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You are here: BAILII >> Databases >> Court of Appeal in Northern Ireland Decisions >> Northern Ireland Water Ltd v Chivers & Anor [2016] NICA 22 (23 May 2016)
URL: http://www.bailii.org/nie/cases/NICA/2016/22.html
Cite as: [2016] NICA 22
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| [2016] NICA 22 | Ref: | WEI9972 |
| Judgment: approved by the Court for handing down | Delivered: | 23.05.2016 |
| (subject to editorial corrections)* |
15/054572
BETWEEN
Appellant/Respondent
Respondents/ Claimants
WEIR LJ (delivering the judgment of the court)
The nature of the Appeal
[1] This is an appeal by Northern Ireland Water Limited ("NIW") by way of case stated from the decision of the Lands Tribunal for Northern Ireland ("the Lands Tribunal") delivered by Coghlin LJ, President, and Mr Henry M Spence, Member, on 12 May 2015. The decision related to a number of preliminary issues referred to it by the parties in relation to a claim for compensation by Mr and Mrs Chivers ("the claimants") arising from certain works executed on their lands ("the lands") at Drumsurn Road, Limavady.
The Background
[2] This is set out in detail in the Lands Tribunal's decision but may be summarised as follows. The lands, at all material times had development potential for housing. In 2006 NIW indicated an intention to lay a foul sewer across the lands ("the works"). A notice of intention was purportedly served by NIW upon the claimants although an issue arose as to whether that notice did in fact come to their attention at the time. In any event when they did learn of the proposal they concluded, probably correctly, that opposition to it would be pointless. NIW applied by notice dated 1 March 2006 through the Department for Regional Development for Northern Ireland ("the Department") for the registration in the Statutory Charges Register of its notice of intention to carry out the works, which application was made pursuant to Article 13(2) of the Water and Sewerage Services (NI) Order 1973 ("the 1973 Order") and paragraph 28(a) of Schedule 11 to the Land Registration Act (Northern Ireland) 1970. That notice was duly registered on 7 March 2006.
[3] On 3 August 2006 NIW entered upon the lands and proceeded to excavate a pipe track, lay a sewer pipe therein and then reinstate the excavations and the ground adjacent so that the work on the lands was completed by 5 October 2007. The claimants contend that, in addition to the inevitable temporary disruption caused during the works, the area of the pipe track together with an exclusion area to either side of it, measuring in total some 266 metres in length by 10 metres in width, is now permanently incapable of being built over. They say that in consequence the "before" value of the lands has been reduced and claim compensation accordingly. NIW does not dispute responsibility for the payment of compensation for the temporary disruption caused during the works but denies an obligation to compensate for any difference between the "before" and "after" values of the lands should any such difference in due course be demonstrated.
[4] The preliminary questions referred to the Lands Tribunal were:
(i) Did the respondent execute works at the claimants' lands at any material time:
(a) within the provisions of Article 55 of the 1973 Order; and/or
(b) within Article 18 of the Land Compensation (NI) 1982 Order ("the 1982 Order")?
(ii) If so, what were those "works" and
(a) when; and
(b) where were they executed?
(iii) Did the claimants sustain "damage" caused by or in consequence of any such works?
(iv) If so, what was the nature of that loss or damage?
(v) In the circumstances, what heads of compensation (if any) are awardable to the claimants pursuant to:
(a) the 1973 Order; and/or
(b) the 1982 Order?
[5] The Lands Tribunal answered the questions as follows:
(i) (a) Yes
(b) No
(ii) (a) The works detailed at paragraphs [6] and [7] hereof and executed between 3 August 2006 and 5 October 2007.
(iii) Yes.
(iv) The exact nature and extent of any loss and/or damage sustained by the claimants is a matter to be established at a further hearing.
(v) To be the subject of further submissions.
[6] NIW applied to the Lands Tribunal to state a case for the opinion of this court and it did so on 3 June 2015, posing the following questions:
(a) Whether the Tribunal was correct as a matter of law to hold that the claimants had sustained damage caused by or in consequence of works within the provisions of Article 55 of the 1973 Order entitling them to compensation in respect of the diminution of the development value of their land as a consequence of the alleged sterilisation of a portion of the land by reason of the presence of foul sewer pipes on their land (paragraph [13] of the Decision).
