England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LANDS TRIBUNAL
(HIS HONOUR MICHAEL RICH QC)
LCA/73/2005

		Royal Courts of Justice Strand, London, WC2A 2LL
		09/05/2007

Lord Justice Chadwick :

1. This is an appeal from an order made on 29 March 2006 in the Lands Tribunal (Member: His Honour Michael Rich QC) on a reference under section 16 of the Land Compensation Act 1973. The question referred was whether the claimants had a valid claim to compensation from the local highway authority under Part I of that Act in the events which had happened.
2. The claimants are the owners and occupiers of a dwelling house known as 55 Braemor Road on the north western outskirts of Calne in Wiltshire. They claim that the value of their interest in that property has been depreciated by noise caused by the use of the Calne Northern Distributor Road ("the NDR"), Wiltshire County Council is the local highway authority for the NDR. The NDR was opened to traffic on 20 January 2000. On 21 January 2001 the claimants - and 78 others in similar position - made claims for compensation. The County Council refused to entertain those claims on the basis that (as it asserts) the NDR was not a highway maintainable at the public expense at the date when it was opened to traffic and had not become so maintainable.
3. The Tribunal accepted the County Council's contention that the NDR was not a highway maintainable at the public expense at the date when it was opened to traffic. It was common ground that, if not then maintainable at the public expense, the NDR had not subsequently become so maintainable (within the period of three years of that date or at all). On that basis the Tribunal decided, as a preliminary issue, that section 19(3) of the 1973 Act barred any claim to compensation which the claimants might otherwise have had.
4. In reaching that conclusion the Tribunal rejected the submission on behalf of the claimants that (if necessary) section 19(3) of the Act could be "read down" under section 3(1) of the Human Rights Act 1998 in order to avoid potential incompatibility with their convention rights (as defined by section 1(1) of the 1988 Act).
5. Permission to appeal was granted by this Court (Lord Justice Pill) on 31 July 2006.

The statutory provisions

6. Part I of the Land Compensation Act 1973 provides for compensation in respect of depreciation caused by the use of public works. Section 1(1) of the Act is in these terms:

"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".

7. Section 1(1)(b) of the 1973 Act requires that a claim to compensation must be made by the person entitled to an interest in land - where the interest qualifies for compensation – "after the time provided" and otherwise in accordance with Part I. Section 2 of the Act sets out the circumstances in which an interest will qualify for compensation. Section 3(1) requires that a claim is to be made by serving on the responsible authority a notice containing particulars of the matters there set out. Section 3(2) is in these terms:

"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".

8. As I have said, the responsible authority, in relation to a highway, is the appropriate highway authority. The appropriate highway authority, in that context, has the meaning given in section 19(1) of the 1973 Act. For present purposes the appropriate highway authority is – "(a) the highway authority who constructed the highway to which the claim relates". "Highway" includes part of a highway and means "a highway or part of a highway maintainable at the public expense as defined in section 329(1) of the Highways Act 1980" (ibid). Section 329(1) of the 1980 Act defines a highway maintainable at the public expense as "a highway which by virtue of section 36 [of this Act] or of any other enactment (whether contained in this Act or not) is a highway which for the purposes of this Act is a highway maintainable at the public expense".
9. Sections 1(9), 3(2) and 19(1) of the 1973 Act must be read in conjunction with section 19(3), which is in these terms:

"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."

10. Section 24(2) of the Highways Act 1980 gives a local highway authority power to construct new highways. Section 36(2) of the 1980 Act provides (inter alia) that "the following highways shall . . . for the purposes of the Act be highways maintainable at public expense: – (a) a highway constructed by a highway authority, otherwise than on behalf of some other person who is not a highway authority". Section 37 of the 1980 Act provides for a highway to become maintainable at the public expense by dedication. Section 38 gives a local highway authority power, by agreement, to adopt an existing way. On adoption the way becomes a highway maintainable at the public expense.
11. Section 274 of the 1980 Act provides that:

"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.

12. Section 278(1) of the 1980 Act is in these terms (so far as material):

"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

13. The genesis for the construction of the NDR can be found in the North Wiltshire Local Plan, adopted in 1993. Paragraph 2.8 (in proposal H3 – Calne) records that:

"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."

