England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		18/10/2006

Mr Justice Cooke :

Introduction

1. This is an appeal from an Interim Arbitration Award issued by Mr David Holgate QC on 24^th November 2005. By the terms of reference, the parties consented to an appeal from his decision. The question of law for determination in this appeal is:-

"Whether (if proved as a matter of fact) a loss of profits arising from the defendant's inability to use land for the purposes of landfill is a recoverable head of loss under Clause 7 of the Deed dated 29^th October 1971".

That Deed had been concluded by the predecessors in title of the claimant in this arbitration claim (to whom I shall refer by their former name Transco) and the defendant to who I shall refer as Lafarge.

2. In paragraph 8 of the Award, the Arbitrator set out the factual background which, he stated, was not in dispute and could be summarised as follows:-

" (i) On 29 October 1971 a deed ("the Deed") was entered into by Federick and Bruce Smith (as grantor) and The Gas Council (as grantee), Lafarge and Transco being their respective successor;

(ii) The Smiths were the then freehold owners of land at Brittons Hall Farm, Chignal St. James, Essex, shown edged yellow on the plan I attached to the Claimant's Statement of Case ("the subject land");

(iii) At that time land in the immediate vicinity of the subject land was in use for mining purposes. Both that land and the subject land became incorporated into a quarry known as Roxwell Quarry;

(iv) The landfill of sand and gravel pits was a well known activity at the time the deed was executed (para.8 of Transco's Statement of Case);

(v) Under clause 1 of the Deed the Gas Council was granted an easement to lay, maintain and use a gas transmission main and ancillary apparatus ("the Works" across the subject land together with the rights of access in the consideration of (a) £1, 329.40 and (b) the Gas Council's covenant in the deed. The Gas main was to be laid in a strip of land 20 feet wide shown on the plan annexed to the Deed. (That plan is not in the bundle, but the approximate route is shown on plan I attached to Lafarge's Statement of Case). The right of access related to that strip of land and to adjoining strips on either side, each being 10'wide. Thus, the overall access corridor was 40' wide;

(vi) By clause 3 of the Deed the Grantor covenanted not to cause damage or injury to the works of the Gas Council, or to make any material alteration to or deposit anything upon any part of the land within the 40' wide corridor so as to interfere with or obstruct access to that land or to the works or so as to interfere with the support of works by the surrounding soil or so as to materially reduce the depth of soil above the works. By clause 3 the Grantor also covenanted not to erect or install any building Structure or permanent apparatus on the 20' wide corridor of the gas main, nor (save with the grantee's written consent) on the 10 feet strips either thereof;

(vii) Clause 7 of the Deed incorporated the provisions substituted for sections 78 to 85 of the Railway Clause Consolidation Act 1854 (the 1845 Mining Code") by Part I of the First, Second and Third Schedules to the Mines (Working Facilities and Support) Act 1923 ("the 1923 Mining Code");

(viii) In the early 1970's the gas pipeline was laid pursuant to the easement;

(ix) The easement was created by a voluntary deed. However, it is agreed by both parties that (a) in the absence of such a deed an Area Board had power under section 11 of the Gas Act 1948 to acquire compulsorily (subject to authorisation by the Mister) a right to place and maintain a gas pipe across such land, (b) the Area Boards were predecessors bodies of Transco and (c) for the purposes of this arbitration nothing turns on the fact that the power of compulsory acquisition was vested in the Area Boards but the grantee in the Deed was the Gas Council. I also note that clause 6 (i)(c) makes it clear that the consideration for the grant of the easements was based upon the compulsory purchase compensation code, with the Council standing in the position of the acquiring authority;

(x) On 28 September 1986 Lafarge acquired the subject land;

(xi) On 9 August 1993 planning permission was granted on land which included the subject land for the extraction of sand and gravel and the subsequent deposition of waste, erection of associated tip accommodation and progressive restoration to agriculture and open water;

(xii) On 4 January 19095 notice was given to British Gas Plc (a predecessor of Transco) of the intention "to work sand and gravel within a distance of 40 yards from the gas main" installed pursuant to the Deed after 30 days from the giving of the notice pursuant to "the Deed and the Substituted Mining Code". The reference to "40 yards", as opposed to the 40 feet corridor in clause 3, comes from the definition of "the area of protection" in section 78(5) of the 1923 Mining Code;

(xiii) On 19 October 2000 Transco served a "Counter Notice requiring support" pursuant to section 78(2) of the 1923 Mining Code (as incorporated in the Deed) requiring Lafarge to leave unworked the minerals specified in the First Schedule to that Counter Notice on the grounds that the working of those minerals would be likely to damage the parts of the 36" gas pipeline referred to in the Second Schedule, a length of about 500m. The specified minerals, together with any overburden lying in a pillar of support and the relevant part of the pipeline were shown on Drawing No. NL03109/02;

