Cleveland Potash Limited v The Honourable Mrs Ferelith Drummond & Ors [2026] EWHC 1182 (Ch)

[2026] EWHC 1182 (Ch)Case No BL-2023-000606IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESBUSINESS LISTVenue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 22/05/2026
Before
MASTER KAYE SITTING AS A DEPUTY HIGH COURT JUDGE
Between
CLEVELAND POTASH LIMITEDApplicant
Morag Ellis KC and Emyr Jones (instructed by Herbert Smith Freehills Kramer LLP) for ApplicantRichard Kimblin KC (instructed by Excello Law and Knights plc) for Respondents.Hearing Hearing dates: 1, 2 and 3 July 2025
Approved JudgmentThis judgment was handed down remotely at 10.30am on 22 May2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives..............................

MASTER KAYE SITTING AS A DEPUTY HIGH COURT JUDGE

[1]The applicant (“CPL”) is the owner and operator of Boulby mine. The mine is situated at Saltburn by the Sea on the north east coast of North Yorkshire. This claim concerns the terms on which leases should be granted to CPL by the respondents (“Rs” and “R1”, “R2” or “R3” respectively) as mineral rights owners in respect of their onshore subterranean mineral rights for areas known as B, C, Q, V, A, and O to enable CPL to continue to operate Boulby Mine for the extraction of polyhalite. The Rs are content to grant a lease to CPL and have provided them with a draft lease. By the end of the trial the issues between the parties were all valuation issues.[2]The application is made under the Mines (Working Facilities and Support) Act 1966 (“the 1966 Act”). The 1966 Act was intended to consolidate Part 1 of the Mines (Working Facilities and Support) Act 1923 (“the 1923 Act”) and certain other enactments amending Part 1. Section 1 1966 Act is entitled “Grant of working facilities.” and confers on the court the power to grant any of the rights specified in the “Table” to provide those working facilities (a Working Facilities Order (“WFO”)).[3]At [5] the Table provides for ancillary rights and provides:
“All minerals: ancillary rights Paragraph 5 of Table. (1) An ancillary right may be conferred on a person having the right to work minerals, who is working or desirous of working the minerals either by himself or through his lessees, if the right is required in order that the minerals may be properly and conveniently worked by him, and the proper and efficient working of the minerals is unduly hampered by his inability or failure to obtain that right. (2) An ancillary right may be conferred on a person on whom a right to work minerals is conferred under this Act at the same time or at any subsequent time”
[4]Those ancillary rights are defined in s.2 of which s.2(1)(b) is the relevant right for these purposes: (1) In this Act “ancillary right” means, in relation to minerals, any facility, right or privilege and, in particular, but without prejudice to the generality of the foregoing provisions of this subsection, that expression shall include— … (b) a right of air-way, shaft-way or surface or underground wayleave, or other right for the purpose of access to or conveyance of minerals or the ventilation or drainage of the mines,[5]For completeness s.14 “Interpretation” defines “minerals” to include: “all minerals and substances in or under land obtainable by underground or by surface working and references to working minerals include references to working, carrying away, treating and converting minerals”.[6]The court cannot grant any rights under the 1966 Act unless s.3(1) and s.3(2) are satisfied. Section 3(1) requires the court to be satisfied that the grant is expedient in the national interest.[7]Section 3(2) requires the applicant to show that it is not practicable to obtain the right by private arrangement by reference to the reasons provided in ss (2)(a) to (d). CPL rely on ss 3(2)(d):
“(2) No right shall be granted under section 1 of this Act unless it is shown that it is not reasonably practicable to obtain the right by private arrangement for any of the following reasons – … (d) that the person with power to grant the right unreasonably refuses to grant it or demands terms which, having regard to the circumstances are unreasonable.”
[8]The mine became operational in 1973. Until 2018 CPL mined salt (rock salt/halite) and potash (sylvinite) from a large subterranean onshore area in and around Boulby but which later extended offshore. Since 2011 CPL have also mined polyhalite from Boulby Mine but from offshore areas pursuant to a lease from the Crown Estate (“TCE”). It is the only currently active producer of polyhalite in the world. Potash and polyhalite are used as a component of fertilizer. There is another proposed polyhalite mine located about 45km south east of Boulby mine - Woodsmith.[9]CPL owns the freehold of the 32-hectare Boulby mine site. At surface level this comprises offices, welfare facilities, laboratories, processing plant, storage, handling and loading facilities and site access to and from the public highway. The phrase “from the rockface to the public highway” (here the railway) is used to describe the scope of access rights required to access the minerals and transport them through the mine to the surface and away but that does not describe the nature and extent of all the rights required for the functioning of the mine. There are two mine shafts with associated gear above them. Those shafts are accessed from the mine site and then drop vertically to a depth of 1,100m to the subterranean roadways which give access to the rest of the mine. One shaft is used for rock and the other for everything else including people, plant and materials. There is a dispute about the extent of the subterranean mineral rights which Rs may have including over the shafts and some of the roadways and what those rights mean for the purposes of setting the rate of compensation for the new leases which the Rs are prepared to grant.[10]The mine itself covers a large onshore subterranean area to which CPL had rights including ancillary rights to work the salt and potash pursuant to up to 150 different leases across/through/under multiple land/mineral owners’ interests not just those of the Rs (“the Onshore Leases”). The original Onshore Leases were granted in 1970/1971 for a period of 50 years and they expired in 2020/2021. CPL were holding over under those Onshore Leases. However, leases for mines and minerals are excluded from Part 2 of the Landlord and Tenant Act 1954 so there is no statutory right to renew them. Rs say that this affects the way in which the compensation should be considered. They say that Rs’ rights should be looked at afresh taking into account the current position and that they are not constrained by any prior lease terms.[11]In order to win or work the minerals (including transporting them through and to the surface of the mine) and to maintain and operate the mine on a day-to-day basis, in addition to the two shafts, subterranean tunnels, roadways, airways and water extraction tunnels and associated infrastructure and plant had been built and maintained since the late 1960s. The minerals were worked and then transported from the rockface to the public highway and in doing so they travelled through the shafts to the surface where the potash and later the polyhalite was processed before being transported away from the mine.[12]The Onshore leases provided for a “Certain Rent” based on area and free passage including of foreign minerals across the mine area. This meant that none of the leaseholders (the mineral rights owners) received additional compensation for the through passage of minerals, people, materials or plant through their lease areas. The Onshore leases also included provision for the payment of an extraction royalty which meant that the leaseholder would receive some financial benefit if any salt or potash was extracted from their own mineral interests as the mine moved through. Because of the right to free passage the leaseholders’ financial benefit was not reduced by having to pay any neighbouring leaseholders/CPL for the right to have that extracted mineral transported through the adjoining interests to the shafts and then to the surface. CPL want to replicate this approach in calculating the compensation to be paid to Rs in the new leases.[13]An alternative approach to valuing the compensation and the one advanced on behalf of Rs does not involve free passage of foreign minerals and focusses on the value of the minerals being transported through the mine. This form of compensation is commonly referred to as a wayleave. The Rs seek compensation for allowing passage across their lease areas by way of a wayleave royalty calculated by reference to the amount of use made of the passage through their lease areas. Rs say this should be based on a % of the market royalty which CPL pay TCE for the right to extract the polyhalite. In some cases, the alternative compensation can be based on a simpler passage rent which may be paid in addition to or as part of the Certain Rent.[14]TCE own the strata of salt, potash and polyhalite which lies offshore immediately adjacent to the area covered by the Onshore Leases. CPL’s current lease from TCE was granted in 2010 for a period 26 years. CPL invested time and money to secure the relevant regulatory consents, permits, leases and licences in relation to the offshore areas to enable it to mine Polyhalite until at least 2048. They employ a skilled local workforce of over 500 people and provide wider benefits to the region and nationally (see below).[15]The mining of potash both onshore and offshore ceased in 2018 when the commercially accessible reserves were largely exhausted. CPL no longer extracts any minerals from the onshore areas. CPL has mined the offshore polyhalite reserves using the existing mine infrastructure since 2011 under the terms of the existing Onshore leases.[16]But for CPL’s decision to mine polyhalite from the offshore areas its operations at Boulby mine would have ceased in about 2018. The mine would have been decommissioned including capping off the shafts. Without ongoing maintenance, the shafts and tunnels would quickly deteriorate and would fail/collapse/fill with water within weeks.[17]In order to work the polyhalite offshore CPL required working rights or ancillary rights through and across different land/surface/mineral owners’ interests to enable it to work the polyhalite and bring it to the surface. The same rights as it had previously had for the salt and potash. However, now that CPL was focussed on the offshore polyhalite deposits it did not need to renew all 150 Onshore leases. Additionally, the use it intended to make of some/all of the onshore areas had changed since there was no intention to work minerals in those onshore areas. What CPL needed were the rights to use the lease areas to enable the day-to-day functioning of Boulby mine to enable it to work the polyhalite. This included passage for the polyhalite from the rockface to the public highway through the tunnels and to the surface but also leases over areas used for maintaining the mine including its dewatering and ventilation requirements.[18]Rs’ complaint about the proposed compensation for the new leases is that now that they will receive little by way of an extraction royalty for their own minerals because they have been worked, the Certain Rent with free passage does not adequately compensate them and is not reasonable. They say a wayleave based on royalties is not unreasonable given the change in circumstances. There is a dispute about the true extent of Rs’ interests and therefore its bargaining position in particular in relation to the shafts.[19]CPL has negotiated commercial terms for either the acquisition of freeholds or new leases with all the relevant land and mineral owners save for the Rs. It has acquired two freeholds (areas 7 and 50) and 19 leaseholds (“the new Onshore leases”). CPL now owns and controls the Boulby mine site and controls many of the essential underground conveyance, airflow, water extraction and maintenance tunnels. The new Onshore leases follow the same compensation structure as the Onshore leases and provide for a Certain Rent based on a per acre per annum sum with an extraction royalty for those land/mineral owners through whose areas a new subterranean roadway is to be constructed and free passage. The new subterranean roadway will pass through Rs’ areas so on this model they would receive an extraction royalty for the period during which the roadway was constructed through their areas. To give an idea of scale the area covered by the new leases, not including Rs’ interests, it extends over a combined area of c.2790 acres.

The Competing proposals:

[20]Although there are a number of legal issues to be determined which may affect the valuation issues the core issue is what compensation should Rs receive for granting CPL new leases to enable them to win and work the polyhalite under the TCE lease. There are two competing proposals as to the type and amount of compensation under the new leases for Rs’ areas.[21]CPL’s proposal is that reasonable compensation should include:(i) Certain Rents at £29.38 per acre per annum;(ii) royalty rents for extraction of potash at £1.69 per tonne; and(iii) royalty rents for extraction of salt at £0.3799 per tonne. Despite most of the minerals having been worked there would be extraction royalties for salt when the new roadway was built. This would provide Rs with a Certain Rent of £56,104.74 per annum compared to £24,118.54 per annum immediately before the expiry of the Onshore Leases subject to regular rent reviews over a 50-year period. The estimate for the extraction royalties for the salt was £100,000 pa for about 3 years.(iv) Free passage i.e. no passage rent for neighbouring or foreign minerals.(v) Other terms of the leases are not for determination in this judgment but would include the frequency and mechanism for rent reviews and break clauses and the like.[22]Mrs Jane Iwanicki (CPL’s expert) explains that the figure of £29.38 per acre per annum is calculated by reference to the cost of acquiring the freehold rights to areas B, C, Q and V. The Certain Rents negotiated and granted to CPL in relation to the other leases were only £13.41 per acre per annum. She considers that the appropriate Certain Rent figure on a per acre per annum basis should apply to all the outstanding areas the subject of or potentially the subject of this referral – that is B,C,Q,V and also A and O and if R1 has the necessary rights then to areas 7 and 67.[23]Mrs Iwanicki has undertaken a cross check by reference to the linear approach used for the leases granted at Woodsmith in respect of the Mine Transport System (“MTS”) where there was a 1966 Act referral in relation to unknown rights owners. She calculated the figures as an annual rate of £8.41 per metre and then applied it to the metres of tunnel in each of B,C,Q,V,A,O,5 and 67. This provided for an annual rent of £52,096.59.[24]Rs’ proposal was that reasonable compensation should be by way of a wayleave. Mr Timothy Troman (Rs’ expert) explains that the wayleave royalty approach provides Rs with an entitlement to compensation linked directly to the notional full market royalty for Boulby mine which he has determined should be 2.5% of the net mine realisation (“NMR”). TCE is receiving 2% NMR so he calculates that R’s should receive 0.5% NMR being 20% of what they say is the full market royalty. His report assumed that TCE and Rs between them controlled all the relevant rights and areas from the rockface to the surface to enable the polyhalite to be worked. Mr Troman’s approach produced a significantly larger sum than the Certain Rent. The average proposed extraction rate over the mine life was estimated at 2 million tonnes per annum.

The Referral

[25]CPL and Rs were unable to agree terms for the compulsory grant of leases and ancillary rights to enable it to continue its operations. When these could not be agreed it submitted its application to the Secretary of State who pursuant to s.4(3) 1966 Act shall refer the matter to the court unless satisfied that a prima facie case is not made out.[26]CPL applied to the Secretary of State under the 1966 Act on 7 June 2022. The application was supported by evidence from: i) Andrew Fulton (Chairman and Director of CPL); ii) Geoffrey Noel Barrett (in house solicitor of CPL); and iii) Mrs Iwanicki (a minerals surveyor and the expert instructed by CPL).[27]The Secretary of State referred CPL’s application to the court for determination on 8 February 2023.[28]Section 5 (1) gives the court a discretionary power to grant rights on such terms as it thinks fit provided it is satisfied that the requirements of the 1966 Act have been met, which includes the provisions in s.1 and s.3.[29]Section 5(2) provides that where the court exercises that power it may, in default of the agreement of the parties, determine the compensation or consideration in respect of the acquisition of the right to be paid to “such persons as the court may determine to be entitled thereto”.[30]Section 5(3) requires the court to have regard to the time reasonably necessary to enable the minerals to be fully worked and, where the interest is a lease, to the duration of the interest under any lease. CPL is seeking rights/lease(s) for a period of 50 years from 2020, and this term is not resisted by Rs.[31]Section 5(4) provides: “In determining whether any right should be granted or the conditions upon which any such right should be granted the court shall have regard to all the circumstances of the case, and in particular to the extent to which the retention of any minerals is required for the protection of any mines or other works from flooding, or for any other mining purpose, and (so far as relevant) to the royalties, covenants, and conditions reserved by or contained in the applicant’s existing mining lease or leases (if any), or customary in mining leases in the district”. (my emphasis)[32]The 1966 Act provides a mechanism for obtaining ancillary rights to enable mining rights to be worked or mined. These ancillary rights are not proprietary rights but rights that are given to a party by means of a WFO to enable them to work their own mining rights – so for example to pass across land vertically or laterally to get to and from the mining deposits they are working and to build the necessary infrastructure to enable them to do so. The 1966 Act therefore provides a mechanism for determining the compensation or consideration for the rights that are to be granted (see below). I accept that the scope of the referral is limited to whether the financial terms demanded are objectively unreasonable, but they will be unreasonable if for example the basis for them is not supported by the facts or if the legal basis for the position adopted is not sustainable.[33]CPL submit that following the reasoning in Bocardo v Star Energy and another [2010] UKSC 35 [2011] 1 AC 380 (“Bocardo”) the compensation to be paid to Rs falls to be determined by reference to compulsory purchase principles including the Pointe Gourde principle irrespective of whether it is to be calculated by reference to a Certain Rent or a wayleave royalty. Rs say that compulsory purchase principles do not apply but if they do the Pointe Gourde principle does not operate against Rs as they hold a key value to the “scheme” necessary to operate and obtain value from Boulby mine.

Representation

[34]I have had the benefit of written and oral submissions from Ms Ellis KC and Mr Jones who also undertook the cross examination of Mr Troman for CPL and Mr Kimblin KC for Rs. I am grateful to them for their careful and detailed submissions. I have taken into account all their written and oral submissions even if I do not set out every argument or submission they made.[35]I have also had the benefit of expert evidence from Mrs Iwanicki on behalf of CPL and Mr Troman on behalf of the Rs. Both are experienced chartered mineral surveyors. The world of mineral surveying is quite small, and Mrs Iwanicki and Mr Troman had worked for the same company, Wardell Armstrong, in the same office for 20 years.[36]Mrs Iwanicki has over 35 years’ experience in mineral surveying. She started out with the Coal Board in 1988. She joined Wardell Armstrong in 1993. She explains that she currently holds the title of Crown Mineral Agent and leads a team of mineral professionals managing TCE’s mineral assets across its rural (onshore) portfolio but not its offshore portfolio. She confirms that TCE are aware of her involvement in this case. She does not consider there to be any conflict of interest.[37]She further explains that she has previously provided independent valuation advice to CPL and been involved with the lease renewal process for CPL. She confirms she supported the application to the Secretary of State and appeared as an expert at the Preliminary Issue trial. As I note below, she has also had direct involvement in some of the comparables relied on by the parties.[38]Mr Troman also has over 35 years’ experience in mineral surveying. He joined Wardell Armstrong as a graduate in 1990 and worked for them until 2017 when he left to set up his own business Mineral Surveying Associates Limited. He explains that he has had continuous involvement with the Boulby mine from the early 1990s including collecting rents and ensuring compliance with covenants for the leaseholders. In 2018 he prepared a valuation for the coastal arc mineral owners group which included the Rs (“CAMOG”). He has been advising R1 on mineral valuation matters concerning Boulby mine since 2018. He too had had direct involvement in some of the comparables relied on by the parties.[39]Their expert reports are dated November 2024, and the joint report is dated 16 December 2024. They had both prepared expert valuations for their respective clients in about 2019 and been involved in the extensive underlying negotiations between CPL, the parties who entered into the new Onshore leases, and Rs. R2 had also instructed an expert Mr Alastair Duncan who had been involved in that process.[40]Whilst neither party raised any concerns about the experts’ prior and ongoing involvement in the issues related to this dispute I will have to consider that involvement as part of my overall assessment of the experts. I remind myself that the experts have an overriding duty to the court which should override their duty to their clients.[41]Mrs Iwanicki was a very impressive witness. She was deeply knowledgeable about her subject. She gave clear, careful, well considered and measured answers to the questions she was asked. She had a good understanding of her overriding duty to assist the court rather than to advocate for a particular position. Her answers were honest and straightforward even where those answers might have been seen as providing some assistance to Rs. That is what the court expects of an expert witness who understands that their role is not to advocate for a particular party or outcome but to assist the court.[42]Mr Troman was also clearly very knowledgeable about his subject, however, unlike Mrs Iwanicki on some occasions he did not appear able to disassociate his longstanding role of assisting the Rs (and other leaseholders) to negotiate what he considered to be a satisfactory outcome with CPL from his duty to assist the court. This more partisan approach had infected some of his evidence and the contents of his report. It was clear from his evidence that he felt that other mineral rights owners who had now agreed terms with CPL should have held out and/or would have done better if they had followed his advice/recommendations. He was reluctant to accept the possibility that the conclusions in his report might need to be adjusted or modified even when it became apparent that there were factors or information that he had not known about and could not therefore have taken into account when reaching his conclusions. His resistance to accepting any possibility that his conclusions on valuation might need to be adjusted was unhelpful and undermined his position. Further he had a tendency to speculate both in his report and in his evidence and on at least one occasion asserted a factual position which turned out not to be true. Overall, this approach undermined his credibility and the weight that I give his expert opinion.[43]Finally in relation to the experts, their joint statement confirmed that neither of them had previously been involved in a claim that involved determining compensation or consideration based on Bocardo. And, in fact, as is clear from their reports, neither of them had applied those principles when assessing what they considered to be reasonable compensation.

Other evidence:

[44]I have had the opportunity to read the evidence submitted to the Secretary of State with the referral and the evidence and documents relied on in support of each of the parties’ positions in this application.[45]I have also had the benefit of and have had the opportunity to re-read the transcript of the trial whilst preparing this judgment. I am grateful to the parties for their patience and apologise for the delay in delivering this judgment. The Issues: National Interest

The Issues:

[46]The court must be satisfied that the making of an award is ‘expedient in the national interest’ (s.3 (1) 1966 Act). The Rs have made no admission but do not challenge CPL’s case that an award would be expedient in the national interest. Valuation Issues: (the financial terms on which those leases should be granted).[47]The valuation issues involve the application of the compensation provisions in s.8 1966 Act. Section 8(1) and 8(2) provide: “Compensation. (1) Where a right is granted under section 1 of this Act, or any restriction is imposed under section 7 of this Act, the court may determine the amount and nature of compensation or consideration to be paid or given and the persons to whom it is to be paid or given, either at the time when it determines whether the right should be granted or the restrictions imposed or at any subsequent time.(2) The compensation or consideration in respect of any right, including a right to enforce restrictions, shall be assessed by the court on the basis of what would be fair and reasonable between a willing grantor and a willing grantee, having regard to the conditions subject to which the right is or is to be granted.” (my emphasis)[48]Mr Kimblin rightly submits that the role of the court is not to grant a lease – which R1 is willing to grant - but to determine what might be fair and reasonable compensation between a willing grantor and a willing grantee. In this case that raised issues about what principles to apply to the determination of the compensation in two different ways.[49]The first group of issues concerned whether the valuation exercise should be determined by reference to compulsory purchase principles: i) Whether the compensation falls to be determined by reference to compulsory purchase principles including the Pointe Gourde principle. This was primarily a question of law and construction of the 1966 Act by reference to Bocardo; ii) If (i) is resolved in CPL’s favour whether the Rs’ claimed bargaining position as holding a key to the functioning of the mine should be disregarded pursuant to the Pointe Gourde principle derived from Pointe Gourde Quarrying & Transport Cov Sub-Intendent Crown Lands 1947 AC 565 (“Pointe Gourde”).[50]The second group of issues concerned the valuation of the compensation. Whether the leases which Rs were willing to grant to CPL should be based on a wayleave royalty as Rs proposed or a Certain Rent based on an area or linear metre rent (together with an extraction royalty for the new road) and free passage as CPL proposed. Rs considered the terms they were willing to offer were not unreasonable in all the circumstances (s.3(2)(d) 1966 Act). They say that is an end of it. CPL considered those terms to be unreasonable in all the circumstances and consequently, CPL did not consider the terms being offered by Rs to be fair and reasonable compensation pursuant to s.8 1966 Act. This raised the following issues: i) If both (i) and (ii) above are resolved in CPL’s favour whether the valuation evidence of Mrs Iwanicki based on a Certain Rent, free passage (and extraction royalty) was to be preferred as providing a fair and reasonable measure of consideration or compensation; ii) In the event that(i) and/or(ii) above are resolved in the Rs’ favour whether a wayleave royalty was to be preferred as providing a fair and reasonable measure of consideration or compensation; iii) If (ii) is resolved in the Rs’ favour whether the valuation evidence of Mr Troman was accepted as the basis for calculating the wayleave royalty. This issue did not need to be determined in relation to the Certain Rent as Mr Troman accepted that if CPL were successful on the approach to compensation that Mrs Iwanicki’s Certain Rent figure was appropriate.

