Economics Conflicting Land Use Cases

Introduction

The Miller v Jackson case is reflective of conflicting land uses that may arise when residential property is created close to property that has been involved in activities over a period of time that may constitute nuisance against the new landowners. The common law has reacted to the issue of such conflicting interests in the cases where plaintiffs ‘come into nuisance’ with an approach that seeks to balance the interests of the new landowners with the interests of the defendants by compensating the new landowners for the nuisance and not recognising the defence of ‘coming into nuisance’. The issue of entitlement has been central to the decisions in such cases, where entitlement means the right of which party will be allowed to prevail over the other. On the other hand, economic analysis has focused on the maximisation of value of production and the efficient allocation of resources.

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The law and economic analysis may be useful in assisting courts in deciding between conflicting land use. In such cases, law and economic analysis may be applied by the courts and has indeed been applied in tort cases. This essay critically analyses the use of law and economics analysis for determining rights in conflicting land use cases.

Miller v Jackson: problems of conflicting land use arising on the facts of the case

An approach that depends on entitlement, that is, a determination as to which party’s right will prevail in case of conflicting interests between two parties with respect to land use, may lead to consequences where courts decide the matter on the basis of legal right. A law and economic analysis approach may lead the court to consider transactional costs as well, arising from the rearrangement of the rights and interests. In such cases, it may become necessary for courts to balance the interests of parties, as noted by Lord Wright in Sedleigh-Denfield v. O'Callaghan:

“A balance has to be maintained between the right of the occupier to do what he likes with his own, and the right of his neighbour not to be interfered with.”

The basis of nuisance liability in the common law has been depended on an unlawful interference with the rights of claimant to enjoy his property. As noted in Sedleigh-Denfield, an occupier of the property should be allowed to use his property the way he likes so long as his neighbour is not interfered in the enjoyment of his property. The test that is generally used to understand whether something is reasonable or not is based on the question of what is reasonable according to the ordinary usages of mankind living in a particular society.

In the cases considered in this essay, predominantly the case of Miller v Jackson, it is difficult to reconcile the idea of nuisance as was laid down in common law, and the decision of the court. The facts of Miller v Jackson are that a particular piece of land had been used for playing cricket by defendants, a cricket club, for almost 70 years. The cricket club had used this land without any complaint from any village member or householder in this time. The conflicting land use issue arose when a neighbouring piece of land was sold for development, and the developer built houses on the land. One of these development houses was bought by the plaintiffs, who complained of both negligence and nuisance due to cricket balls landing on their property. They claimed that the cricket balls damaged the property and also prevented them from enjoying their land. The plaintiffs sought injunction against the defendants’ use of the land for playing cricket, which was awarded by the court of first instance.

When the case came before the Court of Appeal, there were three issues before the court. First, whether the defendants were guilty of negligence and/or nuisance. Second, whether the defendants could claim the defence of the plaintiffs ‘coming to the nuisance’. Third, whether policy reasoning should impact the granting of an injunction. The Court of Appeal found in favour of the plaintiffs and held that the cricket club was liable for both negligence and nuisance. Injunction was not issued by the court as it was held that injunction was a discretionary remedy rather than a remedy for nuisance to be departed from only in exceptional circumstances. With respect to public policy, it was held that it would not negate a finding of negligence or nuisance but could militate against grant of an injunction. In this case, as in Sturges v Bridgman before it, the court has allowed a claimant who knowingly purchased or used property in a manner that would allow nuisance from the defendants, an entitlement to stop the defendants from their activities (Sturges) or pay compensation to continue their activities (Miller).

The case of Miller v Jackson is significant for confirming that there is no defence that the plaintiff came to nuisance. This conforms with the position that the courts in England had held prior to the decision in Miller v Jackson. For instance, in Sturges v Bridgman, the court had held that what constitutes reasonable use of one's property would depend on the character of the locality and that the plaintiff "came to the nuisance" is no defence in such nuisance cases. This was followed in Miller v Jackson, and followed in subsequent cases. Therefore, the position at the time when Miller v Jackson was decided is that the character of a neighbourhood cannot be defined by nuisance, and defendants cannot argue that the as the nuisance has occurred prior to the claimant coming to it, therefore they have a defence against the suit for nuisance.