(xiv) On 7 October 2002 Lafarge submitted a claim under clause 7 of the Deed for compensation in the sum of (a) £7,892,962 under section 78 of the 1923 Mining Code (of which £803,820 relates to "loss of minerals" and £7,089,142 relates to "loss of landfill") and (b) £269,794 under section 81 of the Code;

(xv) On 6 October 2003 Lafarge submitted a claim under 6 seeking a figure of £4,937,274.33 in the alternative to the "landfill element" in the clause 7 claim."

3. The Arbitrator decided that a loss arising from Lafarge's inability to use land for the purposes of landfill (if proved as a matter of fact) was a recoverable head of loss or compensation under clause 7 of the 1971 Deed, subject to (a) there being a causal connection between that loss and the relevant "counter notice requiring support", (b) that loss not being too remote and (c) that loss not having been caused by unreasonable behaviour on the part of the claimant.

The Deed of 29 October 1971

4. By the Deed, Lafarge's predecessors in title granted Transco's predecessors an easement to lay, construct, inspect, maintain and use a main or pipe for the transmission or storage of gas or other materials connected with the performance of its functions over a strip of land 20 feet in width, with the right to pass over that strip and surrounding corridors of 10 feet wide adjoining it on either side. So far as relevant for present purposes, the Deed included the following key previsions (where "the Council" refers to Transco's predecessors in title).

Clause 6. (i) IF AT ANY TIME

(a) permission is granted under Part III of the Town and Country Planning Act 1962 or any statutory modification of re-enacted thereof for the time being in force (otherwise than by a development order) for development which consists of or includes building operations which the Grantor is prevented by the covenants of Clause 3 hereof from carrying out or it is shown that but for the said works such permission might reasonably have been expected to be granted and

(b) the said development whether in the form for which permission is granted as aforesaid or in any alternative form of equivalent value for which permission might reasonably be carried out elsewhere on the said land consistently with the Grantor's covenants in Clause 3 hereof and

(c) the principal amount of compensation which would have been payable is respect of compulsory acquisition by the Council of the easements hereby granted in pursuance of a notice to treat served on the date hereof if such permission had previously been granted exceeds the sum set out in Clause 1 hereof (which is calculated without reference to the prospect of any such operations)

Then subject to the provisions of this clause the Council will pay to the Grantor a sum equal to the excess

(ii) If the Grantor claims to be entitled to a payment under the last foregoing sub-clause hereof he shall give notice in writing to the Council of such claim and shall furnish all such particulars in relation thereto as the Council may reasonably require

(iii) There shall be deducted from any sum which would otherwise be payable under this clause an amount equal to any sum previously so paid in respect of the same land

(iv) Any dispute arising out of the provisions of this Clause shall be referred to a single arbitrator to be agreed upon between the parties in dispute and in default of such agreement to the Land Tribunal.

Clause 7 (i). The provisions of Clauses 2 and 3 hereof shall have effect subject to this Clause

Clause 7 (ii). Subject to the provisions of this Clause the provisions (in this Clause called "the said provisions") substituted by Part II of and the First Second and Third Schedules to the Mines (Working Facilities and Support) Act 1923 for section 78 to 85 of the Railways Clauses Consolidation Act 1845 shall be deemed to be incorporated herein

Clause 7 (iii). The said provisions shall be constructed as if references to the Mine Owner were references to the Grantor; references to the Company were references to the Council; references to any railway or works of the Company were references to the works defined in Clause 1 hereof and references to rail level were references to top of pipeline level

Clause 7 (iv). Any arbitration under the said provisions shall be by a single arbitrators to be agreed upon between the parties in dispute and in default of agreement by the Lands Tribunal and Section 85D(3) of the said provisions shall be of no effect "

5. It can be seen therefore that the rights and obligations set out in clauses 2 and 3 took effect subject to the terms of clause 7 which in turn incorporated particular parts of the Mines (Working Facilities and Support) Act 1923 ( the 1923 Mining Code).

The 1923 Act

6. Section 15 of the 1923 Act substituted sections 78-85E and the First Second and Third Schedule for sections 78-85 and the equivalent Schedules of the earlier 1845 statute. So far as relevant, the 1923 Act provided as follows:-

" S78. Conditions under which minerals under railway may be worked

(1) If the mine owner of minerals lying under an area of protection as hereinafter defined is desirous of working any such minerals, he shall give to the company and also to the royalty owner (if any) notice of his intention so to do at least thirty days before the commencement of the working and on the receipt of such notice the company and the royalty owner respectively may cause the minerals to be inspected by any person appointed for the purposes by the company or royalty owner as the case may be.

