COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LANDS TRIBUNAL
(HIS HONOUR MICHAEL RICH QC)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE SCOTT BAKER
LORD JUSTICE THOMAS
| O'CONNOR and another
|- and -
WILTSHIRE COUNTY COUNCIL
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Mr Timothy Straker QC and Mr Paul Stinchcombe (instructed by Stephen Gerrard, solicitor to the Wiltshire County Council, Trowbridge, Wiltshire, BA14 8JN) for the respondent
Hearing dates: 14 and 15 February 2007
Crown Copyright ©
Lord Justice Chadwick :
The statutory provisions
"1(1) Where the value of an interest in land is depreciated by physical factors caused by the use of public works, then if
(a) the interest qualifies for compensation under this Part of this Act; and
(b) the person entitled to the interest makes a claim after the time provided by and otherwise in accordance with this Part of this Act,
compensation for that depreciation shall, subject to the provisions of this Part of this Act be payable by the responsible authority to the person making the claim (hereinafter referred to as 'the claimant')."
For the purposes of section 1(1) of the Act, section 1(2) provides that the physical factors include noise, vibration, fumes and artificial lighting; section 1(3) provides that the public works include "(a) any highway"; and section 1(4) provides that the responsible authority, in relation to a highway, is "the appropriate highway authority".
"3(2) Subject to the provisions of this section and to sections 12 and 14 below, no claim shall be made before the expiry of twelve months from the relevant date; and the day next following the expiration of the said twelve months is in this Part of this Act referred to as 'the first claim day'".
Section 12 ("Tenants entitled to enfranchisement or extension under leasehold Reform Act 1967") and section 14 (since repealed) have no relevance in the present case. "The relevant date", in the context of section 3(2), is defined in section 1(9). It means "(a) in relation to a claim in respect of a highway, the date on which it was first open to public traffic".
"19(3) In the application of this Part of this Act to a highway which has not always since 17 October 1969 been a highway maintainable at the public expense as so defined
(a) references to its being open to public traffic shall be construed as references to it being so open whether or not as a highway so maintainable;
(b) for references to the highway authority who constructed it there shall be substituted references to the highway authority for the highway;
and no claim shall be made if the relevant date falls at a time when the highway was not so maintainable and the highway does not become so maintainable within three years of that date."
"274 A council may contribute towards any expenses incurred or to be incurred by a highway authority if, in the opinion of the council, the expenditure is or will be of benefit to the council's area."
In that context it is pertinent to have in mind (i) that, outside Greater London, the county council will be the highway authority for all highways in the county (whether or not maintainable at the public expense) which are not highways for which (under section 1(1) of the 1980 Act) the Minister is the highway authority section 1(2) of that Act - and (ii) that "council" is defined by section 329(1) of the Act in terms which include a district council.
"278(1) A highway authority may, if they are satisfied it will be of benefit to the public, enter into an agreement with any person
(a) for the execution by the authority of any works which the authority are or may be authorised to execute, or
(b) . . .
on terms that that person pays the whole or such part of the cost of the works as may be specified in or determined in accordance with the agreement."
The underlying facts
"2.8 Land to the north of the town is proposed for residential development. A new distributor road (see Proposal T7) is required to provide satisfactory access. Ultimately this would be extended around the north side of the town to link the A4 Chippenham Road to the A3102 Oxford Road. . . ."
Proposal T7 (Calne Northern Distributor Road) was in these terms:
"4.7 The entire road is intended to be provided in connection with housing (Proposal H3) and employment (Proposal E4) development proposed around the northern edge of Calne. The precise alignment of this northern distributor road will need to be settled taking into account highway design, the setting of the listed buildings, and the need to serve the allocations for housing and employment. The completion of such a route will, in particular, enable the heavy goods traffic from the main industrial area in Calne, as well as some through traffic, to avoid the bottleneck in the town centre at Curzon Street and Wood Street. Substantial landscaping alongside the road will be important to help soften and screen the hard edges of the built up area, together with sound attenuation measures in order to reduce the noise of traffic. It is envisaged that the completion of the whole of the bypass road from the A4 to A3102 roads will need to be the subject of a planning obligation and a development brief. Careful regard will need to be paid to encourage traffic from the proposed new development to use the proposed northern bypass rather than the existing roads in the town. The construction of the complete bypass road at the earliest possible stage in the development will be essential."