Proprietary issues:

[51]Which of the Rs would grant the leases and to whom compensation should be paid remained a live issue at the outset of this trial. Historically there had been some doubt as to which of the Rs were entitled to enforce the mineral rights to which this dispute relates. The Rs had entered into a collaboration agreement dated 20 March 2024 to address as between themselves how they would account for the benefit of any compensation or consideration. They had resisted CPL’s attempts to clarify whether compensation should be paid to R1 alone, to R1 and either R2 or R3 or to all Rs. This was finally clarified in closing reply submissions when Mr Kimblin confirmed that the leases would be granted by R1 and any compensation should be paid to R1. By reference to the proprietary issues for determination at this trial, Rs position was clarified as follows: i) whether the collaboration agreement entered into between the Rs was relevant to the court award: Answer: Rs agreed that the collaboration agreement was not relevant to the award. ii) whether R3 had any proprietary interest in the tunnels in Area O and if so on what basis; Answer: R3 did not have a proprietary interest in the tunnels in Area O. iii) whether R3 has any proprietary interest in the shafts and if so on what basis; Answer: R3 did not have any proprietary interest in the shafts. iv) whether R2 has any proprietary interest in the tunnels in Area A and if so on what basis; Answer: R2 did not have any proprietary interest in Area A v) whether R2 has any proprietary interest in the shafts Answer: R2 did not have any proprietary interest in the shafts.[52]It was unfortunate that this issue remained live until the end of closing submissions. It had added an unnecessary layer of complication to the submissions and the evidence. I will refer to the Rs as R1 in the rest of this judgment unless context requires otherwise. Preliminary matters: The Role of the Court

Preliminary matters:

[53]Counsel agreed that the role of the court was ultimately quite narrow. It was to determine whether to confer certain rights under s.1 1966 Act and then to determine the valuation issues. Once the parties have a decision on the issues set out above, they intend to seek to finalise the lease terms by negotiation. That seemed a very sensible approach to adopt. I would encourage them to do so.

History of Boulby Mine

[54]Onshore ironstone mining had been carried out in the Boulby district by the Palmer family between the 1860s and 1934. From the 1920s the Palmer family had sold off some of its land interests around Boulby whilst reserving to itself “the mines beds and quarries of ironstone and iron ore and other metals within and under the property with all necessary and proper powers rights and easements for searching for, winning and working, getting in and carrying away the same”. By this means the Palmer family retained or believed they had retained and reserved to themselves certain mining and mineral rights.[55]Potash was discovered to exist at the north east coastal fringe of the Boulby area at a depth of c.1000m in about 1938/1939, but mining had not been undertaken at that depth in the UK at that time.[56]By a conveyance dated 9 December 1946 Mark Palmer, R1’s father, conveyed three parcels of land subject to a reservation and exception in relation to certain mineral rights (“the Reservation”). The Reservation was in similar terms to the earlier reservations in relation to mining rights set out above. A dispute arose as to its meaning and in particular what the effect was of the words “the mines beds and quarries of ironstone and iron ore and other metals”. The dispute concerned whether Mark Palmer or his family and now R1 had any interest in the mines beds and quarries of potash and salt and related rights over the parcels of land the subject to the 1946 conveyance and Reservation. By extension it also affected those who had acquired some of the other areas over which Mark Palmer had reserved mining rights.[57]The disputes about the Reservation and whether it reserved rights in relation to potash were not finally resolved until this claim was issued. When the Onshore leases were entered into (in respect of areas B, C, Q, V, A, and O see below), Mark Palmer, CPL, R2 and R3’s predecessors in title reached a compromise referred to as the “sharing arrangement” which operated for the duration of the Onshore leases.

Preliminary Issue

[58]When the Onshore leases came to an end the issue re-emerged. In these proceedings the court directed the determination of the preliminary issue to determine the extent of the rights reserved by Mark Palmer in 1946 by the Reservation. It would affect whether R1 owned or had any interest in the existing mines beds and quarries of potash and salt and related rights in the parcels of land identified as B,C,Q and V involving around 350 acres. Clare Ambrose sitting as a Deputy High Court Judge determined that preliminary issue ([2024] EWHC 1292 (ChD)). She declared that that the effect of the Reservation was that R1 owned the existing mines beds and quarries of potash and salt and related rights and easements in the onshore areas B, C, Q and V. Such rights were therefore encompassed within the Reservation of ironstone, iron ore and other metals referred to above.[59]Although R2 owns the freehold interest in area A and R3 owns the freehold interest in area O, Mark Palmer had reserved the same mines and minerals rights in those areas. Areas 5 and 67 are the subject of an undetermined application to the Land Registry in respect of R1’s claim to minerals by virtue of her predecessor being the Lord of the Manor.[60]This application proceeds on the basis that the reservation relates to the existing mines, beds and quarries of potash and salt and related rights and easements for areas B,C,Q,V, O and A and so far as relevant areas 5 and 67.

History of Boulby Mine continued:

[61]The parties had agreed that Mrs Iwanicki’s report provided an accurate summary of the history and development of Boulby Mine subject to one modification. I set out below the relevant extract from her report which includes some diagrams and a photo of the relevant area around Boulby. I have added some additional notes in [ ] to clarify some points derived from the submissions and evidence: Boulby Mine – background and development “3.2.1 Evaporite deposits in the Boulby area were investigated by ICI between 1965 and 1968, and potash and salt deposits were recorded at depths of 1100 to 2000 metres beneath the surface. These mineral deposits were deeper than any previously mined in the UK or in Europe, which prompted ICI to join forces with Charter Consolidated Limited, a company experienced in sinking deep shafts. This partnership resulted in the formation of Cleveland Potash Limited (the Claimant). 3.2.2 Planning permission for Boulby Mine was first granted in November 1968 following a public inquiry. The permission related to the working of potash and salt by underground mining methods and the construction of the mine site and processing plant etc. The mine had an original project life of 30 years with a design capacity for mining/transporting up to 3 million tonnes per annum of potash ore (i.e. sylvinite) allowing the annual manufacture of c.1 million tonnes of saleable muriate of potash (MOP) for use in fertiliser products. 3.2.3 The Claimant bought the freehold of the proposed mine site from Bass Charrington (a predecessor of the Second Respondent) on 14 April 1969. The Claimant’s freehold was registered under title CE185395 and is subject to a reservation in favour of Bass Charrington of all mines minerals metals and minerals and metal substances or compounds with underground working rights only, which is in turn subject to the Reservation in favour of the First Respondent (i.e. the First Respondent owns the ironstone, iron ore, other metals, potash and salt and associated working rights within with the Claimant’s freehold). The Claimant is seeking rights to continue using the former mines and workings in the potash and salt along with rights to win and work salt for the purpose of creating a new roadway. 3.2.4 The Claimant commenced site construction and shaft sinking works in 1969 within its newly acquired freehold, which was on the site of the former Boulby ironstone mine. These works were carried out without any lease or other grant of rights by the Respondents’ predecessors. The modern surface footprint of Boulby Mine extends over approximately 32 hectares and is illustrated by Figure 1 below. Boulby Mine – background and development [The two shaft heads can be seen towards the right-hand side of the site above either side of a grey shed like structure. The two shafts are the entrance to the mine. The shafts have all their operating infrastructure on the surface and then drop down to 1,100m where they join up with the roadways. Internal to the shafts are for example lifts but also air ventilation. However, in order to operate the mine, there is also other significant infrastructure across the wider Boulby mine estate. An idea of the extent of that infrastructure and the size of the areas covered by it can be gleaned from the diagram of the underground infrastructure referred to below.] 3.2.5 The Claimant sank two shafts to depths of c.1150m. The shafts were sunk through the subsoil/drift, through the former ironstone workings lying at relatively shallow depths (c. 37-50m below surface) and then through indistinctive strata before reaching the evaporite beds and the economic deposits of potash at a depth of about 1110m below surface. The stratigraphy of the shaft columns is illustrated by Figure 2 below [(i) The orange-coloured strata immediately below the surface represents the original ironstone layer which had been extensively mined between 1860 and 1934 down to a depth of about 40m (ii) The onshore potash strata is marked in red at about 1,100m below the surface – the mine level and forms part of the Permian evaporite strata. It sits between a strata of marl(clay) and salt. Some of the salt was extracted as part of the mining process to create the tunnels and roadways. Mrs Iwanicki explained that the strata above the Permian layers were indistinct in the sense that they were not clearly defined mineral layers – she described the sandstone strata as being an aquifer made up of broken, fractured materials consisting of silt sandstone and cobbles (iii) the shafts pass through these strata from the surface to the roadway built in the salt strata for the purposes of extracting the potash. There is a dispute about ownership rights in relation to the shaft] 3.2.6 In 1970/1971 and following settlement of the dispute outlined in paragraph 2.2.2 above [the sharing agreement], the Claimant entered into about 150 potash leases. These included those granted by the Respondents and others who had agreed to accept the sharing arrangement with Mr Mark Palmer (i.e. the mineral leases relating to areas B, C, Q, V, A, O). As mentioned above, the leases for areas 5 and 67 were not subject to the sharing arrangement; Mr Mark Palmer was the sole lessor. The leases were in a standard form… 3.2.7 Each lease entitled the landlord to receive a Certain Rent based on the area of the lease and royalty rents for any potash or salt extracted and sold from the lease area (n.b. there is provision to agree royalties for any other minerals and metalliferous substances but this was never required). The areas covered by the leases are summarised in Table 2 below along with the rents payable to the Respondents immediately prior to June 2020 (when all but the area 5 lease expired): 3.2.8 The First Respondent received 100% of the rent payable under the leases for areas 5 and 67, and 50% of the rent payable under the other leases referred to in Table 2. The Second Respondent received 50% of the rent payable for the area A lease and the Third Respondent received 50% of the rent payable for the area O lease. 3.2.9 The lease structure is typical of most mineral leases where the landlord is protected against the risks and costs associated with the mineral development (i.e. they receive a guaranteed fixed minimum or Certain Rent irrespective of the mine’s operational status and are rewarded in royalties when their minerals are extracted and sold)… 3.2.10 The leases granted the Claimant rights to carry out certain exploratory works including the sinking of boreholes subject to surface owner consent. This requirement for surface owner consent is understandable as boreholes have potential to cause disturbance to land (e.g. access may be required over agricultural ground, crops may be damaged and the soils around the boreholes are disturbed and need to be properly reinstated when the borehole is closed). The leases provide for the surface owner to receive a surface rent of £30 per acre per annum where any part of the surface land is used for exploratory purposes or other permitted purposes (e.g. pipes, cables, pumping stations, access tracks etc). This clause would have been available to the Second and Third Respondents in the event of any of their lands with areas A and O being subject to exploratory works. 3.2.11 The commercial production of potash commenced at Boulby Mine in 1973 with the mined ore being processed into MOP at the Claimant’s onsite processing facility. The principal users of the processed potash were ICI and Fisons Limited (fertiliser merchants and producers). MOP from Boulby Mine was transported by rail to a freight terminal at Teesside (c.21 km), for onward distribution to ICI’s Billingham plant and to other UK and overseas customers. The overall operation (mine to port) has a number of physical constraints that restrict the annual tonnage of minerals that can be produced and sold from the mine (e.g. existing mine infrastructure and haulage capacity of the shafts, the onsite rail loading capacity, and the capacity of the handling and distribution terminal at Teesport). 3.2.12 The onshore deposits of potash were originally worked using a variation of room and pillar mining but this was later replaced by a stress relief system of mining. The development roadways were driven through the rock salt situated beneath the potash. The mining of rock salt at this depth would not be commercially viable in its own right but the Claimant was able to sell some of the material that it extracted as a low value by-product (i.e. salt for winter road treatment). The Respondents received royalty rents for any potash and salt extracted and sold from their lease areas. 3.2.13 The roadways in the salt were typically 3.5 metres high and 6 metres wide and the Claimant continues to use some of the roadways to gain access to the offshore polyhalite. The following Figure 3 is a not to scale illustration showing the three tunnels required to access the offshore polyhalite mining areas and to transport mined material back to shaft bottom (i.e. the three linear features that are shown highlighted in cyan). The former potash mine workings and relevant lease areas are also shown on the image for reference. The roadway running east to west from the coast and cutting through area 5 (and other areas) is a new roadway that needs to be driven through previously unworked deposits of rock salt. The construction of this roadway has potential to generate royalties for the owners of that salt. [(i) This illustration does not show the full extent of the 150 Onshore leases nor the c. 2790 acres over which the new Onshore leases have been granted. The plans and diagrams annexed to this judgment provide a clearer understanding of the extent of the rights and facilities required to operate Boulby mine; (iv) CPL own the freehold of areas 7 and 50 including the mineral rights (seen more clearly on the diagrams referred to below). The polyhalite passes through area 50 as it is transported from the rockface to the surface. (iv) Mrs Iwanicki confirmed that the proposed new salt roadway required to access the next zone of offshore polyhalite mining is not in fact shown on the illustration above but in fact runs parallel to and directly north of the roadway shown running east to west coloured turquoise. Work had in fact started on the new roadway in the form of a “stub” visible on the diagram referred to below]. 3.2.14 In September 1996, the Claimant submitted a planning application to the North York Moors National Park that included a lateral extension to its mining activities. The application was approved on 6 May 1998 (decision reference NYMR/003/0043B/PA) and it permitted the continuation of mining until 6 May 2023 with mine restoration to be completed by 6 May 2025. The planning permission required a coastal buffer zone to be left unworked but mining in this area was permitted following a 2004 planning application. This effectively opened up access to the offshore reserves of polyhalite (n.b. offshore mineral extraction is subject to a separate permitting regime). 3.2.15 Up until 2018, the operations at Boulby Mine continued to focus on the mining of potash for the manufacture of MOP. At that point, the potash reserves were largely depleted and the Claimant switched to mining polyhalite to be marketed as pure ‘Polysulphate’ and as a blended product ‘PotashpluS’ incorporating MOP imported from outside the mine. 3.2.16 In October 2019, the Claimant applied for planning permission to continue winning and working polyhalite and salt for an additional period of 25 years. The application also proposes the reduction of the onshore mining area from 13,740 to 3,840 hectares (c.9,489 acres), with the onshore areas being used only for access and maintenance purposes. The application states that future mineral extraction will all be offshore. Planning permission was approved on 2 December 2021 and decision notice NYM/2019/0764/MEIA was issued on 27 May 2022 (copy attached at Appendix 4). The 2022 planning permission authorises the winning and working of polyhalite until 6 May 2048 with restoration of the mine to be completed by 5 May 2051. The permission allows for the deconstruction of certain redundant buildings, plant and installations before 31 December 2027 in line with the Claimant’s proposals to phase out the importation of MOP and to reduce its onsite processing facilities. 3.2.17 The planning application refers to the Claimant having extracted a total of 640,000 tonnes of polyhalite in the preceding 10 years with proposals to achieve extraction rates of 1.3 million tonnes by 2023, and 3 million tonnes by 2033. The average proposed extraction rate over the mine life was estimated at 2 million tonnes per annum. 3.2.18 Public reporting of mineral exploration results for the information of investors is common practice. The ‘JORC Code’ is an Australasian professional code of practice that sets minimum standards for the public reporting of mineral exploration results, mineral resources and ore reserves. It is recognised as an international standard and is used by ICL (the Claimant’s parent company). The JORC report prepared in December 2021 refers to Boulby Mine having probable reserves of 8 million tonnes of polyhalite plus an inferred resource of 41 million tonnes of polyhalite. Probable reserves are mineral resources where there is a higher level of geological knowledge and confidence in the available data; inferred resources are where a mineral occurrence has been identified but limited investigation and evaluation has been conducted.

Plans and diagrams

[62]Annexed to this judgment are diagrams and plans intended to provide an understanding of the mine and the extent of R1’s interests in that context. The diagrams and plans show the mining areas both current and historic, onshore and offshore, the area covered by the new Onshore leases, the position of some of the infrastructure necessary for the functioning of the mine and the location of tunnels and roadways. i) Annex 1 is the coloured plan attached to the Particulars of Claim (“POC”). This shows not only those areas in which R1 has an interest but also the other new Onshore leases in the coastal arc – in particular, it identifies areas 7 and 50 (now owned by CPL). ii) Annex 2 is a plan showing CPL’s freehold ownership including the Boulby mine site. The uncoloured area towards the centre is area 50. It also shows areas B,C,Q,V, O, A, 5 and 67 which represent R1’s interests. The coastline can be seen at the top right-hand side of the plan. R1’s areas make up the majority of the coastal arc. iii) Annex 3 shows the areas covered by the new Onshore leases. The inland areas are required for ventilation, dewatering and other essential operations for the functioning of the mine. iv) Annex 4 shows the position of the roads, tunnels, airways and de-watering infrastructure. The new roadway “stump” can be seen extending west to east immediately above the existing roadway. The airways and dewatering facilities and other plant and infrastructure shown on the diagram are located in areas not covered by R1’s leases. The tunnels and roadways related to those facilities pass across/through areas owned by several land/mineral rights owners including CPL. v) Annex 5 is a plan showing the historic and current mining areas onshore and offshore and the main tunnels and roadways. This provides an idea of the extent of the underground infrastructure and extent to which it covers areas beyond those in respect of which R1s have mineral rights. It also shows when those different areas were worked through.[63]After the initial infrastructure including the shafts had been built in the late 1960s the mine started operating in 1973. The rest of the infrastructure was built as Boulby mine grew over the course of the next 50 years and moved out through the potash reserves further away from the Boulby mine site and the shaft heads. This extended the distance over which the minerals had to travel from the rock face. As the mine grew some areas were worked out and the mine moved on, other areas became part of its essential infrastructure even after the potash reserves had been worked. The offshore polyhalite reserves travel approximately 1.5km underground through the onshore underground roadways to the bottom of the shafts before being brought to the surface through the shafts.

