Mining – Subsidence – Applicant authority compensating persons suffering subsidence damage owing to coal mining – Respondents claiming properties unsaleable because of subsidence damage to adjacent properties – Arbitrator making award in favour of respondents – Applicant seeking permission to appeal – Whether respondents entitled to compensation for blight where no physical damage to their own properties – Application and appeal allowed
The applicant was, pursuant to the Coal Mining Subsidence Act 1991, responsible for compensating those whose properties had suffered subsidence damage following coal mining operations. The respondent brothers owned adjoining terraced properties. The properties adjacent to their houses had suffered severe subsidence damage and the applicant had purchased those properties with a view to demolishing them. Section 29 of the 1991 Act provided for the making of the Coal Mining Subsidence (Blight and Compensation for Inconvenience During Works) Regulations 1994 (SI 1994/2564) to alleviate cases of hardship suffered as a result of properties being blighted by subsidence or the possibility of such damage. Regulation 2(2)(a) set out when a dwelling-house would be deemed to be blighted for the purposes of the regulations.
The respondents commenced separate arbitration proceedings against the applicant under the Coal Mining Subsidence (Arbitration Schemes) Regulations 1994; these centred on claims that because of subsidence damage their properties were unsaleable. An earlier claim by the respondents had been compromised many years previously and a joint experts’ report revealed that there had been no subsequent damage.
The arbitrator concluded that although there had been no further physical damage in the past six years, damage had occurred in the form of loss of value following the damage to the adjacent properties, which had been caused by mining subsidence. Accordingly, he found in favour of the respondents and ordered the applicant to purchase the two properties for £84,500 each.
The applicant sought permission to appeal against those awards, pursuant to section 69 of the Arbitration Act 1996. It argued that since there was no actionable physical damage to the properties, the arbitrator had had no power in law to make any award under the 1991 Act. The applicant disputed that it could be liable to the respondents for blight resulting from subsidence damage occurring, not to their properties but to the adjacent houses.
Held: The application and the appeal were allowed.
The arbitrator had been wrong to find that the applicant was liable to the respondents under the 1991 Act where there was no relevant physical subsidence damage because he had no power in law to make such an order. It was clear that, in accordance with section 69 of the 1996 Act, his erroneous decision fundamentally affected both parties’ rights and concerned the principal question that he had been asked to determine. Accordingly, since the issue was a pure point of law, it was just and proper for the court to determine the issue afresh, notwithstanding the agreement of the parties to go to arbitration.
The underlying assumption was that for a claim for compensation to succeed, it was necessary to show physical damage arising from subsidence. In the absence of such damage, no claim for pure economic loss could be pursued. Where there was physical damage, some claims for economic loss, including blight, could be recoverable in accordance with the 1991 Act. However, the right to make such claims had been carefully circumscribed in many key respects so as to exclude several categories of potential claim: see West Leigh Colliery Co v Tunnicliffe & Hampson Ltd [1908] AC 27; Langley v Coal Corporation (No 2) [2003] EWCA (Civ) 204; [2005] RVR 111; and Collins (Pontefract) Ltd v British Coal Corporation (1998) 73 P&CR 219.
In the instant case, the arbitrator had misdirected himself by confusing physical subsidence damage (as defined in section 1(1) of the 1991 Act) and the suffering of damages, which could, in certain circumstances, include economic loss or blight. Section 2(2)(a) of the 1994 Regulations was not sufficiently wide to encompass a claim in respect of property that had not suffered from subsidence, but the value of which had or might have been affected because an adjacent property had suffered such damage. Any other finding would be contrary to the legislation. If “affected by subsidence damage” meant that the property might suffer a loss in value or blight in the future because of damage to another property, section 2(2)(b) which expressly dealt with the circumstances in which claims for potential future blight might be permitted, would have been unnecessary.
Paul Darling QC (instructed by DLA Piper UK LLP, of Sheffield) appeared for the applicant; Paul Morris (instructed by Lawsons, of Wakefield) appeared for the respondents.
Eileen O’Grady, barrister
