National Grid Gas Plc v Lafarge Aggregates Ltd

Compensation under the 1923 Mining Code is not confined to the value of minerals left unworked. Section 78(4) extends to any loss caused by the specified minerals being left unworked, including profit from a use that would have been made of the void created by extracting them. The governing question is one of objective construction of the statutory language incorporated into the parties’ deed. The statutory scheme is a carefully balanced and integrated code, so individual provisions must be read in their statutory context. Recovery remains subject to causation, remoteness and the exclusion of loss caused by unreasonable conduct.

The claimant appealed, by consent, from an interim arbitration award concerning compensation under a 1971 deed. The deed granted an easement for a gas pipeline and incorporated sections 78 to 85E and the Schedules to the Mines (Working Facilities and Support) Act 1923.

The defendant had been prevented by a counter-notice from working minerals required to support the pipeline. It claimed compensation not only for the value of those minerals but also for profits lost because the resulting void could not be used for landfill. The arbitrator held that such loss was potentially recoverable, subject to causation, remoteness and unreasonable conduct. The issue was whether that conclusion was legally correct.

1. The appeal was dismissed. The question was determined by construing clause 7 of the deed and the provisions of the Mines (Working Facilities and Support) Act 1923 incorporated by it.

2. The deed incorporated the 1923 Mining Code as part of a statute. It was not a contract incorporating another contract. The incorporated provisions had to be construed in the context of the Act as a whole and against the background of the carefully balanced compromise identified in B.A. Collieries v LNER [1945] AC 143. The court’s task was objective construction of the language used, rather than an inquiry into Parliamentary intention or the fairness of individual provisions.

3. Section 78(4) imposed compensation for the loss caused by specified minerals being left unworked. Its language contained no restriction confining recovery to the value of those minerals. Section 78A(1), including its proviso, distinguished compensation relating to the value of specified minerals from other possible heads of compensation. Sections 78A(2) and 81(1) also demonstrated that the Code recognised compensation extending beyond the mineral value.

4. The approach endorsed in B.A. Collieries v LNER [1945] AC 143, drawing on Bwllfa and Merthyr Dare Steam Collieries (1891) Limited v Pontypridd Water Works Co [1983] AC 426, required compensation to reflect what the mine owner would have made had working not been prohibited. Accordingly, if the minerals would have been extracted and the resulting void profitably used for landfill, the lost landfill profit was in principle loss caused by leaving the specified minerals unworked.

5. The entitlement remained subject to a causal connection between the counter-notice and the loss, the ordinary rules on remoteness, and the exclusion of loss caused by unreasonable conduct, applying the conditions identified in Director of Buildings v Shun Fung Iron Works Limited [1995] 2 AC 126.

6. The Parliamentary materials did not assist. They contained no clear statement bearing on the central issue and did not satisfy the applicable threshold in Pepper v Hart [1993] AC 593 or R v Secretary of State for the Environment, ex parte Spath Holme [2001] 2 AC 349. Costs were to follow the event, subject to further submissions.

High Court (Chancery Division): appeal by consent from an interim arbitration award dated 24 November 2005. The appeal was dismissed.