Field Common Ltd v Elmbridge Borough Council [2008] EWHC 2079 (Ch) (27 August 2008)

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England and Wales High Court (Chancery Division) Decisions

You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Field Common Ltd v Elmbridge Borough Council [2008] EWHC 2079 (Ch) (27 August 2008)
URL: http://www.bailii.org/ew/cases/EWHC/Ch/2008/2079.html
Cite as: [2008] EWHC 2079 (Ch)

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		Neutral Citation Number: [2008] EWHC 2079 (Ch)
		Case No: HC04C04006

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

27/08/2008

B e f o r e :

MR JUSTICE WARREN
____________________

Between:

	FIELD COMMON LIMITED	Claimant/ Part 20 Defendant
	- and -
	ELMBRIDGE BOROUGH COUNCIL	Defendant/ Part 20 Claimant

____________________

Ms Katherine Holland (instructed by Davies Arnold Cooper) for the Claimant
Mr Robin Green (instructed by The Borough Solicitor) for Elmbridge Borough Council the Defendant
Hearing dates: 24th and 25th June 2008
____________________

HTML VERSION OF JUDGMENT
____________________

Mr Justice Warren :

Introduction

On 7 November 2005, Lewison J gave judgment on liability in favour of the claimant ("FCL") directing an assessment of damages in the terms which I will come to in a moment. I shall refer to the judgment delivered on that date as "the Judgment". The matter now comes before me on that assessment as ordered by Lewison J.

Background

FCL is the freehold proprietor of land lying on the north west and south east sides of Field Common Lane, Walton upon Thames. The defendant ("the Council") is the local authority and freehold owner of an industrial estate lying to the south of FCL's land ("the Industrial Estate").

Between FCL's land and the Industrial Estate there is a private road (a bridleway). The Council, as owner of the Industrial Estate, has a right of way for all purposes over the private road. The private road varies in width between 3.8m at its narrowest point to about 5.3m at its widest.

In 1980, a company called Redland Aggregates Ltd ("Redland") held a lease from FCL of land including the "Red Land" by which I mean the red land referred to in the order of Lewison J to which I will come. Redland was proposing to erect a fence on the boundary of its demise. The Council asked that this fence be set back 6 metres from the boundary of the private road in order to facilitate the movement of vehicles on the private road. It may well, one can infer, have been the case that, in practice, vehicles were encroaching onto the Red Land at that time, and, if that is right, the fact that the Red Land had not been surfaced by the Council (an aspect to which I come in a moment) does not mean that vehicles could not use it. Indeed, in 1977, an internal memorandum from the Borough Surveyor recorded that heavy vehicles had been using the access road, by which he clearly meant the private road and the Red Land together. He noted that it may be necessary to approach the freeholder with a view to making up the road to a suitable standard. A request was made by the Council but it was refused as was a subsequent request.

As a result, the Council decided that it would need to purchase part of FCL's land and, in November 1980, indicated its interest in doing so to FCL. No purchase took place at that time (or indeed ever). Over the next few months, the Council wrote to interested parties (including FCL and Redland) in similar terms:

"In view of the existing state of the bridleway adjoining your property, the council would like to construct a new road thereover and of which the benefit would be received by all users concerned."

It was noted in each letter that the bridleway would need to be widened slightly. The Council recognised that this would give rise to an encroachment and offered to purchase FCL's freehold.

FCL responded in July 1986 saying that it would have to raise objections to the Council's proposals and that it was not prepared to dispose of its freehold. Negotiations proceeded but no agreement was reached. In April 1987, the Council wrote suggesting that FCL might be prepared to license the Council to construct and make good "the existing roadway", the Council paying an annual sum by way of licence fee. FCL responded that such a licence would be premature pending a planning application relating to Weylands Park. On 18 January 1988, the Council wrote to FCL stating that resurfacing of the road would be taking place and that instructions had been given to resurface "up to the boundary fence recently constructed by yourself". The surface would thus encroach onto FCL's land.

It was not until 1989 that the resurfacing took place. The Council then laid a tarmac surface over the private road and part of FCL's land. That was done without the consent of FCL. The tarmac surface (over both the private road and FCL's land) has remained there to the present day and thus even after the date of the Judgment and from the date of the order made by Lewison J to which I will come. It is said by FCL that it has been maintained, to the extent that maintenance has been necessary, by the Council, and has from time to time been swept by the Council. No findings were made by Lewison J about maintenance; nor do I make any.

FCL protested about the encroachment soon after the road was laid. Lengthy correspondence continued through the 1990s up to 2002 for the purchase by the Council of the land over which it had laid the tarmac, but unfortunately, these came to nothing.

By a claim issued on 23 December 2004, FCL alleged that since 1989, the Council had trespassed on a strip of FCL's land to the north of the private road by (i) causing tarmac to be laid, (ii) continuing to maintain the tarmac and (iii) causing and permitting its servants, agents and/or licensees to pass on foot and with vehicles over the strip of FCL's land. FCL sought an injunction restraining the Council from continuing its trespass and/or damages in lieu of an injunction and at common law.

The Council denied trespass as alleged. It averred that it had acquired a right of way by prescription by reason of the use of FCL's land since 1966 by the Council, its servants, agents and licensees and other occupiers of the Industrial Estate.

On 24 March 2005 a split trial was ordered. Liability was determined by Lewison J on 7 November 2005. In his judgment, which was concerned solely with the Council's claim to a prescriptive right of way, he said this:

"32 …..I am prepared to find that it was more probable than not that the actual use of the way was not restricted to the width of the bridleway as described in the plan attached to the Council's conveyance. I find that this use began in 1977 or thereabouts when Mr Sears arrived on the site but intensified from 1982 onwards.

33. However, I discount the evidence based on parking. Parking is not a right carried by a prescriptive right of way, whatever the position might be as regards loading or unloading. Moreover, the fact of parking would have inhibited the use of the land on which cars were parked for passing and re-passing, so also would stacking of pallets and other items against the post and wire fence. Accordingly, although I can say, on the balance of probabilities, that use extended beyond the bridleway I cannot say that the extent of use extended all the way up to the location of the post and wire fence. The evidence is simply too sketchy. In a case where the precise dimensions of the right of way are the real issue I have to conclude that the Council have failed to establish the claimed right of way."

For this and other reasons Lewison J dismissed the Council's claim to a prescriptive right of way.

There followed a dispute between the parties as to what order should be made consequent on the Judgment. There was, in particular, a debate about the extent and effect of the admission which had been made by the Council in its Defence and Part 20 Claim that it had "caused and permitted its servants, agents and licensees to pass on foot and with vehicles along the tarmac running across [FCL's land]". Lewison J gave a further short judgment, noting that admission and observing that those particulars distinguished, at least verbally, between that category of persons and other occupiers of the Industrial Estate. He indicated that he would make the following order:

"There shall be an assessment of damages in respect of the defendant's trespass on the red land, on the basis that the defendant is liable for the acts of itself, its servants and agents, and any other person whom it has caused or permitted to trespass on the red land."

One of the issues for me is whether, on the facts, the Council is liable for the acts of trespass by its tenants of the units on the Industrial Estate and their own visitors.

The formal order annexes a plan showing the area of trespass edged in red ("the Red Land"). The Red Land extends from the edge of the private road over which the Council clearly had a right of way up to the post and wire fence mentioned in the Judgment. The order contains an injunction against the Council "by its servants or agents or licensees or otherwise howsoever" from entering on or making any use of the Red Land without the written consent of FCL. The wording of that part of the order directing an assessment of damages differs slightly from the wording which I have set out contained in the second judgment. What he said in the Judgment is rather more elegant and grammatical than what is contained in the order itself but the sense of each of them is the same and nothing turns on the difference.

The Particulars of Claim originally sought damages "assessed by reference to the sum payable in order for the Defendant to have permission to commit the [pleaded acts of trespass] which sum the Claimants will aver is approximately £1,000,000 …". In the event, nothing like that sum is sought and it is not apparent where it came from. In the alternative, damages were claimed "by reference to the annual letting value of the [alleged area of trespass] since 1989" with a total claim of some £146,370.

There was in addition a claim for exemplary damages but Lewison J made no finding supporting the allegations relied on, nor did he order that the assessment of damages should include exemplary damages.

Although FCL claimed damages for trespass going back to 1989, the Council relied in its defence on section 2 of the Limitation Act 1980. It was common ground between the parties' experts, and before me, that the relevant period within which the claim for damages is to be assessed is 23 December 1998 to the date of the Judgment. The basis of this, no doubt, is that once the Judgment was given, and it was established that the Council had no rights over the Red Land, the Council could no longer be claiming a right to use the Red Land and did not in fact itself, or through its servants agents or licensees, do so. However, there is nothing before me to suggest that the actual use of the Red Land by the tenants on the Industrial Estate has not continued after the Judgment just as it did before. FLC has not, so far as I am aware, sought injunctive relief against the tenants nor has it erected a physical barrier which would prevent use of the Red Land as part of the available access to the Industrial Estate. The tarmac remains in place, but it has not been suggested to me by FLC that the Council has thereby continued its trespass since the Judgment in breach of the injunction granted so as to entitle it to damages in respect of a continuing trespass.

The Evidence

On this assessment of damages, the evidence before me comprises:

a. Certain agreed documentary evidence.

b. Expert reports from Patrick Hill on behalf of FCL and from David Hedges on behalf of the Council. Each has commented on the others reports and an agreed report has also been reported (which does not so much agree common ground as record what it is not common ground).

c. There was also an additional witness statement from Mr Sears (who is referred to in the Judgment), a director and shareholder of FCL.

The experts could not be further apart in their views about the correct approach to valuation. They remain some distance apart on the figures even once the correct approach has been ascertained. Although the experts appear to think that the correct approach is really a matter for them – and thus a matter on which I must choOse between the experts or at least between the options which they consider are possible options – I do not think that that is so. The purpose of expert evidence is to assist me in assessing the amount of damages which have been suffered. Their expertise as valuers is highly relevant to the assessment of damages once the correct approach to that assessment has been ascertained. But the correct measure of damages is really a matter for me to decide, a decision which will, I accept, be influenced by evidence from the experts about how they approach any necessary valuation involved in that assessment; but it will reflect also the way in which the courts have approached similar exercises in similar circumstances.

Acts of trespass

Mr Green (who appears for the Council) says that it is for FCL to prove acts of trespass on the Red Land, within the limitation period, for which the Council is liable. In a sense that is true, but Lewison J has already decided liability and has made the order for assessment of damages which I have set out. However, his order deliberately leaves open the question of whether the Council is liable for the acts of trespass of its tenants. Lewison J, in making the order which he did, clearly thought that such liability turned on whether the Council had "caused or permitted" its tenants to trespass on the Red Land. Mr Green says that it did not do so whereas Miss Holland (who appears for FCL) says that it did.

Even if the Council is liable for the trespasses of its tenants, it remains for FCL to prove the relevant acts of the tenants. Mr Green says that there is no, or no sufficient, evidence of actual acts of trespass. However, it is clear that tenants of the Industrial Estate and their visitors have needed to gain access to the Units and obviously have done so; they have been able to do so at all times. It is the nature of a right of way that it is not in actual physical use at every moment of time – vehicles or pedestrians pass over the land from time to time. Since the Red Land was surfaced with tarmac, there has been no distinction on the ground between the part of the access road over which the tenants have, and do not have, a right to pass. It would be absurd to conclude that the tenants have not in practice enjoyed the same use of the Red Land as they have enjoyed of the private road. It would therefore be absurd also to conclude that there has not been regular trespassing over the Red Land by some, if not all, tenants. Whether the Council is liable for that trespass is a different matter. If it is, in principle, liable, I consider that the correct approach is to infer from the physical position on the ground – a single road surfaced in tarmac – that those who use the access road at all use it to its full width. It would be open to the Council to demonstrate that particular tenants and their visitors had not used the Red Land, or had done so only to a very limited extent. There is no such evidence.

In any event, the Council really has to accept the fact of actual use by the tenants of the Red Land. It wrote a letter to FCL on 6 July 2004 which included this

"the access road has been in continuous use by the Council's employees, lessees and all others sharing the need to use the access road to gain entry to the North Weylands Industrial Estate".

Accordingly, I conclude that, if the Council is liable at all for the acts of its tenants, it is liable on the basis that the tenants have used and enjoyed the Red Land as an access to the Industrial Estate in the same way as they have used the private road.

FCL seeks damages on the basis that the Council is liable for the acts of its tenants and that it should pay a sum (together with interest) which it would have agreed to pay following a negotiation between two hypothetical parties in the position of FCL as owner of the Red Land and of the Council as owner of the Industrial Estate. This negotiation relates to the grant of a licence to use the Red Land as part of an access road, comprising the Red Land and the private road, between a willing grantor and a willing grantee with neither party seeking to take unreasonable advantage of its negotiating position. The hypothetical grant is for the period of the trespass within the limitation period, that is to say from 23 December 1998 to 7 November 2005, a period of slightly less than 7 years (and which for convenience I shall refer to as the 7 year period). The negotiation leading to the grant is treated as taking place shortly before the trespass is to be taken as having begun ie December 1998. The underlying rationale of this approach is to enable FCL to obtain what it might have obtained had the Council acted lawfully. In this context, although the negotiation is between hypothetical owners of the Red Land and the Industrial Estate, the negotiation takes place in the context of the real facts.

I now turn to two aspects which need to be mentioned at this stage. They relate to (i) the continuing presence of the tarmac and (ii) the liability of the Council for the trespasses of its tenants.

The tarmac surface – continuing trespass?

As to (i), there are two distinct, albeit closely connected, trespasses involved. The first is the laying of the tarmac on the Red Land and the fact that it remains there to this day. The second is the use which has been made of the Red Land by persons driving vehicles over it.

Clearly, the laying of the tarmac was a trespass. The question has been raised whether or not the continued presence of the tarmac is a continuing trespass giving rise to a new cause of action every day or whether the laying of it was a one-off trespass, although clearly maintaining and sweeping it would be separate acts of trespass. This is an interesting point on which there is no clear authority. I should refer to Holmes v Wilson (1839) 10 A&E 502 where buttresses supporting a turnpike were erected by the defendant on the plaintiff's land. The plaintiff recovered damages for the trespass up to a certain date. The defendant failed thereafter to remove the buttresses following a request from the plaintiff to do so. It was held that the defendant could be sued in trespass again for permitting the buttresses to remain. Subject to one point, there is not really anything out of the ordinary about that result and one finds it reflected in later cases for instance Konskier v B Goodman Ltd [1928] 1 KB 421.

However, where the trespass takes the shape of fixing materials to the land (such as building a wall on it or constructing a road on it by the laying of tarmac), the materials become, on one view, part of the land and ownership passes to the landowner. On that basis, the continued presence of those materials is not a continuing trespass. That does not mean that the landowner has no remedy. If he suffers loss as a result of the presence of the wall or the road in those examples, he can recover the loss even if there is only a single act of trespass. If the landowner wishes the wall or road to be removed, he can ask the trespasser to do so; if the trespasser fails to do so, the landowner can remove it himself and, if it was reasonable for him to do so, he will be able to recover the expense. It might seem, therefore, that it makes little difference in practice whether there is a single act of trespass or a continuing trespass.