Cases decided later have also conformed to this point. In Kennaway v Thompson, courts allowed the claimant to sue for an injunction against a water-skiing and motorboat club, which was in existence before the claimant built her house next to the lake, which was used for water-skiing and as a motorboat club. In that case as well, the activity that the claimant claimed was nuisance had been carried out prior to the claimant coming into the property. Again, in Coventry v Lawrence, a recent case decided by the Supreme Court, the court allowed an injunction against a speedway track when the claimants moved in to a bungalow near the track; this despite the motorbikes and stock cars having raced on the track since 1975. These cases have stuck to the ratio of the court in Sturges v Bridgman, which based on the legal right of the claimant to stop the defendant from continuing the offending activities without reference to the economic analysis that could have allowed the court to come to a different conclusion that the one applied by it in the case. Despite the courts considering that coming into nuisance does not offer any defence to the defendants in such cases, there have been cases recently that seek to enforce such a defence. However, the courts have so far not altered the ratio in Sturges. For instance, in Lawrence v Fen Tigers, a recent case decided by the Supreme Court, the court considered the issue of plaintiff ‘coming into nuisance’ when they buy a property close to a stadium which conducts motor races, and the appropriate remedy in such cases. The court held that coming to nuisance was not a defence in nuisance cases. The observation of Lord Neuberger is relevant here, where he notes:

“where the claimant in nuisance uses her property for essentially the same purpose as that for which is has been used by her predecessors since before the alleged nuisance started... defence of coming to the nuisance must fail.”

Therefore, the court considered that if the predecessor had used the house for residential purposes and it is for the same purposes that the house is being used by the claimant as well, then the defence of coming to nuisance would fail. However, it raises an interesting question as to whether there are situations where the defence of coming to nuisance pass? The observations of the court above lends to the view that there may be such circumstances, such as, when the claimant uses the property for a purpose which is different from the purpose to which it was put by their predecessor, the defence of coming to nuisance may pass. It may also be noted that coming to nuisance is a defence that may be based in the principle volenti non fit injuria, which means that legal wrong is not committed against one who consents. Therefore, there is basis for claiming the defence in Miller v Jackson, although not recognised by the majority in the case. However, in the more recent case of Lawrence v Fen Tigers may raise the possibility for the defence being recognised, in particular where the claimant’s change of use of own led may have contributed to nuisance. However, if that is the case, it lays to doubt the reasoning of the court in Sturges, where the claimant did change his land use and then claimed nuisance successfully.

The above raises the interest in law and economic analysis because ‘coming to nuisance’ is essentially concerned with issues of fairness and economic efficiency, which lends well the law and economics analysis. The principle is that if the defendant was there first, and the claimant came later, then the claimant should not be allowed to claim nuisance as he himself came to the place where he knew the defendant’s activities were being carried out. In this context, an economic analysis of the situation would involve the application of efficient or social welfare maximising rules that would lead to the maximising of net social value of production.

With respect to remedies, the court in Lawrence v Fen Tigers, held that instead of injunction, damages may at times be the more appropriate remedy in such cases; therefore, the courts should not hesitate to give damages in lieu of injunction. The reasoning of the Supreme Court in the case is that if it is considered that the character of the locality can be determined by the activities of the defendant, then there can be no action in nuisance in any case, which is a perverse position.

In the conflicting interests between the landowner and the nuisance maker, the fact that the claimant landowner may have himself changed their own use of land, may be used as a possible defence in nuisance cases. This is an important observation in the case, and one which provides a possible relief to the defendants in cases where the claimant’s land was used for a purpose that was not incompatible with the defendants’ activities, which are otherwise lawful. In such cases, the defendant would be able to take the defence that the activities were not objectionable to the claimant earlier, but the change in the land use by the claimant himself has led to the incompatibility where it is unfair to demand that the defendant now change the existing use of his land because the claimant has a new scheme for their land, which would make the defendant’s actions nuisance.

It is interesting that the courts have since Miller v Jackson, adopted a more relaxed approach to the granting of an injunction and adopting an approach of unfettered discretion to award damages in such cases instead of granting injunction. This seems to be a way for the courts to balance between the interests of the two parties. In the next section, the essay discusses the capacity of law and economics analysis to assist courts in shaping norms.

