GEO Networks Ltd v The Bridgewater Canal Company Ltd

The Bridgewater Canal Co Ltd (“BCC”) is the long-leaseholder of the Bridgewater Canal. Geo Networks Ltd (“Geo”) maintains a duct under the canal, for which it pays a rent. That duct has sub-ducts. One of them is empty and Geo wishes to lay a further fibre optic cable in it by propelling the cable through the sub-duct by compressed air. It is common ground that it has no private law right to do so; accordingly Geo must, as it does, rely on the provisions of the Electronic Communications Code (“the Code”) enacted by The Telecommunications Act 1984 and set out in Schedule 2 thereof as amended by the Communications Act 2003. In particular it relies on paragraph 12 relating to “Linear obstacles” and has given to BCC the notice required by paragraph 12(4). BCC duly objected in accordance with paragraph 12(5) with the result that an arbitrator, Mr Ian S.Thornton-Kemsley TD, MRICS, DipFBOM, HDA and ACIArb (“the Arbitrator”), was duly appointed by the President of the Institution of Civil Engineers pursuant to paragraph 13(1).

Paragraph 13(2)(e) confers on the Arbitrator power:

“to award such sum as the arbitrator may determine in respect of one or both of the following matters, that is to say—

(i)

compensation to the person who objects to the works in respect of loss or damage sustained by that person in consequence of the carrying out of the works, and

(ii)

consideration payable to that person for the right to carry out the works.”

By an interim award made on 7th August 2009 the Arbitrator concluded, for the reasons he explained in the award, that

“the provisions of 13(2)(e) relate solely to the carrying out of the works and not to any granting of rights”.

With the leave of Simon J granted on 29th October 2009 BCC appealed to the High Court. The appeal was heard by Lewison J on 10th March 2010. For the reasons given in his written judgment handed down on 19th March 2010 Lewison J disagreed with the Arbitrator. In paragraph 51 of his judgment he said:

“..what the operator must pay for is the right to carry out the works; which right carries with it the right to keep the works on (or under or over) the relevant land in accordance with whatever terms and conditions the arbitrator awards. The price payable must be fair and reasonable but will take into account everything that the operator acquires by carrying out the works. Because the price is one that is fair and reasonable it will not include a ransom value. Accordingly, I consider that the arbitrator came to an erroneous conclusion.”

Accordingly Lewison J set aside the Arbitrator’s award and remitted it for reconsideration in the light of his judgment. Geo now appeals from the order of Lewison J with the permission of the judge. Before considering the reasons given by Lewison J, the submissions for the parties and my conclusions it is necessary to refer to the relevant provisions of the Code.

The Code contains 29 paragraphs of which the first 13 are relevant to the issue we have to determine. So far as relevant I have set them out in the appendix to this judgment. Before considering the detailed provisions contained in those paragraphs it is necessary to appreciate the general structure. Paragraph 1 contains a number of definitions to be applied except in so far as a context otherwise requires. The detail is not material but it should be noted that expression “emergency works” is defined, but the term “linear obstacle” is not.

Paragraphs 2 to 7 contain detailed provisions in relation to what the judge called “the general regime”. The basic structure of the general regime is to require the operator, such as Geo, to acquire the rights it needs to install and keep electronic communications apparatus on land in the occupation and/or ownership of another by agreement. If agreement cannot be reached then Paragraph 5 provides a mechanism by which the necessary rights are obtained through the giving of a notice specifying the rights required and an order of the County Court if it is satisfied as to the matters set out in paragraph 5(3). The order of the County Court is required by paragraph 7(1) to make provision for the payment of consideration and compensation. The provisions which are particularly relevant are those contained in paragraphs 2(1), 5(2),(3) and (4) and 7(1). The overall effect of the general regime is that all those who have an interest in the relevant land, if bound by the order, are to be entitled to be paid for the right to install and keep the electronic apparatus on their land and to be compensated for any loss or damage sustained in consequence of its installation and maintenance thereon.

Paragraphs 9 to 13 provide for what the judge called special regimes in respect of street works, a power to fly lines, tidal waters and linear obstacles. Each of the special regimes differs from the general regime in a number of different, but important, respects. In the case of street works paragraph 9 confers on the operator, such as Geo, the right to install, keep, inspect and maintain electronic apparatus under, in, across and along a street maintainable by the public and any incidental works. In the case of street works no provision is made for notices, court orders or payment of consideration or compensation.

