UT Neutral citation number: [2010] UKUT 268 (LC)

LT Case Number: LCA/354/2009

                            TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

COMPENSATION--whether the 3 year time limit provided by section 19(3) of the Land Compensation Act 1973 for making a claim for compensation in respect of depreciation in value of interest in land caused by the use of a highway is incompatible with the claimants’ Convention rights under article 1 of the First Protocol and/or article 6 of the European Convention of Human Rights and if so whether the section can be interpreted under section 3 of the Human Rights Act 1998 so as to be compatible

                                 IN THE MATTER OF A NOTICE OF REFERENCE

BETWEEN                                   Mrs E J Thomas and Others                               Claimants

                                                                           and

                                                 Bridgend County Borough Council                   Compensating

                                                                                                                                     Authority

Re: Hendre Relief Road Pencoed Bridgend

                                                    Before: HH Judge Jarman QC

                 Sitting at: Cardiff Civil Justice Centre, 2 Park Street, Cardiff, CF10 1ET

                                                                 on 12 July 2010

Mr Peter Weir QC, instructed by Hugh James Solicitors, Cardiff for the Claimants

Mr Paul Stinchcombe, instructed by Bridgend County Borough Council

The following cases are referred to in argument:

O’Connor v Wiltshire County Council LCA/73/2005

O’Connor v Wiltshire County Council [2007] EWCA Civ 426

J. A. Pye (Oxford) Ltd v UK (2008) 46 EHRR 45

Antonetto v Italy (2003) 36 EHRR 10

Marcic v Thames Water Utilities Ltd [2004] 2 AC 42

Capital Bank AD v Bulgaria (2007) 44 EHRR 48

Raynor v UK (1987) 9 EHRR 375

Mathews v Ministry of Defence [2003] 1 AC 1163

Wilson v First Country Trust (No 2) [2004 1 AC 816

R (Kehoe) v DWP [2006] 1 AC 42

                                                                    DECISION

Introduction

1.           Mrs Thomas and the other claimants in these consolidated references own and live in dwellings near to a highway known as Hendre Relief Road Pencoed Bridgend (the road) which was first opened for public use on 9 July 2002 and adopted by Bridgend County Borough Council (the council) on 29 June 2006.

2.           The road was built by Redrow Homes South Wales Ltd (the developer) pursuant to an agreement dated 5 April 2002 with the council under section 278 of the Highways Act 1980 and other enabling statutory provisions. The agreement contained the following relevant provisions:

(1)        That the council would adopt the road upon the issue of a letter of acceptance following a 12 month maintenance period after substantial completion to the reasonable satisfaction of the council inspector.

(2)         That the developer would provide a bond in the sum of £554,270 so that should the developer default in its obligation to construct the road in accordance with the terms of the agreement then the council may carry out the works and call upon the bond for reimbursement.

(3)         That the developer would indemnify the council in respect of compensation claims under the Act.

3.           In the present case, however, the developer did not complete works to the road to enable such a letter to be issued for over 3 years, despite being pursued by the council to do so.

4.           The claimants allege that the values of their homes have been diminished as a result of noise and other nuisance caused by use of the road. They wish to claim compensation from the council under the Land Compensation Act 1973 (the Act) but section 19(3) bars such a claim where, as here, the road is not adopted within 3 years of first being open to public traffic.

The Preliminary issues

5.           The claimants argue that the subsection amounts to a statutory bar on their right to compensation and as such is incompatible with their rights under article 1 of the First Protocol to and/or article 6 of the European Convention of Human Rights. The former provides that every person is entitled to the peaceful enjoyment of his possessions. The latter provides that in the determination of his civil rights everyone is entitled to a fair and pubic hearing within a reasonable time by an independent and impartial tribunal established by law.  If so, the claimants further argue that the subsection can be interpreted under section 3 of the Human Rights Act 1998 so as to be compatible with their convention rights and to allow their claims for compensation to proceed.

6.           Accordingly by an order dated 26 March 2010 the President of this Tribunal consented to those issues being tried as preliminary issues and those issues came before me for determination. The issues as ordered to be tried also referred to article 8 of the Convention but Mr Weir QC who appeared before me on behalf of the claimants made it clear that he no longer sought to place reliance upon that article. It is to be assumed for the purposes of such determination that the values of the claimants’ homes have decreased as a result of nuisance caused by use of the road.

