Scottish Court of Session Decisions

TCS Holdings Ltd v. Ashtead Plant Hire Company Ltd & Ors [2003] ScotCS 1 (08 January 2003)

OUTER HOUSE, COURT OF SESSION
A5201/01	OPINION OF T G COUTTS, Q.C. Sitting as a Temporary Judge in the cause TCS HOLDINGS LIMITED Pursuers; against ASHTEAD PLANT HIRE COMPANY LIMITED and OTHERS Defenders: ________________

 

Pursuers: Young; Dundas & Wilson, C.S.

First Defenders: Johnstone; Simpson & Marwick, WS;

Second Defenders: Sanderson; Bishops

8 January 2003

1. The Forth Ports Authority own substantial lands at West Harbour, Granton. They leased 1.34 acres of that land to the pursuers' predecessors in title by Minutes of Lease registered in the General Register of Sasines on 10 July 1980. The date of entry was 5 May 1980. Between those lands and West Harbour Road, Granton, where the main public sewer ran, further lands were leased by the Authority to another, difficult, tenant. A foul water drainage pipe was laid which ran from the pursuers' lands and connect with the main public sewer underneath the adjoining property. The owners of the sewer laid by the pursuers' predecessors, are the Forth Ports Authority. The pursuers accordingly neither own the sewer nor have they any title to the lands through which it runs until it connects with the main sewer. In 1997 various works were commenced upon the lands adjacent to the pursuers' leaseholding through which the said sewer ran. The first defenders were then the leaseholders of that adjacent land. The second defender was the building surveyor engaged by them in connection with those works.
2. In the course of the conduct of those works damage was caused to the said sewer running from the pursuers' premises to the main sewer. As a result it collapsed. Substantial repairs were required which the pursuers were called upon by Forth Ports Authority to undertake in terms of a Minute of Agreement hereafter referred to. This action concerns the pursuers' claim for reparation from the defenders in relation to loss and damage caused by the said collapse.
3. The action came before the Court at procedure roll in respect of pleas-in-law for the defenders challenging the relevance of the action and the pursuers' title to sue. It was accepted by Mr Young for the pursuers that in order to succeed in his action he required to aver and prove that the pursuers had a possessory right to the sewer in question before they could be found entitled to damages.
4. In terms of the Minute of Lease there were leased certain lands together with a right to connect to and take into use all sewers, drains and services under, over or above any part of Granton Harbour and that without payment of any compensation together with the right of access to such sewers and others at all reasonable times for all reasonable purposes and payment of all damages thereby occasioned. The lease was to subsist until 11 November 2105. Development, maintenance and repairs were dealt with under Clause Sixth which in relation to sewers provided:

"The Tenants shall further relieve the Authority of an equitable share calculated according to the respective user of the proper and reasonable expenses attributable to the subjects of upholding, repairing, renovating and, where necessary, renewing all sewers, drains and services as are common to the subjects and the adjoining property and also any dock roadways and pavements and drains ex adverso the subjects for which the Authority might otherwise be liable exclusively or in common; such buildings, development, alterations and improvements as the Tenants shall effect shall become and remain the property of the Authority without any claim for compensation or otherwise by the Tenants on their removal."

In addition, Clause Eighth provided:

"The Tenants shall be bound at their sole expense so far as not already done to construct and maintain in good order and repair all drains, pipes and cables required to serve exclusively the subjects it being agreed, however, that the Authority shall maintain said drains, pipes and cables in so far as situated outwith the subjects let to the satisfaction of and, subject as after provided, at the expense of the Tenants; DECLARING, however, that in carrying out said maintenance the Authority shall not incur any major item of expense without first securing the written approval of the Tenants, such approval not to be unreasonably withheld: DECLARING, further that the Authority shall have the right to use or connect to the said drains, pipes and cables provided that the proposed use or connections are not reasonably likely to interfere with the then or proposed use of said drains and others and that without payment of compensation to the Tenants therefor subject to the Authority thereafter paying, and so indemnifying the Tenants in respect thereof, an equitable share (calculated according to the respective user), of the maintenance cost of said drains and others."

