District loses High Court battle with harbour board over payment for works

Arun District Council must pay towards Littlehampton Harbour Board’s bill for capital works to maintain the harbour, having lost a High Court case in which it argued the board’s demand was unlawful.

Judge Melanie Plimmer, sitting as a judge of the High Court, said in her judgment that she quashed Arun’s decision to refuse to pay and that the board should submit a fresh demand which Arun “will be required to respond to”.

The board challenged Arun’s decision that it would not pay sums requested under s.19 of the West Sussex County Council Act 1972.

These related to investigation and design infrastructure works as part of the Harbour Entrance Renewal Scheme.

Arun argued the £576,311 demand was disproportionate and unaffordable and concerned capital costs, which it said did not fall within s.19.

The board said this was a misinterpretation of the 1972 Act and thus an error of law.

Judge Plimmer noted: “Both parties have contended that stark and significant adverse consequences flow from the defendant's payment or non-payment of the requested sums.”

Board chief executive Colin Monk said that if Arun refused to pay, the board would “become bankrupt in the [financial year] 2024-25 as it will not have sufficient funds to meet its core duties” and there would be a risk of catastrophic failures of infrastructure.

Arun said that as a small local authority faced with the board’s capital expenditure plans, there could be payments of £1m a year for 40 years and this would be disproportionate to the council’s budget and “almost certainly mean cuts to other valuable public services provided by the [council] and would probably result in redundancies”.

Littlehampton is a trust port, and so an independent statutory body, to which Arun and West Sussex County Council are jointly responsible for paying sums claimed under ss.18 and 19 of the 1972 Act.

The board said it was not reasonably practicable to generate sufficient revenue to service its long-term debt with the Public Works Loan Board and there has been a significant decline in commercial shipping because operators now use ships larger than the harbour can accommodate.

It said it had to ask the councils for money as it had been unable to accumulate money for infrastructure repairs in the reserve fund because this has been used to meet the annual deficiency in income.

Judge Plimmer said Arun had not disputed that some infrastructure works were needed as most of the structures at the harbour entrance had clearly exceeded their design life and required regular maintenance.

When the board set its budget it included a demand for £1,152,622, of which Arun would pay half and West Sussex County Council the rest. The latter agreed to pay its share.

Arun said the “cost of the construction, renewal, improvement or extension of” the harbour should be paid for out of either revenues or the reserve fund under ss. 20 and 22 of the 1972 Act, or by borrowing.

The council said s.19 was confined to requesting payments to cover projected shortfalls in anticipated income and did not cover demands for large capital sums.

Faced with Arun’s refusal to pay, the board reduced the sum demanded to cover only certain stages of the infrastructure works and said if more money was needed during the 2024-25 financial year, it would raise this as an additional request under s.18 of the 1972 Act.

Arun still refused to pay and said in a witness statement: “We have always been clear that whilst we would fund the operational expenditure deficit, we would not fund capital expenditure works.”

The board argued there was no express or implicit limitation within the 1972 Act preventing it from requesting sums for maintenance or capital expenditure.

Arun said the 1972 Act should be construed narrowly such that the board could not simply call upon it to fund capital projects.

Judge Plimmer said: “The overall structure of the Act requires the [board] to exercise financial discipline, avoid any deficit and operate consistently with business principles.

“It therefore cannot be properly said that s.19(2) permits no discretion or flexibility regarding the obligation of the two councils to pay their share of any contribution sought.”

She rejected Arun’s argument that if the section did include capital investment or funds beyond merely balancing the budget, the council would be in an impossible position as it “will be expected to make payments with no ceiling, 'come what may’”.

The judge said: ”In my judgment, the 1972 Act provides appropriate flexibility and safeguards in relation to any precept or contribution sought.

“Whilst s.19(2) states that the two councils ‘shall contribute and pay’ if so required by the [board], this must be read subject to the s.21 duty. This means that the two councils are not required to make the relevant payments irrespective of the relevant council's countervailing obligations and duties.”

Judge Plimmer said s.19(2) “clearly includes any lawful expenditure for statutory purposes [with] no ambiguity and therefore no reason to interpret expenditure more narrowly as contended by the [council].”

Mark Smulian