England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM EPSOM COUNTY COURT
(His Honour Judge Hull QC)

		Royal Courts of Justice Strand London WC2 Thursday 9th May, 2002

1. LORD JUSTICE ALDOUS: I invite Lord Justice Mance to give the first judgment.
2. LORD JUSTICE MANCE: Woking has several hundred private roads. Less well-known, perhaps, is the fact that they or many of them are owned by the appellants, Brookwood Cemetery Ltd. This appeal concerns two such roads, Lytton Road and The Ridge. These are cul-de-sacs serving a number of houses, in total 82. It is common ground that each frontager occupies owns and maintains the road in front of his or her house up to the middle. The appellants' ownership might, I hope not unfairly, be described as inactive, at least until this litigation.
3. During 1999 many of the house owners were keen to have and the respondent telecommunications company was interested in supplying an under-road cable facility enabling individual house owners, if they wished, to be connected up to and to receive cable television. The appellants objected that this could not be done without their consent as owners and initially obtained an injunction restraining the works. Thereafter, the present proceedings were begun to obtain an order entitling the respondents to execute the works and to keep and maintain their cabling system and to fix the terms. The works have, we were told, been suspended meanwhile.
4. The proceedings are brought under the Telecommunications Act 1984. Schedule 2 sets out a code, paragraph 2 of which provides that such works require the consent of the occupier of any affected land - that is of the frontager house owners. That consent was here obtained. But paragraph 2 also enables the consent of the landowners, where they differ from the occupiers, to be dispensed with by the court. The crucial provisions are paragraph 2(4) and paragraph 7, which read as follows:

"2(4) An order under this paragraph made in respect of a proposed right may, in conferring that right or providing it to bind any person or interest in land and in dispensing with the need for any person's agreement, direct that the right shall have effect with such modifications, be exercisable on such terms and be subject to such conditions as may be specified in the order.

7(1) The terms and conditions specified by virtue of sub-paragraph (4) of paragraph 5 above in an order under that paragraph dispensing with the need for a person's agreement shall include-

(a) such terms with respect to the payment of consideration in respect of the giving of the agreement, or the exercise of the right to which the order relates, as it appears to the court would have been fair and reasonable if the agreement had been given willingly and subject to the other provisions of the order; and

(b) such terms as appear to the court appropriate for ensuring that that person and persons from time to time bound by virtue of paragraph 2(4) above by the rights to which the order relates are adequately compensated (whether by the payment of such consideration or otherwise) for any loss or damage sustained by them in consequence of the exercise of those rights.

(2) In determining what terms should be specified in an order under paragraph 5 above for requiring an amount to be paid to any person in respect of-

(a) the provisions of that order conferring any right or providing for any right to bind any person or any interest in land, or

(b) the exercise of any right to which the order relates, the court shall take into account the prejudicial effect (if any) of the order or, as the case may be, of the exercise of the right on that person's enjoyment of, or on any interest of his in, land other than the land in relation to which the right is conferred.

(4) The terms specified by virtue of sub-paragraph (1) above in an order under paragraph 5 above may provide-

(a) for the making of payments from time to time to such persons as may be determined under those terms; and

(b) for questions arising in consequence of those terms (whether as to the amount of any loss or damage caused by the exercise of a right or otherwise) to be referred to arbitration or to be determined in such other manner as may be specified in the order."