Capacity of law-and-economics analysis to assist the courts in shaping norms

How law-and-economics analysis may provide a way for courts to shape norms in the cases where plaintiffs come into nuisance is depicted in the American case, Spur Industries Inc, in which a new housing development was created by a developer near an established feedlot operation in a rural area. The new residents demanded the removal of the feedlot operation from the area. The court was required to consider whether Spur (feedlot operator) was required to move from the area in the larger collective interest of the residents of the new housing development, and if so, what would be the possible liability of the developer who brought the plaintiffs to the nuisance by building the development so close to the feedlot operation. The court held that Spur had to move to make way for the rights and interests of the public, and the developer was also entitled to an injunction for the same reason; however, in the interests of equity, it follows that the developer being entitled to the injunction, would be liable to Spur for being the cause of the damage that Spur would sustain in having to move. The court considered that a developer who had taken advantage of low rural property prices and brought people to the nuisance to the foreseeable detriment of Spur, was liable to indemnify Spur for costs of moving or shutting down. Thus, an approach that sought to consider the transactional costs with the entitlement costs was useful in forming the norm that would require the developer to indemnify the nuisance maker for stopping the nuisance.

Calabresi provides a possible method through which the rights of landowners and defendants in nuisance cases where the defence of ‘coming into the nuisance’ is claimed can be balanced with each other. This is the method by which protection may be given to nuisance maker with a liability rule, wherein the nuisance may be committed without liability but the landowner may stop this activity if they are prepared to pay compensation to stop the activity. Calabresi calls this ‘Rule 4’, which can be one of the rules that protect entitlements in the light of transaction costs.

Calabresi writes that there are three rules that are generally followed in protecting entitlements in light of transaction costs: Rule 1 does not allow the nuisance without the consent of the landowner, thereby allowing the remedy of injunction as well as liability for damages; Rule 2 allows nuisance but only if the landowner is compensated, thereby denying injunctive relief but providing damages; Rule 3 allows the nuisance without any liability. Of these three rules, it would seem that the court in the Miller v Jackson case followed the approach in Rule 2. It did not allow injunction but it allowed compensation to the landowner. The observation of Cumming-Bruce LJ in the judgment is relevant here where he notes that the court has to

"strike a fair balance between the right of the plaintiffs to have quiet enjoyment of their house and garden without exposure to cricket balls occasionally falling like thunderbolts from the heavens, and the opportunity of the inhabitants of the village in which they live to continue to enjoy the manly sport which constitutes a summer recreation for adults and young persons."

The reasoning of the court was that as the Millers bought a house that had an open space adjacent to their land, they had to accept the possibilities of the lawful use of the open land restricting the enjoyment of their garden. Thus, the Rule 2 that allows nuisance but compensates owners has been applied in this case. This allows the court to balance the interests of the plaintiffs who have come to occupy land which may be subject to nuisance with those who have been using another property for a specific purpose over a period of time.

Calabresi argued that there is a possibility of the application of a fourth rule in such cases where the plaintiffs ‘come into nuisance’ wherein the landowners pay the cost of changing the existing operation so that nuisance is stopped, but interests of those who were involved in the activity are also protected.

The Pareto principle may also be used to balance the interests of the landowners and the nuisance makers in cases where plaintiffs may have come into the nuisance. Pareto superiority requires that the allocation may be such that makes someone better off without making another worse off. Pareto optimality is where the allocation is such that no other allocation can be pareto superior; in other words, no one is being made better off without making someone else worse off. In cases involving new landowners coming to a locality where existing land use may include activities that could cause him nuisance, it is essential that before the entitlement of one is ascertained the transactional costs of the entitlement also be considered for both the parties. With Pareto superiority, a problem that occurs is that it may not always be possible to discern whether something would leave someone worse off. On the other hand, Kaldor-Hicks efficiency theory has been used to supplement Pareto superiority by arguing that a reallocation of resources may be deemed to be efficient if the winners have obtained enough from this reallocation to fully compensate the losers. Compensation is used to ensure that no one is worse off. In Miller v Jackson, the courts appear to have applied this reasoning to balance the rights between the two parties by making an order for compensation but refusing the order for injunction, thereby allowing the activity to continue but ordering the defendant to compensate the claimant.

