Case No: C1/2014/0024
Neutral Citation Number: [2014] EWCA Civ 1433
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, QUEEN’S BENCH DIVISION, ADMINISTRATIVE COURT
MICHAEL FORDHAM QC (sitting as a Deputy High Court Judge)
[2013] EWHC 
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 31/10/2014

Before:

MASTER OF THE ROLLS
LADY JUSTICE GLOSTER
and
LADY JUSTICE KING
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Between:

	THE QUEEN ON THE APPLICATION OF REDROW HOMES LIMITED	Appellant	
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	KNOWSLEY METROPOLITAN BOROUGH COUNCIL	Respondent	

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Michael Barnes QC (instructed by Legal Director, Redrow Homes Limited) for the Appellant
Paul Tucker QC and John Hunter (instructed by Legal Dept/Knowsley Metropolitan Borough Council) for the Respondent

Hearing date: 22 October 2014
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Judgment
Master of the Rolls: 
1.	The appellant (“Redrow”) is a house builder.  On 7 February 2011, it was granted outline planning permission to carry out a development of 525 dwellings on land at Huyton near Liverpool.  The first phase of the development includes estate roads constructed by Redrow.  The normal course with such developments is that the roads when constructed become public highways maintainable at the public expense.  This result is usually achieved by the mechanism of an agreement made between the developer and the local highway authority under section 38 of the Highways Act 1980 (“the 1980 Act”) whereby (i) the roads are dedicated and adopted as public highways and (ii) they become highways maintainable at the public expense.   
2.	In the present case, both Redrow and Knowsley Metropolitan Borough Council (“the Council”) as the highway authority wish in principle that this should occur.  A part of the roads will be street lighting.  The Council says that it will not enter into an agreement under section 38 unless it contains a provision that Redrow pays at the date of the agreement £39,000 which is a commuted sum representing the estimated capital sum to cover the cost of future maintenance of the street lights.  The Council says that such a provision in a section 38 agreement is lawful by reason of the word “maintenance” in section 38(6) and that maintenance refers to and includes future maintenance of the road following its adoption.  Redrow says that no such provision may lawfully be included in a section 38 agreement.  
3.	Mr Michael Fordham QC (sitting as a Deputy Judge of the High Court) held that the Council’s interpretation of section 38(6) was correct.  He granted a declaration that:
“on the correct interpretation of section 38(6) of the Highways Act 1980, a section 38 agreement, including when made under section 38(3), can in law contain provision for the party other than the highway authority to pay a sum (whether a commuted sum or otherwise) referable to the expenses of a highways maintenance after the date on which it becomes maintainable at public expense.”
4.	Redrow appeals with the permission of Laws LJ.  The present case relates only to street lighting and a relatively small sum.  But the issue of statutory interpretation is of wide importance.  It is perhaps surprising that there is no previous authority on it.  Mr Barnes QC points out that, if the judge’s interpretation is correct, then section 38 agreements may lawfully contain a provision for a commuted sum to cover all aspects of future maintenance of the highway into the indefinite future, or a provision that the developer shall himself pay for (or even carry out) all aspects of future maintenance whenever they become necessary.
The 1980 Act
5.	Section 38 lies at the heart of this appeal.  It provides, so far as material:
“(1) Subject to subsection (2) below, where any person is liable under a special enactment or by reason of tenure, enclosure or prescription to maintain a highway, the Minister, in the case of a trunk road, or a local highway authority, in any other case, may agree with that person to undertake the maintenance of that highway; and where an agreement is made under this subsection the highway to which the agreement relates shall, on such date as may be specified in the agreement, become for the purposes of this Act a highway maintainable at the public expense and the liability of that person to maintain the highway shall be extinguished. ”
			………
(3) A local highway authority may agree with any person to undertake the maintenance of a way— 
(a) which that person is willing and has the necessary power to dedicate as a highway, or 
(b) which is to be constructed by that person, or by a highway authority on his behalf, and which he proposes to dedicate as a highway; 
and where an agreement is made under this subsection the way to which the agreement relates shall, on such date as may be specified in the agreement, become for the purposes of this Act a highway maintainable at the public expense. 