14. Planning consent for residential development in the Northern Development Area of Calne and for the construction of the NDR was granted on 25 November 1997 by the North Wiltshire District Council to "The Calne Consortium". On the following day, 26 November 1997, the District Council, the County Council and nine other parties (together described as "the Developer") entered into an agreement expressed to be made (inter alia) under section 106 of the Town and Country Planning Act 1990 and sections 38 and 278 of the Highways Act 1980 ("the section 106 agreement"). By clause 12.1 of the section 106 agreement the Developer covenanted with the District Council and the Council to carry out (inter alia) the Highway Works. In that context the "Highway Works" meant the highway works described in Schedule 2 Part 1 to the agreement: that is to say, the works needed to provide the NDR.
15. In the events which happened the Highway Works were not constructed in accordance with the provisions of the section 106 agreement. The NDR was constructed pursuant to a further agreement ("the acceleration agreement") made on 20 May 1999 between the County Council, the District Council and two Persimmon group companies – Persimmon Homes (Wessex) Limited and Persimmon Homes (South West) Limited (together, in the acceleration agreement, described as "the Consortium). The two Persimmon companies had been party to the section 106 agreement.
16. The circumstances in which the acceleration agreement was made are explained in the third witness statement of Mr Phillip Tilley, Transportation and Development Manager of the County Council and evidenced in the documents attached to that statement. They may be summarised as follows:

(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.

17. On 20 January 2000 the Director of Environmental Services for the County Council issued a Provisional Certificate. The certificate was expressed to be in respect of the works required under the acceleration agreement of 20 May 1999. It certified that the works required under that agreement had been completed up to Provisional Stage (other than as detailed in a side letter of the same date) and that the NDR had become a highway and was open for use by the public at large.
18. On the basis of the Provisional Certificate, the first claim day for the purposes of the 1973 Act – as defined in section 3(2) of that Act – was 21 January 2001. The claimants submitted their claim for compensation on that day. The response, in a letter dated 7 February 2001 from the Solicitor to the County Council to the claimants' then solicitors, was in these terms:

"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 20^th 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 20^th 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 20^th January 2000, in accordance with Section 19(3) of the Act, the claims are inadmissible . . ."

These proceedings

19. These proceedings were commenced by a reference to the Lands Tribunal dated 22 March 2005. As originally advanced, the claimants' case was put on the basis that, although it was recognised that (prima facie) - if the NDR did not become a highway maintainable at the public expense by virtue of section 36(2)(a) of the 1980 Act and in the circumstances that it was not adopted by the County Council within three years of the date on which it was first open to public traffic – the claim to compensation was barred by the operation of section 19(3) of the Land Compensation Act 1973, nevertheless the claimants were entitled to rely on section 3(1) of the Human Rights Act 1998. It was said that:

"(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 . . .'"

20. It was on that basis that the reference came before the Tribunal in January 2006 on a preliminary issue to determine whether the claimants had a valid claim under Part 1 of the 1973 Act having regard to the proper interpretation of section 19(3) of that Act. The Tribunal rejected the submissions based on article 1 of the First Protocol and on article 8 of the Convention. It did so, I think, on the ground that the rights conferred by those articles were not absolute rights: they were qualified rights. The right conferred by article 1 of the First Protocol is qualified by reference to the public interest: the right conferred by article 8 of the Convention is qualified by reference (inter alia) to the interests of the economic well-being of the country. But it could not be said – and was not submitted on behalf of the claimants – that the availability (or non-availability) of compensation would determine whether the rights, as qualified, were infringed. It followed that (as the Tribunal put it at paragraph 14 of its decision):

"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. . . ."