(1) Under the section 106 agreement the NDR was not scheduled for completion until 2007. Both the District Council and the Calne Town Council were anxious to accelerate that programme. It was proposed that the Consortium would be paid a sum of £3.5 million to fund the early construction of the NDR: that is to say, to induce the Consortium to carry out the Developer's obligations to complete the Highway Works earlier than was required under clause 12 of the section 106 agreement. The Consortium would, over time, reimburse the District Council in accordance with a repayment schedule which took account of the actual costs of construction and interest. The rationale of that arrangement was that the Consortium would suffer no disadvantage (in terms of cash flow) by carrying out the obligations imposed by the section 106 agreement in accordance with an accelerated programme.
(2) That proposal was revised in the light of advice received, in March 1999, that the District Council had no power under section 274 of the Highways Act 1980 (or under any other statutory provision) to lend money to the Consortium, whether directly or indirectly through the County Council. The power under section 274 of the 1980 Act was limited to making contribution to the County Council's costs of constructing the NDR. The revised proposal was set out in a note of a telephone conversation between Mr Kilgallen (an employee in the County Secretary and Solicitor's office of the County Council) and Mr Tilley on 8 March 1999, in a letter from Mr Kilgallen to the solicitor to the District Council dated 11 March 1999 and in a report from the Director of Environmental Services to the Environment and Transport Committee of the County Council for its meeting on 31 March 1999.
(3) It is, I think, sufficient (at this stage) to note the revised proposal as set out in paragraph 7 of the Director's report to the Committee:
"7 County Council officers have proposed consideration of an alternative approach as follows:-
- The County Council appoint the developer to act as its agents under Section 278 Highways Act 1980.
- The developers let the construction contract as agent for the County Council.
- The developers manage the contract through their consultants on behalf of the County Council.
- The District Council reimburses the County Council all sums as they fall due under the construction contract, less the agreed County Council contribution of £25,000.
- The developers warrant that the construction contract and the consultancy arrangements will:
(a) provide the road on the reduced timescale and at the capped financial contribution by the two Councils;
(b) comply with all their obligations under the existing planning agreements.
- The developers will indemnify the two Councils against costs arising from the construction of the NDR in excess of the agreed contributions.
- The developers will pay the County Council sums they would have been obliged to pay to construct the road. These sums will be paid as and when they would otherwise have fallen due on the extended timescale set out in the original planning agreement.
- The County Council will pay the District Council the sums received from the developers.
- The developer's obligations under the planning agreement remain unaltered save that they apply on an accelerated timescale."
Paragraph 8 of that report noted that the developer's solicitors had accepted the revised proposal. Paragraph 9 recommended that "the County Secretary and Solicitor be authorised to complete an agreement under sections 274 and 278 Highways Act 1980 securing the advancement of the Calne Northern Distributor Road".
(4) On 31 March 1999 the Committee accepted that recommendation. Effect was given to the revised proposal by the acceleration agreement of 20 May 1999.
"Unfortunately, the northern distributor road has not yet been adopted as a highway maintainable at the public expense. Once adoption has taken place the County Council will issue a Section 15 Certificate giving the relevant date being one year from the date of adoption."
That letter was followed by a further letter, dated 21 February 2001, in which the Solicitor to the County Council wrote:
". . . I confirm that the northern distributor road should be adopted in the Spring. The date of adoption will be the 'relevant date' and claims can be made one year after the relevant date."
There was further correspondence in 2001 and 2002. The County Council maintained its position that, because the NDR had not been adopted, no claim for compensation could be entertained. On 12 February 2003 the Solicitor to the County Council wrote:
"The Northern Distributor Road was first opened for use by public traffic on 20th January 2000 ('the relevant date'). Section 19(3) of the Land Compensation Act 1973 provides that no claim can properly be made, if the relevant date falls at a time when the highway was not maintainable by the Highway Authority and does not become so within three years of the relevant date (ie: by 20th January 2003).
The Council's Director of Environmental Services has not considered adoption to be appropriate, because there are outstanding issues in relation to the adoption of the surface water sewers to which the highway drains are connected. It is normal procedure for the Highway Authority to ensure that connecting sewers are adopted in advance of road adoption.
Accordingly, I have to inform you that as the road has not been adopted within three years of 20th January 2000, in accordance with Section 19(3) of the Act, the claims are inadmissible . . ."
"(1) The facts of this case engage the claimants' rights under article 1 of Protocol 1 . . . , article 6 and article 8.
(2) The claimants' rights would be infringed by an ordinary interpretation of section 19(3) LCA.