(2) If it appears to the company that the working of any of the minerals to which such notice relates will be likely to damage the railway or works or any part thereof, the company may, at any time after the receipt of such notice, give a counter-notice to the mine owner requiring him to leave unworked all or part of such minerals, and the counter-notice shall specify the minerals (hereinafter referred to as the specified minerals) so required to be left unworked and the particular portion of the railway or works (hereinafter referred to as the protected works) for the support of which the specified minerals are required to be left unworked.

(3) Where any such counter-notice has been served on the mine owner, he shall forthwith serve a copy thereof on the royalty owner (if any).

(4) Where any such counter-notice has been served on the mine owner, the specified minerals shall not be worked or got after the service of the counter-notice, and the company shall pay compensation to the mine owner and the royalty owner (if any) for the loss caused by the specified minerals being left unworked.

……………….

S78A. Compensation for leaving minerals unworked

(1) The compensation payable by the company to the mine owner and the royalty owner respectively for the loss caused by the specific minerals being left unworked shall, in default of agreement, be determined by arbitration:

Provided that so far as such compensation is payable in respect of the value of specified minerals-

i) The compensation payable to the mine owner and to the royalty owner shall be separately assessed.

(ii) the compensation payable to the mine owner shall be a sum for each ton of the specified minerals, the rate per ton in the case of minerals lying under the outer area of protection being one-third of the rate which is or would be awarded in the case of minerals lying under the inner area of protection;

……….

(2) The mine owner shall also be entitled to be paid by the company the amount of any increase in the cost of working any part of his minerals (other than the specified minerals ) which may have been caused by the failure of the company to give the counter- notice within such a reasonable time as would have enabled the mine owner to avoid such increase in cost, and, in default of agreement, the amount so payable by the company shall be determined by arbitration.

S79A. Liability in respect of authorised workings

(1) If a mine owner works any minerals lying under any part of the area of protection in the manner authorised by this Act, he shall nevertheless become liable on demand by the company (subject as hereinafter provided) to contribute towards the expenses properly incurred, or to be incurred, by the company from time to time thereafter in making good any damage caused by such working to the railway or works of the company (not being protected works comprised in any counter-notice relating to such area of protection) the appropriate percentage (if any) of those expenses, the appropriate percentage being such as is specified in the First Schedule to this Act according to the depth of the minerals being so worked…

S81. Additional expenses for severance

(1)Where a counter-notice has been given by the company to a mine owner, the company shall from time to time pay to the mine owner the appropriate percentage (if any) of all such additional expenses and losses as may be incurred by such mine owner in consequence of such counter-notice by reason of…

(2) For the purpose of this section, the appropriate percentage means the percentage determined in accordance with the rules contained in the Third Schedule to this Act…

S85A. Power to vary rights by agreement

Notwithstanding anything contained in this Act, a mine owner, a royalty owner, and the company or any two of them may, by agreement, alter, extend, or otherwise vary their respective rights under the provisions of this Act with regard to any minerals to which this Act applies, but not so as to prejudice the rights of any mine owner, royalty owner, or company not a party to the agreement without his or their consent.

S85E. Exemption from liability to leave support otherwise than under act or agreement

Save as in this Act, or the special Act, or under any agreement between the company and the mine owner expressly provided, the mine owner as between himself and the company…

(a) shall not be under any liability to leave support either inside or outside the area of protection; and

(b) shall be entitled to remove such support in without being liable for any damage thereby caused to the railway or works or nay part thereof; but so that the removal shall be done in a manner proper and necessary for the beneficial working of the minerals and according to the usual manner of working minerals in the district in which the same is situate"

7. Schedules 1 and 2 to the 1923 Statute set out tables of depths of seams, width of seams and the percentages by reference to which compensation was to be calculated. Schedule 3 set out the rules for determining the percentage of contribution to additional expenses for damage payable by a railway company under s81 by reference to the distance by which the specified minerals extended beyond the boundary of the protected works (as defined in s78(2)).