21. The Tribunal rejected, also, the submissions based on article 6 of the Convention. Put shortly, it held, relying on observations of Lord Hoffmann in Matthews v Ministry of Defence [2003] UKHL 4, [28]; [2003] 1 AC 1163, 1178C-D, that section 19(3) of the 1973 Act did not create a procedural bar to an established right; rather, section 19(1) of the Act – by defining "highway" as a highway maintainable at the public expense - limited the extent of the right which Parliament intended to confer. It went on to add that if (contrary to the view which it had reached) section 19(3) of the 1973 Act were properly to be regarded as part of the definition of the right which accrued on the first claim day – and so, in effect, a proviso to the definition of "highway" in section 19(1) of the Act - then it would be possible (within the guidance given by the House of Lords in Ghaidan v Godin-Mendoza [2004] UKHL 30; [2004] 2 AC 557) to give the definition of "highway" an extended interpretation so that it meant "a highway maintainable at the public expense or if not so maintainable at the relevant date, becomes (or has been agreed to become) so maintainable within three years of that date".
22. The Tribunal then addressed an alternative case advanced on behalf of the claimants, which had been introduced (at the invitation of the Tribunal) by amendment to their Statement of Case at the outset of the hearing – see paragraphs 21 and 22 of the decision. It was said that the effect of the acceleration agreement of 20 May 1999 was that, notwithstanding the provisions in the section 106 agreement, the NDR was in fact constructed by the Consortium as agent for the County Council; that, as the County Council was the principal responsible for the construction of the NDR, the road was a highway maintainable at the public expense by virtue of section 36(2)(a) of the Highways Act 1980; and that, on that basis, the claims were validly made within the relevant time period.
23. The County Council's response to that case is recorded at paragraphs 23 and 24 of the decision. It was accepted that the NDR was a highway constructed by the County Council as highway authority, albeit through the agency of the Consortium (paragraph 23). But it was said that "it was so constructed on the Developers' behalf" (ibid). It was pointed out, correctly, that section 36(2)(a) of the 1980 Act, which defines a highway maintainable at the public expense as "a highway constructed by a highway authority", limits the generality of those words by the proviso "otherwise than on behalf of some other person who is not a highway authority". It was submitted that

"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 5^th 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.'"

24. The Tribunal addressed the case based on the acceleration agreement at paragraphs 25 to 27 of its decision:

"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.

This appeal

25. In the grounds of appeal annexed to their appellants' notice, the claimants challenge the Tribunal's conclusions on both the principal issues: that is to say, on the issue whether the treatment of their claim is potentially incompatible with their convention rights and on the issue whether the NDR was maintainable at the public expense under section 36(2)(a) of the Highways Act 1980 on 20 January 2000. By a respondent's notice the County Council seek to uphold the Tribunal's decision on the ground that the NDR "is not to be taken as constructed by the highway authority".
26. As I have explained earlier in this judgment, section 1(1) of the 1973 Act imposes the obligation to pay compensation for depreciation in the value of a claimant's interest in land on "the responsible authority"; section 1(4) of that Act provides that, where the claim to compensation arises from the use of a highway, the responsible authority is "the appropriate highway authority"; section 19(1) of that Act defines the appropriate highway authority as the "the highway authority who constructed the highway to which the claim relates"; and "highway", in that context, includes part of a highway and means "a highway or part of a highway maintainable at the public expense" (ibid). Section 36(2) of the Highways Act 1980 defines a highway as a highway maintainable at the public expense in terms which include "(a) a highway constructed by a highway authority, otherwise than on behalf of some other person who is not a highway authority".
27. Section 19(3) of the 1973 Act applies if the relevant highway has not "always since 17 October 1969 been a highway maintainable at the public expense". At first sight, therefore, the subsection applies both (i) where the highway was constructed before 17 October 1969 but did not become maintainable at the public expense until after that date and (ii) where the highway was first constructed after that date. The significance of the date (17 October 1969) derives from section 1(8) of the 1973 Act: compensation is not payable under Part I unless the relevant date in relation to the claim falls on or after 17 October 1969. In either case the subsection bars a claim to compensation if "the relevant date falls at a time when the highway was not [maintainable at the public expense] and the highway does not become so maintainable within three years of that date". The relevant date, in that context, is the date on which the highway was first open to public traffic: section 1(9) of the 1973 Act. It follows that, in a case within section 36(2)(a) of the 1980 Act, section 19(3) of the 1973 Act does not bar a claim to compensation. That is because, at the date on which the highway is first open to public traffic (the relevant date), the highway is maintainable at the public expense.
28. With these considerations in mind, the Court (at the hearing of the appeal) invited the parties to address, first, the issue whether the NDR fell within section 36(2)(a) of the 1980 Act: that is to say, whether the NDR was constructed by a highway authority otherwise than on behalf some person who was not a highway authority. If the claimants were to succeed on that issue the NDR would have been maintainable at the public expense on 20 January 2000 (the date when it was first open to public traffic). Section 19(3) of the Land Compensation Act 1973 would not bar a claim to compensation. There would then be no question of the treatment of the claim for compensation being potentially incompatible with the claimants' convention rights. That issue would fall away.

