Homepace Ltd v Sita South East Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lady Justice Smith,Lord Justice Waller |
| Judgment Date | 15 January 2008 |
| Neutral Citation | [2008] EWCA Civ 1 |
| Docket Number | Case No: A3 2007/0869 |
| Court | Court of Appeal (Civil Division) |
| Date | 15 January 2008 |
[2008] EWCA Civ 1
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR NICHOLAS STRAUSS Q.C.
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Waller, Vice-president Of The Court Of Appeal, Civil Division
Lady Justice Smith and
Lord Justice Lloyd
Case No: A3 2007/0869
Martin Hutchings (instructed by Clarkslegal LLP) for the Appellant
Mark Wonnacott (instructed by Bevan Brittan LLP) for the Respondent
Hearing date: 26 November 2007
Introduction
This appeal is about whether a certificate issued by an expert under a lease is valid and binding. If it is, the tenant's liability to pay £100,000 by way of annual rent came to an end in December 2005; if not, the tenant is still liable to pay that rent. Mr Nicholas Strauss Q.C., sitting as a Deputy High Court Judge in the Chancery Division, held that it was not valid, and so declared in his order dated 30 March 2007. SITA, the tenant, appeals, with permission given by the judge. Like Mr Strauss, we had the assistance of admirable submissions, in writing and orally, from Mr Hutchings for the tenant Appellant and from Mr Wonnacott for the landlord Respondent, in particular guiding us through the somewhat unusual relevant provisions of the lease.
The lease is of land at Knockdown, near Tetbury in Gloucestershire, including a disused quarry. The agreement for lease was dated 22 May 1996, and the lease itself 10 September 1996. At that time planning consent existed, dating from 1990, for the extraction of limestone and backfilling the quarry with waste material to restore the land to agriculture. The lease demised much more land than had the benefit of that permission. In the agreement for lease the tenant agreed to take all reasonable steps at its own cost to obtain planning consent for the extension of the mineral extraction and waste activities to as much of the area to be demised by the lease as possible. In fact the tenant has not been able to obtain planning consent and it seems to be common ground that there is no current prospect of such a planning permission being granted.
The lease, which runs for 999 years from 10 September 1996, but subject to certain provisions for early termination, granted to the tenant not only the whole of the large area of land (107 acres) but also rights to take minerals from the land and to tip waste materials on the land, but it also reserved certain rights to the landlord, in relation to what are called the Reserved Minerals. The interaction between the grant and the reservation lies at the heart of the case, and I will not anticipate the detailed treatment of the point which will be necessary. The tenant paid a premium of £250,000 for the lease, and was liable to pay a Certain Rent of £100,000 per annum, and royalties in respect of minerals extracted (at 50p per tonne) and also (at 16.5%) in respect of income from infilling the land with waste. The Certain Rent was paid on account of royalties; it was not refundable if the royalties fell short of the amount of the Certain Rent, but any excess could be carried forward to future years.
Large as the area was to which the lease extended, it was no doubt foreseen that, even if there were no difficulties as regards planning permission, the mineral and waste activities would not continue for the whole 999 years of the term. The lease therefore contains provisions for the suspension of the Certain Rent, and also for early termination of the lease. It is the former that give rise to the issue in the proceedings, but they need to be seen in the wider context. In summary, as regards suspension, the tenant can serve a 12 months' notice that its liability to pay the Certain Rent is to cease, accompanied by a Surveyor's Mineral Exhaustion Certificate. That is what the Appellant did in December 2004; the question is whether the certificate (and therefore the notice which depends on it) was valid and effective. If any minerals are extracted after the cessation of the Certain Rent but while the lease still subsists, then the liability to pay the Certain Rent revives.
As regards termination of the lease, if (a) the reserves of minerals are exhausted or not economically recoverable, as certified in a Surveyor's Mineral Exhaustion Certificate, and (b) the land has been restored in accordance with the obligations under the lease, as shown in a notice given by the tenant to the landlord, and certified by the relevant public authorities, and (c) the capacity of the land for infilling by waste materials is either exhausted or not economically usable for the purpose, as shown by a Surveyor's Waste Exhaustion Certificate, and (d) subject to various other conditions, including the service of 12 months' notice, then the tenant can terminate the lease by one month's notice, or it can purchase the land from the landlord for £1.