5. The issue between the parties concerns the proper terms to be fixed under paragraph 7(1)(a). No question arises of any loss or damage or, therefore, of any compensation under paragraph 7(1)(b).
6. So far as concerns the interpretation of these paragraphs, both parties were content before the judge (and before us) to adopt as correct the statements of principle in a judgment of His Honour Judge Hague QC in Mercury Communications Ltd v London and Indian Dock Investments Ltd (1993) 69 P&CR 135. We have not therefore heard argument on any point which might or might be thought to arise as to the proper approach, and we are not in the circumstances to be taken as expressing any concluded view on any such point. However, we can, we think, highlight certain aspects which emerge from the judgment in Mercury, since they are, as we say, common ground before us.
7. First, the exercise required by paragraph 7 is not one of ascertaining market terms or value, although any market terms or value are a relevant consideration to take into account. The test, when fixing terms with respect to either the payment of consideration or the exercise of the rights to which the order relates, is what "it appears to the court would have been fair and reasonable if the agreement had been given willingly". This formulation was no doubt chosen because of the public interest in enabling ordinary members of the public to be offered and to obtain new telecommunications services without individual landowners being able to insist on perhaps excessive sums, for example because of the need to use what might in some cases amount to no more than ransom strips.
8. However, as His Honour Judge Hague remarked at page 144G, this formulation does introduce an element of subjective judgment into the process of fixing of terms. His Honour Judge Hague found that assistance was to be obtained when making such a judgment from examining comparables, and so did the experts called in the present case. When considering comparables allowance should, however, be made if it could be shown that the paying party had, for whatever reason, been ready to concede a high value for pragmatic reasons: for example time constraints, the expense or uncertainty of litigation, or (I might add) the small size of the works and of any payment: see page 168.
9. His Honour Judge Hague further identified as relevant considerations "the importance and value of the proposed right to the grantee" and the parties' relative bargaining positions, although the last factor may, as already indicated, cut both ways: see pages 159 and 169.
10. The importance and value of the proposed right meant in the Mercury case that it was legitimate and indeed necessary to take into account that the proposed spur would "unlock the benefits that Mercury expects to gain from the Canary Wharf extension to its network". That was a relevant general consideration, but His Honour Judge Hague went on to reject emphatically any suggestion that the terms should entitle the grantor to a share of the anticipated profits that the grantee might thus make: see pages 160-163.
11. The judge in the present case heard expert evidence from two experts, Mr Sadler and Mr Walker. I would say at the outset that the latter's report suffered from the apparent problem that it was headed "compensation" and that it failed to distinguish between paragraph 7(1)(a) and (b) of the code, or to draw the distinction made in Mercury (and accepted as common ground before us) between the principles governing compensation for compulsory purchase and those governing terms fixed under paragraph 7(1)(a); and also that Mr Sadler appears to have considerably longer experience than Mr Walker and to have produced more relevant and better documented comparables. Indeed, Mr Walker singularly failed to address in his reports the Guildown comparable which had been disclosed by his own client since it related to them.
12. Mr Walker relied on "industrial rates of or in the region of £6 per metre, which had been agreed between an estates and way leaves committee formed by electricity companies and representatives of other bodies, such as the National Farmers Union (NFU) and the Country Landowners Association (CLA). The evidence, particularly in Mr Walker's cross-examination, suggests that these were agreed to avoid unnecessary litigation, and Mr Walker suggested that they should be adopted with a similar view to obviate any doubt or future disputes like the present. Mr Walker acknowledged that the vast majority of the private land affected in such cases was agricultural land, and that the issue whether such rates could apply to other land was "in dispute". That quote comes from his report. But he submitted that comparables showed that the use to which land was put was "rarely a factor taken into consideration by the telecommunications companies". Where there was a split, as here, of ownership and occupation he said that in some cases a 75/25 apportionment was made. I must confess that the nature of the present appellants' ownership interest might seem to me to suggest a somewhat different division if one were to start from a figure requiring a division.
13. Mr Walker went on to point out that some bodies, particularly BT, always paid industrial rates for all cabling, and never made any such apportionment even where there was a distinction between ownership and occupation. The comparables on which he relied in his supplementary report included two, which involved the respondents' parent agreeing in principle industrial rates of £6 per metre, and in fact paying more because cabling had already been laid without permission. But as Mr Sadler pointed out in his supplemental report in reply, the payment in those cases was for core network facilities. In particular in the Abinger Hammer case he said from his own experience that that was to link southern England with the rest of the parent company's network.