The first issue: did the NDR fall within section 36(2)(a) of the 1980 Act?

29. The issue whether the NDR fell within section 36(2)(a) of the 1980 Act raises two distinct questions: (i) whether the NDR was constructed by the County Council and, if so, (ii) whether the NDR was constructed "on behalf of some person who was not a highway authority". The answers to those questions are to be found in the provisions of the acceleration agreement, read with the section 106 agreement and with knowledge of the relevant landownership.

The section 106 agreement

30. As I have said, by clause 12.1 of the section 106 agreement the Developer had covenanted with the District Council and the County Council to carry out the Highway Works. The Developer, in that context, included all those party to the agreement other than the District Council and the County Council. Three of those parties – the two Persimmon group companies to which I have already referred and Heron Land Developments Limited - were described in that agreement, together as the "Consortium": the other six (including Persimmon Homes (Wessex) Limited) were described together as the "Landowners". Clause 3.16 provided that any obligation and liability made by or with the Developer should be joint and several obligations of all those parties included within that definition.
31. Clauses 12.4 ,12.5, 12.7 and 12.9 of the section 106 agreement were in these terms (so far as material):

"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.

32. Paragraph 13 of Schedule 5 to the section 106 agreement provided that when the relevant phase of the Highway Works had been completed, the Director would issue his Provisional Certificate of Completion; and that "thereafter the Developer shall continue to maintain the Highway Works until the Final Certificate of Completion is issued in accordance with paragraph 14". Paragraph 14 of Schedule 5 set out seven conditions which were to be satisfied before the Final Certificate was issued. In the present context it is sufficient to refer to paragraph 14.7:

"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

33. The parties to the acceleration agreement were the County Council, the District Council and the two Persimmon group companies. The Landowners (as defined in the section 106 agreement), other than Persimmon Homes (Wessex) Limited, were not parties: nor was Heron Land Developments Limited. Heron's interest in the development had (I think) been assigned to the Persimmon companies. In any event, Heron was no longer within the term "the Consortium".
34. The acceleration agreement was expressed to be made pursuant (inter alia) to sections 274 and 278 of the Highways Act 1980. Recital 2.2 was in these terms:

"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."

35. Clauses 4.1 and 4.2 (in a section headed "Acceleration of the NDR") provided that:

"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.

36. Clause 4.1 of the acceleration agreement must be read in conjunction with the definition of "Road Contract" in clause 1.1.11:

"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."

37. The effect of clause 4.2 of the acceleration agreement is that the Consortium assumed the obligations imposed on the Developer by clauses 12.4, 12.5 and 12.7 of the section 106 agreement; but subject to the limitation that those clauses have effect if and to the extent, and only if and to the extent, that they are not inconsistent with the Accelerated Programme. There is nothing in clause 12.4, as it seems to me, which is inconsistent with the Accelerated Programme. On the other hand, clause 12.5 is wholly inconsistent with the Accelerated Programme and can be given no effect. But I can see no reason why effect should not be given to the Developer's obligation, in clause 12.7 of the section 106 agreement, to "undertake the Highway Works" in accordance with the provisions of Schedule 5". In particular, as between the Consortium and the County Council, it seems to me that the Consortium was obliged (under paragraph 13 of Schedule 5) to continue to maintain the Highway Works until the Final Certificate is issued in accordance with paragraph 14.
38. Clause 5 of the acceleration agreement ("Funding of the construction of the NDR in accordance with the Accelerated Programme") and clause 6 ("Payment towards the costs of the Road Works") contained financial provisions:

"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.

39. The effect of the acceleration agreement was that, thereafter, the NDR was to be constructed by the County Council. The Developer was relieved from the obligation to construct the NDR at its own expense which had been imposed by clause 12.1 of the section 106 agreement. That obligation was replaced by the obligation imposed (on the Consortium) by clause 6.1 of the acceleration agreement. The substitution of the payment obligation in clause 6.1 of the acceleration agreement for the obligation to construct the NDR in clause of the section 106 agreement is acknowledged, as it seems to me, by the statement (in clause 6.1) that the amounts to be paid by the Consortium under that clause "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".

