#6659 - Inverugie Investments V. Hackett - Commercial Remedies BCL

Inverugie Investments v. Hackett

Facts

But the facts are unusual, since the land consists of 30 specified apartments in a much larger hotel. The hotel is owned by the defendants, Inverugie Investments Ltd. The plaintiff, the late Mr. Richard Hackett, was the lessee of the apartments under a lease dated 5 June 1970 for a term of 99 years. On 25 November 1974 the plaintiff was ejected by the defendants. On 6 March 1975 he brought proceedings for possession. Those proceedings culminated on 19 December 1984 when the Board dismissed the defendants' appeal against a decision of the Court of Appeal of the Commonwealth of the Bahamas in favour of the plaintiff. Despite a further order granted by Malone J. on 23 June 1986 requiring the defendants to give up possession forthwith, they did not do so until 12 April 1990. The trespass thus lasted for a continuous period of 15 years. The question for decision is the appropriate measure of damages.

Mr. Mowbray made clear to the Board, as he had already made clear in the courts below, that the plaintiff is claiming a reasonable rent for the apartments throughout the period of the trespass. This is the basis on which damages for mesne profits are awarded every day in the county courts. The plaintiff is not asking for an account of profits, perhaps because the hotel was running at a loss, as the defendants have maintained throughout. He is not asserting a restitutionary claim as an independent cause of action.

Mr. Price, for the defendants, accepts that the plaintiff is entitled to a reasonable rent. Accordingly, on the arguments presented, no issue of legal principle arises. The problem is how a reasonable rent should be calculated.

In the ordinary case where the plaintiff is the landlord of domestic premises, and the defendant is or was the tenant, this creates no difficulty. The reasonable rent is almost always the rent reserved under the expiring lease. The difficulty in the present case arises because the facts are the other way round. It is the tenant who is the plaintiff, and the defendants who are the reversioners under the lease.

Holding

Objective Loss in Compensatory Damages cases

The cases to which they have already referred establish, beyond any doubt, that a person who lets out goods on hire, or the landlord of residential property, can recover damages from a trespasser who has wrongfully used his property whether or not he can show that he would have let the property to anybody else, and whether or not he would have used the property himself…. 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.

In Stoke-on-Trent City Council v. W. & J. Wass Ltd. [1988] 1 W.L.R. 1406 Nicholls L.J. called the underlying principle in these cases the “user principle.” The plaintiff may not have suffered any actual loss by being deprived of the use of his property. But under the user principle he is entitled to recover a reasonable rent for the wrongful use of his property by the trespasser. Similarly, the trespasser may not have derived any actual benefit from the use of the property. But under the user principle he is obliged to pay a reasonable rent for the use which he has enjoyed. The principle need not be characterised as exclusively compensatory, or exclusively restitutionary; it combines elements of both.

Calculation of Damages – chance of making a profit or actual profits made?

Mr. Mowbray argues that it makes no difference whether there were 30 apartments, or only one. If there had been only one, the defendants would have been obliged to pay a reasonable rent for the use of the apartment for 365 days in the year, even though the apartment might not be taken by a tour operator, or otherwise occupied, for more than 35 per cent. of the time. The same must apply, says Mr. Mowbray, to each of the 30 apartments.

Mr. Price argues that the unusual facts of the present case take it outside the normal rule. The defendants are hotel operators. If one assumes that the parties had negotiated a notional rent for the 30 apartments as a whole, they would have taken account of the average occupancy. What has to be valued is the chance of the defendants making a profit from the letting of the 30 apartments to tour operators, not the rent which an individual operator would pay per apartment.

Actual profits are not relevant: The point is not altogether easy. But their Lordships have concluded that Mr. Mowbray's argument is to be preferred. If a man hires a concrete mixer, he must pay the daily hire, even though he may not in the event have been able to use the mixer because of rain. So also must a trespasser who...