NRSWA 1991: Section 82 “Shall Compensate” Claims Fall Outside Mandatory Arbitration Under Section 96(3)

1. Introduction

Cadent Gas Ltd v CityFibre Ltd ([2026] EWCA Civ 46) concerns a targeted but important point of statutory construction under Part III of the New Roads and Street Works Act 1991 (“NRSWA 1991”): which forum must determine disputes where one statutory undertaker alleges that another has damaged its apparatus in the street.

CityFibre (the appellant, a telecoms network operator and statutory undertaker) alleged that Cadent (the respondent, a gas distributor and statutory undertaker) damaged CityFibre’s cables during street works in Bracknell in December 2022. CityFibre claimed approximately £7,000, including the cost of making good the damage and associated administrative overheads, relying on sections 82 and 96(1) NRSWA 1991. CityFibre initiated arbitration. Cadent challenged the arbitrator’s substantive jurisdiction.

The issue was not the merits of the damage claim, but whether mandatory statutory arbitration applied at all. The High Court (HH Judge Hodge KC) held it did not, set aside the arbitrator’s partial award on jurisdiction, and granted permission to appeal under section 67(4) of the Arbitration Act 1996. The Court of Appeal dismissed CityFibre’s appeal.

2. Summary of the Judgment

The Court of Appeal held that disputes under section 82(1)(b) NRSWA 1991 (expenses incurred in making good damage to apparatus) are not subject to mandatory arbitration under section 96(3).

Although a section 82(1)(b) claim may involve “costs or expenses” of the kind contemplated by section 96(3)[1], it is nevertheless excluded by the carve-out in section 96(3)[2] because section 82(1) is “expressed as” conferring a right to compensation: it begins with the words “an undertaker shall compensate” (covering both limbs (a) and (b)). Therefore, absent an ad hoc arbitration agreement, the proper forum is court litigation.

3. Analysis

3.1 Precedents Cited

(a) Modern approach to statutory interpretation

  • R (O) v Secretary of State for the Home Department [2022] UKSC 3, [2023] AC 255 and Potter v Canada Square Operations Ltd [2023] UKSC 41, [2023] 3 WLR 963 were cited for the now-settled methodology: the court seeks the meaning a reasonable legislature would convey, giving primacy to the statutory text read in context. In this appeal, that emphasis supported a text-driven reading of section 96(3), particularly the phrase “expressed as”.
  • R (Quintavalle) v Secretary of State for Health [2003] UKHL 13, [2003] 2 AC 687 was cited (Lord Bingham) to underline that purpose matters, but only within “permissible bounds”: the statute must be read as a whole and in its historical context. The Court of Appeal used this to frame (and ultimately limit) policy-based arguments about arbitration versus court.
  • Test Claimants in the FII Group Litigation v HMRC [2020] UKSC 47, [2022] AC 1 was cited for the principle that courts should favour an interpretation that gives effect to legislative purpose. However, the Court of Appeal stressed that where Parliament itself draws a line (here, between arbitrable and non-arbitrable disputes), “purpose” cannot be used to erase it: section 96(3) must be read as a composite scheme containing both the rule and the exclusions.

(b) Meaning of “compensation” in other contexts (limited assistance)

The Court of Appeal held these authorities did not materially advance CityFibre’s case because the statutory question was not the abstract meaning of compensation; it was whether the provision is “expressed as … conferring a right to compensation”. The court treated the drafting choice (“shall compensate”) as determinative for this carve-out.

(c) Prior NRSWA guidance (distinguished)

  • Yorkshire Electricity Distribution Plc v Telewest Ltd [2006] EWCA Civ 1418 was invoked by CityFibre to suggest a judicial preference for avoiding court in section 82(1)(b) disputes. The Court of Appeal held it was obiter, did not address section 96(3), was directed to case management between the parties, and in any event contemplated expert determination rather than statutory arbitration.