Land ownership

40. There was a plan appended to the acceleration agreement. The recitals to the agreement identify the Consortium as owner of the land edged blue on that plan; and the District Council as the owner of the land edged red. For part of its length – between junctions 6 and 8 - the NDR was to be constructed on land which was owned by neither the Consortium nor the District Council. We were provided, after the oral hearing of the appeal, with a copy of an agreement (the "Landowners' Agreement") also dated 26 November 1997 made between the County Council, the two Persimmon companies and Heron Land Developments Limited. It is clear from that agreement – read with attached plan FC 037/83 – that the land between junctions 6 and 8 is part of the Retained Land (Agricultural) defined in clause 1.1.36; and that the Retained Land (Agricultural) was land retained by the County Council – clause 1.1.35. In the light of the Landowners' Agreement it is accepted on behalf of the County Council (at paragraph 11 of the note accompanying the copy agreement) that the NDR was built (as to the part between junctions 6 and 8) on land owned and retained by the County Council.
41. I return, therefore, to the questions: (i) whether the NDR was constructed by the County Council and, if so, (ii) whether the NDR was constructed "on behalf of some person who was not a highway authority".

(i) Was the NDR was constructed by the County Council?

42. For my part, I find it difficult to see how it can be said that the answer to the first of those questions is in doubt. The acceleration agreement provided in terms, at clause 4.1, that the NDR was to be constructed by the Consortium as agent for the County Council. Although the Consortium was to enter into the Road Contract as principal – so that, as between the Consortium and the Contractor, the Consortium would be liable as principal and not as agent – the position as between the County Council and the Consortium was defined by the acceleration agreement. The NDR was to be constructed by the County Council through the agency of the Consortium.
43. The Tribunal thought that the question was not in dispute: it thought that County Council accepted that it had constructed the NDR - see paragraph 23 of its decision. But, in this Court, the County Council seek to avoid the clear words of clause 4.1 of the acceleration agreement by the contention that - as it is put in the respondent's notice - "the NDR is not to be taken as constructed by [the County Council]". That contention is developed, succinctly, in the skeleton argument filed in this Court on behalf of 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.

44. The factors which led the acceleration agreement of 20 May 1999 to take the form that it did are set out in the report of the Director of Environmental Services to which I have referred earlier in this judgment. Paragraph 2 of that report noted that:

"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."

45. Those passages in the report identify the problem which the acceleration agreement was intended to overcome. First, the timetable within which the developers were obliged, under the section 106 agreement, to complete the NDR had ceased to be acceptable to the District Council, with whose objectives the County Council were in accord. Second, the Consortium (which had, it seems, assumed the obligations of the Developer under the section 106 agreement, at least in relation to the NDR), were unwilling to accelerate that programme without monetary compensation in an amount and at a time which would leave their projected cash-flow unaltered. Third, that compensation could not be provided by the District Council by way of a loan to the Consortium: section 274 of the Highways Act 1980 did not permit a loan to the Consortium (which was not a highway authority). Fourth, the view was taken by the District Auditor that any payment by the District Council to the County Council must be by way of "contribution": with the consequence that the District Council could not fund the whole of the costs of the acceleration - some part of the cost of the works had to be borne by the County Council.
46. The solution adopted by the parties was set out in the proposal put to the Environment and Transport Committee in paragraph 7 of the report. The County Council would appoint the Consortium as its agents to construct the NDR. The County Council would pay to the Consortium an amount to cover the cost of construction (the Road Contract Sum). The District Council would contribute to that cost by paying to the County Council sums equal to the cost of construction less the amount (£25,000) which was to represent the County Council's own contribution. The Consortium would pay to the County Council such sums as "[the developers] would have been obliged to pay to construct the road": those sums to 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 would pass back to the District Council the sums which it received from the Consortium.
47. If the accelerated programme which both the County Council and the District Council wished to achieve was to be funded in a manner which was acceptable to the Consortium and which was within the councils' statutory powers, it was necessary that the NDR should be constructed by the County Council (and not by the Consortium as principal). That was the reason why the acceleration agreement took the form that it did. To suggest – as the County Council now suggests in paragraph 74 of their skeleton argument – that "the mere labelling of the developers as agents of the County Council in the Acceleration Agreement never had the effect in law of creating a true agency relationship" and that "as a matter of reality – the NDR was always built by the developers" is to ignore the reasons why the acceleration agreement took the form that it did. I did not understand it to be contended on behalf of the County Council that the Court should treat the acceleration agreement as "sham"; that is to say, as a document which the parties did not intend to have effect according to its terms.
48. It follows that I reject the contention that the NDR "is not to be taken as constructed" by the County Council. There can be no doubt, as it seems to me, that it was the intention to the parties to the acceleration agreement – the County Council, the District Council and the Consortium - that, thereafter, the NDR would constructed by the County Council. There is nothing to suggest that effect was not given to that intention in practice.

