Neutral Citation No:  NICh 23
Judgment: approved by the Court for handing down
(subject to editorial corrections)*
2015 No. 80904
(i) Does the 1976 Grant of Easement permit the plaintiffs to replace a water pipe currently 1.8 metres in diameter with a rectangular pipe 2.2 metres by 5 metres in dimension?
(ii) Are the plaintiffs entitled to rely upon the equity doctrine of estoppel (promissory and/or proprietary estoppel) so as to preclude the defendant from refusing to allow them to replace a water pipe 1.8 metres in diameter with a rectangular pipe 2.2 x 5 metres dimension?
B. BACKGROUND INFORMATION
"All that Weir more particularly described on the Map attached hereto and thereon coloured purple being situate on the River Maine and being partly in the Townland of Aghaboy and partly in the Townland of Magheralave in the County Antrim together with a right to divert and take from said river at the point marked 'H' on the said map attached hereto such quantity of water as the Purchaser shall require for the purposes of the fish farm situate on the Lands coloured blue on the said Map and together also with the right to maintain and operate the said Weir for this purpose and together also with the right to enter upon the said Lands remaining in the ownership of the Vendor for the purposes of repairing or renewing the said Weir …"
(a) Oxygen generation.
(b) Oxygen injection.
(c) CO2 de-gassing.
(d) Heat/cooling regulation of the hatchery.
(e) Water filtration.
(g) Husbandry equipment.
The intensities will be four times higher than in the previous operation. The new intensive processes would be wholly dependent on intensified production methods which require additional electrical capacity. He thought that a power capacity of 200 KW would be required and that this could be provided if a suitable new pipe is installed. I have no doubt from listening to Mr Warrer-Hansen that a modern fish farm, able to operate and make a profit, could only do so if intensive methods are used and that would necessarily require a generous supply of cheap on-site electricity. I also accept that 143 KW would be required by the fish farm in periods of maximum feeding and that at other times the need might be even higher. Hydro-electric power generated from the Weir would provide the cheap power required and thus is a key to ensuring that a commercial fish farm is able to operate successfully on this site.
"… the farm at present is in need of renovation to function even as a non-intensive farm. It is proposed to carry out the following works.
- NH – New hatchery and starter feeding unit with heat/cooling.
- Replacement of the six concrete round tanks with new fiberglass or concrete module tanks same number and size.
- Renovation of the grow-out sets of raceways – same dimensions.
- Six new round tanks in the area below the existing lay-out. These tanks can be used for the larger sized trout. The dimensions 12m diameter and water depth of 1.5m. Total volume of 1,070m3.
- The stock intensities will be intensive, from standard 15-20 kg/m3 an old system to up to 50 and 80 kg/m3 in the table trout part and the larger trout unit reflectively. This will entail oxygen injection systems in both production areas and CO2 de-gassing by aeration in the larger sized trout section."
(a) A hydro-electrical 200kw system was viable at this location.
(b) The project would be eligible for NIE grant funding up to a maximum of £20,000.
(c) It would generate sufficient electricity to make it viable.
I reject any suggestion that it was originally the plaintiffs' primary intention to operate the fish farm with the sale of excess electricity being merely incidental to such a scheme. The primary objective of this original hydro-electric scheme was "to produce electricity for sale to the grid".
"… he intended to put a hydro-electric turbine, to which the (defendant) agreed. The first-named plaintiff explained to (the deceased) that he would bring over his intended planning application drawings for discussion with the deceased."
In November 2010 the first plaintiff claimed that he then produced the drawings and the first plaintiff claims that the deceased gave his go ahead to work being carried out in accordance with the planning application, "as long as the pipe was covered up".
"A significant element in the development of this project will be the need to obtain permission from the owner of the field to install this structure across his land. We would recommend that the terms of this agreement are discussed and agreed at the earliest possible stage of the project, preferably before preparation of planning proposals."
I am satisfied that this was not done. This was sound advice that the first plaintiff should have followed to the letter. The first plaintiff failed to do so at his peril. He should have explained in detail what he intended to do and his purpose. But as I have said I am unpersuaded after listening to the first plaintiff that any clear assurance was given to him upon which he or his co-plaintiff relied.
