Gwynedd Council v British Telecommunications Plc

The appellant’s notice advances eight grounds of appeal. Paragraph 1 repeats the argument that on a correct interpretation of Regulation 2(2) the sum claimed by BT was not an “allowable cost” but fell within the “initial set of plans and estimates” for which BT had to bear its own costs. Paragraph 2 asserts that the judge had erred in law by failing to look at the full wording of Regulation 2(2) and sections 84 and 85 of the Act, with the consequence that he failed to appreciate the distinction drawn between the “measures” required to be taken in relation to undertakers’ apparatus (to which the cost sharing regulations generally applied) and the planning of those measures (to which the cost sharing rules did not apply).

Paragraph 3 of the grounds asserts that judge erred in his interpretation of the Code of Practice, which similarly distinguished between the preliminary planning and liaison process and the actual measures required to be taken in relation to undertakers’ apparatus. Paragraph 9.2 of the Code, properly construed, indicated that the sum claimed by BT was not recoverable.

Paragraph 4 of the grounds asserts that the judge also erred in his interpretation of the word “initial” in Regulation 2(2). “Initial” referred to the planning work done at the beginning of the process. It also distinguished between the plans and estimates produced at the C4 stage of the Code of Practice and any further plans or estimates which may later be required, and which both the Regulations and Appendix C4 itself recognised were chargeable.

Paragraph 5 of the grounds asserts that the judge failed to take into account that the C4 stage was the first point at which plans and estimates were prepared by BT in response to a committed scheme from Gwynedd. Similarly, paragraph 6 of the grounds asserts that the judge erred in his interpretation of the word “preliminary” in paragraph 9.2 of the Code. The C4 “plans and estimates” were preparatory to the works, which were to be carried out. It did not make any sense to distinguish (in the C2-C4 regime) between planning that was preliminary and planning that was not preliminary. There was no conflict between the use of this word and the proper meaning of “initial set of plans and estimates” in the Regulations.

Paragraph 7 of the grounds assert that, in accepting that the reference in the Regulations to “set of plans” could properly be equated with the word “scheme” as used in the Code of Practice, the judge had failed to observe that the word “scheme” when used in the Code related to Gwynedd’s scheme, and not to anything produced by BT.

Finally, the grounds assert the judge erred by rejecting Gwynedd’s argument in relation to the words in the first paragraph of Appendix C4, namely: “if there is a requirement to provide more than one detailed estimate, the utility may charge for such additional estimates”. The grounds repeat the argument that these words are otiose if BT could charge for the first detailed estimate.

The grounds of appeal were skilfully developed in oral argument before us by Mr. Sauvain, who laid particular emphasis on the point, which he argued the judge had failed properly to grasp, that the Regulations made it clear that the term “allowable costs” meant all the reasonable costs of the “measures” needed to be taken for the purpose specified in section 84(1) of the Act. The “measures” identified in section 84(1) were “any measures needing to be taken in relation to the apparatus in consequence of, or in order to facilitate, the execution of the authority’s works”; that is to say the works that the undertaker may require. Section 85, which is the provision that deals with cost sharing specifically relates allowable costs to the “measures” needing to be taken in relation to the apparatus in consequence of the works, or in order to facilitate their execution.

Thus, Mr. Sauvain submitted, the Act and the Regulations read together, drew a distinction between the “measures” themselves (i.e. the works which were required) and the identification of those measures, the settling of a specification of those measures and the co-ordinating of those measures (i.e. the preliminary, planning and liaison stages). This meant, he argued, that the detailed estimate to be provided by the undertaker at the Appendix C4 stage in response to the authority’s “details of the final design, with drawings and an outline programme” was not an allowable cost, although any additional estimates later required by the authority would be. Thus the Regulations did draw the line at cases where authorities, having put the undertaker to the expense of responding to the scheme and preparing a set of plans and estimates, then require undertakers to carry out further work – for example where the authority changes the scheme after it has commenced, or when it goes beyond what the Code of Practice may require. Mr. Sauvain gave as an example extra trial holing, identified at paragraph C1.4 of the Code, and the additional estimates envisaged at Appendix C4.

Mr. Sauvain also submitted that the judge had misinterpreted the somewhat inelegantly expressed paragraph 9.2 of the Code of Practice (set out at paragraph 13 above). That paragraph, he argued, distinguished between “the works described in Appendix C section C4” (which are allowable) and “the costs of either party in respect of that part of the work described in Appendix C2, C3 and C4, which consists of preliminary planning and liaison,” (which are not allowable). On any reading of this paragraph, he argued, the view taken in the Code of Practice was that some part of what is contained in C4 was not allowable because it consisted of preliminary planning and liaison.