(ii) was the NDR was constructed "on behalf of some person who was not a highway authority".

49. It is said on behalf of the County Council that consideration of the question whether the NDR was constructed by the County Council on behalf of some person who was not a highway authority "requires an understanding of the interplay between" the provisions of sections 36, 38 and section 278 of the Highways Act 1980. It is pointed out, correctly, that section 36(2) – which defines a highway maintainable at the public expense in terms which include, at paragraph (a), "a highway constructed by a highway authority otherwise that on behalf of some person who is not a highway authority" – contemplates that that there will be cases where the highway is constructed by a highway authority on behalf of someone who is not a highway authority. The point is reflected in section 38(3) of the Act which empowers a local highway authority to agree with "any person to undertake the maintenance of a way - . . . (b) which is to be constructed . . . by a highway authority on his behalf and which he proposes to dedicate as a highway". In such a case the way to which the agreement relates becomes a highway maintainable at the public expense "on such date as may be specified in the agreement". When read with section 278 of the Act – which (it is said) empowers a local highway authority to enter into agreements with a developer for the execution by the authority of highway works on the developer's behalf and at the developer's expense – the provisions of those sections:

"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."

50. For my part, I would accept the propositions set out in the previous paragraph. But that does not, of itself, provide an answer to the question whether – in the circumstances of this case – the NDR was constructed by the County Council on behalf of some person who was not a highway authority.
51. When the plans attached to the section 106 agreement, the Landowners Agreement (of the same date) and the acceleration agreement are read together, it can be seen that the NDR was to be constructed in part (from junction 2 to junction 6) on land owned by the Consortium, in part (from junction 6 to junction 8) on land owned by the County Council and in part (from junction 8 to junction 9) on land owned by the District Council. That, no doubt, is why (by clause 12.9 of the section 106 agreement) the District Council and (by paragraph 18 of schedule 5 to that agreement) the Developer undertook to dedicate as highway those parts of the land over which the NDR was to be (or had been) constructed which the District Council and the Consortium (respectively) owned. Those undertakings were not affected by the acceleration agreement.
52. It is necessary, therefore, to address the question whether the NDR was constructed by the County Council on behalf of some person who was not a highway authority on the basis (i) that the NDR was constructed in part on land owned by the Consortium, in part on land owned by the District Council and in part on land owned by the County Council, (ii) that part of the costs of the works were to be paid by the Consortium (under the Repayment Schedule to the acceleration agreement), part of the costs were to be paid by the District Council (under clause 5.1 of the acceleration agreement, but subject to partial refund under clause 5.5) and part of the costs were to be borne by the County Council (under clause 5.6 of the acceleration agreement) and (iii) that those parts of the NDR which are on land not owned by the County Council are to be dedicated as highway land. On the basis of those facts it seems to me impossible to hold that the NDR (as a whole) was constructed on behalf of the Consortium alone, or on behalf of the District Council alone, or on behalf of the Consortium and the District Council (to the exclusion of the County Council). Nor do I think it possible to hold, as was suggested by the County Council in their skeleton argument, that the NDR was constructed for any combination which included the Developer (as distinct from the Consortium) or the Calne Town Council.
53. The Tribunal rejected the submission, made on behalf of the claimants, that the words in section 36(2)(a) of the Highways Act 1980 – "otherwise than on behalf of some other person who is not a highway authority" – are to be read to mean "otherwise than exclusively for the benefit of the person who is not a highway authority". The Tribunal said this (at paragraph 25 of the decision):

"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. . . . "