     ………… 
(6) An agreement under this section may contain such provisions as to the dedication as a highway of any road or way to which the agreement relates, the bearing of the expenses of the construction, maintenance or improvement of any highway, road, bridge or viaduct to which the agreement relates and other relevant matters as the authority making the agreement think fit”.
6.	Some light is shed on the correct interpretation of section 38(6) by sections 37 and 53.  Section 37 provides:
“(1) A person who proposes to dedicate a way as a highway and who desires that the proposed highway shall become maintainable at the public expense by virtue of this section shall give notice of the proposal, not less than 3 months before the date of the proposed dedication, to the council who would, if the way were a highway, be the highway authority therefor, describing the location and width of the proposed highway and the nature of the proposed dedication.
(2) If the council consider that the proposed highway will not be of sufficient utility to the public to justify its being maintained at the public expense, they may make a complaint to a magistrates’ court for an order to that effect. 
(3)If the council certify that the way has been dedicated in accordance with the terms of the notice and has been made up in a satisfactory manner, and if— 
(a)the person by whom the way was dedicated or his successor keeps it in repair for a period of 12 months from the date of the council’s certificate, and 
(b)the way has been used as a highway during that period, 
then, unless an order has been made in relation to the highway under subsection (2) above, the highway shall, at the expiration of the period specified in paragraph (a) above, become for the purposes of this Act a highway maintainable at the public expense. 
(4)If the council, on being requested by the person by whom the way was dedicated or his successor to issue a certificate under subsection (3) above, refuse to issue the certificate, that person may appeal to a magistrates’ court against the refusal, and the court, if satisfied that the certificate ought to have been issued, may make an order to the effect that subsection (3) above shall apply as if the certificate had been issued on a date specified in the order. 
		………..”
7.	Section 53 provides:
“(1) Where a person is liable by reason of tenure, enclosure or prescription to maintain a highway, a magistrates’ court may, on a complaint made either by that person or by the highway authority for the highway, make an order that the liability of that person to maintain the highway shall be extinguished, and on the extinguishment of that liability the highway, if it is not  then a highway maintainable at the public expense, shall become for the purposes of this Act a highway maintainable at the public expense. 
       ………..
 (3) Where by virtue of an order under this section the liability of a person to maintain a highway is extinguished, that person is liable to pay to the highway authority for the highway such sum as may be agreed between him and that authority or, in default of agreement, as may be determined by arbitration to represent the value to him of the extinguishment of his liability.”
Redrow’s case
8.	Mr Barnes makes six points which can be summarised as follows.  First, the purpose and essence of an agreement under section 38 is that a private road becomes both a highway open to the public and a highway maintainable at public expense by the highway authority.  A provision in an agreement whereby the expense of maintenance falls on a private person, and not on the public through the highway authority, is a contradiction of that essence and purpose.
9.	Secondly, it is the essence of most agreements that both parties assume a burden and derive a benefit from them.  If the authority bears none of the expense of the maintenance of the road as a highway, it has no burden and the reciprocity of benefit and burden disappears.  It is unlikely that Parliament intended that such a one-sided situation could be insisted upon by highway authorities.  
10.	Thirdly, the reference to construction, maintenance and improvement in section 38(6) has nothing to do with the burden and expense of maintaining the highway indefinitely into the future after it has become a highway maintainable at the public expense.  Section 38 agreements can apply to roads which have been constructed some time prior to the agreement and used for some time.  In such a case, the highway authority will wish to ensure that before adoption the road is maintained (i.e. repaired) and possibly improved to an acceptable standard.  The word “maintenance” in section 38(6) serves this important purpose which does not involve the proposition that a road may become a highway maintainable at the public expense at a time when the public never has to bear the expense of maintaining it.
