TARMAC TRADING LIMITED AGAINST NETWORK RAIL INFRASTRUCTURE LIMITED [2018] ScotCS CSOH_33 (06 April 2018)

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Cite as: [2018] ScotCS CSOH_33, [2018] CSOH 33

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OUTER HOUSE, COURT OF SESSION
[2018] CSOH 33
CA43/17
OPINION OF LORD CLARK
In the cause
TARMAC TRADING LIMITED
against
NETWORK RAIL INFRASTRUCTURE LIMITED
Pursuer
Defender
6 April 2018
Pursuer: Ower; Shepherd & Wedderburn LLP
Defender: J Broome; Dentons UKMEA LLP
Introduction
[1]       In this action, the pursuer (“Tarmac”) seeks damages for an alleged breach of
contract by the defender (“Network Rail”). The alleged breach is of implied terms in an
Undertaking given by the defender to the pursuer. The defender’s position is that the terms
founded upon do not fall to be implied into the Undertaking. The case called before me for
a proof before answer, restricted to the issue of whether the implied terms founded upon by
the pursuer form part of the Undertaking.
[2]       In brief terms, the key facts can be summarised as follows. The pursuer owns areas
of land at Blackridge, in central Scotland, including parts of Blairhall Quarry and land
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adjacent to the quarry. The pursuer also has a lease of the whinstone in the quarry and has
planning consent for the winning and working of minerals from 20 acres of land at the
quarry. The planning consent is due to expire in 2042, but the pursuer expects it to be
extended. For some years the quarry has not been in use. A road or track runs from the
quarry, broadly in a northerly direction and slightly to the west. Bogend Farm, which is
owned by others, is located to the west of the quarry, on adjacent land. A separate road or
track runs from the farm, again broadly in a northerly direction, and slightly to the east.
Prior to the carrying out of the works discussed below, the two tracks met and joined up
into a single track (“the joined track”), and the joined track then ran, still to the north, to
meet the A89 trunk road. The M8 motorway lies to the south of the quarry and the farm.
There is no road or track which runs from the quarry to the M8.
[3]       Until the 1980s, there was a railway line, running broadly in an east to west direction,
just north of the point where the Bogend Farm access track and the quarry access track
joined up. The joined track ran underneath a bridge. The bridge and the railway line were
removed at some point in the 1980s. Following their removal, the joined track ran across the
now flat area of land where the railway line had formerly been positioned. Therefore, if a
vehicle had been travelling from the A89, in a southerly direction, down the joined track, it
would cross the land where the bridge and railway line had been situated, and it could then
either take the fork to the south-east (to the left) towards the quarry, or take the fork to the
south-west (to the right) towards the farm.
[4]       In or around 2006, Network Rail proposed to reinstate the railway line, as part of the
Airdrie-Bathgate Rail Link. A private Bill, the Airdrie-Bathgate Railway and Linked
Improvements Bill, was introduced on 30 May 2006 before the Scottish Parliament.
Accompanying the Bill was a Design Development Proposal, which contained an
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Environmental Statement. The Bill specified certain proposed works, including Work No. 27
which related to the construction of a new road and bridge over the proposed railway line
close to the point where the joined track crossed the land where the former railway line had
been situated. The pursuer objected to the Bill, in a Notice of Objection dated 27 July 2006.
In broad terms, the Notice of Objection did not object to the general principles of the Bill, but
the key point made was that the pursuer was keen to reach an agreement with the defender
that would protect the operational viability of the quarry. The defender, as promoter of the
Bill, issued a response to the Notice of Objection.
[5]       On 9 October 2006, staff and solicitors for the pursuer met with staff and
representatives of the defender, to discuss the concerns raised by the pursuer in the Notice
of Objection. By letter dated 1 December 2006, from the defender to the solicitor acting for
the pursuer, the defender set out various proposals designed to meet the points raised in the
Notice of Objection. There were then telephone discussions, followed by a letter dated
15 January 2007 from the defender’s solicitor to the pursuer’s solicitor. The pursuer’s
solicitor responded by email on 17 January 2007, indicating a broad acceptance of the terms
of the letter dated 15 January 2007. The defender’s solicitor prepared a draft Undertaking,
which was intended to set out the proposals in the letter dated 15 January 2007 in a formal
and binding document. The draft was sent to the pursuer’s solicitor on 21 January 2007.
Revisals were then exchanged and a final version was agreed on 28 January 2007. An oral
hearing was due to take place on 29 January 2007 at the Scottish Parliament. On 28 January
2007, in light of the agreement on the terms of the Undertaking, the pursuer withdrew its
objection to the Bill. The Undertaking was signed on 13 February 2007. While it might be
said that the Undertaking is unilateral, it was in fact given in exchange for the dropping of
the pursuer’s objection to the Bill. It was therefore part of a bilateral agreement.
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[6]       Thereafter, works were carried out which resulted in the new section of railway line
being installed and a new road and bridge being constructed over the railway line. The road
and bridge run between, and hence connect, the joined track to the north of the railway line
and the Bogend Farm access track to the south. The road and bridge do not connect with the
Blairhill Quarry access track. In evidence, it was stated that if one followed the quarry
access track from the quarry in a northerly direction towards the A89, one would now come
to face an embankment, approximately 10 metres in height, which formed part of the bridge
structure. In other words, the construction of the railway line and the road and bridge
resulted in the quarry access track no longer joining with the Bogend Farm access track to
then run as the joined track heading north to the A89. Thus if a lorry heading south from
the A89 on the joined track comes over the bridge, it will be on the Bogend Farm access
track. The defender has not constructed a connecting road or track which could then take the
vehicle on to the quarry access track.
Questions for the court
[7]       The parties produced a joint note of questions to be determined by the court:
1. Was it necessary to imply the following term into the Undertaking dated 13
February 2007 in order to give the Undertaking business efficacy:
That the defender would design and construct the bridge and access road [as
condescended upon] so as to provide continued access to and egress from
Blairhill Quarry by the pursuer, for the purposes of its quarrying operations?
2. Was it necessary to imply the following term into the Undertaking in order to
give the Undertaking business efficacy:
That the bridge and access road to be constructed by the defender would
provide a replacement for the access route which previously allowed access
to, and egress from, Blairhill Quarry’?”
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The evidence
Evidence for the pursuer
[8]       Evidence was led from one of the pursuer’s employees, Stephen Cowan, an Estates
Manager with responsibility for property and planning matters. He explained the extent of
Tarmac’s ownership of, and leasehold interests in, parts of the quarry and surrounding land.
The quarry had been dormant since 1986, other than for a short period of working which
took place in 1996. Substantial rock reserves were contained in the quarry, and Tarmac’s
intention was that it would be fully operated again in the medium to long term. In the
meantime, access was needed for emergencies and inspections. Some light use of the quarry
was also planned in the near future.
[9]       Until around 2009, the quarry was accessed from the A89 travelling south, down to
and then along the quarry access track. Around that time Network Rail constructed the new
access road and bridge, cutting off the connection to the quarry access track. After the
works had been done by Network Rail, Tarmac had no means of vehicular access to the
quarry. To facilitate the use of the quarry for the limited purposes referred to above, Tarmac
had to construct a new track connecting the Bogend Farm access track to the quarry access
track. The new track is suitable for light use only. It is anticipated that on the new track
there will be only one to two vehicles per week, each carrying a load of around two to three
tonnes. To carry out any significant operations at the quarry, it will be necessary to
construct a track which is capable of carrying significantly higher volumes of traffic and
greater weight of vehicles. When fully operational there could be around 500 vehicles per
week going in and out of the quarry carrying an average of 20 tonnes each.
[10]       Various documents indicated that it had been made clear to Network Rail that
Tarmac required future access to the quarry. On 10 August 2005, Mr Cowan wrote to
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Network Rail’s solicitors stating that future access to the quarry track would be required.