The Issues

8. The argument before me centred upon the construction and effect of s78 and s78A of the statute in the context of clause 7 of the Deed. Both parties also referred to and relied upon the decision of the House of Lords in BA Collieries v LNER
   AC 143 and, to a lesser extent, the decision of the Court of Appeal in that action, reported at
   CH 243. I was told that this was the only relevant reported decision upon the 1923 statue although there were a number of authorities relating to the 1845 statute which it had amended. It was a matter in dispute between the parties as to whether or not reference should be made to the 1845 Act and the decisions of the Courts relating thereto, whether reference should be made to Parliamentary Materials in relation to the 1923 Act and whether standard canons of statutory construction should be applied or not.
9. Nonetheless, it was common ground between Transco and Lafarge, as was clear from the decision of the House of Lords in BA Collieries that the 1923 Act set out a Mining Code which was an agreement made between the Railway Companies and the Colliery owners of England and Wales, together with the owners of royalties in the relevant mines. It was that agreement to which statutory affect was given and members of the House of Lords were consequently cautious about seeking to find "the intention of parliament" since what was at issue was construction of a "nicely balanced compromise which had been arrived at by parties interested" (Lord Thankerton at p.171-172).
10. At p.166 Lord Thankerton said this:-

"There can be no doubt that discussion and negotiation between the parties interested led to the new code which is enacted by the Act of 1923…I desire to stress the point that, with the exception of the leading section 77, the full fasciculus of sections in the Act of 1845 which was headed "and with respect to mines lying under or near the railway" is superseded by section 15 of the Act of 1923 which substitutes 14 new sections and 3 new Schedules which, along with the original section 77, form a complete and integrated code, obviously closely balanced and, in my opinion, it is not for the court to consider whether any individual provision of the code does justice to the one party interested or the other. The duty of the court is to construe the language used."

11. Other members of their Lordships' house said words to the same effect. It was common ground before me that the Arbitrator was correct in stating the following at paragraph 28 of his award:-

i) Clause 7 was carefully and deliberately drafted so as to incorporate the 1923 Mining Code and not the 1845 Mining Code;

ii) Clause 7 makes no express reference to either section 6 or section 77 of the 1845 Railways Clause Consolidation Act 1845;

iii) The 1923 Mining Code was the product of negotiation between landowners and railway companies following the decision in Howley Park Coal and Cannel Company v London and North Western Railway Company [1913]

AC 11. Their agreement involved a compromise framed by business interests and a readjustment of the rights created by the previous Code (see London and North Western Railway Company v B.A. Collieries at [1944] CH 243, 249-250; [1945] AC 143, 166, 177, 180 AND 187);

iv) The 1923 Code was materially different from the 1845 Code as regards protecting the railway company against the risk of its line being "let down" by coal mining and for securing compensation for the mine owner for loss caused by his being prevented from working the coal (see B.A Collieries at [1945] AC 143 at pp.166, 176-7,180);

v) The 1923 Mining Code is a self-contained whole creating mutual rights and duties which are so interwoven as to be inseparable. It is impossible to say which part of it was the consideration for any part. It is a complete and integrated code which is closely balanced (A.B. Collieries at [1945] AC 143 at pp. 166 and 177).

12. Nonetheless the Arbitrator pointed out that the specific issue which the House of Lords had to determine in B.A. Collieries was whether or not compensation payable under section 78A had to take into account the mine owner's potential liability to the railway company to make a contribution under section 79A of the Act. No court has as yet had to determine whether the compensation provisions of the 1923 Mining Code are apt to include loss of profits on potential landfill operations after the notional removal of minerals which, it is accepted by Transco, do give rise to a head of compensation by reference to the value of the minerals concerned.

The Approach to the Construction of the Deed and the 1923 Act

The Deed.