Another law and economics analysis method is provided by Coase, who argues for the resolution of conflicts between landowners and nuisance makers through private cooperation rather than state regulation. Coase argues that negative externalities, like costs imposed on one party for carrying out an activity, are problematic because pollution or nuisance is not always a matter of one party harming another party, but a result of an inevitable problem where there are incompatible uses. Coase’s comment below is interesting:

“The traditional approach has tended to obscure the nature of the choice that has to be made. The question is commonly thought of as one in which A inflicts harm on B and what has to be decided is: how should we restrain A? But this is wrong. We are dealing with a problem of a reciprocal nature. To avoid the harm to B would inflict harm on A. The real question that has to be decided is: should A be allowed to harm B or should B be allowed to harm A? The problem is to avoid the more serious harm.”

Coase’s comment is an indictment of the judicial approach to the problem of conflicting interests, where the traditional approach has been focussed on deciding whose entitlement is to prevail over the other, which leads to a problematic situation where one party is restrained in order to make way for the right of the other party. The problem as Coase notes is that this is reciprocal and the gist of the matter is to avoid more serious harm and not just to allow the entitlement of one party to prevail over the other. The more serious harm for Coase is the one that leads to inefficient allocation of resources.

Coase himself gives the example of Sturges v Bridgman, wherein a doctor moved into a property, adjacent to which was a confectionary factory, and the properties shared a common wall, leading to the doctor complaining of noise and vibrations from confectioner’s operation. Coase argues that in this case, to favour any one party would mean harming the other party. Coase does not focus on the entitlement in such cases, rather the efficiency with which resources can be allocated. Initial bargaining may let the parties arrive at a resolution to their conflict in a more efficient manner without imposing a negative externality on either of the two parties, so that instead of one party having to give up its activities entirely, a middle way approach can be found between the two parties, where the interests of both parties can be balanced and the most efficient resource utility can be achieved. With respect to a possible judicial resolution to the conflicting interests of the two parties in nuisance cases, Coase, argues that the judicial approach has largely been focused on the allocation of rights and delimitation of rights in certain cases, although courts “have often recognised the economic implications of their decisions and are aware … of the reciprocal nature of the problem.”

With respect to the decision of the court in Sturges v Bridgman, Coase notes that there is a more appropriate way in which an economic analysis may have allowed the court to come at a different conclusion than the one that they arrived at in its decision. In this case, the confectioner was using a specific kind of machinery, which led to noise and vibration. When the doctor moved into the house, the machinery was already being used and this did not bother the doctor for 8 years. It is only when the doctor built a consulting room at the end of his garden and right adjacent to the kitchen of the confectioner, that he became bothered by the noise and vibration coming from the kitchen. This noise and vibration made it difficult for the doctor to use his consulting room because the noise from the confectioner’s kitchen came in the way of his examining his patients by auscultation as well as being able to think and ponder on the patients’ medical issues. This finally led to the doctor filing a legal action for restraining the confectioner from continuing to use his machinery for making confectionary. The court granted an injunction to the doctor holding that:

“Individual cases of hardship may occur in the strict carrying out of the principle upon which we found our judgment, but the negation of the principle would lead even more to individual hardship, and would at the same time produce a prejudicial effect upon the development of land for residential purposes.”

There are two points of significance in the above observation of the court, which may be highlighted here. First, the court considered that of it did not rule in favour of the entitlement to the doctor, it would lead to individual hardship for the doctor. Second, that unless the court decides to grant an injunction in the case, it would prejudice the further development of the land for residential purposes. With respect to the first, it may be argued that if the court decided in favour of the claimant doctor, it created a hardship for the confectionary owner as well. Therefore, it is one of the cases where if the case is decided in favour of one, it would lead to harm to the other.

With respect to the second observation of the court, it may be argued that the objection by the doctor to the machinery of the confectioner was made only when he built a consulting room at the end of his garden and adjacent to the confectioner’s kitchen. Until this time, for a period of 8 years, there was no such objection which was raised by the doctor against the noise and vibration of the confectioner’s machinery. In this respect, Coase writes that the judges’ opinion on the use of land for residential purpose would be justified only if the costs of carrying allowing the existing market transactions, exceeded the gain which could be achieved by a rearrangement of rights.