The plan produced by Network Rail (“Sheet No. 22”, dated 21 March 2006) which
accompanied the Bill, showed the plots of land that Network Rail intended to compulsorily
acquire in the area covered by the plan. It indicated that they intended to make some
provision for access, but it did not provide any details of what was proposed. There was no
indication from the plan that there would no longer be an access route to the quarry once the
railway was constructed. The description of Work No. 27 in the Bill and in the resulting
2007 Act did not explain in detail what was proposed. That description did not indicate that
there would no longer be an access route to the quarry once the railway line was
constructed. The Environmental Statement that was produced for the purpose of the Bill
stated, in Table 12.13: “The existing access to Bogend Farm and Blairhill Quarry will be
severed.” In the column headed “Mitigation”, it stated: “A new vehicle bridge is proposed
at this location”. In the column headed “Significance”, it stated that there would be no
impact for vehicles. Table 12.17 in the same document detailed the mitigation measures
proposed for communities near the railway line. For Blackridge, the table stated: “A new
road bridge will be built at AGC18 to provide access to Bogend Farm and Blairhill Quarry”.
Network Rail were fully aware of the existence of the quarry access track. Those parts of the
Environmental Statement accorded entirely with what was understood to be Network Rail’s
proposal.
[11]       It was known to both parties that the proposed new railway line would have an
impact on the access track to the quarry. Network Rail were proposing to design and
construct an access road and bridge over the railway line so as to provide continued access
to Bogend Farm and to the quarry. Tarmac understood that the access road and bridge were
intended to provide a replacement for the access route which would be severed by the new
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railway line. Nothing in the material relating to the Bill indicated that Network Rail
intended otherwise, or that there would not be an access route to the quarry once the new
road and bridge were constructed. Given that it was the witness’s understanding that
Network Rail intended to provide continued access to the quarry, his main concern with
what was proposed was that the access road and bridge might not be suitable for the
volume of traffic and the size and weight of vehicles which would need to go in and out of
the quarry for the purpose of future operations (that is, the specification of the road and
bridge).
[12]       The main objective for Tarmac in objecting to the Bill was not to prevent it from
being enacted, but to ensure that Tarmac would continue to have an access route to the
quarry that was sufficient for future operations. This had repeatedly been made clear to
Network Rail. Access issues were dealt with in the Notice of Objection. Tarmac’s position
in relation to the proposed new access road and bridge was set out under the heading
“Access issues: Specification of new access road and bridge to be created”. Those passages
reflected the witness’s understanding, based on the material he had seen relating to the Bill,
that Network Rail intended to design and construct the access road and bridge so as to
provide continued access to the quarry. It was clear from those passages that Tarmac
expected that result, and that Tarmac’s major concern was to ensure that the bridge and
access road had a sufficient specification for Tarmac’s future operations.
[13]       The Notice of Objection also stated that 24 hour access to the quarry was required for
health and safety reasons. It was made clear that Tarmac required continued access to the
quarry at all times, even though it was not operational.
[14]       The letter from Network Rail dated 1 December 2006 provided general assurances,
but it was not specific enough. However, it did state:
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“The Promoter has however indicated in the preceding paragraphs that it intends to
provide a means of access to the quarry from the A89 over the proposed railway. We
would therefore invite you to withdraw this element of your objection.”
This accorded entirely with the witness’s understanding of what Network Rail intended: to
design and construct the access road and bridge so as to provide continued access to the
quarry.
[15]       Witness statements were submitted to the Parliament in relation to the objection to
the Bill and these set out Tarmac’s position in relation to particular issues. The first issue
raised (protection of land-holding for use as a quarry) was overarching. Those statements
again made clear that Tarmac required to ensure that the access road and bridge would have
a sufficient specification for future operations, and also that Tarmac required to have access
to the quarry at all times even though it was not operational.
[16]       The letter from John Kennedy & Co to Tarmac’s solicitors dated 15 January
2007, referred to “Issue 1: Protection of land-holding for use as a quarry”, and stated:
“Your clients seek a binding Agreement which would allow Blairhill Quarry to
remain ready to be opened for extraction. It appeared from our conversation that
this issue would be met by dealing with the specific issues below in a way
satisfactory to your clients.”
That paragraph accorded with the witness’s understanding that Network Rail intended to
design and construct the access road and bridge so as to provide continued access to the
quarry, and that they understood that Tarmac’s major concern was to ensure that the road
and bridge were of a sufficient specification for future operations. Nothing in the letter
indicated that Network Rail did not have the intention to provide access to the quarry, or
that there would not be an access route to the quarry once the access road and bridge were
constructed.
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[17]       The witness was satisfied that the final version of the Undertaking provided the
specific commitments that Tarmac sought in order to ensure that it would have a continued
means of access to the quarry and that the road and bridge had a sufficient specification for
future operations. The Undertaking did not explicitly state that Network Rail would design
and construct the access road and bridge so as to provide continued access to the quarry, or
that the access road and bridge would provide a replacement for the access route which
previously allowed access to the quarry. As far as the witness was concerned, there was no
need for the Undertaking to explicitly set that out. It was obvious that those were
requirements of the Undertaking. The Undertaking needed to set out the specific
commitments Tarmac required, and it did that. Those specific commitments were of no
value if there was no requirement to provide continued access, because if there was no
continued access then Tarmac would be in a worse position once the access road and bridge
were constructed than before their construction. If it was not Network Rail’s intention to
provide continued access to the quarry that would have been made clear, but at no time was
there any indication that they did not have that intention. Clause 3 of the Undertaking,
which was headed “Health and Safety”, narrated that Tarmac sought a commitment that it
would have 24 hour access to the quarry, and Network Rail provided the following
Undertaking:
“Network Rail undertakes that it will not at any time prevent Tarmac from gaining
24 hour access to or egress from Blairhill Quarry and shall ensure that its contractors
are likewise bound by this obligation.”
This was another part of the Undertaking that was consistent with the requirement to
provide continued access to the quarry.
[18]       As a result of Network Rail’s failure to provide a continued means of access to the
quarry, it will be necessary for Tarmac to engage a contractor to carry out the necessary
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works to construct a track connecting the quarry access track to the Bogend Farm access
track. The works will not be straightforward as the ground between the quarry access track
and the Bogend Farm access track is very boggy. It will be necessary to ensure that the track
will be suitable for the heavy vehicles which will require to use it when the quarry is fully
operational. Tarmac has estimated that the cost of the necessary works will be
approximately £312,485.
[19]       In cross-examination, Mr Cowan confirmed that the track used to access the quarry
included part of the Bogend Farm access track and ran on property owned or controlled by
Tarmac, north and south of the railway line. The quarry access track had formerly connected
with the Bogend Farm access track south of the bed of the former railway line. The area
where the joined track crossed the old railway line was not within Tarmac’s ownership or
control. It was accepted that Sheet No. 22 showed the new road bridge alignment. What
had been built was essentially what was shown on Sheet No. 22. It showed the road and
bridge traversing the railway line and it specifically referred to Bogend Farm. Mr Cowan
did not agree that there was no proposal from Network Rail to connect the pursuer’s quarry
access track to the Bogend Farm access track as accessed from the bridge. He accepted that
it was known that there would need to be an embankment supporting the road as it came off
the bridge at the south. He did not know prior to the bridge being constructed that the
quarry access track would come up directly against a large embankment.