That is not necessarily so in all circumstances. Suppose that the wall or the road remain in place for more than 6 years without objection. The limitation period for a claim in trespass in relation to the building or the wall or the construction of the road will have expired. And if there is a single act of trespass, the landowner will have no remedy for the continuing presence of the wall or road. This will be so even if the trespasser continues to enjoy what he has wrongfully placed on the landowner's land, for instance by driving over the road, although in that case, such actual use gives rise to separate acts of trespass for which the landowner may be able to recover damages (possibly on the hypothetical negotiation basis already discussed).

Support for the view that there is only a single act of trespass might be said to be derived from this consideration: the trespasser could not in fact abate his trespass without at the same time committing another trespass (eg entering the land and removing the wall or road) unless the landowner consented and, if not removed, the trespasser would remain liable for a trespass which he could not prevent. Precisely this argument was raised in Holmes v Wilson, but it did not prevent the court from holding that there was a continuing trespass.

It is not a particularly strong argument in any case. It seems to me that, if there is a continuing trespass, the trespasser has a perfectly effective way of protecting himself. He can ask the landowner if he wants the trespassing material removed. If the answer is yes, the trespasser has implicit permission to do so and if he then fails to do so it is right that he should continue to be liable for the continuing trespass. If the answer is no, then the landowner has effectively indicated that he does not object to the presence of the materials on the land so that he could not successfully assert that there was a continuing trespass, at least until he changes his position and asks for its removal. Of course, where there is a lengthy period during which the materials remain on the land without objection but in the absence of an intervention by the trespasser enquiring whether those materials should be removed, it may be that nice questions would arise about whether the landowner is estopped in some way from asserting a claim in trespass.

Mr Green identifies what he describes as a curiosity. If it is right to claim that the mere presence of tarmac across the access way renders the Council liable for causing and permitting trespass, it is odd that FCL should, at one and the same time, seek an injunction against the Council prohibiting it from causing or permitting trespass yet express itself content that the tarmac should remain. I do not think that there is anything in that point so far as the important aspect of the present case – the Council's liability for the trespasses of its tenants – is concerned. At least until the judgment of Lewison J, the Council was maintaining the right to use the Red Land and to keep and maintain the tarmac surface on the Red Land. There is nothing inconsistent in FCL allowing the tarmac to remain whilst continuing to maintain that the Council have no right to use it or to permit its tenants to do so.

Mr Green seeks to distinguish Holmes v Wilson. He says that in the present case FCL had made clear that it was not requesting removal of the tarmac and that the Council had acknowledged that if such a request was made it would remove it. The relevant correspondence dates back to 1991. Miss Holland's position is that the letters do not give rise to a licence constituting a defence to the claim in trespass. In any case, the dispute moved on considerably after 1991 and was subject to detailed consideration by Lewison J. It is clear, I think, that all along FCL has been asserting its ownership of the Red Land, denying the Council's right to use it and the acquisition of any prescriptive right.

Mr Green also refers me to Blake v Highways Department CA 6 October 2000. In that case, the defendant had tipped spoil on the claimant's land pursuant to an agreement. It failed to put the land back into the condition which it had agreed. That did not make the tipping unlawful, but the recorder at first instance decided that there was a continuing trespass and that it was the intention of the parties that the spoil should become part of the land but that this would only occur when the land was put back into the agreed form. The court of appeal disagreed, holding that the spoil became part of the land as soon as it was placed on the land and levelled. The authority could not enter and remove it once it had been placed there under the agreement

The position in Blake v Highways Department is quite different from the present case. The agreement in that case envisaged the depositing of spoil and there was never any intention that it would not remain on the land or become part of it. In the present case, the tarmac was laid without the consent of FCL. In my judgment, the continued presence of the tarmac on the Red Land constituted a trespass which continued from day to day giving rise to a new cause of action from moment to moment. Even if that is wrong, the point is one which, in agreement with Miss Holland's submissions, I consider was for the Council to take at the trial of liability; the Council should not be allowed to raise it in this assessment of damages.

Tenants' trespass – the Council's liability

As to (ii) at paragraph 26 above, FCL says that the Council is liable for the trespass of its tenants. As I have already said, Lewison J clearly thought that such liability depended on whether the Council had "caused or permitted" its tenants to trespass on the Red Land. I am sure that that is the correct approach. Accordingly, FCL has to satisfy me that the tenants are persons whom the Council has "caused or permitted" to trespass.

Did the Council ever cause or permit its tenants to trespass on the Red Land? In this context, I think it is clear that causing or permitting a tenant to use the Red Land (eg by driving over it) would be causing or permitting that tenant to trespass. I am not aware of anything which can be relied on by FCL to establish that the Council has ever caused or permitted a trespass by its tenants except (a) the laying and possibly sweeping and repairing of the tarmac and (b) the possible express grant of a right of way over the Red Land in certain leases of Units. There is, in particular, no evidence of the Council expressly telling tenants that they may use the Red Land (either before or after the laying of the tarmac).

Prior to the laying of the tarmac, none of the leases of Units by the Council purported to grant any right of way over the Red Land. The fact that tenants had, before that time, found it convenient to encroach onto the Red Land, does not of itself make the Council liable for their trespasses. The Council did not, simply by virtue of its ownership of the Industrial Estate cause or permit the tenants to use the Red Land when it, the Council, was under no duty to stop them doing so. Accordingly, before the laying of the tarmac and in the absence of any express permission from the Council to a tenant to use the Red Land, I do not consider that the Council would have been liable for the trespasses of its tenants.

The question then arises whether the laying of the tarmac makes any difference to that result. I do not see how it can sensibly be suggested that the Council has "caused" the tenants to trespass; the real question is whether it has "permitted" them to do so. In this context, it is clear that the Council laid the tarmac in order to improve the access to the Industrial Estate. It quite clearly did so for the benefit of the tenants and their visitors, and not simply for its own convenience: see also paragraph 5 above. It did so following complaints from at least one tenant about the condition of the access road. It is impossible to conclude other than that users of the access road would not, and could not, distinguish between the Red Land and the private road and, indeed, it is not sensible to think that, even if such distinction could be made, visitors, and possibly even the tenants themselves, had any idea that there were rights over the latter but not the former.

Mr Green submits that the Council has not "permitted" the trespass. He refers to the well known case of Sefton v Tophams [1967] AC 50, citing passages from the speeches of Lord Hodson (at 64D-65D), Lord Guest (at 67G-68E and Lord Upjohn (at 75A-76A). Those passages certainly provide powerful support for the conclusion that, as a matter of ordinary language, the Council has not permitted the tenants to trespass, at least in cases where the relevant lease does not purport to grant a right of way over the Red Land. That case concerned the construction of a restrictive covenant in relation to Aintree racecourse. The purchasers covenanted not "to cause or permit" the land to be used otherwise than for the purposes of a racecourse. In context, the majority held, as it is summarised the head-note, that "permit" connoted a measure of control and that, since by parting with the land, the defendant would divest themselves of any authority in respect of it, it could not be said that by the conveyance to a purchaser, they, as vendors, permitted the subsequent user of the land by such purchaser.

Lords Reid and Wilberforce dissented. Lord Reid acknowledged that in some contexts the word "permit" can have the limited meaning which the majority accepted to be correct in the context of the covenant in question. His view, however, was that it could have a wider meaning. He said this:

"Suppose I know that a stranger intends to trespass on and damage my neighbour's property if he can, but he cannot unless I remove an obstacle which is under my control. If I remove the obstacle with the purpose that he shall be able to do as he wishes, then it appears to be a perfectly ordinary use of the English language to say that I have permitted him to trespass."

I do not quote from the speech of Lord Wilberforce, but it provides a powerful counterblast to the decision of the majority. But I do note the qualification which Lord Guest included in his own speech, at p68 D:

"It may be that by entering into a lease for the unauthorised use the appellants might be said to be "permitting" the misuse. But this would be on the ground that they retained control by limiting the period of the lease and the character of the use……"

In response to Mr Green, Miss Holland says this:

"The facts of Sefton v Tophams bear no relationship to the situation here. The common sense reality of the situation in this case is that the Council maintained a tarmac road on the Red Land and even leased this land to some of their tenants. They did not take steps to prevent anyone from using the land and they did not erect a boundary to prevent this from occurring but actually claimed that they owned it. They even asserted that they were in possession of the Red Land through their tenants and claimed that their tenants were entitled to use it. In those circumstances, it is submitted that as a matter of factual reality, the Council caused and/or permitted their tenants to use the Red Land. Such is reflected in the admission that the Council made when they served their Defence and Part 20 Claim."

The last sentence of that cannot, of course, be maintained since that is precisely what Lewison J left open. Further, although it is true that the Council did not take any steps to prevent the tenants from using the Red Land, nor did FCL take direct action against the tenants or even, so far as I am aware, write to them pointing out that they were trespassing. Nor do I consider that any reliance can be placed on the assertion by the Council that it was in possession of the land. The adverse possession claim was not pursued and the basis on which the assertion referred to by Miss Holland was made is not clear.

My conclusion is, nonetheless, that the Council has made itself liable for the trespasses of its tenants. The Council has, in the words of the order, "caused or permitted" its tenants to trespass subject to certain qualifications which appear later in this judgment in relation to the tenants of Units 12 to 14. It has done so by the laying of tarmac on the Red Land which was so great an encouragement to the tenants to gain access to the Industrial Estate by use of the Red Land that the Council can be said to have "permitted" use of the Red Land. Although the torts are different, nuisance and trespass are two different aspects of the protection of property and indeed it may sometimes be difficult to say in borderline cases which cause of action is appropriate. In nuisance, it is established that a landlord can be liable for a nuisance committed by his tenant in cases where the landlord has authorised the activity constituting the nuisance. At least where the nuisance is certain to result or is a virtual certainty, liability is found to exist. In the present case, I consider that the use of the Red Land by the tenants was a virtual certainty. The result which I think is correct in relation to the trespass in the present case at least accords with the approach which would be taken in a case of nuisance. I do not consider that the failure of FCL to insist on the removal of the tarmac can be taken as establishing that the tenants trespassed not because of the Council's permission but because of the presence of the tarmac road with the approval of FCL.

I need to deal separately with the tenants of Units 13 and 14. In paragraphs 16 to 19 of his closing submissions, Mr Green draws attention to these matters:

a. From before 23 December 1998 to 5 March 2004 Units 13 and 14 were let to Browns Building Supplies Ltd ("Browns") and thereafter to Travis Perkins following assignment of Browns' leases on 5 March 2004. Mr Sears controlled Browns before it was sold to Travis Perkins on the same date.

b. Through a holding company, Mr Sears acquired FCL on 7 March 2002. It was Mr Sears's evidence that:

"When I purchased [FCL], I did so with knowledge of [FCL's] dispute with the Council over the trespass. …I was fully informed of the negotiations between surveyors instructed by Mr Lavender on behalf of [FCL] and surveyors instructed by the Council to seek to agree a price at which [FCL] would sell to the Council this land, which it required in order to have adequate access to the Industrial Estate. I continued with those negotiations following purchase of the Company"

Mr Green then submits that, as Browns knew of the dispute over the Red Land, it cannot sensibly be said that any trespass by it on that land was caused or permitted by the Council and a fortiori from 7 March 2002 when Mr Sears and his family took control of FCL.

As for Travis Perkins, Mr Green accurately records that it acquired Browns, and obtained an assignment of its tenancies of Units 13 and 14, in March 2004. Before doing so, its solicitors investigated the permitted access to the industrial estate and even obtained a statutory declaration from Mr Sears. In the letter from Hewitsons of 14 May 2004, the author states, inter alia:

"… As regards the dispute you refer to, this was only revealed to us at the 11^th hour in the disclosure letter produced, in connection with the acquisition of Browns' business by our client's associated company, which, inter alia, sets out matters to be excepted from the relevant warranties given by the vendor, one of which was that there were no disputes relating to the property or business. On seeking further details, I was informed that the dispute was between your Council and Field Common in respect of trespass to land belonging to Field Common, the estate access road having considered to have been widened and to have impinged on property belonging to Field Common

As I recollect it, without ploughing back through my large file, a plan was produced but the colouring on the same did not really add very much, being hard to decipher as we only received a faxed version. The view was taken that the dispute only related to a strip of land on the far side of the road and that quite adequate access was available to my client's premises over the area subject to the rights of way granted by the above Conveyance."

Mr Green asks rhetorically how, in light of this, FCL can contend that the Council caused or permitted Travis Perkins to trespass on the Red Land or indeed that the bridleway over which there is a right of way is inadequate for Travis Perkins's purposes.

Miss Holland says that this is a new point and that if Mr Sears had been asked about this on the two occasions on which the Council had had to cross-examine him, then he would have explained that it has not been contended that there has actually been trespass in the periods in relation to these units. She says the fact of the matter is that as the owner of the Red Land, FCL, through Mr Sears, was fully entitled to permit or grant them rights to trespass over the Red Land.

So far as trespass after the acquisition of the Red Land by FCL on 7 March 2002, I agree that there cannot be a liability on the Council for any acts of trespass by Browns or Travis Perkins. That is not to say that there was no trespass before that time.

Although it is not necessary for me to decide this issue, I add that it seems to me that the Council would cease to be liable for its tenants' trespasses (even where an express grant of a right of way over the Red Land is included in the relevant lease) if it informs them of the order of Lewison J and requests them to cease trespassing. There is little more it could do and it would seem quite wrong that the Council should continue to be liable for that which it cannot prevent and is no longer implicitly permitting.

In the light of my conclusions on the Council's liability for the trespass of its tenants, it is unnecessary to consider Miss Holland's submission that the Council has ratified those acts. I doubt very much that she is correct, but I do not decide the issue.

Quantum of damages

I now turn to the quantum of damages. Conventionally, of course, damages for trespass, as for any other tort, are compensatory; a claimant is entitled to recover money in respect of the loss which he has suffered. Loss can be suffered either because the value of the land is diminished or because the claimant has been deprived of the use of his land. In either case, there may be consequential loss recoverable in accordance with ordinary principles. But in the present case, it is said by FCL that an alternative measure of damages applies, based on what the Council would have paid on a hypothetical negotiation between itself and the Council for the grant to the Council of the necessary rights. That the Council would have agreed to pay something is demonstrated by the letter quoted at paragraph 5 above.

The alternative measure – the hypothetical negotiation basis

The law in this area is developing. I can start with Attorney General v Blake [2001] 1 AC 268 where the relevant principles were considered by Lord Nicholls in his speech at pp 277 to 287.

