Cleveland Potash Limited v The Honourable Mrs Ferelith Drummond & Ors

THE HONOURABLE MRS FERELITH DRUMMOND

CLASSIC LODGES

MRS JEAN MORALEE

Introduction

This case is about the ownership and exploitation of four parcels of land in North Yorkshire situated very close to the North Sea coast between Saltburn and Whitby.

On 9 December 1946 the First Respondent’s father, the late Mr Mark Palmer conveyed three of these parcels subject to an exception and reservation (“the Reservation”) contained in conveyances of that land in the following terms.

This is the trial of a preliminary issue as to the effect of the Reservation and the wording “the mines beds and quarries of ironstone and iron ore and other metals”. In particular, the court is asked to address whether the Reservation means that the First Respondent now owns or has any interest in the existing mines, beds and quarries of potash and salt and related rights in these parcels of land (“the Parcels”) named as areas B, C, Q and V on a plan attached to the particulars of claim, involving in total around 350 acres.

The meaning of the Reservation matters because the Applicant owns and operates Boulby Mine in the same locality as the Parcels. Boulby Mine is described as the UK’s most important non-hydrocarbon mine. From around 1973 until 2018 the Applicant extracted potash and salt from the area (including the Parcels), and it owns the freehold of the Parcels. Since 2018 it has extracted a substance called polyhalite off-shore from land beneath the North Sea on this area of the coast. It no longer mines from the on-shore land but it needs to use the underground tunnels created on-shore (including tunnels under the parcels).

The Applicant’s primary position is that it owns the tunnels and the beds of potash and salt in the Parcels, because they do not fall within the Reservation, while the First Respondent says she owns them because her father reserved ownership under the Reservation (and she succeeded over his rights).

These proceedings were issued by way of Part 8 claim form on 21 April 2023 under which the Applicant is seeking a declaration of its rights over the Parcels. The Applicant made an application to the Secretary of State on 7 June 2022 seeking the compulsory grant of a lease under the Mines (Working Facilities and Support) Act 1966 over two separate pieces of land owned by the Second and Third Respondent (and seeking such leases over the Parcels if it is wrong on its construction of the Reservation). The Secretary of State referred that application to the High Court on 8 February 2023.

On 17 October 2023 Master Brightwell ordered the trial of a preliminary issue as to the construction of the Reservation and gave permission for the parties to adduce expert evidence from a mineral surveyor in relation to that issue.

The Secretary of State is named as referee in these proceedings but did not take part in the trial.

The Issues

The central question before me is as to the meaning of the Reservation in the conveyances, and in particular the term “the mines beds and quarries of ironstone and iron ore and other metals” and as to whether potash and salt fall within the wording of the Reservation. There was no list of issues but the main issues that arose in answering that question can be described as follows:

The Law

The conveyances in issue are legal documents for the transfer of ownership of the Parcels pursuant to contracts for the sale of land. On the law both sides accepted that the issue to be decided was a matter of contractual interpretation.

There was common ground that the basic principles of contractual interpretation to be applied are set out in Investors in Industry v West Bromwich Building Society [1998] 1 WLR 896, 912-913 and Wood v Capita Insurance [2017] UKSC 24. A useful summary of the principles is Lord Hodge’s statement in Wood v Capita [10-11]

The relevant date for testing the parties’ objective intentions is when the contract is made. In the skeleton arguments this was put forward as the date of the grant, (i.e. the conveyances of December 1946/January 1947) but at the hearing the Applicant put forward the auction as the date of sale (i.e. 26 September 1946). It was not necessary to decide which (references to 1946 in this judgment relate to all these dates including 16 January 1947). However, the date of the conveyance was the more applicable date since this was the instrument in issue, and the date when the agreement was executed.