[20]       He was taken to Work No. 27 and the reference in it to the realignment of the Bogend
Farm access track which would include the bridge. He did not accept that it was evident
from that document that there would be a bridge over the railway line. He accepted that it
was “available to the pursuer to know” that the bridge was going to be built and that
Tarmac had lawyers instructed to look after its interests. He also accepted that the
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Environmental Statement stated that the existing access to Bogend Farm and the quarry
would be severed. He agreed that there was no specific mention by Tarmac of the need for
Network Rail to connect to the quarry access track. He accepted that there were various
references in the documents to Sheet No. 22. While there was no specific mention of
connection to the quarry access track, his position was that this was “taken as read”. The
minutes of the meeting on 9 October 2006 made no mention of connection to the quarry
access track. He had understood that Network Rail would pay for what would be a new
access track connecting to the quarry access track. He accepted that Network Rail does not
own any of the land on which the connection would be built and that Tarmac would be
required to grant access rights. He agreed that there was no provision in the Undertaking as
to where any such connecting track would be situated. He further accepted that it would
have to be built to a particular standard. In re-examination he said that he had understood
that the bridge would serve both the quarry access track and the Bogend Farm access track.
Thus, the bridge would lead to the quarry and would provide access to the quarry.
Evidence for the defender
[21]       The first witness for the defender was Alison Gorlov, a partner in a London firm of
solicitors. The firm also practises as parliamentary agents in England and Scotland, in the
latter case under the name John Kennedy & Co. In the period between December 2005 and
the date when royal assent for the Airdrie-Bathgate Railway and Linked Improvements
Act 2007 was granted (May 2007), she acted for Network Rail in its promotion of the Bill.
She also dealt with objections to the Bill. Her direct involvement with Tarmac began on
11 January 2007 when she was instructed to advise on a formal settlement in respect of
Tarmac’s objection to the Bill. She referred to the meeting with Tarmac’s representatives on
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9 October 2006 and the letter dated 1 December 2006 from Network Rail to Tarmac. There
was a telephone conference call held on 12 January 2007 for the purposes of discussing the
proposed Undertaking. In that call, a senior legal adviser for Network Rail told Tarmac’s
solicitor, in the context of a discussion about a possible alternative access via the M8, that
Network Rail could only construct what was in the Bill. There was nothing in the Bill
dealing with an access track, or link to the existing access track, on Tarmac’s own land. That
was never part of the works.
[22]       Following discussions with Tarmac’s solicitor, she prepared the letter dated
15 January 2007. The letter was written in the context of the works to be authorised by the
Bill and nothing more. The relevant scheduled work was Work No. 27. She referred to the
email of 17 January 2007, in which Tarmac’s solicitor had stated that in relation to the
access/egress issues the technical experts had confirmed that they were happy with the
content of the letter dated 15 January 2007. The witness then went on to draft the
Undertaking.
[23]       The Undertaking was intended to be the letter dated 15 January 2007 set out as a
formal Undertaking. It was concerned only with what was within the scope of the Bill, that
is, Work No. 27 as detailed in the Bill. A draft of the proposed Undertaking was sent to
Tarmac’s solicitor on 21 January 2007 and further drafts were exchanged until the final
version was agreed on 28 January 2007. The Undertaking was then signed on 13 February
2007.
[24]       During her involvement in drafting the Undertaking and corresponding with
Tarmac’s solicitor there was never any mention of the specific position of the bridge or of
any connection with the quarry access track. The main concerns expressed by Tarmac’s
solicitor were about the particular specifications of the bridge. Sheet No. 22 was a plan of
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the bridge and it clearly showed the positioning of the bridge. Network Rail did not own
any land across which any connection to the quarry access track could be built. There was
never any discussion of any further land being made available for that purpose.
[25]       The powers granted by the 2007 Act and the deemed planning permission that went
with them only applied to what the 2007 Act had actually authorised, which did not include
any connection with the quarry access track on Tarmac’s land.
[26]       In cross-examination, she accepted the various points that had been raised by Tarmac
in correspondence, in its witness statements provided in relation to opposition to the Bill, at
the meeting on 9 October 2006, and in the Notice of Objection and other documents.
However, the reference to Network Rail providing the means of access to the quarry simply
meant a means of access over the proposed railway line. Network Rail was discussing
works to be done under the Bill regarding the access road and the quarry. The Act
authorised Network Rail to carry out certain works of which Work No. 27 was one. That
work was a bridge over the railway line and approach roads to and from the bridge. In
essence, Network Rail was saying that it was able to build the works and thus give access to
the quarry but not that it would provide a new access road to the quarry. Sheet No. 22 set
out clearly what was to be done. Land leading down to the quarry was outwith the limits of
deviation of the works. The new road and bridge did provide a means of access to the
quarry land. In the context of the Bill, the language used did not mean there would be an
access road all the way to the quarry. She explained that any separate arrangement for the
construction of an access road would have required planning permission and an agreement
between the parties as to the use of Tarmac’s land. The works which were carried out
provided such access as was permissible under the 2007 Act. Tarmac could take its vehicles
over the bridge and go along the farm access track. That is what was authorised by the Act.
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[27]       The Bill and the Undertaking did not include any access track to the quarry after the
road had exited to the south from the bridge. That road enabled access to the quarry. It may
have been the case that Tarmac had an understanding of Work No. 27 resulting in the
replacement of the existing access to and egress from the quarry. But that was incorrect.
The Bill provided the context. The Undertaking must be viewed in that context. Work
No. 27 and Sheet No. 22 made the position clear.
[28]       The next witness for the defender was Carol Deveney, who is the defender’s Head of
Sponsorship. In 2006, she was the Commercial Schemes Sponsor for the Airdrie-Bathgate
rail link project. Part of her function was to seek to resolve objections to the Bill. She
described Tarmac’s objection as concerning whether the bridge to be built to join the Bogend
Farm access track would be able to carry the pursuer’s quarry vehicles. After the possibility
of an alternative route to the M8 was ruled out, Tarmac focused on the specification of the
bridge. Tarmac never objected to the specific position of the bridge, which was laid out in
the relevant plans which accompanied the Bill. It was never suggested that Tarmac might
require additional work to connect the quarry access track to the bridge approach road.
From the outset, the plans had shown where the bridge would land, and this was adjacent to
Tarmac’s property. This was never questioned by Tarmac. Sheet No. 22 showed the limits
of deviation that Network Rail could work within for Work No. 27. The works did not
include a connection to the quarry access track. This would have been clear to Tarmac and
its advisors.
[29]       In cross-examination she accepted that the main reason for Tarmac’s objection was
the adverse effect on its business operations. Protection of Tarmac’s landholding for use as a
quarry was the primary issue it had raised. In addition to protection of operational viability,
there was also reference to the need for 24 hour access for health and safety reasons. The
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witness was aware that these were concerns of Tarmac. She agreed that Tarmac wished to
have replacement of the current access to and egress from the quarry. Tarmac wished access
to the main public roads, including the A89, from the quarry. It was not merely the
specification of the bridge which was the issue. Tarmac was looking for a replacement for
what had gone before. Network Rail had been put on notice that Tarmac needed access to
the quarry at all times. She had attended the meeting on 9 October 2006 and agreed that the
issue of the access road caused the most concern to Tarmac. The objection was about
maintaining access to facilitate operational use of the quarry. It was her understanding that
Tarmac’s primary concern was continuing access and egress.
[30]       She was taken to the letter dated 1 December 2006 and accepted that Network Rail
had indicated that it intended to provide a means of access to the quarry from the A89 over
the proposed railway. However she did not agree with the proposition that this was not
what had, in fact, happened. She accepted that Tarmac no longer had access directly to the
quarry. She further accepted that Tarmac’s position had also been made clear in the witness
statements lodged in relation to the objection to the Bill. She was taken to the document
which was the promoter’s response to Tarmac’s objection which stated that the objector was
concerned that the specification of the new access road and bridge to be constructed over the
railway to and from Blairhill Quarry should be sufficient to cater for heavy vehicles that
would operate out of the quarry. The same document stated that the promoter’s proposals
would not restrict extraction under the existing conditions. The Undertaking itself referred
to the specification of the new access road and bridge to be created “at Blairhill Quarry”; it
did not refer to a new access road and bridge at Bogend Farm.