Conclusions:

[64]For the reasons set out in more detail below I have reached the following conclusions on the referral and will make an order conferring the necessary rights on CPL pursuant to the 1966 Act: National Interest i). It is ‘expedient in the national interest’ to make an award. Compulsory Purchase Principles ii). Compensation does not fall to be determined on compulsory purchase principles. Key Value/Pointe Gourde iii). R1 does not hold the key to unlocking the value of the operation of the mine at Boulby and therefore the Pointe Gourde disregard applies in the event that compulsory purchase principles apply. 68. Compulsory purchase compensation: iv). If I am wrong and compulsory purchase principles and Pointe Gourde principles apply, then Mr Troman accepted that Mrs Iwanicki’s proposals for compensation were generous. It would follow that the terms sought by R1 were in those circumstances unreasonable (s.3(2)(d) 1966 Act). I am satisfied that if I am wrong about the compulsory purchase principles that the requirements of the 1966 Act have been met and pursuant to s.5 1966 Act the court should exercise its discretionary powers to determine compensation. Having regard to all the circumstances as set out below I am therefore satisfied that Mrs Iwanicki’s proposed Certain Rent with free passage and an extraction royalty would be fair and reasonable having regard to the conditions subject to which the right is to be granted (s.8(2) 1966 Act) v). Having regard to all the circumstances R1’s demand for a wayleave is unreasonable (s.3(2) (d)). vi). In any event having regard to all the circumstances R1’s demand for a wayleave of 0.5% NMR based on the TCE polyhalite royalty of 2% NMR is unreasonable (s.3(2) (d)). vii). The requirements of the 1966 Act have been met and pursuant to s.5 1966 Act the court should exercise its discretionary powers to determine compensation. viii). R1 have accepted that in the event that the court concludes that a wayleave approach is unreasonable and that compensation should be based on a Certain Rent that Mrs Iwanicki’s figures are fair and reasonable. ix). Having regard to all the circumstances as set out below I am therefore satisfied that Mrs Iwanicki’s proposed Certain Rent with free passage and an extraction royalty would be fair and reasonable having regard to the conditions subject to which the right is to be granted (s.8(2) 1966 Act). x). If I am wrong about the applicability of a wayleave and it is determined not to be an unreasonable demand, I still do not find that a wayleave based on a royalty of 0.5% NMR based on the TCE polyhalite royalty of 2% NMR is fair or reasonable compensation for the reasons set out below pursuant to s.8(2) 1966 Act. xi). For the reasons set out in this judgment I do not consider that the court is in a position to determine an alternative figure for a wayleave. It will require the experts to reconsider what might be fair and reasonable compensation in light of this judgment. It may be possible for them to agree such a figure should it be necessary. My preliminary view is that it is not necessary for that exercise to be undertaken now but I will hear submissions on when and if that needs to be determined and how at the consequentials hearing. Proprietary Interests xii). As set out above Rs have conceded that any grant should be made to R1 alone and R2 and R3 have no proprietary interests entitling them to compensation. I have consequently made no findings about their interests, but the position should be recorded in any order. The Issues in detail: The National Interest

The Issues in detail:

[65]The National Planning Policy Framework (‘NPPF’) sets out the Government’s planning policies for England and contains a definition of minerals of national importance which includes both potash and polyhalite. The definition is very broad. The Government’s policy position is that the large bulk of minerals in England are of national importance.[66]CPL submitted that the working of polyhalite was in the national interest and falls within the scope of the 1966 Act and supported that with evidence from Andrew Fulton, the General Manager for UK Mining and Processing Operations, a Director and Chairman of CPL and a mining engineer who provided witness evidence in support of the referral to the Secretary of State both in 2020 and updated it in 2022. He explains the extensive potential economic benefits and the potential global market for the polyhalite mined at Boulby as it is currently the only functioning polyhalite mine in the world.[67]The Secretary of State agreed. On 8 February 2023, the Secretary of State confirmed that they had assessed that “Economic analysis indicates that the application established a prima facie case in relation to the rights being “expedient in the national interest” under s3(1) of the Act”. The Reference dated 11 April 2023 recorded at [4] “The Secretary of State has decided to refer the Application to the Court as he is not of the opinion that a prima facie case is not made out.”[68]CPL have secured the exclusive rights to mine the polyhalite and salt from TCE and have all the necessary regulatory consents and planning permissions including permission to 2048 and own and maintain the surface mine infrastructure and site of about 32 hectares. This is a long-term project of national significance.[69]R1 did not admit that the granting of the rights sought was expedient and in the national interest, so it was necessary for CPL to prove it was. I have read Mr Fulton’s evidence with care. Mr Fulton’s evidence was comprehensive, measured, careful and fully supported by documentary evidence. I have no reason to doubt it.[70]The supporting documentary evidence demonstrated Boulby mine’s wide-ranging direct economic benefits for the local, regional and national economy. This included an economic study prepared by Oxford Economics who had considered the socio-economic benefits of the continuation of mining at Boulby and the “Public Planning Statement” submitted to the North York Moors National Park Authority. He explained that CPL have satisfied the “Major Development Test” which considers similar factors to the test in s.3(1) 1966 Act. All of which provided strong support for the proposition that the working of polyhalite was in the national interest and nationally significant.[71]In 2022, Mr Fulton explained that it was expected that the mine would support an estimated £118m contribution to the local GDP by 2024 and its national level impact was projected to increase to £209m over the same period.[72]He further supported the significance of Boulby mine and its national interest with evidence that polyhalite contributes to(i) food security, and(ii) the UK’s balance of payments. He explained that polyhalite was more environmentally sustainable than potash products and is used extensively for fertilizer products. The salt extracted was referred to as part of the winter resilience planning by the Department of Transport. Oxford Economics’ assessment of the impact of Boulby mine noted that it made a sizeable contribution to the local economy and had a wider catalytic contribution to the local area. It recorded not only its contribution to UK GDP but also the provision of 2480 jobs throughout the UK supporting Boulby mine itself and the local economy.[73]It seems to me that the evidence advanced by CPL makes it clear that the mining of polyhalite at Boulby is in the national interest. It is currently the only operating polyhalite mine in the world which puts it in a unique position in the market both nationally and internationally. It makes a substantial positive financial contribution both locally and nationally already and that appears likely to increase. It provides a socio-economic benefit to the local area including increased employment. CPL have satisfied me that the grant is expedient in the national interest under s.3(1) 1966 Act.[74]This conclusion is further supported by the decision of His Honour Judge Davis-White to grant a WFO in relation to the Woodsmith MTS (re York Potash Limited [2018] EWHC 3114 (Ch)). He was satisfied in relation to Woodsmith which has yet to go into production that there was an overwhelming public interest in enabling Woodsmith to operate properly noting its likely contribution to the national need for agricultural fertilizer and the like.[75]CPL submit that the presence of the national interest test as incorporated into the 1966 Act is supportive of and a foundation for their argument that the acquisition of the ancillary rights sought by them from R1 are subject to compulsory purchase principles.[76]R1 did not admit the position. Mr Kimblin submits that very few modern mineral workings would fall outside the NPPF definition. R1 rely on that broad definition to argue that it is so broad that aggregates such as crushed rock or sand and gravel fall within the same definition of minerals of national importance. He submitted that this supported R1’s submissions that compulsory purchase principles should not be applied. It did not however appear to be an objection to the grant of rights being expedient and in the national interest despite the non-admission.[77]Mrs Iwanicki accepted that there would be a national interest in working Polyhalite since it was:
“the UK's only potash mine and is now the UK's only polyhalite mine, I think there has to bean inherent national interest in exploiting that resource oneconomic grounds, but also as a continuation of the employment and social opportunities that that brings in theparticular area.”
[78]She also accepted in broad terms that almost all minerals including aggregates would be covered by the definition in the NPPF but that some have a higher degree of rarity than others. She explained that aggregates are readily found in the UK and are managed in the UK in a different way to other less common types of minerals. Her answers were qualified on that basis: A. I think it would be correct to say that rarity of mineral and specialist nature of mineral gives it greater consideration by the Government, particularly at a local planning level. So, for example, if you applied for an aggregate quarry there would be no guarantee that you would get permission for that if there was sufficient supplies of other aggregates within the region, within the district, within the working party area. Whereas if you are applying for planning consent for a rarer product, there is perhaps more weight given in the balance of the material considerations that are taken into account by planning authorities and by local government. Q. Various in variation in degree excepted, but just returning to my question if we could, on the basis of the definition of nationally important minerals, almost all minerals are nationally important: see the aggregates example? A. Yeah. And I'm not sure you can say that without the qualification actually, because there are lots of examples where mineral planning applications are declined because they are not considered to be in the national interest and there are other outweighing factors, if you like. Q. Yes. A. That stand above any need for the mineral. I think there's also an issue about market areas as well. When we're talking about aggregates, we're talking about pretty localised markets, I think we would agree, you know, 30 miles from a site perhaps. Polyhalite is a mineral that travels globally. It supplies factories and consumers throughout the world. So I think there is some qualification there.[79]Mr Kimblin argued that if CPL were correct about the application of compulsory purchase principles the result would be that any respectable minerals site for sand and gravel, crushed rock, shale for cement, limestone for cement etc would be a suitable target for a WFO on compulsory purchase principles which he argues was plainly never intended. Valuation Issue (i) – do compulsory purchase principles apply? Whether the compensation falls to be determined by reference to compulsory purchase principles including the Pointe Gourde principle? The genesis of the 1966 Act:

Valuation Issue (i) – do compulsory purchase principles apply?

[80]The developments in industry, manufacturing and the associated infrastructure caused by the Industrial Revolution had a profound impact on land owners. It caused them and the legislature to consider how they could or should protect their rights and interests in for example the minerals in the mines under the surface of their land. The combination of mine infrastructure for minerals and coal and the construction of the railways and canals resulted in disputes about those rights including rights of support, access and obligations. This resulted in a series of Victorian cases and legislation some of which were the Private Railways Acts introduced by the independent rail operators throughout the 1800s. All intended to manage the rights and resolve the disputes that arose between parties involved in the industrialisation process including in respect of the development of mines, railways and canals.[81]The 1923 Act concerned “provisions for facilitating the working of minerals and for imposing restrictions on the working of minerals required for the support of railways buildings and works.”[82]The 1923 Act (which was an amendment to the earlier Railways Clauses Consolidation Act 1845 which was itself an attempt to consolidate the various Private Railways Acts) provided an early framework aimed at achieving a balance between the rights and responsibilities between operators and those seeking to construct railways and canals and those concerned with minerals. Part II concerned Minerals under Railways and made amendments to the Railway Clauses Consolidation Act 1845. It was not therefore entirely new but codified a framework developed through the earlier legislation in respect of the rights to work or not work minerals under railways and the construction and use of facilities, damages and compensation.[83]Part I concerned “Rights of working minerals and rights ancillary therefore and of support”. It was the precursor to the 1966 Act. Unlike Part II it was concerned not only with rights themselves but also with working minerals or not working minerals. It provided a mechanism for resolving disputes or differences for those wanting to win or work the minerals who were hampered in some way by other owners of relevant land or rights including provision for the grant of ancillary rights to facilitate the working of minerals. Section 1 provided a power to confer rights on an applicant subject to the limitations set out in s.4.[84]The provisions of s.2(1) 1966 Act (see above) largely replicate s.3(2) 1923 Act which provided:
“3. Power to grant ancillary rights for facilitating the working of minerals (1) Where any facility, right, or privilege is required in order that minerals may be properly and conveniently worked by the person entitled to work the same, and the proper and efficient working of the minerals is unduly hampered by the inability or failure of that person to obtain such right, facility, or privilege (hereinafter referred to as an ancillary right), such ancillary right may be conferred in the manner and subject to the provisions hereinafter appearing on the person having the right to work the minerals who is working or desirous of working them either by himself or through his lessees. (2) In particular, but without prejudice to the generality of the foregoing provision, such ancillary rights shall include— … (b) A right of air-way, shaft-way, or surface or underground wayleave, or other right for the purpose of access to or conveyance of minerals or the ventilation or drainage of the mines ; … (3) An ancillary right may be granted to a person to whom a right of working minerals is granted in pursuance of section one of this Act at the time when such last-mentioned right is granted or at any subsequent time.”
[85]R1 emphasises the breadth of the powers to confer rights on an applicant and focuses on the use of the word any. Section 3(2) (b) 1923 Act and s.2(1) (b) 1966 Act are in identical terms.[86]Section 9(1) and 9(2) 1923 Act makes provision for compensation which are in identical terms to s.8 (1) and 8(2) 1966 Act (set out above). If ancillary rights are granted both Acts provide for compensation or consideration on the basis of what would be fair and reasonable between a willing grantor and willing grantee.[87]In 1934 the Petroleum (Production) Act was enacted (“the 1934 Act”) by which petroleum was nationalised (it did not include coal which was nationalised later). The 1934 Act incorporated by reference Part 1 of the 1923 Act but with specific modifications. Those modifications included an express provision making compensation in relation to ancillary rights (under the 1934 Act) subject to compulsory purchase principles. Thus, although the compensation and consideration provisions and procedures in the 1923 Act were to be applied, they were expressly subject to compulsory purchase principles in respect of petroleum and associated ancillary rights– see both the title of s.3 and s.3(2) (b) below. This made obvious sense in the context of a nationalised petroleum industry.[88]Section 3 of the 1934 Act provided:
“3 Provisions as to compulsory acquisition of rights to enter on land, and c (1) Part I of the Mines (Working Facilities and Support) Act, 1923, as amended by any subsequent enactment, shall apply for the purpose of enabling a person holding a licence under this Act to acquire such ancillary rights as may be required for the exercise of the rights granted by the licence, and shall have effect accordingly, subject to the following modifications: — (a) references to a person having a right to work minerals shall include references to a person holding a licence under this Act, references to minerals shall include references to petroleum, and references to the working of minerals shall include references to the getting, carrying away, storing, treating and converting of petroleum; (b) without prejudice to the generality of sub section (1) of section three of the said Act, the ancillary rights therein mentioned shall include (in addition to the rights specified in subsection (2) of that section) a right to enter upon land and to sink bore holes therein for the purpose of searching for and getting petroleum, and a right to use and occupy land for the erection of such buildings, the laying and maintenance of such pipes, and the construction of such other works as may be required for the purpose of searching and boring for and getting, carrying away, storing, treating and converting petroleum: Provided that, where a right to lay and maintain pipes under a highway is granted by virtue of this subsection, sections nineteen to twenty-eight and thirty to thirty-four of the Waterworks Clauses Act, 1847, shall be incorporated in the order granting the right, subject to any modifications or adaptations specified in the order. (2) In relation to any application made to the Railway and Canal Commission under Part I of the said Act, as applied by this section, the following provisions shall have effect: — (a) the Commission shall, in deciding whether to grant any right applied for or what terms and conditions, if any, should be imposed upon the grant of such a right, have regard, among other considerations, to the effect on the amenities of the locality of the proposed use and occupation of the land in respect of which the right is applied for: (b) in determining the amount of any compensation to be paid in respect of the grant of any right, an additional allowance of not less than ten per cent. shall be made on account of the acquisition of the right being compulsory: …”
[89]The 1966 Act updates and modernises the 1923 Act. It incorporates only Part 1 of the 1923 Act as updated and including a definition of what are now known as WFOs and adding in the provision at s.3(1) that any grant of ancillary rights to be expedient and in the national interest.[90]It is against that statutory framework that I come to consider the issue of whether compensation under s.8 1966 Act is subject to compulsory purchase principles.[91]R1 argues that(i) the 1934 Act does not incorporate the compulsory purchase principles into the 1966 Act and(ii) does not accept that compulsory purchase principles would apply under the 1966 Act at all unless the relevant minerals had been nationalised. None of potash, salt or polyhalite have been nationalised even if the granting of rights under the 1966 Act is in the national interest. R1 further submits that the more limited scope of the 1934 Act to calculate compensation by reference to compulsory purchase principles supplemented by 10% rather than the broader provisions of s.9 1923 Act (now s.8 1966 Act) are important context when considering whether compulsory purchase principles have been imported into the 1966 Act and should be applied to any referral for compensation.[92]CPL submits that following Bocardo compensation paid pursuant to s.8(2) 1966 Act is to be assessed by reference to the compulsory purchase principles including the Pointe Gourde principle such that the level of compensation is assessed on a no scheme basis by reference to value to owner not purchaser.[93]R1 submits that compulsory acquisition principles do not apply but if they do then the Pointe Gourde principle does not apply because they hold the key to the functioning of Boulby mine. R1 submits that her bargaining position should not therefore be disregarded when determining compensation under s.8 1966 Act.[94]The experts had approached the calculation of compensation differently. Mr Troman explained that he had received legal advice and consequently had not applied compulsory purchase principles. Mrs Iwanicki’s report explained her approach at 4.16 as follows: “The 1966 Act provides a statutory basis for determining and compensating the award of ancillary rights required by mining companies who can meet the national interest and other tests. It could be likened to compulsory acquisition and in my professional experience, the existence of the 1966 Act moderates and informs negotiations between mineral developers and landowners. The basis of compensation to be assessed by the Court under the 1966 Act is stated to be “what would be fair and reasonable between a willing grantor and a willing grantee having regard to the conditions subject to which the right is or is to be granted”.[95]Mr Kimblin had challenged Mrs Iwanicki as to the basis of her report suggesting that she had approached it by reference to compulsory purchase principles. However, she gave a clear explanation of her approach consistent with her report. She explained that her valuation was based on a market basis without an element of compulsion but having regard to the comparables consistent with the RICS guidance. Under the 1966 Act the valuation is based on the assumption of a willing grantor and willing grantee so Mrs Iwanicki does not consider that the answer would be remarkably different in any event.[96]That seemed to me to encompass the approach that the experts should both have adopted in relation to the calculation for compensation under s.8(2) 1966 Act. I was satisfied that Mrs Iwanicki had not applied compulsory purchase principles. And since Mrs Iwanicki had approached it on this basis in any event it was not entirely clear why or where the argument about Bocardo took either party. The real issue was whether on the facts of this case and having regard to the comparable evidence which of Mrs Iwanicki’s Certain Rent approach or Mr Troman’s wayleave royalty approach was the appropriate mechanism for valuing the compensation to be paid to R1 under the 1966 Act. Was R1’s demand for a wayleave unreasonable and what was fair and reasonable compensation.

Bocardo

[97]Bocardo concerned ancillary rights to mine petroleum under the 1934 Act. The issues were threefold, as encapsulated in the headnote:(1) on ownership of the sub-surface (not in issue here);(2) applicability of compulsory purchase principles to 1966 Act cases;(3) damages on the facts of Bocardo.[98]CPL submitted that the principles of compensation and valuation enunciated by the majority in Bocardo including those relating to compulsory acquisition can and should be read across to apply generally to any case for compensation under s.8(2) 1966 Act. Consequently, following Bocardo compulsory acquisition principles are to be imported into the assessment of what would be fair and reasonable between a willing grantor and a willing grantee in s.8(2) 1966.[99]The R1 submitted that Bocardo is confined to claims for compensation under the 1934 Act relating to nationalised petroleum. Consequently, compulsory acquisition principles have no application in the context of a non-nationalised mineral such as polyhalite, and which was the subject of an application under the 1966 Act. Section 8 should be applied without the 1934 Act compulsory purchase gloss.[100]Bocardo concerned oil beneath the Oxted Estate. The landowner was seeking what has been described as a “ransom” but which in any event was a sum in excess of the open market royalty assessed to be applicable for the rights in respect of a nationalised mineral – petroleum – the subject of the 1934 Act.[101]Miss Ellis’s analysis of Bocardo started with Lord Clarke’s description of the history of the statutory framework at [130] to [135]. Largely as set out above at [130] he sets out s.3(1) 1923 Act, at [131] he described the 10% compulsory purchase uplift in s.3(2)(b) 1934 Act and at [132] he explained how the 1966 Act provisions came to form part of the 1934 Act. At [133] he explained the difference between the grant of a licence to drill for oil and the right to apply for ancillary rights under the 1966 Act and then at [134] and [135] he explained s.5 1966 Act and s.8 1966 Act explaining that it replaced s.9 1923 Act.[102]That description was then adopted by Lord Hope who said at [37] and [38]:
“(b) Damages 37. The parties are agreed that, if damages are to be assessed on a wayleave or user basis, their measure is the price that reasonable persons in the position of the parties would have negotiated for a grant of a contractual right for the licensee to extract the oil through the sub-strata below the Oxted Estate using wells PW5, PW8 and PW9: Statement of Facts and Issues, Principal Issue 2, para 2(a). It is also agreed that, in assessing the price that reasonable parties would have negotiated, the negotiation must be assumed to have taken place against the relevant statutory background, which at the relevant date would have included the Petroleum (Production) Act 1934 and the Mines (Working Facilities and Support) Act 1966. I gratefully adopt Lord Clarke’s description of the general background and the statutory framework. 38. Section 8(2) of the 1966 Act provides that the compensation or consideration is to be assessed on the basis of what would be fair and reasonable between a willing grantor and a willing grantee, having regard to the conditions subject to which the right is, or is to be, granted. The word “consideration” is included in this subsection because the rights that may be granted under section 1 of the Act include the right to search for, work and take away minerals such as coal. In the present case, however, the relevant word is “compensation”
. This is because the transaction which is in issue is the acquisition of the right to sink the wells under Bocardo’s land which, as Lord Brown says in para 62, Bocardo had no option but to allow the respondents to do. Had it refused to grant them a wayleave, the respondents would have been able to go to the court for an order granting them the necessary ancillary rights under section 3(2)(d) of the 1966 Act. I agree with Lord Walker, Lord Brown and Lord Collins, for the reasons they give, that this must be taken to be a case of compulsory acquisition. So the general principles of compulsory acquisition law must be applied, including the “value to owner” principle and the “no scheme rule” in particular: see Lord Collins, paras 101 and 102.” (my emphasis)[103]Miss Ellis then turned to Lord Collins at [100] to [102]. In fact, it is helpful to consider the passage from [96] to [100]. Like Lord Clark, he describes the statutory scheme for petroleum, starting with the combination of the 1934 Act and the 1966 Act. He then sets out s.8 1966 Act which he reads together with s.3 linking the compensation provisions and the additional compulsory purchase compensation provisions together. It is necessary to read this passage as a whole to understand the context for his conclusions at [101] and [102]. Those paragraphs relate to the combined compensation exercise described in the earlier paragraphs:
“101. Even without the express reference in section 3(2)(b) to the acquisition of the right being compulsory, there can be no doubt that this would have been a case of compulsory acquisition and that any general principles of compulsory acquisition law are applicable…”
[104]Miss Ellis submits that Lord Hope’s references to compulsory acquisition at [37] and [38] coupled with Lord Collins’ conclusion at [101] supported her proposition that Bocardo has wider application to the assessment of compensation under the 1966 Act and is not limited to the specific combination of s.8(2) 1966 Act and s.3 1934 Act.[105]Lord Collins does then consider compensation in a Pointe Gourde context which Miss Ellis submits supports CPLs conclusion that compulsory purchase principles were applicable to the general approach to compensation under the 1966 Act rather than only in the context of the 1934 Act. However, it did not appear to me that when read in context either Lord Hope or Lord Collins’s approach supported that proposition. And indeed, Lord Collins’s explanation of the value to owner no scheme world in the following paragraphs only emphasised that he was considering compensation in the context of petroleum under the 1934 Act.[106]She sought to further reinforce this submission by reference to Lord Brown at [90] to [92]: “90. To my mind, however, this approach is to overlook the true effect of the 1934 Act. It must be recognised that by this Act, Parliament in terms(a) vested the property in all petroleum in the Crown,(b) gave the Crown “the exclusive right of searching and boring for and getting such petroleum” (a right that could be licensed to others, as here to Star) and(c) enabled any licencee compulsorily to acquire any necessary ancillary right (as here to access the petroleum through Bocardo’s land). The correct analysis seems to me to be this: that by these provisions Parliament was at one and the same time extinguishing whatever pre-existing key value Bocardo’s land might be thought to have had in the open market and creating a new world in which only the Crown and its licencees had any interest in accessing the oilfield and in which they had been empowered to do so (to turn the key if one wants to persist in the metaphor) compulsorily and thus on terms subject to the Pointe Gourde approach to compensation. 91…The 1934 Act marked the end of key values and the payment of royalties. As I have sought to explain, compensation thereafter was to be paid on the usual basis in compulsory acquisition cases (with, of course, a 10% uplift). 92. In summary, I reject Bocardo’s contentions, first, that the principles governing the approach to valuation in compulsory purchase cases have no application to the assessment of compensation under section 8(2); second, that in any event there is here no relevant “scheme” to be discounted under the Pointe Gourde principle; third, that Bocardo’s power of control over the passage by wells or pipes through their land gave a pre-existing key value to the ancillary rights which Star needed to acquire from them; and, fourth, that for purely geographical reasons the land through which access was required always had potential value so long as petroleum resources lay underground. Each contention is in reality a re-formulation of the same essential argument, namely that Bocardo are entitled to some share of the value of the petroleum being accessed through their land.If they are, then no doubt substantial damages such as those awarded here at first instance are appropriate (although there are detailed criticisms to be made of the precise calculation arrived at). If not, however, then the £1,000 awarded by the Court of Appeal can be regarded as positively generous: compensation under section 8(2) would have been assessed at no more than £82.50 including the 10% uplift. There is frankly no coherent basis for any intermediate award. 93. As will already be apparent, the Court of Appeal’s approach here (following as it does Peter Gibson J’s decision in very similar circumstances in BP Petroleum Developments v Ryder) is to my mind strongly to be preferred. I would dismiss this appeal. (my emphasis)[107]Although this passage was focussed on the issue of key value it seems to me read in context that Lord Brown is doing no more than explaining how the 1934 Act and the 1966 Act interact and work together in the context of petroleum. When he then concludes at [92] that Bocardo are wrong to say that the compulsory purchase principles do not apply to the assessment of compensation under s.8 1966 Act he is doing so in the context of his explanation in [90] and [91] about the operation of the 1934 Act and is not advancing any broader principle that compulsory purchase principles apply to all compensation awarded under s.8 1966 Act.[108]Lord Brown explains at [71] to [77] why in the context of the rights under the 1934 Act compulsory purchase principles apply with the additional 10% uplift. It is clear from that passage that he recognises that it is the 1934 Act that imports into the 1966 Act the requirement to consider compulsory purchase principles in relation to petroleum.[109]Miss Ellis further argues that the endorsement of British Petroleum v Ryder [1987] 2 EGLR (“Ryder”) by the majority in Bocardo, which included Peter Gibson J’s explanation that there was no difference between nationalised and non-nationalised minerals in the 1966 Act further supported CPL’s contention that the effect of Bocardo was that compulsory purchase principles applied to all compensation for all ancillary rights related to minerals under the 1966 Act. She submitted that this was further supported by the positive decision to separate out how coal was to be dealt with (by then nationalised) from other minerals in the 1966 Act. Consequently, she submits as set out above that the decision in Bocardo is not confined to nationalised mineral cases but rather applies to any claim for compensation under s8(2) 1966 Act. This appeared to go even further than Mr Kimblin’s analysis of CPL’s position in relation to which minerals might be encompassed by those in the national interest.[110]Miss Ellis’s reliance on Peter Gibson J’s explanation of the structure of the 1934 Act and the 1966 Act at 243 D to G in British Petroleum v Ryder [1987] 2 EGLR did not appear to me to change the position set out above. True it is that Peter Gibson J explains that the measure of compensation under s.8 1966 Act is the same whether it relates to a nationalised industry or not but that it not the end of his explanation. That would be the starting point before any compulsory purchase principles were read across from the 1934 Act including whether the Pointe Gourde principle would apply. Indeed, the measure of compensation calculated under s.8(2) in the event that the 1934 Act compulsory purchase principles are then superimposed on it then provides the uplift of 10% to cater for the depressive effect of applying those compulsory purchase principles to the compensation calculated under s.8(2) 1966 and s.3 1934 in combination. This is clear from Peter Gibson J’s subsequent explanation of the process, history and authorities. Throughout his judgment he is considering the compensation to be paid in relation to the rights ancillary to the oil licences by applying the compulsory purchase principles under the 1934 Act and the 10% uplift coupled with s.8(2) 1966 Act. He is not in doing so providing any basis for Miss Ellis’s submission that compulsory purchase principles apply to all compensation under s.8 1966 Act. (see for example Section D at [249]).[111]Lord Brown’s reference to Ryder at [90] to [93] does not assist CPL it does no more than explain how to approach the question of compensation in a compulsory purchase world subject to Pointe Gourde.[112]Lord Brown’s puzzlement as to why the 1934 Act was more generous than other statutes addressing compensation for compulsory purchase tells me nothing about the correct approach to a referral under the 1966 Act. Bocardo was considering a 1934 Act referral which provided for a statutory uplift of 10%. Whether the 10% in the 1934 Act is more or less generous than other legislation is irrelevant because the 1966 Act is not about compulsory acquisition. All Lord Brown was doing at [71] to [77] was explaining why Bocardo were constrained by the provisions of the 1934 Act but with the additional compensation set out in s.3 and how that interacted with s8(2) of the 1966 Act.[113]To understand Bocardo in context it is important to always keep in mind that it was a case that concerned the 1934 Act which adopted the compensation provisions of s.8 1966 Act as modified by s.3 1934 Act. Any reference to an application being made under the 1966 Act in Bocardo is no more than a recognition that the mechanism required by s.3 1934 Act was that an application had to be made under the 1966 Act.[114]As set out above, when Lord Hope refers to that process at [37] and [38] he is doing no more than setting out the mechanism by which the application had to be made. He is not by his reasoning imposing on the 1966 Act a requirement that compensation would be subject to the compulsory acquisition principles set out in s.3 1934 Act.[115]The application of compulsory acquisition principles to the analysis of how the 1966 Act was to operate in relation to Bocardo was entirely consistent with the 1934 Act and its adoption of the mechanism in the 1966 Act for determining fair and reasonable compensation subject to those principles but has no wider application.[116]The principles of valuation and the assessment of compensation and the proper measure of compensation were being applied by reference to compulsory acquisition principles which had been imported into the exercise to be undertaken by s.3 1934 Act and not otherwise. The 1966 Act does not incorporate the 1934 Act by reference or at all. It sits entirely separate. Had parliament intended to incorporate into the 1966 Act the compulsory purchase principles set out in the 1934 Act it would have said so. Nothing in Bocardo can change the clear terms of the 1966 Act or read into it the provisions of the 1934 Act such that it applies to other minerals which are not otherwise encompassed by the limited scope of the 1934 Act.[117]I do not therefore accept Ms Ellis’s submissions that the majority in Bocardo did, were or were intending to apply the general principles of compulsory acquisition or even those in the 1934 Act to any application which engaged s.8(2) 1966 Act. Neither Lord Hope at [37] and [38] nor his reliance on Lord Collins’ explanation of the statutory framework at [101] and [102] provide any support for the proposition that s.8(2) 1966 Act should be construed as to impose compulsory acquisition principles on the assessment of compensation under the 1966 Act generally. Bocardo applies compulsory acquisition principles entirely consistently with the framework of the 1934 Act which was the context in which the question of compensation was being considered.[118]Compulsory purchase principles do not apply to the 1966 Act generally. If another statute such as the 1934 Act incorporates the compensation mechanism set out in s.8 of the 1966 Act that does not import into the 1966 Act a general application of the compulsory purchase principles.[119]Of course, as Lord Clarke recognised that does not of itself change the approach to valuation of the compensation or consideration in any event. Valuation Issue (ii) If (i) is resolved in CPL’s favour whether the Rs’ claimed bargaining position as holding a key to the functioning of the mine should be disregarded pursuant to the Point Gourde principle derived from Pointe Gourde Quarrying & Transport Cov Sub-Intendent Crown Lands 1947 AC 565 (“Pointe Gourde”).