(b) Whether the Tribunal was correct as a matter of law to hold that the claimants were entitled to such compensation by virtue of Article 55(2) of the 1973 Order (read with Section 38(3) of the Mineral Development Act (NI) 1969) on the basis that the respondent had obtained 'ancillary rights' over their land (paragraph [15] of the Decision).
(c) Whether the Tribunal was correct as a matter of law to hold that, if the answer to each of the above questions is 'no' as a matter of ordinary statutory construction, that would be inconsistent with the requirements of Article 1 of the First Protocol ECHR (paragraph [19] of the Decision).
(d) In the premises, whether the Tribunal was correct as a matter of law to answer the preliminary issues raised by the parties as it did (paragraph [20] of the Decision).
[7] It will be noted that the Lands Tribunal had decided at (i) (a) and (b) that the works had been executed subject to the provisions of Article 55 of the 1973 Order and not those of the Land Compensation (Northern Ireland) 1982 Order ("the 1982 Order"). This, put shortly, was because the Lands Tribunal concluded that the latter provisions relate only to situations where works have been executed 'on land acquired' (whether compulsorily or otherwise) by an authority possessing compulsory acquisition powers and held that no land or interest in land had in this case been acquired by the Department whose wayleave merely made lawful the carrying out of works on the lands. That conclusion on the effect of the compensation provisions of the 1982 Order has not been challenged by either party to this appeal and accordingly this court has not been called upon to decide it although, pace the absence of argument, it appears to be correct.
[8] Rather, as noted above, the Lands Tribunal held that the applicable compensation provisions for the works are those under Article 55 of the 1973 Order:
"Compensation etc in respect of execution of works
55.-(1) In executing any works under this Order, the Department shall –
(a) cause as little detriment and inconvenience and do as little damage as possible;
(b) make good, or pay compensation for, any damage to the property of any person caused "by or in consequence of" the execution of the works in relation to a matter as to which he has not himself been in default.
(2) Sub-sections (2) to (6) of section 38 of the Mineral Development Act (Northern Ireland) 1969 shall have effect for the purposes of any claim for compensation under this Article as if, in those subsections, any reference to that section, that Act or the Department of Enterprise, Trade and Development were a reference to, respectively, this Article, this Order or the Department." [All emphasis in italics supplied here and hereinafter]
The compensation provisions of sub-sections (2) to (6) of Section 38 of the Mineral Development Act (NI) 1969 ("the 1969 Act") which are made applicable to claims for compensation under Article 55 of the 1973 Order are as follows:
"Compensation for damage caused in working minerals etc
(2) Any question arising as to—
(a) the entitlement of any person to compensation under this section, or
(b) the amount payable by way of that compensation,
shall, in default of agreement, be referred to and determined by the Lands Tribunal.
(3) Compensation under this section in respect of damage to land shall not be payable to any person from whom any land has, or ancillary rights over any land have, been acquired by the Ministry under this Act and to whom any compensation is payable under Article 8(1) to (3) of the Land Compensation (Northern Ireland) Order 1982 by the Ministry in respect of injurious affection of the first-mentioned land.
(4) In assessing compensation under this section in respect of damage to land regard shall be had to any benefit which the person entitled to the compensation may derive from any works which have been or are to be carried out, or any use of land, by the person causing the damage.
(5) In assessing compensation under this section in respect of damage to land regard shall also be had to any undertaking given by the person causing the damage to make alterations or additions to any works, or to construct additional works, or to vary or abandon any use of land, or to abandon part of any land acquired or any ancillary rights, or to grant other lands or easements.
(6) Where for the purpose of assessing the amount of any compensation payable under this section the value of any land is required to be determined, that value shall be determined in accordance with rules (2) to (4) of Article 6(1) of the Land Compensation (Northern Ireland) Order 1982."