[31]       When it was put to her that what was in fact provided was not a new road and
bridge which leads to the quarry but one which leads to the farm, she explained that the
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road and bridge lead on to Tarmac’s land. It was, however, correct that they lead to the
Bogend Farm access track and not to Blairhill Quarry.
[32]       The final witness for the defender was Keith Sheridan. He is the divisional director
of Jacobs and he had begun work on the Airdrie-Bathgate rail link project in 2004. On behalf
of Network Rail, Jacobs was to produce specimen designs and prepare maps, plans and
descriptions of the works to be carried out. He recalled as the earliest contact with Tarmac
the meeting held on 9 October 2006, which was to discuss Tarmac’s requirements in order
for the objection to the Bill to be withdrawn. From his recollection, there were three main
issues which required to be resolved. Firstly, there was Tarmac’s concern as to the
specification of the bridge, that is, such things as its load-bearing capacity and approach
gradients. Secondly, Tarmac had concerns about noise on the bridge caused by heavy
vehicles going over it. Thirdly, Tarmac asked if access could be created south to the M8
either instead of, or as well as, from the A89. These matters were all dealt with, the last
point about access to the M8 being dropped. Tarmac never asked about the specific
positioning of the bridge. It only ever asked about load-bearing capacity and approach
gradients in relation to the bridge itself.
[33]       In cross-examination, he was taken to the Notice of Objection. He accepted that it
was fair to say that Network Rail was on notice that Tarmac’s first concern was to protect its
landholding, so as to allow it to work the reserves in the quarry in the medium to long term.
Tarmac was concerned to protect its business operations but willing to enter into an
agreement which would protect the operational viability of the quarry. That was Tarmac’s
key concern. The notice of objection also mentioned health and safety and 24 hour access for
that purpose. The previous bridge had bridged over the quarry access track. He accepted
that the purpose of the new road and bridge was to replace the current access to and from
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the quarry. He agreed that Tarmac was concerned with the long-term effect on its business
and with maintaining access while the works were being carried out. This included 24 hour
access for health and safety purposes. He also accepted that Tarmac wished to ensure that
vehicles could access the quarry. It wanted to maintain such access and egress as was
available to it at the time. However, what he meant by access and egress was access and
egress over the railway bridge. He understood that Tarmac wished access to and from the
quarry. He accepted that Tarmac did not wish future extraction work to be restricted. He
did not know whether the road coming over the bridge would connect with the quarry
access track. He learned after the works were done that the road and bridge did not connect
with the quarry access track. In re-examination he accepted that Work No. 27 was the work
required to deal with the access issue. He had no concern with anything to do with access
beyond the end of Work No. 27, to the south. Tarmac had never raised any issue about
continued access beyond that point, to the south.
The witnesses
[34]       It was not suggested on behalf of either of the parties that any of the evidence given
by the witnesses was not credible or not reliable. Mr Cowan gave a genuine and clear
account of the pursuer’s concerns and the understanding it had from the various documents
and from the correspondence and exchanges with the defender and its representatives.
Ms Gorlov struck me as a very careful and impressive witness who had an extremely clear
understanding of the factual and legal issues with which she was dealing. Ms Deveney also
gave her evidence in an open and straightforward manner, as did Mr Sheridan. There was
no direct conflict of evidence on any particular facts, the differences in the parties’ positions
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stemming largely from their differing understandings, impressions and interpretations. I
therefore accept the factual evidence of the witnesses.
Agreed statement of legal principles
[35]       The parties helpfully prepared an agreed statement of the relevant legal principles,
derived from the decision of the Supreme Court in Marks and Spencer plc v BNP Paribas
Securities Services Trust Co (Jersey) Ltd and another [2015] UKSC 72; [2016] AC 742. The
relevant principles derived from that case are discussed below.
Submissions for pursuer
[36]       The submissions made on behalf of the pursuer can briefly be summarised as
follows. The implied terms were both necessary in order to give the contract business
efficacy, and so obvious that their existence went without saying. The evidence disclosed
that the Undertaking was entered into in order to secure the withdrawal of the pursuer’s
Notice of Objection to the Bill. At all times, in all correspondence and in all discussions, the
pursuer made clear that its objective was twofold: (a) to maintain the operational viability of
the quarry; and (b) to ensure that the new road and bridge to be created provided a
replacement for the previous access/egress route to and from the quarry. Conversely, at no
time, in any piece of correspondence or discussion in respect of which evidence was led, did
the defender say to the pursuer that what was sought, namely a replacement of the current
access route giving continued access to Blairhill Quarry, was beyond the scope of Work
No. 27, nor that any such access route would require to be provided by the pursuer, at the
pursuer’s cost. On the contrary, the defender led the pursuer to believe, by its words and
actions, that its objections were being met.
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[37]       The Undertaking was not effective without the implication of the terms which the
pursuer sought to imply. Its purpose was to meet the pursuer’s objections. The
Undertaking itself provided expressly, in bold, in the heading to Clause 2, for the
“Specification of new access road and bridge to be created at Blairhill Quarry, Blackridge,
West Lothian” (emphasis added).
[38]       On any view, without the implication of the terms which the pursuer sought to
imply, the Undertaking lacked commercial or practical coherence. The pursuer was
persuaded to withdraw its Notice of Objections on the basis of the assurances given to it by
the defender, evidenced by the various exchanges of correspondence and discussions,
culminating in the provision of the Undertaking. Put another way, the provision of the
Undertaking to provide a bridge, built to a high specification, and access road which leads to
a farm, but not to the pursuer’s business asset, made no commercial or practical sense.
There was no commercial or business common sense in the result being that the pursuer’s
access to the quarry was cut off.
[39]       Notional reasonable people in the position of the parties at the time at which the
Undertaking was provided would have understood the Undertaking to have contained the
terms which the pursuer sought to imply. That was the commercially sensible approach.
Conversely, the approach favoured by the defender was unreasonable, and not
commercially sensible. The defender’s defence to the action was predicated, or at least very
heavily reliant, upon the provision by the defender to the pursuer of Sheet No. 22. That
document was a plan which, on the defender’s evidence, detailed the scope of the works to
be carried out in terms of the Bill (Work No. 27), and from which the defender asserts the
pursuer ought to have known that the provision of what the pursuer sought, namely the
provision of a road which allowed access to and egress from the quarry, by way of
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replacement of the current arrangements, was outwith the scope of the works. The defender
had failed to address the following issues: (i) nowhere on Sheet No. 22 was it stated that
Work No. 27 would result in the pursuer’s access to the quarry being cut off, with no
replacement being provided, yet the quarry access track was shown on it, evidencing that
the defender was, or ought to have been, well aware of it; (ii) Sheet No. 22 was provided to
the pursuer in or prior to 2006, at an early stage of proceedings, when the pursuer
understood that what it intended to show were the areas (or plots) of land to be affected by
the proposed compulsory purchase to be effected by the defender; (iii) the pursuer’s Notice
of Objection, and all correspondence, discussions and exchanges discussed in evidence
which followed thereon, expressly stated and acknowledged that the pursuer’s objection
was based upon its desire to maintain the operational viability of the quarry, and the need to
secure replacement access/egress to and from the quarry, for that purpose; and (perhaps
most importantly) (iv) at no time following its receipt of the Notice of Objection, or in any
document or discussion, did the defender say to the pursuer that the access road which they
sought was outwith the scope of the works provided for in the Bill and that, in the event that
such access was sought, the relevant works required to be instructed, and funded, by the
pursuer.
[40]       On the contrary, the assurances and, ultimately, the Undertaking given by the
defender referred expressly to the provision of an access road “to Blairhill Quarry”.
