Wiltshire County Council v Crest Estates Ltd & Ors

An indemnity for claims arising out of or in connection with carrying out highway works must be construed in its contractual, commercial and statutory context. Where the wording permits narrower and wider meanings, it may be confined to liabilities arising from construction and maintenance, rather than compensation under Part I of the Land Compensation Act 1973 for depreciation caused by subsequent use. The statutory distinction between injury caused by execution of works and loss caused by their operation is relevant context. A provision’s limited effect on the narrower construction does not itself justify adopting the wider meaning.

Crest companies entered three agreements with Wiltshire County Council and the National House Building Council concerning construction of sections of the Chippenham West bypass. Two agreements were made under section 38 of the Highways Act 1980 and one under section 106 of the Town and Country Planning Act 1990. The Council sought to recover under the indemnities compensation for depreciation caused by use of the highway under Part I of the Land Compensation Act 1973.

The High Court, deciding a preliminary issue, held that the indemnity in clause 6 did not cover that compensation. The Council appealed. The central issue was whether compensation arising from use of the completed highway fell within an indemnity referring to claims connected with carrying out the works.

The appeal was dismissed by a majority. Neuberger LJ gave the principal judgment and Clarke LJ agreed. Ward LJ dissented and would have allowed the appeal.

1. Clause 6 was capable in ordinary language of bearing either party’s construction. The narrower meaning was nevertheless preferable when the clause was read as part of the Agreement and in its statutory context.
2. The reference to carrying out the works more naturally concerned the direct execution of the construction works. The definition of works, namely the works for making up the road, reinforced that conclusion. A claim under the Land Compensation Act 1973 arose from the subsequent use of the road, rather than from carrying out its construction.
3. The overall allocation of responsibility supported the narrower construction. Crest was responsible during construction and the maintenance period. Following the Final Certificate and adoption under section 38 of the Highways Act 1980, the Council was contemplated as bearing future liabilities connected with the public highway. Claims under the 1973 Act could arise only after the highway had opened and become publicly maintainable, and compensation was assessed by reference to actual and reasonably expected use.
4. The established distinction between injury caused by execution or construction of public works and depreciation caused by their operation or use was relevant contractual background. The majority relied on Hammersmith and City Railway Company v Brand (1869) LR 4 HL 171, as summarised in Wildtree Hotels Ltd v Harrow LBC [2001] 2 A.C. 1.
5. The closing reference to the Council’s act, neglect, default or liability did not exclude every liability of the Council. It principally addressed liabilities owed by the Council to Crest; otherwise the indemnity would have little meaningful effect. That point did not alter the conclusion on the 1973 Act claims.
6. The same result applied to clause 20 of the section 106 agreement. Its additional reference to compensation and other wording did not displace the central significance of the phrase carrying out of the Highway Works.
7. Ward LJ considered that the wider words covering claims connected with or incidental to the carrying out of the works included the 1973 Act claims. Applying an objective contextual approach, including commercial considerations, he regarded the exception as confined to claims resulting from Council fault and would have allowed the appeal.

• Court of Appeal (Civil Division): Neuberger LJ, with Clarke LJ agreeing, dismissed the Council’s appeal. Ward LJ dissented and would have allowed it.
• High Court, Queen’s Bench Division: His Honour Judge Iain Hughes QC, sitting as a deputy High Court judge, determined the preliminary construction issue in favour of Crest and held that clause 6 did not cover compensation under the 1973 Act.