Paragraph 10 applies in a case where some electronic communications apparatus has been installed and the operator wishes to attach a line to it, overfly neighbouring land and attach the other end to similar apparatus there. In such a case the paragraph itself confers the requisite power on the operator. No provision is made for notices, court orders or the payment of consideration or compensation.

Paragraph 11 deals with tidal waters. It confers on the operator the right to install and keep electronic apparatus on or over tidal waters and land. But where the tidal waters or land are part of the Crown Estate such right is only exercisable with the agreement of the particular emanation of the Crown concerned. Further, in all cases, the operator is required, prior to seeking to exercise the right, to submit plans of the proposed works to the Secretary of State for his approval. No provision is made for any court order in default of agreement. Nor is consideration or compensation payable to any one.

Paragraphs 12, 13 and 14 deal with what are called “linear obstacles”. Not only is that term not defined but it only appears in the headings to these three paragraphs. This omission may be important in other cases because it may provide a limit to the application of the general regime the terms of which are materially different to those of this special regime in a number of important respects. Paragraph 12 confers the relevant right but subjects its exercise to certain conditions. They include the giving of notice by the operator not to the owner of any interest in the land but to the person with control of it. That person may object to the proposed works and/or require compensation. In those events an arbitrator is appointed in accordance with the provisions of Paragraph 13(1) with the powers specified in paragraph 13(2). The compensation and consideration referred to in paragraph 13(2)(e) is assessed in accordance with paragraph 13(6) and paid, not to the owner of any interest in the land but to the person in control of it. Thus the linear obstacle regime differs from the general regime in at least the following respects:

The starting point for the analysis of that issue is paragraph 12(10) which contains the following definitions:

“(10)

In this paragraph “relevant land” means land which is used wholly or mainly either as a railway, canal or tramway or in connection with a railway, canal or tramway on that land, and a reference to the person with control of any such land is a reference to the person carrying on the railway, canal or tramway undertaking in question.”

This definition operates to confine the linear obstacle regime to a railway, canal or tramway and associated land. Further the person to whom a notice must be given and by whom a counter-notice may be given is the person carrying on the undertaking of a railway, canal or tramway whether or not he owns the land on or over which it runs.

Paragraph 12(1) provides that:

“Subject to the following provisions of this code, the operator shall, for the statutory purposes, have the right in order to cross any relevant land with a line, to install and keep the line and other electronic communications apparatus on, under or over that land and—

(a)

to execute any works on that land for or in connection with the installation, maintenance, adjustment, repair or alteration of that line or the other electronic communications apparatus; and

(b)

to enter on that land to inspect the line or the other apparatus.”

Sub-paragraph (2) deals with deviations. Sub-paragraph (3) prohibits installations which interfere with traffic on the railway, canal or tramway on that land.

Sub-paragraphs (4), (6) and (8) provide for the notices and counter-notices to which I have referred in the following terms:

“(4)

The operator shall not execute any works on any land in pursuance of any right conferred by this paragraph unless—

(a)

he has given the person with control of the land 28 days’ notice of his intentions to do so; or

(b)

the works are emergency works.”

.....

“(6)

If, at any time before a notice under sub-paragraph (4) above expires, the person with control of the land gives the operator notice of objection to the works, the operator shall be entitled to execute the works only—

(a)

if, within the period of 28 days beginning with the giving of the notice of objection, neither the operator nor that person has given notice to the other requiring him to agree to an arbitrator to whom the objection may be referred under paragraph 13 below; or

(b)

in accordance with an award made on such a reference; or

(c)

to the extent that the works have at any time become emergency works.”

......

“(8)

If within the period of 28 days beginning with the giving of a notice under sub-paragraph (7) above [in respect of emergency works] the person to whom that notice was given gives a notice to the operator requiring him to pay compensation, the operator shall be liable to pay that person compensation in respect of loss or damage sustained in consequence of the carrying out of the emergency works in question; and any question as to the amount of that compensation shall, in default of agreement, be referred to arbitration under paragraph 13 below.”