"Further to our discussions regarding the construction of a pipeline in the form of a boxed culvert along the line of the existing pipeline, this letter is to give you formal notice of my intention to carry out the works on your lands in pursuance of the rights granted in the Transfer Deed dated 28 July 1976 from yourself to William John Baird from whom I acquired the benefit of those rights."
It is highly significant that this letter does not rely on any agreement, representation, assurance or promise given by the deceased to the first plaintiff in 2010 but instead relies entirely on the "rights granted in the Transfer Deed dated 28 July 1976", which related to the operation of a fish farm.
"The rights you refer to in the 1976 deed permit you to maintain the water pipe that was installed when the 1976 deed was signed. It does not permit the pipe to be enlarged or enhanced. Our client instructs that your plans disclose a considerably larger pipe being installed. This is not permitted without fresh consent from our client as this work is not permitted under the deed with which you hold land."
"This pipe will be used to convey a supply of water from the river to run a turbine or turbine's free electricity which would be used for the purposes of the fish farm."
The letter then goes on to state:
"For your information, it is not intended that the electricity supply thereby created will be connected to the grid."
I understand that this is a mistake and it was meant to read that the electricity would not be supplied to the grid. In any event, this marks a major change in the plaintiffs' strategy. The deceased's solicitors wrote back on 6 March 2014 saying they had no objection to the installation of an underground water pipe but they insisted that it would be "the same size as the one that it replaced and will not be enhanced". On 3 July 2014 the plaintiffs' solicitors wrote to the deceased's solicitors making it clear that it was their intention to replace the current pipeline with a pipeline of an increased internal section measurement of 2.2 metres by 5 metres.
The defendant's solicitors refused to agree and replied on 22 July 2014 as follows:
"It is obvious that your client is attempting to create a channel for the purpose of a Hydro Scheme by the back-door which is clearly something that goes far beyond the rights already granted in favour of your client."
(i) HydroNI intended to put up the capital.
(ii) This was an excellent site for developing hydro-electric power.
(iii) The cost of making an open channel was much less than a closed pipe, although both were viable.
(iv) HydroNI built projects for clients and have done 37 sites to date.
(v) There was now no entitlement to Renewable Obligation Certificates ("ROCs").
(I should point out that these proceedings have concentrated exclusively on liability. Any potential claim for damages will therefore fall to be considered at a separate hearing following this judgment.)
I can summarise his evidence briefly as follows:
(a) Otterburn is a potentially profitable fish farm.
(b) However to make it profitable will require renovation, expansion and intensified production and improved husbandry.
(c) The net profit dependent as it is on the hydro-electric scheme to produce cheap power for the enterprise, provides a return which would be considered acceptable for a trout fish farm.
(d) The total investment return which is envisaged represents good value.
The above is necessarily a brief summary of the history which forms the background to this particular dispute.
The relevant legal principles
"The precise effect of a purported grant or reservation of easements or profits is, of course, to a large extent a matter of construction of the particular conveyance. In such questions of construction two principles are most relevant, namely that a grant is in general construed against the grantor and that a man may not derogate from his grant. The first principle means that, in the cases of doubt (e.g. over the exact scope of the easement or profit), a grant of an easement or profit would be construed against the grantor in favour of the grantee, …. The underlying philosophy is that the person who is in a position to dictate the terms of the transaction, by making the grant, cannot complain if a dispute subsequently occurs and he is not given the benefit of the doubt."
"As regards the rule that the man may not derogate from his grant, the philosophy here is that, when a man transfers his land to another person, knowing that it is going to be used for a particular purpose, he may not do anything which is going defeat that purpose and thereby frustrate the intention of both parties when the transfer is made."
"From the outset, however it must be emphasised that the section does so through giving an extended meaning to general words in an express grant."
"There is little or no dispute between the parties as to the approach to the construction of the 1995 deed as a contractual document. As Sir John Pennycuick, giving the judgment of himself, Russell and Orr LJJ in St Edmundsbury and Ipswich Diocesan Board of Finance v Clark (No.2)  1 WLR 772 said:
'... one must construe the document according to the natural meaning of the words contained in the document as a whole, read in the light of surrounding circumstances.'
