Highways — Section 278 of Highways Act 1980 — Agreement — Whether land acquisition costs contribution can be included in section 278 agreement — Compulsory purchase order — Whether CPO lawfully obtained notwithstanding section 278(5)
In 1982 planning
permission was granted to the respondent company for the residential
development of a substantial site. At the same time the company entered into an
agreement with the local planning authority, pursuant to section 52 of the Town
and Country Planning Act 1971, that provided for, inter alia, a further
agreement under section 278 of the Highways Act 1980 to deal with certain
necessary highway works. The company was unable to acquire the land required
for the highway works and in January 1983 the appellant county council made a
compulsory purchase order to acquire the necessary land. The section 278
agreement was then made between the company and the county council; it provided
that the company would pay 65% of the cost of constructing the roadworks and
acquiring the necessary land. The compulsory purchase order was confirmed,
following a public local inquiry. The Lands Tribunal ultimately determined that
the compensation payable for the acquisition of the land was £2.15m. The
company commenced proceedings against the county council claiming that the
section 278 agreement was illegal and unenforceable, alternatively for damages
for negligence in not using reasonable care and skill in acquiring the land at
minimum cost. The county council claimed the 65% share owed by the company. On
the hearing of a preliminary point, the trial judge found that the agreement
was illegally performed ‘under the law of contract’. The county council
appealed.
Section 278 of the
Highways Act 1980 did confer express authority on the county council to obtain
a contribution from the company for land acquisition costs incurred by the
county council. There was also power to charge such costs under section 111 of
the Local Government Act 1972. As the inspector and minister found, there was a
present need to acquire the land that did not depend on the existence of the
section 278 agreement and that section 278(5) was not breached, and did not
prohibit the use of compulsory powers; the company was bound by the agreement.
the judgment
McCarthy &
Stone (Developments) v Richmond upon Thames
London Borough Council [1992] 2 AC 48; [1991] 3 WLR 941; [1991] 4 All ER
897; 90 LGR 1; (1991) 63 P&CR
Stokes v Cambridge Corporation (1961) 13 P&CR 77; [1961] EGD
207; 180 EG 839, LT
Tesco Stores
Ltd v Secretary of State for the Environment [1995]
1 WLR 759; [1995] 2 All ER 636; 93 LGR 403; [1995] 2 EGLR 147; [1995] 27 EG
154; [1995] 2 PLR 72, HL
Appeal against the
decision of Judge Viscount Colville of Culross QC
This was an appeal by
Kent County Council from a decision of Judge Viscount Colville of Culross QC in
proceedings by the respondent, Wards Construction (Medway) Ltd, against the
appellants for a declaration or damages and by the appellants against the
respondent for debt.
and Thomas Lowe (instructed by Sharpe Pritchard) appeared for Kent County
Council.
and Rodney Stewart-Smith (instructed by Kingsley Smith & Co, of Chatham)
represented Wards Construction (Medway) Ltd.
judgments were delivered.
HENRY LJ: In 1973 Kent County Council (Kent) produced an informal area
action plan relating to the development of a large area to the north-east of
Maidstone known as the Weavering Street development area. Under the plan,
upwards of 1,750 houses would be built in an area known as Grove Green, and the
road network improved. Among other highway improvements, the plan even then
recognised that the junction where New Cut Road joined Bearsted Road would have
to be improved. It was agreed between the planning authority (Maidstone Borough
Council), the highway authority (Kent) and the developer (Wards Construction
(Medway) Ltd) that Wards should pay 65% and the highway authority 35% of the
cost of acquiring the land and building a roundabout. At that time, it seems
that the cost of acquiring the land (whether by agreement or compulsorily) was
assumed to be modest, say £10,000. But in the event, and (it would seem) long
after the roundabout was built in October 1991, the Lands Tribunal fixed the
compensation to be paid by the highway authority at £2.15m; in 1994 the Court
of Appeal dismissed an appeal by the developer against that determination; and
the House of Lords refused leave to appeal. Whether or not Wards would have
paid 65% of £10,000, it was not prepared to pay 65% of £2.15m.
On 30 December 1994
Wards commenced proceedings against Kent, claiming that this agreement to pay
65% of the costs of acquisition and building of the roundabout was illegal and
unenforceable, alternatively for damages for negligence in not using reasonable
care and skill in acquiring the compulsory purchase order land at minimum cost.
In 1996 Kent commenced proceedings for Wards’ 65% share of the costs of
acquiring the land.
Orders were made in
both actions for the question of the enforceability of clause 3(a) of the
highway agreement between Kent and Wards (whereby Wards agreed to pay 65% of
the cost incurred by the county council in acquiring land for and in
constructing the roundabout) to be tried as a preliminary point. The issue was
tried on the documents by
neither party electing to call oral evidence. The judge found that the
agreement was enforceable ‘as a matter of administrative law’, but
unenforceable because illegally performed ‘under the law of contract’. Kent
have appealed and Wards has filed respondent’s notices.
The facts
This appeal concerns
how the roundabout that improved that junction is to be paid for.
The main potential
developer of Grove Green was Wards. By 1980 it had acquired some 61ha of the
housing land. It applied for outline planning permission in April 1980.
