In the commercial world hard choices are required from time to time and provided the risks involved in making them are properly understood they may be the right choices. This blog discusses legal obligations and remedies, and in particular whether it really matters if there is a breach if it is possible to neutralise, or at least limit, an opponent’s remedies. The discussion focuses on property issues and disputes.
Knowingly acting in breach of a legal obligation may, at first glance, seem a dangerous thing to do but the outcome may be worth it. The big question is what can the other party do about it? – what are his legal remedies? The most common remedies are injunctions, usually ones restraining some action (eg the construction of a building) and damages, the main purpose of which is to compensate for a loss. In the following paragraphs two situations are considered where a party who has infringed, or intends to infringe, another’s rights may be able to limit his opponent’s remedies.
Developers often have to deal with the rights of others, rights which may prevent or limit a development, or make it less profitable. The sorts of rights that come within this category include restrictive covenants and rights to light. If there is a risk of infringement the developer needs to address the issues carefully in advance. In relation to rights of light he might consider making a payment in return for a release of the right. That might be appropriate in some cases but not in all cases. The developer’s main objective will be to avoid the risk of an injunction – he may be able to live with a claim for damages. In deciding his approach one of the first things he’ll consider is whether his opponent is likely to apply for an injunction – a step that carries its own risks – or take proceedings at all. If the developer is seriously concerned he may decide on a strategy to make it difficult for his opponent to obtain an injunction. If well advised he will bear in mind that an injunction is a discretionary remedy, one that the court may grant in order to protect a legal right. It is not a remedy that is likely to be granted if there is evidence that the other party is only interested in damages. Armed with this knowledge, and a certain amount of guile, some developers may be able to obtain the evidence they need to defeat an application for an injunction.
In the field of landlord and tenant the same sort of approach can be taken by well-informed tenants who have committed a breach of a (once and for all) covenant, eg alterations, to protect them from a landlord’s threat to forfeit their lease. Although the prospect of a landlord actually being able to forfeit a long residential lease is remote the financial implications for a tenant could be serious. The general position is that a landlord can only forfeit a lease if he has not waived the right to do so by some inconsistent act, eg demanding rent. Such acts are usually done accidentally but a tenant in breach of covenant may intentionally set up an argument of waiver in order to frustrate his landlord’s right to forfeit.
The point of this blog is to remind us all that a breach of a legal obligation isn’t necessarily the end of the story. Thought needs to be given to an opponent’s remedies. In some cases they may be non-existent and in others it may be possible to neutralise or, at least, limit them.