Paragraph 13 deals with the arbitration. Sub-paragraph (1) provides for his appointment in default of agreement by the President of the Institution of Civil Engineeers. Sub-paragraph (2) confers the following powers on the arbitrator:

(a)

to require the operator to submit to the arbitrator a plan and section in such form as the arbitrator may think requisite for the purposes of the arbitration;

(b)

to require the observations on any such plan or section of the person who objects to the works to be submitted to the arbitrator in such form as the arbitrator may think requisite for those purposes;

(c)

to direct the operator or that person to furnish him with such information and to comply with such other requirements as the arbitrator may think requisite for those purposes;

(d)

to make an award requiring modifications to the proposed works and specifying the terms on which and the conditions subject to which the works may be executed; and

(e)

to award such sum as the arbitrator may determine in respect of one or both of the following matters, that is to say—

(i)

compensation to the person who objects to the works in respect of loss or damage sustained by that person in consequence of the carrying out of the works, and

(ii)

consideration payable to that person for the right to carry out the works.”

In the case of emergency works sub-paragraph 3(b) provides that the arbitrator:

“(b)

shall award to the person requiring the payment of compensation such sum (if any) as the arbitrator may determine in respect of the loss or damage sustained by that person in consequence of the carrying out of the emergency works in question.”

Paragraph 13(5) and (6) are in the following terms:

“(5)

In determining what award to make on a reference under this paragraph, the arbitrator shall have regard to all the circumstances and to the principle that no person should unreasonably be denied access to an electronic communications network or to electronic communications services.

(6)

For the purposes of the making of an award under this paragraph—

(a)

the references in sub-paragraphs (2)(e) and (3)(b) above to loss shall, in relation to a person carrying on a railway, canal or tramway undertaking, include references to any increase in the expenses of carrying on that undertaking; and

(b)

the consideration mentioned in sub-paragraph (2)(e) above shall be determined on the basis of what would have been fair and reasonable if the person who objects to the works had given his authority willingly for the works to be executed on the same terms and subject to the same conditions (if any) as are contained in the award.”

The comparable provisions contained in the general regime are in paragraph 2(1), 5(1)-(5) and 7(1) and (2). They are in the following terms:

“2(1) The agreement in writing of the occupier for the time being of any land shall be required for conferring on the operator a right for the statutory purposes—

(a)to execute any works on that land for or in connection with the installation, maintenance, adjustment, repair or alteration of electronic communications apparatus; or

(b)to keep electronic communications apparatus installed on, under or over that land; or

(c)to enter that land to inspect any apparatus kept installed (whether on, under or over that land or elsewhere) for the purposes of the operator’s network.”

.....

“5(1) Where the operator requires any person to agree for the purposes of paragraph 2 or 3 above that any right should be conferred on the operator, or that any right should bind that person or any interest in land, the operator may give a notice to that person of the right and of the agreement that he requires.

(2)

Where the period of 28 days beginning with the giving of a notice under sub-paragraph (1) above has expired without the giving of the required agreement, the operator may apply to the court for an order conferring the proposed right, or providing for it to bind any person or any interest in land, and (in either case) dispensing with the need for the agreement of the person to whom the notice was given.

(3)

The court shall make an order under this paragraph if, but only if, it is satisfied that any prejudice caused by the order—

(a)

is capable of being adequately compensated for by money; or

b)

is outweighed by the benefit accruing from the order to the persons whose access to a an electronic communications network or to electronic communications services will be secured by the order;

and in determining the extent of the prejudice, and the weight of that benefit, the court shall have regard to all the circumstances and to the principle that no person should unreasonably be denied access to a an electronic communications network or to electronic communications services.

(4)

An order under this paragraph made in respect of a proposed right may, in conferring that right or providing for it to bind any person or any interest in land and in dispensing with the need for any person’s agreement, direct that the right shall have effect with such modifications, be exercisable on such terms and be subject to such conditions as may be specified in the order.

(5)

The terms and conditions specified by virtue of sub-paragraph (4) above in an order under this paragraph, shall include such terms and conditions as appear to the court appropriate for ensuring that the least possible loss and damage is caused by the exercise of the right in respect of which the order is made to persons who occupy, own interests in or are from time to time on the land in question.