Those are the surrounding circumstances at the time the document was executed. Further, as Lord Hoffmann emphasised in ICS Ltd v West Bromwich Building Society  1 WLR 98:
'(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.'
Only if the court cannot ascertain the meaning does it have recourse to the presumption that the document is construed against the grantor."
"(i) The ultimate aim of contractual construction is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant. The reasonable person is taken to have all the background knowledge which would reasonably have been available to the parties in the situation in which they were in at the time of the contract.
(ii) The Court has to start somewhere and the starting point is the wording used by the parties in the contract.
(iii) It is not for the Court to rewrite the parties' bargain. If the language is unambiguous, the Court must apply it.
(iv) Where a term of a contract is open to more than one interpretation, it is generally appropriate for the Court to adopt the interpretation which is most consistent with business common sense. A Court should always keep in mind the consequences of a particular construction and should be guided throughout by the context in which the contractual provision is located.
(v) The contract is to be read as a whole and an 'iterative process' is called for:
'….involving checking each of the rival meanings against other provisions of the document and investigating its commercial consequences'."
Finally, it is important to "elucidate the commercial purpose of the contract under consideration, and as between competing interpretations to select the meaning which best serves the commercial purpose of the contract as perceived by the court": see 2.07 of Lewison on the Interpretation of Contracts (6th Edition).
(i) There is no restriction in the amount of water which can be diverted save that it comprises such water as is (reasonably) required for the purposes of a fish farm.
(ii) There is no restriction placed on the dimension of the pipeline.
(iii) The pipeline must be of sufficient dimension to take the water diverted from the Weir.
(iv) The right is given to the deceased and his successors in title.
(v) The commercial purpose of the easement is to allow the grantee to run and operate a (viable) fish farm.
(vi) Without an increase in the water supply, which requires a consequent increase in the diameter of the water pipe, a fish farm cannot operate at this location.
It seems to me that a fair construction of the easement taking both documents together is that the plaintiffs are entitled to install a pipeline of sufficient diameter to take water diverted from the Weir provided that the water is reasonably required for the purposes of the fish farm. This will of course include providing power to drive the various processes of the farm. The commercial purpose of the easement (and the indenture) is to allow the operation of a fish farm at this location. The plaintiffs are not entitled to install a larger diameter pipe in order to produce hydro-electric power which they can then sell on to the national grid because that is not the purpose of the grant. I do consider that in the overall context "install" and "renew" must include the right to lay down a larger (or smaller) pipeline to cope with such water as is diverted from the Weir and which is required to service the (reasonable) purposes of the fish farm. The right to install and renew, must include the right to lay down a pipe of larger diameter, if otherwise a fish farm could no longer operate as a viable enterprise. To refuse to allow a new, larger pipeline to be installed would defeat the very purpose of the easement, namely to permit a commercial fish farm to operate at this site. Further, I am satisfied that by refusing to allow the plaintiffs to install a larger diameter pipeline, the defendant is derogating from the grant in that he is preventing the operation of a fish farm at Otterburn, given that without the new pipe a fish farm could not operate at this location. In other words, the construction contended for by the defendant defeats the very purpose of the grant, namely the ability of the grantee to operate a fish farm. This cannot be a lawful interpretation of the easement (and the indenture). If the deed is ambiguous, and I do not believe in the overall context it is given its commercial purpose, then the ambiguity as to what install (or renew) means, must be construed against the deceased.
"It is submitted the words themselves are clear and unambiguous and can be construed that there is no restriction on the amount of water other than the requirement that is used for the purposes of a fish farm. It is a wide construction and the dimension of the pipes must be sufficient to carry the water from the Weir to the fish farm. The dimension of the pipes is not fixed within the grant but rather is determined by the amount of water which is required for the purposes of the fish farm."
"The new pipe proposed by the appellants would improve their flow at the expense of that to the farm."