As Lord Nicholls describes at p 278, the common law has long recognised that there are commonplace situations where a strict application of the conventional principle would not do justice to the parties. In particular, in certain cases of trespass – the tort with which the present case is concerned, of course – a landowner can recover compensation notwithstanding that he might have suffered no loss in the conventional sense. Lord Nicholls states that in such a case damages are measured by the benefit received by the trespasser, namely by his use of the land. He gives further examples where the use of the land consists of depositing waste or by using a path across land or using passages in an underground mine referring to Whitwham v. Westminster Brymbo Coal and Coke Co.[1896] 2 Ch 538 and the "wayleave" cases. The judgments in Whitwham are instructive for they show that the damages were nonetheless seen, at least at the end of the 19^th century, as purely compensatory (in the sense that the plaintiff was entitled to compensation for the use of the land even though he had not suffered loss as a result of that use), and that the recovery of damages is not based on the profit made by the defendant from use of the plaintiff's land.

Lord Nichols also refers to Penarth Dock Engineering Co Ltd v Pounds [1963] 1 Lloyd's Rep 359 as a more recent example of the same principle. This concerned the non-removal of a floating dock by the defendants which had caused the plaintiff no actual loss. But the defendant was nonetheless liable for more than nominal damages. As Lord Denning MR said at p 362:

"The test of the measure of damages is not what the plaintiffs have lost, but what benefit the defendant obtained by having use of the berth."

It is relevant to note, however, that this benefit is to be ascertained by reference to the proper value to the trespasser of the use of the property on which he had trespassed, for the period during which he had trespassed: that, at least, was how Megaw LJ described the test in Swordheath Properties Ltd v Tabet [1979] 1 All ER 240.

Returning to A-G v Blake, Lord Nicholls observes that the same principle is applied to the wrongful detention of goods, referring to Strand Electric and Engineering Co Ltd v Brisford Entertainment Ltd [1952] 2 QB 246. It is to be noted that the defendant did not have to account to the plaintiff for the profit he had made, but was liable to pay, as damages, the full market rate of hire for the whole period during which the plaintiff's equipment was retained by the defendant.

Lord Nicholls recognises the principle as established and not controversial. But he describes, I think with some understatement, as more difficult the alignment of this measure of damages within the basic compensatory measure, identifying the recent move "towards applying the label of restitution to awards of this character", referring to Ministry of Defence v Ashman [1993] 66 P&CR 195 and Ministry of Defence v Thompson (1993) 25 H.L.R. 552. These cases are not unimportant in the present context since they demonstrate an approach which seeks to value the benefit of the use of the land to the trespasser. Hoffmann LJ, who sat in the Court of Appeal in both cases, clearly based his approach on restitution saying this in Ashman:

"A person entitled to possession of land can make a claim against a person who has been in occupation without his consent on two alternative bases. The first is for the loss which he has suffered in consequence of the defendant's trespass. This is the normal measure of damages in the law of tort. The second is the value of the benefit which the occupier has received. This is a claim for restitution…..

It is true that in the earlier cases it has not been expressly stated that a claim for mesne profits for trespass can be a claim for restitution. Nowadays, I do not see why we should not call a spade a spade….. All that matters is the value of the benefit which the defendant has received….."

Lord Nicholls does not appear to embrace that approach wholeheartedly, although he does recognise that these awards cannot be regarded as conforming to the strictly compensatory measure of damages for loss unless loss is given a strained and artificial meaning. This is perhaps a reference to what was said by Lord Lloyd of Berwick in Inverugie Investments Ltd v Hackett [1995] 1 WLR 713 (not actually cited in A-G v Blake):

"It is sometimes said that these cases are an exception to the rule that damages in tort are compensatory. But this is not necessarily so. It depends how widely one defines the "loss" which the plaintiff has suffered…."

However that may be, Lord Nicholls concludes that awards of damages of this sort probably are best regarded as an exception to the general rule.

Consideration is given by Lord Nicholls to the jurisdiction to award damages in substitution for an injunction, a jurisdiction originating in the Chancery Amendment Act 1858 (Lord Cairns' Act) and now found in section 50 Supreme Court Act 1981. The Act had the important effect of allowing the court to award damages instead of an injunction for the future, thus in practice sanctioning the indefinite continuance of the wrong. The power to give damages in lieu of an injunction imported the power to give an equivalent for what was lost by the refusal of an injunction but, Lord Nicholls reminds us at p 282, the Act did not alter the measure to be employed in assessing damages going on to say this:

"Thus in the same way as damages at common law for violations of a property right may by measured by reference to the benefits wrongfully obtained by a defendant, so under Lord Cairns' Act damages may include damages measured by reference to the benefits likely to be obtained in future by the defendant. This approach has been adopted on many occasions. Recent examples are Bracewell v Appleby [1975] Ch 408 and Jaggard v Sawyer [1995] 1 WLR 269, both cases concerned with access to a newly-built house over another's land."

to which I would add both cases effectively resulting in permanent rights exercisable by the defendants.

He goes on:

"The measure of damages awarded in this type of case is often analysed as damages for loss of a bargaining opportunity or, which comes to the same, the price payable for the compulsory acquisition of a right. This analysis is correct. The court's refusal to grant an injunction means that in practice the defendant is thereby permitted to perpetuate the wrongful state of affairs he has brought about. But this analysis takes the matter now under discussion no further forward. A property right has value to the extent only that the court will enforce it or award damages for its infringement. The question under discussion is whether the court will award substantial damages for an infringement when no financial loss flows from the infringement and, moreover, in a suitable case will assess the damages by reference to the defendant's profit obtained from the infringement. The cases mentioned above show that the courts habitually do that very thing."

Lord Nicholls then considers the decision of Brightman J in Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798. In that case, certain buildings had been erected on the defendant's own land in breach of a restrictive covenant. The court decided that it would not be appropriate to grant a mandatory injunction to remove the buildings since that would involve an unpardonable waste of much needed housing. In effect, therefore, the defendant had obtained a relaxation of its covenant which, even if not permanent, would last as long as the buildings remained. However, the court exercised the power to award damages in substitution for an injunction. The damages, the judge held, should be such a sum as the plaintiff might reasonably have demanded as a quid pro quo for releasing the covenant had the defendant applied to it for relaxation. In a case such as that, the negotiation is to be regarded as taking place on the basis that the parties were willing to negotiate on a reasonable basis not seeking to drive an unreasonable bargain; and this is so notwithstanding that the person with the benefit of the covenant might, in fact, have been unwilling to contemplate any building at all which would infringe the covenant.

It should not be thought that the principle demonstrated is applicable only in cases where damages are awarded in substitution for an injunction. Indeed, the judge actually relied on the wayleave cases, and other cases (including Whitwham) to support his conclusions. Lord Nicholls considered that he was right to do so.

Before leaving the decision of Brightman J, I draw attention to his actual assessment of the quantum of damages. His approach was to start (with the benefit of hindsight) with the profit which the developer conceded it made from the development, about £50,000. On the particular facts of the case, he awarded only 5% of that profit although this was largely on the basis that the judge did not consider that the developer would have paid the price for the land which it did if the plaintiff had made known that it would not consent to the development. One sees here, therefore, an assessment of damages in substitution for an injunction based on the profit which the developer would make which is a somewhat different approach from that applied in Whitwham where profit was considered to be irrelevant to the measure applicable in a case of trespass. But perhaps there is no real difference, the exercise in each case being to discover the loss to the plaintiff, a loss being measured by what the plaintiff might have extracted for his permission. In Wrotham Park, there being no market, some other yardstick had to be adopted and a percentage of profit seemed to be an appropriate starting point. This was the approach taken by the Court of Appeal in Severn Trent Water Ltd v Barnes [2004] EWCA Civ 570, [2004] 2 EGLR 95 where Potter LJ said this:

"The only relevance of the defendant's profits is that they are likely to be a helpful reference point for the court when seeking to fix upon a fair price for a notional licence. However, while it will generally be appropriate for the judge in such cases to 'pay attention' to the profits made by the defendants as a result of their trespass….he is not obliged to do so and there may well be cases where such an approach is inappropriate, for instance where the profits made are negligible or are impossible to assess."

It is also consistent with what Patten J said in Sinclair v Gavaghan [2007] EWHC 2256 in relation to the consistent application of the principle in cases where an injunction has been refused to remedy a trespass or breach of a restrictive covenant and damages have been awarded in lieu based on the court's assessment of what it would have cost the Defendant to obtain a release or relaxation of the covenant:

"In such cases, the remedy is not an account or share of profits as such, but the court takes into account the profits earned by the Defendant from acting in breach of the covenant when calculating what he would have been prepared to pay for the release."

Patten J then refers, as examples, to Wrotham Park and to Amec Developments Ltd v Jury's Hotel Management (UK) Ltd [2001] 1 EGLR 81. Amec was a decision of Anthony Mann QC (now Mann J) relating to a breach of a covenant by the defendant not to build nearer to the claimant's property than a specified line. It was common ground that the correct approach was to ascertain the sum of money which might reasonably be demanded as a quid pro quo for permitting the encroachment, a sum to be arrived at in a hypothetical negotiation between the parties, each making use of their respective bargaining position without holding out for unreasonable amounts. Negotiations are to be assumed to take place before any transgression occurs, but the court can take account of the actual profits as evidence of what the parties would have contemplated at the time of the hypothetical negotiations.

As Patten J also observed, one obvious and important difference between cases such as Wrotham Park and the case before him, as with the case before me, is that the court was there assessing compensation to be awarded in lieu of an injunction and therefore to compensate the claimant for a continuing and permanent invasion and loss of its rights. Without a notional relaxation of the covenant, the developer had no right to build at all. In the case before me, the award of damages is limited in time to a 7 year period. In relation to the case before him, Patten J said this:

"In principle, however, I can see no reason why the model developed in cases such as Wrotham Park should not be adapted and applied to the present case provided that one bears in mind the more limited nature of the exercise and takes into account the considerations which would have been relevant to negotiations for the limited permission being sought. This approach is consistent with the decision in Ashman (as approved in Blake) that the court is seeking to ascertain the value to the Defendants of their unauthorised use of the Claimants' land."

I agree with that. In the light of that, Patten J identifies three matters for determination:

a. What the acts of trespass were;

b. What were their purpose and effect in relation to the use of the Defendants' own land; and

c. What were the alternatives which the Defendants had to using the Claimants' land.

As to those, I agree entirely with what Patten J says in paragraph 17 of his judgment:

"On the basis of these findings the court must then assess what payment would have been agreed for the temporary use of the Claimants' land. It is not of course open to the Defendants as part of this exercise to say that they would (if confronted with a demand for payment) have avoided making any use of the Claimants' land. The purpose of the assessment is to calculate a sum which compensates the Claimants for the financial benefits which the Defendants actually made from using the Red Triangle. But the alternative possibilities open to the Defendants are of course highly relevant as factors which would have influenced the hypothetical negotiations. Clearly the Defendants would not have been prepared to pay and the Claimants would not have been able to demand a fee which was disproportionate to the actual financial advantages of using the Red Triangle as opposed to postponing the works or creating an alternative access point."

If further authority were needed to establish the principle, it is to be found in the decision of the Court of Appeal in WWF-World Wide Fund for Nature v World Wrestling Federation Entertainment Inc [2007] EWCA Civ 286 [2008] 1 WLR 445 Taking from the heading note in WLR report (which I consider accurately states the judgment of Chadwick LJ with whom the others agreed) it was held that on a claim by a covenantee for an injunction and damages against a covenantor who had acted in breach of a restrictive covenant, the court could, in addition to granting an injunction to restrain future breaches, award damages in respect of past breaches notwithstanding that the covenantee could not establish actual financial loss; that such damages in respect of past breaches might be in an amount which it would have been reasonable for the covenantor to pay and the covenantee to accept for the hypothetical release of the covenant, assessed on the basis that the hypothetical release would have taken effect from a date immediately before the covenantor was first in breach and continued no later than the date on which the injunction to restrain future breaches took effect; that damages were awarded on that basis where the court was satisfied that it was a just response to circumstances in which the compensation which was the claimant's due could not be measured or solely measured by reference to identifiable financial loss; and that, accordingly, the basis on which such an award was assessed did not preclude its categorisation as a compensatory award of damages.

I should also mention Horsford v Bird [2006] UKPC 3; [2006] 1 EGLR 75. The respondent had built a boundary wall and fence which encroached to a considerable extent on the appellant's land. The land thereby expropriated became part of the respondent's garden since a mandatory injunction to remove it was refused. The appellant was entitled to recover damages representing the value of the expropriated land. The trial judge and the Court of Appeal had allowed only the market value of the land as an undeveloped plot, but the Privy Council doubled that amount to reflect the value of the land to the respondent as part of his garden. It was not discussed whether this was a compensatory or restitutionary basis of compensation. The Privy Council also allowed recovery of damages in the form of mesne profits for the use of the land up until the date when the judgment had given the appellant the value of the land in lieu of an injunction. The quantum of that claim was to be assessed on a yearly basis as a percentage of the capital value of the piece of land in question.

Finally, I should refer again to Inverugie Investments Ltd v Hackett which Miss Holland relies on. In that case, the plaintiff was the lessee of 30 apartments within a hotel complex. The defendants ejected the plaintiff and for some years used the apartments as part of the hotel with an average occupancy rate of not more than 40%. The defendants were held liable for damages in trespass for the use of each apartment at the going rate for 365 days for each year of trespass notwithstanding that they had been unable to derive an income from the property for the entire time due to low occupancy rates. Three aspects of this decision should be noted.

a. First, it is not a case where the hypothetical negotiation basis was applied. If it had been, one might think that it would have been obvious that the defendants would never have agreed to pay as a licence fee the amount which the Privy Council considered to be appropriate as damages; the defendants would surely have negotiated a fee based on prospective occupancy rates and allowing for the expenses of running the apartments.

b. Secondly, the cases demonstrates that an account of profits is not to be equated with damages for trespass so that the amount of damages is not to be limited by the profit (or indeed loss) which the defendants have made (or suffered).

c. But thirdly, the approach in Ashman as a measure of the quantum of damages appears to have been rejected. Instead, Lord Lloyd distinguished Ashman saying this:

"[Mr Mowbray] is not asserting a restitutionary claim as an independent cause of action. So the point which divided the Court of Appeal in [Ashman] and the interesting theoretical questions which discussed in Part VII of the Law Commission Consultation Paper on Aggravated, Exemplary and Restitutionary Damages (1193) (Consultation Paper No 1332) do not arise for decision."

I would question the extent to which the distinction which Lord Lloyd draws is maintainable, as a matter of English law, in the light of A-G v Bloke. As I have said, Lord Nicholls refers to Ashman apparently approving of the result but not the categorisation of the award as restitutionary.

I have spent some time on at least some of the authorities even though the principles stated are not disputed. I have done so because it is important to understand how the hypothetical negotiation approach has come about in order to see what it is that is sought to be achieved. This approach has developed as a way of assessing, in some cases, what is fair compensation for the claimant to receive for the unauthorised use of his land by the defendant. It is not, of course, necessary to adopt this method of assessment in all cases. Thus, in cases where a landlord seeks mesne profits in an ordinary case of holding over without consent, the basis of assessment is generally the open market rental value of the property. To take another example, the approach of the majority in Ashman (apparently approved, apart from labelling, by Lord Nicholls in Attorney General v Blake) clearly restricted the claimant to a sum representing the value of her occupation to Mrs Ashman herself. There was no mention of negotiation and no reference to Wrotham Park. Similarly, in the wayleave cases, it is not apparent that any hypothetical negotiation was considered: rather, it was a question of identifying what a reasonable fee would be.