The pursuer’s objection was to be met by the defender placing the pursuer in the same
position as it had been in prior to the carrying out of the works. It followed that the terms
sought to be implied were reasonable and equitable, standing the clear objectives which the
pursuer set out, repeatedly, in clear and simple terms, to the defender; and in view of the
assurances which the defender gave to the pursuer. Importantly, they were both reasonable
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and equitable standing the defender’s failure, at any stage of proceedings, to state to the
pursuer that the provision of an access road which provided access to and egress from the
quarry, ensuring its operational viability, was outwith the scope of the works. Reference
was made to Chitty on Contracts, 32nd ed., paragraphs 14-002 - 14-007.
[41]       Reliance was placed on the evidence of Mr Cowan and on his explanation of the
content of the various items of correspondence, documents and other exchanges between the
parties. The pursuer did not envisage that a connecting track would be required between
the Bogend Farm access track and the quarry access track. The pursuer’s expectation was
simply that having come over the bridge heading south, vehicles would continue to have
access to the quarry. The form of access to the quarry would be a replacement for what had
gone before.
[42]       In relation to the defender’s witnesses, Alison Gorlov was unduly focused on the
works said to be authorised by the Bill and, in particular, Work No. 27. In her evidence, she
failed properly to recognise the fundamental issues raised by the pursuer’s objection, and
the steps that were necessary in order to meet it. It was redolent of the absurdity of the
defender’s position that, in order to meet an objection raised by the pursuer that access and
egress to the quarry was being severed, and required to be maintained to secure its
operational viability, the construction of a bridge which did not provide access would have
been sufficient to meet that objection. Carol Deveney accepted that the pursuer’s concern
was far wider than simply the specification of the bridge. On her evidence, in terms of the
correspondence, meetings, discussions and documents, the pursuer’s objectives, namely the
maintenance of the operational viability of the quarry and the obtaining of a replacement
access/egress to and from the quarry, were made absolutely clear to, and fully understood
by, the defender. Keith Sheridan accepted that the pursuer’s concerns were far wider than
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the issues identified in his witness statement. The pursuer’s objectives, and the defender’s
knowledge and acceptance of those, was absolutely clear from the documents. The access to
be provided was to and from Blairhill Quarry.
[43]       Evidence had therefore been adduced which bore upon the purpose of the
Undertaking, viewed objectively, and upon parties’ knowledge of the circumstances in
which the words contained within it were used. That is the context in which the pursuer’s
objection was withdrawn, in exchange for the grant of the Undertaking. Understood
objectively, that could only mean that the pursuer’s concerns had been satisfied by the
defender.
[44]       Not only did the defender fail positively to advise the pursuer of the fact that the
provision of the access road to replace that which had gone before was said to be outwith
the scope of the works; but numerous statements were made, on various occasions and by
various means, which clearly indicated that the defender, in fact, intended to provide a new
bridge and access road to the quarry. No indication was given that what was to be provided
was something other than what was suggested by the ordinary use of those words.
[45]       The approach contended for by the pursuer was a commercially sensible one, in
contrast with the defender’s approach, which did not produce a sensible result. A further
difficulty for the defender was that its contention focused entirely on documentation
provided to the pursuer at an early stage, prior to the lodging of its Notice of Objection,
which the Undertaking was produced to meet. It was open to the court to conclude that
there had simply been a mistake by the defender in relation to where the bridge connected.
[46]       Accordingly, the answer to each of the questions before the court should be in the
affirmative.
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Submissions for the Defender
[47]       In summary, the submissions for the defender were as follows. The questions before
the court should be answered in the negative. The underlying principles to be applied to
implication of contract terms are those identified in Marks and Spencer plc v BNP Paribas
Securities Services Trust Co (Jersey) Ltd and another, principally in paragraphs 18 to 21. All of
the agreed legal principles were of relevance to the determination of the two questions
before the court. However, the first three agreed legal principles were of particular
application in this case. They were that: (i) a term will be implied into a detailed
commercial contract only if that is necessary in order to give the contract business efficacy or
so obvious that it goes without saying (Marks and Spencer at paragraphs 18 and 21); (ii) a
term will not be implied if the contract is effective without it (Marks and Spencer at
paragraphs 18 and 21); and (iii) a term can only be implied if, without the term, the contract
would lack commercial or practical coherence (Marks and Spencer at paragraph 21). The
unifying theme was that the implication of the precise implied terms pled must be necessary
to make the Undertaking effective, otherwise they will not be implied.
[48]       The starting point for addressing whether any term was to be implied was what the
parties had expressly agreed in the Undertaking (Marks and Spencer at paragraph 28). The
Undertaking was given generally in the context of the Bill. It made repeated references to
Work No. 27 and it referred to Parliamentary plans; Sheet No. 22 was the relevant
Parliamentary plan. The Undertaking also expressly narrated the terms of eight specific
commitments which the pursuer had sought. In each case, by way of response, there was
narrated the specific Undertaking given by the defender. Any argument that there was in
some way a significance in the words “to be created at Blairhill Quarry” in the heading to
Clause 2 was entirely misconceived. There was nothing in the evidence of any witness to
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suggest that Work No. 27 was considered by any party to be located in Blairhill Quarry
itself. There was no scope for seeking to extend what was covered by Clause 2 to encompass
or touch upon something other than Work No. 27.
[49]       Clause 3 was expressly headed “Health and Safety”. If the pursuer had ever
considered that the part of the Undertaking in respect of access for health and safety
purposes had been breached it could have, and no doubt would have, sued in respect of
such breach, given the importance of health and safety obligations.
[50]       Clause 4 expressly related solely to Work No. 27 in both its heading and its terms.
Clause 5 simply expressly recorded “For the avoidance of doubt” the pursuer’s right to
object to any amendment to the Bill.
[51]       From the foregoing analysis, it was plain that the Undertaking was entirely effective
on its own express terms. It lacked nothing in any coherence of any kind. The issue of any
connecting road or track did not in any way arise in respect of the terms of the Undertaking.
The Undertaking was entirely commercially and practically coherent in its express terms.
The fact that the location and extent of Work No. 27 meant in practice that a connecting road
or track remained to be constructed did not in any way deprive the Undertaking of its
effectiveness. The pursuer owned the land on which any such road or track could be built.
In terms of commercial coherence the cost of any such construction would fall to the
pursuer, which was an entirely coherent position (even if the pursuer now wishes it were
otherwise). In contrast, forcing the defender to construct any connecting road or track, and
to bear the cost thereof, would take the defender entirely outside the terms of the framework
in the Bill, which provided only for Work No. 27. That would be both practically and
commercially incoherent. Moreover, the fact of there being two alternative contractual
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solutions, one of the pursuer bearing the cost of a connecting track or road and the other of
the defender doing so, pointed to the proposed implied terms not being implied.
[52]       The Undertaking being entirely effective on its own express terms alone was
sufficient for the defender to succeed in these proceedings. There were however other
factors beyond the Undertaking’s own terms which supported that same conclusion that it
was not possible to imply the implied terms. The Undertaking was negotiated by
experienced professionals on each side, including solicitors for the pursuer and a
parliamentary agent for the defender. Mr Cowan also gave evidence that he had engaged
specialist roads consultants to assist the pursuer in its task of objecting to the Bill. In this
case the matter in issue was the implication of terms intended to compel the defender to
build a connecting road or track between the Bogend Farm access track and the pursuer’s
quarry access track (all to an unstated specification, at an unspecified cost and in an
unspecified location on the pursuer’s land over which the defender has no rights). It could
not be inferred with confidence that the parties must have intended to make provision to
that effect when they plainly omitted to do so in what was a carefully drafted contract by
well-qualified and experienced professionals.
[53]       Although not necessary for the defender to succeed, the evidence also showed that
the implied terms would make the Undertaking commercially and practically less coherent.
There would be no specification of any connecting road or track. The pursuer’s implied
terms were tantamount to trying to imply an engineering contract into the Undertaking.