5. Prior to the lease, on 30 January 1980 the Forth Ports Authority had signed a document headed "Wayleave" commencing "... Minute of Agreement between the Forth Ports Authority and Town Centre Enterprises Limited" (the pursuers' predecessors). That document provided that the Authority, subject to conditions, granted to the second party the following "privilege" videlicet Lay storm water and foul drainage pipes to West Harbour Road, Granton Harbour between points illustrated on an attached drawing. That privilege was thereafter referred to as such in terms of the Minute of Agreement. Paragraph 4(5) and (6) provided, read short, for a complete indemnity for the Authority for any matter which but for the exercise and enjoyment of the privilege would not have arisen. By paragraph 5 it was provided:

"The Authority shall:-

(1) In the event of the Second Party carrying on any act in connection with the Privilege which in the opinion of the Authority and of which it is to be the sole and exclusive judge shall appear injurious or objectionable or likely to become so or shall be an annoyance or inconvenience to the Authority or to the neighbourhood or in case any part of the annual payment shall be in arrears for one month after the term when due or in case the Second Party shall fail to observe or perform the conditions herein contained or any of them then and on the occurrence of any of these events be entitled not only to recover from the Second Party all loss or damage the Authority may thereby sustain but also and in addition may in its option terminate this Agreement forthwith;

(2) after the expiration of three months notice in writing to the Second Party of its intention to do so (which notice may be given at any time) terminate this Agreement;

(3) reserve the right of its agents, servants and workmen to inspect the Privilege at all reasonable times and to construct under or over the Privilege any additional works which might be deemed necessary for the purpose of its undertaking without compensation to the Second Party therefor."

6. In relation to that matter a qualification was written by Town Centre Enterprises Limited on 29 January 1980 as follows:

"With regard to Clause 5, Paragraph (2) in the Agreement, it is understood that, while you do not wish to delete this Clause, its provisions would only be exercised as the result of a national emergency or a major dock redevelopment scheme.

I should be grateful if a copy of this letter could be attached to the Agreement and should be further obliged if you would confirm that our understanding is acceptable to you."

The understanding was plainly accepted by the Authority because they completed the Minute of Agreement upon the following day.

7. Counsel for the defenders set out in some detail before the Court the basis in authority for the proposition that the pursuers require to have a possessory right, but that having been accepted by counsel for the pursuer need not be rehearsed. Counsel argued that on a proper construction of the Lease and the Minute of Agreement the pursuers acquired no more than a personal right against the Forth Ports Authority to use the pipeline under the first defenders' leased lands. That personal right was defined as a privilege in terms of the documents, not as a right. It was not said to be transmissible, and was described as a wayleave. It was not recorded and was terminable by the grantor on a number of grounds thus giving extensive power to the Forth Ports Authority. The documents do not give to the pursuers a right of possession similar to that of ownership. The situation is similar to that described in Nacap Limited v Moffat Plant Limited 1987 SLT 221 at 223A-B where after referring to a long line of authorities the Court said that

"The distinction which is being drawn is between ownership on a right of possession similar to that of an owner on the one hand, and on the other hand mere contractual rights to have the use of services of the chattel for certain limited purposes. The question which arises in the present case is whether the right which they pursuers enjoyed in relation to the property which was damaged falls within the first or second of the foregoing categories".

The Opinion of the Court continued:

"In our opinion, although the pursuers no doubt had physical possession of the pipes while they were laying the pipeline in the sense that they handled the pipes, any possession which they had was for a limited purpose only. Any possession which they had was much less than that enjoyed by an owner or a person with a possessory right or title as recognised by the law. Any possession which the pursuers enjoyed was for the limited purpose of proceeding with the construction of the works. As already observed, the pursuers were not the owners of the pipeline. Moreover there was no question of the pursuers having anything in the nature of a lien over the pipeline. In terms of the conditions of contract, in relation to materials belonging to the pursuers, and transferred to the British Gas Corporation, it was specifically provided that the pursuers should not have a lien on such materials. If the pursuers were not to have a lien in such circumstances, it is even clearer that they would have no lien in the case of the pipelines which all along remained the property of the British Gas Corporation."

If, said counsel, it is correct that the defenders negligently damaged the Forth Ports Authority pipe, the proper measurement of damages is the loss caused to the Forth Ports Authority. Since it is not clear that those damages would be the same as the loss sustained by the pursuers that points to the conclusion that this claim is one which ought to be pursued by an owner or equivalent. In a recent case, Hand v North of Scotland Water Authority 2002 SLT 798, the pursuer was found to have had a possessory right to advance a claim for economic loss caused by a persistent ingress of water caused by the perforation and blocking of a sewer. But that was plainly different from the present case because Ms Hand was the tenant of the premises damaged a tavern, which was the very subject matter of the lease there under consideration.