Pill LJ's conclusion that the word "install" was not designed to permit the appellants to install a completely new system was a correct finding on those facts. But such a conclusion was confined to another deed and circumstances were very different, including the fact that the only claim before the court at first instance (and the Court of Appeal) related to one of trespass.
" The authorities discussed above appear to me to indicate that that issue should have been determined by answering two questions. Those questions are:
(i) Whether the development of the dominant land, ie the site, represented a radical change in the character or a change in the identity of the site …
(ii) Whether the use of the site as redeveloped would result in a substantial increase or alteration in the burden on the servient land, ie the cottage …
 In my opinion, the effect of the authorities in relation to the present case is that it would only be if the redevelopment of the site represented a radical change in its character and it would lead to a substantial increase in the burden, that the dominant owner's right to enjoy the easement of passage of water through the Pipe would be suspended or lost.
 In reaching this conclusion, I am relying principally on cases relating to rights of way. It appears to me that none of the decisions concerned with the passage of water are inconsistent with such reliance, and there are two such decisions. … The satisfaction of only one of the two requirements will not, at least on its own, be sufficient to deprive the dominant owner of the right to enjoy the easement, in light of the first and third principles which I have suggested can be extracted from the cases. However, where both requirements are satisfied, the dominant owner's right to enjoy the easement will be ended, or at least suspended so long as the radical change of character and substantial increase in burden are maintained."
(a) A representation in the nature of a promise.
(b) A promise that the promisee understood was intended to effect relationship by the promisor and could be relied upon by the promise.
(c) An existing relationship: see Snell's Equity (33rd Edition) at 12-24.
(i) A representation or assurance made to the plaintiff.
(ii) Reliance on it by the plaintiff.
(iii) Detriment to the plaintiff as a result of his (reasonable) reliance: see Gillet v Holt  Ch 210 at 225.
"Proprietary estoppel requires, in my opinion, clarity as to what it is that the object of the estoppel is to be estopped from denying or asserting, and clarity as to the interest in the property in question that that denial or assertion, would otherwise defeat."
"Furthermore, the more recent cases indicate, in my judgment, that the application of the Ramsden v Dyson principle – whether you call it proprietary estoppel, estoppel by acquiescence or estoppel by encouragement is really immaterial – requires a very much broader approach which is directed rather at ascertaining whether, in particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly or unknowingly, he has allowed or encouraged another to assume to his detriment than to enquiring whether the circumstances can be fitted within the confines of some pre-conceived formula serving as a universal yardstick for every form of unconscionable behaviour."
It is important to note that Lord Walker does say at paragraph :
"This passage certainly favours a broad or unified approach to equitable estoppel. But it is emphatically not a licence for abandoning careful analysis for unprincipled and subjective judicial opinion."
In this case there was no clarity, taking the plaintiffs' case at its very height, as to whether the consent was to a new and large pipe for the generation and sale of hydro-electric power for sale to the grid or for the generation of power for use in a more intensive fish farm or for a combination of both.
(a) I am unpersuaded by the testimony of the first plaintiff as to whether a clear assurance was given to him by the deceased at all in respect of the pipe.
(b) Certainly there was no clear and unequivocal representation by the deceased to the plaintiffs that they could put down a new larger pipe to produce hydro-electrical power for sale to the grid, which was the plaintiffs' original scheme. The plaintiffs' position changed much later apparently following legal advice. By then the deceased and his solicitors had made it clear that a larger pipe could not be installed as of right and would have to be paid for by the plaintiffs.
(c) If an assurance was given by the deceased, and I remain unpersuaded, the plaintiffs did not rely on this assurance at this time because they would have been aware that the defendant was not agreeing to them building a turbine to allow them to produce power for the onward sale to the grid.
(d) In those circumstances the deceased did not act unconscionably in refusing to allow the plaintiffs to relay a larger pipe for the turbine and it is unsurprising, apparently following legal advice, that the nature of the project has changed to one involving primarily the supply of hydro-electric power to use in the fish farm. Given that conclusion it is not necessary for me to comment about whether the plaintiffs, and in particular that the first plaintiff, behaved unconscionably by seeking to take an unfair advantage of the deceased, an elderly man.