7.           The unchallenged evidence before me shows that the present references are not isolated cases of the right to compensation lapsing as a result of delays in the adoption of the relevant road.  Mr Neil Stockdale, a solicitor acting for the claimants, has given details of several other schemes where the road has not been adopted within the 3 years and compensation has consequently been denied.  In those cases where Mr Stockdale has been able to ascertain the detail of the agreement under which the roads were constructed, there was an indemnity provided by the relevant developer to the highway authority similar to the one given in this case.

8.           Indeed it is not the first time that this problem has been considered by this Tribunal. Similar arguments to those now deployed on behalf of the claimants were advanced by Mr Weir before His Honour Michael Rich QC in O’Connor v Wiltshire County Council LCA/73/2005.  The judge accepted that noise pollution could so affect a property as to involve a breach of the owners’ rights under article 1. However he went on to hold that once it was conceded, as it was, that there is no general rule that interference with the enjoyment of property required compensation, the provisions for compensation in the Act were not part of the rights safeguarded by article 1. Moreover, he held that the provisions do not create a procedural bar to an established right so as to amount to a breach of article 6, but define and limit the extent of the rights created by the Act.

9.           Permission to appeal that rejection of Mr Weir’s arguments was given by Lord Justice Pill and the matter was fully argued before the Court of Appeal in O’Connor v Wiltshire County Council [2007] EWCA Civ 426.  The Court held that on the facts of that case, the highway authority had adopted the road at the date it was first open to the public, so those claimants succeeded on that basis. Lord Justice Chadwick, with whom the other members of the Court agreed, expressly declined at paragraph 60 to make observations on whether there would be potential incompatibility in a case in which the road was not adopted when it was first open to traffic, as such views would be obiter and serve no useful purpose.

10.        The way is thus open for Mr Weir to repeat his arguments before me in the present references. In doing so he properly accepts that although the decision of Judge Rich is not binding upon me, it is to be accorded respect. With that respect however, he submits that the decision is wrong. Before turning in more detail to the reasons for making that submission, it may be helpful to set out the background to the passing of the Act and its relevant provisions.

The statutory scheme

11.        Before the Act was passed there was no right to compensation for depreciation in the value of interests in property caused by the use of new public works.  In a paper entitled “Development and Compensation –Putting People First” and dated October 1972 the Secretaries of State for the Environment, Scotland and Wales identified what they referred to as a new approach to striking the right balance between ensuring essential developments are undertaken for the benefit of the whole community and the no less compelling need to protect the interest of those whose property may be injured in the process. In paragraph 2 of the paper this conflict was said to be a conflict of right with right – “the public’s undoubted right to have a new road or school or waterworks and the private person’s right to enjoy his home and garden, undisturbed.”   In paragraph 5 it was indicated that the Government was determined to provide a better balance between provision for the community as a whole and the mitigation of harmful effects on the individual.

12.        Some 6 months later the Act was passed and its preamble referred to “a new right to compensation for depreciation of the value of interest in land caused by the use of highways” and other public works.

13.        Section 1(1) of the Act provides:

“1(1) Where the value of an interest in land is depreciated by physical factors caused by the use of public works, then if –

(a)     the interest qualifies for compensation under this Part of this Act; and

(b)     the person entitled to the interest makes a claim after the time provided by and otherwise in accordance with this Part of this Act,

compensation for that depreciation shall, subject to the provisions of this Part of this Act be payable by the responsible authority to the person making the claim (hereinafter referred to as ‘the Claimant’).”

14.        For the purposes of s 1(1) of the Act, s 1(2) provides that the physical factors include noise, vibration, fumes and artificial lighting; s 1(3) provides that the public works include “any highway”; and s 1(4) provides that the responsible authority, in relation to a highway, is “the appropriate highway authority”.

15.        Section 1(1)(b) of the Act requires that a claim to compensation must be made by the person entitled to an interest in land – where the interest qualifies for compensation – “after the time provided” and otherwise in accordance with Part I. Section 2 of the Act sets out the circumstances in which an interest will qualify for compensation.

16.        Section 3(1) requires that a claim is to be made by serving on the responsible authority a notice containing particulars of the matters there set out. Section 3(2) provides, subject to provisions which are not presently material, that “ no claim shall be made before the expiry of twelve months from the relevant date; and the day next following the expiration of the said twelve months is in this Part of this Act referred to as 'the first claim day'.” “The relevant date”, in the context of s 3(2), is defined in s 1(9). It means – “(a) in relation to a claim in respect of a highway, the date on which it was first open to public traffic”.