14. Mr Sadler thus distinguished between mains system cabling, such as fibre-optic cabling serving many thousands or millions of customers, and cabling such as the present, simple old-fashioned copper cabling with its very limited function of serving no more than a total of 82 houses and two roads. Mr Sadler pointed out that agricultural land had its own intrinsic value which could easily be affected by underground apparatus or intrusions; and he gave evidence from his own knowledge that the agricultural value of the land was still the starting point for the agreement and use of industrial rates. BT was, he explained, in a special position. It was obliged by statute to provide services. It could not walk away from unprofitable operations or proposals as the respondents could. Its rate, which was the same in all situations, was not, in his view, relevant. Nor was the NFU/CLA flat rate, which took no account of the grade or location of land, the size or use of any duct, or the importance of the right to the grantee.
15. The judge accepted Mr Sadler's evidence. He distinguished accordingly between situations in which industrial rates might be used and the present situation. He took into account the evidence of Mr Budd, the respondents' manager, that the anticipated take-up was unlikely to be more than 45% of the houses involved, and that the economic case for the installation and operation of the cabling in the two roads was at best marginal. The enthusiasm of the frontagers alone had persuaded the respondents that the take-up might exceed 45% and so be worthwhile.
16. The judge took into account primarily a comparable produced by Mr Sadler consisting of a prior wayleave granted by the appellants in Guildown Road in 1997 at a capitalised figure of 62p per metre. But he also mentions as background some other comparables produced by Mr Sadler, in particular grants by the appellant itself of wayleaves to the electricity board in 1997 at 60.6p per metre.
17. It is fair to say, as Miss Hutton has pointed out, that those electricity wayleaves were at the bottom end of a spectrum of standard rates for different facilities or utilities. She suggests that the judge should have started at the top end of that spectrum, with the £6 per metre charged, for example, by agricultural landowners, in cases where ownership and occupation were undivided, or to BT.
18. The judge also took into account that the respondents had in 1994 offered to pay the appellants £10 per house passed, which, the appellants submitted, would with inflation make an absolute minimum lump sum for the present 82 houses of some £1,600. The judge, however, based himself on Mr Sadler's evidence and comparables and, after making a small uplift for inflation at 3% per annum since 1997 on the Guildown Road figure, took a capitalised figure of 70p per metre, giving a lump sum of £667.80.
19. The appellants submit that the judge was in error in disregarding industrial rates and that he should have taken them as a start point and made allowances or discounts from them. The judge, however, pointed out that such rates originated in negotiations involving agricultural land, as Mr Sadler had said. He pointed out that they were used irrespective of the nature and use of the cabling or other apparatus involved, and were therefore capable of covering core network facilities as well as any other. He distinguished in the present context between fibre-optic cabling core facilities for many thousands or millions of people on the one hand, and the present very limited facilities for at most 82 houses on the other hand.
20. In my view, the judge had ample material before him to justify such distinctions and they were well-founded. Industrial rates for core or fibre-optic cabling with an origin in agricultural negotiations were not, on the evidence, a sound starting point. Across-the-board rates, regardless of location, size, use and importance seem to me the antithesis of the fair and reasonable rate required to be fixed under the code.
21. There is a suggestion in the appellant's grounds, which I mention for completeness, that the distinction between core and local networks was only raised during the course of evidence by one of the respondents' witnesses, a Miss Doane, in cross-examination. That is misconceived. The suggestion appeared in Mr Sadler's supplemental report, paragraphs 2.1-2.6 and 3.2.1; in Miss Doane's own witness statement, paragraphs 13 to 16; and in the respondents' trial skeleton, pages 43 to 52 in the bundle. It is right to say at this point that Miss Hutton was not trial counsel and did not settle the grounds of appeal, and that she did not pursue any such suggestion before us.
22. Miss Hutton's attack on the judge's rejection of industrial rates was combined by way of pincer movement with an attack on the relevance of the comparables which the judge did adopt. But before moving to that aspect, let me deviate slightly to put out of the way certain other points which have been raised in the grounds of appeal, which again Miss Hutton did not settle and which she did not pursue before us.
23. Ground five involved the proposition that because this case has importance, or may have importance, as some sort of precedent, the judge was wrong to treat it as concerned with only 82 houses and should have regarded it in the same light as, presumably, Mercury's Canary Wharf link, on which the future development of Mercury's Dockland activity depended. It is also said that the judge as a result undervalued the appellants' bargaining power.
24. I do not accept any such submission as either logical or admissible. The value of this case, if it has any, as a precedent has nothing do with the fair and reasonable terms for the use of the underground parts of two cul-de-sac roads serving 82 houses.
25. The submission also smacks of the argument rejected by His Honour Judge Hague that a ransom value may be set by an owner. What is relevant in fixing the fair and reasonable value of the present roads is the advantages which the respondents may obtain from their use and the fact that the appellants' land is being used -not any precedential value, if any, that the present decision may have.