It was also common ground that the case of Earl of Lonsdale v Attorney General [1982] 1 WLR (“Lonsdale”) is relevant to assist in the interpretation of the Reservation. The case was about the construction of a reservation of “mines and minerals” which was a fairly common wording (also found in a number of statutes). The wording here is different but the approach remains useful, as shown by Wynne-Finch v Natural Resources Body for Wales [2021] EWCA Civ 1473) (“Wynne-Finch”). In Lonsdale Slade J provided an important survey of a great deal of case law on the construction of that wording spanning the 19^th and the 20^th centuries. These reservations (and disputes relating to them) were quite common when land was conveyed for the purpose of building canals and railways. Slade J provided a valuable summary at p924-925:

There have been relatively few cases where the direct evidence is conclusive as to a vernacular usage or meaning (for example it was not found in Darvill v Roper [1855] 3 Drew 294 and Wynne-Finch. However, in the absence of direct evidence of the vernacular meaning, the court will go on to draw inferences as to that meaning. That exercise is comparable to the more recent authorities’ explanation of ascertaining the objective meaning of the language in its wider context, as suggested in Wood v Capita, and both parties relied on that approach.

There was an issue as to the significance of vernacular understanding as to whether potash could be commercially extracted for the purpose of profit in 1946.

The First Respondent maintained that potash (and salt) was commercially extracted at the time and the parties would have been aware of this, even if it had not yet been mined in the UK. Her counsel relied on Slade J saying that it is irrelevant that the parties did not have the substance in mind, and accepting that a reservation of this type may apply even if the existence of the substance was unknown (Lonsdale, p905H).

The Applicant relied on Slade J’s suggestion that a court must take account of the general state of knowledge of the relevant substance at the date of the grant and the way in which it was then regarded and treated as a commercial matter (p925C). It submitted that Slade J’s principle (3) in Lonsdale refers to inferences drawn as to knowledge of dealing with the relevant minerals “in this country” so that extraction of a mineral outside England would not be sufficient to establish relevant vernacular understanding of its commercial potential. More generally, it relied on Mrs Iwanicki’s evidence that potash was not recognised as a commercially viable mineral in the UK in 1946, and not mined there to suggest that it was not covered.

On the first point I prefer the Respondent’s position, namely that foreign exploitation of a mineral may be sufficient to give rise to a relevant vernacular understanding that a mineral can be commercially extracted. Slade J’s reference to knowledge of dealing with the mineral “in this country” (in principle (3) of his summary set out above) was made for the purpose of identifying the relevant group that make up the mining, commercial and landowning world. The court is investigating the vernacular of the mining and commercial world in England rather than elsewhere. Lonsdale was dealing with the rights of the Crown, and many of the other authorities were dealing with the construction of legislation for compulsory purchase of land in England and Wales (or Scotland) so it was unsurprising that the term was being assessed against mining “in this country”. However, this provided no basis to suggest that a reservation of this type cannot apply to a mineral unless it is recognised to be commercially viable to extract within the relevant jurisdiction. Indeed, the factual investigation in Lonsdale covered mining in many jurisdictions.

On the more general point, knowledge of whether a mineral can be commercially exploited at the relevant time will be relevant as to whether the parties would have bargained to reserve it. Slade J in Lonsdale (see p918F) suggested that if it would never have occurred to the parties to reserve the mineral in question then that mineral is unlikely to have been reserved. Lonsdale and Wynne-Finch shows that a reservation will not generally be construed as covering a material unless it is recognised at the time that it can be commercially extracted for the purpose of profit.

However, the recognised potential economic interest need not be immediate, local or significant. While this type of reservation may protect minerals known to exist in commercially viable quantities, an equally important purpose may be to reserve rights over minerals where there is uncertainty as to their existence or future exploitation. The authorities show that this type of reservation is not generally entered into for the purpose of immediate commercial exploitation of minerals known to be present or potentially present. They are primarily designed to preserve mining rights where land is being purchased for other purposes such as farming or building a canal or railway. If the parties knew there were minerals that were worth extracting for commercial gain then they would be more likely to use different terms regulating exploitation in much greater detail (and indeed a sale might be surprising).