However, in the cases where the hypothetical negotiation has been adopted, it has been the case that the value of the benefit to the particular defendant can be seen to be the value of the benefit which any person in the position of the defendant would receive. That may not be so in all cases. Where it is not so, a hypothetical negotiation may not give the right answer. Or, if that approach nonetheless has to be applied, it will be important to recognise that it is designed to establish the value of the wrongful use to the defendant and not some objective figure as between hypothetical persons negotiating for a hypothetical license: after all, even if damages are to be seen as compensation for loss of an opportunity to negotiate, that negotiation would be one between the actual parties, albeit that they are to be treated as parties willing to deal with each other with a view to reaching a reasonable result. By way of analogy, suppose that it had been appropriate to establish Mrs Ashman's liability by reference to a hypothetical negotiation between her and the Ministry of Defence. The Ministry, taking a reasonable position and not taking advantage of its negotiating position, would not be able to insist on what it asserted was the open market rent: instead, it would be restricted to recovery of an amount which it was reasonable for Mrs Ashman herself to pay as described by the majority.

I pause here to emphasise, because it is easily lost sight of, that the benefit enjoyed is to be distinguished from the fruits of the enjoyment. Thus, in the wayleave cases, the benefit enjoyed is the actual use of the land which is to be contrasted with the profit which the trespasser has been able to make as a result of his trespass. Similarly, in Inverugie Investments Ltd v Hackett, the defendants had actual enjoyment of the 30 apartments for which they had to compensate the plaintiff; there was a readily ascertainable going rate for such enjoyment against which the defendants were not entitled to pray in aid in their defence the absence of profit or the incurring of a loss.

The authorities which I have already considered at length all concern a claimant whose rights have been infringed by a defendant who has himself obtained the benefit of the wrong: indeed, in the trespass cases, it is the very act of trespass by the defendant which had provided him with the benefit. In the present case, the position is different because it is, principally, the tenants and their own visitors who have enjoyed the benefit of access over the Red Land. The Council may have used it from time to time, too, but the real use has been by tenants in connection with their own occupation of the various Units. Accordingly, it is tenants themselves who were the actual trespassers; FCL had a perfectly good cause of action against each tenant in respect of which it might well have been able to recover the alternative measure of damages relevant to that tenant by reference to a hypothetical negotiation with each tenant. Further, although the Council is liable for the trespasses of its tenants, it was not itself the actual trespasser. The Council has not, therefore, itself enjoyed the benefit of the trespass by the tenants in the way that it has enjoyed the benefit of the trespass by its servants and agents. In those circumstances, it might be thought that there is no need to hold the Council accountable on the alternative measure. The alternative measure was seen by Lord Nicholls in Attorney General v Blake as an exception to the general rule; to hold the Council liable on the hypothetical negotiation basis would represent an extension to the exception from that general rule.

One question, therefore, is whether the alternative measure of damages is available at all against the Council in respect of the tenants' trespasses. If it is available, the second, related, question is what is the correct quantum. Is it the amount for which the tenants would have been liable if they had been sued? Or the amount which the Council's tenants would have been prepared to pay for their use of the Red Land? Or the amount which the Council and FCL would have agreed in some hypothetical negotiation? Or the amount which the Council in fact obtained from its tenants for that use? Or some other amount? These two questions or groups of questions, although logically distinct, are closely interrelated because it is only if it is possible to give a principled answer to the second that it would be appropriate to make the alternative measure of damage available. I propose to address them together.

One view, although not a view put forward by Miss Holland but one I need to address for completeness, is that the Council is liable in precisely the same way as the actual trespassers – the tenants – would be. There is a certain cold logic about this. After all, the purpose of damages is to compensate FCL and it might be said that the compensation cannot depend on who is liable to pay it. Accordingly, precisely the same amount should be recoverable, in principle, from the Council which is liable for the acts of the trespassers.

I reject such a conclusion. Of course, where damages are measured by the loss to the claimant, the question of who is to pay makes no difference to the amount which is to be paid. But where the loss is assessed on the alternative measure, there is a disconnection between the trespasser (in the present case the tenants) and the defendant (in the present case the Council). In my view, there can also be a disconnection between the quantum of damage for which the tenants are liable and the quantum of damage for which the Council is liable. It must be remembered that the alternative measure of damages is awarded because the conventional measure would not do justice between the parties. The cases provide no warrant for imposing on a defendant a liability based on the benefit enjoyed by another person (which in its turn might fall to be ascertained by a hypothetical negotiation not between the claimant and the defendant but between the claimant and that other person); I do not consider that to impose such a liability would be to do justice between the parties.

Once one has rejected the quantum discussed in the preceding two paragraphs there is also a cold logic in rejecting the alternative measure of damages altogether. Since there is no necessary connection between the benefit enjoyed by the tenants and the benefit enjoyed by the Council, there is no reason to allow FCL to recover from the Council in respect of a benefit which the Council has never enjoyed. I do not think that that is right either. The Council is, I have held, liable for the acts of its tenants. It is right in principle that FCL should recover compensation in respect of the benefits which the Council has enjoyed as a result of the tenants' trespass; such benefit as the Council has enjoyed is to be treated as if it were an enjoyment of the land itself in respect of which FCL is entitled to recover damages. Although this has an even greater flavour of a restitutionary remedy than is found in Ashman, it is I consider a principled extension of the approach which Lord Nicholls explains and of which he approves: I consider that the exception to the general rule is to be extended. Accordingly, the Council should, in my judgment, be liable in respect of the benefit it has enjoyed as a result of its tenants' acts.

A good starting point for ascertaining the value of the benefit enjoyed by the Council is to consider a hypothetical negotiation taking place at the beginning of the 7 year period. There is an attraction to the proposition that the appropriate level of compensation is the amount which the Council would have been prepared to pay for a licence to do what it did do, namely permit its tenants to use the Red Land as an access.

However, there are, it seems to me, arguments for restricting FCL, viewing the tenants' trespasses in isolation, to recovery of the value of the benefits which the Council has actually enjoyed. Those arguments, if successful, could well result in a different figure from a hypothetical negotiation. For instance, in a hypothetical negotiation, an amount £X might be attributed to the chance of obtaining an increased rent of £Y from an existing tenant. In actual fact the Council (i) appears to have obtained no extra rent at all from existing tenants and (ii) even if it had attempted to obtain any extra rent, it is likely that it would have been unable to do so since it did not in fact have a licence from FCL enabling it to grant the necessary extra right. Mr Green does not really support that result and Miss Holland says it is wrong. In the light of that, I will not address the arguments in detail. I only conclude that, on balance, I do not think arguments such as those should succeed provided the terms of the hypothetical negotiation are properly identified.

Accordingly, in my judgment, the correct approach to the assessment of damages in this case is the hypothetical negotiation approach; it is an approach which reflects the justice as between the parties. This is, however, a conclusion which is critically dependent on the factors which are to be taken into account in the hypothetical negotiation envisaged and which I come to in a moment, in particular, the ability or willingness of existing tenants to pay any additional rent is to be taken into account.

But in case I am wrong about that, I must state that I am of the view that the hypothetical negotiation approach is the correct approach in the present case for another reason. Thus far, I have considered the position, as I have stated in a number of places, on the footing that the tenants' trespasses are considered in isolation. However, on the facts, they do not fall to be considered in isolation. Rather they fall to be considered together with the Council's own trespass. I have already held that the presence of the tarmac is a continuing trespass on the part of the Council. It is that very trespass which has resulted in the Council's own liability for the tenants' trespasses because, as I have held, it was the presence of the tarmac which led to the Council "permitting" the tenants to trespass. The liability of the Council for the tenants' trespasses is therefore to be seen as part and parcel of its own liability in respect of the tarmac. It is therefore right, in my judgment, to apply the hypothetical negotiation approach in respect of the retention of the tarmac and, in so doing, to recognise the benefit to the Council of the use which the tenants will be able to enjoy.

The authorities have also sought to justify the alternative approach in certain cases as the loss of an opportunity to negotiate: see Lord Nicholls cited at paragraph 34 above. But that was said in the context of cases where the court was awarding damages in lieu of an injunction and the defendant was, in effect, being allowed to acquire an interest in the claimant's property.

Although an analysis based on the loss of a bargaining opportunity works, at least as a close analogy, in that sort of context, it is important to realise its limitations. An actual claim, pleaded and argued on the basis of a loss of opportunity, would place the onus on the claimant of showing, on a balance of probabilities that, had a negotiation taken place, it would have produced a result and that such a result would, in money terms, be the same as that which would be reached in a hypothetical negotiation. It would not be correct to assess the percentage chance that an agreement would have been reached, thus entitling the claimant to a percentage of the full damages. This is because the chance depends not on the acts of a third party when the percentage approach would apply but depends on the acts of the defendant himself where it is "all or nothing" depending on whether or not the claimant establishes on a balance of probabilities that a negotiation would have been successful: compare Allied Maples Group plc v Simmons & Simmons [1995] 1 WLR 1602. The claimant in such a case may therefore fail to establish causation. In contrast, the assessment of damages by reference to a hypothetical negotiation assumes the success of such a negotiation and assumes, often contrary to the facts, that there are willing parties on each side.

I do not propose to consider much further the possibility of an actual claim based on loss of a bargaining opportunity. It is clear on the facts that FCL would be unable to show, even on a balance of probabilities, that negotiations with the Council for the grant of a right of way whether for the 7 year period or any other period, would have succeeded. The actual negotiations with the Council for the purchase of the Red Land came to nothing, and I see no reason for having any more confidence that an attempt to negotiate a temporary right of way pending the purchase negotiations would have been any more successful. Indeed, FCL in fact refused to grant such a temporary licence when it was requested.

Nonetheless, the analogy of loss of a bargaining opportunity does provide an analogy in cases such as this case. A hypothetical negotiation between the Council and FCL replaces that lost opportunity and presents a sensible resolution of the difficulties in assessing the Council's liability.

The hypothetical negotiations

It is, accordingly, necessary now to address a hypothetical negotiation between the Council and FCL and to ascertain precisely what it is that such a negotiation is directed at. Before I do so, I explain the various interests in the Industrial Estate. These are of importance in the context of Mr Hill's report and how he says the negotiation should be addressed.

The Council is the freeholder. It has granted a long lease ("the Headlease") of Units 1 to 10 on the Industrial Estate and the land surrounding them to a company called Rediweld Ltd. I am not clear about the relationship between Rediweld and the Council: nothing turns on that since, from a valuation point of view, Mr Hill has treated the interests of the Council and Rediweld as independent of each other. The lease is for a term of 125 years from 24 August 1984. The rent is a peppercorn for the first 25 years (ie until 2009) after which the rent becomes 12.5% of the open market rental value with reviews after each period of 25 years, in each case the rent being 12.5% of the open market rental value.

Rediweld has granted a lease ("the Council's lease") back to the Council which in turn lets Units 1 to 10 to occupying tenants. I imagine that this was done as part and parcel of connected transactions including the grant of the Headlease. The Council's lease is for a term of 25 years from 24 August 1984. The rent payable is 65% of the market rent of the units on the Industrial Estate (whether or not the Council is obtaining that rent from each of the Units). On the basis that all units are let at a market rent, the Council thus retains 35% of the rent which it receives from occupying tenants. In August 2009, the Council's lease expires after which the Council receives 12.5% of the open market rent according to the terms of the Headlease as summarised above.

The hypothetical negotiation which needs to be addressed is as follows:

a. It is between the Council and FCL: there is no reason to think that other parties are involved in it, in particular, Rediweld or the tenants.

b. It is aimed at ascertaining the amount which the Council would be prepared to pay for the relevant rights.

c. The relevant rights are the right during the 7 year period (i) to maintain the tarmac over the Red Land and to use, and to permits its employees, servants, agents, licensees and tenants to use the Red Land as part of the access road to the Industrial Estate.

d. It is to be assumed that the parties to the negotiation are willing to reach an agreement and will act reasonably in reaching a negotiated result. That may not reflect the reality. Apart from that consideration, the negotiation is to take place in the real world.

e. The negotiation ought logically to be treated as taking place at the beginning of the 7 year period. It ought to take account of the actual leases of Units which subsisted at that time. It ought also to take into account so far as reasonable the actual characteristics of the relevant tenants. I qualify these aspects by using the words "ought" and "reasonable" because the nature of the hypothetical negotiation must be tailored to the facts of the case. If information is unavailable as of the appropriate start date, it may be possible to take a different date and adjust the figures in a reasonable way; and if it would be disproportionate to investigate the precise circumstances of each tenant, reasonable assumptions may need to be made about what the characteristics of a tenant of a particular Unit might be.

The extent to which the real world impinges in other ways on the hypothetical negotiation may need to be examined. Among other points which could arise for consideration are the following:

a. First, the amount which the Council would in fact be prepared to pay would surely reflect the amount which its existing tenants were prepared in fact to pay by way of an increase in their rent for use of the Red Land as an access: some tenants might, in fact, be perfectly content to have access only over the private road and be willing to pay nothing, or only very little, for the added convenience of access over the Red Land. FCL, in an actual negotiation, would have to recognise this and would therefore need to recognise also that the Council would not be prepared to pay more than it could in turn recover from its tenants during the 7 year period (although I suppose that the Council might have been willing to pay a modest amount in order to provide its tenants, free of charge, with an improved access).

b. Secondly, (but subject to e.) the Council would, on a Unit becoming vacant, be able to charge a rent which reflected the use of the Red Land. In contrast with its existing tenants, therefore, the Council could be assured of obtaining the benefit of such increased rent as the market would stand (a matter for expert advice).

c. Thirdly, the Council will be receiving only 35% of any increased rent which it might obtain from the tenants of Units 1 to 10 for providing an improved access. The Council might then argue that it should only pay 35% of the amount which it would have to pay if it received all of the rent since it has to account for 65% under the terms of the Headlease. From the Council's perspective that would be an entirely reasonable attitude to take. But from FCL's perspective, it is unfair. What FCL could say, with some justification, is that the Council will receive 100% of the increase in rent recovered from its tenants and that it is a matter for the Council to negotiate with Rediweld how they divide the cost of obtaining the grant from FCL. In reality, either Rediweld would be brought into the negotiation or the Council would itself negotiate for a contribution from Rediweld to any amount which it found itself having to pay to FCL. Indeed, it may even be, in the real world, that the tenants would be consulted.

d. Fourthly, the third point may, however, be a bad point: it depends on the true construction of the Headlease. It has been assumed by Mr Hill in carrying out his valuation, that the notional difference in rent which tenants would be willing to pay with and without access over the Red Land would fall to be divided, under the Headlease 35/65 between the Council and Rediweld. His assessment of damages reflects the assumption that the Council would be prepared to make a payment to FCL which reflects that division so that it needs to account only for the value of receiving 35% of the rent in respect of Units 1 to 10. I propose to proceed on that basis too without deciding the point. I only note that, contrary to that basis, it may be that the market rental of a Unit to which the Headlease refers is restricted to the market rental on the basis of such rights and easements as the Council was able to grant at the time of the grant of the Headlease and that a subsequent acquisition of property or rights by the Council enabling it to grant better and more valuable rights to the tenants in return for a larger rent does not impact on that market rental.

e. Fifthly, the Council itself had and has no right to prevent use of the Red Land by the tenants; that was and is a right of FCL. Thus, even if FCL had actually granted a right to the Council to use, and licence its tenants to use, the Red Land for access, an existing tenant might have declined to pay the Council anything; FCL would have no incentive to prevent such use so that the Council might find itself having paid for the grant from FCL without being able to recover anything from tenants who in fact continue to trespass on the Red Land. In the real world, this point would need to be covered by appropriate arrangements between FCL and the Council, for instance by the Council being given authority by FCL to prevent such use by a tenant and by FCL covenanting not itself to authorise use of the Red Land by the tenants. [On a new letting, of course, the point does not arise because the Council would be able to seek to charge a rent which reflected the right of access over the Red Land. But on a rent review under an existing lease, the strict position would be that a tenant could not be obliged to pay a rent reflecting the use of the Red Land (although, of course, he would not then be entitled to use it)]. If this point were covered in the real world, one can also be reasonably sure, as I have said, that FCL would in fact refuse to grant such a licence unless it were for the full fee, either by bringing Rediweld and/or the tenants into the negotiation or leaving it to the Council to make its own arrangements for recovery from Rediweld and the tenants.

