Lease – Certain rent – Payment – Parties entering into lease of land for quarrying – Respondent landlord granting rights to extract minerals from land – Appellant tenant’s liability to pay rent ceasing on mineral reserves becoming exhausted or economically irrecoverable – Expert surveyor issuing mineral exhaustion certificate – Whether certificate valid and binding – Appeal dismissed
Under a 999-year lease from September 1996, the appellant tenant was granted 107 acres of land together with the right to take minerals from, and to tip waste materials on, the land. The lease also reserved certain rights to the respondent landlord in respect of reserved minerals. The appellant paid a premium of £250,000 for the lease and was liable to pay a certain rent of £100,000 pa on account of royalties.
The minerals were defined as “all minerals including limestone and clay deposits within the land excluding… the reserved minerals”. Clause 3.5.4 of the lease provided for the cessation of the appellant’s liability to pay the certain rent should all the reserves of minerals become exhausted or economically irrecoverable, and if there were no reasonable prospect of them becoming so within the following 10 years, provided that, not less than 12 months prior to the date upon which the liability to pay the certain rent ceased, the appellant had served a written notice of its intention to cease that payment, such notice to be appended to a surveyor’s minerals exhaustion certificate.
An expert surveyor was appointed for the purposes of clause 3.5.4. He issued a certificate concluding that the minerals, as defined in the lease, were not economically recoverable and there was no reasonable prospect of them becoming so within the following 10 years. The respondent challenged that decision and the judge found that, since the surveyor had excluded from the scope of his certificate all limestone suitable for building, walling and the other uses specified in the definition of reserved minerals, he had misconstrued the definition of minerals so that his certificate was not valid or binding.
The appellant appealed. The questions for the court were: (i) what the lease had entrusted to the expert; (ii) whether that was what he had decided; and (iii) if so, whether it could be shown that he had made a mistake that vitiated his decision.
Held: The appeal was dismissed.
(1) Each case depended upon the terms of the contract under which the determination was made and it was necessary to examine that determination to establish whether it lay within the scope of the expert’s authority. The structure of the lease was such that, despite the absence of any words such as “final and binding”, the surveyor had been given exclusive power to determine the questions to which his certificate was directed, whether as to the exhaustion of all minerals or their economically recoverability: Jones v Sherwood Computer Services plc [1992] 1 WLR 277, Mercury Communications Ltd v Director General of Telecommunications [1996] 1 WLR 48 and National Grid Co plc v M25 Group Ltd [1999] 1 EGLR 65; [1999] 08 EG 169 applied; Norwich Union Life Insurance Society v P&O Property Holdings Ltd [1993] 1 EGLR 164; [1993] 13 EG 108 considered.
(2) The surveyor was not obliged to respond to requests for clarification of his certificate and his report but, since he had done so, and thereby clarified the basis upon which he had proceeded, the court had to examine his explanations when considering the reasoning that led him to issue his certificate and whether it had been prepared on the correct basis. The certificate did not disclose any error, but the report of which it formed part hinted at an error by the exclusion of reserved minerals that, on the true construction of the lease, should not have been left out of account.
(3) The surveyor had not proceeded on the correct basis and the certificate was not therefore effective or binding between the parties. It was for the surveyor to decide whether the minerals had been exhausted or were no longer economically recoverable and the extent and quality of those minerals. However, it was not in his remit to determine what was meant by “the minerals”. The certificate was ineffective under the lease since it considered the question of, in this case, economic recoverability by reference to an erroneous understanding of the minerals concerned.
Martin Hutchings (instructed by Clarkslegal LLP, of Reading) appeared for the appellant; Mark Wonnacott (instructed by Bevan Brittan LLP, of Bristol) appeared for the respondent.
Eileen O’Grady, barrister