Valuation Issue (ii)

[120]If I am wrong about issue (i) the question of whether R1 holds a key to the functioning of Boulby mine arises and whether therefore the Pointe Gourde principle should be applied. This would leave the negotiation for compensation to take place on the footing set out in s.8(2) 1966 Act in any event. That would still require the compensation to be fair and reasonable as between a willing grantor and willing grantee which would or should as Mrs Iwanicki explains moderate the expectations of the parties.[121]The Pointe Gourde principle or the no scheme rule applies when assessing compensation or value in a compulsory acquisition context. The principle was described in Pointe Gourde as:
“It is well settled that compensation for compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition.”
[122]This means that for the purposes of assessing compensation in a compulsory purchase world the value of the land to be acquired (or in this case the mineral rights) cannot include any increase in value attributable solely to the “scheme” of the acquiring entity – it would be left out of account.[123]In this case that would mean R1 would not be able to insist on compensation based on any increase attributable to the scheme underlying the intended acquisition. The compensation will be assessed on a value to owner basis.[124]Waters v Welsh Development Agency [2004] UKHL 19 concerned the basis for compensation for the compulsory acquisition of land to enable the Cardiff barrage to be built across Cardiff Bay. Lord Nicholls highlighted the difficulties which parties experienced in seeking to navigate the application of statutory provisions concerning compensation for compulsory purchase. He noted “hand in hand with the power to acquire land without the owner’s consent is an obligation to pay full and fair compensation.” However, at [18] he cautioned that “Parliament cannot have intended that the acquiring authority should pay as compensation a larger amount than the owner could reasonably have obtained for his land in the absence of the power.” Explaining at [19] that this approach is encapsulated by the phase “value to owner not value to purchaser”.[125]Lord Brown in the majority in Bocardo on this issue, at [78] to [92] considered whether Bocardo could still assert an entitlement to benefit if they held the key to unlock the scheme being “the exploitation of the petroleum licence in the specified area”. Lord Brown referred back to Lord Nicholls’ consideration of ransom or key value in Waters at [64] to [66] as well as his own speech in Waters at [156] to [158]:
“Ransom value 64. One last point should be noted before returning to the present case. This concerns so-called ‘ransom’ value or, less pejoratively, ‘key’ value. I have already mentioned that under the ‘value to the owner’ principle or the Pointe Gourde principle, whichever nomenclature is preferred, the pressing need of an acquiring authority for the subject land as part of a scheme should be disregarded when assessing its value for compensation purposes. The value of the land is not the price a ‘driven’ buyer would be prepared to pay. But a strip of land may have special value if it is the key to the development of other land. In that event this feature of the land represents part of its value as much for purposes of compensation as on an actual sale in the open market. 65. The intersection of these two principles was identified neatly by Mann LJ in Batchelor v Kent County Council (1989) 59 P & CR 357 , 361: ‘If a premium value is “entirely due to the scheme underlying the acquisition” then it must be disregarded. If it was pre-existent to the [scheme] it must in my judgment be regarded. To ignore the pre-existent value would beto expropriate it without compensation and would be to contravene the fundamental principle of equivalence.’ 66. In the present case the claimants contend their land had key value because of its importance as compensatory wetlands required for completion of the Cardiff Bay barrage project. Whether this contention is well founded for compensation purposes depends, in accordance with the principle enunciated by Mann LJ, on the ambit of the scheme of which the subject land's acquisition was an integral part.”
[126]Lord Brown continued in Bocardo referring back to his own conclusion in Waters at [158]:
“Assuming, however, that any premium value, or indeed any other particular value, of the land were “entirely due to the scheme underlying the acquisition” (or, if one prefers Lord Nicholls’s formulation in Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111, 136, due to the “very scheme of which the [acquisition] forms an integral part”), then in my judgment, notwithstanding that it represents the land’s “unrealised potentiality” . . . it clearly falls to be disregarded”
[127]He continued at [82] and [83] in Bocardo: “82 …Nor can there be any doubt that, whatever particular value existed in the ancillary right here required to facilitate that exploitation (any “premium” or “key” or “ransom” value), it existed exclusively (“entirely” or “solely” are other words used in this context) because of the scheme. But for the scheme, there was no potential use or value whatever in the right being granted. It thus fell to be disregarded under the Pointe Gourde principle … 83 To my mind it is impossible to characterise the key value in the ancillary right being granted here as “pre-existent” to the scheme…[128]Lord Brown then turned to consider Fletcher Moulton LJ’s judgment in In re Lucas and Chesterfield Gas and Water Board’s Arbitration [1909] 1KB 16 and the statutory provisions related to it and Lord Nicholls’ summary of the position at [34] in Waters that there was “no room for taking into account a potential use of the land where the acquiring authority is the only person who could turn this potentiality into an actuality.” Concluding at [88] that the correct approach was to treat the Fletcher Moulton approach as “an integral part of the Pointe Gourde principle” when considering key value.[129]Lord Brown considered how those principles should be applied in a 1934 Act compulsory purchase world having regard to the compensation provisions in the 1966 Act. His conclusions are set out above at Bocardo [90] to [93].

What is the scheme?

[130]In the context of an issue about wider mine ownership and the interaction between lease areas, the experts agreed that none of the mineral interests at Boulby mine, including those owned by R1, CPL and TCE could function on a standalone basis. Whatever the true ownership position they needed to collaborate to achieve value.[131]CPL says that the scheme is simple – it is the exploitation of polyhalite derived from the area of the TCE lease. They submit that but for that scheme there is no potential use or value whatsoever to the rights being granted by R1 to enable CPL to transport the polyhalite through her tunnels and through the shafts and therefore her rights fall to be disregarded under the Pointe Gourde principle. Further that without the polyhalite mining operation including the essential dewatering operations, the shafts and tunnels, whether the interest in them belong to R1’s or not, would cease to exist within a matter of weeks. CPL therefore takes an expansive approach to the scope of the scheme including within it all those interests they have already acquired to enable them to exploit the polyhalite and achieve value.[132]R1 takes a much narrower approach to the scheme limiting it to elements where cooperation is needed between only CPL, R1 and TCE. The focus is on the narrow argument that the shafts and roadways which do or may fall within the scope of R1’s interests are such that without them there is no scheme at all and therefore R1 holds the key value to the operation of the scheme as so defined.[133]In their joint report the experts had agreed that it was reasonable to assume that there is no alternative use value in relation to R1’s mineral rights for the foreseeable future. Mr Troman having agreed the position with Mrs Iwanicki, when cross examined, was reluctant to accept that there was no alternative use at all. He explained that it was not impossible over the life of a 50-year lease that the position might change but he accepted that was unforeseeable.[134]Mrs Iwanicki explained that the experts had considered that there might be alternative use in relation to surface land but not the underground assets. She explained that the mine dewatering pumps pumped out about 1 million gallons of water every day to keep the mine dry enough to continue to operate. If CPL switched off the pumps or could not access the pumps the shaft bottom would flood within 3 weeks.[135]I am satisfied that in relation to R1’s interests however extensive they may be that there is no alternative use value.[136]The extent of Boulby mine and whose interests were essential or key for its functioning and to enable the polyhalite to be exploited was relevant not only in identifying the scheme and any relevant rights related to the scheme but overlapped with the approach taken by Mr Troman is calculating what he considered to be fair and reasonable compensation.[137]The scheme as defined by CPL involves all the parts of the overall mine operation above and below surface required to enable the polyhalite to be exploited not just the shafts and tunnels/roadways the subject matter of the R1’s leases. Whilst they accepted that R1’s voids and tunnels were an important part of the scheme they did not accept that they were more important that other aspects of the scheme required for operational purposes.[138]In addition to having the right to exploit the polyhalite through the TCE lease and its planning permissions CPL rely on the following elements of the overall scheme to emphasise their submission that R1 do not hold a key to the mine (R1 do not accept that CPL owns/R1 does not own the shafts): i) CPL’s freehold ownership of the 32-hectare Boulby mine site including the processing areas, associated infrastructure, shaft heads/surface structures, and the access to the rail link for the transportation of the polyhalite away from Boulby mine. ii) CPL’s interest in the shafts themselves which includes the lifts and other internal infrastructure including those parts which act as part of the mine’s internal ventilation rotation. iii) CPLs freehold ownership of areas 7 and 50 including the subsurface interests such that any roadways or tunnels passing through areas 7 and 50 are passing through CPL’s own interests. Mr Troman accepted in cross examination that 3 of the 4 key roadways to and from the offshore polyhalite (including the new roadway) pass through these areas as well as R1’s interests. R1 does not therefore have rights over the full extent of the access from the rockface to the public highway (other than TCE) on any basis. iv) The 19 new Onshore leases CPL had obtained to enable it to operate and maintain Boulby mine including further tunnels and areas used to operate and maintain the essential ventilation and dewatering infrastructure and tunnels.[139]Mrs Iwanicki’s evidence was that each of those elements was necessary and formed part of a jigsaw that enabled the polyhalite to be exploited and the Boulby mine to function. If any one of the elements identified was not in place there was no value to either CPL or R1. The scheme had to incorporate everything. CPL submitted that any value in R1’s interest in the shafts and the tunnels was wholly dependent on the wider scheme and had no pre-existing potentiality. Consequently, they were not key and any value in R1’s interests fell to be disregarded rather than credited to R1 because the value was entirely due to CPL’s scheme.[140]Mrs Iwanicki considered that assembling a mine site in multiple ownerships required all of the owners to reach agreement in order for the project to proceed, subject to the ability to utilise the 1966 Act as here – that is obviously right. She considers that this is particularly true for an underground mine where the workings radiate out from the shafts and progress from one ownership area into the next as here. Over the course of the last 50 years CPL has worked through onshore lease areas of varying sizes none of which would have been large enough to work on a standalone basis. From a commercial and practical perspective, the land and mineral rights owners all needed one another along with the CPL’s land/infrastructure to derive any financial benefit from Boulby mine. In practical terms that has not changed. R1 does not own all the mineral rights between the surface and the polyhalite rock face and without the cooperation and agreement of the 19 new Onshore leaseholders and CPL as owner of areas 7 and 50 not in fact limited to CPL as mine operator, R1 would be unable to achieve any benefit from her mineral rights held by the Reservation.[141]Mrs Iwanicki’s evidence seemed to me to emphasise at a very practical level that the value in the exploitation of the polyhalite required collaboration and cooperation between the different interests beyond those of just R1, CPL and TCE and that no single mineral rights owner, surface rights own or even CPL as the mine operator held the key value in a Pointe Gourde context. Each of the new Onshore leaseholders, and the sellers of the freeholds of areas 7 and 50 could have adopted the same approach as R1 and refused to have agreed the proposed terms. Each of those interests form part of the scheme and are integral to the functioning of the mine and the ability to exploit the polyhalite.[142]It might even be said that the true key to the value in the scheme to exploit the polyhalite under the TCE lease vested in CPL since without that lease and the rights to exploit the polyhalite there would be no mine to operate and no value in any of the other interested parties’ rights key or otherwise.[143]As set out above Mr Kimblin took a very narrow view of the scheme which focussed entirely on the shafts and the roadways within R1’s interests. He argued that in order for CPL to create value in its surface infrastructure and from its TCE lease it has to use R1’s shafts and tunnels. The scheme therefore simply comprised of elements involving the need for that cooperation without which there was no scheme at all.[144]Mr Kimblin’s submission was both that R1 had a key as a matter of fact because of the access route through the roadways and shafts was key but also that the Reservation provided her with greater rights over the shaft than was acknowledged by CPL (see below).[145]He submitted that the rights excepted and reserved by the Reservation were extensive enough to override any rights that CPL may have had to the shafts and the roadways and that consequently the key value was “a special value because it was key to the development of other land, that will represent part of its value to the owner which may be taken into account in the assessment of compensation in just the same way as it would if the owner was negotiating to realise its value in the open market” Lord Hope in Bocardo at [39].

Roadways:

[146]Even on R1’s narrow construction of the scheme, her rights in relation to the roadways were only part of the jigsaw.[147]For the purposes of key value this can be dealt with shortly. As is clear from the diagrams, with CPL’s freehold ownership of areas 7 and 50 and as Mr Troman ultimately accepted R1 does not have an interest in the entirety of or over the entire length of the current roadways and the new roadway that provide the access to the shafts and the surface even on Mr Kimblin’s narrow approach to the scheme. Mr Troman explained that he had not known about/the position had changed in relation to areas 7 and 50 which is why they were not dealt with in his report which was relevant to his assessment of compensation (see below).[148]Mr Troman accepted as a matter of fact that R1 did not therefore own all of the roadways from the rockface to the bottom of the shafts (in combination with TCE) and could only provide a route from the rockface to the bottom of the shafts if the parties were to cooperate. On the narrow scheme that would mean CPL in its capacity as freeholder of Areas 7 and 50 would have to cooperate to enable the scheme to operate not just as mine operator. It clearly significantly dilutes the submissions about the key value or bargaining position of R1 since she also needs the cooperation of at least CPL to achieve access from the rockface to the shafts.[149]Mr Troman also accepted that despite the approach adopted in his report that the ventilation and dewatering elements of the CPL scheme were important parts of the jigsaw just not as important as the roadways. Again, this tends to support CPL’s broader description of the scheme.[150]The main area of disagreement was about the status of the shafts. On the basis of the legal advice Mr Troman had received he considered that R1 owned the shafts and although ultimately accepting that R1 did not own the shaft heads/winding gear. Mr Troman distinguished between the infrastructure and the “property” interests for the purposes of emphasising R1’s position as key to the functioning of the mine. There remained an issue about ownership of that infrastructure within the shafts.

The Shafts:

[151]The shafts provide access between the underground roadways and the surface. Mr Troman’s position in cross examination was that the ownership of or interest in the shafts carried particular weight both generally and in relation to his valuation (see below). Mr Troman considered that whilst new roads could be built it was not realistic to build a new shaft which is why he considered they carried particular weight. Mrs Iwanicki did accept that given the current configuration of the mine it was not financially feasible to put in new shafts to access the polyhalite but hypothetically that would be an option open to CPL, but it is not what they want to do, and it is not economic for them to do so.[152]Without access to the shafts CPL cannot exploit the offshore polyhalite. Consequently, R1 says that her control over the access to the Boulby mine is key because without it the polyhalite is “earth locked”.[153]R1 submits that one has to consider R1’s position not as it was when the Onshore leases were granted but now when considering whether it holds a key. CPL is no longer seeking to work R1’s minerals but is simply seeking ancillary rights onshore to enable it to work the offshore polyhalite. This did not seem to me to be a difference in terms of the scheme when all the pieces of the jigsaw need to be in place to provide any value to anyone. Although R1 has a key she is still only a part of the pieces of the scheme needed to for anyone to obtain value. Yes R1’s minerals have been worked so she will not get an additional extraction royalty but that goes to the question of compensation if relevant at all and not to whether she has a key for the purposes of the Pointe Gourde principle.

Who owns the shafts?

