Knibb and another v National Coal Board

Coal Mining (Subsidence) Act 1957 — Jurisdiction of Lands Tribunal to award interest as from the date when a cause of action for compensation by way of damages arose under section 13(3)(b) of the Act — Appeal by cases stated from decision of tribunal awarding claimants £2,500 in respect of damage from subsidence together with interest from the date when the National Coal Board announced their decision to make a payment instead of carrying out remedial works — On appeal the claimants queried the date as from which interest was payable and the absence of an award of costs, while the board raised the question of the tribunal’s jurisdiction to award interest — Held by the Master of the Rolls and Glidewell LJ (Nourse LJ dissenting) that the tribunal had jurisdiction to award interest for a period prior to the making of an award of compensation; and that interest should have been awarded as from the date when the cause of action accrued, ie when the damage occurred, not merely from the date when the board announced their decision to make a payment — Held also that there was no error of law on the part of the tribunal in making no order as to costs save for legal aid taxation of the claimants’ costs — In his dissenting judgment, Nourse LJ considered that the cases of Swift v Board of Trade and Monmouthshire County Council v Newport Borough Council (which the Master of the Rolls distinguished in his judgment) were authorities against the view that the tribunal could order interest to be paid by the board in respect of a period before the compensation was determined — Board’s appeal dismissed — Claimants’ appeal in regard to the date from which interest was payable allowed — Board’s application for leave to appeal to the House of Lords granted on terms The following cases are referred to in this report. Attorney-General v BBC [1981] AC 303; [1980] 3 WLR 109; [1980] 3 All ER 161, HL Chandris v Isbrandtsen-Moller Co Inc [1951] 1 KB 240; [1950] 2 All ER 618, CA Hadley v Baxendale (1854) 9 Exch 341 Monmouthshire County Council v Newport Borough Council [1947] AC 520; [1947] 1 All ER 900, HL President of India v La Pintada Compania Navigacion SA [1985] 1 AC 104; [1984] 3 WLR 10; [1984] 2 All ER 773; [1984] 2 Lloyd’s Rep 9, HL Swift v Board of Trade [1925] AC 520, HL These were appeals by case stated by both parties, the claimants (John Stanley Knibb and Nancy Knibb) and the National Coal Board, from the decision of the Lands Tribunal (Mr J H Emlyn Jones FRICS) determining the amount of compensation payable to the claimants in respect of damage to their bungalow at 27 Nottingham Road, Nuthall, Nottinghamshire, caused by subsidence. The Lands Tribunal’s decision is reported at [1985] 1 EGLR 182; (1984) 273 EG 307 and 413. Nigel Wilkinson (instructed by Anderson & Co, of Nottingham) appeared on behalf of the claimants; Anthony Purnell QC and Guy Roots (instructed by J G Tyrrell, solicitors’ department, National Coal Board, Eastwood) represented the board. Giving judgment, SIR JOHN DONALDSON MR said: The primary issue raised by this appeal is whether the Lands Tribunal has jurisdiction to include a sum by way of interest when resolving a dispute as to the amount of compensation payable under the Coal Mining (Subsidence) Act 1957. It is a matter of some general importance because, although the sum involved in the instant appeal is typically not very large, such claims are numerous and accordingly the result of this appeal will, subject to any further appeal, have a significant effect upon the total amount payable by the National Coal Board in respect of subsidence caused by coal mining. The claim of Mr and Mrs Knibb (the ‘claimants’) was complicated by the fact that there were two periods during which their bungalow, at 27 Nottingham Road, Nuthall, was affected by subsidence. In 1966 they began building it on the site of a previous building. Some time between then and 1972 the bungalow, which had not yet been completed, suffered subsidence damage as a result of the mining of the Tupton seam. Arguments ensued as to the extent to which the damage was caused by the mining or by a failure to build the bungalow on the foundations of the previous building. However, in 1972 this claim was settled for £2,900, which was duly paid by the National Coal Board. Not all the defects were remedied and the bungalow had still not been completed when, in the period July 1974 to December 1975, it was further affected by subsidence caused by the mining of the deeper Blackshale seam. The claimants again claimed compensation and on this occasion there was the further complication that they maintained, and the board denied, that subsidence was still continuing. The subsequent history can be briefly stated. Under section 1 of the 1957 Act the primary obligation of the board is to