| Date | 13 November 2002 |
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| Judgment | Amec Developments Limited -v- Jury's Hotel Management (UK) Limited, 17 November 2000 |
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| The Issue | The measure of damages as a proportion of the benefits obtained by the defendant. |
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| Implication |
In certain circumstances, damages will be assessed on the basis of the gain obtained by the party in breach of duty, even where no loss is suffered by the other party. |
printAssessing damages can be a tricky business, particularly where, in certain cases, no clear cut answer can be given. An example is to be found in the case of Amec Development -v- Jury's Hotel, which concerned the construction of a hotel at Great Bridgewater Street in Manchester. Amec owned land adjacent to the hotel site and benefited from a restrictive covenant in which Jury was required not to construct any buildings on its site beyond a line which was a few metres behind the boundary line. In October 1997 Jury applied for planning permission for a 260 room hotel which it intended to build on the site. Jury was aware of the restrictions that it could not build too close to the boundary with Amec's land, but it appears that its enquiries as to the exact measurements to be considered were not particularly thorough. In the event, planning permission was obtained and building contractors were appointed for a 265 room hotel. Works were commenced in early 1998. Amec soon spotted that the building works were being carried out closer to its land than was permitted by the restrictive covenant. A meeting with Jury was arranged. Precisely what was said at that meeting was not accurately recorded, but it appears that it was accepted by both parties that the building works were transgressing beyond the permitted building line. Thereafter nothing seems to have been done with any degree of urgency. Jury simply carried on building its hotel in accordance with the existing plans. By June 1998, Amec had woken up and issued a writ claiming an injunction to restrain further building works, demolition of the hotel as it stood and damages. Once again, however, the matter went to sleep for a while. The construction of the hotel continued and it opened in May of the following year. It was not until almost one year later when Amec revived its proceedings and served an application on the court seeking judgment in a sum of over £2.3 million. In due course, Jury served a defence, admitting that its building was no more than 3.9 metres beyond the permitted line. As a consequence of that pleading, the court granted an order with the consent of both parties, that Jury should pay Amec damages to be assessed. The court then had to grapple with the question of the relevant measure of damages to apply. Amec did not contend that it had suffered a loss, and did not seek to measure its claim by reference to a diminution in value of its land or any other identifiable adverse effect upon it. Instead, Amec claimed that it was entitled to damages to reflect the sum of money it might reasonably have been able to demand from Jury as a deal for allowing the encroachment beyond the permitted building line. The court agreed that the principal issue was to ascertain the amount of the benefit that Jury had acquired in being allowed to build over the permitted line and to determine what share of that benefit Amec should be given. An appropriate way of ascertaining that sum was to consider the sum that would have been arrived at in negotiations between the parties, had each been making reasonable use of their respective bargaining positions without holding out for unreasonable amounts. The court then heard opposing expert statements upon the nature of benefit that Jury had obtained. It was argued that, having been enlarged by 3.9 metres in one dimension, an increase in the floor area of the building of approximately 11% had been obtained. This was potentially sufficient to have increased the number of bedrooms from 240 to 265. Calculations were then made on a discounted cash flow basis of the increased revenue which Jury would enjoy and against these, deductions were made for the increased building costs which had been incurred. As is so typical in cases of this sort, the experts could agree on very little. Amec's case was that Jury had gained something in excess of £3 million for which they were entitled to 50%. Jury's case was that the benefit it had obtained was minimal or slight and that the damages to Amec should not exceed £140,000. Attempting to take all these factors into account, the court held that it should make an assessment based upon a hypothetical negotiation between the parties at a date before the building works were started. The assessment would be of a sum of money that Jury, as a willing buyer, would be prepared to pay to acquire the right to build beyond the permitted line, without being held to ransom. The court also took into account that the additional land that Jury would be seeking was not just a few inches, it was almost four metres wide. The area represented a significant amount of extra building space. However, as a matter of common sense, the course considered that Jury would never have paid a sum approaching £1.5 million for the right to build on a four metre strip of land, when it had only paid £2.65 million for a whole plot in the first place. In conclusion, the court assessed damages at £375,000, without giving any explanations as to how that figure was arrived at. Not too bad an investment, one might say, for the right to build 25 hotel bedrooms in the centre of Manchester.
CJ-0244
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