Moreover, the evidence demonstrated the width of the scope for disagreement on this issue.
Mr Cowan in his evidence accepted that the pursuer itself had been able to construct, and
had already constructed, a connecting road or track, which has as a purpose the removal of
rock from the pursuer’s quarry. Yet Mr Cowan referred to the fact that if the pursuer
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wished to carry out any significant operations at the quarry, it would be necessary to
construct a track which is capable of carrying significantly higher volumes of traffic and
greater weight of vehicles. Just what such a specification of track would have been was
entirely unknown. The absence of any specification would result in the Undertaking, if it
contained the implied terms, being incoherent both commercially and practically.
[54]       Similarly the cost of construction of any connecting road or track would be
unknown. Without the implied terms it was clear that the obligation to construct the
connecting road or track, and therefore the obligation to bear the resultant cost, lay on the
pursuer. It was a much more coherent position, both commercially and practically, that the
party for whose benefit the road or track would be and on whose land it would be
constructed should bear the unknown cost of constructing it. That party was in a much
better position to balance the issues of cost and benefit. It would also avoid the obvious
scope for disagreement over betterment as against the quality and standard of the previous
quarry access track. Similar considerations applied as to where exactly any connecting road
or track was to be built. The pursuer was in a much better position to judge where it
perceived the benefits and dis-benefits of alternative locations and routes for any connecting
road or track to lie. Particular ground conditions at particular spots, in what was boggy
ground, would plainly be a salient factor. Mr Cowan stated that the works would not be
straightforward as the ground between the quarry access track and Bogend Farm access
track was very boggy. There would be no provision in the Undertaking as to access to, and
possession of, whatever would become the required parts of the pursuer’s land for the
purpose of construction itself and for any necessary working compounds. Ms Gorlov gave
uncontradicted evidence in her cross-examination that planning permission was likely also
to be required. There was plainly no provision in the implied terms to deal with that. These
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factors were relevant not only to the issue of commercial and practical coherence but also to
the other aspects of the test for implication of terms.
[55]       The evidence that the pursuer had indicated in the course of objecting to the Bill that
the pursuer was interested in maintaining access to its quarry for operational purposes, and
that the defender understood this, had no bearing on the questions before the court as to
whether the pursuer’s particular implied terms were to be implied. As the Undertaking was
effective without the implied terms and the implied terms made the Undertaking less
coherent, reasonable people in the position of the parties would not have agreed to the
implied terms. In any event, should any weight be given to such matters they would be
outweighed by the fact that the evidence established that the pursuer never at any point
prior to the Undertaking raised the issue of any form of connecting road or track being
required by it. Standing the detail which the pursuer, and ultimately the Undertaking, went
into on the specification of Work No. 27, it stretched the bounds of credibility that
reasonable people in the position of the parties would have agreed to the bare implied terms
being contained within the Undertaking in the circumstance where the pursuer had never
even troubled to seek any undertaking in relation to any connecting road or track.
Decision and reasons
Introductory observations
[56]       The pursuer repeatedly made clear its desire for continued access to allow the quarry
to remain viable and operational, as well as that it required 24 hour access for health and
safety reasons. It is, however, equally plain that a requirement for direct access to the
quarry access track, either straight from the new road and bridge or by means of a
connection with the Bogend Farm access track, was not expressed in specific terms to the
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defender. When one looks at the exchanges between the parties, this point appears almost
to be the elephant in the room.
[57]       Of course, the reason for the present action and the basis upon which it proceeds is
that the Undertaking itself does not make provision to deal with the access requirements
desired to be implied by the pursuer. It might therefore be said that the pursuer is the
author of its own misfortune in failing to have the Undertaking encompass what it says was
its key specific concern. But I prefer the view that Mr Cowan and the representatives of the
pursuer genuinely felt, and had some grounds for so feeling, that the pursuer’s key concern
had repeatedly been made clear. However, the evidence amply demonstrates that the
parties had different understandings of what was meant by the concept of the continuation
of the means of access to the quarry.
[58]       The defender was seeking to construct a railway line. The railway line would run
east to west, and at right angles across the existing joined track. To deal with the effect of
the railway line being put in place, there were, at least in theory, two possibilities. One was
that the railway line would run up and over a bridge, rather than along the ground. The
alternative was to build a road and bridge over the railway line. There appears never to
have been any suggestion of the former course. Work No. 27 specifically stated that it
“includes a bridge over the railway” so the chosen method, the latter option, was never in
any doubt. The former option would have left the joint track unsevered, continuing to run,
as it had done when there had previously been a railway line, under the bridge. The latter
option necessarily involved a road and bridge that would rise up from ground level on
either side of the railway line. What was, on the evidence, foremost in the mind of the
defender, was in essence how it would deal with the main effect of installing a railway line
on the ground, and severing the track, which was to put in place a road and bridge over it.
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From the defender’s perspective, the pursuer’s position was open to the interpretation that if
the new road and bridge gave access to the pursuer’s land, that would resolve the pursuer’s
objection. That view on the part of the defender can be seen as having been bolstered by
what appears to be the pursuer’s apparent focus on particular issues with the specification
of the road and bridge, for the purposes of carrying heavy-duty vehicular traffic to and from
the quarry. Importantly, in my view, the pursuer’s engagement with the issues about
specification makes clear that the pursuer understood that traffic would come across the
bridge, rather than under it, as had been the earlier position.
[59]       The defender’s understanding was further bolstered by the fact that documents were
issued setting forth the nature and extent of the works to be carried out (in particular Work
No. 27 and Sheet No. 22), which on a reasonable understanding of their terms dealt with the
construction and placement of the road and bridge and did not include the connection
which the pursuer desired. In addition, no point was raised by the pursuer in any of the
numerous exchanges as to the positioning of any connection between the road, as it exited
south from the bridge, and the quarry access track. On the basis of the exchanges between
the parties, the defender could readily be forgiven for concluding that any such connection,
requiring to be on the pursuer’s land, was not a matter in which it required to become
involved; rather, dealing with the fact that the existing track was to be severed by a railway
line by putting a road and bridge over the railway line, meant that the defender could
consider that it had resolved the difficulty.
[60]       I make these points by way of introduction and in order to seek to understand how it
came to be that the problem in this case arose. However, the question of the subjective
intentions of the parties and whether or not they had, by the language they used, agreed on
what work was to be done is, of course, not the issue with which the court is faced; this is
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not an action in which rectification is sought. Rectification is a means of giving effect to the
parties’ actual intentions, commonly as manifested in a prior agreement. Instead, the central
matter upon which I require to focus is the application of the legal test for the implication of
terms into a contract. That exercise is designed to give effect to the presumed intentions of
the parties. It is about what notional reasonable people in the position of the parties at the
time of contracting would have agreed. In that regard, the parties jointly identified the key
legal principles to be applied.
The key legal principles
[61]       In Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd and
another, Lord Neuberger of Abbotsbury PSC (with whom Lord Sumption and
Lord Hodge JJSC agreed), drew the well-established distinction between, on the one hand,
terms implied by law and, on the other hand, terms “implied into a particular contract, in
the light of the express terms, commercial common sense, and the facts known to both
parties at the time the contract was made” (paragraph 15). That case concerned, as does the
present case, the latter type of implied term. Lord Neuberger then (at paragraphs 16-21)
cited earlier seminal authorities on implied terms and then the succinct summary by
Lord Simon in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283, of
the five conditions to be met for the implication of a term into a contract. Lord Neuberger
added in various observations made by Bingham MR (as he then was) in Philips Electronique
Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472, 481, and then went on to add
six further comments of his own. Taken together, and read in the context of the earlier
authorities cited by Lord Neuberger, these passages set out the key principles now to be
applied in respect of implication of terms. The five separate conditions mentioned in the BP
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case were described by Lord Neuberger as “cumulative”. He also commented that it is
questionable whether the first condition added anything and noted that the second and
third conditions could be alternatives, in the sense that only one of them needs to be
satisfied. In the present case, the defender places no particular reliance on any alleged
failure to meet the fourth or fifth condition. Accordingly, the central points for present
purposes are the potentially alternative conditions two and three, which I discuss further
below. In addition to these two elements of the test, there are also principles which apply to
the approach to be taken, including that the starting point is construing the express words of
the contract (Marks and Spencer at paragraph 28).