11.	Fourthly, if it is correct that a section 38 agreement can refer to maintenance after the road has become maintainable at the public expense and can require a developer to pay for and carry out that maintenance, it must follow that there can be a provision in such an agreement requiring a developer to improve the highway or pay for its improvement at any time in the future.  It would mean that a highway authority could by such a term in the agreement require the developer not only to carry out or pay for all the future repair and maintenance of the highway, but also to carry out any improvements that may be necessary from time to time.  That would be an extraordinary state of affairs.  It cannot have been intended by Parliament.  
12.	Fifthly, if the judge’s interpretation of section 38(6) is correct and a developer can be required under a section 38 agreement to maintain or pay for the maintenance of the highway in the future, the developer will prefer to operate the section 37 procedure and have the road established as a highway maintainable at the public expense as of right.  In that way, the authority will not be able to impose the burden of future maintenance or payment for it on the developer.  The result is likely to be that section 38 will become something of a dead letter.  The great benefit of section 38 agreements is that the developer and a highway authority can agree in advance exactly where the roads shall go and their characteristics.  It is in order that there should be co-operation on matters of this sort for the general benefit that section 38 was enacted.
13.	Sixthly, if the judge is correct, a highway authority can recover under a section 38 agreement annual sums equal to the amount which they expend on maintaining the highways which are the subject of the agreement.  Section 305 of the 1980 Act provides express means by which a highway authority can recover expenses from landowners. Section 305(7) specifies eight provisions of the 1980 Act to which these means of recovery are applied, but section 38 is not among them.  If it had been intended that under section 38 highway authorities could recover from a developer the expenses of maintaining a highway which the authority were themselves liable to maintain, it seems at least likely that the provisions of section 305 would have been applied to section 38.
Discussion
14.	In my view, the judge reached the correct conclusion largely for the reasons given by him and amplified by Mr Tucker QC.  The starting point is that section 38(6) is expressed in wide and unqualified terms.  On its face, it permits an agreement between a developer and a highway authority containing “such provisions as to the dedication as a highway of any road or way…, the bearing of the expenses of the construction, maintenance or improvement of any highway, road…to which the agreement relates and other relevant matters as the authority making the agreement think fit”.  It could hardly be wider in its scope.  In particular, there is nothing in the language of the subsection which draws a distinction between what is permitted in respect of the period before and what is permitted in respect of the period after the road or way becomes a highway maintainable at the public expense.  As the judge said at para 44 of his judgment:17.	 
“If Parliament had intended a provision which did not include a temporal restriction, what would that provision look like?  In my judgment, there is no reason to suppose that it would not look like subsection (6) of section 38.”
18.	Mr Barnes accepts that there is nothing in the language of section 38(6) which expressly states that the subsection only permits an agreement for the construction, maintenance and improvement of a road or way before dedication as a highway maintainable at the public expense.  But, as I have said, he submits that, properly construed, the subsection has that effect.   The first and critical point made by Mr Barnes is that the subsection permits agreements containing provisions as to the dedication of a highway maintainable at the public expense.  An agreement “under this section” is either an agreement under section 38(1) or an agreement under section 38(3).  The consequence of making an agreement under either of these subsections is that the “highway” (in the case of section 38(1)) or the “way” (in the case of section 38(3)) becomes a “highway maintainable at the public expense”.  It is this feature of the statutory scheme on which Mr Barnes particularly relies in support of his submission that section 38(6) is in fact subject to the restriction that it only permits an agreement for the construction, maintenance and improvement of a road or way before it becomes a highway maintainable at the public expense.  
19.	I do not accept this submission.  First, as a matter of ordinary language the phrase “maintainable at the public expense” connotes that the highway authority will be liable as a matter of public law to maintain the highway.  But it does not indicate how the authority is required to discharge that liability. The authority may carry out the maintenance itself or make an agreement for a developer to carry out the work.  It may choose to pay for the maintenance of the highway out of public funds or obtain funds for doing so from the developer or a combination of the two.  Whichever course is adopted, the highway authority remains liable and the highway continues to be maintainable at the public expense.  Thus, for example, if a developer agrees to maintain a dedicated highway and defaults on his obligation, the highway authority remains liable.  That is because the highway is maintainable at the public expense.  The use of the phrase “maintainable at the public expense” is far too slender a foundation on which to base an argument that the apparently wide and unqualified words of section 38(6) should be given the restrictive meaning for which Mr Barnes contends rather than their plain, natural and ordinary meaning.