17.        Section 7 of the Act provides for the payment of compensation subject to a minimum of £50.

18.        Section 19(1) of the Act gives the definitions of phrases used therein which for present purpose are as follows.  The responsible authority, in relation to a highway, is the appropriate highway authority– “(a) the highway authority who constructed the highway to which the claim relates.” “Highway” includes part of a highway and means “a highway or part of a highway maintainable at the public expense as defined in s 329(1) of the Highways Act 1980.”

19.        Sections 1(9), 3(2) and 19(1) of the Act must be read in conjunction with subsection 19(3), which provides:

“In the application of this Part of this Act to a highway which has not always since 17 October 1969 been a highway maintainable at the public expense as so defined:

(a)     references to its being open to public traffic shall be construed as references to it being so open whether or not as a highway so maintainable;

(b)     for references to the highway authority who constructed it there shall be substituted references to the highway authority for the highway;

and no claim shall be made if the relevant date falls at a time when the highway was not so maintainable and the highway does not become so maintainable within three years of that date.”

20.        A number of important concessions are made on behalf of the claimants. Firstly, it is accepted that upon the usual rules of interpretation, that latter provision means that they can make no claim for compensation in the present case.  Secondly, it is accepted that the council has not acted wrongly in arranging for the road to be built and its construction had been assessed as being in the public interest. Thirdly, it is not contended that there should be a payment of compensation simply on the basis that there has been an interference with the claimants’ property rights. Fourthly, it is accepted that section 19(3) of the Act has the legitimate aim of not imposing liability on the part of a highway authority to pay compensation to owners whose property values have been affected by the building of a private road which the authority did not intend to adopt.

21.        Rather, the complaint is with the means by which the Act sets out to achieve that aim, which gives to rise to what, it is submitted, is an unintended gap through which deserving cases fall. It arises in a case such as this where a highway authority agrees with a developer to adopt a road but there is a delay in adoption beyond 3 years from the date upon which the road is first opened to the public. There is no evidence before me as to whether this situation was known or envisaged at the time of the passing of the Act. Mr Weir submits, however that where, as here, an indemnity is given then it is in the interest of the developer to delay completing the relevant works. During argument it seemed to me that there may be scope for providing in the relevant agreement that a developer should pay upon completion an amount equivalent to the decrease in value of properties as a result of use of the development.  However, no such provision was made in the present case.

Article 1

22.        Article 1 of the First Protocol provides:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No-one shall be deprived of his possessions except in the public interest and subject to conditions provided for by law.

The preceding provisions shall not, however, in any way impair the right of a Sate to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

23.        It is common ground that that article contains three distinct rules, as recognised in a number of judgments by the European Court of Human Rights, most recently in J. A. Pye (Oxford) Ltd v UK (2008) 46 EHRR 45 at paragraph 52.  The first rule is of a general nature and enunciates the principle of the peaceful enjoyment of property. The second rule covers deprivation of possessions. The third rule recognises that contracting states are entitled to control the use of property in accordance with the general interest. Mr Weir submitted that the present case is one of interference rather than deprivation and so falls within the first of those rules. He referred to cases where interference been found to amount to a violation of this rule. For example in Antonetto v Italy (2003) 36 EHRR 10, the Court unanimously found such a violation where a homeowner had been unable to obtain enforcement of a judgment ordering the demolition of an unauthorised building which partially obstructed the view from and light to her property. In Marcic v Thames Water Utilities Ltd [2004] 2 AC 42, the House of Lords considered a case where a homeowner’s garden was flooded with sewage and surface water after heavy rain due to an inadequate sewerage system.  Lord Nicholls observed at paragraph 37 of his opinion that such direct and serious interference was prima facie a violation of, amongst other articles, article 1.

24.        The Court in the Pye case considered whether the law of adverse possession in the United Kingdom operated in violation of the applicants’ article 1 rights. In paragraph 53 of the decision of the majority of the Court, it was said that in order to be compatible with that rule, an interference with the right to the peaceful enjoyment of possessions must strike a “fair balance” between the demands of the general interest of the community and the requirements of the protection of the individual’s private rights. In paragraph 83, it was noted that the registered land regime in the United Kingdom is a reflection of a long established system in which a term of years’ possession gives sufficient title. The majority decision continued thus;

“Such arrangements fall within the state’s margin of appreciation, unless they give rise to results which are so anomalous as to render the legislation unacceptable.”