The Competing Arguments of the Parties
[9] Before the Lands Tribunal and again before this court the essential argument of NIW on the proper construction of Article 55(1)(b) of the 1973 Order was that the right to compensation is limited to direct physical damage to property, in this case the digging of the pipe track and the loss of use of the affected area of land during the period of the works until ultimate reinstatement. Any restriction upon the subsequent development of the lands due to the inability to build over the pipe or its immediate vicinity is to be categorised as "pure economic loss" and not a subject of compensation. On behalf of the claimants it was argued that there has been damage to their property for which, absent the protection of the statutory power to carry out the works on private land given to NIW by the provisions of Articles 13 and 50 of the 1973 Order, the land owners would have been entitled to sue for damages. However, in those circumstances the assessment of compensation is to be such as legislation provides for, in the present case under Article 55 of the 1973 Order coupled with Section 38 sub-sections (2) to (6) of the 1969 Act.
The Lands Tribunal Decision
[10] The Lands Tribunal first noted that Outline planning permission for housing had existed on the lands prior to the works and that, on a part of the lands, Reserved Matters approval had since been granted. It also noted that there would be a prohibition on the erection of buildings and/or permanent structures over and for a distance on either side of the sewer. It concluded that the works had resulted in restriction of the land owners' ability to develop the land to the full extent of planning permission.
[11] The Tribunal then considered whether this restriction fell within the words of Article 55(1)(b) of the 1973 Order requiring the Department to "pay compensation for any damage to the property of any person caused 'by or in consequence of the execution of the works …" and concluded that the words "in consequence of" must import something more than compensation for the direct physical damage caused 'by' installing the sewer. It rejected the submission by Mr Scoffield QC for NIW that the words 'in consequence of' should be limited to physical damage eg further excavations necessary for future repairs and/or maintenance of the sewer. It concluded that 'in consequence of' encompassed damage following as a result or effect of the execution of the works. More controversially perhaps, it concluded at [15] that the Department had acquired 'ancillary rights' to install and maintain the sewer by virtue of Article 55(2) of the 1973 Order when read with Section 38(3) of the 1969 Act. Finally, having invited supplemental submissions on the question, it concluded at [19] that if the land owners were, contrary to its finding, not in fact entitled to compensation for any diminution in the development value of the land which might be demonstrated as a consequence of the alleged sterilisation of a portion of the lands by the presence of the sewer such lack of entitlement would be inconsistent with the requirements of Article 1 of the First Protocol of the ECHR. This was because the interpretation contended for by NIW "would provide the state with the power to reduce the development value of the claimant's land by restricting the claimant's ability to fully develop their property in accordance with the outline planning permission while depriving the claimants of fair compensation therefor".
Consideration
[12] In the view of this court the starting point for a consideration of the questions raised is to determine the legal nature and quality of a wayleave such as this. Article 3(1)(b) of the 1973 Order[1] imposed a duty on the Department as one of its functions under that Order to provide and maintain sewers. Article 13 empowered the Department to provide and maintain such works as it considered necessary or expedient for the purposes of any of its functions under that Order but before constructing a sewer in or over any land not forming part of a road maintainable at the public expense it was to give notice to the owner and occupier of the lands. There was provision for the consideration of any objections following which, if the work was to proceed, Article 50 provided powers of entry for executing the work. Importantly, nothing in the 1973 Order or elsewhere provided for the acquisition of any legal interest in the lands over which the works were to be effected. The effect of the legislation was simply to make lawful actions by the statutory undertaker on the land of another which would otherwise have constituted a trespass.
[13] Not dissimilar legislation was discussed by the English Lands Tribunal in St John's College Oxford v Thames Water Authority [1990] 1 EGLR 229 which was a reference by consent to determine compensation for damage done to, or injurious affection of, two agricultural estates owned by the college and let to farmers as a result of the laying across them of an underground water pipe. The language of the relevant English legislation was:
"Where the undertakers, in the exercise of their powers under this section, lay a main in, on or over any land not forming part of a street, or inspect, repair, alter, renew, or remove a main laid in, on or over any such land, they shall from time to time pay compensation to every person interested in that land for any damage done to, or injurious affection of, that land by reason of the inspection, laying, repair, alteration, renewal or removal of the main.