Negotiations took place over the next two years with the planning authority
(Maidstone) and the highway authority (Kent). Wards was ‘keen to enter into an
agreement to tie-up off-site contributions on… highways on the first three
phases of this development’. These negotiations proceeded on the basis that no
dwelling within Phase II of the programme would be occupied until the relevant
highway improvements had been made, and that Wards had agreed to contribute to
the cost of these improvements.
In relation to the
roundabout, its contribution was to be 65%, and Kent’s contribution 35%. The
reason for this division of the cost was the recognition by Kent that the extra
traffic that would be generated by the development would simply advance by a
few years the time when the road improvements would be necessary, even without
the traffic generated by the Weavering Street development area scheme.
It was at all times
clear that this programme for an orderly development would be secured by:
(i) conditions in the
planning permission;
(ii) Wards entering
into an agreement under section 52 of the Town and Country Planning Act 1971,
regulating the development or use of the land with Maidstone; and
(iii) Wards entering
into an agreement with Kent under what was then section 60 of the Highways Act
1971 (and then became, on consolidation, section 278 of the Highways Act 1980)
requiring it to contribute to the expenses incurred by Kent in executing the
highway improvement works — here the roundabout.
The planning package
for this housing development envisaged these three legally binding components.
It was envisaged that
Wards would acquire the land necessary for the construction of the roundabout,
but that if it failed to agree terms with the owner, Kent would acquire it by
the use of a compulsory purchase order (CPO). That land was one corner of an
agricultural field (allocated in the action plan as public open space) owned by
Mr Batchelor. The land necessary for the roundabout was only 0.35ha, but it was
recognised that the whole field (still only 0.75ha) would have to be acquired.
In the event, Wards
and Mr Batchelor could not agree on the price for the land. Mr Batchelor
initially wanted £9,000 and Wards would not go above £7,000. Negotiations broke
down in June 1981.
Kent then negotiated
with Mr Batchelor. They offered to buy the land at a price to be fixed by the
Lands Tribunal (as it would be if the land were acquired by them under a
compulsory purchase order), but Mr Batchelor (through his solicitors) replied:
the roadworks are
essentially purely incidental to private development, and we do not consider
that it is right for your council to use compulsory powers to carry this out.
If Messrs Wards would make a reasonable offer for the land our client would
sell privately, but he is not prepared to accept compulsory purchase procedure.
Kent then reverted to
their contingency plan agreed by members in November 1980, that if the
developer’s attempt to acquire the land failed, they would use their compulsory
powers of acquisition to acquire it, and would make an agreement under what was
then section 60 of the Highways Act 1971 and was about to become section 278(5)
of the Highways Act 1980, whereby the developer would contribute towards the
costs of the scheme. In November 1980 Kent decided to take the risk of
acquiring by CPO if necessary. The report to councillors, dated 21 November
1980, of the county secretary and county surveyor (prepared, so we were told,
by Mrs Gane) said, before going on to warn of the risk:
As Members are
aware, it is not the Council’s practice to exercise its compulsory powers to
facilitate private development (although this is done elsewhere) but in view of
the importance of securing the development of the Weavering Street area in
accordance with planning policies and the general improvement of the highway
network that would result from the agreement, we would suggest Members make an
exception in this case if Wards are unable to acquire the land themselves.
Kent did this despite
the warnings from Mrs Gane of their legal department of the risks posed by
subsection 5, and the extent of the restriction it imposes on the use of
compulsory purchase powers.
The planning
package
On 30 March 1982
outline planning permission was granted by Maidstone to Wards, subject to
condition (xvii)(b) that:
no dwellings within
Phase 2 shall be occupied until the off-site roadworks subject to the Section
60 agreement in respect of that Phase are completed.
On the same day
Maidstone and Wards entered into a supplementary agreement under section 52 of
the Town and Country Planning Act 1971, which recited that Maidstone were
concerned to provide for the orderly development of the housing areas
identified, requiring the carrying-out of the off-site highway improvements and
the phasing of the development, and that planning permission was granted subject
to the conditions in the application for planning permission and the section 52
agreement. That agreement provided, in relation to the roundabout, that:
2. The owners for
themselves and their successors in title… hereby jointly and severally covenant
with the council so as to bind the land… as follows:
(1)(a) to enter into
an agreement under Section 278 of the Highways Act, 1980 with the Kent County
Council as highway authority in respect of the improvement of New Cut Road in
two phases namely:
(i)
the improvement of New Cut Road, Bearsted and between the points marked ‘W’ and
‘X’ on the plan…
(1)(b) not to occupy
or permit or cause to be occupied:
(i) any dwelling forming
the subject matter of housing areas 14, 15, 18 and 19 before the substantial
completion of the road improvements referred to in Clause 2(1)(a)(i) above or
as the County Surveyor may otherwise agree.
The documents show
that, over that summer, Kent were pressing Wards to enter into the section 278
highway agreement, and Wards was ‘in no hurry’.
Importance is
attached by Kent to the sequence of events thereafter. On 25 January 1983 the
compulsory purchase order over the land required for the roundabout was made.