Moreover, Mr. Sauvain argued, the “works” (plural) described in paragraph 9.2 were both the “measures” referred to in C4 (i). and the “works” described in C4 (ii) - i.e. the works that are needed to be undertaken in relation to the apparatus in consequence of the undertaker’s works, or in order to facilitate the execution of the highway authority’s works - see s.85 and Regulation 2(2). The “work” (singular) involved in determining those measures or in preparing a specification of those measures (i.e. everything done up to and including the C4 stage) was, he argued, preliminary planning and liaison work, and thus not an allowable charge.

Mr. Sauvain also criticised the judge’s interpretation of the word “initial” in Regulation 2(2). He argued that the word “initial” in the Regulations referred to a “set of plans and estimates”, and that there was no reference in the Code of Practice to an undertaker ever being required to produce a “plan” per se, although plans might be prepared and produced at the C2, C3 or C4 stages. Estimates, he accepted, may be produced at both the C3 and C4 stages. C4 contemplated that there may be additional estimates for which the utility may charge. There was, however, he submitted, no common sense reason why the second plan (produced at the C3 stage) should be part of an “initial set of plans” but the second estimate (at the C4 stage) should not be part of an “initial set . . . of estimates”. Furthermore, the reference to a “set of plans and estimates” could be related to the planning stage of identifying and specifying the undertakers’ required works. All the information contained at C4 stage could be said to be part of such a plan or set of plans - as could the information to be supplied at C2 and C3. Mr. Sauvain saw no difficulty in using the OED definition of “initial” in the Regulations to refer to the specification and other documents produced at the C4 stage. The specification, he submitted, would be BT’s “plan” for dealing with their apparatus within Gwynedd’s scheme. It would be the plan that had been provided at the beginning or outset of the works themselves. Finally on this point, Mr. Sauvain submitted that the word “initial” also distinguished between the C4 plans and estimates and any further plans or estimates that may later be required and which both the regulations and C4 itself recognised were chargeable.

Mr. Sauvain criticised the judge for failing to take into account that the C4 stage was the first point at which plans and estimates were prepared by the undertaker in response to a committed scheme from the highway authority. The C3 stage was in respect of a draft scheme, which may or may not be firmed up into a final scheme. Mr. Sauvain pointed to the evidence given by BT’s witness and set out in paragraph 36 above, that BT received many times more C3 requests than they do C4 requests.

Mr. Sauvain was similarly critical of the judge’s interpretation of the word “preliminary” in paragraph 9.2 of the Code of Practice. He submitted that there was no difficulty with the use of the word “preliminary” in the Code of Practice. Once again he was content to adopt the definition of “preliminary” in the OED. The Appendix C4 “plans and estimates”, he argued, were preparatory to the works that are to be carried out. There was, accordingly, no conflict between the use of this word and the proper meaning of “initial set of plans and estimates” in the Regulations.

Furthermore, in holding that the reference in the Regulations to “set of plans” could properly be equated with “scheme” as used in the Code of Practice, Mr. Sauvain argued that the judge had failed to observe that the word “scheme” when used in the Code related to the local authority’s scheme and not to the “measures needing to be taken in relation to the apparatus in consequence of, or in order to facilitate, the execution of the authority’s works” referred to in sections 84 and 85 of the 1991 Act and cross referred to in Regulation 2(2). The word “plans” in the Regulations, he submitted, referred to something being produced by the undertaker.

Mr. Sauvain also placed reliance on the wording at the end of the first paragraph in Section C4 namely: “if there is a requirement to provide more than one detailed estimate, the utility may charge for such additional estimates”. Those words, Mr. Sauvain argued, were otiose if BT could charge for the first detailed estimate.

Mr. Sauvain also pointed out that the reference in the Regulations to “any further plans and estimates which the authority may require” in Regulation 2(2)(a) – for which a charge may be made – was, as he put it “uncannily similar to” (and consistent with) the wording in Appendix C4. This statement in C4, he argued, would have been quite unnecessary if the initial C4 estimate was subject to a charge – in such a case later estimates would necessarily also be chargeable. The need for the reference in the Code of Practice was to point out that the Gwynedd had only one bite at the free estimate cherry once they had produced their final plans.

In relation to the argument that C4 is only the initial stage where the Appendix C procedures have been foreshortened and stages C2 and C3 omitted, Mr. Sauvain argued that there was no obvious reason why the preparation of a detailed estimate and specification should fall outside the “allowable costs” where the foreshortened procedure in paragraph C1.2 was adopted if that work was otherwise usually allowable. BT had to accept that in such a case the work was not allowable because on their dictionary interpretation of the word “initial” such an estimate and specification would obviously be the first and only document provided by the undertaker to the authority. Curiously, in such a case they would be required to pay for the higher level of work involved in a detailed estimate specification when in the usual case (as argued by BT) they would only have to pay for the lesser preliminary work.

