Welcome to the second of our RED Alerts of 2023.

Also featuring in this month's update:

• No more peeking: Supreme Court decision in landmark Tate nuisance claim.
• Peril at Picnic House: email exchange affects transfer of property to ex-partner.
• Pay now, argue later: Supreme Court decision on conclusiveness of service charge certificates.
• Supreme Court solution to service charge reapportionment.
• Adverse possession: service charge and squatter's rights.

Davies v Bridgend County Borough Council [2023] EWCA Civ 80

Summary

An owner of an investment property claimed damages for the reduction in the value of the property caused by the encroachment of Japanese knotweed from neighbouring land which had since been treated and eradicated. The question for the Court was whether such damages were available in law given it could be characterised as pure economic loss.

The facts

Mr Davies had bought the subject residential property for investment in 2004. In 2019, Mr Davies notified Bridgend County Borough Council (the Council) that Japanese knotweed from their neighbouring land had encroached onto his property. Before reaching the Court of Appeal, the District Judge found the Council had breached its duty as a neighbour to treat the knotweed. Mr Davies' damages claim by that point was for "blight" or "residual" diminution in value remaining even after the knotweed had been treated and eradicated. This was submitted by the expert evidence as amounting to £4,900.

The District Judge held that diminution in value damages were not recoverable in these type of cases following the Court of Appeal's decision in Williams v National Rail [2018] EWCA Civ 1514. Consequently, the claim was dismissed.

In the Williams case, the Court of Appeal had said:

"The purpose of the tort of nuisance is not to protect the value of the property as an investment or a financial asset."

Mr Davies unsuccessfully appealed to the High Court with the Judge agreeing that the Williams case was authority "that such economic damage is not recoverable" and that the Court of Appeal words in that case "could not be clearer." Undeterred, Mr Davies appealed again.

The Court of Appeal examined the Williams case in detail.

The Williams Case

This case concerned two claimants whose properties had also suffered from encroachment by Japanese knotweed. There were two bases for their claim:

• Encroachment Basis: They suffered a nuisance from the actual encroachment of knotweed even though it had not yet caused any physical damage. The lower court dismissed the claim due to the absence of physical damage. However, the Court of Appeal allowed the claimants' appeal holding that the non-trivial presence of knotweed is an immediate burden interfering with the amenity/quiet enjoyment and that damage could be demonstrated by the reduced ability of the claimants to use and enjoy the property.
• Quiet Enjoyment Basis: They suffered a nuisance by virtue of knotweed existing on the neighbouring land as it interfered with their right of quiet enjoyment/amenity value of their properties. The lower court acknowledged this proposition and suggested that the damage was demonstrated by the diminution in value of the properties and the fact that the claimants would have to live with the consequences of a devalued property. However, the Court of Appeal rejected this and found that the presence of the knotweed did not "become an actionable nuisance simply because it diminishes the value of the Claimants' land."

Consequently, in the Williams case, the Court of Appeal found for the claimants on the Encroachment Basis. More importantly, the Court then awarded damages to the claimants which included damages for the diminution in the value of their properties.

The decision

Following this analysis, the Court of Appeal held that the Judges below had misunderstood the Williams case. Williams was not authority for the proposition that damages for diminution in value cannot be awarded if nuisance was established. In fact, the correct approach was first to consider if there was an actionable nuisance. If so, did it lead to damage? In Mr Davies' case, such damage amounted to the immediate burden of having knotweed on his land. Having established nuisance, Mr Davies was entitled to damages for the diminution to the value of his property caused.

Our comment

It is important to understand the meaning of damage that enabled nuisance to be established in this case. It was not the amount of the diminution in value as that is pure economic loss which is not permissible in the law of tort and includes nuisance claims. The damage was in fact the loss of amenity or enjoyment of his land.

A victory for Mr Davies but also helpful clarity on the recoverability of damages for nuisance. This case also demonstrates the importance of context. The Court of Appeal's judgment in Williams appeared clear but was misinterpreted as the Court of Appeal found in this case.