The third and fifth points, and to some extent the second point, are indications of the difficulties which arise in applying the hypothetical negotiation in the present case. In the real world, it is not easy to see why FCL, however willing it might be to grant a right of way over the Red Land, would do so for the limited consideration that the Council would be prepared to pay (in the light of the 35% point). As I have said, in the real world, Rediweld and possibly the tenants would be brought into the negotiations. And yet the hypothetical negotiation envisages one of two alternatives. Either the grant is for a consideration representing 35% of the "full" value of the grant in respect of Units 1 to 10 (something FCL would not contemplate in the real world) or at 100% (something the Council would not contemplate). This points to a stark difference of position when the failure to reach agreement is not because of unreasonable behaviour or even hard bargaining, but because the hypothetical exercise is so divorced from reality that it cannot be seen as taking place in the real world. Similarly, in the real world, it is not easy to see why the Council would pay anything for this somewhat limited grant alone when, having paid whatever is the appropriate figure for it, the tenants would be able to continue to trespass with impunity – the Council having no power to prevent it and FCL having no incentive to do so. In the real world, the Council would want something more from FCL to ensure that, having paid for the right, the Council could reap the benefit of its use by the tenants. It is going rather beyond the conventional sort of negotiation envisaged – payment for infringed right – to introduce terms into the eventual hypothetical agreement designed to protect one party or the other in order to make commercial sense of the right granted. Miss Holland says that the tenants in fact enjoyed the benefit of the Red Land during the 7 year period without any attempt by FCL to restrain them which shows that FCL would not have objected to the inclusion of such a term. The hypothetical negotiated agreement should therefore be one which does include such a term. I am not at all sure that it would be right to introduce such a term.

The objections to the hypothetical negotiation approach based on difficulties such as those are powerful. On balance, however, they are not enough to persuade me that that approach should be abandoned altogether. It must be remembered that the hypothetical negotiation approach is only a technique for assessing the value to a particular person of a certain right – in the present case the value to the Council of the right to retain the tarmac and to use, and license others to use, the Red Land for access. The fact that FCL may recover only a part of the full value of the use of the Red Land from the Council does not matter because the hypothetical agreement is simply that – hypothetical, and so does not impact on FCL's rights against other persons such as the tenants (save to the extent that double recovery will not be allowed) or indeed on the Council's own rights, for instance to contribution from the tenants to the extent that they still subsist.

The expert evidence

I come, at last, to the expert evidence, starting with Mr Hill on behalf of FCL. He has, I think, attempted to take account of the actual facts in reaching his valuations, but the manner in which he arrives as his end figure of damages is complex. His assumptions are (i) that he is making his valuations on 7 November 2005 (the date of Lewison J's judgment); (ii) that at that date, FCL could have constructed a barrier along the boundary of the Red Land, thereby preventing further trespass; and (iii) that negotiations were conducted between hypothetical willing parties who were acting reasonably and professionally advised. The parties would, of course, be negotiating the grant, for a licence fee, of a licence to use the Red Land for access to the Industrial Estate.

He adopts a six-stage process summarised in paragraph 8 of his report:

a. He determines the Market Value of the freehold interest of the Council in the Industrial Estate subject to and with the benefit of the various leasehold interests, thus taking account of the Council's separate interests as freeholder and lessor under the Headlease and as lessee under the Council's lease. He does so on the basis that the tenants of the various units have a right of access over the entire width of the private road and the Red Land. He arrives at a figure of £2.45 million.

b. He then considers the impact on this market value of reducing the width of the access by excluding the Red Land. In practice, he applies a 20% reduction to that capital value which he says reflects the value of the Industrial Estate with the more limited access over the private road without the Red Land – in other words, as if there were a physical barrier between the private road and the Red Land preventing encroachment by users of the private road. This 20% difference is, according to this approach, the benefit to the freeholder of having a right of way over the Red Land in addition to a right of way over the private road.

c. He then decapitalises the resulting figure (ie the difference between a. and b.) in order to work out the annual value of the benefit to the freeholder. He adopts a decapitalisation rate of 7.5%. He thus arrives at an annual rental equivalent of £44,461 pa.

d. He then divides this figure in half on the grounds that the parties would share equally the value of the wider access to the owner of the Industrial Estate, giving £22,231 pa.

e. Since he had started his valuation process in 2005, he calculates the appropriate annual sum for each year of the 7 year period by applying a recognised property index, namely the IPD rent index for Surrey Industrials to his basis figure. He derives a total licence fee of £142,750 for the entire 7 year period.

f. To the resulting figure for each year is added interest in order to arrive at the damages for which the Council should account. The total interest is £50,640.

Mr Hill acknowledges that, in principle, he should carry out the valuation which is appropriate on his approach at the time when the trespass started, since it would be just before then that the hypothetical negotiation would have taken place. He says that he did not have the information from the Council concerning the details of the occupation leases and the rents payable necessary to carry out that exercise. Accordingly, he has taken as his starting point the position at the end of the period of trespass in November 2005 and applied the index in order to arrive at the correct result. He says that, in practical terms, his opinion is that this method will give broadly the same figure as would have been obtained had it been possible to start from December 1998 in the first place.

That brief description of Mr Hill's approach, complicated enough as it is, hides further complexity. The further complexity arises from the structure of the interests in the land – the Headlease, the Council's lease and the occupying tenants' leases. I need to mention a number of complicating factors.

The first complicating factor is that there is no evidence about market rents in December 1998. It is now known, although it was not known to Mr Hill when he carried out his valuation, what the terms of the occupation leases were. But, according to Miss Holland, it is not known whether the rents payable under those leases were market rents or not

The second complication (connected to the first) is that the leases extant in 1998 apparently granted rights of way only over the private road, whereas in practice, according to Miss Holland, the tenants of Units in fact used the Red Land as well as the private road for access and one cannot, she says, know whether the rent paid by tenants reflected that reality.

The third complication is that new leases which have been granted of some units since 1998 have purported to grant a right or way over the Red Land as well as the private road. Connected with this is the level of rent on a rent review. Miss Holland suggests that the rent on reviews will likewise reflect the position on the ground namely that tenants will be able to use the entire width of the apparent access road, namely the Red Land and the private road.

Mr Hill put the same points in relation to these complications in a slightly different way in his answers in cross-examination. He accepted that the Council had not actually obtained more rent than provided for in the leases which granted an access only over the private road; but who can tell, he asked, if it had got a good rent. In other words, he wonders whether the Council might not have obtained better rents at reviews taking place after the laying of the tarmac than they would otherwise have obtained, simply because one might think that the tenants would pay for what they saw on the ground and which they may not have realised they had no right to use.

In relation to the first stage of his approach, Mr Hill explains that in his calculations he has adopted the investment method of valuation whereby rent, both actual and anticipated, is capitalised at an appropriate rate of return. He takes rates of between 5% and 7.5% "reflecting the investment characteristics of the different income streams including, in particular the length of the unexpired lease terms". He then assigns values to units 1 to 10 as a group and to units 11 to 14 separately. He arrives at a total figure of £2.59m but, after an allowance for what he refers to as purchaser's costs and rounding, he arrives at £2.45m.

A Schedule to the report shows how the values just referred to are arrived at. In relation to Units 1 to 10, Mr Hill provides a table. It shows in each case the passing rent (as at November 2005), the area and the rate per square foot. He then states his view of the open market rental value of each unit at that date, as a rent per square foot and as a rent for each unit. He then works out the income which the Council itself would receive on the basis of his assessment of the open market rent: this is taken as 35% of the open market rental value up to August 2009 paying regard to the terms of the Headlease and is taken as 12.5% thereafter being the rent payable by Rediweld after the Headlease has come to an end (the occupying tenants then being tenants of Rediweld rather than the Council). The first of these is capitalised for 3.75 years (ie from November 2005 to August 2009) at 5% and the second is capitalised in perpetuity but deferred 3.75 years again at 5%. He does not attach any value to the freehold reversion from the expiry of the Headlease.

Mr Hill deals with each of Units 11, 12, 13 and 14 separately. In each case he values the Council's income over certain periods.

In relation to Unit 11, that is subject to a least for 29 years from 11 June 1981 to 14 April 2010. The lease is a building lease requiring the tenant to erect a building, an obligation reflected in the structure of rent payments under the lease. For the first 5 years the rent was £1,500 with review in 1996, 2001 and 2008. The rent was reviewed in 2001 at £3,600: I have no information of what was determined at earlier reviews. That rent is valued by Mr Hill at £48,000 using a capitalisation rate of 7.5%. Once the lease falls in 2010, the rent reverts to market rates for the buildings. Carrying out another calculation based on the value of that rent in perpetuity gives a capital value of this rent of £225,411.

Mr Hill has carried out a similar exercise in relation to Units 12, 13 and 14 in the light of the terms of the leases of those Units. It should be noted that the leases in all of these cases, including Unit 11, are for various periods ranging from 29 years to 55 years. All of them pre-date the laying of the tarmac; all of them expire (ignoring any statutory protection) after the judgment of Lewison J (the earliest expiry date is in 2010); and none of them purports to grant any express right over the Red Land. There is no evidence to suggest, one way or the other, whether the Council or any of the lessees considered that the rent on any relevant rent review should reflect any use of the Red Land. Moreover, it was not until 3 or 4 years (depending on the lease concerned) after the judgment that the significant rental increases shown in Mr Hill's table would come into payment when the lessee became obliged to pay rent reflecting the value of the buildings. The largest figures are those for Unit 14 where, of the total value of £1,084,248 placed on this Unit by Mr Hill, £266,227 relates to a passing rent of £20,000 payable in perpetuity, no less than £376,301 represents the value of rents accruing after a review date in 2006 (and thus after the Judgment) and the balance, over £441,000, relates to the period after some date in 2011.

At the second stage, Mr Hill states that his approach is to consider the impact of the more restricted access on the market value previously ascertained. He considers this to be 20% for Units 1 to 13 and 30% for Unit 14. He accounts for this difference in percentage having regard to the fact that Unit 14 has the greatest frontage onto the access road and has the most traffic. He arrives at a difference in value, after allowing for purchaser's costs, of £592.814. He does not in his report give any reason for adopting these percentages. In his oral evidence, he said, correctly, that there is no "right" answer to this and that, in the absence of helpful comparable of which there were none, it is a matter of experience and feel. He was unable to give any more scientific an explanation than that. He did, nonetheless, quite properly take account of the difference in access which the Red Land would make, visiting the site himself on three occasions to assess the impact of congestion.

Since he is applying a 20% or 30% differential to the value of the Industrial Estate as a whole, and since the valuation at the first stage is based on capitalisation of rental flow, it might be thought that Mr Hill's view is also that the market rental of each Unit would also be 20% less or 30% less in the case of Unit 14 without access over the Red Land. When I asked him if that was his view, he said that it was.

Having reached a figure for the difference in value of the Council's interest in the Industrial Estate with and without the use of the Red Land as an access, Mr Hill carries out an apparently conventional valuation approach – although even on this basis, Mr Hedges challenges the assumptions – to arrive at an annual value of the use of the Red Land. He adopts a decapitalisation rate of 7.5% this, according to him, "being the rate adopted for the majority of the income" by which I understand him to mean the rate at which he had capitalised the rental stream. He then apportions the resulting annual rental equally between the Council and FCL, giving a figure for the Council's benefit of £22,231 pa as of November 2005. He then applies an index to this figure to reduce it for the period of the trespass, the entirety of which falls prior to the valuation date. He then calculates interest on each of the annual amounts thus calculated.

It can be seen, therefore, that Mr Hill is proceeding on the basis that there will be some sort of negotiation between the Council and FCL. Indeed, that was the basis on which he gave his oral evidence. His starting point is the difference in the capital value of the Council's interest in the Industrial Estate with and without the use of the Red Land that difference being decapitalised to give an annual value. On his approach, it is not necessary to ascertain what the market rent of a Unit without any rights over the Red Land was at any time or to know what the tenants were actually paying. Instead, a market rent with rights over the Red Land is taken – on the basis of Mr Hill's expert assessment of that market rent – and that amount is capitalised. His expertise is then applied to assess the impact on the capital value of the absence of the right and the difference is then decapitalised, at a rate ascertained again in accordance with Mr Hill's expert view, to give an annual amount. Since the natural date for carrying out the exercise – 23 December 1998 – has not been adopted, adjustments are needed by reference to an index, the IPD index being adjudged by Mr Hill using his expertise, to be appropriate and which may or may not in fact reflect changes in market rentals on this particular estate. Mr Hill has not presented any evidence to establish actual market rents on this estate either with or without the benefit of access over the Red Land.

Mr Hill's first report does not consider any other approach to damages.

Mr Hedges, for the Council, takes an entirely different approach to the assessment of damages in his first report. He is, however, to some extent directed by his instructions which were to provide valuations of the following:

a. The diminution in the value of the Red Land (ie as a result of the presence of the tarmac).

b. The value of the loss of "use" of the Red Land (ie the use which FCL would otherwise have been able to make of the Red Land).

c. The benefit received by the Council's use of the Red Land.

As to a., he considers that there is no loss. The tarmac was laid in 1989 and there have been no physical changes since then and there has been no change in planning status.

As to b., he considers that the uses to which the Red Land could have been put are very limited, the land being in the Green Belt. He considers the market value of this type of land to be about £3,000 to £5,000 per acre. The market rent depends on a number of factors – for grazing, perhaps £1,000 per acre. On this basis, the area being about 0.056 acres, this would equate to about £56 pa.