[154]Mr Kimblin submits that pursuant to the terms of the Reservation R1 “owns” the shafts. His submission is that this “ownership” overrides any interest CPL may have in the shafts such that whatever the scheme, R1’s interests are key and Pointe Gourde should not apply. He argues that because the Reservation includes an exception for mines the freehold to anything that comes within the definition of the mines was excepted from the transfer of the freehold by Mark Palmer. R1 owns at least the freehold of the shafts from the roadway to the surface.[155]Mr Kimblin submits that an exception for mines is “an underground excavation made for the purpose of getting minerals” (Glasgow Corporation v Fairie [1888] 13 App. Cas 657 HL). Thus, he submits that the exception reserves the mine beds including the potash and salt and “mines” which includes the shafts because they are an excavation made in respect of the potash and the salt reserved to R1.[156]R1’s Reservation, so far as relevant, provides:
“AND ALSO EXCEPT AND RESERVING to the [R1] the mines beds and quarries of ironstone and iron ore and other metals [determined to include the potash, salt and polyhalite] within and under the property with all necessary and proper powers rights and easements for searching for winning working getting in and carrying away the same whether by underground or surface workings including power to let down the surface whether built upon or not and full power to sink any pits or shafts or drive-drifts or to erect or construct any buildings engines machinery roads tramways waterworks waterways airways or other works or conveniences necessary or desirable for the purpose of getting working carrying away converting or disposing of such mines and minerals or for any purpose connected therewith…”
[157]Emmett & Farrand on Title provides at 17.043: “Exceptions of mines and minerals By an exception of mines, the stratum is reserved, and the owner can use it for any purpose he thinks fit, e.g. he may make a road through it for the conveyance of the produce of adjoining mines (Duke of Hamilton, &c. v Graham (1871) 9 M. (H.L.) 98); but in the case of an exception of minerals without more, only the minerals can be taken, and the chamber containing the minerals is comprised in the grant and not in the exception, and the grantor has no interest whatever in the space which his working creates (Ramsay v Blair (1876) 1 App. Cas. 701). But the exception may contain words which may extend the meaning. For instance, in the case last mentioned, the words were, “the whole coal, stone, quarries, and all other metals and minerals”, and it was held that the effect of these words was to except the whole of the land under the surface. An exception of mines and minerals will carry with it a reservation of all powers necessary for working the minerals without these powers being expressly reserved (Aspden v Seddon (1874-75) L.R. 10 Ch. App. 394); but not so as to damage the surface, even though this restriction would destroy the value of the right (Mundy v Duke of Rutland (1883) 23 Ch. D. 81). In General Accident Fire and Life Assurance Corp, Ltd v British Gypsum, Ltd [1967] 1 W.L.R. 1215, Plowman J held that the exception and reservation of all mines and minerals together with full powers by means of underground workings or operations only to win, work and carry away the mines and minerals, included the right to search for minerals by implication from the word “win” but that this was restricted to underground searching and gave no right to enter on the surface of the land.” (my emphasis)[158]Mr Kimblin submits that the void remaining from subsurface mineral working is the property of the mineral owner: Batten Pooll v Kennedy [1907] 257 Ch (“Batten Pooll”); founded in the judgment of the MR in Eardley v Granville [1876] 3 Ch D 826 and Proud v Bates [1865] 1 Y & C ex 481; 34 L. J. (Ch.). Therefore, as the route to the polyhalite is through the existing mine as defined above it is necessary for CPL to use the voids created by the mining of the potash and salt which are owned by R1.[159]CPL accepts that the voids created and left behind by the mining of the potash and salt stratum remain within R1’s interest but does not accept that the exception for mines creates an ownership right in the entirety of the shafts. From a practical/factual perspective they argue that based on the stratigraphy of the shafts that at best R1 has an interest in some of the stratum through which the shafts have been built. This is because they argue that the stratum above the Permian evaporate layers and below the ironstone are not metalliferous and do not therefore fall within the Reservation. Beyond that she has a right to work her minerals but no greater ownership rights.[160]Mr Kimblin says that this argument fails to acknowledge the difference between the rights that were reserved and those that excepted freehold title which was not conveyed at all and included the excavations (see Emmettabove).[161]In Batten Pooll land was conveyed to the plaintiff’s predecessors by a deed which contained a reservation and exception concerning “all mines and veins of coal in or under” the land. The defendants had worked the coal mines under the land and made an underground road which was not limited to the seam of coal but cut through the adjacent strata. The road was used to carry the coal including from areas beyond that covered by the reservation and exception. The seams of coal were narrow, and the roadway could not be built only in the reserved coal seams. It had been built beyond the coal seams and cut into the adjacent strata such that the workings for the coal therefore extended beyond the coal seams reserved and excepted to enable the mine to be worked. Warrington J explained that the road would have been useless if it had not extended beyond the coal seams.[162]Warrington J having considered Duke of Hamilton v Graham [1871] L.R.2.H.L Sc 166 (“Duke of Hamilton”), Proud v Bates [1865] 34 LJ 406 Ch and Eardley v Granville [1876] 3 ChD 826 found “that by virtue of the exception rather than the reservation the property in the strata below the surface remained in the defendants sufficiently to entitle them to construct roads therein and use them in any way they pleased.”[163]Mr Kimblin argues that consequently R1’s rights should be construed in a wide sense and include a right of ownership in relation to the shaft as a whole not just a right to work the minerals reserved by the Reservation since she retained the rights in the strata below the surface. This seemed to me to be an overreach particularly given that she did not retain to herself any other minerals other than those excepted and reserved.[164]Warrington J recorded that in Duke of Hamilton and Proud v Bates the court noted that “where the owner of the whole grants away the surface excepting the mines, it is reasonable to suppose that he intends that exception to cover all that may fairly and properly be included in the expression “mines””. He continued that it was plain that “mines of coal meant more than merely coal” and included working rights but that the relevant exception and reservation was not broader than that.[165]Warrington J quoting from the MR’s judgment in Eardley v Granville 3 CHD 826 explained: “If a freeholder grants lands excepting mines he severs his estate vertically, i.e. he grants out his estate in parallel horizontal layers, and the grantee only gets the parallel layer granted to him, and does not get any underlying mineral layer or stratum. That underlying stratum remains in the grantor. The freeholder retains the mineral stratum as part of his ownership; and whether or not he takes the minerals or subsoil out of the stratum, the stratum still belongs to him as part of the vertical section of the land."[166]He continued to confirm that Proud v Bates decided the same thing before emphasising that “in a case like that the word “mines” meant subsoil containing the minerals and not merely the minerals themselves”.[167]Miss Ellis argued if R1 were right then by retaining to herself the right to work her reserved minerals she in fact created ownership rights in the other strata that she had not retained to herself to the exclusion of the owner of those stratum. She sought to demonstrate the difficulties that would arise as follows: Owner A has reserved potash found at 1,000m and owner B has reserved ironstone found at 50m and owner C owns the surface and the rest of the subsurface. Owner A constructs a shaft to the potash; later Owner B uses that shaft.[168]On R1’s analysis if Owner A is the first to mine then Owner A denudes Owner C of the ownership of all the substrata between the surface and the potash as 1000m and denudes Owner B of its ownership of the ironstone which it had expressly reserved. She argues that this fails to appreciate that the exercise of rights over the servient owner’s land does not deprive that servient owner of ownership. She submits that the correct approach is that A can use the shaft whilst working its potash, Owner B can use the shaft to work its ironstone. Each of Owner A and Owner B continue to own the voids in their respective stratum but the rest remains in the ownership of Owner C.[169]The answer to this issue was as explained in Emmett. R1 had excepted and reserved the mines that were connected to or attached to those minerals that had been excepted and reserved by her – that is the stratum of minerals that she retained ownership of under the Reservation. There is nothing in the exception and reservation that goes wider. Insofar as there are stratum of other minerals which do not form part of the Reservation, they are in the ownership of CPL (the equivalent of Owner C).[170]This is entirely consistent with the approach adopted by CPL. R1 has not by the Reservation retained to herself greater rights of ownership than those expressly excepted and reserved to her by the Reservation. She has simply ensured that she has a right to work her own minerals and retains ownership of the voids. She has ownership rights in no more than the stratum excepted and reserved to her.[171]R1 does not own the entirety of the shafts by virtue of her ownership of the minerals covered by the Reservation but as a corollary of her working rights. Those rights allowed her and other owners of salt and potash mineral interests to use or construct the shafts to access their own minerals. Each of the relevant Onshore leaseholders and CPL will have had equal rights to work their minerals by construction or use of the shafts. R1’s ownership interest in the strata does not create a right, power or easement which amounts to more than an interest in her minerals coupled with her working rights. It does not override CPL’s interests and transform into a greater ownership or proprietary interest than CPL’s existing rights.[172]CPL submit that in any event Warrington J confined his decision in Batten Pooll to its own facts. “I come to the conclusion that the reservation of " all mines and veins of coal" includes more than the mere layer of the coal itself, that it includes at all events some part—how much it is not material to decide—of the underlying strata”.[173]CPL say that the reason why Warrington J refrained from going further or setting down any rule of law or determining on a point of construction how much of the vein or seam of coal was included in the reservation was because the facts were very particular and the road in question would have been useless if merely cut through the seams of coal as they were too narrow.[174]I was not persuaded by Mr Kimblin’s arguments. It did not seem to me that a right to excavate to support the Reservation could override CPL’s freehold ownership rights. I do not consider that the authorities go that far. I am satisfied that the effect of the Reservation including the exception for mines was not to create in R1 an ownership interest in the entire shaft to the exclusion of CPL who hold the freehold to all minerals other than those excepted and reserved to R1 by the Reservation. Properly understood the exception and reservation excepted from the conveyance in 1946 those minerals to which the exception and reservation related and the working rights to mine those minerals.[175]The minerals covered by the Reservation were not conveyed to CPL, but the balance of the proprietary interests were including the proprietary interests in the other minerals under the surface. CPL argue that the shale, mudstone and sandstone above the Permian evaporates and below the ironstone would not fall within the Reservation and are in any event not commercially viable. R1 does not purport to have retained those interests other than by the Reservation argument but rather seeks to argue that her rights provide some greater interest in the shaft such that she has key value.[176]I do not accept that argument. R1 retains her interest in her minerals and the voids created following the working of those minerals. In so far as there are any other minerals which fall within the Reservation that can be mined/worked she retains the right to work or mine them by reason of the Reservation and to transport them through the shafts and the roadways whether or not she “owns” those shafts or roadways. But she does not have a greater right over the shaft areas where she does not have an excepted or reserved mineral than the owner of that stratum.[177]The consequence may be that there are parallel and overlapping rights and interests which require a measure of cooperation between R1 and the other mineral rights owners but R1’s rights do not override and exclude anyone else’s ownership rights to access their own minerals and work them.[178]Consequently, however weighty and important the shafts are for the functioning of the Boulby mine or to the ability to exploit the polyhalite, R1 does not have any exclusive or greater interest that overrides those of CPL. R1’s and CPL’s rights in the shafts sit side by side but do not exclude each other. They therefore need to cooperate but that does not improve R1’s position in relation to the argument that they hold a key/the key to the functioning/operation of Boulby mine whether on Mr Kimblin’s very narrow articulation of the scheme or CPL’s articulation of the scheme.[179]In light of this even on Mr Kimblin’s narrow interpretation of the scheme it is clear that R1 is not the key to the exploitation of the polyhalite and did not have the key position she thought she had in relation to both the roadways and the shafts but rather was one of a number of elements that needed to work together – she was a part of the jigsaw described by Mrs Iwanicki.[180]Even if R1’s position were one of key value it would have to be justified on the facts which would also bring back into consideration the scope and extent of the different elements of the scheme whether the narrow or more expansive one.[181]Mr Kimblin sought to rely on Mrs Iwanicki’s acceptance that R1 held a key. However, whilst Mrs Iwanicki accepted that access to the roadways was a key to the operation of the mine and its viability, her evidence was that R1’s interests were part of the scheme they were not the entirety. They were important but no more or less important than other parts of the scheme for operational purposes.[182]She agreed that R1 did not hold a ransom because she accepted R1 held one of the keys to unlocking value, but her evidence was and remained that none of the interests whether it was R1, TCE, CPL or other leaseholders could work alone and it was only when all the pieces of the jigsaw were put together that there could be an operational mine and the polyhalite could be exploited.[183]As set out above although R1’s position was that she had the key to the operation of Boulby mine, even Mr Troman ultimately accepted that R1 was only part of the jigsaw although he attributed greater weight to her interests particularly to the shafts.[184]Underlying the arguments about ransom and key value is the fact that CPL have made an application under the 1966 Act which by its nature means that ultimately there is no space for a ransom in its true sense. Mrs Iwanicki is therefore right. If R1 does not approach the negotiation in a manner consistent with s.8 1966 Act then CPL can, as it has done, refer the issue of what is fair and reasonable compensation for determination by the court. Even though compulsory purchase principles do not apply I agree with Mrs Iwanicki that the effect of s.8 is to moderate all parties’ expectations.[185]The extent of the scheme is a question of fact, but it seems to me that the scheme is much broader and does include the elements identified by CPL. I am satisfied on the basis of the evidence available that the scheme cannot operate on R1’s narrow construction and whilst there might be room for debate about whether all of the infrastructure elements of the scheme are properly to be regarded as part of the scheme for the purposes of assessing what is key nonetheless there are key elements missing from R1’s scheme. For the scheme to exploit the polyhalite pursuant to the TCE lease to operate it requires as a matter of fact the jigsaw pieces identified by Mrs Iwanicki even if not all the infrastructure elements identified by Mrs Iwanicki amount to proprietary interests.[186]Here it seems clear to me that only CPL can benefit from what R1 has to “sell” and R1 should not be able to obtain some additional benefit simply on the basis that they own to whatever extent a part of the scheme necessary for the functioning of the mine and to enable CPL to exploit the polyhalite. Nor should they be able to maintain that they hold a key to the value of that scheme by simply holding out until the end, so they remain the last piece of the jigsaw.[187]For completeness, I am not persuaded by Mr Kimblin’s narrow articulation of the scheme. On any common-sense practical consideration of the scheme, it is as articulated by CPL for the exploitation of polyhalite derived from the area of the TCE lease which is consistent with the approach taken in Bocardo.[188]If compulsory purchase principles apply, then I find that the Pointe Gourde principle applies and R1 does not have a key value that would entitle it to override those principles such that the Pointe Gourde disregard should be disregarded.[189]The joint experts report recorded that Mr Troman had accepted that if he was wrong about the nature and extent of R1’s ownership rights in respect of the shafts, in particular, that he would need to revisit his figures for the proposed wayleave royalty. I take that into account when considering the next stage of the valuation exercise.

Valuation Issues: Stage 2

[190]There are only limited areas of dispute about valuation and quantum. The following were agreed: i) Mr Troman accepted that if the proper approach to assessing the compensation or consideration for R1 was by reference to value to owner (that is if the compulsory purchase principles and Pointe Gourde disregards applied) then the terms offered by CPL were generous (Certain Rent, free passage, and an extraction royalty that merged with the Certain Rent). ii) The experts had agreed that(i) that the proposed level of Certain Rent c.£56,000 per annum was reasonable although Mr Troman did not agree Mrs Iwanicki’s methodology based on a surface rate of £29.30 per acre per annum;(ii) Certain Rents and extraction royalties should merge such that the Certain Rent would be paid as a minimum for the duration of the lease - but if the extraction royalty exceeded the Certain Rent, then R1 would be paid the additional extraction royalty to the extent that it exceeded the Certain Rent;(iii) the building of the new roadway would/was generating extraction royalties which would be of a relatively short duration (perhaps 3 years) and would cease once the new roadway has been completed;(iv) if the court determined that a wayleave royalty was appropriate it too should merge with the Certain Rent.[191]The remaining issues were focussed on the expert evidence.(i) What was the appropriate mechanism for compensation or consideration – in simple terms Mr Troman’s proposed wayleave royalty or Mrs Iwanicki’s Certain Rent with free passage; and(ii) quantum of the wayleave - 0.5% NMR ?[192]Mr Kimblin submits that the court should not interfere unless R1 is seeking terms which are unreasonable. He says that the proposed wayleave based on 0.5% NMR is objectively reasonable and supported by Mr Troman’s evidence.[193]The experts agreed that neither of them had ever successfully completed a negotiation of a wayleave for underground mineral rights. Mr Troman maintains that it is nonetheless the proper approach in this case given the unique situation at Boulby.[194]I accept that the mere fact that there is no evidence of an underground wayleave in similar circumstances does not preclude it from being a fair and reasonable measure of compensation nor does it automatically make the demand for those terms unreasonable.[195]However, I need to be satisfied that(i) having regard to the circumstances the terms being demanded by R1 are not unreasonable and(ii) if I consider that R1’s proposal is unreasonable I then have the power to grant rights taking into account s.5 1966 Act including s.5(4) which requires me to consider all the circumstances and in particular royalties, covenants and conditions contained in CPL’s existing mining leases or which are customary in mining leases in the district. I do not therefore accept that I can ignore the position in relation to, in particular, the other new Onshore leases nor the wider Boulby/Woodsmith arrangements when considering s.8(2) 1966 Act which requires me to assess what would be fair and reasonable between a willing grantor and willing grantee having regard to the conditions subject to which the right is to be granted. Valuation issue(iii) Should the consideration or compensation be based on a Certain Rent with free passage or should it be based on a wayleave royalty?

Valuation issue (iii)