The surveyor who has to issue a Surveyor's Mineral Exhaustion Certificate, or a similar certificate as regards waste, is an independent chartered surveyor experienced in mineral matters appointed by agreement between the parties or, in default, by the President of the RICS. The question in the proceedings, and on this appeal, concerns a Surveyor's Mineral Exhaustion Certificate which the surveyor appointed in this case, Mr John Hill, issued on 16 December 2004. Two different questions arise: did the certificate comply with the requirements of the lease, and how far, if at all, can that question be examined by the court. Logically the latter point needs to be addressed first, but before I do that I will set out the facts in more detail.
The facts
I will start with the provisions of the lease. It was made between the Claimant, Homepace, as landlord and Hughes Waste Management Ltd as tenant. The Defendant, SITA, is an assignee of the lease. Nothing turns on that and I will refer to it, as necessary, as if it had been the original tenant. The demise is of the land shown on a plan annexed, together with the Rights but except and reserving the Reserved Rights. That grant and reservation take effect by reference to two other defined phrases. Minerals means:
“all minerals including limestone and clay deposits within the Land excluding for the avoidance of doubt the Reserved Minerals”
In turn Reserved Minerals means:
“up to 12000 tonnes in each year of this lease of limestone suitable for use as building walling and/or rockery stone and/or stone tiles and roofing slates”
The point of this distinction is that the top layer of stone, of about 2 metres' depth, has a value as vernacular Cotswold stone for building purposes, and the landlord carries on a distinct business of extracting, cutting and dressing such stone for sale for this market, whereas the lower strata are only of use as aggregate or, once extracted, as providing a space for landfill.
I do not need to say more about the Certain Rent and the royalties, or their interrelationship, but I must set out clause 3.5.4 (which I do with the correction of some obvious errors):
“3.5.4 The Lessee's liability to pay the Certain Rent shall cease upon the exhaustion of all the reserves of Minerals in on or under the Land or upon those Minerals becoming economically irrecoverable and there being no reasonable prospect of them becoming economically recoverable within the next ten years PROVIDED THAT:
3.5.4.1 not less than twelve (12) months prior to the date on which the liability to pay the Certain Rent ceases the Lessee has served on the Lessor a notice in writing of its intention to cease payment of the Certain Rent which notice shall append a Surveyor's Minerals Exhaustion Certificate; and
3.5.4.2 if at any time after the Lessee's liability to pay the Certain Rent has ceased and during the subsistence of this Lease any Minerals are extracted at the Property the Lessee's liability to pay the Certain Rent shall resume upon the terms herein before contained”
The definition of Surveyor's Mineral Exhaustion Certificate, in clause 1, is as follows:
“A certificate signed by the Surveyor which unequivocally confirms that all Minerals in on and under the Land are exhausted or are not economically recoverable and there is no reasonable prospect of them becoming economically recoverable within the next ten years”
Mr Hill's certificate in the present case was issued on the basis not of exhaustion of all Minerals but of the Minerals being economically irrecoverable.
The lease contains tenant's covenants of a normal character for such a lease. One to which reference was made in argument is clause 5.15, as follows:
“5.15 Provided it is reasonable to do so in the prevailing market conditions throughout the Term and subject to clause 10 to exercise reasonable endeavours to:
5.15.1 Search for dig work and get the Minerals in a skilful and workmanlike manner without any unnecessary waste and without prejudice to the foregoing work the same continuously and without interruption
5.15.2 Procure waste materials for infilling of the land and without prejudice to the foregoing to continuously infill waste materials at the Land
5.15.3 Procure Foreign Waste Materials for bringing onto the Land and without prejudice to the foregoing to continuously bring Foreign Waste Materials onto the Land”
Special provision was made to deal with the extraction by the landlord of the Reserved Minerals, in clause 7, which I set out in full:
“7. In relation to the extraction of the Reserved Minerals the...
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