Application of the key legal principles
Construction of the Undertaking
[62]       I now deal in turn with the particular aspects of these key principles which I consider
to be of importance in the present case. I begin by construing the express words in the
Undertaking. In Clause 1.1, under the heading “Interpretation”, it states that “references to
the new access road and bridge are to Work No. 27”. In Clause 1.2, it states that “unless the
context otherwise requires, words and expressions to which a meaning is assigned by the
Bill have the same respective meanings”. In the Bill, Work No. 27 was expressly described
as a “realignment of the Bogend Farm Access Road” between specified points and, as I have
noted, that it “includes a bridge over the railway”. Work No. 27 did not include a
connection to the track which led to the quarry, whether that was a connection directly after
the exit of the road south from the bridge or between the Bogend Farm access track and the
quarry access track.
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[63]       The Undertaking states in the heading of Clause 2: “Specification of new access road
and bridge to be created at Blairhill Quarry, Blackridge, West Lothian”. I accept that there is
potential for confusion in the reference to “at Blairhill Quarry” but the definition of the new
access road and bridge as being Work No. 27 brings one back to the meaning of that term as
stated in the Bill. Work No. 27 was plainly not going to be located in or beside the quarry
itself.
[64]       In Clause 2, the Undertaking sets out seven commitments sought by the pursuer,
each under the heading “Commitment sought”. Apart from the seventh of these, the
commitment is followed by a paragraph headed “Undertaking”, which sets out the aspect of
the Undertaking which relates to that particular commitment. As is apparent from the
heading of Clause 2, noted above, these matters deal with issues of specification of the new
access road and bridge, that is, such things as vehicle loading, width and design of the
bridge and approaches, gradients, and road and bridge surfacing. The last of the seven
commitments, dealing with inspection, maintenance and repair, is met with a “Response”
that the road will become a public road. In other words, no undertaking is given on that
matter. I accept the defender’s submission that this fact makes plain that the parties did not
have an objective common intention at the time of the Undertaking of giving to the pursuer
anything and everything that the pursuer sought. I also accept the defender’s submission
that each of the Undertakings given in Clause 2 was itself given, either expressly or by
obvious implication, specifically in relation to Work No. 27. Clause 2 contains nothing
which encompasses or touches upon anything other than Work No. 27.
[65]       Clause 3 is headed “Health and Safety”. The commitment sought was that the
pursuer would have 24 hour access to Blairhill Quarry. The undertaking given in response
was that the defender will not at any time prevent the pursuer from gaining 24 hour access
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to or egress from the quarry and shall ensure that its contractors are likewise bound by this
obligation. As the defender submitted, there has been no suggestion that Clause 3 has ever
been breached, but if the pursuer considers that it has been breached then the appropriate
remedy is not that sought in the present case.
[66]       Clause 4 is headed “Status of Work No. 27”. It contained an undertaking that, if and
in the event that the Bill was amended so that Work No. 27 was not a public right of way,
the defender would grant the pursuer and its successors in title as the owners of Blairhill
Quarry
“a servitude right of access for pedestrians and vehicles, including heavy vehicles,
along Work No. 27 between its junctions at either end with the access track from
the A89 to Blairhill Quarry and Bogend Farm, to and from Blairhill Quarry for the
purposes of its quarrying business”.
Once again, this part of the Undertaking is tied to Work No. 27.
[67]       Clause 5 merely preserves the right of the pursuer to object to any amendment of the
Bill that the pursuer considered to adversely affect its interests in any land.
The second condition
[68]       The second of Lord Simon’s five conditions is that the term must be necessary in
order to give the contract business efficacy, so that no term will be implied if the contract is
effective without it (Marks and Spencer at paragraphs 18 and 21). The meaning of the
expression “business efficacy” is explained by Bowen LJ in The Moorcock (1889) 14 PD 64, 68:
“In business transactions such as this, what the law desires to effect by the
implication is to give such business efficacy to the transaction as must have been
intended at all events by both parties…”
Another way of putting this aspect of the test was described by Lord Clarke of Stone-cum-
Ebony in Marks and Spencer (paragraph 77) as
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“whether it is necessary to make the contract work: see the detailed discussion by
Lord Wilberforce in Liverpool City Council v Irwin [1977] AC 239, 253-254.”
In that case, Lord Wilberforce stated (at 253) that
“In other cases, where there is an apparently complete bargain, the courts are willing
to add a term on the ground that without it the contract will not work - this is the
case, if not of The Moorcock (1889) 14 PD 64 itself on its facts, at least of the doctrine
of The Moorcock as usually applied.”
[69]       In Marks and Spencer, Lord Neuberger, referring to the test of “business efficacy”,
considered that a more helpful way of putting the point was that suggested by Lord Sumption
in the course of argument, that a term can only be implied if, without the term, the contract
would lack commercial or practical coherence.
[70]       The proper approach is not simply to take the express terms of the contract and ask
the question whether these are effective in the sense that they can work. Implication of
terms does not succeed only where without them the contract would be completely
inoperable. As was made clear by Bowen LJ in The Moorcock, what is being considered is an
implication from the presumed intention of the parties with the object of giving to the
transaction such efficacy as both parties must have intended that at all events it should have.
This involves, as Bowen LJ went on to state, considering what each party knew the
transaction to be. Thus to ask whether, without the implied terms, the contract would work,
is not simply to raise that point in the abstract; it is to ask whether it would work, in the
sense of being commercially and practically coherent, in light of the presumed intention of
the parties. It is therefore relevant, in an issue as to implication of terms, to have regard to
the surrounding circumstances as known to both parties at the time of the contract (Marks
and Spencer paragraph 27). I would add that the court is dealing here with the presumed
intention of the parties, having regard to their shared knowledge of the surrounding
circumstances and viewing them as notional reasonable people. This is therefore an
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objective exercise and not one which relies upon the subjective intentions or interests of
either party. The shared knowledge in this case includes the contents of the various
documents which were exchanged. While there was some evidence about what could
perhaps be described as pre-contractual negotiations, it did not add materially to the
evidence about the contents of these documents (including such things as the Notice of
Objection and the Parliamentary witness statements) which plainly were not themselves
pre-contractual negotiations.
[71]       On behalf of the pursuer, it was submitted that the defender’s witnesses had
accepted that they knew that the pursuer’s consent would be given only if, after the works
had been completed, the connection to the quarry access track remained in place. I do not
consider this proposition to be well founded. It does not reflect the evidence of Ms Deveney
that she understood the access road should simply lead on to the pursuer’s land. Nor does it
reflect the evidence of Ms Gorlov, the gist of whose evidence was that the whole focus was
on the works provided for in the Bill, that is, Work No. 27. Mr Sheridan’s concern was that
Work No. 27 would provide replacement access over the railway line. As I have noted
above, that appears to have been, for the defender, the primary issue.
