Mines and minerals: What developers need to know

11th November 2019

David Manda and Claire Acklam, specialists in Real Estate Litigation and Commercial Dispute Resolution with particular experience in development disputes, offer legal and practical advice on how mines and minerals rights may impact or interfere with the development of land.

What are the issues?

When it comes to land ownership, the starting point is that the owner of surface land owns the airspace above it and everything beneath or within the land down to the centre of the earth. However, ownership of different vertical levels of land can be severed in a variety of ways [1], giving rise to a divergence in ownership between levels. That can impact whether, and how, land or anything within it can be accessed and/or used.

A divergence in ownership between the mines and minerals underground (or rights or reservations relating thereto) and the surface of the land can give rise to potential problems in the development context because, in these circumstances, any works or disturbance below the surface constitute a trespass. Depending on their motivation, therefore, a mines and minerals owner could delay or even prevent development, and/or could ‘ransom’ the surface owner to allow development to proceed.

What claims might a developer face?

The key concerns facing a developer are that a mines and minerals owner can threaten an injunction to prevent, or even undo, development; and/or a claim for damages (financial compensation).

Injunctions

Injunctions are an equitable remedy. That means that the award of an injunction is underpinned by fundamental fairness and decided by the court at its discretion.

The court will undertake a balancing exercise when exercising its discretion and will consider [2].

The [3] guidelines are used by the courts when deciding whether to grant an injunction. The guidelines consider:

• whether there is a serious, arguable case to be tried;
• whether damages would be adequate as a remedy [3];
• the ‘balance of convenience’ (i.e. which party would suffer the greatest prejudice were an injunction to be granted or not to be granted); and
• whether the status quo should be maintained.

In addition, the court will apply certain principles of equity including:

• the equitable maxim of clean hands. That is, anyone looking to equity for a remedy must be free of wrong doing him/herself; and
• the doctrine of ‘laches’ (delay). Delay can cause unfairness in itself and so an equitable claim may be barred if it is not brought within a timely manner.

The parties’ conduct can, therefore, be taken into account. For example, the doctrine of laches could constitute a defence to an injunction where a mines and minerals owner had, say, allowed a site to progress through the planning process, with the developer having been put to significant time and expense, before threatening an injunction at a late stage. Equally, however, if a developer proceeded without giving appropriate notices, without obtaining planning permission or acted in breach of covenants or undertakings, then an injunction may be appropriate even where the actual infringement or trespass itself is minor [4].

Damages

The law in relation to damages for mines and minerals trespass is not straightforward. There are a number of possible bases on which the calculation can be made. A claim brought by a mines and minerals owner could comprise one or more of the following types of damages (in addition to each other or as alternative claims) depending on the circumstances of the particular case.

• If a mines and minerals owner proves interference with his title then, unlike with other causes of action, he is entitled to recover nominal damages, even if he has not suffered any actual loss.

• If the trespass has caused the mines and minerals owner actual damage, he is entitled to receive such an amount as will compensate him for his loss. That is likely to be based on the value of the diminution of the mines and minerals title.
• If the developer has benefited as a result of its trespass, the mines and minerals owner may be entitled to receive ‘gain-based’ (or ‘negotiating’) damages, calculated by reference to such sum as should reasonably have been negotiated and paid by the developer in return for consent for that interference/trespass [5].
• Where there is an oppressive or arbitrary trespass, where there are aggravating circumstances or where the rights of the mines or minerals owner have been disregarded with the object of making a gain by unlawful conduct, exemplary (or ‘punitive’) damages may be awarded.
• Finally, although damages are normally awarded only for loss that has already been suffered, in an appropriate case the court may award damages in lieu of an injunction in respect of anticipated loss which the claimant has not yet sustained.

What practical advice arises?

So, what practical steps can be taken to avoid or mitigate the threat of an injunction and/or damages claim?

• Information is power. When undertaking site investigations from the earliest stage, developers should undertake research as to title with a particular focus on mines and minerals ownership. Developers should also obtain, as far as possible, a detailed history of property and its uses over time – both at and below the surface. As well as flushing out potential mines and minerals issues before significant time and cost are incurred, such research can potentially arm developers with legal and factual arguments which they may wish to rely on later down the line.
• Where any claim is intimated, developers should query exactly the scope and extent of the mines and minerals ownership and/or rights/reservations claimed and should put the [potential] claimant to strict proof as to its title. Mines and minerals ownership information is notoriously difficult to prove, particularly where historical conveyances may have been lost over time, or where use of the property over time is inconsistent with the claim being alleged. (For example, is there any scope for the developer (or any other party?) claiming adverse possession of the mines and minerals title through long-standing and continuous use; or has the value of any mines and minerals been diminished or exhausted over time?)
• Developers should also undertake surveys to confirm the geology of the site. As well as helping to establish the existence of and ascertain the likely value of any mines and minerals, geological surveys can inform as to what will be the actual impact of the proposed development on claimed mines and minerals ownership/rights/reservations.
• Developers should assess whether there is any scope for proceeding with the development as planned, or with some changes. If so, that may impact, or even wholly undermine, the likely value of any ‘ransom’ or negotiating damages.
• In most cases, particularly where the existence or identity of any mines and minerals owner is unknown, it will be prudent to obtain indemnity insurance to protect against potential claims.
• Finally, be on your best behaviour! The importance of interacting positively with neighbours and adjacent landowners before undertaking development, so that they are adequately consulted regarding any relevant proposals, cannot be underestimated when it comes to mitigating potential mines and minerals claims. Trying to carry out works surreptitiously will rarely be successful and will be regarded unfavourably by the courts. Behaviour and conduct can be relevant for the grant of an injunction, for the award of exemplary/aggravated damages, and when it comes to the question of costs.

WM Comment

This article necessarily gives only an overview of the various legal and practical issues associated with mines and minerals ownership. For tailored advice and tactical solutions in relation to any individual site, please do not hesitate to contact David or Claire, who will be very happy to provide expert assistance.

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[1] Examples of means of severance include: a transfer or lease of mines and minerals, or of the surface excepting mines and minerals; Acts of Parliament and Crown grants (which vest gold, silver, petrol and coal in the Crown and Coal Authority respectively); or adverse possession.
[2] These considerations are known as the Americal Cyanamid [1975] UKHL 1 guidelines
[3] In the case of Coventry (t/a RDC Promotions) v Lawrence [2014] UKSC 13, the Supreme Court held that the public interest, if it arose, would be a relevant factor when considering whether the court should award damages in lieu of an injunction.  It commented that, in some cases, the grant of planning permission might provide strong support for the contention that the development was of benefit to the public, which would be relevant to the question of whether or not to grant an injunction.
[4] Coventry (t/a RDC Promotions) v Lawrence Ibid; Ottercroft Ltd v Scandia Care Ltd Unrep, 6 July 2016 and see our earlier briefing
[5] See our briefing for further information and advice on ‘gain-based’ damages