.....

7(1) The terms and conditions specified by virtue of sub-paragraph (4) of paragraph 5 above in an order under that paragraph dispensing with the need for a person’s agreement, shall include—

(a)

such terms with respect to the payment of consideration in respect of the giving of the agreement, or the exercise of the rights to which the order relates, as it appears to the court would have been fair and reasonable if the agreement had been given willingly and subject to the other provisions of the order; and

(b)

such terms as appear to the court appropriate for ensuring that that person and persons from time to time bound by virtue of paragraph 2(4) above by the rights to which the order relates are adequately compensated (whether by the payment of such consideration or otherwise) for any loss or damage sustained by them in consequence of the exercise of those rights.”

After setting out the facts and the material parts of the award Lewison J considered and described the statutory framework in some detail. He commented in paragraph 7 on how badly the code was drafted. In paragraphs 8 to 13 he described the general regime. In paragraphs 14 to 16 he described the special regimes concerning street works, overflying lines and tidal waters. In paragraph 18 he noted the existence of certain special provisions in paragraph 23 applicable if a statutory undertaker wished to modify the apparatus of an operator. In paragraph 19 he set out the whole of paragraphs 12, 13 and 14 dealing with linear obstacles. After noting the question for his decision, in paragraphs 21 to 24 he made seven general observations.

I should refer to the first, third and fifth. The first related to the comparison of the general and linear obstacle regimes for the requirement of notices. Lewison J noted that in the one case notice is given to the occupier in the other to the person in control. The third pointed to two views as to whether paragraph 12(1) conferred three rights or only one. The fifth related to the distinction that in the case of the linear obstacle regime it was paragraph 12 of the code which conferred the right whereas in the case of the general regime it was the order of the County Court. In paragraphs 25 to 29 he considered various submissions made to him in relation to the provisions for arbitration. None of them arises on this appeal.

The judge then considered issues in relation to ‘payment’. In paragraphs 30 to 34 he dealt with issues raised before him by counsel then appearing for Geo and rejected them. In paragraphs 35 to 40 he discussed a number of matters arising under paragraph 7 in relation to the general regime, namely that payment was described as ‘consideration’ and ‘compensation’. In paragraphs 41 to 51 he carried out the same exercise in relation to the linear obstacle regime. For the reasons explained in paragraph 42 he concluded that the arbitrator was obliged, if he found that loss or damage had been sustained, to award compensation in respect of it. He added:

“If that goes for compensation under paragraph 13 (2) (e) (i) it is difficult to see how a different approach is warranted for paragraph 13 (2)(e)(ii), which is introduced by the same words.”

In paragraphs 43 and 44 the judge considered the facts that the consideration was payable to different people, ie the occupier or controller, depending on which regime applied. He suggested that the wording of paragraph 13(2)(e)(ii) assumed that the person in control to whom the consideration was payable had a sufficient interest in the land to justify the assumption that he had willingly consented to the works. He noted that the general regime applied if the line and apparatus to be installed ran alongside the railway, canal or tramway or crossed it. In the circumstances he did not see any force to be derived from the argument of counsel then appearing for Geo based on the fact that under paragraph 13 payments could only be made to the person in control, whether or not he had any proprietary interest in the land.

The reasons for his conclusion expressed in paragraph 51 are contained in paragraphs 49 and 50 in the following terms:

49.

[Paragraph 13 (2) (e) (ii)] is concerned with "consideration" (i.e. price). Since loss and damage to the undertaker has been dealt with in paragraph 13 (2) (e) (i), the natural reading of paragraph 13 (2) (e) (ii) is that it is dealing with something else. What is that something else, if not the value to the operator of acquiring the right? If, as I think, part of the notion of carrying out works is the permanent (or indefinite) consequence of carrying them out, then it seems to me that paragraph 13 (2) (e) (ii) envisages that the consideration will take into account the fact that the right to carry out the work will carry with it the right to retain on or under the land whatever apparatus has been installed as a result of those works. The notion that the consideration must be assessed on the assumption that the operator has no right to retain or use the apparatus after it has been installed seems to be to be both counter-factual and far divorced from the real world. If a counter-factual assumption is to be made, then it must be spelled out clearly. There is only one counter-factual assumption referred to in this part of the Code, and that is the counter-factual assumption that authority has been willingly given. So far as the real world is concerned, if an operator and an undertaker were discussing the consideration that the operator would be required to pay in order to acquire the right to carry out works to install apparatus, the first question that the operator would ask would surely be: can I keep it there once I have installed it? If the answer is no, it is difficult to see why the operator should agree to pay anything, particularly since he will have to compensate the undertaker for any loss or damage suffered in consequence of the works. Yet paragraph 13 (2) (e) (ii) must have contemplated that consideration would be payable, at least in some circumstances. [Counsel for Geo] was not able to explain satisfactorily in what circumstances consideration would be payable.