(3) In order to avoid any incompatibility between the claimants' rights and section 19(3) LCA, this section should be read and given effect so that it reads:
'. . . and no claim shall be made if the relevant date falls at a time when the highway was not so maintainable and when the highway authority had not agreed that the highway would become so maintainable and the highway does not become so maintainable within 3 years of that date . . .'"
"14 . . . The possibility of breach of the Convention rights . . . does not place any burden on the Highway Authority to establish the reasonableness or justification for the compensation provisions of the Land Compensation Act. Those provisions are not part of the rights required to be safeguarded by these articles of the Convention, and there can be no question of their being incompatible with the Convention rights secured by Articles 1 and 8. . . ."
"24 The Acceleration Agreement recites the s.106 Agreement, but, save that it advances the date by which the NDR is to be constructed, it does not vary its terms. It is by paragraph 18 of the 5th schedule to the s.106 Agreement that the Developer agrees to dedicate the NDR as a highway from the date of its opening for public use. Thus the power which the highway authority exercised under s.38(3) of the Highways Act 1980 to agree with the Developers to maintain the highway from a date specified in the s.106 Agreement remains, for that power is exercisable . . .in respect of 'a way .. (b) which is to be constructed by [the other party to the Agreement], or by a highway authority on his behalf, and which he proposes to dedicate as a highway.'"
"25 Mr Straker [for the County Council] accepts that it is a matter of fact whether the Council, on a proper construction of the agreements did indeed construct the NDR on the Developers' behalf. Mr Weir [for the claimants] submits that these words mean exclusively for the benefit of the person who is not a highway authority. I reject that submission because the highway authority would have no power to undertake the construction unless they were 'satisfied that it will be of benefit to the public' (see s.278 of the Act, which appears to be the only source of power for the highway authority to make agreements as to the execution of highway works). The question therefore appears to me to resolve itself into an inquiry as to whether the Council was exercising its power to construct a highway under s.24(2) of the Act or under s.278.
26 The Council could not have constructed the NDR under s.24 of the Act on land which it neither owned nor acquired except with the agreement of the owners. It did not obtain that agreement because the land-owners, although parties to the s.106 Agreement were not joined in the Acceleration Agreement. The Council relied on the Developers' agreements to construct the road, and to dedicate it. It is, I think for this reason that the Acceleration Agreement was right to rely on s.106 of the Town and Country Planning Act 1990 to bind the Developers to carry out their obligations under the Agreement (see Clause 3.2). The obligation to make the payment of the sums set out in the Repayment Schedule were included within that Clause, but the Agreement continued
'3.3 Further and in consideration of the County Council's advancement of the NDR (access from which highway will be to the benefit of the [Developers'] Land) the [Developers] agree to pay the sums set out pursuant to sections 38 and 278 of the Highways Act 1980.'
Thus, in my judgement the Council's agreement to construct the NDR was an agreement to execute works on terms that the other party to the Agreement (the Developers) pays the costs on the basis that the works are executed for the Developers' benefit. The benefit is not only that which is recited, but also that the construction of the road enables the Developers to fulfil their obligations under the s.106 Agreement to complete and dedicate the NDR.
27 Mr Weir seeks to contradict that conclusion by saying that it is impossible for the principal to an agreement, as the Council is, by virtue of Clause 4.1, also to be the agent of its agent, which the Developers are by virtue of that same Clause. I do not need to consider whether there is indeed necessarily an impossibility either in law or in logic: certainly it is not easy to think of circumstances in which such a circular arrangement of agency would arise. The phrase in s.36(2)(a) and s. 38(3)(b), however, is 'on his behalf'. I accept that an agent is always acting on behalf of his principal. It does not follow that one cannot act on behalf of another person in the sense of for his benefit, without being his agent. Indeed it seems to me that an agreement under s.278 is the only route, by which a highway authority could construct a way 'on behalf of' a person who proposes to dedicate the way on its completion, as provided for by s.38(3)(b), and there is no reason why the agreement which the highway authority makes under s.278 should constitute the authority as agent of the person on whose behalf it carries out the work."
On the basis of that reasoning the Tribunal concluded that the claim for compensation under Part 1 of the Land Compensation Act 1973, advanced by way of amendment, also failed. The claim was dismissed.
The first issue: did the NDR fall within section 36(2)(a) of the 1980 Act?
The section 106 agreement
"12.4 The Developer covenants with the County Council to complete the Highway Works in accordance with the plans drawings and specifications approved under Clause 12.2. . . . to the Director's satisfaction and obtain his Provisional Certificate of such completion in accordance with Paragraph 13 of Schedule 5 . . .