[72]       It was also submitted for the pursuer that its understanding was not that a track
connecting the quarry access track to the Bogend Farm access track needed to be
constructed. Rather, it was just that the road and bridge would connect with the track and
allow access to the quarry. There are difficulties with this contention. Firstly, it is merely
the subjective view of the pursuer and there is no basis for considering that a notional
reasonable person in the position of the parties would have understood matters on that basis
(particularly having regard to the contents of Work No. 27 and Sheet No. 22). Secondly, and
related to the first point, the pursuer cannot reasonably rest on so broad an assumption,
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without having considered with appropriate care the contents of the documents just referred
to, and the practicalities of connecting with the quarry access track. In very simple terms, if
a road and bridge were to run north to south, across the railway line running east to west,
the structure would require to rise up over the railway line and come back down. That
raises the obvious and immediate issue of whether the road leaving the bridge and running
south could connect with the joined track, and, if not, then whether it would connect with
either the Bogend Farm access track or the quarry access track. The pursuer appears not to
have applied its mind to the question of the extent of the road and bridge and whether the
road would extend southwards beyond what had been the point at which the tracks joined,
and with what consequences. Work No. 27 was described in the Bill as including a road,
“being a realignment of the Bogend Farm Access Road between Main Street (A89)
and Bogend Farm…passing southwards over the railway…and terminating at a
point in Bogend Farm…”.
Sheet No. 22 shows the beginning and end of the road as described in Work No. 27. Even a
fairly cursory examination of Sheet No. 22, when compared with, for example, the plan
prepared in 1999 by the pursuer for planning permission purposes, shows that after the road
exits south from the bridge it connects with the Bogend Farm access track and that it does so
quite some distance to the south beyond where that track had formerly joined with the
quarry access track. Notional reasonable people in the position of the parties, knowing that
Work No. 27 and Sheet No. 22 stated what was to be done, could not sensibly have assumed
that the implied terms required to be part of the contract in order to give it commercial or
practical coherence, for that would mean that, as the road exiting south from the bridge
connected with the Bogend Farm access track, another connecting track would require to be
constructed. Questions would then arise as to where, how (given that the land was owned
by the pursuer), to what specification, at what cost to which party, and subject to what
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constraints such as planning permission, any further connecting road or track would be
constructed. There was simply no evidence to the effect that the road coming from the
bridge, at the south, could have been made to connect to the joined track. I was left with no
basis for concluding that such a connection with the joined track could have been a
presumed intention of both parties in the circumstances.
[73]       I am satisfied that the Undertaking is effective, on an objective assessment of its
terms and having regard to the shared knowledge and presumed intention of the parties, as
notional reasonable people. It works without the implied terms. It does not lack
commercial or practical coherence. In terms of commercial coherence, the Undertaking
makes clear commercial sense. An objector, the pursuer, had raised various issues about the
impact of the works to be done under the Bill. The Undertaking dealt with the matters
caused by Work No. 27, the key works specified in the Bill, being carried out. It addressed
the issues raised by the pursuer, as objector, by listing each commitment sought and giving
the defender’s undertaking or response. If these were acceptable to the pursuer, as the
pursuer had confirmed, a commercial deal could then be done which rendered otiose the
Parliamentary objection procedure. On the face of the Undertaking, the pursuer got what it
wanted in terms of the specification of the new access road and bridge and a commitment
which met its requirement for 24 hour access to the quarry. The new road and bridge would
accommodate quarry vehicles carrying heavy loads. The scope and effects of the
Undertaking were clear.
[74]       Another aspect of commercial coherence is that the Undertaking includes express
terms of a similar nature to the proposed implied terms, in the sense that it identifies where,
under reference to Work No. 27, the road over the bridge would exit: on the Bogend Farm
access track. Moreover, the Undertaking did not involve itself with matters concerning the
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land owned by the pursuer on which any connecting road or track could be built. It did not
engage with questions of where, how, at what specification, at what cost to which party, and
subject to what constraints such as planning permission, any further connecting road or
track would be constructed. It made clear commercial sense not to engage with these
hitherto unventilated issues. In terms of practical coherence, similar points can be made.
The Undertaking was given in the context of works to be done under a Bill, to which an
objection had been taken, and it sought to identify the grounds of objection and the
undertakings and responses given by the defender. It was a practical solution to resolving
the objection. Limiting the Undertaking to the matters noted above was entirely appropriate
and practical.
[75]       While the Undertaking is not particularly lengthy, there can be little doubt that it is
carefully drafted. It is true that it was drafted principally by the defender’s solicitor, but
drafts were exchanged and the pursuer’s legal team considered and consented to the terms
which ultimately formed the Undertaking. It cannot be inferred with confidence that the
parties must have intended to make provision in the terms contended for by the pursuer
when they plainly omitted to do so in what was a carefully drafted contract between what
appear to be experienced professionals and when the parties had clearly directed their
minds to the specific points listed and dealt with in the Undertaking.
[76]       My conclusion therefore is that the Undertaking is effective on its own express terms.
The second condition is not satisfied. This conclusion applies in respect of each of the
proposed implied terms.
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The third condition
[77]       However, there are also other aspects of the “strict constraints on the exercise of this
extraordinary power” to imply terms (to quote from Bingham MR, as cited in Marks and
Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd and another, paragraph 29)
which are not satisfied.
[78]       As a potential alternative to the element of the test just discussed, the third condition
for a term to be implied is that the term must be so obvious that it goes without saying that it
forms part of the contract (Marks and Spencer at paragraphs 18 and 21). This is again a matter
to be determined objectively. The condition derives from the famous articulation by
MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206, at 227, of the
officious bystander suggesting some express provision to form part of the parties’ contract
and their reaction to that suggestion being that of course it did. It is not the presumed
reaction of the actual parties to the hypothetical officious bystander’s suggestion that is
relevant; it is the response of notional reasonable persons in their position. Standing the
clear language, structure and meaning of the Undertaking, and the parties’ shared
knowledge of the surrounding circumstances, it is simply not possible to see how this
condition could be met in respect of either of the implied terms proposed by the pursuer.
[79]       When one views the implied terms and seeks to fit them into the carefully drafted
Undertaking they do not sit well. The primary reason is that the implied terms entirely fail
to deal with essential issues such as, in light of the description of the works in Work No. 27
and Sheet No. 22, where any connection between the quarry access track and the road after
it had exited from the bridge was to be situated. The implied terms do not specify that the
road was to connect with the joined track. They therefore leave open the possibility (which,
on the evidence, seems to have been the only real possibility) of the road connecting with the
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Bogend Farm access track so that a connection between it and the quarry access track would
become necessary. How that connection was to be constructed and to what specification,
what arrangements were to be made between the pursuer and defender allowing the
defender to carry out this work on the pursuer’s land, and how and when any necessary
issues of planning permission would be addressed are not covered by the implied terms. In
brief, it cannot be accepted that notional reasonable people in the position of the parties
would agree that the carefully drafted, detailed and comprehensive Undertaking should
have implied into it two terms which would leave many important questions entirely
unanswered. That would be an odd result. Applying the officious bystander test as stated
by MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd, I am quite unable to conclude
that notional reasonable people in the parties’ positions at the time of contracting, faced with
the officious bystander suggesting as express provisions the implied terms now proposed by
the pursuer “would testily suppress him with a common ‘Oh of course!’”. I reach this view
in respect of each of the implied terms.
Conclusion
[80]       I have a degree of sympathy with the position in which the pursuer finds itself. It
plainly thought that the severing of the access track would be remedied and that the existing
access route to the quarry would be replaced. But the pursuer appears not to have directed
its mind to the specifics of what was being proposed in the Bill or in the Undertaking.
Instead, the pursuer accepted a form of words which made commercial and practical sense,
but which did not meet its own expectations. What was, on the evidence for the pursuer,
“taken as read” by it, was not taken as read by the defender, nor would it have been by a
notional reasonable person in the position of the parties.
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[81]       For these reasons, my answer to each of the two questions posed by the parties is in the
negative: the proposed implied terms do not form part of the Undertaking. The result is that I
shall repel the pursuer’s pleas-in-law, sustain the defender’s third and fourth pleas-in-law and
pronounce decree of absolvitor in favour of the defender.



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