The appellant oil and gas companies (P and S) appealed against an arbitrator’s decision concerning the construction of a deed which S had entered into with the respondent landowner.
S and P were the successors of companies which had entered into separate agreements with the landowner in 1994, giving them the right to run parallel subsurface pipelines across its land. S had an easement to run a pipeline across the land, granted under a deed, whereas P had the right to run its pipeline under a lease. The surrounding land was exploited for the extraction of ball clay. The effect of the pipelines was to prevent the exploitation of the minerals in those parcels of land so that the minerals were sequestered. The deed between S and the landowner expressly incorporated the provisions of the Railways Clauses Consolidation Act 1845 (the Mining Code) in relation to the compensation which was payable if the landowner obtained planning permission for building works but was prevented from carrying them out because of the pipeline. If the landowner wished to work any minerals, he had to give 30 days’ notice of his intention to do so and if S did not want to divert its pipeline, it could give a counter-notice within the 30-day period, requiring the landowner to leave the minerals unworked, in which case S became liable to pay compensation to the landowner. S could also give a counter-notice at any time after the expiry of the 30-day period, in which case works could not be started or would have to stop and compensation had to be paid. The lease also made express provision for compensation for sequestered minerals if P gave a counter-notice. Both the deed and the lease contemplated a situation in which the landowner was entitled to compensation under both agreements and they contained provisions to avoid double compensation so that if compensation was payable under both, the landowner would recover only the greater of the two amounts and S and P would each pay half. In 2011, the landowner obtained planning permission to extract ball clay from the area and gave notice that he intended to develop the land. Under the terms of the lease, P gave a counter-notice that it did not want to divert its pipeline and it paid compensation in accordance with the lease. S did not serve a counter-notice. If compensation had been payable under the deed, it would have been considerably more than that payable under the lease as it would have been assessed differently. The landowner claimed compensation from both P and S. An arbitrator found that there was an implied term in the deed that S should be deemed to have served a counter-notice if P had served a counter-notice and the presence of P’s pipeline prevented the landowner from developing the land.
The issue was whether there was an implied term in the lease that S was deemed to have served a counter-notice.
HELD: The suggestion that a counter-notice had to be deemed to be served by S if P gave notice that it would pay compensation was inconsistent with the incorporation of the Mining Code into the deed. The provisions of the Mining Code did not require S to give a counter-notice and permitted it to give a counter-notice at any time. Further, there were a number of difficulties with the argument that it had to have been intended that if compensation were payable under the lease it would also be payable under the deed. That argument involved a number of assumptions about what the commercial effect of the two agreements was intended to be. If the intention of the parties had been that the two agreements should match each other so as to ensure that where a counter-notice was served under one agreement it was also served under the other, it might be expected that the provisions of the two agreements would follow the same pattern. However, they were significantly different. Against the background that the Mining Code gave the option of whether or not to serve a counter-notice and allowed the pipeline owner to serve it at any time, it might have been expected that if there were circumstances under the deed in which S was required to serve notice, that would have been spelt out. No such provision was included, even though in other respects the Mining Code had been expressly adapted to the particular circumstances of the deed. Further, there was no sharing of the burden of compensation where surface building works were in issue and that cast doubt on any assumption that a sharing of the burden was necessarily the intention where a mining development was prevented by the presence of pipelines. The fact that the deed catered for the circumstance where both parties were liable to pay compensation did not lead to the conclusion that the parties anticipated that position in any or all situations. It was not at all clear either that the parties intended something other than what was expressly agreed. The implied term was not one which was either necessary to give the deed business efficacy or which went without saying (see paras 44-54 of judgment).