50.

In addition, the consideration must be "fair and reasonable". It does not seem to me to be fair that an operator should have something for nothing. If he acquires something of value to him, fairness seems to me to require that he pays for it. As I have said, [Counsel for Geo] warned against allowing persons in control of linear obstacles extracting ransom payments from operators. However, it seems to me that the use of the phrase "fair and reasonable" precludes the extraction of a ransom payment, as Mance LJ observed in Cabletel. Once that objection has been cleared out of the way, I do not consider that there is a compelling argument against the payment of consideration by an operator.”

Counsel for Geo submits that the judge was wrong. He contends that the opening words of paragraph 12(1) themselves confer the right to install and keep the line and other electronic apparatus on, over or under the relevant land as defined, ie the railway or canal, and for that purpose the operator is entitled to execute the works. He suggests that a right to execute works is the same as a right to carry them out so that the consideration payable under paragraph 13(2)(e)(ii) is only for the right to execute the works and not also for the right to keep them on the relevant land as and when executed. He contends forcibly that as such consideration is not necessarily payable to any person entitled to grant the right to keep the works on the relevant land as and when installed the judge’s construction would give a windfall to the person carrying on the railway, canal or tramway undertaking. In addition he notes that if the judge is right a situation could arise whereby the operator has to pay for the right to keep the installation more than once, first when it is installed and thereafter whenever it is altered or repaired. This would be because the right to the consideration arises under paragraph 12(1) and 13(2)(e) on the execution of the works.

Counsel for Geo contrasts the special regime for linear obstacles with the general regime. He submits that, in the case of the latter, paragraph 2(1) clearly demonstrates that the regime is dealing with three separate rights to be conferred by agreement. In cases where no agreement is forthcoming the machinery for which paragraph 2(2), (3) and (4) and paragraph 5 provide results in an order of the court, binding on the relevant proprietors, thereby dispensing with the need for agreement. The result is that the rights are conferred by the order so that the consideration for the exercise of those rights must extend to the right to keep the installation, as well as to install it, for which paragraph 2(1) provides. He relies, in addition, on the fact that the person to appoint the arbitrator is the President of the Institution of Civil Engineers, an unlikely choice if the arbitral exercise is to be or include one of land valuation.

Counsel for BCC contends that the judge was right for essentially the reasons he gave. He points out that as BCC operates the canal and has a sufficiently long leasehold interest to give effect to the right to keep the installation in situ Geo would obtain an uncovenanted benefit if it obtained a right to maintain its installation for the residue of the lease without payment. At the root of his submission lay the general proposition that paragraph 13 should be interpreted to avoid the injustice which would result if the property of BCC was subjected to a burden for the benefit of Geo without payment. He submits that just as paragraph 13(2)(e)(i) includes compensation of future loss so paragraph 13(2)(e)(ii) should be interpreted as including the future rights arising from the execution of the works.

In response to the contentions of counsel for Geo counsel for BCC submitted that the award of compensation or consideration under paragraph 13(2)(e) was discretionary so that an arbitrator could refuse to order a second consideration to be paid on a repair when full consideration for the right to keep the apparatus had been paid on its installation. He pointed out that the special regime for linear obstacles only applied to those under the control of railway, canal or tramway undertakings so that in the case of a linear obstacle in private ownership only the general regime would apply and under that regime consideration would be payable for the right to keep the apparatus in situ after installation.

