Home Information Cases Homepace Ltd v Sita South East Ltd (2008)

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Homepace Ltd v Sita South East Ltd (2008)

Summary

A surveyor's mineral exhaustion certificate certifying that the minerals on the land were not economically recoverable was issued on a mistaken basis, because he had misconstrued what was meant by "the minerals", and that error vitiated the certificate.

Facts

The appellant tenant (S) appealed against a decision that a certificate issued by an expert under a lease was not valid. The lease was of land including a disused quarry which had planning consent for the extraction of limestone and backfilling the quarry with waste material to restore the land to agriculture. The lease demised much more land than had the benefit of that permission. Applications to extend the planning permission to more of the land had been refused and there was no prospect of such permission being granted. The respondent landlord (H) reserved the right to take up to 12,000 tonnes each year of the top layer of limestone which was suitable for use as building stone. S was liable to pay an annual rent but the liability to pay could be suspended and the lease terminated by giving notice accompanied by a surveyor's mineral exhaustion certificate certifying that the minerals on the land were exhausted or were not economically recoverable and there was no reasonable prospect of them becoming economically recoverable within the next 10 years. A surveyor (J) appointed by the parties issued a certificate under the lease that the minerals were not economically recoverable. He explained that he did so taking account only of the minerals and not of the reserved minerals, meaning all limestone suitable for building. The judge held that J had thereby misconstrued the definition of minerals and that his certificate was invalid. H submitted that the reserved minerals only extended to the building stone that it extracted each year, and that S could extract all the rest of the building stone as well as the lower strata, even if, sooner or later, that left H with no more building stone available to it under the reservation, and that accordingly J had misconstrued the definition of minerals.

Held

(1) The binding effect of an expert's determination depended on the terms of the contract under which the determination was made, both as to what it was that the expert had to decide, and as to how far his decision was binding on the parties. In each case it was necessary to examine the determination, in order to see whether it lay within the scope of the expert's authority. If it did not, then it had no effect as between the parties. If it did, then the contract also governed the question whether the determination was binding or whether, and if so to what extent or on what grounds, the determination could be questioned, Jones v Sherwood Computer Services Plc (1992) 1 WLR 277 and Mercury Communications Ltd v Director General of Telecommunications (1996) 1 WLR 48 applied. (2) Despite the absence of any words such as "final and binding", the surveyor was given exclusive power under the lease to determine the questions to which his certificate was directed. J need not have responded to the requests for clarification of his certificate and his report. If he had not done so, he could not have been compelled to explain himself. However, since he did so, and thereby made clear the basis on which he had proceeded, the court had to look at his explanations when considering whether the certificate was prepared on the correct basis. (3) The definition of the reserved minerals was puzzling, but the implications of the rival interpretations were such that H's reading was clearly to be preferred. H was only able to take for itself 12,000 tonnes of building stone in any year, and S would be entitled to sell as building stone any stone suitable for that purpose which it in fact extracted. (4) J accordingly erred by proceeding on the basis that S was not entitled to remove from the land any limestone which was suitable for use as building stone. On the correct construction of the lease J should not have left the reserved minerals out of account, or at most he should have disregarded 12,000 tonnes as one year's entitlement on the part of H. (5) It was for J to come to his own view as to whether the minerals were no longer economically recoverable but his certificate was only effective under the lease if it considered the question of economic recoverability by reference to the correct definition of the minerals, National Grid Co Plc v M25 Group Ltd (No1) (1999) 1 EGLR 65 applied; P&O Property Holdings Ltd v Norwich Union Life Insurance Society (1993) 1 EGLR 164 distinguished. J's certificate did not proceed on the correct basis and was not binding between the parties or effective under the lease.

Appeal dismissed

Court of Appeal
Waller LJ (V-P), Smith LJ, Lloyd LJ
Judgment date
15 January 2008
References

LTL 15/1/2008 

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