20.	Secondly, quite apart from the natural meaning of section 38(6), I agree with the judge that it is clear from other provisions of the 1980 Act that Parliament did not intend by the use of the phrase “maintainable at the public expense” in the subsection to exclude the possibility of an act of privately maintaining or of privately contributing to the cost of maintaining a highway maintainable at the public expense.  It can be seen from provisions such as section 44 and 278 that an act of private maintenance or an act of the provision of expenses is not inconsistent with the concept of a highway being maintainable at the public expense.  
21.	Section 44 provides that a person who is liable “under a special enactment or by reason of tenure, enclosure or prescription to maintain a highway” may enter into an agreement with the highway authority “for the maintenance by him of any highway maintainable at the public expense by the highway authority”.  Such a person may also enter into a section 38(1) agreement.   Parliament clearly envisaged in such circumstances that the highway remains maintainable at the public expense notwithstanding continuing maintenance obligations on the part of the counterparty to the agreement.  Section 278 provides that a highway authority may enter into an agreement with any person for the execution by the authority of any works which the authority is or may be authorised to execute on terms that that person pays for the whole or part of the cost of the works.  Section 278(3) provides that the agreement may also “provide for the making to the highway authority of payments in respect of the maintenance of the works to which the agreement relates”.   There can be no doubt that an agreement made pursuant to section 278 can provide for a payment in respect of maintenance of a highway, including a highway maintainable at the public expense.
22.	Thirdly, as the judge pointed out, section 38(1) when read together with section 53 shows that Parliament cannot have intended to preclude the possibility of an agreement for maintenance by a developer after the dedication of a highway.  The judge summarised the argument in this way:
“37. Mr Barnes points out that [section 38(1)] is a specific provision, dealing with a specific statutory mechanism. I agree. But, in my judgment, it is inconceivable that Parliament could both: on the one hand, require a provision for the payment of sums plainly referable to future maintenance – for that is the value of what is being extinguished – when the case gets to the magistrates; but also on the other hand, exclude any equivalent voluntary provision in an agreement between two parties who wished to arrive at an agreed position and avoid going before the magistrates. 
38.  I can see no logical basis on which it could be said to be impermissible to have a consensual payment of the sort which would become mandatory were the matter to be pursued before the magistrates under section 53. 
39.  I find nothing in the wording of section 38(6) to indicate such a restriction. On the contrary, in my judgment, the wording chosen by Parliament is not only broad but open-textured in including that sort of expense provision.”
23.	The main points made by Mr Barnes in response to this reasoning are as follows.  (1) Section 53 is a provision which is likely to be applied extremely rarely today.  The operation of section 38(6) and the provisions which an agreement may contain should not be dictated by circumstances covered by a section which in practice will hardly ever arise today.  (2) That which may be determined by agreement or arbitration under section 53 is “the value to [the person concerned] of the extinguishment of his liability”.  There is in nearly all cases under section 38, as in the present case, no extinguishment of liability to maintain or repair anything.  Section 53, therefore, addresses a different situation from that addressed by section 38.  (3) There is a difference between sections 53 and 37.  Section 53 applies to a situation where an existing highway becomes compulsorily a highway maintainable at the public expense as a result of an order made by Magistrates.  In section 37, which applies when the road in question is not a highway at all, no sum can be ordered to be paid to the highway authority by the person by whom the way is dedicated.  In a situation covered by section 38(3) (like the present case), the nearest analogy is section 37, not section 53, and it suggests that there is to be no question of imposing a liability to pay the expense of repair on the individual who has constructed the road, and who secures its adoption as a highway maintainable at the public expense through an order of the Magistrates.