Mr Hedges then addresses the possible benefits to the Council. He identified three:

a. The use of the Red Land in connection with its own occupation of any property on the Industrial Estate.

b. The additional value obtained from a sale of any property during the trespass period.

c. The additional rental income received by the Council from its tenants for use of the land during the trespass period.

As to a. and b., there was in fact no occupation by the Council and no sales were effected during the trespass period. Mr Hedges points out that most of the leases contained grants of rights of way over the private road and not over the Red Land. He states his view that there is therefore clearly no benefit to the Council from such leases. However, he identifies three leases which have been completed during the period of trespass – namely Unit 5, Unit 9 and Units 6 & 7 which are smaller Units and, of course, are subject to the Headlease and the Council's lease. He says that these leases pass on to the tenants the rights of way enjoyed by the Council over the private road but have attached to them plans which include both the private road and the Red Land.

Mr Hedges gives details of the leases of those Units. They provide for rents as follows:

a. Unit 5; May 2001; 5 years from 1 February 2000 at a rent of £8,750 or £8.75 per sq ft.

b. Units 6 & 7; December 2002; 5 years from 30 August 1999 at a rent of £17,000 pa or £7.73 per sq ft.

c. Units 5, 6 & 7 new lease; from 24 December 2005 at a total rent of £29,000 (which I calculate to be £9 per sq ft).

d. Unit 9; 5 years from 24 June 2003 at a rent of £4,500 pa or £9 per sq ft.

Mr Hedges describes the private road. It is wide enough to take the widest vehicles one way but not wide enough for two vehicles to pass. A wider access is therefore of greater benefit to tenants whose businesses require access by large vehicles than those tenants whose deliveries tend to be in smaller vehicles. Subject to the point made in the next paragraph, I do not think that there is, or at least could sensibly be, any dispute about that. Mr Hill has responded to this by saying that, at only 12'6" at its narrowest, the access afforded by the private road alone is not wide enough for most vehicles to pass by each other even without vehicles parked on the pavement or roadside. Mr Hill also makes a point about congestion on the Industrial Estate itself (in contrast with the access road) being detrimental even to small Units. That may well be so, but that has absolutely nothing to do with the width of the access road. Indeed, if anything, it weakens FCL's claim because the tenants have to put up with that congestion come what may. It might make them even less willing that they would otherwise be to pay to relieve congestion on the access road which would not provide a solution to all the congestion problems.

Mr Hedges suggests that small units (up to 2,500 sq ft) generally have few if any large vehicles requiring access on a regular basis so that the value of a wider access road would only be nominal to tenants of smaller units. There is more room for debate on this. It may be true that the wider access would be of less benefit to the tenants of smaller Units than to tenants of larger Units; but congestion and even obstruction by large vehicles will constitute an inconvenience to the tenants of smaller Units. Accordingly, the wider access to be used by all tenants would be a benefit to all of them.

Mr Hedges also suggests that small units on this sort of estate are in short supply. There is always a demand. Tenants with unpopular trades, such as car repairs, have to take what they can get and at the rent demanded. In such cases, factors such as the width of an access road are minor or even irrelevant and a tenant is unlikely to risk losing a Unit by trying to negotiate a discount for a narrower access which has little real effect on its business.

Mr Hedges analyses the actual rents achieved. His analysis shows that the rents of Units 5, 9 and 6 & 7 were at the same level as rents on other similar Units. This, he suggests shows that there does not appear to have been any additional rent paid by those tenants due to the widened access road. In reaching this conclusion, Mr Hedges relies on the figures set out in Schedule 1 to his first report, which contains passing rents for Units 1 to 10 at various times. Although there is nothing to show the basis on which rents for these Units were negotiated, I am entitled to conclude, as I do, that the rents were all market rents when they were set and that those rents were payable in respect of the relevant Unit and the actual right granted. Thus it is only in the case of Units 5, 9 and 6 & 7 that the rent can be seen as including a right of access over the Red Land.

Further, if Mr Hills is correct in his assessment of open market rent in November 2005 of £10 per sq ft for Units 1 to 7 and £10.50 per sq ft for Units 8 to 10, with the benefit of the wider access, then the actual rentals achieved for Units 5, 6 and 7 in December 2005 do not reflect that. That would not, I accept, mean that the rents achieved were not in fact market rents including the wider access; it would only mean that Mr Hill's assessment of the open market rent is on the high side. But it is not the best starting point for Mr Hill.

In any case, according to Mr Hedges, these three Units (Units 5, 9 and 6 & 7) are small and Mr Hedges says that he would not have expected the width of the access road to have any effect on market rent for the reasons previously given. Accordingly, he does not believe that there has been any benefit received by the Council in the form of increased payments from any of its tenants.

Mr Hill and Mr Hedges have each made reports responsive to the other's first report. I take Mr Hill's response first.

His first point is that Mr Hedge's reasons for reaching the conclusion that there has been no diminution in the value of the land over the period of trespass is flawed for two reasons:

a. First, the Council claimed that it had an interest in the land and that, had FLC sought to sell the Red Land, that fact would have become known to potential purchasers and the price would have been reduced.

b. Secondly, the grazing rate is irrelevant because it would be impossible to graze land covered in tarmac and that the cost of removal of the tarmac would inevitably impinge on its value.

In my judgment, those criticisms are misplaced. As to a., FLC did not in fact attempt to sell or otherwise deal with the Red Land during the trespass period, and there is no evidence that it wished to use it in a way which the trespass prevented. The Red Land is free of any claim by the Council as a result of Lewison J's judgment so that the Council's claim no longer has, if it ever had, any impact on the market value of the land. As to b., damages are not claimed on the basis that FLC can recover the cost of removing the tarmac and there is no evidence of the cost of doing so. It may well be that it would not wish to remove the tarmac since, by leaving it there, it will be in a position to negotiate for its use by the tenants.

Mr Hill rejects Mr Hedge's approach to value based on grazing. He is no doubt right to do so, although I think that Mr Hedges was actually attempting to be generous since he could think of no use for this land and used grazing as the best example he could think of for income generation. If grazing was not possible, then some other use would have to be relied on by Mr Hill to show that FLC has been prevented from using the Red Land in a productive way. He attempts to do this, suggesting that as much as £9,600 pa could be generated. I will come to this aspect later, since I will need to look at the planning situation in relation to such use. I simply note for the present that, so far as I am aware, in the period since Lewison J's judgment in November 2005 (2 years and 8 months ago), FLC has not in fact let, or even attempted to let, any parking spaces on the Red Land to tenants on the Industrial Estate other than Travers Perkins (as to which see at paragraphs 139ff below). I am accordingly somewhat sceptical that FLC has suffered any loss on this score during the trespass period.

As to the three possible benefits identified by Mr Hedges and the way in which he deals with them, Mr Hill responds in this way.

a. First, he says that the fact that the Council did not occupy any part of the Industrial Estate is irrelevant. What is relevant, he says, is that it was held by the Council as an investment and its market value was influenced by the quality (including the width) of the access road leading to it. I disagree. In my judgment, in making that criticism, Mr Hill has lost sight of the exercise in hand which is to establish what is the liability of the Council for the trespass, and in particular the trespass of the tenants. Mr Hedges, in his first point, was identifying as a potential benefit, the use of the Red Land made by the Council in connection with its occupation of the Industrial Estate. There was no such occupation so that there can have been no benefit from such occupation. That is not to say that the Council is not liable in some other way for the trespass of its tenants' but that liability does not arise, subject to one point, because of its own occupation of any part of the Industrial Estate.

b. There is this slight qualification to that. The Council itself may have obtained some benefit from the access over the Red Land in that its own servants and agents would be able to use that access and may on occasions have done so. It is not realistic to think, however, that in a hypothetical negotiation, the Council would have agreed to pay any significant sum for such access coupled with the right to maintain the tarmac in place. There is, in any case, no evidence at all about what the Council ought to pay for that limited right.

c. Secondly, Mr Hill says that the fact that the Council did not sell its interest in the Industrial Estate during the period of the trespass is also irrelevant. He points out that he has owned a home during the period of the trespass the market value of which has more than doubled. He says that an owner of property does not need to sell it for its market value to increase or to reap the benefit of the increase eg by remortgaging it. That example is no doubt true. But again the criticism is misdirected. Mr Hedges was simply trying to identify benefits to the Council. He identified a potential benefit as an increase in the sale price but since there had been no sale, he said this benefit was irrelevant. He was right to do so. If the market value of the Industrial Estate has increased, that may, if Mr Hill's approach is correct, be reflected in the compensation for which the Council is liable. But that has nothing to do with the potential benefit identified and rejected by Mr Hedges.

d. Mr Hill then addresses Mr Hedges' point that the Council has obtained no extra rent. He says this:

"If that is the case, it is perhaps unsurprising given that the tenants were making full use of the access road irrespective of whether their leases entitled them to do so. In other words, since they were already 'enjoying' the benefit of the wider access for free, why pay more for it?"

He then goes on to consider the reaction of the tenants if a wall had been built along the boundary of the Red Land thus preventing its use by them. One would he says, expect the tenants to kick up a stink – I can readily agree with that – and demand demolition. They may well demand demolition, but what Mr Hill fails to address is that they have no right to demand that anyone should demolish it. That would be a matter for someone to negotiate with FLC. Mr Hill's approach to the calculation of damages assumes, as he puts it, "that the tenants would be willing to pay an increased rent on account of this, which is both logical and reasonable in my opinion". But that may, in fact, be an incorrect assumption.

e. In his summary, Mr Hill says that Mr Hedges has failed to consider the fundamental point which he describes as being that the market value of the freehold interest in the Industrial Estate was influenced in no small part by the width of the access road leading to it. Both parties would have recognised the inadequacy of the limited access and would have taken it into account in negotiating a licence agreement authorising the use of the land. That proposition I can agree with, although how it would be taken into account in a negotiation between the Council and FCL rather than one between the tenants and FCL is a matter of difficulty and the effect on the market value of the property may not be of the central importance which Mr Hill ascribes to it.

Mr Hedges makes some important observations in relation to the hypothetical valuation.

a. In the negotiation, the Council would have assessed what benefits could be derived from the licence in order to calculate an appropriate fee which the Council could afford. Since the term would be only 7 years, the Council would have deduced that there was no permanent increase in the capital value of the Industrial Estate and that any benefit could only arise by way of additional rental income derived from tenants. That as a matter of factual analysis appears to me to be correct. However, whether Mr Hills is correct in his approach (to consider the effect of a permanent right in order to calculate the impact of such a permanent right and then to assess the annual value of the permanent right) as a technique for assessing the benefit to the Council is a different matter.

b. The Council would also take into account the fact that it cannot compel existing tenants to pay any more rent whether unilaterally or even on a rent-review. That too is correct. It is a different matter whether a tenant would actually be prepared to pay any additional rent and, if so, whether it would pay it to the Council when it is FCL which would have a cause of action in trespass. Although Mr Hedges does not mention it, this takes us back to the proposition that, in the real world, if the Council were to pay for a licence, it would also want to be in a position to prevent tenants from using the Red Land without payment, a right which would need to be negotiated with FCL as part of the licence agreement.

c. Mr Hedges is of the opinion that, if approached, most, if not all, of the tenants would not have wanted to pay any increase in rent. He says that it is difficult to see why any of them would have wished to pay an increased rent for the use of the Red Land when the access to their Units shown in their leases would have been sufficient for the purposes. Mr Hill disagrees.

d. On this footing, the only increased rental which the Council could have achieved would have been from new lettings and given that the estate was fully let this represented only a very small potential. If Mr Hedges is correct in saying that no existing tenants would pay any extra rent, then his conclusion is correct.

Quite apart from those comments, Mr Hedges draws attention to the valuation date which Mr Hill has adopted, a date after the end of the period of trespass. He points out, I think correctly, that the valuation should have addressed market conditions and value as they were at the date of the hypothetical negotiation in 1998 at the beginning of the 7 year period. Mr Hill accepts that it would have been preferable to take the earlier date. However, he says that the relevant data was not available. Having taken the later date, he then adjusts his results by reference to an index. Mr Hill says that the index is an appropriate index and that the result would not be materially different from taking the actual figures as of 1998. Mr Hedges does not agree, saying that conditions in the property market in 2005 were considerably better than in 1998 with higher rents and capital values. He states that rental figures for 1998 were readily available from records and that there was no need to use statistics drawn from sources such as IPD.

Mr Hedges goes on the attack Mr Hill's approach in section 4 of his comments. This contains important material which I must summarise:

a. He refers to the investment method of valuation adopted by Mr Hill. He accepts that this method might have been appropriate if the use of the Red Land was being granted in perpetuity so that it would then be appropriate to address the "marriage value" (in the present case, effectively the increase in value of the Industrial Estate as a result of having a permanent right over the Red Land attached to it); it would be necessary to ascertain that value since FCL would then quite reasonably expect to receive a share of that marriage value. Mr Hedges considers that this approach is wholly inappropriate for calculating rental values or licence fees, particularly where, as he says is so in the present case, actual rents for Units with and without the use of the Red Land are readily available.

b. He notes that usually there is a direct correlation between investment value and rent (value = rent x 100/yield). It is therefore a pointless exercise to convert rent into capital values, adjust the figure by an assumed percentage and then convert back into rent. Mr Hedges' opinion is that this only complicates the valuation process and introduces a layer of error by having to assume yield and projected rents based on a series of other assumptions. Moreover, in the present case, it is, he considers, the wrong method for calculating rent for the period of trespass because it takes into account assumed future income in the process of capitalisation and this is then included in the sum which is decapitalised thereby producing a totally false figure for current rent which is higher than the actual current rent. Thus, in relation to Unit 12, the actual rent in 2005 was £14,000 but the decapitalised rent attributable to this Unit is £44,632.

c. In that context, Mr Hedges refers to Mr Hill's figures for Units 11, 12, 13 and 14 which I have already mentioned. He points out that these Units were, during the trespass period, held by the tenants at low rents. By assuming that the rent for each of the Units will revert to full market rent (as it will) there are huge capitalised figures produced totalling over £1 million, which is about 42% of the total capitalised figure used to calculate the rent and licence fee.

d. Mr Hedges criticises Mr Hill for adopting assumptions which are in large measure unsubstantiated, including rents, future rents, yields for capitalisation and decapitalisation and percentages used for uplift in rental value due to the use of the Red Land (ie Mr Hill's 20% or 30% differential). Mr Hedges considers that many of the assumptions and figures are at wide variance with market conditions in 1998. In particular, he objects to the assumptions of yields and rent which were much higher in 2005 than in 1998.

e. Mr Hedges considers that the use of the IPD indexation of rents is not an appropriate index to use for this estate. He regards the use of an index at all unnecessary given that rents and rental values in 1998 were readily available for preparation of expert reports. He also considers that a single fee for the 7 year period would have been agreed and not an annual fee.

f. He makes the important point, which I have already mentioned, that the reality is that the Council was not able to charge any additional rent to its existing tenants where the use of the Red Land was not included in their leases. The Council would not negotiate a licence which resulted in its being worse off than without it.

g. Mr Hedges concludes that Mr Hill's valuation approach is fundamentally flawed and as such inappropriate to be used for assessing damages.