26. Another ground which Miss Hutton did not pursue is ground four. There it was said that the judge wrongly took into account the "potential commercial profitability" of the use of these roads for the respondents and that this was contrary to His Honour Judge Hague's reasoning.
27. That is, it seems to me, to misunderstand that reasoning. His Honour Judge Hague was rejecting the proposition that an owner could insist on a share of the grantee's potential profit. The use to be made and the relevant importance of the particular wayleave sought is central to the exercise required by paragraph 7 under the principles suggested by His Honour Judge Hague.
28. In another ground, ground seven, not now pursued, it is said that the judge wrongly took into account the lack of detriment to the appellants as grantor. He correctly mentioned that as a fact. It is true that, had there been loss or damage, that could and would no doubt have been covered by compensation ordered under paragraph 7(1)(b). The judge, of course, still had to consider whether any special term was required under paragraph 7(2) to cater for any prejudicial effect of the order, but again none was suggested. The fact that there could be no prejudice remained a background factor that he was entitled to identify in order to state the parameters of the situation with which he was concerned. It does not appear to me to have influenced the figure at which he arrived. He certainly did not reduce the sum awarded from that which he deduced from the relevant comparables.
29. I therefore return to grounds one and three, which concern the judge's use of comparables and were the focus in Miss Hutton's further submissions.
30. Miss Hutton submits that the judge in effect overlooked three areas of the evidence. The first was the evidence of the respondents' own employee, Mr Budd, who explained that normally the respondents did not have to pay for the laying of apparatus, because normally they were working under public roads in respect of which there is no obligation to make any payment under the legislation, and because in other cases private landowners may not seek payment. The normal situation, according to Mr Budd's evidence, is that it is the residents who are asking for telecommunications cabling to be laid. They are the people who wish to facilitate that and so, quite naturally, they do not seek to extract a payment. If they did, they would no doubt have to pay it back by way of licence fee.
31. Another aspect of Mr Budd's evidence was that in relation to each project the respondents undertake a cost-benefit analysis. They apply to the resulting costs a figure which they regard as the maximum they can afford to spend per house in the relevant road. That figure, of course, depends on what percentage of the houses they think may take up the use of their facilities.
32. Secondly, Miss Hutton submits that the judge did not pay proper attention to the evidence regarding Guildown Road. Thirdly, she submits that he did not pay proper attention to the evidence of the £10 per house offer made in relation to Highlands Lane in 1994.
33. The judge clearly had all these matters in mind - that is the evidence of Mr Budd, the position regarding Guildown Road and the position regarding Highlands Lane - since he mentioned them at different points in his judgment. The complaint is really that he failed to appreciate their significance or give them due weight.
34. Mr Budd's evidence however, so far as it went, was, in my judgment, favourable to the respondents. He explained, in effect, that the present scheme was not important to the respondents, but was of marginal viability. Sums such as the appellants were and are seeking would render it uneconomic. Indeed, he said that even the interrupted work might never be resumed.
35. It may be questionable in the light of His Honour Judge Hague's judgment how far one can go into the detailed profitability of a scheme, but it seems to me that in general terms what Mr Budd was saying regarding the importance of the scheme was admissible. It may be that it could have been investigated further and that further disclosure could have been sought, or that further cross-examination could have been directed as to the basis upon which the respondents arrived at their maximum economic installation cost. It is too late to undertake any such inquiry now, and Miss Hutton did not suggest that we could or should. All that the judge had was Mr Budd's account of the scheme's significance, which, as I have said, was on any view of general relevance.
36. In relation to Guildown Road it is suggested that the judge based himself entirely on that as a comparable. It seems to me, as I have indicated, that that suggestion is wrong. He based himself on Mr Sadler's evidence, which also drew on Mr Sadler's general experience, and was to some extent buttressed by the electricity cabling comparables. Guildown Road was undoubtedly the closest and most relevant comparable, and as I have pointed out Mr Walker singularly failed to consider it in either of his reports, even after it had been drawn to his attention by Mr Sadler's first report.
37. In the pleading it is pointed out that Guildown Road appears to be alluded to as a direct comparable by the respondents, but on a basis that one could derive from it a per house figure rather than a per metre figure; the per house figure pleaded being £12.70. However, at trial neither party, nor either party's expert, suggested anything save a per metre rate, whether annual or capitalised, at least until a very late stage of the trial after the evidence had been given.