13. Transco submitted that the Deed had to be construed as a whole and that clauses 6 and 7 had to be read in the light of one another. Clause 6 was expressly drafted to define the scope of development which would give rise to compensation and Transco submitted that landfill constitutes "development" for which planning permission would be required and would therefore, if it were to be am agreed subject of compensation, find its way into the provisions of clause 6. As clause 6 made no such provision (as the arbitrator found and which was not the subject of cross-appeal) this showed that the parties did not intend that the loss of a land filling opportunity should give rise to compensation in respect of the lost development value. It was said that a loss of development clause was the appropriate place to address the issue of compensation for loss of landfill and that this clause would have been apt for the provision of compensation in respect of the loss of landfill opportunity had the parties wished it to be included.
14. It was submitted by Transco that the Deed which sets out the contract, incorporated the 1923 Mining Code, which was itself a contract. It was therefore suggested that if Landfill was not in contemplation in 1923 in relation to mines, it would be wrong to construe the 1923 rules in such a way as to include compensation for the lost opportunity of landfilling in the void spaces of the mine.
15. In my judgement, however, the position is as follows. The Deed incorporated the 1923 Mining Code which was recognised to be a part of a statute. Whilst only sections 78-85E were specifically included, the context in which those sections fall to be interpreted is the Act as a whole. Section 15 of the 1923 Act provided that the Railways Clauses Consolidation Act 1845, as incorporated in any Act, order or any other instrument should have effect as if the 1923 Mining Code were included instead of section 78 to 85 and the first to third Schedules thereto. Whilst it is clear from many passages from the decisions of the House of Lords in B.A. Collieries that the 1923 statute was the result of a compromise agreement hammered out between the Railway Companies, the Mining Owners and the Royalty Owners over some three years, what was in incorporated in the Deed was part of the statute which fell to be considered against the entire statute in which it was found and the legislative background of the compromise agreement to which B.A. Collieries refers. As a matter of analysis however the Deed is not a contract which incorporates another contract.
16. If considering what was in the contemplation of the parties therefore, the issue is what was in the contemplation of the parties to the Deed at the time of the Deed and not what was in the contemplation of the parties to the compromise agreement which led to the statute in 1923. As is recorded by the Arbitrator, landfill of sand and gravel pits was a well known activity at the time the Deed was executed.
17. Clause 6 of the Deed is concerned essentially with development which consists of building operations. Whilst the wording used is "development which consists of or includes building operations" the arbitrator held that this must mean development where building was the main purpose. That is not the subject of appeal by either party. Once it is seen that clause 6 deals with future building and clause 7 deals with future mining operations, the point made by Transco loses its force. If the words of clause 7 are apt to include loss of profit resulting from the lost opportunity of landfilling as a "loss caused by the specified minerals being left unworked", there is nothing in clause 6 which would militate against that.
18. In these circumstances the issue turns on the proper construction of clause 7 and the 1923 Mining Code which it incorporates. If the wording of the 1923 Mining Code is apt to include compensation for the loss of landfilling profit then there is no reason why effect should not be given to the wording used. It may well be that the parties to the Deed in 1971 had no shared understanding of the compass of the 1923 Act. It may well be that the draftsman of the 1923 Act did not have any head of loss in mind resulting form the use of void spaces following the extraction of specified minerals. As however the decision of the House of Lords in B.A. Collieries makes plain, time and time again, the issue is one of objective construction of the 1923 Act because it represents a compromise where the individual elements of give and take are not necessarily susceptible to individual justification, whether on the grounds of reasonableness or otherwise. There are potentially arbitrary elements within the scheme but the scheme effected a detailed compromise agreement and the terms of it have to be construed objectively by reference to the wording used.
19. The Arbitrator dealt with the claim under clause 7 of the Deed at great length in no less than 41 pages of his Award, although a number of those pages merely set out the relevant clauses of the Deed and sections of the Act. He explored the relationship between the 1845 and the 1923 Mining Codes, accepting the submissions of Transco as set out in paragraph 10 above in paragraph 28 of his Award. He analysed the decision of the House of Lords in B.A. Collieries and referred to the assistance which the House of Lords gained in that case in considering the 1845 Mining Code and the decisions thereon as antecedents from which the 1923 Code had evolved. He therefore considered at length the 1845 Mining Code and the case law on it before moving on to the construction of the 1923 Mining Code and determining the effect of incorporating the latter Code into the 1971 Deed. That process of reasoning is, in my judgment faultless but, for the reasons which hereafter appear, I do not find it necessary to explore the matters in the same way as the arbitrator did since the terms of the Deed and the 1971 Act are, in my judgment, readily construed by reference to the decision of the House of Lords in B.A. Collieries.
20. The Deed, as is common ground, incorporated sections 78-85E of the 1923 Code and did not incorporate section 77 of the 1845 Statute. As the Arbitrator found, the nature of the arrangement made by the Deed made it unnecessary to do so, since the Deed did not transfer the freehold or the surface of the land to Lafarge's predecessor in title and there was therefore no need to incorporate section 77 in order to exclude the transfer of ownership of the underlying mines with the transfer of the surface. The grant of the easement meant that the ownership of all the land, both surface and subjacent soil remained with the grantor. Clause 3 of the Deed required the grantor to protect the integrity of the gas line but was subject to clause 7 so that the appropriate scheme of notices and counter-notices provided by section 78 was brought into play. When such notices were served, the respective rights of the parties would be controlled by the 1923 Mining Code, as modified by clause 7 (iii) and (iiii) of the Deed itself.
21. Clause 7 of the Deed did not incorporate section 6 of the 1845 Act but it was Lafarge's contention that it was not unhelpful to look at section 6 and section 77 of the earlier statute because of the guidance they gave as to the scope of compensation payable under the 1845 Act as amended by the 1923 Code set out in section 78-85E. Whilst I consider that this is correct and that assistance can be gained from them, consideration of the issues of construction must begin with the terms of section 78-85E themselves and the decision of the House of Lords in B.A. Collieries. In my judgment that consideration gives rise to a clear result which it is unnecessary to fortify by any reference to those sections of the earlier Act.