12.5 The Developer covenants with the County Council that all of the Highway Works including the Northern Distributor Road up to the proposed Junction 7 described at Schedule 2 Part 1 paragraph 3 shall be completed by the occupation of 650 houses on the Application Site or within seven years from Implementation of the Planning Permission whichever date shall first occur and all of the Highway Works including the Northern Distributor Road up to proposed Junction 9 shall be completed by the occupation of 1026 houses on the Application Site or within ten years from Implementation of the Planning Permission whichever date shall first occur.
. . .
12.7 In addition to the obligations and covenants on the part the Developer and County Council in this clause 12 the Developer further covenants with the Council and the County Council that it will undertake the Highway Works in accordance with the provisions of Schedule 5 and all the Highway Works referred to in Schedule 2 Part 1 shall be the subject of legally binding agreements with the Relevant Authority for adoption to take place and the Developer shall use their best endeavours (sic) to comply with the terms of such agreements.
. . .
12.9 The Council covenants with the County Council and the Developer that it will dedicate the land shown hatched in black on the Highway Plan as highway land pursuant to section 37 of the Highways Act 1980 immediately following Implementation of the Planning Permission."
The "Director" means the Director of Environmental Services of the County Council for the time being. The "Relevant Authority" means (inter alia) such organisation as is responsible under statute for the provisions and maintenance of ". . . surface water drains and roads" as the context so requires. "Implementation of the Planning Permission" means the carrying out of any material operations pursuant to the planning consent.
"14.7 where the surface water sewers . . . are to be vested in and under the control of the . . . Water Authority in accordance with the Water Industry Act 1991 written confirmation has been received by the County Council from the appropriate authority that the sewers have been constructed to their satisfaction and have been adopted by that authority."
Paragraph 15 of Schedule 5 provided that:
"15 The County Council shall from the date of the Final Certificate of Completion maintain that part of the Highway Works which constitute alterations and additions to the existing publicly maintainable highway and adopt the remaining Highway Works as part of the highway maintainable at the public expense."
Paragraph 18 was in these terms:
"18 The Developer hereby agrees to give up and dedicate all that part of the Highway Works carried out on land which is not within the existing publicly maintainable highway to the public for highway purposes to the intent that the same shall be added to and form part of the public highway from the date when the Developer opens the same for public use."
The acceleration agreement
"2.2 The County Council is satisfied that it is of benefit to the public to enter into this agreement to accelerate the construction of the NDR and the parties have agreed to fund such accelerated construction as specified below."
"4.1 The Consortium will construct the NDR in accordance with the Accelerated Programme as agent for the County Council and for that purpose the Consortium will as principal enter into the Road Contract.
4.2 The Consortium agrees with the County Council to construct the NDR in accordance with the Accelerated Programme and otherwise (save where inconsistent with the Accelerated Programme) in the manner required by the Section 106 Agreement."
For the purposes of those provisions "Accelerated Programme" meant the revised programme for the construction of the NDR which was appended to the agreement as Appendix 1: that provided for substantial completion of the Road Works to be achieved by 30 June 2000. "Road Works" meant the works to be carried out to construct the NDR.
"1.1.11 "Road Contract" means the contract entered into by the Consortium as agent for the County Council pursuant to clause 5.3 of this Agreement for the construction of the NDR in accordance with the Accelerated Programme."
Clause 5.3 was in these terms:
"5.3 The Consortium has concluded the Road Contract. The Consortium agrees to provide at or before the end of the retention period under the Road Contract all documents and information (including without prejudice to the generality of the requirement accounts invoices and Correspondence with the Contractor and the Consortium consultants) which the County Council and/or the District Council may reasonably require to establish the true accurate and reasonable cost of the Road Works given the warranties and obligations of the Consortium under this Agreement."
"5.1 The District Council has on or before the date of this Agreement paid to the County Council the Road Contract Sum as a contribution to the cost of the Road Works pursuant to Section 274 Highways Act 1980
5.2 The County Council has on completion paid to the Consortium the Road Contract Sum receipt of which is hereby acknowledged by the Consortium in full and final settlement of all of (sic) obligations of the County Council to make payment to the Consortium under this Agreement and the Consortium undertakes to apply the Road Contract Sum solely for the purposes of the Road Works
. . .
