Mines and minerals: Exception or reservation from transfer?
[Read time: 4 minutes]
In the recent case of ARC Aggregates Ltd (ARC) v Branston Properties Ltd (Branston)  EWHC 1976 (ch), the High Court looked at the interpretation and construction of the words in two transfers to decide whether the mines and minerals were the subject of an exception or reservation.
The decision emphasises the importance of clear drafting to effect the parties' intentions.
The property consisted of agricultural land that had been sold by ARC by two transfers in 1988 and 1989. Branston subsequently purchased the property from the original transferees.
The 1988 transfer defined the land transferred as "Red Land" and neighbouring retained land as "Blue Land".
Clause 2(a) of the 1988 transfer provided that:
"The Red Land is transferred:- EXCEPT and RESERVING to the Transferor for the benefit of ... [the Blue Land] ...
- All such quasi-easements or rights or privileges ... as are now or usually enjoyed by the Blue Land over through or from the Red Land ...
- (ii) All mines minerals and mineral substances lying beneath the surface of the Red Land at a depth below the lowest level or past excavation carried out by the Transferor and its predecessors in title but without the right to work or get the said minerals or mineral substances"
Very broadly, under Clause 3(c), the transferee covenanted not to extract minerals from the Red Land.
The 1989 transfer contained very similar provisions and comprised the Blue Land referenced in the 1988 transfer. ARC retained further neighbouring land.
Following its purchase of the property from the original transferees, Branston began to develop the land. ARC objected to this; claiming that it was the freehold owner of the mines and minerals beneath the property and that Branston had encroached upon them resulting in trespass. Branston had also removed some of the minerals for profit during the development works. Broadly, ARC sought a declaration that it was the said freehold owner and an injunction to restrain Branston's encroachment.
Unsurprisingly, Branston counterclaimed for a declaration that ARC held only an incorporeal easement, right or privilege in respect of the mines and minerals.
The parties each applied for summary judgement.
High Court decision
The key question that the Court had to decide was whether ARC was the freehold owner of the mines and minerals beneath the surface of the property or whether it simply retained an incorporeal right in the nature of a profit à prendre.
In reaching its decision, the Court considered the ways in which a transferor of land may retain an interest in the mines and minerals beneath the surface upon transfer of that land. Two ways were identified and distinguished (paragraph 25 of the judgment):-
- Exceptions – A transferor may except the mines and minerals from the transfer altogether so that they are not conveyed at all. The mines and minerals would then remain with the transferor.
- Reservations - Alternatively, a transferor can simply reserve an incorporeal right by way of a profit à prendre.
With this in mind, the Court then went on to consider the interpretation of the two transfers.
The 1988 Transfer
It was held that the mines and minerals were excepted from the transfer.
The key difficulty here was that the draftsman of the 1988 transfer had combined the boilerplate phrase "except and reserving" in clause 2(a) and had also included the wording "for the benefit of… [the Blue Land]" (see above). It was unclear whether the transfer was intended to contain any exceptions or not. The Court confirmed that the correct approach to determining which parts of clause 2(a) were exceptions or reservations was to have regard to the clause wording in the context of the agreement as a whole.
Following a detailed analysis of the factual matrix and the wording used, the Court concluded that clause 2(a)(ii) was properly intended to except the mines and minerals from the transfer altogether. In reaching this decision, the Judge noted the fact that the draftsman had specifically excluded the right to work to get the minerals (an essential element in a profit a prendre) as strongly reinforcing the conclusion that the clause was intended to except the mines and minerals from the transfer.
The 1989 Transfer
The 1989 transfer was said to have differed in several respects from the 1988 transfer, but these only sought to reinforce the conclusion that it, too, contained an exception (rather than reservation) of the mines and minerals.
Branston's application for summary judgment was dismissed. Summary judgment was instead granted in favour of ARC.
A useful reminder…
Whilst every case will turn on its own facts, this case serves as a useful reminder that exceptions and reservation are two distinct concepts and should be treated accordingly. If the parties intend to "except" something from a transfer of land etc, this should be made clear on the face of the document, otherwise parties may find themselves involved in a costly row, later down the line, disputing the interpretation of the words used.
It is interesting to note that the Land Registry's title for the 1988 transfer included an entry that the mines and minerals were excluded from the registration as they were excepted from the transfer. The Judge rejected that this was conclusive. This emphasises the importance of effective due diligence, which goes beyond what is stated on the registered title.
At the time of writing, this decision has been appealed to the Court of Appeal and therefore this might not be the end of the story for ARC and Branston.