The Reservation of a mineral involves an allocation of risk where the parties will rarely know what minerals will be exploited in the future. A workable reservation does not necessarily require common knowledge that a mineral is worth extracting from the land in question, or the likely potential for such extraction, or even its existence. However, evidence of what the parties would objectively have understood will influence the conclusion as to what they were contracting for. This may include the expected purpose of a reservation, the type of working allowed and the intended economic exploitation.

As Slade J suggested, the parties’ knowledge provides pointers but may not be decisive. The weight of the evidence will depend on the context, including the mineral and land in question and the working terms by which any mineral can be extracted.

Where a mineral has a low value and will be used locally then knowledge of local use and exploitation is likely to be relevant to decide whether its extraction would have occurred to the parties, and also the related questions as to whether it is extracted for the purpose of profit and whether its use is exceptional (as in Wynne-Finch v National Resources Body for Wales [2021] EWCA Civ 1473 and Waring v Foden [1932] 1 Ch 276). However, if the disputed substance is sought after and traded internationally then it may not be necessary to establish that it is exceptional although knowledge of potential exploitation may be relevant in testing whether its extraction was bargained for (as in Lonsdale).

Evidence

The Applicant instructed Mrs Jane Iwanicki who is a chartered mineral surveyor and holds the title of Crown Mineral Agent. She was asked to give her views on the meaning of the wording of the Reservation from a mineral perspective and whether the mining/commercial world would have regarded rock salt as a metal at that time. The First Respondent instructed Mr David Sandbrook who is also a chartered mineral surveyor.

Both experts gave helpful evidence. Mrs Iwanicki was an extremely knowledgeable expert. She provided a very helpful and impressive report on the relevant terrain, the mining and geological history and understanding of the substances and terms under consideration. She had a stronger grasp of the relevant mining and commercial world, and deeper knowledge of the area in question than Mr Sandbrook.

However, she was effectively asked to give her opinion on the construction of the conveyance. To a lesser degree Mr Sandbrook was also drawn to do this. Construction is a matter of law and this part of their evidence was of very limited relevance. It also meant that the oral evidence was less helpful than it might have been because, unsurprisingly, the experts tended to defend their opinion on the construction of the conveyances. Lonsdale justifies reliance on expert evidence on the vernacular usage or meaning of specific words or phrases. Expert evidence of history, geology, land use and matters of technical and market practice may also be required for the court to understand the factual matrix. However, Lonsdale does not justify having opinions from experts on the construction of conveyances. For similar reasons the evidence of views expressed by experts instructed in the proceedings issued in 1969 on the effect of the conveyances was of limited relevance.

The applicant served several witness statements setting out much of the factual background. These included two statements from Ms Iwanicki relating to factual matters and statements served in relation to separate applications, much of which did not relate to the issue before me.

Findings on substances that are present and have been mined

The Applicant rightly maintained that the preliminary issue is about the use of language. Before considering the disputed language and facts it is perhaps helpful to highlight substantial consensus between the parties on much of the language, meaning, content and categorisation applied to many of the substances relevant to the dispute. The findings below are drawn from the witness and expert evidence and reflect ordinary meanings rather than technically precise scientific definitions.

There was also much common ground as to what was present and mined. In brief, there have been two very different eras of mining in this area. First, there was extensive ironstone mining in the locality of the Parcels between around 1860 and 1934 because ironstone was used for producing iron. The mines were owned by businesses run by the First Respondent’s family. Ironstone mining in the wider Cleveland area stopped completely in 1964. Ironstone was mined at around 40m depth.

The second era has been the Applicant’s modern day mining in the same locality at very much greater depths (over 1000m below ground level) for evaporite minerals used for fertilisers, with rock salt as a by-product. The Applicant mined for potash (mainly sylvinite) and rock salt at such depths between 1973 and 2018. Since then the Applicant has been mining polyhalite off-shore in nearby areas under the seabed (at similar depth).

There was much agreement as to the substances under discussion.