The court could have considered these points from a different angle as well, where it could have considered the hardship to the confectioner by closing down his unit as an important value that could be balanced as against the interest of the doctor to be able to run his consulting without noise and vibration from the confectioner. Instead, the court decided that the doctor had the right to prevent the confectioner from using his machinery. This is the result that may have come from focusing on entitlement, and considering that one party’s entitlement had to prevail over the other. The problem with this approach is that from an economic point of view, there was a loss of resources that may have been avoided. Coase argues that if the parties were allowed to enter into a bargain with each other, it would have been possible to modify the arrangements made in the court, where the doctor could have waived his right and allowed the machinery to if the confectioner would have paid him a sum of money greater than the loss of income suffered on having to move to another location. Another scheme could have seen the confectioner building a separate wall between his kitchen and the doctor’s consulting room so as to negate the effect of noise and vibration from his kitchen. This the confectioner would have been willing to do if the cost of building the wall was less than the cost of moving to a new location or abandon his business. According to Coase: “the solution of the problem depends essentially on whether the continued use of the machinery adds more to the confectioner’s income than it subtracts from the doctor’s.” The problem with the confectionary machinery arose only because the doctor started his consulting work at the edge of his garden; had he not, the confectioner’s machinery would not have disturbed him. Coase argues that in a way causation was not only caused by the confectioner but also the doctor who built his consulting room next to the kitchen. In Coase’s view, since both parties are responsible for the causation of nuisance, they should both take the effect of their actions into account and decide on their course of action.

While Coase’s approach leads to a different conclusion in the same case, it is also important to note that courts are not always influenced by economic factors while deciding on such cases of conflicting interests arising out of allocation of resources. While an economist would prioritise the maximisation of value of production, the courts would be concerned with the legal rights of the parties. Therefore, for the courts, the question of entitlement would be more important than the question of transaction costs for upholding the entitlement of one party. Having said that, it cannot be denied that the cases considered in this essay are unique in the way nuisance is something that the claimant comes to, having bought property in the area where the activity is already being carried on. Looking for further insights on Economic Growth? Click here.

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Conclusion

Courts have used law and economics analysis to decide cases that pose conflicting uses of land and the tort of nuisance arising in such conflicting uses. However, to some extent, the application of law and economics approach has given way to the important question of entitlement based on legal rights. This has led to decisions that do not really take into consideration how economic injustice may be caused by preventing the defendant from continuing his activity, which had been in practice even before the claimant came to the locality. To a great extent, the court’s granting of injunction in Sturges and damages in Miller proceed on the idea that the claimant is entitled to the use of his property without interference from the defendant. However, the courts failed to consider the economic impact of such decisions on the defendant. Coase theorem can provide a better conclusion to such cases through the private bargaining between parties, which can lead to a more efficient rearrangements between the parties as opposed to focussing on the legal right which is to have a prevailing effect. A focus on legal right alone is dissatisfactory as seen in the case of Miller v Jackson.

List of Cases

  • Coventry v Lawrence [2014] UKSC 13.
  • Kennaway v Thompson [1980] EWCA Civ 1.
  • Lawrence v Fen Tigers [2014] UKSC 13.
  • Miller v Jackson [1977] 1 QB 966. Sedleigh-Denfield v. O'Callaghan [1940] A.C. 880 Spur Industries Inc v Del E Webb Development Co (1972) 494 P 2d 700. Sturges v Bridgman (1879) LR 11 Ch D 852.
  • Books

  • Swanson T and Kontoleon A, ‘Nuisance’ in Boudewijn Bouckaert (ed.), Property Law and Economics (Edward Elgar 2010).
  • Journals

  • Calabresi G and Melamed AD, ‘Property Rules, Liability Rules, and Inalienability: One View of the Cathedral’ (1972) 85 Harvard Law Review 1089.
  • Calabresi G, ‘The pointlessness of Pareto: carrying Coase further’ (1991) Yale Law Journal 1211.
  • Claeys ER, ‘Jefferson Meets Coase: Land-Use Torts, Law and Economics, and Natural Property Rights’ (2009) 85 Notre Dame L. Rev. 1379.
  • Coase R, ‘The Problem of Social Cost’ (1960) 3 (1) J.L. & ECON. 29.
  • Cordato RE, ‘Time passage and the economics of coming to the nuisance: Reassessing the Coasean perspective’ (1997) 20 Campbell L. Rev. 273.
  • Websites

  • Lees EF, ‘Lawrence v Fen Tigers: where now for nuisance?’ (2014), accessed

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