Durham County Council v Darlington Borough Council

The court considered two appeals by Durham County Council against awards made in statutory arbitrations under the Local Government Changes for England (Property Transfer and Transitional Payments) Regulations 1995.

First, the court held that regulation 5(6)(b)(i) must be read objectively: a property is caught only if it is required by the acquiring authority for the purposes of, or in connection with, identifiable functions to be exercised on and after the reorganisation date. The relevant functions must be identified (the decision examined the waste disposal functions under the Environmental Protection Act 1990, section 51) and ownership of land does not of itself constitute a "function" merely because it is permitted by section 111 of the Local Government Act 1972. On those grounds the arbitrator was correct to treat Creebeck as surplus land and the appeal against that award was dismissed.

Second, the court held that the Regulations determine when interest runs: interest under regulation 18 applies only where a sum has become payable by virtue of Part III and has not been paid by the due date, and the notice "giving rise to the liability to pay" is the regulation 16 notice served after an arbitration award. The arbitrator therefore erred in awarding interest under the Regulations from an earlier date. The court also held that the arbitrator did not have a principled power under section 49 of the Arbitration Act 1996 to award interest for the prior period in the face of the Regulations' express scheme, and set aside the award of interest in that respect.

Background and parties. Durham County Council (DCC) appealed two arbitration awards made under the Local Government Changes for England (Property Transfer and Transitional Payments) Regulations 1995 arising from the 1997 structural reorganisation that made Darlington Borough Council (DBC) a unitary authority. Leave to appeal was granted under section 69(3) of the Arbitration Act 1996.

Nature of the proceedings and relief sought. DCC challenged (i) an award by Mr Malcolm Spence QC that a former DCC landfill site (Creebeck) in the Darlington area was "surplus land" under regulation 5(6)(b)(ii) and therefore not required by DBC; and (ii) an award by Mr Christopher Cochrane QC that DCC should pay interest to DBC on a transitional-payment sum from an earlier date, said to be authorised by regulation 18 of the Regulations and alternatively by the arbitrator's power under section 49 of the Arbitration Act 1996.

Issues framed by the court. The court identified (i) the correct legal test under regulation 5(6)(b)(i) for whether land is "required by the acquiring authority" for the exercise of its functions on and after the reorganisation date, and (ii) whether an arbitrator may award interest for periods before a sum becomes payable under Part III of the Regulations, either under the Regulations themselves or under the Arbitration Act 1996.

Key facts. DCC had leased and later purchased the Creebeck landfill site after tipping ceased. The site required monitoring and remediation for gas and leachate and had negative value. DCC contended the site was required by DBC for waste functions; DBC said it was surplus land.

Court’s reasoning. On regulation 5(6)(b)(i), the court treated the word "required" objectively and required identification of the particular function or functions exercised by the acquiring authority on and after the reorganisation date. The relevant function was the waste disposal duties under the Environmental Protection Act 1990, section 51; because Creebeck was full, not licenced for waste treatment or disposal and was being monitored as an owner, it was not usable for the activities authorised by section 51 and so was not "required" by DBC for those functions. The court rejected treating ownership of land merely as a "function" so as to bring all land within regulation 5(6)(b)(i).

On interest, the court examined the statutory notice scheme in Part III (notably regulations 14, 16 and 17) and Schedule 1 and held that sums become payable only when a designated authority serves the calculation notice required by regulation 16 after an arbitration. Regulation 18 confers interest only where the sum has become payable and is unpaid by the due date; accordingly the arbitrator erred in awarding interest from an earlier date under the Regulations. The court further held that the Arbitration Act 1996, sections 49, 94 and 95, does not authorise an arbitrator to award interest for a period before a sum becomes payable under a statutory scheme where the Regulations provide a particular mechanism and timing: the arbitrator therefore lacked principled power to award interest for that prior period and the award of interest was set aside.

Procedural posture. The appeals were heard in the Administrative Court before Mr Justice Stanley Burnton on 22–23 October 2003 with judgment delivered 6 November 2003.

This was an appellate disposition of two arbitration awards. The appeal by Durham County Council against Mr Spence’s award that Creebeck was surplus land was dismissed: the arbitrator was correct to apply regulation 5(6)(b)(i) objectively and to find Creebeck was not required by Darlington for waste functions under section 51 of the Environmental Protection Act 1990. The appeal against Mr Cochrane’s award of interest succeeded: the arbitrator erred in awarding interest under the Regulations from an earlier date and lacked principled power under the Arbitration Act 1996 to award interest for the period before a principal sum became payable under the Regulations; the interest award was set aside.

Leave to appeal was granted by Blackburne J under section 69(3) of the Arbitration Act 1996. The awards under challenge were statutory arbitration awards made under regulation 19 of the Local Government Changes for England (Property Transfer and Transitional Payments) Regulations 1995 and were considered on appeal to the High Court (Administrative Court).