There was much debate as to the meaning of the word “metals” in the Reservation. However, there was no dispute as to some aspects of the meaning of that term and its application. The experts agreed that iron (Fe), sodium (Na) and potassium (K) are metals, and they are also described as metallic elements. Both experts used the chemical symbols (i.e. letters such as Fe) commonly used for them.

Iron is a metal in very common use with metallic qualities such as lustre, hardness, an ability to conduct heat and electricity, and ductility. However, in the context of mining, iron is not found in economic quantities in nature in what Mrs Iwanicki described as its metallic or native state. This state was also sometimes described as the elemental, natural or pure or near pure form of the metal (generally referred to hereafter as a native state). An example of a metal in its native state would be a new iron nail.

More generally, metals in their native state are not found in nature in economic quantities other than precious metals such as gold and silver.

Sodium and potassium are highly reactive with air and water, and are not ordinarily found in their native state other than for laboratory use. They can be isolated in their native state from compounds such as NaCl or KCl through electrolysis.

The experts did not attempt to identify a definition of metallic qualities but it was acknowledged that potassium and sodium lack some of those qualities since they are reactive. Both experts’ evidence was that the metallic element potassium (K) is an essential constituent of plant and animal life.

The parties’ positions on construction of the Reservation

The Respondent’s case

The Respondent’s case was that the Reservation must be construed against the whole wording and taken in the overall context of the conveyance. The obvious purpose of the reservation was to retain the vendor’s interest in the future value of mining minerals on the land, because it used broad language and interchangeable references to “mines”, “mines and minerals” and “any minerals”.

In 1946 potash would have been regarded as a mineral of exceptional use and value for commercial exploitation because the presence of potassium makes it a good fertiliser.

The mining, commercial and landowner world would have understood the reference to “other metals” in the Reservation as a reference to minerals which yield a metal of some utility. That would include potassium by reason of its uses in industry and agriculture, and the very considerable quantities which the market required.

The First Respondent also relied on Mr Sandbrook’s view that people in the mining and commercial world and landowners would have regarded natural sources of potassium and sodium as metals. The evaporite minerals are regarded as metallic salts. As potassium is a metal, natural sources of that metal such as sylvinite were commercially extractable and of exceptional use as a fertiliser, and would be considered within “metals” within the vernacular of the mining, commercial and landowning worlds. The Reservation for “other metals” should be read as “other sources of metal”.

The First Respondent also relied on the remarks in the auction particulars and the fact that the Reservation was very comprehensive as to the facilities for mining which were reserved (it included both underground and open mining, quarrying, and roadways). The Reservation was not limited to substances that the parties would actually or objectively have had in mind at the time of the conveyance, but also reflected their intention to secure the vendor’s position as to future exploitation of the land.

The Applicant’s case

The Applicant’s case was that the Reservation was not effective to reserve ownership of potash and rock salt. It acknowledged that the term “other metals” gave the Reservation broader effect than reserving ironstone and iron ore.

The Applicant also accepted that “other metals” had a wider meaning than metals in their native state. This was a sensible (and necessary) approach since “other metals” could not meaningfully be construed in this context as referring to metals in their native state as this would give the words no practical effect (and made little sense taken alongside the reservation for ironstone and iron ore). The only metals found in economic quantities in a native state are precious metals and, as Mrs Iwanicki commented, these would generally be categorised separately at a commercial level.

The Applicant’s acknowledgment that the Reservation was not limited to metals in their native state was important. It meant that neither side was suggesting that “other metals” meant metals in their native state.

The Applicant’s case in its skeleton argument was that “other metals” only captured metalliferous minerals (or metallic ores) extracted to produce other metals with typical metallic qualities (such as tin, copper, lead etc). The Applicant submitted that rock salt and potash are only extracted in order to use the compound rather than for the purpose of producing the pure metals which are too reactive to be kept or used outside a laboratory. The Applicant further explained that the term “other metals” covered a mineral from which conventional metals in their pure or near pure form (also described as their native state) could be derived for economic use. They also submitted that it would depend on whether the metal in its pure or native state would have economic importance or display the qualities giving metal its economic importance, i.e. whether it is strong and workable etc.