execute remedial works. However, it has the right to elect instead to make a payment to the claimant equal to the reasonable cost of executing remedial works or to the depreciation in the value of the dwelling-house, if that be less. Although it was only on July 31 1980 that the board wrote formally to the claimants’ solicitors giving notice that: as the reasonable cost of executing remedial works would, in the opinion of the board, exceed the amount of the depreciation in the value of the property caused by the said damage, the board have decided to make a payment under paragraph (a) of section 1(4) and not to execute remedial works under section 1(2), the board must in fact have elected not to execute remedial works at some time before April 1979. I say that because in April 1979 the board offered to settle the claim for a payment of £6,300 plus certain costs, and in September 1979 it increased that offer to £7,000 with costs. Both these offers were, I think, on the basis of an election to pay compensation based upon the reasonable cost to the claimants of executing remedial works. When, in July 1980, the board made the further and formal election to compensate on a depreciation basis, this was followed in February 1981 by a reduced offer to settle for the sum of £6,750 with costs. None of these offers was accepted by the claimants and on August 5 1981 Mr and Mrs Knibb referred their claim to the Lands Tribunal. The decision of the Lands Tribunal (Mr J H Emlyn Jones FRICS) was that: THE TRIBUNAL DETERMINED the amount of compensation payable in respect12 of damage to the land and premises . . . in the sum of £2,500 (two thousand five hundred) together with interest from July 31 1980. No order was made as to costs, save that the tribunal ordered a legal aid taxation. Both parties asked the tribunal to state cases for the opinion of this court, the National Coal Board on the subject of the jurisdiction to award interest and the claimants on whether interest should not have been awarded from December 31 1975 rather than July 31 1980 and on whether they should not have been awarded their costs. Jurisdiction to award interest By section 3(1) of the Law Reform (Miscellaneous Provisions) Act 1934, it is provided that: In any proceedings tried in any court of record for the recovery of any debt or damages, the court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of judgment. Before the Lands Tribunal it was contended on behalf of the claimants that the tribunal was a court of record and the claim a claim for damages. The member held that while the tribunal had the characteristics of a court (see Attorney-General v BBC [1981] AC 303) he was not persuaded that it was a court of record, since it was a creature of statute and the statute creating it did not so declare. This aspect of his decision is now accepted. The member then turned to the alternative basis upon which he had been urged to assume jurisdiction to award interest, namely, by analogy with the powers of arbitrators. After an exhaustive review of the authorities he held that there was no reason in logic why the Lands Tribunal should not have the same powers as an arbitrator. In reaching this decision he said that he was also influenced by the fact that smaller claims under the Act, where the rateable value of the property did not exceed £100, were referred to the county court, which was a court of record and, in appropriate cases, had power to award interest. He then turned to the question of whether the proceedings were for the recovery of any debt or damages and concluded that they were properly to be regarded as for the recovery of damages. The whole question of the power to award interest was examined exhaustively by Lord Brandon of Oakbrook in President of India v La Pintada Compania Navigacion SA [1985] 1 AC 104 in the context of an award of interest by an arbitrator, the claim for the principal debt having been settled after the proceedings had been begun, but before the award was made. From this it emerges that there is no general common law power which entitles courts to award interest (p 115), but that if a claimant could bring himself within the second part of the rule in Hadley v Baxendale (1854) 9 Exch 341, he could claim special damages, notwithstanding that the breach of contract alleged consisted in the non-payment of a debt (p 127). It also emerges (at p 119) that, so far as arbitrators are concerned: The true position in law is, in my opinion, not in doubt. It is this. Where parties refer a dispute between them to arbitration in England, they impliedly agree that the arbitration is to be conducted in accordance in all respects with the law of England, unless, which seldom occurs, the agreement of reference provides otherwise. It is on this basis that it was held by the Court of Appeal in Chandris v Isbrandtsen-Moller