[14] In giving the decision of the English Tribunal, the President, VG Wellings QC, said this about the nature of a Water Authority's statutory power to lay mains under land and the nature of any compensation to be paid in consequence of the exercise of the power:
"It is common ground between the parties and indeed axiomatic that when a pipe is laid under land by a water authority under section 19 of Schedule 3 to the Water Act 1945, as amended, no easement or other legal or equitable right in the land is created or acquired by the authority. The section is concerned to give not rights but powers to water authorities. The section does not provide for a consideration to be paid by the authority in exchange for the exercise of any of the powers granted. The only remedy provided by the section is compensation for damage done to land or for injurious affection of land where the damage or injurious affection is attributable to the laying, repair, alteration, renewal, removal or inspection of the main. The descriptions of payments made by the Thames Water Authority to landowners as "recognition payments" or "right of entry payments" do not appear to be apt, because they do not appear to describe compensation for damage but rather payments in the nature of consideration for a right to enter or re-enter the land. The section provides no remedy for loss of the consideration which a landowner might expect to receive if he granted an easement."
[15] We agree with this description of the way in which an entitlement to compensation may arise. No interest in land has been acquired and compensation is payable only for "damage to the property … caused by or in consequence of the execution of the works". The next question therefore is as to what amounts to compensatable damage? Assistance with this is also to be gained from the decision in the St John's College case. In it the valuers on either side had put forward competing figures for the alleged permanent loss, based upon assessing the "before" value per acre of what was agricultural land, calculating the acreage affected by measuring the actual length and the "sterilised" width of the pipe track and its margins and applying a percentage reduction to that affected acreage.. The President considered himself constrained by the parties' agreement to use this approach but expressly made it clear that he did so only because that had been agreed between the valuers on both sides:
"In my judgment, the damage or injurious affection attributable to the pipe affects not merely the strip but each farm as whole and therefore the college's reversions expectant upon the tenancies in that the strip cannot in practice be utilised for the purposes of improving the holdings by erection of new buildings, agricultural or otherwise, or planting timber trees there. I accept that by reason of that damage or injurious affection the reversions are diminished in value.
In the circumstances, I have to assess the compensation by applying one of the methods recommended by the expert witnesses. It is a possible interpretation of all the formulae put forward by them that they are designed not for the purpose of assessing compensation for damage or injurious affection but rather as a recognition payment or right of entry payment, that is to say, a payment in the nature of a consideration. Unless I call for further evidence or argument (both of which I wish to avoid) I must, however, do the best I can with the material provided."
[16] This court agrees with the approach suggested by the English President had he been free to follow it and as in fact followed by the Lands Tribunal in the present case. If compensation were to be limited to the temporary damage caused by the works prior to their reinstatement together with temporary interference with agricultural or other operations over the area of land physically affected then the words "caused by" would have adequately covered the payment of compensation for such. However, as the Lands Tribunal pointed out at [13] of its decision, "… the ordinary meaning of the words "in consequence of" the execution of the works in Article 55 of the 1973 Order encompasses damage following as a result or effect of the execution of the works". In other words, compensation may also be claimed for any depreciation that can be proved in the value of the lands due to the presence of the sewer within them.
[17] Interestingly, it appears from an internal Practice Note of May 2004 by the Valuation and Lands Agency ("VLA"), which was provided to this court in the parties' joint bundle of materials, that the VLA had altered its own approach to the proper basis for the assessment of compensation where a wayleave is "acquired" under the 1973 Order in the light particularly of reconsideration by it of the St John's College case. The following passages from that Practice Note are of particular interest in the context of the present case:
"4.2 Actual Loss
4.2.1 Following on from Article 55, the need to remedy the damage to property caused by the scheme means that the valuer must try and establish actual loss. This necessarily involves taking a view on the "before" and "after" values.
4.2.2 Existing VLA instructions (para 3.8) do say that "in all cases the final measure of compensation payable for the wayleave is the depreciation, if any of the interest as a result of the works ie the difference between before and after values". This paragraph should have been emphasised more strongly at the time.