The Applicant asked the court to find that in the vernacular of the mining, commercial and landholding world (whether now or in 1946) salt and potash are not regarded as metalliferous minerals. It argued that in the vernacular world, evaporite minerals such as rock salt or potash do not fall within metalliferous minerals. In opening the Applicant further explained its case submitting that “metals” meant metal ores or metalliferous minerals where the target mineral is a metal end-product as opposed to something which happens to have metal within its compound formation, and can only exist as a compound.

In closing submissions it submitted that the Reservation for “other metals” meant metalliferous minerals producing metals in a simple form, also described as everyday metals. The Reservation did not include minerals which are composed of metal compounds unavailable in nature in their pure or native state (i.e. where the metal does not ordinarily exist in its native state). The Applicant did not attempt to define everyday (or conventional) metals but it mentioned tin, copper and lead minerals as falling within the reservation and maintained that elemental potassium cannot be used as an everyday metal.

The Applicant argued that the wording should be given its meaning as a matter of common sense rather than as a matter of chemistry or the periodic table. A substance is not regarded as a metal just because it contains metallic elements (foods such as milk and bananas are not ‘metals’ even though they are important sources of calcium and potassium). Sodium and potassium display none of the metallic qualities for which metals are produced and traded and which gives them economic importance. In the vernacular of the mining, commercial and landholding world of 1946 salt would not be regarded as a metal or a metalliferous mineral. In the mining world metalliferous minerals are materials used to produce hard, malleable metals and the preceding words of the reservation establish that this is the conception of “other metals” being deployed.

Other common minerals contain metals (e.g. limestone which contains calcium) but it would be wrong to regard a limestone quarry as an example of metalliferous mining.

The Applicant also relied on canons of construction including ejusdem generis to support its main argument. It also alleged that potash and rock salt were not recognised as a commercially viable resource in the UK in 1946. These aspects are addressed below in more detail.

The factual background against which the conveyance was made

The area of North Yorkshire surrounding the Parcels has a very rich history of mining and commercial activity, which has been carefully preserved. The economic need for industrial resources also led to investigation of the geology of the area. The following findings largely reflect matters which were not in dispute.

As Mrs Iwanicki explained, the main solid geology of this part of North Yorkshire is a succession of sedimentary rocks formed during the Permian period around 225-300 million years ago. These rocks are predominantly evaporites (also called salts) formed by the evaporation of a vast ocean stretching from Yorkshire to Poland. These evaporites were formed first and are at great depth. Above the evaporites are much younger sedimentary rocks including sandstones and mudstones deposited in the Jurassic period, some 180-190 million years ago. Over time these deposits became saturated with iron-rich fluids at depth. This series of sedimentary rocks includes the Cleveland ironstone beds (described in geological terms as forming part of the Middle Lias). The main ironstone seams lie at depths of 36-42m below ground level.

This broad geological history of the area (including the presence of salt deposits) would have been known in the mining and commercial world in 1946 as shown by the materials relied on by Dr Alexander Fleck, (who later become Baron Fleck and chairman of ICI) in a lecture entitled “Deposits of Potassium Salts in North East Yorkshire” given in Newcastle on 17 October 1950 to the Newcastle section of the Society of Chemical Industry (also published with the same date in a 15 page article in a publication called Chemistry and Industry).

Mining activity in the wider area of the Parcels goes far back. There was a huge expansion of mining in Victorian times alongside significant industrial activity in the area including railways, ironworks, steel mills, shipping and shipbuilding.

The First Respondent’s ancestors were successful industrialists who established the Palmer shipyard at Jarrow. They had complementary interests in coal, iron, shipping and shipbuilding, and connections with four local ironstone mines, including Staithes Mine and Port Mulgrave Mine in the second half of the 19^th century. They opened the Grinkle Park Ironstone Mine in 1872 (following purchase of the Grinkle Park Estate in the 1860s) and it remained in production until 1930. The nearby Boulby Mine was also owned and operated by the Palmers between 1903 and 1934.