Finally, and for the avoidance of doubt, Mr. Sauvain argued that not only could the provisions of the Manual have no relevance to the interpretation of the statute or regulations: the interpretation therein contained was also incorrect.

For BT, Mr. Ian Mayes QC analysed the position in the following way. The Regulations provided for certain of the costs of work done pursuant to the Act to be borne solely by the highway authority or the utility undertaker and other costs to be shared in prescribed proportions. Among the costs to be borne solely by the utility undertaker were those incurred in preparing the initial set of plans and estimates in relation to measures needed to be taken for the purposes specified in section 84(1) of the Act. The costs of preparing any further plans and estimates which the highway authority may require are “allowable costs” - see Regulation 2(2)(a) - and are to be shared.

It followed, Mr. Mayes argued, that where a utility undertaker prepared a Budget Estimate in accordance with Appendix C3 of the Code of Practice, the costs were not allowable costs and were to be borne solely by the utility undertaker because they were costs incurred in preparing the “initial set of plans and estimates”. However, he argued, except in a case where, as described in Appendix C1.2 of the Code of Practice, by agreement between the highway authority and the utility undertaker the procedures set out in Appendix C to the Code could be foreshortened and the Draft Scheme and Budget Estimate stage omitted, a Detailed Estimate under Appendix C4 of the Code was a further estimate and the costs of preparing it were “allowable costs” which fell to be shared.

Mr. Mayes accepted that if there was no C3 Budget Estimate and, by agreement, the parties proceeded straight to C4, then the C4 Detailed Estimate was the initial estimate and the utility undertaker alone bore the cost of preparation. The Code of Practice envisaged that the C2 and C3 stages could be omitted and the procedure start at the C4 stage in smaller-scale works or where schemes have minimal effect on the utility undertaker’s apparatus - see Appendix C 1.2. Thus the passage in brackets towards the end of the first paragraph of Appendix C Section C4, upon which the Appellant had placed great emphasis, namely:

Mr. Mayes argued that, as the evidence at trial had showed, in most instances, there are just two schemes and estimates: namely (a) the draft scheme and budget estimate (C3); and (b) the final detailed scheme and detailed estimate (C4). However, in the event that the parties did go direct to the Appendix C4 detailed estimate stage but two detailed estimates were required, he accepted that the costs of preparing the initial one of these were not “allowable costs”; but, he argued, the costs of preparing any further estimate(s) were “allowable costs” (as they were not costs of the initial estimate).

In BT’s submission, upon a proper construction, the Regulations were consistent with the practical guidance contained in the Code of Practice approved by the Secretary of State; but if the Code of Practice could not sensibly be read in conjunction with the Regulations, he agreed that it was the Regulations, which prevailed.

On the interpretation of the inelegant sentence in Paragraph 9.2 of the Code of Practice set out at paragraph 13 of this judgment, Mr. Mayes submitted that the part of Appendix C4 “which consists of preliminary planning and liaison” was (1) the “joint discussions” following which the highway authority submitted to the utility undertaker details of the final design with working drawings and an outline programme and (2) in those instances where the parties, by agreement, proceeded direct to C4, the cost of the initial detailed estimates but not any further detailed estimates.

Thus, Mr. Mayes argued, the construction of the Regulations for which BT contended accorded both with the Code of Practice and with the guidance given in the Manual which, he pointed out, had been given by the Highways Agency and the National Assembly for Wales in August 2001, after the Act had been in force for eight years.

As I indicated at the outset of this judgment, and like the judge, I do not find the construction of the Act and the Regulations easy. I readily acknowledge that my mind vacillated during the course of the able oral arguments presented to us. In particular, and despite Mr. Mayes’ reassuring submissions, I detected a possible tension between the strict meaning of the statutory language, and the pragmatic manner in which it had been interpreted in practice on the ground. Having reflected on the matter, however, I have come to the conclusion that the construction proffered by Mr. Mayes is correct, and that the judge reached the right conclusion.

I accept Mr. Sauvain’s proposition that the “measures needed to be taken for the purpose specified in section 84(1) of the Act” identified in Regulation 2(2) are “the measures needing to be undertaken in relation to the apparatus” of the undertaker. I also accept that section 84 of the Act draws a clear distinction between the “measures” required to be undertaken in relation to the undertaker’s apparatus, and “the execution of the authority’s works”. It is, I think, clear, therefore, that the “allowable costs” identified in Regulation 2(2) relate exclusively to the measures “needing to be taken in relation to the apparatus” of the undertaker.