[196]A wayleave is a permission to pass through or across a third party’s land/mineral interests. A payment/rent is paid for that right.[197]There are various ways of calculating the appropriate rent/payment for a wayleave. As set out above Mr Troman considers that the payment/rent in this case should be based on a royalty. Mrs Iwanicki explained that surface wayleaves tended to be expressed as a surface area rent or a fixed pence per tonne. They are not necessarily based on a percentage of what the main landlord is receiving (here TCE).[198]Wayleaves are commonly used for powerlines, pipes and utilities. In a mineral context the experts have identified a number of comparables where they have been used for the passage of foreign minerals at surface level for quarries. Several of the comparables also appear to use wayleaves where there is a combination of surface and underground interests. None of the comparables identified by the experts was for an underground wayleave alone.[199]Mr Troman says that historically underground wayleaves were more common. However, the only evidence he produced to support this was an extract from MacSweeney’s “The Law of Mines, Quarries and Minerals’” 5th Edition published in 1922 before the 1923 Act. It was obviously not itself evidence of any actual underground wayleaves and was written prior to the establishment of the process for determining fair and reasonable compensation under the 1923 Act. It may well be that in the Victorian era or at the beginning of the 20th century underground wayleaves were common but neither of the experts have ever negotiated one successfully in 35 years and they have not been able to find any evidence of them during the course of the last 6 years whilst seeking to reach agreement on the terms of the new leases. This suggests that they are not common at all. And that may suggest there is some reason for that and why they are no longer commonly used.[200]Whilst the absence of any current underground wayleave and no recent evidence of any underground wayleaves does not of itself preclude a wayleave as an appropriate mechanism for compensating R1 it is a factor to take into account when considering whether in all the circumstances it is an appropriate mechanism and whether seeking one in the current circumstances is unreasonable.[201]Mrs Iwanicki explains that a surface wayleave is often used for the passage to and from freehold and leasehold interests and for the importation of foreign minerals from another site or quarry – so for example a charge may be applied if the operator of the quarry rather than the surface owner were to use their processing plant to process foreign minerals (other people’s minerals). This would involve bringing another party’s foreign mineral into the site. She explains that a surface wayleave may be used where there is a demonstrable loss to the surface owner of their land whatever they had used it for at the time. It is a loss for the entirety of the lease term. The surface cannot be used for anything else even if it were only a greenfield site. For example, it cannot be developed. The loss has a tangible value.[202]Conversely, she explains that an underground wayleave would generally concern the carrying of foreign minerals from the rockface to the surface. Mrs Iwanicki does not consider that the loss of for example otherwise abandoned underground workings to be of the same quality as the loss of surface rights.[203]Mr Troman does not agree with Mrs Iwanicki and considers an underground wayleave is appropriate in this case because R1 should be compensated for the movement of foreign minerals through her interests in circumstances where her own mineral interests have been substantially exhausted such that she will not receive an extraction royalty.[204]There was no automatic right to renew R1’s lease. Mr Troman explains that because the nature of R1’s interests have changed it is reasonable for the mechanism and basis for compensation for CPL’s continued use of R1’s rights to reflect the reality of the situation. He considers that the only appropriate mechanism to reflect that new reality is a wayleave for the passage of the foreign minerals through R1’s interest and compensation which reflects the value of the minerals transported so that R1 obtains a share of the benefit which CPL derives from having passage through R1’s areas. This is why he has proposed a wayleave based on what he assesses to be the full open market royalty of the polyhalite which will pass across R1’s mineral interests.[205]Mrs Iwanicki had considered the appropriateness of a wayleave as part of her valuation exercise but did not consider it was appropriate. Mr Kimblin asked Mrs Iwanicki if she considered that the approach being adopted by Mr Troman and Mr Duncan was unreasonable. In 2019 she had prepared a report looking at the options for valuation of compensation prior to the resolution of the Preliminary Issue. The report sets out, as now, her preferred option of using Certain Rents. However, she included for comparison purposes the option of a wayleave at 8% for what were described at the time as the strategic leases which included R1 to be split between the relevant owners, as a mean of a range of 6% to 10%. But it remains her view that it was not her preferred or the reasonable approach to achieving reasonable value in this case. Mrs Iwanicki was reluctant to use the word unreasonable in her answers but accepted that there were different ways of arriving at a reasonable value and that one of those might be a wayleave set at an appropriate rate, but her answer was caveated by quite rightly saying that it would depend on the interests and the circumstances.[206]Mr Kimblin submits however, that this is an end of the matter since the approach of using a wayleave is not unreasonable. I do not agree. I have to consider the circumstances which includes the evidence and decide if having regard to those circumstances a wayleave based on a royalty is unreasonable.[207]When pressed by Mr Kimblin about the level of compensation that Mr Duncan and Mr Troman proposed she was again reluctant to use the word unreasonable. She explained that she was prepared to consider any evidence produced by them to justify their proposals but said that she had be provided with very little. That may be of course because there is very little as was apparent from the lack of comparables. However, she was not prepared to accept that the figures proposed were reasonable commenting:
“Q. Just focusing on the question, because it's important thatI understand your position, are you saying that Mr Troman andMr Duncan have reached numbers, percentages, which areunreasonable? A. When I look at those numbers in the broader context of theevidence that I've looked at, so the broader comparables, I feel that they are particularly high. I don't think theyreflect circumstances that relate to the simple passage ofminerals through underground voids, I think they take accountof comparables that include much broader property assets.”
[208]Mrs Iwanicki explains that in her experience it is usual for mineral leases to include a Certain Rent. Whilst she accepts that Certain Rents can be based on a proportion of anticipated mine sales if a mine is operational, she explains that it is difficult and not always possible or feasible to do that where there are multiple owners. There are difficulties in estimating sales relating to a particular lease area when it is underground and the apportionment might result in de minimis sums if based on an estimate of actual mine sales attached to a particular lease. Mrs Iwanicki’s opinion is that the principle of a Certain Rent in proportion to area provides a convenient and equitable alternative.[209]Mr Kimblin suggested to Mrs Iwanicki that depending on the potash price, a wayleave would have produced a better outcome than the Certain Rent under the Onshore leases. Although neither Mr Troman nor Mrs Iwanicki had undertaken a comparison Mrs Iwanicki considered that the fluctuations in price if NMR were allowed to fluctuate with the revenue price would not have produced a significant difference over the period of the lease. Potash (and now polyhalite) was a global commodity which reacted to geopolitical events. Both experts had noted the spike in prices in 2022 with the invasion of Ukraine and sanctions and Mrs Iwanicki explained there had also been a spike during the financial crisis in 2008. However, overall, she considered that RPI had risen by a greater percentage over the period of the Onshore leases.[210]She considered that the simplicity of the area approach was fair and provided benefit to everyone across the entire mine complex for all the surface and mineral rights owners ensuring they all received a guaranteed income proportionate to their acreage. They continued to receive that Certain Rent throughout the term of the lease whether or not their area was still in use by the mine.[211]She explained that whilst in theory you could pay a Certain Rent to each landlord based on their mineral and their proposed output that was not realistic over such a large area/number of leases. In the case of Boulby mine the leaseholders and CPL had reached agreement on a reasonable way to apportion the rents by reference to area. The Palmer family had been represented when the Onshore leases were entered into.[212]Although there may have been other options I agree that trying to manage or monitor over 150 + leases over an extensive area would have been a complex exercise particularly when you consider that the Onshore leases commenced in the 1970s long before the technology that is now available had been invented.[213]Mrs Iwanicki does not consider that Mr Troman’s wayleave approach is workable in a situation involving a subterranean mine and multiple mineral rights owners. She acknowledges that such an approach would be more easily accommodated for surface owners coupled with the carriage of foreign minerals to say a quarry, she notes that in such circumstances there are generally not multiple owners, and it is easier to understand or find out what the position is in relation to the carriage across an adjacent surface owners’ land.[214]She explains that where there are multiple owners it becomes very difficult to manage in a situation where each adjacent owner is charging the next adjacent owner a wayleave. She says this would in effect cancel out the effect of the wayleave. It is exacerbated in an underground situation where it becomes even more difficult to manage where the mineral has come from and who is charging who what. She explains that it is more effective and easier where a group of owners agree what she calls a model of equivalence where they each get an equal share of the whole. There is then no need to seek to work out the effect of multiple wayleaves across a large area. I accept that an underground wayleave involving multiple owners might well be difficult to manage and that there are other complications which are not the same as those involved with a surface quarry for example.[215]Mr Troman maintains that the fair and reasonable approach that provides appropriate compensation for R1 is a wayleave. He relies on the fact that unlike the Onshore leases or the other complex multiple owner situations this is only about R1 and her rights in respect of the voids. There will not be any complication about what is travelling through the mine because it is her voids that are being used. I accept at one level that the complexities which Mrs Iwanicki identifies will not be as prevalent at Boulby now as they would have been if this exercise had been undertaken in the 1970s with 150 leases.[216]Mrs Iwanicki considers that the overall approach taken in Boulby and Woodsmith albeit not replicated in other areas represents custom and practice in the Boulby and Woodsmith areas of North East Yorkshire. It has been the custom and practice now for over 50 years. She says that Certain Rents based on the mineral lease area based on either a per acre or per hectare price has provided a logical and workable method for apportioning fixed rents across multiple ownership.[217]Mrs Iwanicki concludes that:
“in circumstances where a mine has been constructed and developed on the intent expressed in the 1970/1971 leases and on the basis of a rental model expressly agreed to deal fairly with multiple mineral owners, it would seem unreasonable for any one of those mineral owners to demand a share of royalties for minerals extracted from neighbouring lease areas. Custom and practice within a mining region usually play a significant role in determining the level of mineral rents during negotiations between a willing grantee and willing grantor (i.e. the parties rely on these as comparable evidence). In the case of Boulby Mine, there is considerable evidence to support the custom and practice of granting potash/polyhalite leases on the basis of a Certain Rent merging with royalty rents for the demised minerals, and permitting the free passage of minerals worked from other lease areas (i.e. foreign minerals).”
[218]She relies on the comparables to support her evidence. All of the comparables of other mine operations in the UK (save for one) with or without multiple mineral owners have models of compensation involving free passage for third party or foreign minerals coupled with a Certain Rent and extraction royalty. They do not have wayleaves.[219]Mrs Iwanicki considers that the Certain Rent based on area supplemented by an extraction royalty provides a simple and fair model. She notes that the local landowners in Boulby have been used to receiving a Certain Rent based on area – they understand it and it is simple. It is proportionate as it relates to each lease area that has been granted – not the surface area. The same approach was adopted for Woodsmith where there are over 400 leases. Mrs Iwanicki considers that with multiple owners the Certain Rent based on area provides a mechanism for each of the owners receiving a fair and equitable share of the whole.[220]Mr Troman did acknowledge that where a mineral wayleave would be either peripheral or negated by mutual wayleaves with other owners the rate would be towards the mid to lower end of his range – though he was not able to help with how that would be worked out. He did not consider this was a bar to the appropriateness of a wayleave royalty in this case in any event where the beneficiary of that wayleave would be R1.[221]A 100% or the full market royalty assumes that both the access rights and the mineral rights were held in a single ownership. Where the surface rights and mineral rights are split the starting point would be 50:50. Where there are multiple ownerships the percentages will be different and often be the subject of negotiation. Mr Troman notes that a mineral rights owner may retain surface access rights even if they do not own the surface itself which would increase the value of the mineral rights owner’s rights for the purpose of assessing compensation. The first question, however, is whether a wayleave is an unreasonable demand by R1. I consider the issue of the appropriate level of compensation later in this judgment.[222]Mr Troman asserted in his report that mineral wayleaves were the usual method of compensating mineral owners for use of existing shafts and roadways to enable the development of foreign minerals. However, as set out above there was little evidence to support this theory and he acknowledged that the majority of the wayleaves he had relied on as comparable evidence were in fact surface agreements not underground wayleaves. He explained that “ in the situation that we have at Boulby it would be pretty much every mineral surveyor and I’ve asked many it would always be a wayleave because that’s … the way they would look at it it is just that’s the way it is.” Yet he was unable to provide any evidence to support the statement in his report. He accepted that as a consequence the wayleave ranges, he relied on were based on a small data set and the facts behind each comparable were not entirely clear. Having considered the comparables I do not consider that they support the proposition that the usual method of compensation is a wayleave- quite the contrary.

Comparables

[223]The experts agreed that Boulby mine is the only operational polyhalite mine in the world. It is also the case that there are very few mines still operating in the UK. Despite their best efforts neither of them had identified a pure underground wayleave comparable – other than one they both discounted.[224]There was a lack of direct comparable evidence. As the differences between the comparable evidence and what they are being compared to multiply or increase the less confidence the court or the experts can have in that comparable. Many of the comparables related to quarries rather than mines and consequently involved surface working or at least a mix of surface and underground working rather than only underground working.[225]It is particularly important in those circumstances to consider the comparable as a whole and whether it in fact provides any helpful comparable evidence. It is not helpful to cherry pick a single term from one comparable in isolation. There can be many different equally justifiable reasons why commercial terms are negotiated in a particular way and/or with a particular structure that weighs different elements of the overall commercial package differently.[226]Mrs Iwanicki considered that given the body of evidence available in respect of polyhalite mining in North Yorkshire it was appropriate to adopt a market valuation approach using the available comparable evidence of potash/polyhalite leases in the local area. Mr Troman did not disagree with the comparable approach but considered that other comparables from other areas of the country mining or quarrying different minerals provided helpful additional comparables.[227]Boulby mine had been operational for 50 years and over that period a considerable body of evidence had built up. Mrs Iwanicki considered this to provide direct comparable evidence which supported her approach or at a minimum provided clear evidence of established custom and practice for the area sufficient for the purposes of s.5(4) of the 1966 Act. The model for compensation used at Boulby had been substantially replicated at Woodsmith. She considered that the model used provided a simple, reasonable and fair model for compensation. It was a model with which the local land and mineral rights owners were familiar- it provided certainty that there would be a Certain Rent each year and it was proportionate because it related to the lease area (not the surface area) to which the lease related.[228]Mrs Iwanicki’s considered that geography, geology, tenure and surface ownership/ the nature of the ownership were all relevant to the valuation exercise. An important component of value was geology since different royalties or sums were payable for different minerals. For this reason, she considered that the evidence of the approach adopted in Boulby and Woodsmith was of particular importance and carried particular weight.[229]Mr Troman did not consider that relying on the historic evidence from Boulby was a good basis from which to negotiate the terms for compensation. In particular he considers the position at Boulby now to be very different to when the Onshore leases were negotiated 50 years ago not least because the minerals have been worked. He considers that the position should be looked at afresh and does not consider Boulby generally to be a suitable comparable.[230]The experts between them had located the majority of the comparables that might be available (36) so have had the opportunity to consider the body of available evidence. They had discussed many of the comparables during negotiations over the last 6 years. All of the other relevant rights holders have now reached agreement with CPL resulting in the new Onshore leases which all reflect the Certain Rent model. R1 considers she is in a stronger position to the other Onshore leaseholders because she controls the access rights.[231]Mrs Iwanicki had identified two groups of comparables: i) Site A to Site T which were surface wayleaves negotiated/managed or valued by Wardell Armstrong. She confirmed that none of CPL sites A to T were calculated on an area basis. Each had resulted in either a pence per tonne payment or a percentage of headline royalty. She explained that the calculation and reference to wayleave as a percentage of the open market royalty in the schedule of comparables reflected her own attempt to reflect the lease terms in that form for comparison purposes and did not mean they had been expressed in that way in the lease. The percentages ranged from 6% to 33%. ii) Sites 1 to 10 were all underground mines whose leases provided for Certain Rents, extraction royalties and free passage and did not contain wayleaves including Woodsmith and Boulby. Mrs Iwanicki confirmed that in respect of those comparables even where a royalty was used for part of the overall package of terms there was still free passage and no wayleave. However, Mrs Iwanicki considered that other than Woodsmith and Boulby none of CPL sites 1 to 10 were comparable in geology or geography. She says that the principle of no passage rent and use of a Certain Rent is a common pattern.[232]Mr Troman (and Mr Duncan)’s comparables were a mixture of mines and quarries. R1’s Sites 1 to 14 had been discussed as part of the earlier negotiations. Mr Troman had added two more when preparing his expert report. He considered there was less significance to the difference between surface and underground rights when considering a wayleave and that geology and geography have less importance than the amount of the head royalty. Consequently, he says that the comparables wherever they are in the UK can be considered as comparables because the area or district is less significant. He considers that surface wayleaves provide some additional evidence to support his proposed wayleave approach. The percentages of the full market royalty range from 22% to 50%. None involved a situation where there was only an underground wayleave.[233]R1’s position is that the existence of surface wayleaves provides evidence that mineral wayleaves are within a range of reasonable compensation under the 1966 Act and the demand for one is not unreasonable.[234]Many of R1’s comparables related to surface rights coupled with access to and the use of processing plants and or involve the surface importation of foreign minerals. A wayleave payment to enable a foreign mineral to be brought onto a surface site for processing or to use manufacturing facilities from a different mine or quarry – not even adjacent land did not appear to me to provide comparable evidence at all.[235]When considering the comparables a further factor which Mrs Iwanicki considered to be significant was that almost none of those identified involved multiple ownership rights. Boulby mine originally involved 150 Onshore leases and even now there are already 19 new Onshore leases. As set out below Woodsmith is vast involving for one aspect of it only 400 option leases. One of the other comparables involves 7 owners but generally they concern a very limited number of rights holders. R1 is only one rights holder but one has to consider the approach proposed in the context of the mine as a whole. I agree that the number of rights holders is a factor in considering the appropriate mechanism for compensation and I take that into account.[236]I will refer to the comparables either by name or add a prefix of CPL or R1 to the site number or letter as appropriate. Comparables - Boulby and Woodsmith: Onshore leases:

Comparables - Boulby and Woodsmith:

[237]Mrs Iwanicki explains that in the 1960s there were three potash mining projects competing with each other in north east Yorkshire. Although she has not seen the options and leases for the other projects, they covered an area of c.18,000 acres and there would have been a number of different land owners. She assumes therefore that at the time there was likely to have been(i) a body of locally available market evidence for Mark Palmer and his advisers when they sought to negotiate the terms of the Onshore leases and(ii) a competitive market.[238]All the Onshore leases were for a period of 50 years and on the same terms. They provided for a Certain Rent based on £0.6666 per acre and royalty rents for extraction of potash (11.25p/tonne) and salt (2.5p/tonne). For surface owners the rent was based on £30 per acre for land actually required by CPL. There were provisions for rent reviews (upwards only providing additional protection) and break clauses. They all provided for free passage for foreign minerals across the different lease areas. The Onshore leases provided CPL with the ability to work the minerals across the whole of the area and then transport it from the rockface back to the shafts and to the surface at no additional cost. The shafts had been constructed before the Onshore leases were entered into. As will be apparent from the plans and diagrams the mine grew in different directions over the years. Some of the Onshore leaseholders’ mineral rights were worked out much earlier than other areas leaving those leaseholders with only the continuing entitlement to a Certain Rent for the remainder of the term.[239]Mr Troman suggested that the Onshore leases had been entered into at a discounted rate to reflect capital expenditure and accommodate the need for the infrastructure to be built and to allow the mine to be developed on a greenfield site. He considered that R1 could claim to have contributed to those capital costs and that she had “foregone a significant proportion of the value of the potash that would have been received through royalties if initial capital expenditure had not been reflect in the 1970’s royalty rates.” In the joint report he explained that if the capex had already been incurred at Boulby Mine by 1970 and written off years before that the then lessors (including R1) would have asked for a significant uplift in the royalties.[240]This was pure speculation. He had no evidence at all to support his theory. It is clear that Mark Palmer was a very experienced and canny businessman as evidenced by his retention of mineral rights. I have no doubt that had there been an opportunity to negotiate improved terms he would have done so. But in any event, there was in fact evidence that supported the contrary conclusion.[241]William Armstrong (a predecessor to Wardell Armstrong) were actually the mineral agents for the Palmer family. Mrs Iwanicki had located historic files relating to the grant of the Onshore leases. She found evidence that there had been an adjustment to the option fees and the Certain Rent suggesting some form of negotiation but had been unable to identify any evidence to support Mr Troman’s theory. I accept Mrs Iwanicki’s view that if there had been a discount one would have expected there to be some evidence of it in the files particularly since there was evidence of the other adjustments. On the basis of the evidence available there is nothing to support Mr Troman’s theory that the Onshore leases were entered into at a discounted rate to reflect capital expenditure.[242]And that is reinforced by the evidence that in 1976 CPL did offer enhanced terms uplifting the Certain Rent and royalty rents and providing for more frequent rent reviews. In so far as there was anything in the point made by Mr Troman it appears to have been addressed between the parties in any event in 1976.[243]Mrs Iwanicki explained that in her experience it was in any event usual for the tenant to take responsibility for the development, mining, and restoration/mine closure costs. Here, consistent with that proposition there are stringent requirements for decommissioning for which CPL are responsible.[244]By contrast Mrs Iwanicki’s evidence was that when TCE granted its first lease a discount was specifically negotiated for the first few years of the lease in the 1970s to allow CPL to get their production levels up to the level of the Certain Rent.[245]Mr Kimblin submits that the Onshore leases are not a good comparable because all of the Onshore leases were about or included extraction royalties as well as Certain Rent and involved extracting the leaseholders own minerals and are not about passage. I do not think the Onshore leases can be rejected on that basis. Yes, the Onshore leaseholders will in many cases have obtained the benefit of the extraction royalty to supplement their Certain Rent but they also provided free passage. As it is clear from the plans of the area and when the mining took place, for long periods of time some of the original Onshore leaseholders will have been receiving only a Certain Rent and providing free passage whether before or after their areas were worked.[246]In that sense they simply mirror the position of R1 on the proposed Certain Rent model.

TCE Offshore lease:

[247]The most recent TCE lease was dated 23 April 2010 and grants CPL working rights to the polyhalite and salt under the foreshore and the seabed over an area of 790km² for a period of 26 years. As with the Onshore leases it provides for a(i) a Certain Rent of £61,186 pa (0.7745 per hectare per annum) subject to upwards only annual rent reviews and(ii) a royalty of 2% NMR. NMR is defined in the lease as CPL’s revenue from the sales of minerals less distribution and marketing costs. NMR is not therefore representative of full sales revenue achieved by the mine operator. The TCE Offshore lease was entered into before the Onshore leases expired. They of course provided free passage for foreign minerals.[248]Mr Troman’s approach to quantum was to assume in favour of R1 that TCE had undersold itself and would have been entitled to a higher % NMR of 2.5% and then to base his assessment of what compensation R1 would be entitled to for providing passage through her mineral rights now that the Onshore leases had expired on that higher % NMR. His assumption was that she controlled access and so would be entitled to the full difference of 0.5% by way of compensation. For the reasons set out below it seems to me that assumption needs some adjustment.[249]Mrs Iwanicki explains that TCE like many large landlords have a preferred standard precedent for lease terms and options. The TCE preference is to receive royalties as a percentage of NMR, net mines smelter returns (for metals) or gate price (if an aggregate quarry). She explains that this is why the TCE lease is framed as 2% NMR. Mrs Iwanicki noted that TCE has a statutory obligation to maintain and enhance the value of its assets and a “best consideration” requirement and as a consequence she assumes that TCE considered that the terms they had negotiated were not less than market value.

The Freehold acquisitions

[250]CPL has acquired the freehold mineral interests in areas 7 and 50 for a capital value equivalent of £29.38 per acre. Mrs Iwanicki explains that the rate per acre was negotiated and agreed with the owners of the relevant mineral and land interests on an acreage basis to ascertain a Certain Rent.[251]R1 has no reservation of mineral rights to these areas but they are part of the access from the rockface to the surface. This appeared to me to change the strength of R1’s position since she now required the cooperation of CPL qua mineral rights owner to provide access for the purposes of exploiting the polyhalite.

The new Onshore Leases

[252]To continue to operate Boulby mine, and to exploit the polyhalite, CPL needed to be able to continue to access a large part of the original mine. This included having access to the infrastructure and subterranean tunnels not limited to those that passed through area 7 and 50. Most of these areas were not required to access the polyhalite but were still required to exploit it.[253]Mrs Iwanicki explains that:
“The leases grant [CPL] rights to use all tunnels, shafts and voids for purpose of dewatering and ventilating the mine, and to place and use generators and other electrical equipment, pumps, fans, cables etc required in connection with those uses. [CPL] also has access rights in connection with inspecting and maintaining the lease areas, and equipment etc. The leases do not grant rights to mine so there is no need for mineral royalties in these leases. [CPL] can, however, excavate and maintain structural mine support systems where this is required to maintain the property. ”
[254]The new Onshore leaseholders range from private individuals to landed estates and include diocesan bodies who have Charity Act trustee type duties and obligations. When agreeing the terms some had their own professional advisers some did not. All the new Onshore leases provide for Certain Rent and free passage.[255]Mr Troman says the terms of the new Onshore leases did not reflect market value and could not be relied upon. There did not appear to be any evidence to support this assertion.[256]He suggested that the new Onshore leases simply included uplifted figures from the Onshore leases. This was however based in part on his incorrect assumption that the original Onshore leases had been entered into at a discount.[257]He considered that CPL had put pressure on those other leaseholders to agree terms. He referred to this in his expert report which resulted in it being explored at trial. Although CPL did tell leaseholders that if terms were not agreed they would rely on their rights under the 1966 Act, the correspondence was not inappropriate and was between two experienced solicitors. What did seem inappropriate was to double down when cross examined and claim that other leaseholders had been pressured to agree terms. On being challenged he downgraded his complaint to encouraged. Mr Troman also asserted that Savills on behalf of some of the new Onshore leaseholders had not yet agreed to the Certain Rent proposal and were looking for other terms in support of his position on quantum. It was subsequently conceded that he had been mistaken.[258]However firmly Mr Troman feels he could have done better for those other leaseholders, his comments were inappropriate and appeared to have no evidential basis. It undermined his credibility as an independent expert who should have been assisting the court. I would add that the fact that two of the new Onshore leaseholders had been advised by Savills and still accepted the terms proposed by CPL further undermined his position on quantum.[259]Despite the insinuation of poor behaviour on the part of CPL, he accepted that if I determine that a Certain Rent is the appropriate form of compensation then Mrs Iwanicki’s figure for Certain Rent based on area was reasonable. This makes the inappropriate comments in his report and evidence even more surprising.[260]In fairness to Mr Troman, Mrs Iwanicki accepts that neither she nor Mr Troman have encountered an apportionment of Certain Rent by surface area outside the Boulby and Woodsmith area where the model has been operating, it appears, successfully for over 50 years.[261]Mrs Iwanicki believes it provides some fairness and convenience in complex multi-owned sites. All 19 new Onshore leases provide for a Certain Rent, free passage and so far as relevant, an extraction royalty. However, unlike R1 they are not going to benefit from the extraction royalty. So far as R1 is concerned the proposed Certain Rent model will provide income from extraction for a period of time.[262]Mr Troman maintains that it takes no account of the value of the minerals which CPL are extracting under the TCE lease. I understand that R1 would like to have a proportion of that value but that does not mean a wayleave is not unreasonable or that compensation based on a percentage of the full market royalty is reasonable.

