Mayclose Ltd v Central Electricity Generating Board

Compensation — Claim against CEGB for deterioration in value of land as a result of the placing of the placing of electricity power lines by board — Appeal by case stated from decision of Lands Tribunal on a preliminary point of law — Whether claimants’ right to compensation was governed exclusively by a deed of grant entered into by their predecessors in title so that any claim under section 17 of the Electric Lighting Act 1882 was excluded — The deed of grant in question, executed in 1965, in addition to covenanting to pay rent for wayleaves and compensation for damage, provided for compensation for diminution in the value of any land for which planning permission had been granted, due to the existence of the electric lines on that land — What was envisaged at that time was a possible sterilisation of part of development land, with a consequent reduction in value, but what actually happened to the present claimants in 1981 was a complete refusal of permission for development — It was submitted on behalf of the claimants that the deed of grant of 1965 was not an exclusive agreement outside the ambit of the statutory provisions contained in section 22 of the Electricity (Supply) Act 1919 and section 17 of the Electric Lighting Act 1882, but was a grant of consent under the former and attracted the compensation provisions in the latter so far as not covered by the deed of grant — Held by the Court of Appeal, upholding the decision of the Lands Tribunal, that the rights of the parties were governed exclusively by the deed of grant — It was clear that the deed of grant, executed after lengthy negotiations, was intended to encompass the whole of the relationship between the parties in regard to rent and compensation, including compensation for any depreciation in the value of the subject land — Appeal dismissed No cases are referred to in this report. This was an appeal by case stated by Mayclose Ltd, successors in title to Pilkington Bros Ltd, from a decision of the Lands Tribunal (Mr V G Wellings QC) on a preliminary point of law as to the basis of a claim for compensation against the Central Electricity Generating Board in respect of electricity lines over the appellants’ land. Nigel Macleod QC and Christopher Katkowski (instructed by Asshetons, agents for Whelmar Homes legal department) appeared on behalf of the appellants; F M Ferris QC (instructed by Chalmers Carr, solicitor to CEGB) represented the respondents. Giving the first judgment at the invitation of the Master of the Rolls, GLIDEWELL LJ said: This is an appeal by way of case stated from a decision of Mr V G Wellings QC, sitting as the Lands Tribunal, on a preliminary point of law as to whether the appellants, Mayclose Ltd, are entitled to pursue a claim for compensation under section 17 of the Electric Lighting Act 1882. The matter was referred to the Lands Tribunal by the consent of the parties, who then set down, and the tribunal accepted, the preliminary point of law. The facts are set out in the case stated and can be summarised quite shortly. In 1963 an area of land the subject of the reference, near Doncaster in South Yorkshire, was owned by the well-known company, Pilkington Brothers Ltd. At that date the Central Electricity Generating Board had it in mind to construct a major electric power line, part of which was intended to cross the land owned by Pilkingtons. In June and July 1963 there was an exchange of correspondence between the board and Pilkingtons about that proposal. The documents before us and before the tribunal include not merely that correspondence but also notes or memoranda of certain meetings that took place between representatives of Pilkingtons and the board at that time. From these it emerges clearly that Pilkingtons wished, and expected to be able, to build houses on a major part of the land and envisaged that, if this power line were constructed crossing the land, it would have the effect of reducing the number of houses which they would be able to construct, thus inevitably sterilising part of the land and reducing its value as a building site. For that reason principally they made it clear that the grant of a wayleave for the construction of the electricity transmission line would be prejudicial to their interests and it was unlikely that they would consent to what the board wished to do. They suggested, understandably, that the line should follow an alternative route, a little distance to the east, that ran across another landowner’s property. However, the board were not willing to adopt that alternative solution and they returned to the proposal in a letter of April 16 1964 which said: . . . I regret that after very careful investigation, it has been found undesirable to re-route the proposed line as suggested by you. In view of this, I hope you will be able to assist the Board by giving your consent to this very important line. I therefore enclose a Statutory Notice . . . together with a Form of Consent and plans, giving details of the proposals to which I trust you will have no objection. Before I turn to that notice, which is included in the bundle before us, I think it appropriate to go to the statutory provisions. There are a number of Acts which deal with the supply of electricity and the construction of lines for the conducting of electricity. They are all, we accept, to be read as one. The provision relating to consent is contained in section 22 of the Electricity (Supply) Act 1919. That section deals with wayleaves. So far as is material, subsection (1) provides: . . . any