The 1923 Act

22. I have very much in mind the matters already set out in this judgment at paragraphs 8-11, in relation to the background and effect of the Code which were common ground between the parties and stated by the Arbitrator.
23. I was shown the Parliamentary Materials on which Transco relied de bene esse. They were relied on for the purpose of including the following, as set out in Transco's skeleton argument;

"16. The foregoing statements demonstrate that the 1923 Mining Code was an agreement between the affected parties which was given statutory effect, without intervention or interference from Parliament.  It is highly specific and entirely complete within its own terms.

17. These particular and peculiar provisions are not susceptible to the usual rules of statutory construction.  The phrase "the intention of Parliament" is of no application.  Still less is it possible to find rational approaches to fairness, promotion of public interest or the mischief to be addressed.  Rather, the sections and their Schedules are a 'deal.'  Their purpose, the negotiations and their statutory expression are highly specific and focussed solely on two issues, namely subsidence and the profit to be had from minerals.

18. The parties did not create a generalised right to compensation.  They created a specific formula for calculating the profit from minerals.

19. It applied solely to railways.  The 1845 Mining Code as it applied to, for example, waterworks was unaffected".

24. By and large, the conclusion set out in paragraphs 16 and 17 can be reached by reference to the decision of the House of in B.A. Collieries. It is accepted by both parties, as was clearly stated by their Lordships that the language must be construed as it stands and that issues of Parliamentary intention are not readily found for any individual provision. The conclusion in paragraph 19 of the Skeleton is self evident from the terms of the 1923 Act itself, but the parties chose to use this Code, with the modifications set out in Clause 7 of the Deed to their own situation. Similarly the conclusion in paragraph 18 of the Skeleton appears from the Act itself, (i.e. the nature of the compensation is defined in the Act) unless it is suggested that the central question raised by this appeal is concluded thereby. There is nothing in the Parliamentary materials to which I was referred which bears upon this central question at all or which could help in deciding whether or not lost profits arising from the inability to landfill fall within the scope of the Act.
25. The Parliamentary materials are therefore of no assistance and do not satisfy the third test set out in Pepper v Hart [1993] AC 593 at 642, inasmuch as there is no clear statement from the promoters of the Act which bears on the question at issue in this action. Certainly there is nothing which falls within the test set out in R v Sec of State for the Environment, ex parte Spath Holme [2001] 2 AC 349 at 391-2 , namely a statement which would almost certainly settle the matter immediately one way or the other. The Arbitrator, in his Award, drew attention to the absence of any production of any Parliamentary materials, but there is, in my judgment, nothing in them which would have assisted him in his task or which helps me in mine.

Construction of the 1923 Act (The Mining Code).