Co Inc [1951] 1 KB 240 that, although section 3(1) of the Act of 1934, by its terms, empowered only courts of record to include interest in sums for which judgment was given for damages or debt, arbitrators were nevertheless empowered, by the agreement of reference, to apply English law, including so much of that law as is to be found in section 3(1) of the Act of 1934. One other decision of the House of Lords deserves mention by way of introduction, namely, Monmouthshire County Council v Newport Borough Council [1947] 1 All ER 900, 916, where the award was that of a statutory, as contrasted with a consensual, arbitrator, who had been appointed under the provisions of the Local Government Act 1933 to determine the sums to be paid by one local authority to another consequent upon an alteration of boundaries. The approach adopted by the House was to determine the mandate of the arbitrator by reference to the terms of the statute under which he was appointed, treating the statute as the equivalent of a consensual agreement to refer. It held that an arbitrator appointed under that statute for that purpose had no power to award interest, but not that a statutory arbitrator could not have such a power. The mandate of the Lands Tribunal is derived from the Lands Tribunal Act 1949, the Lands Tribunal Rules 1975 and the Coal Mining (Subsidence) Act 1957. The 1949 Act is silent on the topic of interest, but, consistently with the fact that it is an Act to amend the Acquisition of Land (Assessment of Compensation) Act 1919, under which official arbitrators were appointed (see section 1(3) to the 1949 Act), contains power in section 3(6) to make rules applying to the tribunal any of the provisions of the Arbitration Acts 1889 to 1934, now, so far as material, replaced by the Arbitration Act 1950. In the exercise of this power, rule 38 of the 1975 rules applies certain sections of the 1950 Act to all proceedings of the tribunal and certain additional sections to proceedings in which the tribunal is acting as an arbitrator under a reference by consent. The sections which apply to all proceedings are 12 (conduct of proceedings, witnesses, etc), 14 (interim awards), 17 (slip rule), 18(5) (security for solicitors’ costs), 20 (‘A sum directed to be paid by an award shall, unless the award otherwise directs, carry interest as from the date of the award and at the same rate as a judgment debt’) qualified under the rules by the words ‘subject to any enactment which prescribes a rate of interest’ and 26 (enforcement of award as a judgment of the High Court or the county court). Section 13(1) of the 1957 Act provided that ‘any question arising under this Act shall, in default of agreement, be referred’ to the county court where the rateable value of the damaged property does not exceed £100 and in any other case to the Lands Tribunal or, in Scotland, to the Sheriff. Three features are important. The first is that the county court is a court of record with power to include interest in the sum for which judgment is given, where the claim is for the recovery of any debt or damages. The second is that the phrase ‘shall, in default of agreement, be referred’ is the language of arbitration. The third is that the phrase ‘in default of agreement’ is apt to cover not only agreement upon the question itself, thus obviating the necessity for any reference, but also an agreement to resolve it by consensual arbitration. Parliament thus seems to have approached disputes arising under the 1957 Act by providing that they shall be resolved in the case of small claims by the county court, in the case of larger claims by the Lands Tribunal as a statutory arbitrator or, in either case if the parties so agree, by a consensual arbitrator. Two of these disputes settlers, the county court and the consensual arbitrator, undoubtedly have power to award interest. I find it inconceivable that the third, the Lands Tribunal, was not intended to have a similar power, if and in so far as proceedings before the tribunal are for the recovery of a debt or damages. The express reference to section 20 of the Arbitration Act 1950 in the tribunal’s rules underlines the arbitral character of the tribunal, but does not impliedly exclude a general power to award interest, because the section does not have this effect in the context of consensual arbitration. In the light of this conclusion, it is necessary to analyse what was the nature of the claim which the claimants referred to the tribunal. The answer is to be found in the formal notice of reference, which was in the following terms: [the claimants] being a person claiming compensation in respect of the property described above hereby apply for the determination by the Lands Tribunal of the question of which particulars are set out below: . . . 