24.	In my view, these points do not undermine the logic of the judge’s reasoning.  The first and second point amount to the same thing: (i) there are differences between the subject-matter of section 38(1) (and linked section 53) and that of section 38(3) (and linked section 37); and (ii) section 38(1) and 53 are rarely applied today.   But Parliament saw fit to make provision in the 1980 Act for the case of a person who is liable “under a special enactment or by reason of tenure, enclosure or prescription to maintain a highway”.  This provision is part of the statutory scheme which governs the power of highway authorities to adopt by agreement.  Its part in the overall scheme cannot be ignored.  No reason has been suggested why Parliament should have intended to permit, indeed require, a provision of sums referable to future maintenance in relation to agreements made under section 38(1), but not to do so in relation to agreements made under section 38(3).  The fact that agreements made under section 38(1) are rare is not a rational reason for treating agreements made under the two subsections differently.   It is true that the two subsections (and the corresponding sections 37 and 53) address different situations, but the differences are not material to the question with which we are concerned.  As regards Mr Barnes’s third point, it is true that there are differences between sections 37 and 53 just as there are differences between section 38(1) and 38(3).  But these do not justify interpreting the general language of section 38(6) as having one meaning in relation to section 38(1) agreements and a different meaning in relation to section 38(3) agreements.    
25.	I can deal with the other points made by Mr Barnes more briefly.  In my view, his benefit/burden point sheds no light on what Parliament must have intended in enacting section 38(6).  A developer will not enter into a section 38(3) agreement unless he thinks that it is in his interests to do so.  If the highway authority is only prepared to offer a deal which is not commercially acceptable to the developer, then he will use the machinery of section 37.  Section 37 also provides the answer to the spectre raised by Mr Barnes of an agreement under which the developer may be required to maintain and improve the highway indefinitely.  A developer cannot be compelled to enter into an agreement under section 38(3) (or indeed section 38(1)) and is most unlikely to enter into an agreement unless he considers it to be in his commercial interests to do so.  
26.	The fact that section 38(6) extends to the expenses of the “improvement” of a highway does not cast doubt on the judge’s interpretation. A prudent developer will be wary of committing himself to an open-ended obligation, whether in relation to construction, maintenance or improvement of the highway.  But that is a matter for his commercial judgment.  He cannot be obliged to commit himself to an unreasonable bargain.  The fact that the subsection extends to improvements does not suggest, still less compel, the conclusion that Parliament must have intended section 38(6) to bear a restrictive meaning that the words do not naturally bear.  
27.	I do not accept that, on the judge’s interpretation, section 38 will become a dead letter.  The benefits of section 38 agreements are well understood.  They are of advantage to both developers and highway authorities.  I see no reason to suppose that parties will not usually negotiate sensibly and that section 38 agreements will continue to be made.  
28.	Mr Barnes fairly recognised that his sixth point (based on section 305 of the 1980 Act) was of less weight than his others.  He was right to do so.  In my view, the fact that section 38 is not mentioned in section 305(7) casts no light on the meaning of section 38(6). 
29.	I should say for completeness that the decision of Warrington J in In re Earl of Stamford and Warrington [1911] 1 Ch 648 was relied on to some extent by the judge.  That was a decision under section 148 of the Public Health Act 1875 whose language is not the same as that of section 38 of the 1980 Act.  Mr Fordham said that it should be approached with great caution.  I agree.  Nevertheless, he seems to have derived some support for his conclusion from the reasoning of Warrington J.  I have preferred to reach my conclusion without relying on it
Conclusion
30.	For the reasons that I have given, I would dismiss this appeal.  The Council is entitled to its costs of the appeal.  It is common ground that costs should be the subject of a summary assessment.  The Council’s statement of costs includes £9,550 charged at £100 per hour, i.e. for 95.5 hours of work.  In my view, this number of hours cannot be justified on an appeal which was a re-run of the hearing below and concerned only issues of law in a case where counsel was instructed and took the lead.  I would reduce the total costs from £26,760.70 to £23,000 (including VAT).  I make it clear that I regard the fees claimed for counsel as entirely reasonable.
Lady Justice Gloster:
31.	I agree.
Lady Justice King:
32.	I also agree.