54. In my view the Tribunal was wrong to think that there is some dichotomy between section 24(2) and section 278 of the Highways Act 1980. It is section 24(2) – in Part III of the Act ("Creation of Highways") – which confers on a local highway authority power to construct a new highway. Section 278 – in Part XIII ("Financial Provisions") – confers no independent power to construct a highway: the section is concerned with the funding of works "which the authority are or may be authorised to execute". Section 278(1)(a) enables the local highway authority to enter into an agreement with someone else under which the authority agrees to construct a highway (under the power conferred by section 24(2) of the Act) upon terms that the other party to the agreement will pay the whole or a part of the cost of those works. In the present case it was section 278(1)(a) of the 1980 Act which enabled the County Council to enter into the acceleration agreement; but it was section 24(2) of that Act which authorised the County Council to perform the obligation – that is to say, to construct the NDR – which it assumed under that agreement.
55. Further, as it seems to me, the Tribunal was wrong to think that the County Council did not have the agreement of the owners of the land over which the NDR was to be constructed. It is true that, other than Persimmon Homes (Wessex) Limited, those who were parties (as Landowners) to the section 106 agreement were not joined to the acceleration agreement; but, as I have explained, the parties to the acceleration agreement were themselves the owners of the land over which the NDR was to be constructed.
56. It follows that I do not find assistance in the Tribunal's reasoning on this point. And, in any event, I do not think that the point turns on the question: "for whose benefit is the highway constructed?". The 1980 Act – at sections 36(2)(a) and 38(3)(b) – uses the phrases "on behalf of" and "on his behalf". Further, for my part, I would reject the proposition that a highway is necessarily to be taken as constructed "on behalf of" a person who makes a payment of part of the cost of works under a section 278 agreement; or as constructed "on behalf of" another authority who makes a contribution under section 274 of the Act. It must be kept in mind that there may well be cases in which the payment or contribution may represent only a small proportion of the whole cost; and cases where the person making the payment or contribution has no power to dedicate the way (when constructed). I am not persuaded that the legislature intended that the proviso to section 36(2)(a) of the Act would operate so as to lead to the result that a highway constructed by a highway authority was not maintainable at the public expense in every case in which there had been some payment under a section 278 agreement or some contribution under section 274.
57. The proper approach, as it seems to me, is to ask whether the circumstances in which the highway was constructed by the highway authority should lead to the conclusion that it was so constructed on behalf of some other person who was not a highway authority. Adopting that approach in the present case, I would conclude that the NDR was not constructed on behalf of some other person. I am not persuaded that the NDR was constructed on behalf of the Consortium: the purpose of the acceleration agreement was that the NDR should not be constructed by the Consortium – for reasons which I have explained. I decline to hold that an agreement under which – for good reason – an act is to be done by A as agent for B is to be treated as having the effect that B is doing the act on behalf of A. Nor am I persuaded that the NDR was constructed on behalf of the District Council. The District Council had no power to construct the NDR: their power was limited to making a contribution under section 274 of the Act.
58. For those reasons I would determine the first issue in favour of the claimants. The NDR did fall within section 36(2)(a) of the 1980 Act. Section 19(3) of the Land Compensation Act 1973 does not bar the claim to compensation in this case.
59. I should, perhaps, add that the conclusion that the NDR is a highway maintainable at the public expense does not lead to the further conclusion that the County Council cannot rely – as a matter of contract – on the obligation imposed on the Consortium by paragraph 13 of Schedule 5 to the section 106 agreement, read with clause 4.2 of the acceleration agreement.

The second issue: is the treatment of the claim under section 19(3) of the 1973 Act potentially incompatible with the claimants' convention rights?

60. The view which I have taken on the first issue leads, necessarily, to the conclusion that, in the circumstances of this case, the proper application of section 19(3) of the 1973 Act does not give rise to any potential incompatibility with the claimants' convention rights. The question whether there would be potential incompatibility in a case in which the highway had not become a highway maintainable at the public expense at the time that it was first open to traffic does not arise for decision. Any observations which I might make on that question would, necessarily, be obiter; and so would, I think, serve no useful purpose.

Conclusion

61. I would allow this appeal. If the parties are unable to agree the amount of compensation payable to the claimants under Part I of the 1973 Act, the reference should be restored before the Lands Tribunal so that that question can be determined.

Lord Justice Scott Baker:

62. I agree.

Lord Justice Thomas:

63. I also agree.