3. Nature of question — dispute or case to be determined by Lands Tribunal for an Order requiring the National Coal Board to carry out their obligations under the above Act or alternatively for compensation by way of damages in respect of the failure of the National Coal Board to carry out their obligation under the above Act as a result of which [the claimants] continue to suffer damage to their property by reason of subsidence occasioned by the underground workings and operation of the National Coal Board. The wording of paragraph 3 reflects that of section 13(3) of the 1957 Act, which is in the following terms: (3)  The tribunal, court or sheriff by whom any question is heard and determined under this Act may make such orders as may be necessary to give effect to its or his determinations and in particular may by order — (a)    require the Board to carry out any obligations imposed upon them by this Act within such period as the tribunal, court or sheriff may direct; (b)    award damages in respect of any failure of the Board to carry out any such obligations within a reasonable time The Act does not create a civil debt owing by the board to the claimant. It creates statutory duties to execute remedial works or, at the board’s election, to pay compensation. These alternatives are reflected in para (a) of section 13(3), which empowers the tribunal to make an order for specific performance within a specified time, and is appropriate if the board is in breach of its duty to execute remedial works, and para (b), which is appropriate if the board is in breach of its duty to make a payment. Para (b) also enables the tribunal to give13 damages for any loss or damage consequent upon any failure by the board to execute remedial works ‘as soon as reasonably practicable’. In my judgment the tribunal erred in, in effect, making a declaratory award. However, I should not like it to be thought that this conclusion involves any sort of criticism of the member. The cases which he stated are models of their kind and I doubt whether the view which I have expressed on the law was ever put to him, at least in the form which has appealed to me. It may well be that if the sole question referred had been the amount of the payment which the board should make, a declaratory award would have been appropriate, but there could then have been no award of interest. But this is not what was referred. Ignoring the claim to relief under section 13(3)(a) as having been inappropriate once the board had exercised the election to pay compensation, the claimants were seeking damages. The award should have been for damages and interest at a specified rate. In fact it appears that the parties were agreed that the rate should be that applicable to judgment debts, but this should have been specified in the formal order. I have had the advantage of reading in draft the judgment of Nourse LJ and, in the light of that judgment, I should perhaps explain why I consider that Swift v Board of Trade [1925] AC 520 and Monmouthshire County Council v Newport Borough Council [1947] 1 All ER 900, 916 are distinguishable. In Swift the Food Controller had the right to requisition goods and the obligation to pay ‘such compensation . . . as shall, in default of agreement, be determined by the arbitration of a single arbitrator’. The arbitrator’s mandate was thus to fix a figure for compensation and not to make an order for its payment or for damages for failure by the controller to pay it. If the controller failed to pay the compensation after it had been fixed by the arbitrator, any remedy would have been by action. The decision on interest turned upon the suggested application of the practice of the Court of Chancery in relation to the payment of the purchase price of land. This is what Lord Brandon in the President of India decision (supra) called ‘the area of equity’. It is not an area with which we are concerned and, of course, the Law Reform (Miscellaneous Provisions) Act 1934 had not then been passed. In Monmouthshire the task of the arbitrator was again to fix a sum, rather than to make an award based upon a failure by the authority to pay such a sum. Failure to pay the sum so fixed would have given rise to a cause of action enforceable in the courts and the courts could have awarded interest in respect of the period of delay in payment after the award had fixed the amount payable (per Viscount Simon, p 917G). By contrast, the obligations of the board to pay compensation do not depend upon any determination by an arbitrator of the amount of that compensation or, for that matter, upon his determination that particular damage is subsidence damage. The cause of action is complete if subsidence damage occurs and the board fails to execute remedial works or to pay compensation in either case as soon as reasonably practicable. The mandate of the arbitrator under section 13 