the fact that between 23 March 2020 and 12 April 2021 Mrs Ray would not have been able to operate a business offering self-contained holiday accommodation: see the “Timeline of UK government coronavirus lockdowns and restrictions” at www.instituteforgovernment.org.uk. At first sight, it should follow that Mrs Ray should be treated as benefiting from the rent received under the AST, during that period of over a year, when she would not have been able to have obtained any alternative holiday let income.
208. However. Mr Wignall submitted that the Government restrictions with their known impact upon the holiday letting business, including the likely reluctance of many vulnerable persons to take holidays even when restrictions were relaxed, were irrelevant to Mrs Ray’s ongoing claim for damages. He said this was because the entry into the AST was an act of mitigation of a loss arising before outbreak of the pandemic and the subsequent pandemic and resulting restrictions did not mean that the ongoing loss of £4,000 per month was not suffered.
209. In my judgment, that submission ignores the basic point, applicable to a claim for damages said to be accruing on a monthly basis, that there was no loss at all during the relevant period. The basis for generating rental income from self-contained holiday accommodation simply did not exist. It also ignores the fact that Mrs Ray had not, pre-pandemic, bound herself to a tenancy which would inevitably continue during what later became the period of lockdown. She could have terminated the AST by giving two months’ notice at any time after April 2019. If the reward of a higher net rental income from using Kevinscot as a holiday let was there to be won then during the relevant period then she would have done so. It must be remembered that Covid-19 was more effective than the Council’s enforcement action in abating the (presumed) nuisance by putting the kibosh on DLHR’s business in late March 2020. No noise and odours were emanating from St Kevins from that time onwards but the fact is that Mrs Ray could not lawfully have secured any holiday visitors before April 2021. To hold Windrush accountable for the suggested loss of a higher holiday let income during the year in question would offend the basic compensatory principle underpinning an award of damages.
210. Ms Jabbari said that Mrs Ray’s failure to terminate the AST once restrictions upon offering self-contained holiday lets had been lifted, and Kevinscot was free of the alleged nuisance from St Kevins, also served to undermine Mrs Ray’s claim of continuing loss for the period after April 2021. Ms Jabbari said that Mrs Ray’s claim to recover the marketing and start-up costs of the holiday let business (her third head of loss) was vulnerable to the same point as there is no reason why those costs should be treated as written off when the business could have got off to a delayed start.
211. I agree with those submissions. For the purposes of these proceedings against Windrush, in my judgment it is not met by Mrs Ray saying that even now she is faced with a position of uncertainty created by the risk that the alleged nuisance through the use of the Mechanical Plant might resume. The Defence served by Windrush on 25 June 2021 told Mrs Ray that DLHR had gone into liquidation in July 2020, that Windrush had decided to sell St Kevins and would not resume use of the Mechanical Plant without first giving her reasonable notice to the Claimant and/or before obtaining the necessary planning consent. That was enough to enable her to resume the holiday let business.
212. I have already explained how Windrush also gave the Undertaking on 6 July 2022 and expanded upon it on the last day of trial. In these circumstances, an award of damages against Windrush on the basis that the previous operations of DLHR continue to disrupt Mrs Ray’s holiday let business would be unjustifiably punitive rather than properly compensatory in nature.
213. Drawing the above points together, the true position on Mrs Ray’s damages claim against Windrush is that she lost the chance of securing a holiday let rental income for the period between April 2018 and 23 March 2020 (i.e. the nuisance period).
214. As to the presumed holiday let income, Mrs Ray did not treat the marketing costs incurred by her in promoting the holiday let business as items to be offset against that income. Likewise, as she explained in her witness statement, her approach to utility bills and other outgoings for Kevinscot (from 1 April to 2 November 2018) were sought to be recovered on the basis that they were borne solely by her and not covered by the anticipated holiday let income. However, in my judgment, that observation simply highlights that she cannot claim damages reflecting the loss of the anticipated gross rental income from a holiday let business (under her first head of loss) and also damages in respect of the expenses she would have incurred to obtain that income (under the third, fourth and fifth heads of loss). Mrs Ray seemed to accept this in cross-examination. The same point applies to her claim to recover the initial marketing and website costs so far as her claim to the loss of additional rental income after November 2018 (the second head of loss) is concerned. As Ms Jabbari submitted, the claim is essentially one for loss of profits and that involves making proper deductions, not additions, for the expenses that would have been incurred in generating the lost income.
215. Mrs Ray’s evidence was that after Kevinscot had been converted for the holiday let business she continued to pay business rates on the same basis as when it operated as The Living Green Centre. The Council’s Non-Domestic Rates Bill for 2018 showed that Kevinscot had a rateable value of £9,400 on the basis it was a “shop and premises” and that the charge for the period 1 April 2018 to 31 October 2018 was £2,717.04.
216. Mrs Ray makes no claim for damages in respect of a business rate liability after the date of the AST. Yet had she proceeded with the holiday let business she would have continued to pay business rates on the property (albeit on a different rating basis than for a shop). She would have needed to meet the liability for business rates out of the income from the short-term holiday lets. She would also have had to pay the property insurance premium and the utility bills. Under the terms of the AST, by contrast, Mr Tongue and his wife covenanted to pay the Council Tax in respect of Kevinscot. Mrs Ray said this was around £2,500 per annum. The broadband and utility charges (though not the insurance) are also the responsibility of the tenants under the AST.
217. It follows that Mrs Ray’s responsibility for such outgoings would have fallen to be offset against the damages sought for the complete loss of rental income for the period between April and November 2018 and the partial loss of it for the period after November 2018.
218. These points about the way the damages claim has been presented and the true nature of the claim being one for a loss of profit attributable to the prospect of securing holiday let income (for the nuisance period, when no bookings had been secured for the early part of it) leave me in real doubt about the measure of loss suffered by Mrs Ray as a result of the alleged nuisance. In respect of the period between November 2018 and March 2020 (inclusive) the value of the AST to Mrs Ray, not only in the rent received and liability for certain outgoings passed to the tenants, is also to be offset against the claim to lost income (though I recognise it would not be right to include a credit for the council tax liability borne by them in addition to any greater allowance for the notional business rate liability to be borne by Mrs Ray when the two liabilities are of the same ilk).
219. The nuisance period was almost 2 years in duration. On my general assessment of the evidence, including the popularity of Bourton-on-the-Water with visitors, I would have accepted that during that period Mrs Ray could have secured a gross rental income of, say, £45,000 based upon her being able to let Kevinscot for 25 weeks in the period April 2018 to March 2019 and for 30 weeks between April 2019 and March 2020, before lockdown, and having regard to the range of figures identified in her Rate Card (as well as her note of caution about letting for the maximum number of occupiers). Her ownership liabilities of the kind identified in her fourth and fifth heads of loss (allowing for the uncertainty as to what the business rate liability would have been when it appears to have been approximately £5,400 p.a. on the previous rateable value) together with any recurring marketing costs of the kind identified in her third head of damage would then fall to be deducted from that income. On the basis of the pleaded Particulars, this indicates that approximately £16,000 would fall to be deducted as expenses incurred to generate the £45,000. Then, for 18 months of the nuisance period, the value of the rent received under the AST would fall to be deducted: £18,000.
220. Deductions of £16,000 and £18,000 against a notional income of £45,000 indicate that the true measure of loss suffered by Mrs Ray as a result of the (presumed) nuisance was the region of £11,000. As Mrs Ray was not in personal occupation of Kevinscot, I would not have been persuaded to award general damages for the less tangible loss of amenity reflected in the annoyance and discomfort caused by the nuisance.
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