Real property – Mining – Coal authority – Compensation – Loss – Subsidence

Coal Authority v (1) FW Davidson (2) WE Davidson: QBD (TCC) (Mr Justice Coulson): 9 September 2008.

The appellant authority appealed against arbitration awards in favour of the respondent property owners (D) ordering the authority to purchase their two properties.

D had commenced arbitration proceedings against the authority under the Coal Mining Subsidence (Arbitration Schemes) Regulations 1994 claiming that, by reason of subsidence damage, their properties were unsaleable. The arbitrator found in favour of D and ordered the authority to purchase their properties.

The properties formed part of a terrace with two other properties. The other properties had suffered severe subsidence and had been purchased by the authority with a view to demolition. In the past, D’s properties had suffered damage due to subsidence and repairs had been carried out. D claimed that the properties had suffered further subsidence damage but the expert evidence was that there had been no further damage due to subsidence. The arbitrator nevertheless held that D were entitled to be compensated for damage in the form of loss in value.

The parties agreed that the issue of whether a house owner could claim compensation for blight in circumstances where his property had suffered no physical damage but the adjoining property had was a point of general public importance within section 69(3)(c)(ii) of the Arbitration Act 1996.

The authority submitted that, given the finding that there was no actionable physical damage to D’s properties, the arbitrator had no power in law to make any award to D under the Coal Mining Subsidence Act 1991, and the authority was not liable for blight that arose as a result of subsidence damage that had occurred not to D’s properties but to adjacent houses.

Held: (1) The assumption underlying section 1(1) of the 1991 act was that, for a claim for compensation to succeed, there had to be physical damage caused by subsidence, Tunnicliffe & Hampson Ltd v West Leigh Colliery Co Ltd (1908) AC 27 HL applied. In the absence of any physical damage, no claim for pure economic loss could be pursued, Tunnicliffe applied. In circumstances of physical damage, some claims for economic loss, including blight, could be recoverable in accordance with the act, Langley v Coal Authority (No2) (2003) EWCA Civ 204, (2005) RVR 111 considered. Even where there had been physical damage, the right to make claims for economic loss had been carefully circumscribed in many key respects so as to exclude several categories of potential claim, Collins (Pontefract) Ltd v British Coal Corp (1998) 76 P & CR 219 CA (Civ Div) considered.

(2) The arbitrator’s conclusion on the fundamental issue was obviously wrong and D’s claims had to be dismissed. The Coal Authority was only liable to pay compensation for mining subsidence in cases of physical damage to the relevant properties and was not liable where properties had been blighted by physical damage to neighbouring properties. The whole regime of the 1991 act and the 1994 regulations was based on the assumption that the property in question had suffered physical damage due to subsidence. The words ‘subsidence damage’ in section 1(2) could not encompass any loss or claim for damages which might have been suffered in the absence of such physical damage. The provisions of the act which referred to economic loss or blight only applied in the case of a property affected by physical subsidence damage.

The arbitrator misdirected himself by confusing physical subsidence damage with the suffering of damages which could, in certain circumstances, include economic loss or blight. Damages for blight were not recoverable under the act where there had been no subsidence damage as defined in section 1(1). The 1994 regulations could not enlarge the scope of the liability to pay compensation. In any event, a ‘property affected by subsidence damage’ in the regulations meant a property that had suffered physical subsidence damage.

Appeal allowed.

Paul Darling QC (instructed by DLA Piper) for the applicant; Paul Morris (instructed by Lawsons) for the respondents.