This was a week after Wards’ solicitors had sent Kent the highway agreement
executed by their client. On 1 February 1983 Kent executed their copy of the
highway agreement. The agreement was expressed to be made under section 278 of
the Highways Act 1980 and in pursuance of clause 2(1)(a) of the section 52
agreement. It required the council to complete the works within one year of
receiving a request from Wards to do so, provided that that request was not
made until the county council had notified Wards that they had acquired
possession of the land. Clause 3 required Wards:
to make the following
financial contributions towards the costs of the County Council incurred in
connection with the works:
i) 65% of the cost
of the construction of the works;
ii) 65% of the costs
of acquiring land in connection with the works.
The works in question
were, of course, the construction of the new roundabout.
Challenge to the
CPO
Mr Batchelor objected
to the making of the CPO. He was the sole objector. The public inquiry was held
on 7 June 1983, and Mr Batchelor’s objections were that the works were
unnecessary, that the landscape would be adversely affected and that the scheme
would take valuable agricultural land that should be kept in production. He
told the inspector that he had negotiated with the developer and was against
the use of compulsory purchase powers to assist the developer. He did not take
the point now taken by Wards that section 278(5) prohibited Kent from using
compulsory purchase powers where there had been a section 278 agreement. While
it is hard at this distance of time to be sure what documents there were before
the inspector, the only express reference to the section 278 agreement and the
fact that Wards was obliged to contribute to the cost of the new roundabout was
to be found in the proof of evidence submitted on behalf of Kent’s traffic
engineer:
The Weavering Street
development, however, will cause an unacceptable
programme with a contribution from the developer.
That pointed to a
section 278 agreement and so casts doubt on the judge’s finding that Kent’s
witnesses did not mention the agreement, particularly as Mr Batchelor had, in
his evidence, referred to Wards’ contributions to the infrastructure:
the developers who
were obliged to participate in the funding of common services in the area (see
Inspector’s Report 223, para 18).
The CPO was
confirmed. The minister, in his decision letter, summarised the inspector’s
findings of fact:
5. The Inspector
finds (paragraph 26 of his Report) that an informal plan for the area was
published by the Council in 1973 describing in detail the improvement of these
roads and junctions, that present/predicted levels are such that the
improvement is becoming a matter of urgency and the Order land is essential to
it, that alternative junction improvements have been considered and rejected,
that negotiation for the land was left to the developer until agreement could
not be reached.
He then concluded:
that there is a need
to improve the highway as proposed, and further that the land scheduled in the
CPO is required for this purpose.
There was no appeal
from his decision. Such an appeal lies under section 23 of the Acquisition of
Land Act 1981, and must be made within six weeks of the publication of the
confirmation of the CPO. After that period, section 25 applies, which, so far
as is relevant, provides:
Subject to the
preceding provisions of this part of the Act, a compulsory purchase order…
shall not, either before or after it has been confirmed, made or given, be
questioned in any legal proceedings whatsoever.
It would have been
inconceivable for Wards either to have objected or to appeal. The planning
package had been agreed with it and benefited it. It knew that should its
negotiations to purchase the land not succeed, Kent would use CPO procedures.
It knew that CPO procedures would ‘import some uncertainty and possibly delay
into the matter’.
So the minister
confirmed the order, Kent served notice to treat, Mr
his claim for compensation, and, on 1 August 1984, Kent took possession of the
order land.
In March 1986
determination of the right figure for compensation for the compulsory purchase
of Mr Batchelor’s land was referred to the Lands Tribunal. Following a five-day
hearing, the Lands Tribunal, in a decision dated 19 February 1987, determined
the compensation for the order land to be £500,000 and for the adjoining land
to be £150,000. Kent requested the Lands Tribunal to state a case for the Court
of Appeal. On 26 July 1989 the Court of Appeal remitted the assessment of
compensation in respect of both the order land and the adjoining land to the
Lands Tribunal. Between
trial days and, on 28
order land to be £2.15m. That sum reflected the ‘ransom value’ of the land: see
Stokes v Cambridge Corporation (1961) 13 P&CR 77. The judge
was clearly right to find (at p24) that back in 1983 the thought of
compensation at ransom value had crossed nobody’s mind. It would not be
unreasonable to assume that the magnitude of the compensation made Wards
rethink its attitude to the agreement.
Wards sought to
appeal that order, and on 1 July 1994 that appeal was dismissed by the Court of
Appeal. On 13 December 1994 the House of Lords refused leave to appeal. We have
not seen the Lands Tribunal decisions, nor the judgments in either Court of
Appeal hearing.
Consequently, these
proceedings were commenced and this preliminary point ordered (see
introduction).
The issues
Mr Malcolm Spence QC,
for Kent, has identified five issues for this court to consider. Not all of
those issues were determined by the judge. And in relation to some issues, the
parties do not agree even on what the judge in fact decided. Where that is the
case, I will deal with that subissue when dealing with the issue itself.
The issues are:
Issue A: Did section
278(2) of the Highways Act 1980 (the 1980 Act) confer express authority on Kent
to obtain a contribution from Wards for land acquisition costs incurred by
Kent?
Issue B: Did section
239 of the 1980 Act and section 111 of the Local Government Act 1972 confer
implied authority on Kent to obtain a contribution from Wards for land
acquisition costs incurred by Kent?
Issue C: Did section
278(5) of the 1980 Act prevent Kent from making a compulsory purchase order
under section 239 the 1980 Act?
Issue D: Did section
25 of the Acquisition of Land Act 1981 prevent Wards from relying on section
278(5) of the 1980 Act as a defence to a claim for contribution?
Issue E: Are Kent
prevented from enforcing the agreement in respect of the contribution towards
the land acquisition costs by reason of illegality?
The scheme of the issues
is as follows: Kent must initially show that either section 278(2) of the
Highways Act 1980 (issue A) or section 111 of the Local Government Act 1972
(issue B) permits Kent to receive a contribution to the land acquisition costs
of the roundabout from Wards.
If Kent succeed on
either of those issues, then the next question is whether the use of compulsory
purchase powers to acquire that land was permitted having regard to section
278(5) (issue C) and/or whether Kent were prevented from enforcing the section
278 agreement by reason of common law illegality (issue E).
If either issue C or
issue E would present a bar to recovery of the agreed contribution, does
section 25 of the Acquisition of Land Act (issue D) prevent Wards from
successfully relying on either issues C or E?
express authority on Kent to obtain a contribution from Wards for land
acquisition costs incurred by Kent?
This issue seems to
have been confused by the way it was argued below. On the pleadings the issue
is clear. Wards’ case (see the amended statement of claim) was that:
Section 278… only
authorised highway authorities to enter into agreements providing for
contributions towards the costs of executing highway works and not the costs of
acquiring land required for such works.
Kent’s case (in para
3a of their defence) was:
the phrase in
Section 278(2)… allowing for contributions towards the expenses incurred by a
highway authority in executing highway works includes contributions towards the
cost of acquiring land in connection with such works.
But when Kent’s case
was argued below, that point was not taken. As a result, the pleaded issue went
by default, entitling the judge to conclude:
Whatever may be the
source of the local authority’s power to acquire land for the [?execution?] of
a section 278 agreement purpose (and I have held that the source is the section
itself) there is no dispute that the section is not wide enough to allow for
the insertion into an agreement of a provision for Wards to pay any part of the
purchase price.
However, Kent argued
issue B (implied powers under section 111 of the Local Government Act 1972) as
an alternative to issue A. It seems that Kent succeeded on issue B before the
judge but for the illegality point (issue E).
Before us, Mr Spence
argued both points. As issue A involved a pure point of law not affecting the
evidence, we permitted him to. As the quotation from the judgment above shows,
the judge wrongly concluded that the source of Kent’s power to acquire land for
highway improvement was section 278 — see his judgment at pp9 and 16.
In fact, Kent are
authorised by section 64(1)(b) to construct the roundabout at the
T-junction for regulating the movement of traffic. Section 239(3) empowers them
to acquire that land for the improvement of the highway. Section 329 defines
improvement as: ‘the doing of any act under powers conferred by Part V’, and
‘Part V — Improvement of Highways’ includes section 64. So the judge was wrong
to find that the source of the acquisition power was section 278.
But (without the
implied powers to be considered in issue B) nothing in those acquisition
sections empowers Kent as highway authority to exact a financial contribution
towards the highway improvement from the developer (or anyone else). Such
powers are only to be found in section 278. The important subsections for this
issue are (1) to (4), but it is convenient to quote subsection (5) as well,
which will have to be considered under issue C:
Contributions
towards highway works by persons deriving special benefit from them
278.– (1) Subject to subsection (4) below, a highway authority
proposing to execute any works which they are authorised by or under any
enactment to execute may enter into an agreement under this section with any
other person who would derive a special benefit if those works incorporated
particular modifications, additions or features or were executed at a
particular time or in a particular manner.
(2) An agreement
under this section is an agreement whereby the other party to the agreement
agrees that if one or more (as the agreement may provide) of the following
conditions, that is to say:
(a) a
condition that the works to be executed by the highway authority will
incorporate such modifications, additions or features as may be specified in
the agreement;
(b) a
condition that the execution of the said works will be begun, or (as the
agreement may provide) completed, before such date as may be so specified;
(c) a
condition that the said works will be executed in such manner as may be so
specified,
is or are fulfilled,
he will make towards the expenses incurred by the highway authority in
executing the said works a contribution (whether by a single payment or by
periodical payments) of such amount as may be so specified.
(3) An agreement
under this section may provide for the making to the highway authority by the
other party to the agreement of payments in respect of the maintenance of the
works to which the agreement relates and may contain such incidental and
consequential provisions as appear to the highway authority to be necessary or
expedient for the purposes of the agreement.
(4) A highway
authority shall not enter into an agreement under this section unless they are
satisfied that it will be of benefit to the public.
(5) Where for the
purpose of executing any works to which an agreement under this section relates
a highway authority shall have power to acquire land either by agreement or
compulsorily and they would not need to execute that power for that purpose had
they not entered into an agreement under this section they shall not exercise
their power to acquire land compulsorily for that purpose.
Neither the question
posed by this issue nor section 278 itself is concerned with the giving of
powers to acquire land. Section 278(1) to (4) limits section 278 agreements
under which developers may be required to make contributions ‘towards the
expenses incurred in the execution of works’. The question is whether those
words are limited to the cost just of doing the building and engineering works
(a narrow and literal construction), or whether they also include the cost of
acquisition of land where that is necessary for the execution of the works.
Section 278(5) acknowledges that for certain purposes (including road
improvement) the highway authority have power to acquire land by agreement or
compulsorily, and obliges the highway authority to be satisfied that any such
agreement will be of benefit to the public. The basic condition for such an
agreement is satisfied where the developer would ‘derive a special benefit’
from the incorporation in the works of ‘particular
place or in a particular manner’.
As the overriding
principle is that such an agreement should be for the benefit of the public
(rather than for the benefit of the developer), it seems to me clear that it
must have been parliament’s intention, when developers had been specially
benefited, that the contribution they should make may in proper cases be based
on the total cost of the works (including acquisition costs), rather than the
cost of the works excluding those costs. If, for example, the benefiting
‘addition’ was some land that would not have been acquired had the highway
authority not entered into the section 278 agreement, can it sensibly be
contemplated that parliament, in using those words, would not have intended
that the developer’s contribution would include a contribution to the
acquisition costs of land acquired by agreement? Or when, as in this example,
to activate the planning permission, the land must be acquired in order to do
the works, and the date for completion of those works is advanced (for the benefit
of the developer), why should parliament allow the highway authority to accept
an agreed contribution to the building costs and not to the land acquisition
costs? The narrow and literal construction would exclude acquisition costs in
all cases. The broad construction would make it a question of mixed law and
fact in all cases whether land acquisition costs were included in the expenses
incurred in executing those works. Often (as on the facts here) such land
acquisition costs are, as Mr Spence submits, an obvious and primary ‘expense
incurred in executing’ the highway works.
In support of the
narrow construction, Wards relies on: first, that when the original section 278
was repealed and replaced by section 23 of the New Roads and Street Works Act
1991, the costs of acquisition were specifically listed as included in the
costs of the works to be executed. The costs of land acquisition are
specifically referred to in the rather different financial provisions found in
section 272. Second, a more general phrase might have been used, such as ‘the
costs incurred by the highway authority in connection with the works’. Those
points are valid so far as they go, but are almost always available in any case
of statutory construction, and, in my view, do not here take matters very far.
Here the words used
are ambiguous. The choice lies between a broad and a narrow construction. On
the narrow construction, I can see no sensible reason for such a provision. Mr
Gerard Ryan QC makes the valid historical point that developers contributing to
the costs of the infrastructure necessary as a result of their development was
less common then than after the 1991 reforms, which removed restrictions
previously imposed relating to the introduction of private finance into highway
improvements, particularly where that private money was necessary to allow the
development (which created or contributed to the need for the improvement) to
proceed: see Tesco Stores Ltd v Secretary of State for the
Environment [1995] 1 WLR 759. But while recognising the change of policy,
only the broad construction makes sense. The broad construction, in my
judgment, reflects the clear statutory intention. So I would conclude that
section 278 did confer express authority on Kent to obtain a contribution
from Wards for land acquisition costs incurred by Kent.
Issue B: Did
section 239 of the 1980 Act and section 111 Local Government Act 1972 confer
implied authority on Kent to obtain a contribution from Wards for land
acquisition costs incurred by Kent?
Having decided that
section 278(1) to (4) conferred express authority on Kent to obtain a
contribution from Wards for land acquisition costs, this issue does not arise.
While McCarthy & Stone (Developments) v Richmond upon Thames
London Borough Council [1992] 2 AC 48 is clearly distinguished on its facts
(this cannot be ‘incidental to the incidental’), I was impressed by Lord
Lowry’s emphasis on the rigour of the test of ‘necessary implication’. But it
seems to me that here the power to charge (if it did not arise under section
278) would arise under section 111 by necessary implication. The object of the
agreement was to bring forward highway improvements that required compulsory
powers to acquire land, being improvements that both conferred a special
benefit (section 278(1)) for the developer, but were of benefit to the public
(section 278(4)). It would be nonsensical for the developer’s contribution to
be limited to (as Kent’s skeleton argument puts it) ‘the cost of the asphalt
and not the cost of the land’.
Issue C: Did
section 278(5) of the 1980 Act prevent Kent from making a compulsory purchase
order under section 239 of the 1980 Act?
The judge rightly
recognised section 278(5) as ‘the primary source of the [alleged] invalidity in
the relevant part of the agreement’. But despite recognising its importance, it
is not entirely clear whether he concludes there was a breach of subsection
(5), and if so, what it was. Kent submit that he does not appear to have
decided the issue, although it was fully argued. Wards submits that while he
nowhere stated his conclusion unequivocally, it should be concluded that he did
find that section 278(5) prohibited the agreement made, but that he concluded
that while section 25 of the Acquisition of Land Act 1981 (issue D) barred any
challenge to the validity of the CPO or the section 278 agreement, it did not
bar a claim at common law based on the fact that the agreement was performed in
a manner that was unlawful (issue E).