Whilst the Act does not define the word “measures”, I also accept that in the context of sections 84 and 85 “measures” mean the works needed to protect the undertaker’s apparatus. That this is so seems to me clear both from section 84(1)(b) which enjoins the parties to take such steps as are reasonably required “to settle a specification of the necessary measures”, and from section 85(1) which refers to “the allowable costs of the measures needing to be taken in relation to the apparatus in consequence of the works”.

However, I am unable to accept Mr. Sauvain’s arguments (1) that “allowable costs” relate only to the costs of the execution of the physical work required to move or otherwise protect the undertaker’s apparatus, and (2) that BT’s Appendix C4 estimate in this case is excluded from the concept of allowable costs because it represents costs incurred “in preparing the initial set of plans and estimates”. Whilst Mr. Sauvain’s construction is plainly arguable – and, indeed, is attractive in its simplicity - I do not think it is what the Act and the Regulations mean or envisage.

In my judgment, it is plain from Regulation 2(2) itself that the phrase “all the reasonable costs of the measures” is not limited to the cost of the physical execution of the measures. Self-evidently, measures designed to protect the equipment of an undertaker do not materialise out of thin air, or spring fully armed from the head of the undertaker’s engineer. They have to be planned.

Section 85(2) and (4) of the Act delegate to the Regulations the power to identify and apportion allowable costs. That is precisely what Regulation 2(2)(a) does. It excludes “costs incurred in preparing the initial set of plans and estimates in relation to those measures (but not in preparing any further plans and estimates which the authority may require)”. The crucial question, therefore becomes: what are the initial set of plans in this case?

At this point, it seems to me, we have to turn to the Code of Practice, and the first three of the seven stages identified in paragraph C.2, namely, (i) preliminary inquiries (ii) draft scheme and budget estimates and (iii) detailed scheme and detailed estimates. These concepts are, of course, fleshed out at Appendix C2, C3 and C4, and the heading of Appendix C4 adds the word “final” to the phrase “detailed scheme and detailed estimates”. It is common ground that these stages were followed in this case. This is not a case in which they were foreshortened, or in which the parties moved straight from C2 to C4.

I do not propose to repeat the matters set out in the Code of Practice under the three headings C2, C3 and C4. It is, I think, sufficient for me to say that on the facts of this case I am unable to agree that the C4 plans and estimates prepared by BT are “the initial set of plans and estimates in relation to (the) measures”. Mr. Sauvain’s submission seems to me, with respect, to be contrary to the structure of the scheme contained in the Act and the Regulations as fleshed out in the Code of Conduct, and inconsistent with the fact that in this case the parties clearly regarded themselves as proceeding from stage Appendix C2 through stage C3 and then to stage C4.

In other words, in my judgment, the instant case was plainly not one where the C4 plans prepared by BT were “the initial set of plans and estimates”. The initial set of plans and estimates were the C3 document described in paragraph 31 of this judgment. It follows that the “Detailed Client Estimate” for which BT seeks to charge is a “further estimate” and thus an allowable cost within Regulation 2(2).

Whilst it is, of course, by no means conclusive, the language of the stages identified in the Code of Practice indicates clearly that Appendix C2 and C3 are preliminary inquiries and draft schemes and budget estimates: C4 is the final detailed scheme and detailed estimates. Although the language is different, this fits conveniently with the wording of paragraph 2(2)(a). In my judgment, therefore, on the facts of this case, the costs excluded by paragraph 2(2)(a) are those at stages C2 and C3: the C4 costs are not excluded and are part of the allowable costs of the measures.

This conclusion needs, of course, to be tested against the other objections made by Mr. Sauvain. I see no difficulty, firstly, with the words in brackets in paragraph 2(2)(a) of the Regulations. The C4 plans and estimates in this case are “further plans and estimates” over and above those prepared at stage C3. Moreover, the phrase, “further plans and estimates” in my judgment, is wide enough to cover both the C4 plans prepared following completion of stage C3 and any additional plans which Gwynedd might have required following receipt of the C4 plans. The relationship between BT and Gwynedd, it must be remembered, is statutory not contractual, and it was common ground that in exercising its powers as a statutory authority, Gwynedd had the power to require further plans and estimates from BT.

