ARC Aggregates Ltd v Branston Properties Ltd

Mining – Mineral rights – Claimant selling property to defendant’s predecessor – Transfer excepting and reserving to transferor mines and minerals beneath surface – Claimant seeking declaration as to freehold ownership of mines and minerals – Defendant resisting claim – Both parties applying for summary judgment – Whether claimant retaining corporeal right to mines and minerals beneath surface of property – Whether claimant retaining merely incorporeal right to mines and minerals – Defendant’s application dismissed – Claimant’s application allowed The claimant, a building materials company, sold property between the A38 and the River Trent at Branston, Burton-on-Trent, Staffordshire, pursuant to two transfers. The defendant, a commercial property developer, was the successor in title to the transferees. Clause 2(a)(ii) of each transfer provided that the land was transferred, except and reserving to the transferor all mines, minerals and mineral substances lying beneath the surface at a depth below the lowest level or past excavation carried out by the transferor and its predecessors in title but without the right to work or get the minerals or mineral substances. A dispute arose as a result of development work undertaken by the defendant. The claimant argued that the defendant had encroached upon the mines and minerals and excavated or carried off minerals in the course of its development work. It sought a declaration that it was the freehold owner of the mines and minerals, an injunction to restrain the defendant from encroaching on them or excavating, working or carrying off the minerals (or damages in lieu) and damages for trespass and conversion. The defendant counterclaimed, seeking a declaration that on the true construction of the transfers, the property conveyed included the corporeal fee simple in the soil of the property and everything beneath the soil, and that the claimant merely reserved an incorporeal easement, right or privilege in respect of the mines and minerals. The defendant applied for summary judgment on its counterclaim contending that it raised a point of law as to the construction of the transfers which could be resolved on a summary basis. The claimant resisted that application and applied for summary judgment on its claim for declaratory relief. Held: The defendant’s application was dismissed; the claimant’s application was granted. (1) By section 1(2) of the Law of Property Act 1925, the only interests or charges in or over land capable of subsisting or being conveyed or created at law were an easement, right or privilege in or over land for an interest equivalent to an estate in fee simple absolute in possession or a term of years absolute. A fee simple in the surface of land included the strata beneath it, including mines and minerals found there, unless there had been alienation of the minerals by a conveyance, at common law or by statute, to someone else: Bocardo SA v Star Energy UK Onshore Ltd [2010] 3 EGLR 145 considered. (2) There were two ways in which someone other than the owner of the surface of the land might assert an interest in the mines and minerals beneath. The first was to divide up the land into separate physical strata, with boundaries at different vertical levels, each being a corporeal estate within section 1(1) of the 1925 Act, capable of being owned in fee simple by different persons. The second was to granting an incorporeal right within section 1(2)(a) by the owner of the surface granting a right to a third party or reserving a right to itself upon conveying the land to a third party. Such a right was a profit à prendre (a right to take something off another person’s land) which might be either appurtenant (for the benefit of another piece of land) or in gross. A fee simple estate could only exist in gross. On a transfer of land, if the transferor wished to retain an interest in mines and minerals beneath the surface it could except the mines and minerals from the transfer altogether, so that they were not conveyed at all and the transferor retained an estate in fee simple in the mines and minerals; or it could reserve an incorporeal right in the mines and minerals by way of profit à prendre, a new right created at the time of the conveyance. (3) There was an important difference between an “exception” and a “reservation” when those words were used in a transfer of land. Exceptions were properly placed directly after the parcels, while reservations should be placed in the habendum although in practice they tended also to be placed after the parcels, the whole being introduced by some such words as “except and reserving….”. The correct approach was to have regard to the contents of clause 2(a), in the context of the agreement as a whole, to determine which parts, if any, constituted exceptions or reservations. The fact that “except and reserving” was commonly used in conveyances, before a habendum containing both exceptions and reservations, militated strongly against reading “except” as a mere preposition to the word “reserving”. (4) The incorporeal right for which the defendant contended would itself preclude it extracting any minerals. In any event, the covenant against extraction covered all minerals. The words used had to be construed in the context of the transfers as a whole, without any a priori assumption that either of the words “except” or “reserving” was intended to govern any of the matters identified in the subclauses that followed. The exclusion in clause 2(a)(ii) of the right to work the mines and minerals pointed strongly towards the conclusion that the parties did not intend to create an incorporeal right in the form of a profit à prendre. Thus, it expressly prevented the transferor doing the very thing which a profit à prendre was designed to permit. The defendant’s application for summary judgment would be dismissed. (5) It did not necessarily follow from the dismissal of the counterclaim that summary judgment should be granted on the claimant’s claim for declaratory relief because of the defendant’s concession for the purposes of its own application that the court should assume in the claimant’s favour that the land was sold for agricultural purposes at agricultural values. However, once the possible impact of the concession was put aside, it logically followed that the rejection of the defendant’s case on the true construction of the transfers led to the acceptance of the claimant’s case on construction. The court would grant the claimant’s application for summary judgment. Edwin Johnson QC (instructed by Knights Professional Services Ltd) appeared for the claimant; Mark Wonnacott QC and Harriet Holmes (instructed by Gowling WLG (UK) LLP) appeared for the defendant. Click here to read a transcript of ARC Aggregates Ltd v Branston Properties Ltd Eileen O’Grady, barrister