Wards’ submission may
best explain the judge’s final paragraph:
I am satisfied that
Kent’s pleadings and arguments are sound, as a matter of administrative law and
that there is no reason on those grounds why Wards should not pay. Kent simply
does not address the issue raised under the law of contract. Looking at Devlin
LJ’s three principles in Archbold, there was always, or most of the
time, a clear intention on Kent’s part to perform this part of the agreement by
unlawful means, and at the time of actually making the agreement (which was
subsequent to the making of the CPO) there was already an intention to break
the law, a knowledge that it was so and an actual breach. I do not go so far as
to hold that section 278(5) prohibits an agreement of the sort into which the
parties entered: indeed I hold to the contrary. It is the way in which Kent
chose to perform it that is fatal to it. No way out of this dilemma has been
offered and in my judgment there is indeed no escape.
Accordingly, I make
the declaration sought in the 1994 action and reject Kent’s claim in that
brought in 1996.
It seems to me that
the judge did find that section 25 of the Acquisition of Land Act 1981 would be
a defence to any breach of section 275(5). He concludes his consideration of
this issue with the manuscript addition to his judgment:
If the CPO cannot be
challenged there is no route via this branch of the law [ie administrative law]
for impugning the agreement.
While, in my
judgment, it was necessary here for the judge in terms to find whether there
was a breach of section 278(5), and if so what that breach was (with reasons),
it may be that the reason for that apparent omission lay in the way Wards had
pleaded and put its case. The pleading of illegality on this issue was in para
27(2) of the amended statement of claim. The only particular of illegality
pleaded is use of a CPO to acquire the land. We get from the judgment a summary
of Mr Ryan’s submission (the use of compulsory powers in this case, in defiance
of section 278(5)), and the judge seems to have assumed or accepted that the mere
fact of the use of compulsory purchase powers was unlawful without any
additional finding of fact being required. The judge went seamlessly from
quoting the ‘defiance of section 278(5)’ to asking the question ‘What is the
result of an Ôunlawful’ use of CPO powers’ without spelling out whether and why
the use of such powers was unlawful in this case. It seems to me that he did
not do that because he regarded the fact that compulsory purchase powers had
been used to give the landowner ‘an unanswerable objection’ on appeal — see the
judgment at p24:
By July 1981 Wards
was being told that Kent would take the risk arising from a CPO, the risk
being, as I believe it, that Mr Batchelor would enter an unanswerable
objection.
I believe that
analysis to be incomplete in that, in my judgment, it does not identify any
fact other than the acquisition procedure to found the illegality, and the
subsection itself makes clear that it is sometimes permissible to use
compulsory powers to acquire land the subject of a section 278 highway
agreement, namely where the highway authority ‘would… need to exercise [the
compulsory purchase] power [for highway improvement] even had they not entered
into [the section 278] agreement’. Or to put the same point in a different way,
if it was unlawful to use compulsory powers to acquire land subject to a
section 278 agreement, there would be two consequences: first, the subsection
would simply not permit compulsory acquisition of land subject to a section 278
agreement, and/or second, there would be no purpose for the inclusion of the
words:
and they would not
need to exercise that power for that purpose had they not entered into an
agreement under this section.
Certain matters as to
the application of section 278 to the facts in this
the relevant subsection.
1. Kent, as the
highway authority, were proposing to build a roundabout (authorised as
improvements by section 239) and wished to enter into an agreement with Wards,
as the developer, which would derive a special benefit if the time for
construction of that roundabout were brought forward (‘executed at a particular
time’).
2. Kent agreed, under
subsection 2(b), to bring forward the date of construction of the
roundabout (which had to be completed before the new housing was occupied) in
consideration for Wards promising to contribute 65% of both the cost of
acquiring the land (as identified) and of the construction of the works.
3. Kent were
satisfied that that agreement would be of benefit to the public, as clearly it
was. Therefore, the basic requirements of subsections (1) to (4) were complied
with. Subsection (5) is quite different. It prohibits certain actions. The
prohibition is against a highway authority exercising their power to acquire
land compulsorily where:
1. they had power to
acquire the order land compulsorily; but
2. they would not
have needed to exercise that power had they not entered into a section 278
agreement (or, to strip the negatives, they would have needed to acquire the
order land whether or not they had entered into the section 278 agreement). The
section 239 power to acquire land to improve the highway clearly satisfies
number 1 — the order is expressed to be ‘for the improvement of the highways
known as New Cut Road and Bearsted Road’. Condition 2 is a question of fact,
and is the question that the judge did not attempt to answer.
The judge summarised
subsection (5) as follows:
It contains a
compendious reference back to subsection (2): if the agreement contains
provision for doing things that the highway authority would not otherwise have
done, whether in terms of, say, an addition to the improvement works or
the bringing forward of the timing of them [emphasis added]… then to that
extent, and to that only, compulsory powers shall not be used. The rationale
for this prohibition is that it prevents the owner of land being compulsorily
deprived of his land for the benefit of some other private individual to an
extent that, or at a time when, apart from that other individual’s scheme… he
would not have been deprived of it, or at least not yet. If, instead of the
land being a field, it had been the site or part of a factory, it can be
readily seen that the loss of that part or an advancement in the timing of that
loss, even if it would happen eventually, is something against which the
factory owner should, in the circumstances, be protected.
I agree with that
summary of the subsection and the reason for it. It correctly sets up the unanswered
question: would the highway authority have needed to use the compulsory
purchase powers when they did irrespective of their section 278 agreement?
The judge makes a
point as to advancement of the date of acquisition as a result of the section
278 agreement in other parts of his judgment:
Even by late 1980
Kent were busying themselves with the roadworks aspect
1982/1983. Much discussion eventually led to the Phase II agreement under
section 278 of the Highways Act 1980, which is at the heart of the issues in
these two actions. For both the widening of New Court Road and the roundabout,
Wards was to pay 65% of the cost and Kent the rest… The reason for this
division of the cost was that Kent recognised that the works would be needed
anyway, probably by about 1990/1991 to deal with general traffic growth and
traffic from the TV studios; however, occupation of houses at Grove Green would
bring forward the date by which the improvements would become essential and
Wards was the major developer. It was quite an urgent problem…
It is ironic to note
that if Kent had bought the land at the moment when it would have been required
by the general growth of traffic, say in 1991, it is probable that it would
have cost them only a few thousand pounds, being the agricultural or public
open space value.
In my judgment, those
two passages do not reflect the real question as to advancing the date of the
highway improvements. The comparisons there made are unreal in that the need
for the improvements with the Weavering Street development already partially
completed (1982/1983) is compared with the artificial and unreal scenario at
the date when 1982/1983 traffic would, on natural growth, without there being
any Weavering Street development, have required the improvements, making it
necessary to exercise the CPO power. The right question is answered on the
actual factual traffic and planning situation on the ground when the decision
whether to confirm the compulsory purchase order is made. And that was the
principal issue litigated (and decided in Kent’s favour) in the local inquiry
into this compulsory purchase order.
Before dealing with
that inquiry, there is one free-standing point that is probably best taken
here. In his judgment, the judge reached certain conclusions that are strongly
objected to by Kent. Objection is taken to two passages, the first at p24 of
the judgment, and the second, higher on the same page:
Looking at Devlin
LJ’s three principles in Archbold, there was always, or most of the
time, a clear intention on Kent’s part to perform this part of the [section
278] agreement by unlawful means, and at the time of actually making the
agreement (which was subsequent to the making of the CPO) there was already an
intention to break the law, a knowledge that it was so, and an actual breach.
By July 1981 Wards
was being told that Kent would take the risk arising from the CPO, the risk
being, as I believe it, that Mr Batchelor would enter an unanswerable
objection… Eventually, in January 1983, Kent made the CPO; there is no
explanation in the documents, but they made the order under section 239 of the
Highways Act. This attracted the section 278(5) risk, but I infer that the
reasons [sic] why this was acceptable were that there was no reason why
Mr Batchelor should know about the (then) proposed [section 278] agreement.
Kent’s objection was
that none of those matters had been pleaded, and that had those matters, which
went to their good faith, been pleaded, then it would or might have affected
their decision not to call oral evidence but
to waive their legal professional privilege to invite this court to admit
various documents not previously before the court into evidence. Mr Ryan QC,
for Wards, objected to the fresh evidence, but cut the Gordian knot by
indicating that those findings were not necessary to his case, and so could be
ignored. Accordingly, we make no order on Kent’s application.
Returning to the
narrative, in my judgment, this case required a specific finding on the factual
issue as to whether section 278(5) had been broken, and if so, how. As this was
a case where no oral evidence was called on either side, credit was not an
issue. Therefore, this is not a case where this court starts at a marked
disadvantage to the trial judge. Accordingly, I would not remit for a new trial
on the preliminary point but would urge this court to decide this issue.
I return to the local
inquiry into the CPO. There lawyers acting for Mr
took the objection that it was ‘unnecessary’ for Kent to acquire the land.
‘Unnecessary’ in this context meant premature. And under the statutory
framework, Kent would have to show that there was a ‘need’ to exercise the
power to acquire, other than one dependent on the section 278 agreement. They
sought to demonstrate that present need by both a traffic case and a planning
case.
In the traffic case,
they called Mr Kersey to deal with the large growth of traffic using the
junction between 1980 and 1983, with the junction approaching capacity at
morning and evening peaks. He put the matter this way:
If traffic grows as
I forecast, the capacity of the existing junction is likely to be exceeded
within two or three years, during morning and evening peak periods. This
predates the major effects of the Weavering Street development. For such a
junction to be overloaded is not uncommon. With a marginal degree of overload,
unless the accident record worsens appreciably, it is unlikely that funds would
be available for an improvement before the end of the decade. The Weavering
Street development, however, will cause an unacceptable degree of overload and
so the improvement has been brought forward in the programme with a
contribution from the developer.
His summary and
conclusions then are:
18. The existing
junction is operating at or near its capacity at peak times and will require
improvement by the end of the decade. The Weavering Street development will
exacerbate the situation and mean that the improvement is needed sooner.
19. Any junction
improvement would encroach onto the Order Land to a certain extent, as there is
no practical alternative location.
20. The proposed
roundabout provides a junction with adequate capacity to cope with the traffic
in the medium term with less risk of accidents than at the existing junction.
It represents the most appropriate and cost effective solution to the problem,
as it is the cheapest alternative with the longest design life.
21. I therefore
submit that the improvement… is fully justified and the compulsory purchase
order should be confirmed.