I prefer the submissions of counsel for Geo. In my view it is necessary first to consider the ambit of the Code in general and of paragraphs 12 and 13 in particular before, not after, subjecting the words used in specific sub-paragraphs to a textual analysis. The Code was originally enacted as part of the privatisation of British Telecommunications and consequential expansion of the telecommunications market. It was substantially amended by the Communications Act 2003 which was enacted for the like purpose but in the light of all the technological developments in the intervening period. Thus the overriding principle proclaimed in paragraphs 5(4), 13(5) and elsewhere is that

“no person should unreasonably be denied access to an electronics communications network or to electronic communications services.”

In furtherance of that principle the Code sought the agreement of the relevant occupiers/owners affected by the need to install and keep electronic communications apparatus. The general regime concentrated at the outset on the occupier no doubt because he was primarily affected but also most easily identified. If and so far as it was necessary for the agreement to bind others with an interest in the land detailed provision was also made in paragraph 2. But the procedure was intended to be swift; thus only 28 days had to elapse from the service of the relevant notice to the commencement of proceedings in the County Court. The order in those proceedings might bind any person having any interest in the land. And in assessing the consideration to be paid the County Court is specifically required to ensure that all persons bound by the order are adequately compensated for the grant of those rights. If necessary the order for compensation may take the form of an order for periodical payments. In that context it is plain that the compensation or consideration must extend to each of the rights specified in paragraph 2(1). Thus the consideration will extend to payment for the right to keep the apparatus on the land.

The special regimes are quite different. No consideration is payable in relation the installation of electronic apparatus in, on or under streetworks or in tidal waters. Nor is consideration or compensation payable for ‘overflying’. Thus it is to be expected that the special regime entitled ‘linear obstacles’ will differ from the general regime. It also differs from the other special regimes in that some consideration or compensation is payable. The question is ‘for what?’. There are a number of pointers to the answer to that question.

The first is that paragraph 12 is concerned to enable the operator to cross a railway, canal or tramway. Although the crossing does not have to be by the most direct or shortest route the excess must not exceed 400 metres. Thus the interference or intrusion on the land of others is minimal. Second, the land in question must be used by or incidental to a railway, canal or tramway. Land used for any other purpose does not fall within the linear obstacle regime. An undertaker of those activities is not necessarily a public body, but is likely to be providing a public facility. There is no principle of which I am aware which requires the provider of one public facility, a railway, to be paid by another, a provider of electronic communications networks or services for such a minimal intrusion as crossing the railway with a line and, if necessary, a pylon. Third, it is noteworthy that under paragraph 13(2)(e) the compensation or consideration is payable to the person in control of the land, that is the person carrying on the railway, canal or tramway undertaking. It is payable to him either in respect of loss sustained by him or as consideration ‘for’ the right. There are no provisions applicable to this special regime comparable to those of the general regime for binding persons with an interest in the land in question or assessing compensation in respect of those interests. Indeed the payments under paragraph 13 are made to the person in control of the land, namely the person carrying on the railway, canal or tramway as the case may be, not, as in the general regime, to the occupier.

Given these features I do not approach the question, as counsel for BCC was inclined to do, on the basis that the code should be interpreted so as not to burden a person’s property without some compensatory payment. Moreover in my view paragraphs 12 and 13 do not require it. It is clear from the opening words of paragraph 12 that subparagraphs (a) and (b) are included for implementing the grant of the right to install and keep the apparatus crossing the railway not for conferring it. The compensation and consideration payable under paragraph 13(2)(e) is in respect of the right to carry out of those works and the loss sustained by reason of doing so in implementation of the right to install and keep. Given the structure of paragraphs 12(1) and 13(2)(e) I see no reason to interpolate into the words “the right to carry out the works” in paragraph 13(2)(e) the additional words “and to keep the same...”.

This interpretation avoids the windfall and also the anomaly referred to in paragraph 22 above which might arise on the judge’s construction. I would add that I derive no support from the fact that the appointor is the President of the Institution of Chartered Engineers. The powers of the arbitrator conferred by paragraph 13(2) are wide. The issues which may arise are not confined to any one professional discipline. Further there are other professional bodies whose members may be equally or more concerned with particular issues capable of arising in such arbitrations, see Whitaker’s Almanack 2001 pp.637-640.

For these reasons I disagree with the reasoning and conclusion of Lewison J. I would allow this appeal.