The phrase “further plans and estimates” is also wide enough, in my judgment, to cover the situation in which the parties have moved directly to stage C4 (leaving out stage C3) with the result that the C4 plans represent “the initial set of plans and estimates”. In such a case the undertaker could not charge for the first C4 plans, because they would be “the initial set”. It could, however, charge for any “further plans and estimates” which the authority required.

In this context, therefore, I do not think that the word “initial” causes any difficulty. The “initial set of plans and estimates” are either those produced at stage C3 (in which case they are not chargeable) or those produced at stage C4 where there has been no stage 3. In neither case can the undertaker charge for them.

Equally, whilst it would have been preferable if paragraph 9.2 of the Code of Practice had followed the wording of the Regulations, I do not have any difficulty in applying the word “preliminary” to the C3 stage, or to the C4 stage where they has been no stage C3. Whilst there may be some circumstances in, which it is necessary, in relation to a given event, to draw a clear distinction between “initial” and “preliminary”, what is here under discussion is a process – a series of stages - and in that context the distinction between the precise meaning of the two words becomes blurred. The initial stages of a football match occur only after the referee has blown his whistle to start the game. Everything prior to that moment is preliminary to the match. However, where a process such as that envisaged by the Act and the Regulations is concerned, it seems to me perfectly possible to describe the C2 and C3 stages (and part of the C4 stage where there has been no C3) as either the initial or the preliminary stages in the process of taking the steps set out in section 84(1) of the Act. I certainly do not see the use of the word “preliminary” in the context of the Code of Practice as inconsistent with the interpretation of Regulation 2(2)(a) which I have reached.

If the Code of Practice is inconsistent with the Act and the Regulations it is, of course, the latter, which prevail. The sentence in the second part of paragraph 9.2 of the Code of Practice (and set out at paragraph 13 above) is most unfortunately worded, but, in my judgment, Mr. Mayes’ answer to it is the right one. Paragraph 9.2 of the Code envisages the situation in which the parties have proceeded direct to stage C4, with the consequence that the work undertaken by the undertaker represents the work normally undertaken in stages C2 and C3, and with the further consequence that the C4 work represents both the initial set of plans and estimates within paragraph 2(2) of the Regulations, and the “preliminary planning and liaison” within paragraph 9.2.

Finally, I do not accept Mr. Sauvain’s argument that the phrase in paragraph 2(2)(a) of the Regulations (“but not in preparing any further plans and estimates which the authority may require”) and its echo at the start of Appendix C4 necessarily implies that a charge cannot be made for the C4 plans and estimates. As I have already indicated, the Regulations can, in my judgment, properly be read as meaning that whilst the undertaker cannot charge for the Appendix C3 estimate, it can both charge for the first C4 estimate, and is entitled to charge for any additional estimates required. Paragraph 2(2)(a) of the Regulations, as I have already, I hope, made clear, is to be read as excluding the C3 estimates, but not those required at the C4 stage, where C4 follows C3.

For all these reasons, and despite the able arguments of Mr. Sauvain, I am satisfied that the judge came to the correct conclusion, and I would dismiss this appeal.

I add two riders. The first is that, as the judge recognised, the interpretation which he preferred involved the obvious danger, as he put it, that: -

The judge made these comments in response to a submission from Mr. Mayes voicing BT’s concern, if the court found for Gwynedd, that it would become commonplace for authorities to seek to omit stages C2 and C3. The judge went on to say that: -

I respectfully endorse those sentiments. Both Highway Authorities and Utility Undertakers are, in their different ways, servants of the public. No doubt the pressures on budgets provide a powerful incentive for both authorities and undertakers to avoid incurring costs wherever possible. However, both the Act and the Code of Practice require authorities and undertakers to co-operate, and it is to be hoped that the decision of this court will assist in clearing the air.

My second rider may well provide one issue on which the parties can unite. If the interpretation I have reached is not that intended by either Parliament or the various Agencies involved, the reason, in my judgment, lies primarily in the fact that the draftsmen of the Code of Practice have, for reasons which I do not understand, expressed themselves in different language from that contained in the Statute and the Regulations. A Code of Practice, which is designed to facilitate the operation of a statutory scheme, should surely follow the language of the Statute and the attendant Regulations. If, for any reason, the draftsmen choose to depart from that language, they should explain clearly what they mean and why they are not using the statutory terminology.

The explanation in the instant case may lie in the fact that the Code of Practice, which was approved by the three relevant Secretaries of State in June 1992, appears to pre-date the Regulations, and was the product of a Committee (the Highway Authority & Utilities Committee). Whether or not the cart preceded the horse, the committee ought to have had access to the draft Regulations, which were made on 15 July 1992. The use of different language is unfortunate and appears to demonstrate a lack of sensible co-ordination.