Mr Hedges then stands back from the debate to look coolly at the result for which Mr Hill contends. That result is a licence fee of £142,750 for the 7 year period (or nearly £200,000 with interest). This is the sum said to be appropriate for a trespass over an area of land of about 225 sq m which, I would add, although certainly improving the access, was not necessary for access. The value of the Red Land was negligible (although I should say that that is subject to the possibility of use for parking to which I will come). This figure, he says, simply fails sensibly to reflect any benefit which the Council might have received.

Parking and Storage on the Red Land

At a comparatively late stage, the issue of parking and storage on the Red Land has arisen. It was suggested that an alternative use of the Red Land would have been for parking and storage and the FCL had lost the chance of letting or licensing the Red Land for such purposes thereby suffering actual loss. Alternatively, the possibility of such letting or licensing at a significant level of payment indicates that the Red Land would have real value to FCL, a factor which would have informed the hypothetical negotiation between FCL and the Council. I deal with this aspect as a discrete issue at this stage.

Mr Hill has produced a further expert report in relation to it. I also have some evidence in the form a further witness statement from Mr Sears on which he was cross-examined. Mr Hill exhibits a letter from Travis Perkins to Mr Sears, dated 18 April 2007, and a copy of the plan referred to in the letter; he also exhibits copy correspondence with the solicitors retained by Travis Perkins.

The documents include a "subject to contract" offer from Travis Perkins, which is the tenant of Units 13 and 14, to lease part of the Red Land for a term of about 20 years (subject to a tenant's break option) at an annual rent of £9,600 pa. The proposed use of the land is parking/storage. Travis Perkins would, of course, have exclusive possession so that other tenants would not be able to use it: this was not simply to be a right of way for Travis Perkins or even the grant of right to park and store. It is easy to see how a tenancy of this land for parking and storage would be of real value to Travis Perkins: its Units are adjacent to the access road and it would be a real convenience for its lorries (some of the larger lorries visiting the Industrial Estate) to be able to park and unload on this strip of land. However, I find the willingness to pay the sum of money indicated for parking and storage for 20 years of no assistance in resolving the amount which it would be appropriate to pay for a right of access over the Red Land, a far more limited right, for a period of only 7 years. I think, on the contrary, that it is irrelevant to that issue.

I can see that FCL might have a claim in damages for being deprived of the use of its land because of unauthorised use as an access. This would be a conventional claim for consequential loss and has nothing to do with a hypothetical licence at all. To succeed on that claim, FCL would have to show (a) that it was deprived of the opportunity to let its land for parking and storage and (b) that it would have attempted to do. Assuming that it could establish those matters, then it can claim damages for loss of the opportunity to do so. But there is no evidence one way or the other, save the Travis Perkins negotiation, that any tenant would have been willing to rent any part of the Red Land for parking or storage. There is, in any case, a further complication since there is a dispute between the Council and FCL about whether planning permission for such use would be required and, if it is required, whether it would be given.

As to the planning issues, Mr Hedges states that the Red Land is situated within designated Green Belt and as such the uses to which it can be put are very limited and strictly controlled by planning legislation. According to him, the Red Land does not have the benefit of planning consent for uses of parking and storage. He refers to, and exhibits, a retrospective planning application by Mr Sears made in January 2003 for use of certain land which, Mr Hedges says, included the Red Land. The application was refused on 20 May 2003 and enforcement action was taken. Mr Hedges concludes that use for parking and storage during the trespass period would have been unlawful and cannot be taken into account in any damages claim. If he is correct about the planning situation, I agree with his conclusion. However, it is not that straightforward as will appear in a moment.

Mr Hedges also considers that the rent which Travis Perkins is prepared to pay far exceeds an ordinary market rent. That is a difficult argument for him to run since what Travis Perkins is prepared to pay may be seen as the actual market. However, Travis Perkins has a particularly strong reason for wanting to rent the land and may be prepared to pay over the odds. More importantly, what it is prepared to pay today (or in 2007 when the offer was made) is not a particularly good indication of the market value of the rent which FCL could have achieved for Red Land during the 7 year period, beginning as long ago as late 1998. Further, so far as I am aware, the lease to Travis Perkins has not in fact been completed which does not inspire any confidence that FCL could, in fact, have let any part of the Red Land for parking or storage. Mr Sears sates that he was advised by his solicitor not to complete the lease until conclusion of these proceedings. It is not easy to see why such advice would be given since that dispute, so far as resolution of the parties' rights is concerned, was resolved by Lewison J at the end of 2005. Mr Sears also states that he still wishes to complete the lease, and that Travis Perkins still wants a lease, and the failure to complete has nothing to do with the planning situation. Be that as it may, there is no evidence at all of any attempt being made by FCL to let that part of the Red Land which is not included in the proposed lease to Travis Perkins.

To support the suggestion that Travis Perkins still wishes to continue, Mr Sears exhibits a letter dated 19 June 2008 in which its solicitors say just that. But this is subject to an important caveat. Travis Perkins requires a break clause (which it is said FCL has agreed to) to be exercisable by Travis Perkins if any action is taken (whether against it or FCL) by the Council to prevent the use of the Red Land for parking or storage. Realistically, one can expect enforcement proceedings to be taken unless the Council is persuaded that planning permission is not required. The value, if any, of the Red Land for parking and storage can be seen to depend critically on the planning position.

On any footing, FCL cannot claim damages cumulatively on the basis of a hypothetical negotiation and on the basis of actual loss of the opportunity to let the Red Land for parking. The most obvious reasons for this are that, if the Red Land had in fact been let for parking and storage, it would have been unavailable for access; alternatively, if it had been subject to a licence to the Council, it could not then have been let for parking or storage. FCL would have to elect which measure of damage it seeks.

In relation to the planning aspect, Mr Sears made a further witness statement shortly before the hearing in front of me. He says that Mr Hedges is wrong when he says that the Red Land (or any part of it) was included in the retrospective planning application which was made. He asserts that the land concerned was in an area adjacent to the Red Land. He states (and this is not disputed) that the land adjoining the tarmac surface was raised to the same level as the tarmac and surfaced with compacted gravel. He then draws attention to the refusal of planning permission. In the report attached to that refusal, a report recommending refusal, reference is made, as Mr Sears points out, to the land concerned having been surfaced with compacted gravel, showing, he says, that the planning application did not include the Red Land within its scope. I might also add that the land is described as "adjacent to the access road"; the Red Land was not, however, adjacent to the access road, it was actually part of it, or at least would be seen as part of it by anyone inspecting the land..

Whatever description of the land might have been in the report recommending refusal, it is the application itself which defines the area of land over which permission is sought. The words of the application do not assist, the description being general and fitting with either view. There is, however, a plan showing the application area edged in red. The scale is quite small and indeed the photocopying of the copy which I have may have distorted the scale. It is, however, clear from a comparison of the application plan with Plan 2 annexed to the Particulars of Claim and the plan attached to the order of Lewison J that the land edged red on the application plan includes the Red Land. That comparison is, I hasten to add, not simply a "well it looks like it" comparison. I have compared a number of measurements from each of the plans as a result of which I am satisfied, insofar as it is possible to be accurate at all, that the land edged red includes most, if not all, of the Red Land. [As an aside, I mention that there is also a plan at page 318 of the bundle. I am not clear of the status of this plan: it appears to have been sent to the Council by Peter Black Associates and shows "Retention of Existing Parking and Storage Area Adjacent to Hersham Trading Estate". The plan is not wholly clear, but it is difficult to read it as other than showing the area of parking as being on the Red Land. I do not rely on that plan but if, as I suspect is the case, it shows the area which FCL was intending to use for parking, it tends to confirm the view that the Red Land was included in the application.]

It was the application which was refused. The fact that the report may have misidentified the area of land concerned may have consequences for the validity of the refusal, but it is difficult to see how, on the facts, any different a conclusion would have been reached if the report had referred to the Red Land as well.

The relevance of this is that FCL asserts that there is an established parking and storage use on the Red Land which has continued for over 10 years with the result, I am told, that parking and storage could take place without the need for planning permission. If that is correct, then it may be that it makes no difference that an actual application for planning permission has been refused. If permission was not needed in the first place, perhaps it is the case that refusal of an application makes no difference. I do not myself know the answer to that question as I have little experience of planning matters, nor have I received any submissions on it.

As a matter of fact, there is a dispute about whether sufficient parking and storage use has been established in relation to the Red Land. Mr Sears says in his additional witness statement that it is clear from the evidence within the trial bundle, that the Red Land covered in tarmac by the Council has been used for parking for more than 10 years. I note that he does not say it has been used for storage. In cross-examination, Mr Sears was asked whether there had been parking to north of the Red Land to which he responded that there had been and, indeed, according to him it was that area to the north to which the planning application related. Mr Green contends that the evidence was to the effect that there was parking only to the north of the Red Land. I do not think that Mr Sears' evidence can be taken that way: it was not his evidence that there was no parking on the Red Land only that there was parking on the land to the north of it. One is accordingly left with the evidence before Lewison J on this issue. It seems to me that some acts of parking on the Red Land have been established although their extent and regularity is a matter of some speculation. I am not satisfied on the evidence that there has been any storage on the Red Land, in contrast with the land to the north of it, or, if there has been some, it is of a minor extent. It follows that I do not consider that an established use for storage has been shown.

My assessment of the situation, therefore, is that were Travis Perkins to take a lease of the Red Land, enforcement proceedings would be likely if the land were used for storage and that those proceedings would succeed. Whether or not the Council would be entitled to serve an enforcement notice in respect of parking is open to doubt. Further, had FCL actually granted a lease for parking and storage to Travers Perkins or any other person during the trespass period, it would have been likely to be terminated because inevitably, it seems to me, enforcement proceedings would have been taken and would have succeeded. At best, FCL would have received payment of rent for only a comparatively short period. Even then, the payment would have been received in respect of a use of the Red Land which was a breach of planning control. Whether FCL should be entitled to damages on the basis that it has been deprived of the use of land for a use which breached planning control, I rather doubt. I have heard no argument on the point and think that I should say no more about it.

At best from FCL's point of view, it can say that it has lost the opportunity of letting the Red Land for parking or storage. But that only avails it if it can show that it would have gone on at least to attempt to let it. The fact that FCL never said to the Council that it wished to let the land but was being prevented from doing so, the fact that there is no evidence of any attempt to do so following the judgment of Lewison J and the qualified terms on which Travis Perkins is now, apparently willing to take a lease, do not persuade me that FCL would have attempted to do so during the trespass period. On a balance of probabilities, I think that it would not have done so. That is enough to dispose of a claim for damages on the basis of loss of the opportunity to let.

If that is wrong, then it is necessary to consider what loss flows. The assumption here is that FCL would have attempted to effect lettings and that it is to be compensated for the loss of the opportunity. It would then be necessary to assess the chance that such lettings would have been achieved. I do not think that the chance of letting would have been very high; one reason for this is that storage (and possibly also parking going well beyond the sort of casual parking already in practice enjoyed by tenants and their visitors) would be likely to be subject enforcement notices resulting in the termination by the tenant of his lease from FCL. The best that can be said from FCL's point of view is, I think, that it might have been able to licence (without fear of enforcement proceedings) the sort of casual parking previously enjoyed. The figure which Travers Perkins is prepared to pay for different and more extensive rights is not a good indication of the payments which FCL might have hoped for.

Moreover, the only customers for such parking rights would have been the actual tenants of the estate, for themselves and their visitors. I have no evidence at all about what the actual tenants during the trespass period might have been prepared to pay in the relevant period and only from Travers Perkins thereafter in relation to the more extended rights. It is not at all obvious that tenants in Units away from the access road would have any interest in parking rights on the Red Land.

It follows from these considerations that FCL has not established any loss as a result of the loss of opportunity to let the Red Land for storage or parking purposes. This is, first, because I do not consider on the balance of probabilities that FCL would in fact have sought to do so during the 7 year period. If that is wrong, then its best case would be that it could licence the sort of parking which was actually taking place during the trespass period. I have no evidence on the basis of which I can form an assessment of a reasonable rent for such a purpose. Accordingly, I do not need to assess the chance that any such letting would have been achieved, although I do not think it is particular high.

I return then to the expert evidence in relation to the alternative measure of damages. I have set out at some length what the experts have said in their reports. They have also produced a joint report; it really adds nothing to their previous expert reports but records where their differences lie and I need say no more about it.

The experts were also cross-examined but neither of them was fundamentally shaken in what they said. Mr Hills maintained his stance that the hypothetical negotiation would proceed on the approach he adopted and defended his figures. Mr Hedges maintained his stance that the approach was wrong. But even adopting the hypothetical negotiation, he maintained his criticisms of Mr Hill as to the nature of the negotiations, rejecting the need to ascertain freehold values and then to discount them in order to arrive at what both experts acknowledge to be the correct end-point, namely what the Council would reasonably agree to pay for the right for itself and its tenants to use the Red Land for access. Apart from the matters which I have already mentioned, I also note the following:

a. Mr Hills was asked about the index he had used. It was prepared, he said, with reference to a basket of properties. He was unable to effect proper comparisons with Units on the Industrial Estate because the details of the reference properties are confidential to the index compiler. He had not compared the index with the actual changes in passing rents. He said that this was because he did not have the relevant information. There is no evidence that he had sought that information or, having sought it, that its provision had been declined by the Council. Mr Hedges made clear at latest in his comments on Mr Hill's first report that he disagreed with the valuation date being taken at November 2005 and the use of the index. I think that he was right to disagree and that even at this comparatively late stage, Mr Hill should have attempted to use actual data relevant to this property rather than valuations. After all, the parties to the hypothetical negotiation would surely have used facts rather than surmise.

b. Both experts gave their opinions about congestion on the site and the effect this would have on tenants practically and on their willingness to pay additional rent for the use of the Red Land for access. They did so on the basis of their visits and on the basis of photographs of vehicles parked on or near to the Red Land and the private road. Without detailed evidence following surveys of use of the Red Land over a period of time including reports on a daily basis of congestion, the experts, like the court, can only speculate about the extent of that congestion and the practical disruption it might cause. In that context, it would also be possible to ascertain the extent of congestion on the Industrial Estate itself which might have very little to do with congestion on the access road. Indeed, to the extent that there was actual congestion and inconvenience within the Estate, it might be thought that it would be that congestion rather than congestion on the access road which would concern tenants (other than perhaps Travis Perkins in Units 13 and 14). Not surprisingly Mr Hill paints a picture of serious congestion at present and a scenario of doom and gloom if access were restricted to the private road. Mr Hedges is far more sanguine, regarding the existing congestion as not all that bad and expressing the view that all tenants could manage with the restricted access and thinking that most, if not all, tenants would be unwilling to pay more. It is also to be noted in this context that Travis Perkins, when acquiring the land, knew of the dispute with the Council about the Red Land but nonetheless stated that it regarded the access over the private road as adequate: see paragraph 49 above.

c. What it is safe to conclude is that the use of the Red Land certainly makes the access more convenient although even with it there is some congestion caused, in some considerable part, by vehicles parking on or adjacent to the Red Land and the private road. It is also safe to conclude that the tenants are able to gain access to their Unit even if the access is limited to the private road. There may be problems in larger vehicles turning round, but even on that I am unable to conclude that reversing onto the access road to effect a turn could not be done without encroaching on the Red Land. I have already mentioned that congestion is caused by parking on or near the Red Land and the private road; the result of the parking, insofar as it is possible to tell from the limited photographic evidence, is to restrict vehicles to a single file – it is this one-way-only restriction which causes the problem. That is a problem which subsists even with the use of the Red Land because parking effectively restricts the width to use for a single vehicle at a time. But that is precisely what the position will be if the access is restricted to the private road. On either scenario there is room for access but no room for two vehicles to pass. I do not suggest that there would be no difference: it is doubtless the case that a few parked vehicles would cause less disruption than a wall built along the boundary of the private road and the Red Land. But the improvement which the use of the Red Land provides should not be overstated. I should add that I reject as having any serious weight Mr Hill's suggestion that parking would still continue even if the Red Land were not available, with the private road being entirely blocked by parked cars. People are selfish, he says; to which I would respond, on the whole not that selfish and if they are, suitable policing measures would have to be undertaken.

