As a follow up, there has been separate litigation on who should actually pick up the bill when compensation is payable under the Land Compensation Act 1973 (eg because of noise caused by a new road). Should the money be paid by the developer or by the council?

What happened in a recent case was fairly typical. The developer agreed to build a road, maintain it for a twelve-month period, and then make good any defects discovered during that period. Once that was all done correctly, the LA would issue a final certificate and the road would then become a highway maintainable at the public expense. The agreement between the developer and the LA contained indemnities, with the developer indemnifying the LA:

‘In respect of all actions, claims, demands, expenses and proceedings arising out of or in connection with or incidental to the carrying out of the works…’

Did this mean that the developer had to indemnify the LA for any blight compensation paid out? Not surprisingly, the developer argued that the indemnity only extended to claims arising out of the actual works, and not claims arising out of the subsequent use of the road. That argument succeeded in both the High Court and the CA, but Neuberger LJ did say that the clause was ‘fairly easily capable of bearing the meaning for which either party contends’. Moreover, one CA judge did dissent. Accordingly, it was a fairly half-hearted decision in favour of the developer and it is easy to envisage a situation in which the decision could have gone the other way.

Clearly, both the developer and the LA want to have an unambiguous arrangement so both sides know what they are liable for. In this case, the developer escaped liability for compensation claims which would not arise until at least a year after the new road was open to the public; conversely, the LA was left with a compensation bill which they thought would have been picked up by the developer. The end result of this case is likely to be that LAs will now take great care to ensure that claims under LCA 1973 are expressly stated to be the developer’s responsibility. In practice, therefore, any ambiguity on the point is soon likely to be removed as LAs ensure that contracts make it quite clear that developers do take on this liability. For their part, developers must be aware that such claims do not arise for at least a year from the opening of the road to the public, a time when they might well have moved on to other projects (and will not welcome facing an unexpected bill). All of this is, of course, entirely separate from the point we looked at last month, which is the problems that arise when an LA – for whatever reason – avoids adopting the road. In that situation, local residents can be denied their rightful compensation. Wiltshire CC v Crest Estates [2005] EWCA Civ 1087. Source: DLA Planning Bulletin.  © Practical Lawyer