38. The only bases on which Mr Walker and the appellants sought at trial to distinguish Guildown Road were that, firstly, Losely Estates, the owners, had sought a collateral benefit in the form of clause 8 entitling them to connect any adjoining property of theirs to the facilities free of charge; and secondly, Losely Estates may have wished to placate local residents and so by implication may have accepted an unduly low price. The former point was destroyed in cross-examination of Mr Walker when it was pointed out that the price for the wayleave at Guildown Road had been agreed before the collateral benefit was ever introduced. The latter had very little documentary support, if any, and was not buttressed by any other oral evidence. It seems to me that the judge having heard Mr Sadler was entitled to accept his view that these were not relevant distinguishing factors.
39. It occurs to me that there is one possible distinction between Guildown Road and the present roads which was not mentioned or investigated at trial. Guildown Road was some 1,200 or 1,300 metres long and had only 62 houses. The present two roads are some 954 metres long with 82 houses. So their density of housing was much greater. That of course might be said to cut both ways. The metreage per house was longer with Guildown Road, and so the length of interference with the appellants' property was that much greater. On the other hand, the scheme for the present roads was on its face, by the same token, more attractive for the respondents, since for a lesser metreage they stood to gain by a larger number of users. No such argument was investigated at trial. The argument may or may not have any validity whatever. There may be other countervailing factors. There may be further relevant figures or information which could have borne upon it if it had been raised. For these reasons, it seems to me that we can express no view whatever upon its merits or demerits. In that respect this case cannot serve as any precedent or guide.
40. I turn to the respondents' offer in 1994 to pay £10 per house passed in respect of Highlands Lane. Again, there was a significant lack of information, here extending to the number of houses and the length of this road. Again, it seems to me that there could be relevance in that. There may be very significant differences between paying £10 a house for 10 houses in a 25-yard cul-de-sac and paying £10 a house for 100 houses spread over a kilometre. In any event, on the actual evidence which was called, and despite the pleading of a per house figure based, it appears, on Guildown Road, the payment of money for a wayleave on a per house basis would represent an unusual financial basis of payment. Neither party's expert suggested that a per house basis calculation was appropriate in the present case. It seems to me in those circumstances that what the judge was faced with was a relatively ancient offer on a basis which was not suggested before him by either expert as relevant, and that in those circumstances he was entitled to prefer the more recent information provided by the Guildown Road transaction, which was an actual transaction, and supported generally by Mr Sadler's evidence, evidence from someone whose testimony it is clear that the judge preferred generally to that of Mr Walker.
41. I should mention that it is right that the respondents' internal calculations of viability use a per house figure, and that it might again be suggested that that could have some bearing on the matter, although again the argument might have to be faced that that involved looking inadmissibly at the profitability of a particular scheme, contrary to what His Honour Judge Hague thought was appropriate. Again, it does not seem to me that any argument was addressed below on this basis. The experts, as I have said, looked at the matter from the point of view of metreage and that, of course, does relate directly to the property interest in respect of which there is an infringement which is, under the code, to be paid for.
42. Standing back, therefore, it seems to me, in the light of the evidence and the issues as they were put before the judge, that he was entitled to accept Mr Sadler's evidence and approach. He was entitled to accept it both as to the appropriate starting point - that is, by rejecting industrial rates as a starting point - and as to the appropriate level based on the admittedly limited comparables produced, but supported strongly by convincing evidence from Mr Sadler. It does not follow that in another case another judge would necessarily arrive at the same conclusions. There may, as I have said, be aspects which were not fully investigated in this case which could be in another case. There may in another case be different or better evidence of comparables. However, in this case I have no doubt that the judge was right to prefer Mr Sadler, and certainly entitled to prefer Mr Sadler to Mr Walker, having regard to the way the case was developed and supported before him.
43. There is one other ground which I should mention which Miss Hutton did not pursue, and that is ground eight whereby it was submitted that the judge was wrong to order a once and for all payment, and that he ought to have insisted upon an annualised payment, because that was what the appellants were seeking and that indeed was what Mr Walker was primarily suggesting in his evidence.
44. I can see no basis for that submission at all. The appellants certainly had no right to dictate terms under the statute. What the terms were was for the judge to determine. Mr Sadler's evidence was emphatically that a once and for all payment was nowadays the common way of paying for such a wayleave. The arguments of a practical nature, which could be advanced by the respondents, against any continuing relationship involving a lease or annual wayleave with calculations and variations from time to time were, it seems to me, overwhelming. It would, as was said at one point, have been taking a sledgehammer to crack a nut. The judge was right to order a once and for all payment.
45. In my judgment, therefore, this appeal fails on all grounds.
46. LORD JUSTICE LONGMORE: I agree.
47. LORD JUSTICE ALDOUS: I also agree.
ORDER: Appeal dismissed with costs on the standard basis, to be assessed if not agreed. (Order not part of approved judgment) ____________________