4.2.3 In practice, actual loss has at times tended to get confused by the use of the term "recognition payment". As recent DSO advice has highlighted there is no automatic right to compensation simply because a pipe has been laid over a person's land. For example, actual loss due to a scheme may be NIL. It is therefore recommended that from now on the term "recognition payment" be no longer used.
4.2.4 Since most cases dealt with by VLA involve agricultural land where there is no market evidence in regard to the "after" value, the practice has been to assess compensation for damage to property based on 50% of the area of the working width (following the Tribunal's award in the St John's case).
4.2.5 DSO has recently given the opinion that they are "not convinced that it is appropriate to pay compensation based on an artificial formula as a matter of policy". To do so runs counter, in their view, to both Horn v Sunderland principles of equivalence and the wording of the relevant statute ie Article 55 of the 1973 Order.
4.2.6 In this context VLA cannot be seen to be applying the 50% formula in any automatic or unthinking way. As already stated actual loss must be the valuer's primary consideration. However, in the absence of any other evidence regarding the post-scheme value, the 50% formula still has a place in achieving settlements. It is a method of calculating loss accepted by both the public and private sectors and DSO also accept that it should continue to be used where there is no other method of establishing the after value.
4.2.7 It should be noted that working width varies depending on the size of the pipe being laid. Hence, the affected area should be examined in terms of each individual scheme so that the actual loss can be assessed.
4.2.8 Compensatable damage to property may also include temporary disturbance and other losses directly attributable to a scheme. However, mere temporary inconvenience is not compensatable and there is an overriding obligation on claimants to minimise their loss.
4.2.9 Compensation is also payable in the event of subsequent pipe bursts, subsidence etc, if the person had a compensatable interest initially. It is therefore not appropriate to include as separate heads of claim at the initial stage the possibility of future loss as this could lead to double counting.
…
4.4 "Hope Value"
4.4.1 Hope value is a matter of fact and degree – it must not be a vague hope of planning permission but must be reasonable and not too remote. Claimants should be required to first prove the existence of hope value and then prove that it has been damaged by the scheme.
4.4.2 If, as is often the case, the pipeline runs close to the road frontage of land then the hope value may not have suffered any damage at all i.e. development potential before is the same as development potential after.
4.4.3 Where a pipeline runs across land that is likely to be developed, it is usually possible to design a layout around the pipeline with no loss of housing density, in these circumstances there would be no loss of value, though there may be expenses associated with reviewing a layout that had already been completed."
[18] These VLA instructions to government valuers accord with the views of the English President in the St John's College case, with the conclusion of the Lands Tribunal in the instant case and with those of this court. Plainly the approach to be used in the assessment of any claim for compensation arising from "damage" caused by or in consequence of the works involves two possible separate elements:
(i) any residual un-reinstated physical damage due to the works and/ or loss of use during the period of the works themselves; and
(ii) any diminution in the value of the lands as a whole to be assessed by examining the "before" and "after" values of the lands to see whether there has been a diminution when assessed according to the principles imported from section 36(3)(6) of the 1969 Act.
[19] Unfortunately however, the fact that the instant claim for compensation was not heard as a whole but by the raising of preliminary questions has complicated the task of the Lands Tribunal and made it impossible for this court to answer some of the questions raised by the case stated. There seems to be no very good reason why the Lands Tribunal should have been asked to deal with this claim by way of "split" hearings. That approach has prolonged the matter and will no doubt have added to its expense to an extent far exceeding the cost of preparing expert valuation evidence in respect of any claimed loss and presenting it at a single hearing. Had the matter been dealt with in a complete rather than piecemeal fashion the entire matter could have received consideration. This court has said before and is now again obliged to repeat that "split" trials ought not to be sought nor ought they to be permitted unless in exceptional circumstances and for very good cause. The way in which the first and fourth questions for this court's opinion have been drawn makes them incapable of proper answer, simply because the factual material needed has yet to be presented to the Lands Tribunal. However, in order to seek to avoid yet further delay by remitting this matter to the Lands Tribunal to reconsider its answers to the preliminary questions posed to it in the light of valuation evidence together with the questions posed by the Lands Tribunal to this court we shall endeavour to provide our conclusions based, necessarily, upon hypotheses. This is not an ideal approach but rather one motivated by a pragmatic desire to see this claim in respect of 2006 works proceed to finality.
