The rocky route to compensation

Fri, 28 Jun 2019

The article has been reproduced with kind permission from Mineral Planning.

When a single pipeline is laid under another’s land the standard industry approach is to include provision for payment of compensation. But can this also be applied to parallel pipelines?

Martin Kingston and Nicola Preston investigate

To what extent, if any, can the payment of compensation be avoided in the case of parallel pipelines? Where there is a single pipeline laid across or under another’s land, either under a deed of easement or a lease, then it is common to include provision for the payment of compensation if it prevents the landowner, for example, from extracting mineral. It is also very common for the Mining Code to be incorporated into the deed of easement or lease, as the case may be. There are currently many infrastructure projects being developed across the country, many of which will follow this industry-standard approach to dealing with mineral resources. That approach, however, will need to be considered carefully by landowners in light of the experiences outlined below.

The Mining Code is a (Victorian) statutory process whereby a landowner who wishes to work minerals under a railway, pipeline or similar infrastructure, serves notice on the infrastructure owner, who then has two options. It can either serve a counter-notice, the effect of which is to prevent the working of minerals upon payment of compensation to the landowner.

Alternatively, it can do nothing, which will mean that the landowner is entitled to continue to work the minerals even if, in an extreme case, such workings resulted in the destruction of the infrastructure in question (as occurred in Ruabon Brick and Terra Cotta Company v Great Western Railway Company [1893] 1 Ch 427 CA).

Arbitration

Is the position any different in the case of parallel pipelines? Information of such cases is scant owing, in part, to the fact that disputes are usually resolved by arbitration, which is a confidential process. In Bond v (1) Mackay (2) Perenco UK Limited (3) Southern Gas Networks plc [2018] EWHC 2475 (TCC), however, an interesting point arose as to whether a claim alleging a breach of a covenant by the utility owner “to take all reasonable precautions to avoid obstruction to or interference with the user of the land and damage and injury thereto” was within the ambit of the original statement of case.

The relevant facts (as set out in the judgment) are as follows. An oil pipe (pursuant to a lease) and a gas pipe (pursuant to a deed of easement) run across Bond’s land at Doreys Pit, Dorset. The enabling documents contained the usual provisions in relation to service of notices, counter-notices and payment of compensation.

Bond obtained planning permission to extract mineral. He served notice on both utilities. Perenco opted to retain use of its pipeline and pay compensation. But SGN, declined to serve a counter notice which meant Bond could extract the mineral.

The dispute that has emerged arises from SGN’s stance that it need do nothing to prevent mineral working (and thereby require it to pay compensation) because it can achieve the same result at no cost by sheltering behind the notice given by Perenco to retain its pipeline. It is argued the pipelines are sufficiently adjacent that if the landowner exercised his right to work the mineral around the SGN pipeline, it would cause breach of a high pressure gas pipeline that would destroy not only that (gas) pipeline, but also the Perenco (oil) pipeline as well.

So when Bond started work, it was opposed, not by SGN, whose pipeline was being undermined, but by Perenco who owns the more distant pipeline.

The recent decision of the Technology and Construction Court (TCC) has meant that the issue of whether, by its inaction, SGN has failed to take all reasonable steps to avoid interference with the land user, is within the ambit of the extant arbitration. The TCC reasoned that what Bond is seeking is compensation for the sterilisation of mineral under his land occasioned by the presence of the pipelines.

The issue has now been referred back to the arbitrator. For reasons of confidentiality, the final outcome may never be made public. But the case serves as a reminder that great care needs to be taken in drafting easements and the like especially when there is more than one pipeline. The scheme of the Mining Code can be effective where there is only one pipe. Its suitability, without adaptation, where there is more than one may be in doubt.

Ongoing dispute

Over seven years after planning permission was obtained, the dispute as to the extent to which Bond can extract mineral continues. This alone may cause landowners to consider carefully whether they would consent at all to infrastructure being installed on their land if subsequent dealings with the operators were to proceed in a like manner as in Bond’s case. The landowners, however, are usually between a rock and a hard place in that such easements or leases are commonly entered into voluntarily under the threat of compulsory acquisition. The inequality of arms between landowner and infrastructure companies is almost inevitably skewed heavily in favour of the infrastructure owners.

The conclusion reached in the TCC was that the claim was one for compensation. Taking the same broad view of the deed of easement, a clear purpose and intent of the easement was to provide for the landowner to be compensated if his use of the land was restricted by the pipeline. It is to be hoped that the arbitrator will also take that view.

Martin Kingston QC barrister and Nicola Preston were instructed by Burges Salmon LLP on behalf of Mr Bond.

Related articles

No5 Barristers' Chambers ranked in leading Chambers UK 2020 Guide...

Date: Sun, 13 Oct 2019
No5 Barristers’ Chambers has once again confirmed its standing as one of the leading sets of barristers in the country in the annual Legal 500....

Date: Mon, 30 Sep 2019
Two cricket tournaments staged by No5 Barristers’ Chambers in memory of a late member have raised a total of £3,375 for the national charity of the Bar – Advocate....

Date: Thu, 08 Aug 2019