I found both Mr Hill and Mr Hedges to be suitably qualified to give their opinions. Although Mr Hedges has had a long-term connection with this site, I do not doubt his objectivity. Nor do I doubt Mr Hill's objectivity. Both of them were doing their best to help but had genuinely held views about the correct approach.

I have addressed at length the proper approach as a matter of law, my conclusion being that, difficult as it may be, one must imagine, and start with, a hypothetical negotiation for the grant by FLC to the Council for the 7 year period (whether at an annual fee or for a capital sum probably does not matter) of the right for the Council, its servants, employees, agents, licensees and tenants, to use the Red Land as an access to the Industrial Estate and for the Council to be able to retain and maintain the tarmac surface for that purpose. I have also addressed the factors most relevant to that negotiation.

In my judgment, Mr Hill's approach to that hypothetical negotiation is not one which can be justified. The object of the exercise is quite simple: it is to establish what the Council would be willing to pay, had the matter been addressed in advance, for this right. I consider that most of Mr Hedges' objections to this approach are justified. As to the principle of the capitalisation approach I would say this:

a. First, it is very odd that the value of this limited right for a limited period, when its enjoyment is a convenience rather than an essential, should be assessed by reference to the capital values of the Industrial Estate in the way which Mr Hill done. Mr Hill has started with an assumption which fails to reflect any sort of reality, namely that there is a permanent right to use the Red Land for access; that is coupled with another assumption which is that the enjoyment of the more limited right for a comparatively short period is properly to be judged by the value of the permanent right.

b. Second, it is also odd to my mind, that it should be necessary or appropriate to consider the rental flows accruing to the Council from its tenants (taking account of the Headlease and the Council's lease) for very many years into the future when we are concerned with the amount which the Council itself would be prepared to pay for a right of access over the Red Land for the limited 7 year period. What possible relevance can the rents which the Council might be able to obtain in 2010 or 2050 have to the amount which the Council should pay for this limited right in the light of conditions in 1998 or 2005? I think that the answer is that there is none. I agree with Mr Hedges when he says that the investment basis of valuation is wholly inappropriate for calculating damages in the present case.

c. Mr Hill's approach results in this distortion: he has capitalised rents (all assumed market rents) to arrive at a capital value for the Industrial Estate with the benefit of the Red Land as an access. He then deducts his 20% or 30% to arrive at the value without the Red Land. He then decapitalises. He does so at a fixed rate of 7.5% whereas his capitalisation rate used different rates for different period on different Units. It may or may not be that that technique is appropriate as a matter of general valuation practice in some circumstances. For my part, I fail to see how it can be fair to assess an annual value of this particular right by such an up-and-down exercise.

d. Mr Hill expresses the view that the extra rights would be worth an increase of 20% (or 30% in the case of Unit 14) on top of the passing rent. If that is right, he does not need to go through the convoluted and complex valuation which he has gone through. In this context, he appears to be able to assert, as matter of expert opinion, that capital values would be affected by those margins in the case of a permanent right; and confirmed to me that the same margins would apply to market value rents.

That deals with some of the objections. But there are other objections which appear when one considers the hypothetical negotiation. It is not a negotiation carried out in abstract; it is treated as being carried out in the real world, albeit that the parties are treated as having characteristics of reasonableness and willingness to reach a deal which they may not in fact possess. In this context, the following factors (relied on by Mr Hedges) are relevant:

a. The Council would asses what benefits it might receive which would accrue only over a short period (thus giving rise to the objection already addressed concerning reference to capital values at all). It would assess what, if any, advantage it would be able to obtain. Even assuming that there would be a rent differential (ie with or without the Red Land) on a new letting, it does not follow that an existing tenant would be prepared to pay more than it was already paying. Mr Hill has not even attempted to discover what actual tenants on the estate might be prepared to pay. Obviously, what an existing tenant would be prepared to pay is a matter of fact; it may be difficult to ascertain the true position and assumptions may need to be made or inferences drawn. But there is considerable force in what Mr Hedges says about the smaller Units and the adequacy of the access over the private road alone for those Units. It is important to note, in this context, that the hypothetical negotiation is not one taking place between FCL and a tenant. In such a negotiation (for instance if the tenant were being sued) it would have to be assumed that the tenant was a willing party and that a deal would be reached. In contrast, in the context of the hypothetical negotiation between FCL and the Council, it cannot be assumed that the tenant would be willing to pay anything at all; it may be that he would rather simply restrict his use to that of the private road.

b. There is this other difficulty already mentioned with the proposition that the Council would be able to extract more money from its existing tenants, namely that, even if the Council had the necessary licence from FCL, it has no way of preventing the tenants from using the Red Land. That would remain a matter for FCL unless it granted the Council appropriate rights. But that is not what the hypothetical negotiation is designed to achieve. The negotiation is designed to assist in ascertaining what the Council should pay for the benefit which it has received or enjoyed. It appears, in fact, to have received nothing extra and FCL still has its cause of action against the tenants to recover compensation for their enjoyment of the Red Land.

c. Even if that point is wrong, the figures of 20% or 30% of rental value for a right of this limited duration are ones which I find very high indeed. I prefer Mr Hedges' evidence that the figures should range from 25p per sq ft for small Units to 50p per sq ft for Units 11 to 14, bearing in mind that both experts' figures relate to the extra rent which could be achieved from a tenant willing to pay (or, to put it another way, from a new tenant). I say Mr Hill's figures are high because they would indicate, on the smaller Units, a difference in rent of for instance, £2,000 on those Units where the open market rent is assessed by Mr Hill at £10,000. That is an enormous increase to think that a tenant of a smaller Unit might pay and does not accord with what one sees on the ground. One sees rents under new leases including the Red Land and leases from similar date not including the Red Land being at much the same rents. Of course, that might be because the full rent was being paid even where there was no purported grant of rights over the Red Land. But equally it might be because there is not really the sort of difference which Mr Hill suggests there is.

d. Further, one could look at the position of Travis Perkins, perhaps to be taken as the keenest candidate for agreeing to pay for an improved access. Mr Hill assessed the open market rent of Units 13 and 14 (both occupied by Travis Perkins) in 2007 or 2008 as follows:

i. Unit 13: £25,020 pa buildings at £10 per sq fit; £20,000 storage at £1 per sq ft.

ii. Unit 14: £91,500 pa buildings at 10 per sq ft; £7,000 storage at £1 per sq ft.

e. On those figures, applying the 20% (Unit 13) and 30% (Unit 14) differentials which Mr Hill confirmed to me applied to rent as much as to capital value, the improved access would be worth £32,454 pa taking into account the buildings without the storage areas. This, it will remembered, is for an access over the Red Land. And yet Travers Perkins have been negotiating a lease at £9,600 pa of a large portion of the Red Land for parking and storage; no doubt, if it chose, it could, instead of parking and storing, simply pass and re-pass over the Red Land. Travis Perkins' offer is not consistent with the sort of value which Mr Hill's methodology produces for the value of the additional access (albeit to the whole Industrial Estate).

f. I have already mentioned Mr Hedges' observations on the correlation between investment value and rent (value = rent x 100/yield) and the inappropriateness of this approach in the present case: see paragraph 137b. above. He draws attention to the consequences of this in relation to Unit 12, where the actual rent in 2005 was £14,000 but the decapitalised rent attributable to this Unit is £44,632. Now, it is true that in 2005, the rent was for the land and not the buildings; but, so it seems to me, it is not likely that the Council could sensibly expect the tenant to contribute to the Council (whatever it may have agreed to pay to FCL if sued by it) an increased rental based on what the rent would become in 2007 especially if one takes the date of the hypothetical negotiation between FCL and the Council as taking place in 1998.

The upshot of all this is that I agree with Miss Holland that the damages recoverable by FCL are to be based on a hypothetical negotiation between FCL and the Council, but I disagree that Mr Hill's approach is a proper reflection of that negotiation. In my judgment, the proper approach is to start with an assessment of what, in fact, the Council would perceive itself as likely to be able to extract from its tenants for the right to use the Red Land for access in the light of the actual facts of each tenant. I acknowledge that in the real world, it might not have been appropriate actually to make enquiries of each tenant, but an assessment of the type of tenant in each Unit would be made. I accept Mr Hedges' approach that existing tenants of smaller Units would be far less likely to agree to any payment than those of larger Units. Account would need to be taken, it seems to me, of the fact that the Council would not be able to compel any payment or, indeed, itself to prevent continuing trespass. However, if one ignores that point, then on the basis that the Council could extract from each tenant an amount equal to the additional rent which each tenant is to be taken as willing to pay (and assuming that, absent payment, its continuing use of the Red Land would be restrained), I assess the extra amount at 25p per sq ft pa for Units 1 to 10 and 50p per sq ft pa for Units 11 to 14, taking building areas only into consideration. Given the margin or error in these figures I think it is appropriate to take the same figure for each year of the 7 year period and not to adjust for rental increases generally.

In relation to the new leases which I have mentioned and which provide for access over the Red Land (Units 5, 6, 7 and 9) FCL is entitled to recover damages on the basis that additional amounts thus calculated (ie at the 25p figure) have actually been received under those leases from the respective rent commencement dates, together with simple interest at the rate set out in Mr Hill's revised report. Of that rent, the Council would receive the benefit of only 35%, being obliged to pay an amount equal to 65% under the Headlease. Accordingly, subject to paragraphs 168-9 below, the Council is liable for damages equal 35% of the extra rent treated as received.

In relation to existing leases, in the absence of evidence about what actual tenants would do, I consider that it is appropriate to start with the same figures for notional rent. But they need to be discounted in the context of the hypothetical negotiation, to reflect the facts (i) that tenants might not in fact agree to pay further rent because they are happy with the limited access and (ii) that the Council could not prevent the tenants from continuing to use the Red Land. So far as the tenants of the smaller units are concerned (Units 1 to 10 save in respect of Units 5, 6, 7 and 9 for the periods discussed in the preceding paragraph), I am not satisfied that they would have agreed in fact to pay any more rent, but I do think that the Council would have to acknowledge, in a hypothetical negotiation, that some allowance should be made for the prospect that they might pay and this is so notwithstanding that the Council could not prevent them from continuing to use the Red Land. I cannot be scientific about this, and I do not think expert evidence on this could help: but to reflect the chance of obtaining further payment from the tenants, I would allow 30% of the 25p rate to take account of both discounts. To that reduced notional additional rental should be applied the 35% factor. Again, subject to paragraphs 168-9 below, the Council is liable for damages equal to 35% of 30% of the extra rent treated as received.

So far as Units 11 to 14 are concerned, I consider that there is a much higher prospect that the tenants would have agreed to pay for better access. But there remains the fact that they could have continued to use the Red Land without paying the Council, and it would have only been FCL which could have prevented them. Again, it is not possible to be scientific about this and I must make as assessment of the outcome of the negotiation. I would allow 50% of the 50p figure. Accordingly, subject to paragraphs 168-9 below, the Council is liable for damages equal to 50% of the extra rent treated as received.

However, I do not consider that any damages can be recovered in respect of Units 13 and 14 in respect of the period after 7 March 2002, when, when Mr Sears and his family acquired FCL. It was not because of any permission from the Council that Browns and Travis Perkins used the Red Land, but because Mr Sears was able to allow them to do so. It is no answer to this to say that at the date of the hypothetical negotiation in 1998, no-one would have known what would happen in 2002. That, of course is true. But what has to be remembered is that the hypothetical negotiation is only a technique for ascertaining the appropriate damages over the period of trespass. If during part of that period there is in fact no trespass, the technique has to be adjusted accordingly. The notional annual fee must therefore be reduced so as to eliminate any damages in respect of the use by Browns and Travis Perkins of the access road after 7 March 2002. This means that FCL can obtain damages only in respect of the period before that date; and what I might call the 50p calculation only applies up to that date. A similar point arises in relation to Unit 12, but only in respect of the period after 28^th February 2003 when Brown's obtained a lease of Unit 12.

In his own calculations, Mr Hill has carried out an apportionment between the Council and FCL, apportioning one half of the extra rent achieved from the tenants to each of them. The rationale for that is as follows. The difference in capital value, as calculated by Mr Hill, represents the marriage value between the Industrial Estate and the use of the Red Land. The Red Land has no value without the Industrial Estate, but the Industrial Estate is more valuable with it. It is in the interests of both parties, on a negotiation, to share that value, and in the absence of any other yardstick, Mr Hill takes 50%.

Is it correct to apply a similar apportionment adopting the approach to damages which I have? In my judgment, the answer is Yes. Once one applies the hypothetical negotiation approach, the only difference – or only relevant difference – from the real world which is important is that the parties are to be treated as willing to reach an agreement; it is implicit that they would share the benefit which accrues from the ability to harness the benefit of both pieces of property together. I agree with Mr Hill that a 50/50 split in the circumstances of this case would be reasonable. Mr Hedges had not suggested any other basis although he does not accept an equal split as appropriate. His reliance on the way in which the parties were proceeding when a purchase of the Red Land was under consideration (ie a 1:2 split in favour of the Council) is not in my view a proper reflection of the parties' positions in this hypothetical negotiation. This is to be contrasted with a hypothetical negotiation with a tenant in respect of his own trespass where he would be expect to pay 100% of the negotiated fee.

I hope that the parties will be able to agree a figure based on these rulings. I have not myself done the arithmetic, but I do not think that there are any outstanding points of principle which need to be addressed.

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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Field Common Ltd v Elmbridge Borough Council [2008] EWHC 2079 (Ch) (27 August 2008) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2008/2079.html Cite as: [2008] EWHC 2079 (Ch)