25.        In Capital Bank AD v Bulgaria (2007) 44 EHRR 48, the Court had considered article 1 in respect of the withdrawal by the state of the applicant bank’s licence to conduct business.  In a unanimous decision, the Court at paragraph 134 said that the requirement of lawfulness, within the meaning of the Convention, presupposes that domestic law must provide a measure of legal protection against arbitrary interferences by public authorities with the rights thereby safeguarded. The Court accepted that article 1 contained no explicit procedural requirement and that the absence of judicial review does not, in itself, amount to a violation of the article, but continued;

“Nevertheless, it implies that any interference with the peaceful enjoyment of possessions must be accompanied by procedural guarantees affording to the individual or entity concerned a reasonable opportunity of presenting their case to the responsible authorities for the purpose of effectively challenging the measures interfering with the rights guaranteed by this provision. In ascertaining whether this condition has been satisfied, a comprehensive view must be taken of the applicable judicial and administrative procedures.”

26.        Mr Weir submitted that what he described as the “unintended gap” in the present case does not strike a fair balance and produces a result which is so anomalous as to render unacceptable section 19(3) of the Act, namely that the claimants are left with dwellings which have decreased in value as a result of use of the road without compensation, through no fault of their own. Furthermore, he contended, it is obviously arbitrary that compensation should turn on the speed with which a developer, whose interests directly conflict with homeowners, completes the work.

27.        For the council, Mr Stinchcombe submitted that article 1 is not engaged. The main thrust of his argument was twofold.  Firstly, article 1 protects existing possessions, but not the possibility of future compensation. Secondly, it protects against only very severe interferences with property rights, such as where the value of a dwelling is seriously affected by aircraft noise, as occurred in Raynor v UK (1987) 9 EHRR 375.  It is not violated by the use of a road which it is accepted is built in the public interest.  Mr Stinchcombe pointed out that the Antonetto case did not involve lawful use which was in the public interest. Moreover there is no direct and serious interference in this case as there was in the Marcic case. He further emphasised that there was no right to compensation before the Act came into force.

28.        In my judgment the difficulty with Mr Weir’s argument arises from his concession that the road was built in the public interest. For my part I am prepared to accept that in principle noise and other nuisance arising from the use of a public road may be such as to amount to interference within the first rule in article 1. It is to be assumed for the purpose of this preliminary issue that the claimants will be able to show that the values of their properties have been decreased as a result of the noise and other nuisance. Accordingly I have not heard evidence as to the nature or extent of such nuisance. It is noteworthy that the threshold for compensation is a very low one. A decrease in value of £50 or more gives rise to a right to claim. It is not appropriate for me, therefore, to comment further on the level of noise or other nuisance.

29.        However, that acceptance in principle does not in my view assist the claimants in this case. It is not contended that the building of or the use of the road amounts to a violation of the claimants’ article 1 rights. As Judge Rich observed in O’Connor, the Act does not affect the rights which are protected by article 1. The claimants will continue to suffer whatever noise and other nuisances emanate from the use of the road, which has been determined to be in the public interest, whether or not they receive compensation under the Act.

30.        The scheme under the Act aims to mitigate one effect, a decrease in value of homes, by the giving of compensation. Mr Weir emphasised that it is that effect which is at the heart of his case of interference within the meaning of article 1.  However, such a decrease, in my judgment, has been suffered whether compensation under the Act is paid or not.  The compensation provided for by the Act to mitigate that decrease is not in my judgment a possession within the meaning of article 1.

31.        Moreover, the Act does not in my judgment affect the opportunity of the claimants to challenge the interference with the rights protected by article 1. Even when a comprehensive view is taken of the judicial and administrative procedures for such a challenge, it cannot be said that the scheme for compensation forms part of the “measures interfering with the rights guaranteed” by article 1 within the meaning contemplated by the Court in the Capital Bank case.

32.        Accordingly, in my judgment, section 19(3) is not incompatible with the rights under article 1 of the claimants in this case.

Article 6

33.        I turn now to the case on article 6(1) which provides “In the determination of his civil rights…,everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law..”