5.4 The Consortium will within 28 days from the end of the retention period under the Road Contract pay to the County Council the balance (if any) between the Road Contract Sum and the reasonable and proper cost of the Road Contract had it been let and managed in accordance with the Consortium's warranties under this Agreement
5.5 The County Council will pay to the District Council as a partial refund of the contribution of the District Council pursuant to Section 274 Highways Act 1980 all sums received from the consortium (sic) under clause 5.4 above
5.6 The County Council hereby agrees with the District Council to contribute in kind to the cost of the Road Works the value of £25,000 by waiving its supervision fees to that extent"
"Road Contract Sum" means £3.5 million "or (if less) the amount of the successful tender for the Road Contract plus 5%".
"6.1 The Consortium shall pay the County Council the amounts set out in the Repayment Schedule on the dates specified in the Repayment Schedule which amounts are agreed by the Consortium to reflect the costs which the Consortium would have borne had the Road Works been carried out in accordance with the timing requirements of the Section 106 Agreement
6.2 Subject to any deduction pursuant to clause 14.3 the County Council will within 14 days of receipt pay to the District Council the sums received from the Consortium under clause 6.1"
Clause 14.3 is not material in the present context. The Repayment Schedule provided for payments, amounting in aggregate to £4,436,140, to be made by the Consortium on 1 July 2001, 2003, 2005 and 2008.
(i) Was the NDR was constructed by the County Council?
"74. Moreover, it is submitted that as a matter of reality the NDR was always built by the developers, and that the mere labelling of the developers as agents of the County Council in the Acceleration Agreement never had in law the effect in law of creating a true agency relationship. . . ."
I find that contention surprising: and no less surprising in that it is advanced on behalf of a local authority who might have been expected to understand why it was necessary that as "a matter of reality" and not for the purpose of "mere labelling" the NDR should be constructed by the County Council (and not by the Consortium as principal) if the accelerated programme which both the County Council and the District Council wished to achieve was to be funded under statutory powers.
"2. The County Council as Highway Authority has consistently sought to achieve the early construction of the [NDR]. . . . The planning obligation for the site requires that the NDR shall be provided . . . within seven years of the commencement of the development . . ."
Paragraph 3 recorded an earlier resolution of the Committee (on 30 September 1998) that:
"3. . . . the County Council, as Highway Authority, would work closely with the District and Town Councils and the developers to accelerate the construction of the road."
Paragraph 4 referred to "the arrangement initially proposed by the District Council and the developers" that the construction works should be funded by a loan by the District Council to the Consortium (by then the two Persimmon companies). It was noted that:
"4. . . . County Officers have expressed doubt as to the statutory power to make such a loan."
Paragraph 5 of the report was in these terms:
"5. A second difficulty has been raised by the District Auditor. His view is that the highway powers which the District Council are seeking to use involve making a contribution. By definition this cannot involve the District Council paying the full cost of the advancement of the NDR. The County Council would have to pay some part of the cost in order to allow use of the relevant highway power by the District Council. It is difficult to fix a sum as the minimum required but the sum of £25,000 would seem reasonable. This will be provided by meeting the cost of supervision of the developer works to the requisite amount."
Paragraph 6 referred to the position taken by the developers:
"6. The developers had indicated that they were not willing to proceed otherwise than on the basis of the loan. If their accounts show the expenditure on the road earlier than provided for in the planning agreement, there is an adverse effect on their gearing ratios."
(ii) was the NDR was constructed "on behalf of some person who was not a highway authority".
"create a statutory regime by which development can be facilitated where they give rise to the need for a highway to be built: in particular, a highway authority is empowered to agree to construct such a highway on the developer's behalf, requiring him to pay for it; and to agree with that developer precisely when the highway will become maintainable at the public expense."
"25. . . . I reject that submission because the highway authority would have no power to undertake the construction unless they were 'satisfied that it will be of benefit to the public' (see s.278 of the Act, which appears to be the only source of power for the highway authority to make agreements as to the execution of highway works)."
It went on:
"25. . . . The question therefore appears to me to resolve itself into an inquiry as to whether the Council was exercising its powers to construct a highway under s.24(2) of the Act or under s.278".
26. The Council could not have constructed the NDR under section 24 of the Act on land which it neither owned nor acquired except with the agreement of the owners. It did not obtain that agreement because the land-owners, although parties to the s.106 Agreement were not joined in the Acceleration Agreement. The Council relied on the Developers' agreements to construct the road and to dedicate it. . . . "
The second issue: is the treatment of the claim under section 19(3) of the 1973 Act potentially incompatible with the claimants' convention rights?
Lord Justice Scott Baker:
Lord Justice Thomas: