Public Health Act 1936, section 278–Claim for compensation for loss of profit suffered by owner of repair garage by reason of road closures–Reconstruction of storm relief sewer by water authority–Award by arbitrator appointed under Act of £2,500 to plaintiff–Denial of liability by defendant authority on the grounds inter alia that the entrance to the plaintiff’s premises had not been obstructed and that a claim for loss of profit was not competent–Alternative procedures for enforcing award discussed–Application under section 26 of Arbitration Act 1950 for leave to enforce award or, alternatively, action on award–Action on award in present case–Plaintiff entitled to amount claimed–Principle of ‘Lingke v Christchurch Corporation’ applied–‘Herring v Metropolitan Board of Works’ and ‘Harper v Hayden’ analysed–No rule that actual interference with access to plaintiff’s premises essential for claim–No defence that obstruction was not greater than was reasonably necessary for carrying out defendant authority’s duties–Claim for loss of profit competent–Compensation not limited under section 278 to injury to land
In this action
the plaintiff, Andreas Leonidis, sought by specially indorsed writ to obtain
judgment for a sum of £2,500 awarded to him by an arbitrator as compensation
under section 278 of the Public Health Act in respect of business loss suffered
by him from road closures ordered by the Thames Water Authority under statutory
powers for the purpose of reconstructing the Brixton storm relief sewer. The
defendant authority had refused to pay the plaintiff the amount awarded by the
arbitrator and raised certain points of law in support of such refusal.
Michael Rich
(instructed by Daniel Davies & Co) appeared on behalf of the plaintiff; G E
Moriarty QC and Guy Seward (instructed by the solicitor to Thames Water
Authority) represented the defendant authority.
Giving
judgment, PARKER J said: The plaintiff in this case, at all material times,
carried on the business of a motor repair garage at premises known as Andrews
Garage, Melbourne Square, London SW9. Melbourne Square runs east off Brixton
Road. It is a two-way street and thus persons wishing to resort to it could, in
normal circumstances, conveniently do so. Whether proceeding north or south
along Brixton Road, they had merely to turn into Melbourne Square when, almost
at once, they would find the plaintiff’s garage. When leaving, they could also
proceed to the junction with Brixton Road and turn north or south as they
wished.
Normal
circumstances, however, ceased to exist from May 19 1975 to April 15 1976, for
during that period the defendant completely closed off access between Brixton
Road and Melbourne Square in exercise of statutory powers for the purpose of
reconstructing the Brixton storm relief sewer. It did so by placing hoardings
across Melbourne Square at the Brixton Road end and carrying out excavation
works between the hoardings. As a result, access from and to the plaintiff’s
premises to and from Brixton Road was, during the period of 11 months, entirely
impossible for vehicular traffic. For part of the period, however, there was a
readily available alternative access, for running to the south-east from
Brixton Road immediately to the north of Melbourne Square is another road known
as Normandy Road. This also is a two-way street and converges with Melbourne
Square after a short distance. Someone wishing to reach the plaintiff’s
premises could therefore do so by using Normandy Road instead of Melbourne
Square and turning right where the two highways converged. As in the case of
access via Melbourne Square it was possible to turn into Normandy Road whether
proceeding north or south along Brixton Road, and it was also possible to turn
north or south when emerging from Normandy Road into Brixton Road. This alternative
access was unfortunately also wholly closed by the defendant under statutory
powers, in a like manner and for the like purpose as the closure of Melbourne
Square but for a shorter period, namely, from July 7 to September 29 1975.
During that period anyone wishing to get to or from the plaintiff’s premises
from Brixton Road had to make, due to other road closures in the area by the
local authority and one-way systems, a long detour.
As a result of
the defendant’s operations, the plaintiff considered that the profits from his
business had suffered and he, accordingly, made a claim against the defendant
for compensation under section 278(1) of the Public Health Act 1936, which
provides:
Subject to
the provisions of this section, a local authority shall make full compensation
to any person who has sustained damage by reason of the exercise by the
authority of any of their powers under this Act in relation to a matter as to
which he has not himself been in default.
It is common
ground between the parties that the powers exercised by the defendant were
among the powers referred to in the section and that the defendant is a local
authority within the section. It is therefore unnecessary for me to set out the
somewhat complex legislative route which leads to these results.
The defendant
denied liability and the plaintiff then availed himself of the procedure under
sections 278(2) and 303 of the Act. Section 278(2) provides: ‘Any dispute
arising under this section as to the fact of damage, or as to the amount of
compensation, shall be determined by arbitration . . .’ and section 303
provides: ‘In arbitrations under this Act the reference shall, except where
otherwise expressly provided, be to a single arbitrator to be appointed by
agreement between the parties or, in default of agreement, by the
Minister.’ The parties having failed to
reach agreement upon an arbitrator, the Secretary of State for the Environment
on August 18 1976 appointed R E Wright FRICS FRVA as arbitrator to determine
the dispute which, by the appointment, was defined as follows: ‘as to the fact
of damage arising from the construction of storm relief sewers by the
[defendant] in the
therefor.’
On October 28
1976 the arbitrator made an award by consent in the following terms: ‘By
consent I award that by reason of the closure of Normandy Road and Melbourne
Square by works carried out by the Thames Water Authority pursuant to their
statutory powers in that behalf the business carried out by Mr A Leonidis at 1A
Melbourne Square suffered a loss in the sum of £2,500.’ The arbitrator, also by consent, made
provision for costs, awarding that, if the defendant was liable to pay the
plaintiff £2,500 or any sum, it should pay the costs of the arbitration but
that, if it was not liable to pay the plaintiff any sum, then the plaintiff
should pay such costs.
Following upon
this award the plaintiff demanded payment of £2,500 but the defendant refused
to pay and on October 6 1977 the plaintiff commenced this action by specially
indorsed writ. The defendant’s defence dated January 11 1978 denied liability
on the grounds: (i) that the £2,500 was in respect of loss of profits; (ii)
that the entrance to the plaintiff’s premises was not at any time obstructed,
nor was any person or vehicle prevented from entering therein; (iii) that the
arbitrator was not appointed to and did not purport to determine liability.
I have set out
the history in some detail, for, at first sight, it would appear that since (1)
the arbitrator had been appointed to determine the fact of damage and the
amount of compensation and had awarded compensation in the sum of £2,500; (2)
the Arbitration Act 1950 applied by virtue of section 31(1) thereof to the said
arbitration; (3) there had been no request for any case stated and no
application to set aside or remit the award, the plaintiff was clearly entitled
to judgment.
Such a simple
view of the matter seems, however, to be misplaced. The note on section 278 in Halsbury’s
Statutes, 3rd ed, vol 26 p 348 states baldly: ‘An arbitrator cannot decide
the question of liability but determination of the question of liability is not
a condition precedent to the claimant’s right to proceed to arbitration.’ In support of this observation there are
cited three cases: The Brierley Hill Local Board v Pearsall
(1884) 9 App Cas 595; Re Walker and Beckenham, Kent, Local Board (1884)
50 LT 207; and Lingke v Christchurch Corporation [1912] 3 KB 595.
All these three cases were decided under section 308 of the Public Health Act
1875, but that section does not differ in any material respect from the section
presently under consideration and it has apparently been the practice for very
many years for an applicant first to arbitrate on fact of damage and amount of
compensation and then to bring an action on the award to establish liability
rather than proceed by way of application under section 26 of the Arbitration
Act 1950 and Rules of the Supreme Court, Order 73, rule 3 for leave to enforce
the award. If correct, this procedure appears to be one which exposes the
claimant to compensation to a double set of costs and makes the recovery of
compensation prolonged, expensive and complicated instead of, as one might
suppose was the intention, speedy, cheap and simple. Sometimes the two-part
process is avoided by special agreement, as was recently done in George
Whitehouse Ltd v Anglian Water Authority,* a case before the Lands
Tribunal, a transcript of the judgment in which was supplied to me, but in the
generality of cases this is not done. An examination of the validity of the
ordinary procedure, which was accepted by counsel for both parties to be
lacking in sense, therefore appears to be called for.
*(1978) 247
EG 223, [1978] 2 EGLR 168
The Brierley
Hill case was in terms no more than a decision that a claimant could
proceed to arbitration without having first established liability. It thus
amply justifies the second phrase in the note in Halsbury’s Statutes,
but it does not, in my judgment, establish the first phrase. Lord Selborne at p
599, in referring to section 308 of the earlier Act, said:
. . . the
arbitration is to be upon ‘any dispute as to the fact of damage or amount of
compensation.’
Now, on
ordinary principles of construction, laying aside entirely the prior
authorities, I should have thought that it was plain there, that two things
were meant at all events to be the subject of inquiry by the arbitrators; the
first, ‘the fact of damage,’ the second, the ‘amount of compensation’ when
damage there was. What is meant by ‘damage’?
On common principles of construction it surely must mean that damage
described in the words which immediately precede, and in respect of which alone
compensation is to be made. ‘Damage by reason of the exercise of any of the
powers of this Act in relation to any matter as to which he is not himself in
default.’ Those words are introduced as
the foundation of the inquiry into the fact of damage, the fact of such damage
as gives a right to compensation. That matter of fact no doubt cannot be
ascertained without dealing with the actual state of facts, whatever it may be
found to be; and that actual state of facts may possibly raise questions of law
as to what is or what is not done properly ‘in the exercise of any of the
powers of the Act,’ and also as to what is or what is not a default on the part
of the claimant. But the inquiry does not cease to be an inquiry into the facts
though the facts may raise questions of law. If the arbitrator goes into the
inquiry, as he ought, as a question of fact, and if he deals with the facts as
he finds them, but deals with them in a wrong view of those facts according to
law, then no doubt his award will not be final. If an action is brought upon it
and it appears that he has been mistaken in the view of the law which has
governed his view of the facts, there will be a verdict for the defendants upon
the award; but if he has not miscarried, the award certainly cannot be worse
for his stating upon the face of it that he finds that state of facts into
which by the express terms of the law he is bound to inquire and which alone
could give any right to compensation.
This does not
suggest that the arbitrator has no power to determine liability but recognises
that the arbitrator cannot be conclusive on the law. An example of this appears
in the second of the cases cited in Halsbury’s Statutes, Re Walker and
Beckenham, Kent, Local Board where, after an arbitration, the claimant in
accordance with the then procedure sought to enforce it by motion. The local
board took the point that the claimant had not proved his title to the land
which had been damaged and it was held that this question should be determined
in an action on the award.
In Lingke’s
case there was an action on the award in accordance with what was then already
settled practice; the defendants taking the point that damage suffered
consisted in loss of business profits only which, it was contended, was not
‘damage’ within the section. Fletcher Moulton LJ said at p 606:
. . . it is
well-established law that the decision of an arbitrator as to quantum of
compensation under public Acts, which grant compensation for damage by works,
does not decide the question of liability, although it does decide the quantum
of compensation if liability be proved. The consequence was that the plaintiff
brought an action . . . to establish her right to compensation.
I do not read
these judgments as meaning that a claimant’s rights under the Arbitration Act
are so emasculated that he can never obtain leave to enforce an award as a
judgment. In some cases, like a claimant in any ordinary arbitration, he may
well be unable to do so but, as Lord Selborne pointed out, the arbitrator has
power to determine the fact of damage, and the damage which he has to determine
is damage sustained by reason of the exercise by the authority of statutory
powers. This may in some circumstances be a simple issue of fact but in others
it may be mixed fact and law: for example, where it is contended that a
particular type of damage is not ‘damage’ within the meaning of the section.
Such mixed questions frequently arise in arbitrations and are normally dealt
with in one of two ways. Either a consultative case may be stated or the award
may be stated in the form of a special case. If neither course is adopted then
the award is in the ordinary way final although it may yet be bad for error of
law on its face. There appears to be no reason to
anyone else who resorts to arbitration and in none of the cases was the point
considered.
Strictly, the
point does not arise here, for the claimant has, in accordance with the
ordinary practice, chosen to proceed by way of action on the award. Indeed, in
the light of the history it was no doubt the only reasonable course open to
him. However, there is, in my judgment, nothing to prevent a claimant in an
ordinary case from adopting the other route if he wishes to do so. Like any
other claimant he may not succeed, but I do not consider that he has
necessarily to proceed by action.
I turn now to
the substance of this case. The argument centred around two cases: Lingke’s
case, which I have already mentioned, and Harper v G N Hayden &
Sons Ltd [1933] 1 Ch 298. In Lingke’s case the claimant under
section 308 of the Public Health Act 1875 was held entitled to recover for loss
of profits of a furniture business where the local authority had excavated the
highway and obstructed access to the claimant’s house and shop. It was held
that the claimant was entitled to recover and the Court of Appeal in so holding
were not deterred by the earlier case of Herring v The Metropolitan
Board of Works (1865) 19 CB (NS) 510. Vaughan Williams LJ and Buckley LJ
interpreted that decision narrowly or distinguished it, and Fletcher Moulton LJ
considered that it should be overruled. The interference in Lingke’s
case was immediate in that the workmen deposited the excavated soil against the
claimant’s house and shop, and this fact was much relied upon by the defendant
in the present case and was said to be a reason for distinguishing Lingke
and preferring Herring. I reject this argument for a number of reasons.
In the first place, there is no principle to support it and it is consistent
with many cases of nuisance by obstruction of the highway, where there was no
direct interference with access. Secondly, Mr Moriarty was constrained to
concede that if Melbourne Square had been blocked at both ends so that access
to the plaintiff’s premises was completely cut off, but there was no immediate
obstruction of his entrance, there would, subject to arguments on remoteness,
be liability, notwithstanding that the immediate entrance to the plaintiff’s
premises was unimpeded. Thirdly, in Lingke’s case, the Court of Appeal
proceeded on the ground, not of immediate obstruction to the entrance, but on
the ground that the effect of what was done in the highway was to deprive the
claimant of ordinary access to her house.
Lingke’s case was decided by the application of the principle stated by Lord
Chelmsford in Ricket v The Metropolitan Railway Company (1867) 2
HL 175 at p 187 as follows: ‘Unless the particular injury would have been
actionable before the company had acquired their statutory powers it is not an
injury for which compensation can be claimed.’
This principle was directly applied by Vaughan Williams LJ at p 600 and
again at p 604, where he said: ‘I ask myself this question: If this sewer had
been dug and thus these acts which are the subject of the allegation at the
trial had been done by a private individual, would or would not there have been
a good cause of action against the defendants?’
See also Fletcher Moulton LJ at p 608 and Buckley LJ at p 612.
If this
principle is applied to the present case there can, in my judgment, be but one
answer. If a private individual had done what the defendants did in the present
case the claimant would have had a good cause of action for the loss of
business suffered which was over and above the ordinary inconvenience suffered
by the public at large.
It is
suggested, however, that Harper v Hayden in substance restores Herring
and that the law now is that, so long as an authority in exercising its powers
does not create an obstruction greater in extent than or for longer than is
reasonably necessary for the proper carrying out of their duties, no claim will
lie under section 308. This contention is in my judgment untenable. Harper
v Hayden was not a decision which, despite what was said in it about the
decision in Lingke’s case, decides anything more than that where an
owner of premises adjoining a highway is conducting building works and, for the
protection of the public, erects a hoarding which obstructs the highway for no
longer than reasonably necessary, he commits no wrong. This is in accord with
both Herring and Lingke. To extend this to obstructions by local
and other authorities in the exercise of statutory powers would be to deprive
section 278 of all content. It would enable a water authority to close
completely a street of shops for a year or more if it was reasonably necessary,
thus depriving the shopkeepers of their livelihood for a year, and yet say that
there was no right to compensation. A construction of the section leading to
such a result would be to attribute to Parliament an intention which amounts
almost to confiscation without compensation. I can attribute no such intention.
Moreover, such a construction would be against the ordinary meaning of the
words ‘commonsense’ and ‘authority.’
I conclude,
therefore, that neither the pleaded defence that there was no physical
interference with the entrance to the plaintiff’s premises, nor the suggestion
that there was no greater obstruction than was reasonably necessary for
carrying out the defendant’s duties, will avail them.
There remains
one further point which Mr Moriarty desired to keep open, namely that loss of
profit was too remote to be recoverable under the section, which he said
required injury to land. This is plainly directly contrary to the decision in Lingke
by which I am bound. It also appears to be contrary to the express words of the
section itself, for subsection (4) expressly deals with claims by owners of
land and thereby implicitly recognises that other claimants may succeed.
Furthermore, even under sections which do limit compensation to injury to land,
it is recognised that loss of profitability may affect the value of the
tenant’s or owner’s interest in the land: see Argyle Motors (Birkenhead) Ltd
v Birkenhead Corporation [1974] 1 All ER 201. It appears to me an
inescapable inference that, during the period of the defendant’s operations,
the letting value of the plaintiff’s premises must have been diminished and,
the amount of the compensation having been determined, that would be an end of
the matter.
Accordingly,
there must be judgment for the plaintiff for the amount claimed and, by
agreement, an order that the plaintiff’s costs of arbitration be taxed if not
agreed.
Judgment was
given for the plaintiff for £2,500. It was ordered that the plaintiff’s costs
in the arbitration should be taxed, if not agreed, and paid by the defendant
authority. It was also ordered that the plaintiff’s costs in the present action
should be paid by the authority. Legal aid taxation of the plaintiff’s costs
was ordered and by consent the sum of £2,500 was to carry interest at the same
rate as the judgment debt as from the date of the award.