Questions posed to this Court
[20] The answers to the questions posed to this court are:
(a) (i) We consider that the Lands Tribunal was correct to hold that "damage" was caused within the meaning of Article 55 of the 1973 Order "by" the execution of the works. Compensation will potentially include any restoration that NIW may not have adequately completed together with the loss of use of the land over which the work was actually carried out during its continuance.
(ii) We cannot say whether damage was caused "in consequence of" the execution of the works as that will depend upon an assessment of the "before" and "after" value of the lands, as to which neither the Lands Tribunal nor this court has any present information. Whether any possible housing layout has been compromised in design, density, ease or cost of development or the need to avoid building on or near the sewer are but examples of matters that might, if any apply, cause a diminution in the "before" value. In addition, it will be recalled that Section 38(4) of the 1969 Act provides:
"In assessing compensation under this section in respect of damage to land regard should be had to any benefit which the person entitled to the compensation may derive from any works which have been or are to be carried out … by the person causing the damage."
Whether this provision might affect the assessment of any loss claimed to have resulted from the "damage" we simply cannot know at present.
(iii) It is therefore impossible to say at this juncture whether there has been a diminution of the development value of the lands. Valuation evidence will first be required. All that can at present be said is that, should there be proved to be such diminution in consequence of the works we would hold that loss to be compensatable.
(b) We find that the Lands Tribunal was correct as a matter of law to hold that any compensation that the claimants may be entitled to will derive from the provisions of Article 55(2) of the 1973 Order assessed in accordance with the principles imported from Section 38(3) to (6) of the 1969 Act. We do not however agree with the Lands Tribunal that that entitlement arises "on the basis that the respondent had obtained ancillary rights over the lands". As is clear from the earlier discussion, any entitlement to compensation arises from "damage" caused by the works and nothing more. The respondent has obtained no rights over the lands, ancillary or otherwise, by virtue of either Article 55(2) of the 1973 Order or Section 38(3) of the 1969 Act whether read separately or together. On the contrary, Section 38(3) makes it plain that compensation for damage is not payable under the Section 38 provisions to any person from whom any land has, or ancillary rights over any land, have been acquired under the 1973 Order and to whom compensation is payable under Article 8(1) to (3) of the Land Compensation (Northern Ireland) Order 1982 in respect of injurious affection of that acquired land. In short, Article 55(2) of the 1973 Order provides for compensation for "damage" to land and not for "acquisition" of land or any ancillary right over land. In this particular respect we hold that the Lands Tribunal was not correct.
(c) As we have answered both questions (a) and (b) posed by the Lands Tribunal with a qualified "yes" this question on the potential applicability of Article 1 of the First Protocol ECHR does not arise.
(d) This question revisits the preliminary issues posed to the Lands Tribunal. The basis for our conclusions appears from the earlier discussion:
(i)(a) We agree that the respondent did works on the claimants' lands to which the provisions of Article 55 of the 1973 Order applied.
(b) It was not argued before us that the Lands Tribunal was wrong to conclude that the provisions of Article 18 of the 1982 Order did not apply to the works.
(ii) We agree that the works were executed between 3 August 2006 and 5 October 2007.
(iii) We agree that the claimants sustained "damage" caused by the works. In the absence of valuation evidence we are unable to say whether the claimants sustained "damage" in consequence of the works.
(iv) We agree that the exact nature and extent of any loss and/or damage allegedly sustained by the claimants is a matter that must be established at a further hearing.
(v) We agree that the heads of compensation (if any) awardable to the claimants pursuant to the 1973 Order require to be the subject of further submissions and we express the earnest hope and expectation that such submissions will be made at a final hearing which is adequately informed by comprehensive valuation evidence sufficient to bring this matter to a final conclusion without any more hypothetical ado.
Note 1 The 1973 Order was repealed and replaced by the Water and Sewerage Services (NI) Order 2006 (NI21) on 1 April 2007 [Back]