3.2 Legal Reasoning

The judgment is a close reading of section 96(3) as a two-stage, textually anchored filter for forum allocation. The court’s key reasoning steps were:

  1. Structure of section 96(3): rule plus proviso.
    Section 96(3)[1] contains a broad arbitration mandate for disputes about entitlement-circumstances or amounts recoverable where Part III enables recovery of costs/expenses. Section 96(3)[2] first widens that mandate to include differently worded enabling provisions (“recover”, “reimburse”, “indemnify”, “bear the cost”), and then excludes particular categories (fees, compensation, and section 78). The second limb of section 96(3)[2] is therefore a qualifying carve-out.
  2. The statutory trigger is drafting form: “expressed as”.
    The court treated “expressed as” as deliberate and practical: parties can identify the correct forum by looking at the wording used in the enabling provision, without having to debate the “substance” of the claim.
  3. Section 82(1) is “expressed as” compensation.
    Section 82(1) begins: “an undertaker shall compensate …” and that introduction governs both subsection (a) and subsection (b). Therefore, claims under section 82(1)(b) arise under a provision “expressed as … conferring a right to compensation”, engaging the carve-out.
  4. Coherence across section 82(1)(a) and (b).
    The court highlighted the implausibility of Parliament using identical introductory language for (a) and (b) but intending only (a) to be “compensation” for section 96(3)[2] purposes. It would be an “unrealistic” and confusing drafting technique.
  5. Overlap between section 96(3)[1] and the carve-out is possible (and expected).
    CityFibre’s argument depended on treating the carve-out as describing claims that would never fall within section 96(3)[1] in the first place. The court rejected this: a claim can satisfy section 96(3)[1] yet still be excluded by section 96(3)[2]. The court illustrated this with section 82(1)(a) (some heads could be “costs/expenses”) and with section 78 contributions (which can relate to “cost” and “works”).
  6. Policy arguments could not overcome the enacted line.
    The court found competing policy considerations about cost, speed, expertise, and small claims procedure to be inconclusive. More fundamentally, since Parliament expressly created both inclusion and exclusion categories in the same subsection, the court considered it illegitimate to infer a general pro-arbitration purpose that would narrow the carve-out’s natural meaning.

3.3 Impact

The decision provides authoritative guidance on a recurring practical question under NRSWA 1991 for low-value street works disputes:

  • Forum clarification for apparatus damage claims. Claims framed under section 82(1)(b) must, absent agreement, be brought in court, not under NRSWA mandatory arbitration. This is particularly significant given the volume of modest-value disputes between utilities and communications providers.
  • Drafting-form test for section 96(3). Parties and advisers can treat “compensate/compensation” wording as a strong signal that the carve-out applies, and “recover/reimburse/indemnify/bear the cost” wording as a signal that mandatory arbitration is more likely—subject always to the carve-outs.
  • Procedural and costs consequences. For many section 82(1)(b) claims, the County Court (often the small claims track) will become the default forum. That may reduce recoverable legal costs and alter settlement dynamics (including leverage created by arbitration costs and speed).
  • Strategic pleading constrained. The judgment reduces scope for arguing that a claim’s “substance” (expense reimbursement) can override the “compensation” label chosen by Parliament in the enabling provision.

4. Complex Concepts Simplified

  • “Mandatory arbitration” under NRSWA. Some disputes under Part III must be decided by an arbitrator rather than a court. Section 99 provides for appointment (often by the President of the Institution of Civil Engineers) where arbitration is mandated.
  • Section 96(3) “rule + exception”. Section 96(3)[1] is the general rule pushing many “cost/expense recovery” disputes into arbitration. Section 96(3)[2] expands what counts for [1] (different drafting styles), but then excludes certain categories (fees, compensation, and section 78).
  • “Expressed as”. This means the court looks primarily at the legislative wording used in the enabling provision, not at a free-standing characterisation of what the claim “really is”.
  • Section 82(1)(b) in plain terms. If an undertaker’s street works damage someone else’s apparatus in the street, the undertaker must pay for the reasonable expenses of making good that damage. Even though the amount is limited to certain expenses, the statute still frames it as “compensation”.

5. Conclusion

Cadent Gas Ltd v CityFibre Ltd establishes a clear forum rule for Part III NRSWA disputes: where the enabling provision is expressed in the language of compensation (here, section 82’s “shall compensate”), the dispute falls within the section 96(3)[2] carve-out and is not subject to mandatory arbitration, even if the claim concerns recoverable costs/expenses.

The judgment is a disciplined application of modern statutory interpretation: it prioritises the enacted words and the internal structure of section 96(3), limits resort to contested policy narratives, and provides a practical reading that parties can apply quickly when choosing between arbitration and court.