authorised undertakers may place any electric line . . . above ground across any land other than land covered by buildings or used as a garden or pleasure ground in cases where the placing of such lines above ground is otherwise lawful, and where any line has been so placed across any land the . . . undertakers may enter on the land for the purpose of repairing or altering the line: Provided that, before placing any such line across any land, the . . . undertakers shall serve on the owner and occupier of the land notice of their intention, together with a description of the nature and position of the lines proposed to be so placed; and if, within twenty-one days after the service of the notice, the owner and occupier fail to give their consent or attach to their consent any terms or conditions or stipulations to which the . . . undertakers object, it shall not be lawful to place the line across that land without the consent of the Board of Trade. Then there are provisions for the procedure to be followed if the19 owners will not give their consent and the matter has to be dealt with by what was then the Board of Trade and is now the Secretary of State for Energy. That section thus contains a statutory procedure under which the board gives notice of intention to construct the power line and seeks the consent of the landowner. The landowner may give such consent within 21 days or may refuse it. If he gives consent he may attach conditions to it which the board may not like. If either consent is refused or the board does not like the conditions the matter has to go to the minister, now the Secretary of State for Energy, who in turn may give his consent and attach appropriate conditions. The document which the board put forward in April 1964 was not merely a form of consent but it included what they were suggesting were conditions which they would find acceptable. The document in form, if it had been signed by Pilkingtons, would have contained their consent to the board’s placing the line across the property on the route shown on a plan. It provided for the board paying a yearly rent for the wayleave, and then, in the Third Schedule, it provided by way of conditions for certain other payments. Clause 4 of the Third Schedule provided: In addition to paying the yearly rent the Board shall: (a)  If the existence of the electric line shall cause any interference with agricultural operations pay to the Owner . . . in accordance with the following scale . . . . There then follows a scale which is related to the size of the base of the pylons at a rate per annum. (b)  Pay to the Owner or Occupier as the case may be compensation for any loss sustained by him in consequence of any damage caused by the electric line or by the placing of the electric line to his land . . . or property or shall make good such damage to his reasonable satisfaction. (c)  Keep the Owner indemnified against all actions claims costs and expenses which may be made against the Owner. The statutory provisions for compensation for damage are contained in section 17 of the Electric Lighting Act 1882, which provides: In the exercise of the powers in relation to the execution of works given them under this Act, or any licence, order or special Act, the undertakers shall cause as little detriment and inconvenience and do as little damage as may be, and shall make full compensation to all bodies and persons interested for all damage sustained by them by reason or in consequence of the exercise of such powers, the amount and application of such compensation in case of difference to be determined by arbitration. For myself I think it likely that the intention of clause 4(b) of the Third Schedule to the form of consent was to indicate one part of the compensation for damage which the board accepted they would have to pay under section 17 of the 1882 Act, but that question does not directly arise in the circumstances of this case. What happened thereafter was that, by a letter of June 5 1964, Pilkingtons refused their consent. The writer of the letter said: ‘. . . I am afraid the matter will have to be referred to the Minister for a decision.’ Before the matter got before the minister, the board wrote again to the legal department of Pilkingtons. Apparently there had been a discussion between representatives of the board and the company in the meantime, and the letter from the board included this paragraph: So far as the proposed erection of the line on your Company’s property is concerned, you will recall that it was confirmed that the Board would pay compensation for any depreciation the proposed line may cause to the property, and I attach a ‘compensation clause’ which, I think you will agree, makes the position quite clear. The Board would be happy for this clause to be included in the form of consent already in your possession. Then it goes on to make it clear that the company was still unhappy about the possible loss of building land. In reply to that, on August 20, a Mr Hartley on behalf of Pilkingtons wrote that he was taking instructions, he was going away on holiday and he would not be able to let the board have a full reply until after his return, but: If the Company’s Board is prepared to consent, I think I would prefer to have a Deed of Grant covering all the terms of the wayleave in a similar form to the one which has been negotiated for the Rainhill/Kirkby 400 kV line across the Company’s Eccleston Hall Estate in St Helens. Similarly, I think a capital payment in place of rent would be preferable. When he got back from holiday Mr Hartley took instructions