of the 1957 Act is to resolve disputes as to that liability and to make orders in the nature of specific performance or the award of damages in enforcement of that pre-existing liability. It is not to make a determination which will create the liability. Thus the member’s function is the same as that contemplated for the courts in Swift and Monmouthshire. When interest should begin to accrue The first case, stated at the request of the board, raised the question of whether, in principle, interest could be awarded for a period prior to the making of the award by the tribunal. This I have answered in principle. The second case, stated at the request of the claimants, challenged the decision of the member to award interest from July 31 1980 rather than December 31 1975 and to deny them the costs of the hearing. The relevant part of the member’s decision reads as follows: There remains the question of the date from which interest on the sum of £2,500 is to run. It seems to me that there are four possible dates: (a)    August 31 1975, being the date when the damage notice was served on the board by Mr Knibb. (b)    December 31 1975 being the date by which all the relevant damage had occurred. (c)    July 31 1980 being the date when the Coal Board gave notice that they did not propose to carry out remedial works and were therefore prepared to make a payment as provided in section 1(4) of the Act. (d)    August 5 1981 being the date of the notice of reference to the Lands Tribunal. I disregard the earliest date because at that time there was no indication of the extent of the damage as finally determined. It is true that December 31 1975 can be taken as the date when the cause of the action arose but at that time it was open to the board to make good the damage by carrying out remedial works. The date of the notice of reference is the date when the proceedings in the Lands Tribunal were started, but by that time damage had been suffered for a period of more than five years. In the circumstances I consider that the proper date from which interest is to be calculated is to be July 31 1980 from which date the board clearly accepted liability to pay to the claimants a sum equal to the amount of the depreciation in the value of their property caused by the damage If we were to accept the member’s reasoning, it would be open to the board to reduce its liability in terms of interest by postponing its election to make payment instead of executing remedial work and this notwithstanding that a duty to do one or the other plainly arises ‘as soon as reasonably practicable after the occasion of any subsidence damage’. This cannot be right. The fallacy lies in concentrating on the board’s election, rather than its composite duty to execute remedial works or to pay compensation. The board does not have to do both and it has the right to elect which. The making of that election fixes the form which the duty is to be deemed to have taken ab initio. It follows that the member should have approached the matter on the footing that the board’s obligation was to pay compensation ‘as soon as reasonably practicable after the occasion of the subsidence damage’. As he has held that the claimants’ cause of action arose on December 31 1975, he must have considered that this was the latest date for the performance of that duty. Accordingly, the claimants have been deprived of the use of the money, and the board has had the benefit of its use, since that date. This advantage to the board and disadvantage to the claimants falls to be redressed by an award of interest which should date from that date. Costs of the hearing before the tribunal There remains only the question of costs. Bearing in mind the open offers of settlement which were made, I am not persuaded that the order made by the member was other than a reasonable exercise of his discretion and accordingly I do not think that we should intervene, whether or not we would ourselves have made the same order. Conclusion I would answer the question raised by the case stated at the request of the board by saying that in determining under section 13(1) of the Coal Mining (Subsidence) Act 1957 the amount payable by the board to the claimants, there was no error in law in including interest in the award. I would answer the questions raised by the case stated at the request of the claimants by saying that interest should have been awarded to run from December 31 1975 and that there was no error of law in making no order as to costs save that there be a legal aid taxation of the claimants’ costs. Dissenting, NOURSE LJ said: I have had the advantage of reading the judgments of the Master of the Rolls and Glidewell LJ in draft, but regret that I am unable to agree with them that the Lands Tribunal has power, under section 13 of the Coal Mining (Subsidence) Act 1957, to