26. Section 78 (4) of the 1923 Act provides that where a counter-notice is served, the minerals specified in the original notice given by the Mining Company shall not be worked. Because the Railway Company has insisted on preventing such work by its counter-notice, compensation is then payable for not working those minerals and is expressed to be for "loss caused by the specified minerals being left unworked". There are no words of restriction which relate to this loss except the words of causation. Nothing in the subsection suggests that the loss in question is limited to any particular head of loss nor to the actual loss relating to the specified minerals themselves rather than to any loss of profits which might result from some other consequence of the non working of the minerals, such as use of the void space which would have been created by the working of those minerals. Provided the loss in question is caused by the specified minerals being left unworked, the terms of the subsection appear to be satisfied, on a literal reading of the subsection.
27. Transco's case is that under section 78A(1), a mine owner is only entitled to the notional price payable for the specified minerals on extraction, less the notional costs of working the minerals to obtain that price. Alternatively it is submitted that any additional compensation is limited to the heads identified in section 78(2) and section 81. It is Transco's main contention that compensation must relate to "the value of specified minerals", as set out in section 78A(1), where the "value" means the market price obtainable less the costs of extracting the minerals. Apart from sections 78(A)(2) and 81(1), the measure of compensation payable to the mine owner for the value of the specified minerals as set out in the proviso to section 78A(1) exhausts the entitlement to compensation for "the loss caused by the specified minerals being left unworked" under section 78(4) and that part of section 78A(1) which precedes the proviso. Transco relied upon the absence of any decided authority allowing compensation for anything other than the value of minerals left unworked (as compared with a considerable number of decisions relating to the calculation of the value of minerals by reference to market price less cost of mining) and maintained that the compromise agreement which underlay the 1923 Act provided for nothing else by way of compensation, save for the express provisions of s 78A(2) and s 81(1). Transco also relied upon a dictum of MacKinnon LJ in the Court of Appeal in B.A. Collieries [1944] CH 243 at p.260-1 to the effect that the words "so far as such compensation is payable in respect of the value of the specified minerals" were included because of the entitlement to compensation under section 78A(2) and section 81(1).
28. As the Arbitrator held however, Transco's submissions do not accord with the natural construction of the sections or the ordinary and natural meaning of the words in the context in which they appear. As he put it, the effect of Transco's submissions gave no real meaning to the form of section 78A with the proviso as worded. The ordinary and natural meaning of section 78(4) and 78A(1) is that there is an overarching claim in respect of "the loss caused by the specified materials being left unworked". The proviso to section 78A(1) then operates "so far as such compensation is payable in respect of the value of specified minerals", with the necessary inference that compensation could be payable in other respects also. In other words, the principles which are thereafter set out in section 78(a)(1)(i)–( iv) apply only when compensation is payable in respect of the value of the specified minerals, thus inevitably implying the possibility of other heads of claim which are not "in respect of the value of the specified minerals".
29. It is clear from the terms of section 78A(2) that additional compensation is also payable which falls outside the terms of section 78A(1) where there is an increase in the cost of working other minerals as a result of late service of a counter-notice. This has nothing whatever to do with the value of specified minerals, nor is it expressed as a proviso to s 78A(1) as a "loss caused by the specified minerals being left unworked". Equally, under section 81(1), which is likewise not a proviso to s 78A(1), the mine owner can recover additional expenses and losses incurred in consequence of a counter-notice where the continuous working of the mine is interrupted or the mine is worked in such a way as not to damage the "protected work", which is defined as the portion of the railway or works supported by the ground in which the specified minerals are located. In this case also compensation is not "payable in respect of the value of the specified minerals" even though the percentage of expenses recoverable is, by virtue of Schedule 3, dependant upon the location in which the specified minerals are found.
30. Lord Thankerton at p.167 in the report in the B.A. Collieries decision remarked that payments under section 78A(2) and section 81(1) were not included in the compensation for loss caused by the specified materials being left unworked, going onto say that, in contrast with payments under section 78(4) and 78A(1), they were not based on any hypothetical workings of the specified minerals. Although the contrary was argued before me, in my judgment, Lord Thankerton was plainly right, even if I am not bound by his conclusion. Both section 78A(2) and section 81(1) relate to the consequences of serving counter-notices or not serving them as the case may be and whilst section 81 indirectly relates to the inability to work the specified minerals, the compensation under neither section is based upon any hypothetical working of those minerals. Compensation under those sections has and the calculations involved have nothing whatever to do with the value of the specified minerals at all.
31. On a proper construction of the sections, in my judgment, it is clear that compensation under the 1923 Mining Code is not limited to "the value of the specified minerals", whether consideration is given to section 78(4) and section 78(A) on their own terms or consideration is given to section 78(2) and section 81 also. The dictum of MacKinnon LJ is not apt to and does not explain away the use of the words "so far as such compensation is payable in respect of the value of the specified minerals" and is directly contradicted by Lord Thankertons' dictum. Sections 78(2) and 81 do not form part of a further proviso to the general wording in s 78A(1) which provides for "loss caused by the specified minerals being left unworked". There remains therefore a category of potential loss under section 78(4) and 78A(1) which falls outside the terms of the proviso.
32. When considering whether compensation payable under section 78(4) and 78A(1) should be calculated by taking into account compensation which would have been payable in the opposite direction under section 79A, had the specified minerals been worked, the House of Lords in B.A. Collieries had cause to consider the basis upon which compensation was to be paid. The House did not of course have to consider the issue before this court. Nonetheless Lord Thankerton referred, with approval, to Counsel's agreement that the question was "not what was the value of the coal at the date of the counter-notice, but what would the coal owners, if they had not been prohibited, have made out of the coal during the time it would have taken them to get it". In support of that he referred to the decision of the House of Lords in Bwllfa and Merthyr Dare Steam Collieries (1891) Limited v Pontypridd Water Works Co [1983] AC 426 at 432 and the speech of Lord Robertson in relation to the estimate of profit which had to be made.
33. Equally, Lord Macmillan in B.A. Collieries said this:

"The nature of the compensation to be paid to the Mine Owner can not in my opinion be better expressed that it was by Lord Macnaghten in Bwllfa…namely that "so as far as money can compensate him he is to be placed in the position in which he would have been if he had been free to go on working…the hypothesis being that the Mine Owner is to receive by way of compensation for not working the minerals, what he would have made by working them…"