34.        Mr Weir accepted that on one reading of section 19(3), and in particular the words “and no claim shall be made,” the claimants have no cause of action so article 6 cannot bite. However he submitted that in the context of article 6, the effect of section 19(3) of the Act is to vest in the executive, in this instance the council, the power to make a decision whether a given homeowner can recover compensation. It does so by determining the date at which it adopts the new road.

35.        He relies upon a number of authorities where the meaning of article 6 has been analysed and in particular the House of Lord authorities of Mathews v Ministry of Defence [2003] 1 AC 1163, Wilson v First Country Trust (No 2) [2004] 1 AC 816, and R (Kehoe) v DWP [2006] 1 AC 42.

36.        In the first of those authorities the House of Lords considered whether section 10 of the Crown proceedings Act 1947 was compatible with article 6. Under that section, the Ministry could deprive a serviceman of a claim damages for personal injury by substituting a no-fault system of compensation. The claimant argued that it was objectionable that the Crown’s immunity from suit depended upon the issue of a certificate by the Secretary of State. The House unanimously rejected that argument and held that section 10 imposed a limitation which operated not as a procedural bar but as a matter of substantive law under which the claimant had no civil right to which article 6 may apply.

37.        Nevertheless, Mr Weir relied upon a passage in the speech of Lord Hoffman, who at paragraph 29 observed that the issue of a certificate looked like a procedural bar but continued:

“But provided one holds on to the underlying principle, which is to maintain the rule of law and the separation of powers, it should not matter how the law is framed. What matters is whether the effect is to give the executive a power to make decision about people’s rights which under the rule of law should be made by the judicial branch of government.”

38.        Mr Weir emphasises that this observation was adopted by Lord Nicholls in Wilson (see paragraph 35) and Lord Hope in Kehoe (paragraph 40). The former case involved the question, amongst others, whether a statutory bar upon a lender enforcing a consumer credit agreement amounted to an infringement of the rights of the lender under article 6(1). It was unanimously held that article 6(1) does not create substantive civil rights but only guaranteed the procedural right to have the claim in respect of existing civil rights and obligations adjudicated by an independent tribunal. Accordingly whilst the bar in question restricted the lender’s rights by rendering agreements unenforceable unless in prescribed terms, it did not bar access to the court to determine whether or not the agreement was unenforceable. In Kehoe it was held by the majority that article 6 was concerned with safeguarding rights accorded by national law rather than requiring that particular substantive rights should be accorded, and accordingly was not engaged so as to require a right for a parent to recover child maintenance from the other parent.

39.        Mr Stinchcombe submitted that section 19(3) of the Act does not concern the rule of law or the separation of powers. It is concerned to provide compensation to a limited group of people, namely those whose homes decrease in value as the result of the use of a public, and not a private, road, which is adopted within 3 years of opening. There is no bar upon such persons bringing a claim.

40.        In my judgment, article 6(1) is not engaged in this case. Section 19(3) is determinative as to whether a particular homeowner has a claim for compensation. If there is such a claim, then there is provision for it to be determined by an independent tribunal. Once 3 years have elapsed between the opening of the road and it’s adoption, there is no claim to determine. I do not accept that the decision on the part of the highway authority as to whether or not there is such adoption within that timescale involves giving the executive power to determine a person’s rights which should be decided by the judicial branch of government, so as to lead to an erosion of the separation of powers in the way contemplated by Lord Hoffman in Mathews.  In the present case the rule of law does not require that the date upon which the road is adopted should be a decision of the judicial branch of government.

41.        Accordingly, in my judgment section 19(3) of the Act is not incompatible with the rights under article 6 of the claimants in this case.

Conclusion

42.        I can understand that the claimants may be left with a justifiable sense that they have deserving claims which have fallen through an unintended gap, for the reasons advanced by Mr Weir. It may be that highway authorities will wish to take such arguments into account when giving consideration to the provisions in or the enforcement of agreements similar to the one entered into in this case.  However, as the scope of this determination of the preliminary issues is limited and as I have not heard argument on such matters, it is not appropriate to make further comment in this decision.

43.        For the reasons given above, in my judgment section 19(3) of the Act is not incompatible with the claimants’ Convention rights and the first preliminary issue must be determined in the negative. That being so the second preliminary issue does not arise and I make no determination upon it.

44.        A letter on costs accompanies this decision, which will take affect when the question of costs has been determined.

Dated 29 July 2010

His Honour Judge Jarman QC