and wrote another letter in which he said, on September 15 1964: Further to my letter of the 20th August, the Company is prepared to consent to the Generating Board’s proposal to erect the above mentioned line across its estate, subject to the terms of a Deed of Grant being settled and approved on behalf of the Company. Then he said that he had already indicated that he preferred the deed to be in a form similar to that which had already been negotiated in respect of land in the St Helens area. So in due course a deed of grant was prepared, and it was executed on January 4 1965. Its material terms provide: . . . the Grantor has agreed to sell and the Board have agreed to purchase the said rights and liberties at the price of Nine hundred pounds. The rights and liberties which were granted by the deed were of three kinds: ‘full right and liberty for the Board to erect use maintain repair renew inspect and remove the electric lines and works specified in the Schedule’, right and liberty to fell and lop trees which would be in the way of the line, and right and liberty to enter to inspect and to repair where necessary. The board specifically covenanted, among other matters, to: forthwith make good to the reasonable satisfaction of the Grantor any damage to the . . . property or to the buildings . . . caused by the electric lines or by the erection of the electric lines. If for any reason any such damage cannot be made good they shall in lieu of making good such damage compensate the Grantor or its tenants thereof. The board also covenanted to place the towers in specified positions and that the towers would be at a height which would allow the construction underneath the lines of houses no greater than 30 ft in height. In their turn Pilkingtons covenanted, in relation to the position as dwelling-houses, that no part of any dwelling-house would be less than 18 ft from the conductors. Then there was a clause specifically dealing with what the parties apparently envisaged as a real possibility at that time, namely that if planning permission were granted for the development of the land it would contain a limitation requiring the houses to be kept away from the pylons. Clause 4 provides: If at any time during the continuance in force of these Presents the Grantor obtains permission under the Town and Country Planning Legislation to develop the said property or any part thereof the Board shall within six months of their receiving written notice thereof from the Grantor pay such additional sum to the Grantor as compensation for any diminution in the value of such part of the said property for which planning permission is granted by reason of the existence of the electric lines as may be agreed between the Board and the Grantor or in default of agreement as may be determined . . . by the Lands Tribunal on reference to it. That was the position when, by a conveyance of June 30 1971, Pilkingtons conveyed the land to the present applicants, Mayclose Ltd. At some stage in the meantime the electricity power line had been constructed. Mayclose Ltd are a company whose business is or includes the construction of houses, and in due course they applied for planning permission to build on the land. In 1981, not having received any response to their application, they appealed to the Secretary of State for the Environment against the failure to give a decision on their application. An inspector, who held an inquiry into that appeal, on November 12 1981 recommended to the Secretary of State that the appeal should be dismissed and the Secretary of State accepted that recommendation. There are three matters considered in the Secretary of State’s conclusion as to why the appeal should be dismissed, one of which was the existence of the electric power line across the land and the undesirability of having houses close to or underneath the line. I need not go into the question whether that was really the sole reason for refusal or what were the reasons for the refusal. The fact is that there was a refusal. It is obvious to me that Pilkingtons and the board, back in 1963-64, had not envisaged a complete refusal of planning permission in respect of the land. What they had envisaged was a possible sterilisation of part of the land and a reduction in its value accordingly, but they had not envisaged that they would not be allowed to develop at all. The applicant company, Mayclose Ltd, then claimed compensation from the board not under the terms of the deed but under section 17 of the 1882 Act, the terms of which I have already read out. The response from the Generating Board was that there was no right to compensation under section 17 because the whole of the rights of the parties are governed by the deed of January 4 1965. It was in effect the question whether that was correct or not which was set down for the decision of the Lands Tribunal. The learned member of the Lands Tribunal said: 20 The questions upon which the decision of the . . . Court is desired are: (A)  Whether on the facts stated in my . . . decision I erred in law in holding: (i)  that the rights of the parties were governed exclusively by the deed of grant made on 4th January 1965 between Pilkington Brothers Limited and the Respondents. (ii)  that therefore: (a)  the claimants had no entitlement to make a claim under section 17 of the Electric Lighting Act 1882 and then two consequential matters upon which we so far have not heard argument. (b)  the Lands Tribunal had no jurisdiction to entertain the reference: (c)  accordingly, the Tribunal had no power to make an order for costs. The