In the planning case,
Mr Eaton’s evidence, as set out in paras 4 and 6 of his statement was:
4. Outline planning
permission was granted by the Maidstone Borough Council in March 1982 for
residential development, a primary school and the preparation of public open
space in respect of a major part of the Weavering Development. This permission
was granted subject to planning conditions and a Section 52 agreement which,
amongst other things, precludes occupation of dwellings in Phase II (that is
housing areas 14, 15, 18 and 19) until New Cut Road has been widened and
improved along its northern section and a new roundabout constructed at the
junction of New Cut Road and Bearsted Road. The Order site is required for this
junction improvement. Detailed planning approvals have now been given for the
Phase I development (housing areas 22, 23 and 25) and also for housing areas 18
and 19 in Phase II.
5. …
6. The Weavering
neighbourhood is the principal new residential area in Maidstone for the next
ten years and it is essential in strategic planning terms that it proceeds at a
steady rate commensurate with the provision of necessary infrastructure
improvements and community facilities. Its development will make a major
contribution towards meeting the housing needs of the Maidstone/Malling
planning area in accordance with the provisions of the Kent Structure Plan and
the Department of the Environment circular 9/80 which requires an adequate five
year supply of available housing land. If the development of the neighbourhood
were to be delayed or prevented from proceeding as a result of, for example,
essential infrastructure improvements not coming to fruition, this would raise
serious implications for the planning authorities in the provision of new homes
in the Maidstone/Malling planning area during the next ten years…
The inspector
concluded:
31. That as the land
subject to the Order is essential to the plan for improvement of the highways
and the construction of a roundabout it is necessary that it should be acquired
as soon as possible in the public interest.
The minister accepted
that need and confirmed the order.
The judge was
suspicious of the CPO inquiry, noting that there was no direct reference to the
section 278 agreement and suggesting that the ‘risk’ under section 278(5) was
the risk of the agreement being known to Mr Batchelor. I disagree. The risk was
that of a successful challenge, namely the risk that the inspector and/or
minister would find there was no present need to acquire the land, because such
acquisition was not necessary because it was premature. The issues decided in
the CPO inquiry were precisely those that would have to be considered on a
challenge to the CPO based on illegality under section 278(5) — the council
would have to show a present need not dependent on a section 278 obligation.
That was what they demonstrated, and the decision seems to me to be quite
unappealable. I also regard it as unreal to assume either that the tribunal did
not know of the agreement or that Kent were trying to keep it from the
tribunal. Mr Batchelor gave evidence of developers being obliged to contribute
to the infrastructure, Mr Kersey said in terms that the
contribution from the developer (only possible under a section 278 agreement),
and there was reference to such an agreement (albeit identified by its old
section number — 60) in both the planning permission and the section 52
agreement with which the tribunal was concerned. And it is not too much to
assume that Mr Batchelor’s lawyers, the inspector and the minister all knew the
law, and that highway improvement contribution meant section 278 agreement.
In those
circumstances, I am quite satisfied that, as the inspector and the minister
found, there was a present need to acquire the land that did not depend on the
existence of the section 278 agreement, and that section 278(5) was not
breached, and did not prohibit the use of compulsory powers, and Wards is bound
by the agreement it made.
Issues D and E
From my finding on
issue C, it follows that it is not necessary for Kent to rely on section 25 of
the Acquisition of Land Act 1981 (issue D), and that there was no illegality
(issue E). Therefore, it is not necessary to deal with either issue. However,
my provisional but clear view is that section 25 would have afforded Kent a
defence to Wards’ claim, which, in my judgment, clearly questions the
compulsory purchase order. To succeed in its claim, Wards would have to show
that the compulsory purchase order should never have been made. It had a
theoretical window of opportunity to challenge it within six weeks of the
publication of the minister’s confirmation of the order in September 1993. It
had no case for challenging it then or later. Section 25 would have afforded
Kent a defence, had they needed to rely on it.
Accordingly, I would
allow the appeal and determine the preliminary point in Kent’s favour.
WARD LJ: I agree.
SIR CHRISTOPHER
STAUGHTON: I agree that the words ‘expenses
incurred by the authority in executing the said works’, in the unamended
section 278(2) of the Highways Act 1980, included the cost of acquisition of
land. The fact that section 272(1) of the Act expressly mentions the
acquisition of highway land does not deter me from that conclusion. Nor does
the substitution of a different section 278 by the New Roads and Street Works
Act 1991, with express mention of the cost of acquisition of land. Amendment of
a statute does not, to my mind, cast any light on what it meant before the
amendment, at any rate as a general rule and unless it expressly seeks to enact
a retrospective interpretation.
That makes it
unnecessary for me to express any view as to whether power to extract a
contribution towards acquisition costs can be implied, by virtue of section 239
of the Highways Act 1980 and section 111 of the Local Government Act 1972.
However, my provisional view is that no such power is to be implied from those
enactments.
What does remain to
be decided is whether the compulsory purchase order was validly made under
section 278(5) of the Highways Act (as
Council would have needed to exercise their power to acquire the land even if
they had not entered into an agreement under section 278.
I agree that the
appeal should be allowed and the order of the deputy High Court judge set
aside.
Appeal allowed.