The Cleveland ironstone boom ended in around 1875 with the advent of steel for which it was initially an unsuitable raw material. Ironworks then became accustomed to using other iron ores. Mining of ironstone in the area declined after World War 1 as economically workable seams were exhausted and the last mine closed in 1964.

ICI had started manufacturing fertilisers at its plant in Billingham in the 1920s using anhydrite (an evaporite mineral) mined near the plant. It came to be one of the most significant industrial businesses in Teesside. Mr Sandbrook also refers to the founding of the British alkali industry in the area in around 1797.

In the 1920s some lands were sold off by the Palmer family and those conveyances excepted and reserved “the mines beds and quarries of ironstone and iron ore and other metals coal and other minerals”.

Mr Mark Palmer inherited what remained of the Grinkle Park Estate in 1933. He sold the Estate by way of auction on 26 September 1946. The printed auction particulars contained a notice of the main items, general remarks and the conditions of sale. These conditions of sale contained at condition 10 the wording set out above that was the Reservation in the conveyance now being construed. The general remarks stated:

Coal was not referred to in the particulars, conditions of sale or conveyances. Ms Iwanicki suggested that the probable reason for this was that the ownership of coal was nationalised under the Coal Act 1938 and thereafter a reservation of coal would have been of limited use.

As for potash, the experts agreed that the presence of soluble potassium salts was first discovered in North Yorkshire near Aislaby in Eskdale, near Whitby (approximately 8.5 miles from the Boulby Mine) in 1938 and 1939 by the D’Arcy Exploration Company (owned by Anglo-Iranian Oil Co, a forerunner of British Petroleum). At that time, when war was already feared, this company entered a programme of petroleum prospecting in the UK and it sunk a deep exploratory borehole near Aislaby down to around 1500m. This was a significant exploration exercise (alongside other boreholes sunk around the UK) and, as Mrs Iwanicki commented, was probably the deepest drilling ever seen in the UK at the time.

ICI was involved in the Aislaby boring exercise in 1938-1939, and conducted chemical analysis of the cores drilled, as recounted by Dr Fleck in his 1950 article. Dr Fleck reports that ICI’s analysis of the material bored out revealed the presence of potash in all three of the Permian salt beds discovered. He provides a description of the Aislaby boring and the findings on the chemical analyses that were published by the Chief Geologist of Anglo-Iranian Oil, Dr GM Lees, and Mr AH Taitt (named by Dr Fleck as a consultant at ICI) in an article published in the Quarterly Journal of the Geological Society in 1945 under the title, The Geological Results of the Search for Oil Fields in Great Britain.

Dr Fleck provided a summary of the findings of Lees and Tait, explaining that polyhalite was found in the 1939 borehole (in substantial quantity in a bed of some 45 ft), and sylvinite, sylvite and halite were also located. He also reproduces the diagrammatic log of the Aislaby boring published by Lees and Tait in 1945. There was a dispute as to the weight of evidence of the Lees and Tait article.

Mr Sandbrook gave evidence of the importance of potassium for the UK economy in 1946 (as supported by Dr Fleck’s article) and that the main commercial source of potassium at that time was potash in evaporite beds. He refers to longstanding interest in potassium and potash prior to 1946 (again supported by Dr Fleck’s article), noting that German mines were the main European source for potash and that the UK had to depend on imports of potash from Russia and north America during the Second World War.

Dr Fleck refers to ICI’s keen and longstanding interest in potash before, during and after the Second World War. He refers to earlier pre-war attempts by ICI to overcome the scarceness of potassium in Britain, and the significance of having an indigenous source of potassium. Mrs Iwanicki acknowledged that the discovery of polyhalite in the Aislaby boring in 1939 was of potential commercial importance.

Dr Fleck reported that in 1943 ICI informed the British ministry of supply of the discovery of polyhalites in the Aislaby boring. At that stage the Government decided that even if boring gave favourable results, investigations should be shelved until after the war. The Applicant contended that this communication would have been confidential.