Woodsmith:

[263]Woodsmith is a vast and complex project that needs to be looked at in the round. It is not useful to cherry pick the parts that are considered supportive of a particular argument.[264]All of the Woodsmith leases and options allow for free passage for all foreign minerals. All of the Woodsmith leases and options use what is in reality a Certain Rent model which is calculated by area. The leases also provide for an extraction royalty. And like Boulby mine when the extraction of the polyhalite comes to an end in a particular area the leaseholder will continue to receive the Certain Rent for the balance of the lease term. The lease term for the 400 option leases is 50 years.[265]The mine has been in development for 10 years and Mrs Iwanicki says there have been press reports that mine production was not likely to commence until 2030. The mine head is located 45km (28 miles) to the south-east of Boulby. It is comparable in terms of geography, geology and mining methods. In order to develop Woodsmith its owners/operators have acquired leases for land and minerals across an expansive mining area in multiple ownerships. Woodsmith was originally promoted and developed by York Potash Ltd but acquired by Anglo American PLC in 2018. References to “York Potash” were therefore references to Woodsmith.[266]In addition to the mine itself the MTS is being constructed, a 37km underground mineral transport system with intermediate shaft sites from Woodsmith to Teesport to avoid transporting the polyhalite across the North York Moors National Park. Mr Troman says the still unfinished MTS has already cost US$9bn which gives some idea of the scale of the project.[267]Initial planning permission was granted in 2015 and provides for permission for the winning and working of polyhalite and potash for a period of 103 years. Construction started in 2017. This was some 50 years after Boulby’s initial infrastructure was built in the late 1960s. The timing of the planning and development overlaps with the timeline for the new Onshore leases. It is therefore more evidence of negotiations and agreements that would have been available to the parties negotiating the new Onshore leases as well as providing evidence of customary practice in the local area.[268]Woodsmith is said to have one of the world’s largest deposits of polyhalite with probable reserves of 290 million tonnes of ore plus inferred resources of 1,770 million tonnes as of 31 December 2020 compared to Boulby’s 8 million tonnes and inferred resources of 41 million tonnes. It is expected to have an operational life of 103 years compared to Boulby’s 25 years. Anglo American estimate an initial production capacity of 10 million tonnes per annum, increasing to 13 million tonnes per annum, and with potential to expand up to 30 million tonnes per annum subject to further planning and additional infrastructure – ten times the production capacity of Boulby. However just like any other mine over time areas will be worked and the mine will move on leaving voids and roadways and other infrastructure.[269]Woodsmith provides recent comparable evidence in the local area concerning a mine, underground leases, the same minerals, multiple interests and a similar method of compensation. None of the comparables other than Boulby itself and Woodsmith had the same scale or the same issues of multiple ownership. Mining leases granted in 2016-2018 in relation to the Woodsmith Project;[270]The leases granted between 2016 and 2018 were granted on a similar basis as the new Onshore leases. The Woodsmith leases are all based on a Certain Rent plus an extraction royalty and free passage. There is no wayleave for use of the underground access routes across the different underground lease area.[271]However, given the overall size of Woodsmith and the number of leases (about 400) rather than calculating the extraction royalty for each lease the mining area was divided into fourteen local areas. Each leaseholder received a proportion of the extraction royalty for the minerals extracted from that local area by reference to their proportion of the overall lease area covered by that local area. This refinement on the normal extraction royalty model makes sense given the scale of the operation. The effect of this was that a leaseholder would continue to receive extraction royalties until the entire local area had been worked out. I do not consider this modification affects the comparability of the approach.[272]The initial Certain Rent was calculated by reference to option fees until the mine starts to produce sales of minerals after which it will be based on a Certain Rent based on £75 per hectare (this equates to £30.35 per acre per annum very similar to the £29.38 per acre per annum offered by CPL to R1) plus an annual fixed amount of £1,250.[273]Mr Troman rejects Woodsmith as a comparable when one considers the Certain Rent and free passage provisions but relies on Woodsmith to assist with setting the market royalty rate for Boulby. Mr Troman had been involved with negotiating terms on behalf of some of the option lease holders at Woodsmith and has undertaken other work for the rights holders. He says that it was not possible to negotiate a wayleave at Woodsmith for two reasons(i) York Potash acquired leases across a large area before they knew exactly where the mine was going to be. He says this enabled York Potash to negotiate for free passage because no one knew if they were going to benefit if they sought a wayleave and(ii) because of the use of local areas. That appeared to me to simply reinforce the appropriateness of the method used and the fairness of it rather than explain why there was no wayleave.[274]The Woodsmith royalty for extraction is based on 2.5% gross sales receipts (“GSR”) rather than NMR and includes consideration of the quality or grade of the minerals extracted not just the weight/quantity. Mrs Iwanicki explains that this means that if lower grade ore/mineral were extracted there would be some adjustment to the figures such that the 2.5% GSR as defined might produce a different or lower figure than 2.5% NMR. Mr Troman accepts that GSR may produce a lower level of royalty than NMR but does not consider it would be significant.[275]Mrs Iwanicki accepted that as a matter of principle it was not unreasonable to consider the Woodsmith 2.5% GSR if considering a wayleave but explained that(i) the effect of GSR is not yet known but more importantly(ii) that irrespective of the 2.5% GSR it was not being used at Woodsmith for a wayleave it was being used in connection with an extraction royalty. There was free passage of foreign minerals through the collective entirely consistent with Boulby and the offers made by CPL to R1.[276]Mr Troman considered a key distinction between Boulby mine and Woodsmith was that the leaseholders at Woodsmith would have an extraction royalty whereas R1 would not. Mr Troman accepts there is no wayleave at Woodsmith. The absence of the opportunity for an extraction royalty was fundamental to his reason for proposing a wayleave for R1.[277]Mrs Iwanicki did not accept that distinction noting that even in Woodsmith there would be areas being worked and areas that are redundant and/or where the mine had moved on leaving the leaseholders with only the Certain Rent. Given Mr Troman’s explanation about the approach to the 400 leases it seemed likely there would be some areas that might never be worked at all. Mrs Iwanicki does not therefore consider that this difference is in fact significant.[278]Mrs Iwanicki submits that extraction royalties were only relevant to payments for that extraction and provide no evidence at all to support a royalty or wayleave payment for use of the tunnels or voids after the mineral had been extracted. In her experience she had never seen a royalty in connection with the use of the voids remaining after the mine had moved on or through the relevant area.[279]Mr Troman’s reliance on the 2.5% extraction royalty at Woodsmith seemed to me to fall into the pick and mix trap. The model at Woodsmith was Certain Rent, free passage and extraction royalty. It was not a wayleave royalty. Woodsmith is therefore on all fours with the approach which CPL propose for R1.

MTS leases

[280]There is no MTS at Boulby however the MTS leases provide further evidence of the approach adopted at Woodsmith. In order to build the MTS leases were granted between 2016 and 2018 along the length of the route between Woodsmith and Teesport. They provide for free passage across the various leasehold interests since that is the very purpose of the MTS and there is no wayleave royalty.[281]The MTS terms are slightly different. They are based on a linear area and provided for a Certain Rent based on the measured length of the tunnel as a one-off rent of £80 per metre. The leases are for 70 years with the potential to renew for another 60 years in which case an additional £200 per metre of built tunnel length will be paid as a one-off payment.[282]Not all of the rights holders along the route of the MTS could be identified, and this resulted in the need for an application and referral under the 1966 Act. The linear approach that was therefore carried forward to the 1966 referral concerning the unknown rights holders along its route.[283]Mrs Iwanicki used the MTS approach as a cross check to her area method for Certain Rent. R1 does not consider it to be comparable. It seems to me it is just part of the wider package of arrangements that make up the whole of Woodsmith. It does, in keeping with the rest of Woodsmith, provide for free passage but it is for a specific purpose and if it were a freestanding comparable it might not have made it on to the list other than in passing.

Woodsmith MTS 1966 Act referral:

[284]His Honour Judge Malcolm Davies White considered the issues raised by the referral in relation to the unknown rights holders in 2018. Mr Kimblin represented York Potash and the hearing unsurprisingly, given it related to unknown rights holders, was uncontested.[285]The award replicated the linear lease approach negotiated with the known rights holders. HHJ Davies White awarded compensation of £214,150 based on £100 per linear metre of tunnel. There was no additional consideration or compensation. It provided for free passage.[286]Mr Troman explains that the MTS leases provide for a 50:50 split between surface and mineral rights owners. If the MTS passes through lease areas where the rights owner owns both surface and mineral rights, they receive the £100 per linear metre of tunnel and if they rights are split so is the £100 – 50:50. He does not consider that this is comparable.[287]Mrs Iwanicki had used this to cross check her Certain Rent figures. Although he accepted her maths, he did not consider it to be a reliable cross check as it was based on only one piece of information. Since he accepts her Certain Rent figure it does not matter. However, he suggests an alternative consideration might be to look at the costs of building the MTS at £1.1bn for 37,000 metres. This would produce a figure of £30,000 per metre. As set out above the burden of the costs of construction fall on the mine operator so this does not appear to me to be an appropriate metric.[288]It seemed to me that despite Mr Troman’s complaints about the usefulness or appropriateness of Boulby mine and Woodsmith as comparables that viewed as a whole, they provided a considerable body of evidence both of recent and historic approaches to the mechanism for and level of compensation for mineral rights owners’ interests covering a geographically and geologically similar area. But in addition, given the scale and size of both undertakings they in fact provide the bulk of the evidence of the approach to underground mines across the UK in any event. They seem to me to provide the strongest and best comparable evidence available.[289]They demonstrate a consistent approach in that local area to underground mineral rights owners providing free passage for foreign minerals across that vast area in return for a Certain Rent. When looking at the mining areas mined for potash across Boulby one can see large areas that were worked out many years ago and the mineral rights owners will only have been receiving a Certain Rent since then. Despite the fact that many of the areas at Boulby now subject to the new Onshore leases were worked years ago all of the Onshore leaseholders agreed terms on the basis of a Certain Rent and free passage and this is the model adopted at Woodsmith. Although Mr Troman says there are reasons why a wayleave was not used at Woodsmith that does not diminish the fact that it uses the same model as Boulby.[290]The historic and current evidence at both Boulby and Woodsmith pointed strongly away from a wayleave approach.[291]Many of the new Onshore leaseholders own mineral rights which are necessary to provide some of the infrastructure, tunnels and roadways which are essential to the functioning of the mine including the dewatering and ventilation and without which the polyhalite cannot be exploited. There is no reason to treat their interests as different or less important than R1’s rights and no reason to consider that a different mechanism should be used to set compensation for R1. Indeed, although Mr Troman treated their interests as less important than R1’s interest in the shafts he did acknowledge that their interests might be more closely equivalent to R1’s interest in the roadways. The consequence of this was that on his analysis those interests were ones which would also justify a wayleave royalty. The difficulty with that is that it then brings into sharp focus the potential problems with managing multiple underground interests.[292]These are all factors to take into account when assessing whether the demand for a wayleave is unreasonable.

Other Comparables

[293]None of the other comparables provided evidence of an underground wayleave in similar circumstances to R1. Whilst they do provide evidence in some cases of wayleave royalty percentages, they are therefore of more limited weight.

CPL Site 2: Fluorite

[294]This is a fluorite mine located in Derbyshire. Mrs Iwanicki says this is similar in terms of tenure to Boulby but not in scale, geology or mining methods. It is an underground mine mining metalliferous minerals. However, the minerals have vein structures which Mrs Iwanicki explains make them more difficult to mine than sedimentary beds of potash, salt or polyhalite.[295]The mine operator owned the mine surface and site, processing facilities and access to the public highway similar to CPL. There were seven underground mineral rights owners. The old leases had provided a Certain Rent, an extraction royalty and free passage. The Certain Rent was not linked to area but was instead an agreed fixed payment so was conceptually the same. The same model as Boulby.[296]On renewal two mineral rights owners had initially sought to negotiate a wayleave on the basis that other minerals would have to pass through their areas. In those negotiations it became apparent to the parties that one wayleave would negate another. Ultimately all the mineral rights owners agreed to a Certain Rent, free passage and an extraction royalty. This would ensure that even after the minerals were extracted, they would still continue to receive a Certain Rent and continue to provide free passage for the length of the lease. The same model as Boulby and Woodsmith.[297]Mr Kimblin sought to distinguish this from Boulby on the basis that unlike Boulby the leaseholders would receive an extraction royalty as well as a Certain Rent. Mrs Iwanicki accepted that the extraction royalty would not be long lived at Boulby However, she explained that some of the mineral rights owners at CPL Site 2 also no longer had any mineral to be extracted and only receive the Certain Rent. In that sense therefore there is no difference between R1’s mineral rights and any other mineral rights.

CPL Site 4: Zinc and metals

[298]CPL Site 4 concerns an option for a lease in an area which had historically been an area of lead mining. The operator sought to put together a site by acquiring options from four key mineral rights owners. It is a sign of how small the mineral surveying world is that Mrs Iwanicki represented two of the mineral rights owners, Mr Troman represented one mineral rights owner and the fourth was TCE. The parties agreed they would work together to enter into an agreement which provided for a Certain Rent, an extraction royalty and free passage for foreign minerals. Precisely the same mechanism as was negotiated and agreed with the 19 new Onshore leases at Boulby and which is proposed for R1.[299]Again, R1 sought to distinguish this on the basis that there would be an opportunity to supplement the Certain Rent with an extraction royalty. The model remains the same: once the minerals were worked and the mine moved on the mineral rights owners would be left with a Certain Rent and free passage. How soon that would occur would depend on how a mine is developed and when the minerals were worked out. Mrs Iwanicki considered the position in relation to CPL Site 8 to be similar to CPL Site 4. CPL Site 10 – Cornish Tin mines.[300]Cornwall has historic tin mines which provided some evidence of the historic approach to mining leases in other parts of the country. Mrs Iwanicki’s evidence was that those leases provided a similar mechanism to those at Boulby. There was a Certain Rent with an extraction royalty for own minerals and no underground passage rent.[301]The fact that historically the approach at Boulby is consistent with other underground mines does not preclude a change to the approach now but it did add further weight to Mrs Iwanicki’s evidence. R1’s Comparables R1 Site 8 Gypsum mine

R1’s Comparables

[302]This is an example of an underground gypsum mine based in the Duchy of Lancaster although Mrs Iwanicki believes that it now only produces anhydrite (an evaporate deposit used in construction).[303]R1 relies on this comparable because it appears to provide for a royalty for foreign minerals in relation to an underground mine. Although Mr Troman does not draw any distinction between surface and underground access it appeared to me that in order to compare like with like it was necessary to understand the nature and extent of the interests. For example, a landlocked mineral right without any access to the surface was obviously different to a combined mineral and surface right.[304]The lease grants mineral rights and extensive surface rights including rights to use the manufacturing plant for gypsum and other infrastructure and a right of access to the public highway. It is not obviously comparable with Boulby since the landlord at R1 Site 8 was the surface owner was granting both mineral and surface rights including the right to use that surface infrastructure and access to the public highway whereas Mr Troman is advocating for a wayleave for just underground passage.[305]Mr Troman did accept that R1 Site 8 was not evidence of a wayleave exclusively for underground passage. However, R1 does rely on R1 Site 8 as providing supportive evidence for the proposed level of wayleave royalty. Mr Kimblin submits that since the owner receives 35p per tonne and the operator receives 18p per tonne that this equates to a wayleave for the mineral owner of roughly 50%. He submits that this would be no different to TCE receiving 35p per tonne and R1 receiving 18p per tonne. However, this does not take into account the different quality of the rights in this case as set out above.[306]It seemed to me that R1 Site 8 was not comparable at all. It involves a combination of surface ownership rights and underground rights and provides access to and use of extensive surface infrastructure and manufacturing facilities. Mr Troman suggested that manufacturing facilities were likely to be dealt with separately. Even assuming they are subject to a separate lease arrangement R1 Site 8 is not comparable. The landlord’s combined surface and mineral interests are more extensive than R1’s and transform the quality and nature of the rights. Unlike R1 the party with the benefit of the wayleave does control the interests from the rockface to the public highway. Any wayleave at Boulby would be limited to an underground passage rent across R1’s interests only and in circumstances where she does not hold full access rights given CPL’s ownership of areas 7 and 50. R1 Site 8 is therefore qualitatively different to the rights which R1 owns at Boulby. This comparable provides no assistance at all when seeking to establish that a wayleave is not an unreasonable demand and/or that a wayleave royalty is fair and reasonable.

R1 Site 9 Portland Stone

[307]Mr Troman knew very little about this site and considered that the 50% wayleave royalty was a little on the high side, but he used it to support the reasonableness of his 20% wayleave royalty. Mrs Iwanicki does not consider that R1 Site 9 is comparable. It is geographically remote and geologically different, and the nature of the operation is qualitatively different from Boulby. She says that the 50% wayleave is explained by the nature of the rights which the landlord was granting and the nature of the wayleave being granted. It might be said that the TCE lease terms which include royalties provide some support for R1’s approach.[308]R1 Site 9 was originally a surface quarry but because of its environmental impact it was moved underground to reduce the surface impact.[309]Mrs Iwanicki did not negotiate the leases, but she does have some involvement in the management of this mine on behalf of TCE. She explains that although the lease is expressed in terms that suggest there is an underground passage rent that is not in fact the case. The TCE prefer to have leases which provide for royalties as a percentage of NMR.[310]TCE owns a significant part of the surface area, the factory, the mine adits and the underground areas. The factory is solar powered and although the tenant obtains the benefit of the electricity it is TCE who benefits from any surplus. The surface area is significant because very large blocks of stone are taken out of the mine, taken to the factory (also owned by TCE) and cut and prepared ready for sale. She explains that about 1/3rd of the material extracted is waste which is then deposited in spoil heaps also on TCE’s surface areas. There is therefore a significant impact on TCE’s surface areas. This is clearly a complex and multifaceted operation with advantages/disadvantages and benefits/disbenefits which were all part of an overall negotiation for the terms of the lease.[311]Mr Kimblin submitted that R1 Site 9 was evidence of a wayleave being paid partly for bringing in the foreign mineral into the manufacturing plant and for processing in a similar way to surface wayleaves for the various quarries referred to in CPL Sites A to T. Mrs Iwanicki agreed in principle that a surface owner could seek to negotiate terms which included a wayleave, but it is necessary to look at the entire package of rights for which the 50% was being paid.[312]As with R1 Site 8 the combined interest of the landlord who holds at a minimum combined surface and mineral rights are qualitatively different and more extensive than R1’s interest in Boulby which is limited to underground passage. I do not consider that R1 holds the same type of interests as TCE, and I do not consider that R1 Site 9 provides supportive comparable evidence.

R1 Site 13 Aggregate Quarry

[313]This comparable was originally a surface extraction quarry which moved underground. The lease appears to provide for a 100% wayleave. Mrs Iwanicki and Mr Troman agree it makes no commercial sense with Mr Troman describing it as a poorly thought through aberration. The quarry and mine operator owned adjacent sites. The two sites could operate independently from each other. The mine operator does not work the site because the 100% wayleave is uneconomic and leaves them no benefit. The landowner is recovering nothing at all by being too greedy. This was the only pure underground wayleave included in R1’s comparables and was not one which either party relied on.

CPL Site N/R1 Site 2 additional Quarry

[314]This comparable appeared to provide for a wayleave at 1/3rd of a full market royalty which Mr Troman relied on to support his 20% figure. Although this is described as a quarry it is in fact a former open cast and underground coal mine and is now a coal reclamation site. The operator saw an opportunity to reclaim/recover other workable minerals and then to restore the site as part of the operation – it was all surface work as it was a quarry but with an access element. Some of the minerals were owned by one party, some of the surface was owned by another party and the access road to get the material off site was owned by a third party. The parties agreed to act as a collective and take 1/3rd each and this was then recorded as a wayleave. The owner of the access road granted an easement allowing access/use of the road in return for tonnage payments referred to as royalties based on a 1/3rd sharing agreement. It was therefore properly characterised as a wayleave of 1/3rd full market royalty. This is quite obviously different to the position that R1 finds herself in. Whilst it is evidence of a wayleave it is not evidence of either an underground wayleave or a wayleave in circumstances where there is multiple ownership.