34. If reference is then made to the decision in Bwllfa, a decision under the Lands Clauses Act, it is found that the House of Lords approved of the first instance Judge when he stated that "the true enquiry here is not what is the value of coal field or of the coal but what would the Collieries Company, if they had not been prohibited, have made out of the coal during the time they could have taken them to get it".
35. It is thus plain that the House of Lords in B.A. Collieries were aligning themselves, in the context of the 1923 Mining Code with the approach to compensation which was taken in Bwllfa and looking at the question of loss caused by the prevention of working, rather than the value of the minerals (whether considered at the date of the counter-notice or at any other time). As it was put by Mr Gaunt QC for Lafarge in argument, the claim for landfill in this action is the converse of the position in BA Collieries since on the facts there, an element of additional expense fell to be taken into account in assessing the loss flowing from the prevention of working the specified minerals, whilst here there is an element of additional profit to be taken into account in consequence of the prohibition.
36. I did not find the decision in Rugby Portland Cement v LNWR [1908] 2 KB 606 to be of any assistance. There the lost profit in the manufacture of cement was not allowed in respect of compensation under s 55 of a private Act passed prior to the 1845 Act , but the terms of that section provided for the purchase of the mines or part thereof in the event of the service of a notice seeking to work the mines within 40 yards of the railway. The purchase was to be at "the amount or value of such mines" and the only matter properly in issue there was the value of the minerals which would have been worked. In the absence of any market for those minerals (limestone) after mining, because of the cost of transportation, the claimants had built a factory for the manufacture of cement. The Court of Appeal held that the sale price of the cement could be used to work backwards to the value of the limestone. Despite reference to the House of Lords' decision in Eden v NER [1907] AC 400 and the similar calculations under the 1845 Act, and the submissions of Transco to the contrary effect, I do not derive any principle from the Rugby Portland Cement decision which could assist in determining the meaning of the words used in s 78(4) and s 78A(1) of the 1923 Act.
37. The arbitrator therefore rightly concluded that the correct reading of section 78(4) is that compensation is payable to the mine owner for any loss that he sustains by being compelled to leave the specified minerals in the ground in order to support the railway. There is no justification for reading down that language so that it relates solely to the loss of profits which could have been earned out of the sterilised minerals themselves - the "value" element. Accordingly as a matter of principle the owner of minerals is entitled to be compensated for the profits he would have been able to earn by working the specified minerals, if he had not been obliged by the counter-notice not to do so. In principle therefore if, in the absence of the counter-notice a mine owner would have extracted the minerals to make a profitable use of the void thereby created, that loss of profit falls with section 78 (4) since it is a " loss caused by the specified minerals being left unworked".
38. The arbitrator held that there were three conditions which qualified the entitlement without limiting the potential heads of the claim. He held that the Mining Code operated in such a way as to deprive a mining owner of various rights and that it could be assumed that compulsory purchase would have occurred in the absence of voluntary agreement. He therefore applied the three conditions laid down by Lord Nicholls in Director of Buildings v Shun Fung Iron Works Limited [1995] 2 AC 111 at p.126. There must be a causal connection between the counter-notice prohibiting the working of specified materials and the loss in question; the loss must not be too remote; and compensation is not payable for losses incurred by unreasonable behaviour on the part of the claimant. Those three conditions were not the subject of any dispute or argument in this court.

Sections 6 and 77 of the 1845 Act and the principle of Equivalence

39. I therefore find no need to advert to sections 6 or 77 of the 1845 Act nor to the equivalence principle in compulsory purchase upon which the Arbitrator placed some reliance. As a matter of construction of the Deed and the parts of the 1923 Act incorporated in it, in the light of the House of Lords' decision in BA Collieries and its endorsement of the approach in Bwllfa, there is scope for compensation for heads of loss which relate not just to the minerals themselves which cannot be worked, but also to other consequences which may follow from the prevention of such working.
40. I do not need therefore to refer to the 1845 Act nor to other decisions relating to it. If I had felt the need to do so, it seems to me that there is much force in the argument of Lafarge that the principle, set out in section 6, of "full compensation for the value of the lands so taken [where surface land was purchased] or used , and for all damage sustained ...by reason of the exercise, as regards such lands, of the powers ...by this or the Special Acts… vested in the company" would reinforce its argument on construction.

Conclusion

41. For the reasons given, the appeal must be dismissed. It seems to me, that, absent any special factors of which I have not been made aware, costs must follow the event, but I await to be addressed on the subject.