8. There are further sound policy reasons for drawing a distinction between persons with rights similar to that of an owner and the personal or contractual right - Candlewood Navigation Corporation Ltd v Mitsui OSK Lines Limited 1986 AC 1 per Lord Fraser of Tullybelton, 15-16, 17F.
9. In any event even if the Minute of Agreement did give a possessory right of the necessary kind the pursuers' pleadings do not aver relevantly a duty on the part of the defenders to protect against economic loss. The duties averred in Condescendence 6 do not go beyond reasonable foreseeability and that is an inadequate basis on which to plead economic loss. See Rich & Co v Bishop Rock Limited, 1996 AC 211 per Lord Steyn at 235.
10. Counsel for the second defenders argued that the position which the law of Scotland had already reached prior to the speech of Lord Brandon in Leigh & Sillivan Limited v Aliakamon Limited Shipping Company 1986 AC 785 at 807 and 809E was expanded in that case. Reference was made to Dynamco Limited v Holland & Hannen & Cubitts Limited 1971 SC 259; East Lothian Angling Association v Haddington Town Council 1980 SLT 213 and to Nacap.
11. Counsel for the pursuers contended that the terms of the Lease and the Minute of Agreement did convey an aspect of a real right in relation to part of the pursuers' tenancy. He claimed and averred an exclusive right and referred the Court to North Scottish Helicopters Limited v United Technologies Corporation Inc 1988 SLT 77. There the Lord Ordinary felt able to disregard an argument that only one of the pursuers could have possessed the chattel in question at the material time finding comfort from Lord Brandon's words at p. 345 in Chahbre Corporation Pte. LW. And Jag Shakti (Owners) 1986 1 AC 337 known as "The Jag Shakti" where he said that for the purpose of the law of damages it was irrelevant whether A had the general property of the goods as the outright owner of them, or only a special property in them, as pledgee or only possession or a right to possession of them as a baillee. The Lord Ordinary further stated that in none of the cases cited in Leigh & Sillivan by Lord Brandon, did the claimant maintain that he had possession of the property in question at the material time. He said that he considered that the pursuers had a possessory right with a reasonable contract attaching to the chattel itself and further said:

"In future cases I anticipate that it may prove difficult to reconcile in all respects that formulation in Nacap with other authoritative statements of the principle."

However he felt able to distinguish Nacap. Counsel cited that case as illustrative of what could be held as constituting a possessory right.

12. So far as the proximity tests and the other tests for damages of economic loss were concerned, counsel for the pursuer maintained that there were neighbouring proprietors. The duties would reasonably foreseeable and it would be just and equitable to impose them in the particular circumstances.
13. In my opinion the argument of the defenders requires to be sustained. I consider that while the pursuers plainly had contractual rights and obligations in relation to the sewer, they did not have a possessory right akin to ownership. They did not have exclusive use. Their use could be interrupted by the Forth Ports Authority. There was an entitlement for other persons to utilise the sewer provided for in the Minute of Lease the sewer being owned by the Forth Ports Authority. I see nothing in the documents to give the pursuers that exclusive possession or right to possession which in my view is necessary and such as is enjoyed by a pledgee or a bailee or the holder of a servitude right.
14. The principles and analysis propounded in Nacap are, of course, binding upon me, and with the greatest of respect to the distinguished judge in North Scottish Helicopters, I cannot follow his apparent difficulty in the application of Lord Brandon's dicta and the gloss upon it in Nacap. I cannot envisage a situation in which two different parties have real rights to possession at the same time although it is easy to see how two persons could have contractual rights relating to possession of specific items at one and the same time. I am unable to follow how it can be said that there can be created a possessory right by reason of the contract attaching to the chattel itself. A possessory right must in my view be good against the world and although it must relate to the chattel, that cannot be the only reference point.
15. Accordingly nothing in North Scottish Helicopters causes me to doubt in any way the view I have arrived at in relation to this preliminary question which is that these pursuers did not have the necessary possessory right in the sewer to entitle them to sue for damages caused to it.
16. I would add that had I been persuaded that there was the necessary possessory right, I would have allowed a proof before answer on the question of the extent and appropriateness of the duty not to cause economic loss in the circumstances. The application of any general policy could not I think in this case be ascertained without inquiry into the degree of proximity and the extent of reasonable foreseeability of the actions in questions. That question is best determined by inquiry into the whole facts.
17. However, since I do not consider the necessary possessory title has been made out on the pursuers' averments, I shall sustain the first and second pleas-in-law for the first defender and the first and second pleas-in-law for the second defender and dismiss the action.