first part of that is the matter upon which at the moment I am giving judgment. The learned member did go on to express certain opinions in the event that he was wrong on the first point of law, but we have not been into those and there is no need to do so. In the case stated, which sets out the position with entire clarity, the learned member rehearsed the history much as I have done and then posed the preliminary point of law as: (1)  Are the rights of the parties governed exclusively by the deed of grant so that any claim by the claimants under section 17 of the Act of 1882 is precluded? Mr Macleod, who appeared for the company before the tribunal as he has before us, submitted to Mr Wellings, as he has to us, that there were three ways in which the board might obtain the necessary rights over the reference land to enable it to construct the electricity power line. One, which never arose in the present case, is that it might have made a compulsory acquisition of a part of the land under powers granted to it by section 9 of the Electricity Act 1947. Second, it might have proceeded under the statutory scheme to which I have already referred, that is to say by obtaining the consent of the landowner under section 22 of the Electricity (Supply) Act 1919 or, in default of that consent, the consent of the minister under that section. In that case, Mr Macleod submits, compensation, other than specifically provided for in that consent, would be payable under section 17 of the 1882 Act. Mr Macleod not merely accepts but asserts that a third possible way in which the board could acquire the necessary powers is by agreement. The board, being a statutory body, has the powers granted to it by statute, and it is specifically given the power to enter into contracts under section 2(5) of the Electricity Act 1947. Mr Macleod has argued that the deed of January 4 1965 was not an agreement outside the ambit of section 22 of the Electricity (Supply) Act 1919 but was a formal grant of consent under that section. He goes on to argue that the deed, and if he is right the consent, thus contains terms dealing with the payment of rent for the wayleave and the payment of compensation in the event that planning permission is granted but the value of the land depreciates, but that it is inherent in the statutory procedure that the statutory right to compensation under section 17 of the 1882 Act still applies where there is something not dealt with in the conditions of the consent. He submits that the position which has arisen here, where the value of the land has been depreciated by a complete refusal of planning permission, which he will submit, if he succeeds in this appeal, is the result of the power line being constructed, is something not dealt with in the conditions of the consent and accordingly that he is entitled to look to the statutory provisions for compensation. For my part I am not convinced that it is necessary to consider whether the deed is an agreement outside section 22 or a consent within it. I am inclined to the view that it is the former, an agreement outside section 22. But the important question is the question which the member of the Lands Tribunal posed: ‘Are the rights of the parties governed exclusively by the deed of grant so that any claim by the claimants under section 17 of the Act of 1882 is precluded?’  To my mind there really can be only one answer to that question: it is ‘yes’. Parties knowing exactly what they were about, having negotiated for well over a year, in 1965 entered into this formal document. They included in it provisions dealing with rent and compensation, and to my mind it is absolutely clear that that document encompassed the whole of the relationship between them with regard to this matter. It removed any potential rights there might be to compensation under the 1882 Act. It was intended that everything that was to be dealt with should be dealt with in the document, and so it was. I did suggest during the course of argument that it may be that under the deed itself there may be a right to compensation: we are not concerned with whether that suggestion was a sound one or not. But the answer to the question posed to the Lands Tribunal to my mind is, as I have said, that the rights of the parties are governed exclusively by the deed. Accordingly I conclude that the learned member was entirely justified in the decision he gave and that this appeal should fail. Agreeing, SIR FREDERICK LAWTON said: In my judgment the issue in this case is what the parties intended by the deed of January 4 1965. Their intention is to be inferred from the words used in the deed construed in the light of the surrounding facts and circumstances. As my lord has pointed out, there were negotiations lasting over a year before the deed was executed. During the course of these negotiations Pilkington Brothers Ltd made it clear to the board that they were concerned about the likelihood that the value of their property would be depreciated having regard to the probability that at some time in the future the land would be ripe for development. It is against that background of fact that one comes to look at the words of the deed. For the reasons given by Glidewell J it seems to me clear that the parties did intend that the deed should embody all the terms of the agreement including compensation for any depreciation in the value of Pilkington Brothers’ land. I, too, would dismiss the appeal. SIR JOHN DONALDSON MR also agreed and did not add anything. The appeal was dismissed with costs. Leave to appeal to the House of Lords was refused.