Wayleave or not

[315]It seems to me that the weight of the evidence falls firmly in favour of rejecting the wayleave royalty approach. In doing so I am satisfied that the demand for a wayleave royalty in the circumstances set out in this judgment is unreasonable.[316]Mr Kimblin submits that a wayleave is not unreasonable and is R1’s preference. CPL’s preference is Certain Rent but Mr Kimblin submitted there was no in principle objection to a wayleave. As set out above Mrs Iwanicki had caveated her position on the appropriateness of a wayleave.[317]Mr Kimblin submits that without R1’s access there is no value and that Mrs Iwanicki had accepted that R1’s position was not one of ransom or veto. She did but that was because she considered that the parties’ behaviours would be moderated by the operation of the 1966 Act. That is what this application is about.[318]I accept that just because there is no evidence of a similar wayleave does not of itself make it unreasonable. However, it is clear that a wayleave would at least be very unusual given the evidence of the experts and the comparables.[319]She maintains that it is unfair that she should not be able to benefit from the exploitation of the polyhalite jointly with CPL and TCE given what she understands to be the strength of her position. R1 has mineral rights which mean she has ownership of the voids and tunnels through which some of the roadways used to exploit the polyhalite have to pass to reach the surface. She has some rights to the shaft, but I have not found them to be as extensive as she considered them to be. She nonetheless does have rights in the shafts.[320]However, another significant factor is that R1’s interests are not to the entire access route. There are other owners with interests along the access route. Those are primarily as the route is currently configured CPL qua freeholder. But it seems to me that immediately highlights the issue with underground wayleaves and the possibility of multiple wayleaves and the negation of interests. Mr Kimblin accepted this was a factor to take into account but said that there was no evidence as to how the difficulties might manifest themselves in these particular circumstances. He accepted it was a matter of fact and degree. I keep in mind Mrs Iwanicki’s evidence above about the difficulties of managing wayleaves and the utility of the Certain Rent approach.[321]I accept that the type of wayleave as presently understood would be less complex and more manageable than one involving 100s of interested parties such as say Woodsmith, but it did seem to me to be a factor that weighed against a wayleave. There will immediately be the possibility of several rights owners along the access route. I cannot therefore preclude the possibility that a wayleave would lead to considerably more complication over the next few years. Whilst Mr Kimblin says CPL has not identified any risks it seems to me, they are obvious. Changing or departing from the long established custom and practice plainly puts at risk that custom and practice.[322]R1’s submission that a Certain Rent would not be fair because she would not receive any benefit from the polyhalite exploitation has to be considered in the context of all the other Onshore leaseholders having accepted terms involving Certain Rent and free passage. The custom and practice for Boulby has been continued into the new Onshore leases.[323]In addition, unlike the other Onshore leaseholders R1 will in fact benefit because she will receive about £300,000 of extraction royalty over 3 years to supplement her Certain Rent. Far from not receiving any benefit she benefits to a greater extent that the other leaseholders. And that is despite Mr Troman’s evidence that upon reflection he considered there were other leaseholders within Boulby who had interests that might have justified a market royalty too.[324]Further, the Certain Rent approach with free passage is plainly the custom and practice for mining leases in the area. It is the model that has not only been used at Boulby for 50 years but has been taken up and modernised and adopted by Woodsmith on a vast scale. The absence of a wayleave provides fairness and simplicity between multiple owners. That is a significant factor to take into account when considering the demands of R1 against that extensive history of custom and practice.[325]The same pattern could be seen across the underground mine comparables which again was a factor to take into account. The comparables that had wayleaves either involved surface quarries or very different combined interests.[326]Both experts agree that in considering a commercial negotiating position, a willing grantee will usually take account of its combined property and plant costs, and its ongoing development and operational costs. A willing grantor will have regard to the value of what is being taken from it; whilst the grantor is not exposed to the risks and costs of operating and developing a mineral asset it usually expects a lease to be granted at market rents and incorporating appropriate lease terms.[327]Whilst the core issue when considering what is fair and reasonable for a willing grantor and willing grantee may be thought to be the financial terms it also includes what the appropriate model is for the lease to be granted. It seems to me that in this case for all the reasons set out above a lease on terms that allow for a Certain Rent, free passage and an extraction royalty would fall within the range of what would be considered fair and reasonable. I do not consider that a wayleave linked to full market royalty would fall within the range of what is fair and reasonable having regard to all the circumstances and factors set out in this judgment. I consider the specific issues raised by Mr Troman’s 0.5% NMR below.[328]R1 holds the only mineral rights that have not yet been renewed. She is prepared to provide a lease but only on terms that I consider to be unreasonable and consequently which do not represent terms which I consider to be terms that would be fair and reasonable as between a willing grantor and willing grantee.[329]As set out above the terms for the Certain Rent and free passage proposed by CPL in the event that there is not a wayleave are agreed by Mr Troman to be reasonable. I do not therefore need to consider those further.

The Market Royalty:

[330]The various matters addressed earlier in this judgment come back into account. As I consider that a wayleave is an unreasonable demand under s.3(2)(d) the starting point is that a market royalty is not appropriate and Mrs Iwanicki’s Certain Rent and free passage model of compensation should be adopted as fair and reasonable compensation as between a willing grantor and willing grantee.[331]If I am wrong about that the question of whether Mr Troman’s market royalty percentage for the wayleave is reasonable has to be considered.[332]As I set out earlier in this judgment Mr Troman had a tendency to be partisan in seeking to promote his client’s position. He is clearly a very knowledgeable mineral surveyor with considerable experience but unfortunately that slightly more partisan approach became more apparent when dealing with quantum. This should not have been an exercise in maintaining his figure against all comers but in considering the issues raised and in an appropriate situation accepting that his figure may have needed adjustment to take into account a particular factor.[333]I was also troubled by the fact that it appeared that he had not updated his assumptions from his 2019 valuation when preparing his 2024 expert report which appeared to have embedded wrong assumptions or outdated assumptions into his evidence.[334]The approach to calculation of the compensation to be paid for a mineral wayleave is by reference to the full market royalty. Once the full market royalty has been established it is necessary to look at the nature of the rights including the mineral rights and access. As the experts explained where the mineral owner and surface owner have to cooperate to get to and work the mineral the starting point could be 50:50 split. In the 50:50 split scenario the surface owner was receiving a wayleave – a payment for permission to extract the mineral through their surface rights. However, what was a reasonable split would depend on the circumstances. Mr Troman acknowledged that the full open market royalty value is ascertained by reference to both the mineral ownership rights and the access rights. The maximum royalty would assume that a single landowner owned all of the relevant mineral and access rights.[335]Mineral wayleaves are therefore based on a proportion of the full open market royalty which will adjust depending on the extent of the relevant parties’ rights and Mr Troman acknowledged that the level of the wayleave proportion of the market royalty was determined by how important the wayleave was overall.[336]Mr Troman had based his calculation on the market royalty at Woodsmith which was 2.5% GSR (he says that that figure could be higher). As a consequence, he considered that TCE royalty of 2.0% NMR was only 80% of the full market value. He considered that the TCE royalty would have been suppressed because it did not deal with access. This left 0.5% of NMR or 20% of the full market royalty value (or 25% of TCE royalty) available. This then allowed him to assume that the true figure was 2.5% with the 0.5% available for other rights owners who provided access rights. Of course, at the time the TCE lease was negotiated the Onshore leases were still providing free passage so there is no certainty about his assumption and there has been no evidence to support it.[337]There was no evidence to support Mr Troman’s read across from Woodsmith such that he imported the 2.5% to Boulby other than the logic above. Equally Mrs Iwanicki’s reference to the best consideration requirement for TCE would not affect Mr Troman’s argument on this issue because he has assumed that this was not about TCE but about an additional royalty for access to be paid by CPL which does not affect TCE’s %. However, the fact that there was no evidence to support the assumption does lead me to treat it with caution given my concerns overall about Mr Troman’s approach as set out below. Given what I say below the exercise of determining any market royalty, if necessary, will have to be redone in any event. That will provide an opportunity should it be necessary to consider what if any market royalty is fair and reasonable compensation which will include no doubt revisiting the starting point on some proper basis.[338]Mr Troman says that the cost of access should not be additional to a mineral royalty but be deducted from the payment to the mineral owner. He says that if the figures agreed between TCE and CPL therefore do not fully take into account the need to pay R1 for her rights that is a matter between CPL and TCE and does not alter R1’s entitlement to a wayleave royalty fixed by reference to the full market royalty. It may mean that CPL will be out of pocket until they renew their lease with TCE. He considered that a mineral owner such as TCE should have been entitled to at least 50% of full market value. Conceptually I accept that if he is right on all the other points that if the fair and reasonable compensation to be paid to R1 were to leave CPL short that is their problem.[339]Because of the assumptions he made (see below) he considered that R1 would be entitled to the balance of the full market royalty of 20% of 2.5% and that such a figure was fair and reasonable.[340]Mr Troman ultimately appeared to accept that there might be other owners who should receive some value, but he considered that should come out of the 2% not the 0.5% which he attributed to R1 although he accepted that the position could not be recalibrated until the TCE leases were renegotiated in 2035. He considered that it would mean that CPL would be paying no more than the full market royalty and would need to look to TCE to reduce the 2.0% when that lease is up for renewal in 2035.[341]Negotiations had been taking place for some time in relation to the appropriate measure of compensation. Mr Troman has maintained that the appropriate wayleave royalty was 20% of 2.5% of NMR since at least 2019. He was reinforced as to the reasonableness of his approach because Mr Duncan on behalf of R2 considered it should be 50% on the basis that the Rs had a ransom. As set out above the approach is not one of ransom but by reference to s.8(2) 1966 Act to determine what is fair and reasonable as between a willing grantor and willing grantee. I did not therefore find the reliance on Mr Duncan’s 50% nor the references to a ransom or Stokes v Cambridge negotiating damages to be of assistance when seeking to determine quantum. Nor does the fact that Mr Duncan on behalf of R2 maintained a position that 50% was reasonable provide any additional support for Mr Troman’s figure. Mr Troman needs to satisfy me that there is some proper basis for his 20%.[342]Mrs Iwanicki considers that Mr Duncan and Mr Troman’s figures are particularly high and do not reflect the circumstances. As set out above she does not consider that the comparables they rely on such as R1 Site 8 and R1 Site 9 are comparable since they include much broader property assets. I agree. She does not consider that relying on the wayleave royalties of around 50% is fair or reasonable.[343]Before turning to Mr Troman’s assumptions, Mr Troman says that given the risk of volatility in the market for polyhalite given the previous volatility of potash that a royalty and wayleave linked to a percentage of the sale price (net mine realisation NMR) is appropriate rather than a royalty expressed in £/tonne indexed linked to inflation.[344]The experts discussed the volatility of potash prices which they agreed can fluctuate wildly and be affected by global events. This can be demonstrated by its peak price shortly after the Russian invasion of Ukraine in 2022 which the experts agreed to be £918/tonne. Both agreed that polyhalite was a relatively new entrant to the market and there is less evidence available against which to consider whether there were any long-term trends. Mr Troman noted that the same level of volatility could not be ruled out when considering the terms on which to grant 50-year leases as sought in this case. Mrs Iwanicki simply points out that the £/t has been the way it has previously been approached at Boulby and that many other mineral owners prefer a fixed payment based on £/t rather than the volatility of a % of NMR.

Mr Troman’s assumptions:

[345]Mr Troman’s two main assumptions were(i) that the full market royalty was 2.5% NMR and(ii) that R1 had the entirety of the access rights required in order to get from the rock face to the public highway other than TCE’s rights. Consequently, Mr Troman considered that R1 was entitled to the entire difference of 0.5% NMR. He explained that the wayleave for access plus the TCE royalty for ownership should in aggregate equate to the full market royalty for the minerals worked and carried from the mine.[346]Mr Troman prepared a valuation for Rs in 2019 which was intended to persuade CPL that Rs position on wayleave and royalties should be adopted. It was not an expert report. When Mr Troman prepared his expert report in 2024, he appears to have carried across the assumptions made in the 2019 valuation without modification. Although in cross examination he sought to suggest that many of the factors identified by CPL either had been taken into account or made no difference despite not being mentioned in his report I was not persuaded by this. It did not align with his evidence about what he knew and when. Further in his evidence he did accept that there were at least some factors which would have formed part of a negotiation had one taken place. There was an additional factor which as a result of this judgment means that there is a further difficulty with Mr Troman’s figures. He had proceeded on the basis of an understanding of the extent of R1’s interest in the shafts with which I do not agree and which on the basis of his evidence ought to have a significant impact on his percentage royalty figure. Whilst I can have some sympathy with Mr Troman in relation to the assumptions he made about ownership of the shafts his apparent assumptions in relation to the other factors identified by CPL were more problematic as was his resistance to acknowledging that his figures might have needed to be adjusted to reflect those factors.[347]Mr Troman explained in his report that he calculated the full market royalty taking into account amongst other things the following:(i) the costs of direct vertical access to TCE polyhalite offshore would be prohibitive such that without R1’s rights and in particular her rights over the shafts the TCE polyhalite has no value.(ii) TCE lease pre-dated the end of the Onshore leases so did not take into account the need to pay for rights of access i.e. pay for passage, consequently the TCE 2% NMR cannot be regarded as full open market royalty as TCE no longer have rights of access without R1’s access rights to use the existing roads and the shafts.[348]Mr Troman accepted in cross examination that the assumption of full access rights required the mineral owner/TCE to have(i) ownership of the mineral,(ii) possession and control and the ability to use of all the roadways to get from the rock face to the bottom of the shafts(iii) possession and control and the ability to use the entirety of the shafts to the surface(iv) access to the surface to the public highway and(v) the right to process on the surface if that was required before it can be sold on.[349]Mr Troman was shown the plans and diagrams annexed to this judgment and asked about the new Onshore lease areas shown at Annex 2 which cover both inshore and coastal areas not owned by R1. He was also shown the locations of the main roadways and area 50. He accepted that there would be other roadways, airways and dewatering infrastructure that were not within R1’s control or ownership which would be part of the mine operation and included in some of the Onshore leases. They were not mentioned in either the 2019 valuation or the 2024 report. He said he did not consider them to be as important as R1’s roadways and the shafts. He explained that it was all about weighting.[350]However, they cannot have formed part of his assessment in 2019 because he said he was not aware of the need for the other leases interests and infrastructure which did not form part of R1’s interests. He accepted that he knew about the Onshore leases by the time he prepared his 2024 report. They are not referred to. It was not clear to me how the potential interests had been accounted for in his 20% or why no adjustment would need to be made.[351]Mr Troman was asked why he had not taken into account the ownership of areas 7 and 50 when preparing his 2019 report or his 2024 report. This seemed to me to be a significant factor given his assumption in relation to access rights.[352]In 2019 the owners of area 7 – one of the coastal arc leases - were co-owners of area B with R1. Area 7 was subsequently acquired by CPL. In 2019, given the predecessors in title to areas 7 and 50, it might be thought that ownership of those areas formed part of the basis for the calculation of 20%. It might explain the assumption in 2019 about control of access. By 2024 areas 7 and 50 were owned by CPL. Mr Troman accepted that the existing roadway crosses area 50. He also accepted that the new roadway would also cross area 50. Of the four main roadways which would be used by the mine Mr Troman accepted that three out of four of them crossed areas 7 and 50. Those areas were not owned or controlled by R1. The effect of CPL’s ownership of areas 7 and 50 was that R1 only had ownership interests for part of the areas through which the roadways passed. She no longer had the quality of access rights which formed the assumption underlying Mr Troman’s evidence.[353]Mr Troman accepted that the fact that R1 did not control all of the roads would mean that she would have to share a portion of the wayleave royalty with other owners but maintained that his figure of 0.5% already reflected that adjustment. He explained that although it was not shown in his calculations it is assumed in the difference between his 20% and 50% (being the figure proposed by Mr Duncan).[354]None of this evidence nor the apparent complex balancing weighting or adjusting of the figures to reach the 0.5% was recorded in the 2024 report. It had not formed part of his discussions with Mrs Iwanicki. He explained that he had formed a view that it was not critical to the valuation of R1’s interest even though it had formed part of the overall assessment.[355]It was very difficult to accept Mr Troman’s explanation as genuine when at the same time he explained he had not had the information or known about the location of the roadways or area 7 and 50 in 2019 when he prepared his report.[356]But his explanation became more convoluted when he then explained that the other factor, he had taken into account in reaching the figure of 20% was that CPL owned the surface. He considered that R1’s Reservation would have been sufficient to enable her to make use of the surface as part of her working rights although that was not recorded in either the 2019 valuation or the 2024 report nor in any of the joint discussions.[357]Mr Troman explained that he had already moderated his view on valuation by reference to CPL’s surface ownership rights, but this was not recorded in either the 2019 or 2024 reports. To the contrary the 2024 report appeared to maintain that the surface ownership was irrelevant because of R1’s working rights. He agreed that he had contradicted himself and reverted to the position adopted in his 2024 report.[358]This was however not consistent with what he had said he had considered but not recorded in his report in 2019 which included ownership of areas 7, 50, and CPL’s ownership of the surface and the ventilation and dewatering.[359]There was nothing in the 2024 report to explain how he had now taken into account these additional factors but still came out with the same figure overall for just R1. He continued to maintain that his opinion remained that 0.5% was a reasonable figure.[360]However, Mr Troman now agreed that ventilation and dewatering were essential elements for the operation of the mine and that R1 did not own or control all the areas required for ventilation and dewatering. Mr Troman accepted that no minerals were going to be taken from those areas. The new Onshore leases for those areas provided for a Certain Rent and free passage. None of them were going to receive an extraction royalty in relation to the new roadway. Mr Troman accepted those leaseholders may have had rights and an entitlement to seek a wayleave royalty just as R1 had sought, but he considered it could be accommodated in the difference between the 20% and the 50% and it did not require him to moderate his 20%. He now considered that other than R1’s interest in the shafts which was more significant and weightier those other leaseholders were in the same position as R1. He suggested that they should get something but not the full difference between the 20% and 50%. As his evidence progressed so each time a factor was identified that he considered might have required him to adjust his 0.5% he suggested he had taken it into account and/or anyone else should be compensated from the difference between 20% and 50%.[361]Part of Mr Troman’s rationale for proposing a wayleave royalty was that R1 was no longer going to receive any extraction royalty. In fact, of all those with interests in Boulby mine the only person who would now receive an extraction royalty was R1. Mr Troman appeared to accept it was about £100,000 pa for about 3 years a total of about £300,000 whilst the new road was built. He was asked how that was factored into his 20% given his rationale. He explained he had not known about the new roadway or the extraction royalty when he prepared his 2019 valuation. He did not appear to have taken it into account at all. It appeared on his analysis to be a significant missing element of the assessment.[362]By this stage CPL had identified a number of factors such as CPL’s acquisition of areas 7 and 50, the location of the roadways and the receipt of the extraction royalty which would appear to me to be factors that would have a direct effect on R1’s entitlement to and measure of compensation. In addition, Mr Troman appeared to accept that other Onshore leaseholders on his analysis may have had an entitlement to a wayleave royalty.[363]Mr Troman was given numerous opportunities to accept that at least some of these factors which he had not taken into account in his 2019 valuation might have caused him to revisit the compensation he proposed in 2024 or now. They had not been taken into account in the 2024 report which appeared to adopt the assumptions made in 2019. He was not prepared to concede that there should be any adjustment at all to his figures but rather maintained that any adjustments had either already been taken into account or where they related to other parties and could be accounted for in the difference between 20% and 50% and were essentially CPLs problem.[364]As he candidly accepted in evidence the calculation of the 20% was a balancing exercise – an art not a science. I certainly accept that in valuation there can be a range, but that range has to have some proper basis which I would expect to see articulated. Mr Troman accepted that he would not have necessarily put up the % if R1 had owned everything but nor would he have lowered it if he had known that R1 did not own everything. The most that Mr Troman was prepared to concede was that had someone raised these issues with him as part of the negotiations he would have taken them into consideration.[365]This point was explored in cross examination:
“Q. But if your factual premise is my client owns all the roads and having regard to that and everything else, I say 20%, somebody pops out of the woodwork and says, Mr Troman, that's not a quite right, she co-owns the road with the Armstrongs and the Neilsons(?), that would tend to suggest your valuation would go down, it would not stay the same, would it? A. If we actually had a reasonable negotiation over these percentages, which we never did, I would accept that that would be a negotiating point that I would take into consideration. Q. It tends to push the going rate down, doesn't it? A. It would. I'm not saying it would, but it would certainly bea consideration.”
[366]This did not seem to me to reflect well on his duty to the court in relation to the 2024 report. Assisting the court is not about entering into some partisan negotiation on behalf of R1. It is about independent assessment to the court. I want to know his opinion about the level at which he considers the compensation for the wayleave royalty should be set having regard to all the factors he now accepts should have been taken into account (some of which he says he did take into account). Should any of those factors have had a depressive effect on the 0.5% for R1?[367]It seemed to me that he should have reassessed the position in 2024 by reference to the factual position at the time. I do not consider that given these numerous factors which do not appear to have been addressed in the 2024 report that I can accept Mr Troman’s 0.5% NMR as having any credibility at all.[368]There was another critical factor in Mr Troman’s assessment both in 2019 and 2024 which he continually emphasised carried particular weight. I was clear from all his evidence that a significant part of the value of R1’s interests for the purpose of calculating the wayleave royalty was tied up in his understanding of her interest in the shafts.[369]In his 2019 report he went as far as suggesting they were the only part of the ownership that could not be excluded. By trial he accepted that the roadways were important and that the dewatering and ventilation infrastructure were important but maintained that none of those factors should be weighted as highly as the shafts.[370]Mr Troman resisted the suggestion that the shafts were just voids without any infrastructure and did not provide access to the surface. Mr Troman did not agree that controlling the winding towers, lifts, or infrastructure that enabled the shafts to be used was necessary – he characterised that as being no different to suggesting that in relation to a surface quarry one needed to own a truck to take the mineral from the quarry to the plant.[371]Mr Troman’s evidence was that the lifts and winding gear were simply part of the equipment of the mine. It did not form part of the calculation when assessing the full market royalty which was focussed on the property owners’ interests and access but not the mine infrastructure. Even if the mineral owner had property rights, they would not necessarily own the winding gear, shaft infrastructure or head gear but either they or their operator/tenant would have use of the infrastructure to bring the mineral to surface. Mr Kimblin focussed on Mr Troman’s evidence about the infrastructure but whether Mr Troman is right or wrong about the infrastructure the more problematic issue for valuation purposes was his approach to the shafts and the other factors identified above.[372]Mr Troman accepted that if CPL were right and R1 did not own the shafts in full but had ownership of the relevant mineral strata and rights over the balance of the shaft to enable her to work her own minerals and thus was a co-owner with CPL that it would have affected his valuation which would have come down.[373]Given my determination in relation to the shafts which Mr Troman emphasised carried particular weight in relation to his assessment of the compensation it is clear that his 0.5% NMR will need to be adjusted to reflect that change.

Conclusions on Wayleave Royalty:

[374]The effect overall was that I do not consider that on the basis of the evidence available I am satisfied that Mr Troman’s figure for the wayleave royalty can be supported. I cannot be satisfied about the underlying basis for it for the reasons set out in this judgment as a consequence of which having regard to the circumstances the demand for a wayleave royalty of 0.5% was unreasonable because of the way in which it has been calculated and the factors which either have not been taken into account or for which there is no evidence that they have been taken into account. It does not therefore reflect fair and reasonable compensation between a willing grantor and willing grantee.[375]For completeness nor do I consider it appropriate, as CPL propose, to adopt the figure included in Mrs Iwanicki’s 2019 report as the appropriate royalty for any wayleave. That report was undertaken in relation to what were then called the strategic leases. The interests as between the parties have changed not least because of CPL’s acquisition of areas 7 and 50. It too would need to be revisited.[376]If I am wrong about the unreasonableness of a wayleave then the parties will need to go back to the drawing board in respect of the appropriate royalty for that wayleave based on the true position as between the parties taking into account, the various factors above.