order interest to be paid by the National Coal Board in respect of a period before the compensation is determined. In my judgment the present case is governed by the decisions of the House of Lords in Swift v Board of Trade [1925] AC 520 and Monmouthshire County Council v Newport Borough Council [1947] 1 All ER 900, 916. It is unfortunate that the latter decision was barely referred to in argument and the former not at all. It is possible that if they had been fully examined I could have been dissuaded from the view that there is no ground on which they can properly be distinguished in the present case. As it is, I can see no material difference between the provisions for reference to arbitration and the mandates given to the arbitrators in those cases and the provisions of section 13 of the 1957 Act. Indeed, the provisions in the Monmouthshire case were if anything wider, because they provided that ‘the award of the arbitrator may provide for any matter for which an agreement might have provided’. In each of the three cases the task of the arbitrator was to determine a sum of money which could not be quantified beforehand. No distinction can be drawn merely because the sum to be determined in the present case is for14 compensation in the nature of damages or, if the correct view is that the Lands Tribunal was acting under section 13(3)(b) of the 1957 Act, actual damages. Once the similarities between the present case and the two decisions of the House of Lords are recognised the only argument which is left is that section 13(1), in referring small claims to the county court, a court of record empowered to order the payment of interest on a debt or damages under section 3(1) of the Law Reform (Miscellaneous Provisions) Act 1934, has impliedly conferred the same power on the Lands Tribunal when dealing with large claims. However desirable that implication may be, I think that it is one which accepted principles of statutory construction do not allow us to make. You cannot, under the guise of implying something into a general enactment such as section 13, supply what are in reality the omissions of section 3(1) to extend beyond courts of record and of the Lands Tribunal Act 1949 to constitute that tribunal as such a court. I would therefore have allowed the appeal of the National Coal Board and answered the question raised by the case stated at their request in the contrary sense to that proposed by my lords. But if I had shared their opinion on that question, I would also have agreed with their proposed answers to the questions raised by the case stated at the request of the claimants. Agreeing with the judgment of the Master of the Rolls, GLIDEWELL LJ said: I wish, however, to make clear my view that this decision is limited to the wording of this particular statute, the Coal Mining (Subsidence) Act 1957. It should not be understood as a decision that the Lands Tribunal is entitled to award interest in every case of disputed compensation from the date on which the right to compensation arises. As Mr Emlyn Jones observes at p 22 of his admirable decision, the Act of 1957 requires the Lands Tribunal to determine ‘any question arising under this Act’. By analogy with the powers of an arbitrator appointed by agreement between the parties, the Lands Tribunal is required to apply English law, including, where appropriate, section 3 of the Law Reform (Miscellaneous Provisions) Act 1934. It is appropriate to apply that section in the present case because: (a)  as my lord makes clear, the claimants’ claim in their reference was ‘for compensation by way of damages’ under section 13(3)(b) of the Act of 1957; and (b)  the question which the statute requires the Lands Tribunal to determine is wide enough to comprehend the determination and award of interest on such damages. An arbitrator now has the power under section 19A of the Arbitration Act 1950, inserted by the Administration of Justice Act 1982, to award simple interest ‘for such period ending not later than the date of the award as he thinks fit’. If it be thought that the Lands Tribunal should have the same power to award interest for a period before the date of its award, this could be achieved by an amendment of the Lands Tribunal Rules 1975 to add section 19A to those sections of the Arbitration Act 1950 which already apply to proceedings in the tribunal. SIR JOHN DONALDSON MR said that the questions stated in the two cases stated would be answered as shown in the conclusion of his judgment, the decision being that of the majority, Nourse LJ dissenting. The National Coal Board’s appeal was dismissed. The claimants’ appeal was allowed with costs to the extent that the first question in the case stated was answered in their favour. Leave to appeal to the House of Lords was granted subject to conditions imposed on the board as to costs.