Developments since the conveyance was made

ICI lacked the expertise to reach the depth of the potash deposits identified in Aislaby (which were more than 1000 metres beneath the ground) but it remained motivated to find further local supplies of resources for its fertiliser products. In late 1947 there were discussions between ICI and the Mineral Development Committee of the Ministry of Fuel and Power. Dr Fleck reported that ICI undertook further explorations with additional boreholes in 1948-49 because it was possible that potassium chloride could be economically extracted from brine. Dr Fleck publicised the results in his lecture.

ICI then trialled the possibility of solution mining for potash in 1952-54. This was not a success but further investigations were undertaken in the 1960s with 15 further boreholes drilled between 1965 and 1968. Confirmation that potash existed within the former Grinkle Park Estate was obtained by way of a borehole drilled in 1966. Planning permission for mining potash was obtained in 1968.

The Claimant was formed when ICI joined forces with Charter Consolidated Ltd in 1967 (and its parent company is now Israeli Chemicals Limited).

There was a dispute over ownership of mining rights in the 1960s when mining was under consideration. The Applicant initially dealt exclusively with the late Mr Palmer but the Second Respondent’s predecessor in title, Hope and Anchor Breweries Ltd, issued High Court proceedings in 1969 against both Mr Palmer and the Applicant asserting that it owned the potash. These proceedings were compromised in accordance with Heads of Agreement dated 5 August 1970 under which Mr Palmer and all the relevant surface owners of the former Grinkle Park Estate subsequently entered into joint leases with the Applicant.

The Applicant started commercial production of potash (and halite) in 1973 and later acquired the freehold of the Parcels.

The compromise of the proceedings in 1970 allowed the Applicant to proceed with mining potash but did not determine the issue as to the meaning of the Reservation. The leases concluded in 1970 expired in June 2020 but the Applicant is holding over. Mining continues but these proceedings were issued to resolve the basis for any compensation to the Respondents.

Discussion on the proper construction of the Reservation

Neither side put forward a position on the burden of proof. On a preliminary issue on the proper construction of a contract that question may not arise. However, there were factual issues in dispute and the court was being asked to decide whether the rock salt and potash on the onshore areas were reserved. The Applicant is seeking declaratory relief but I also take into account that the First Respondent is claiming to fall within an exception. Slade J in Lonsdale (see p921) suggested that a defender must establish that it has the benefit of the Reservation. Accordingly, if relevant, I assume the burden of proof lies on the First Respondent to establish that potash and salt fall within the reservation in her favour.

Discussion of the evidence

The Applicant mainly relied on Ms Iwanicki’s opinions summarised as follows:

The Applicant relied on the Shorter Oxford English Dictionary from 1908 and also that from 1944 which provides as follows:

The Applicant’s counsel suggested that I address the literature (including Dr Fleck’s article) forensically. They put significant emphasis on Mineral Planning Factsheets (“MPF”) that were published on various dates in the 2000s and 2010s by the British Geological Society (“BGS”) and the Office of the Deputy Prime Minister on economically important industrial minerals extracted in England. The Applicant asked Mrs Iwanicki to comment on these MPFs.

The MPFs provided a useful summary of mining activity and had some relevance.

The Applicant emphasised that neither the Miscellaneous MPF nor the MPF for Metals list sodium or potassium, nor do they mention salt and potash, or describe either as a metalliferous mineral. It relied on Mrs Iwanicki’s comment that the fact that these MPFs do not refer to potassium or sodium suggests that these elements are not treated as mined commodities. It argued that the fact salt and potash have their own MPF is precisely because they are not metalliferous minerals. However, these points had limited weight. There was no MPF for metalliferous minerals or metallic ores, or for metals such as iron, copper, lead or tin, mainly because there is no significant economic production of minerals containing these metals.

The MPFs on Metals and Miscellaneous Minerals provided some support for the Applicant’s case on the meaning of metalliferous metals. However, they were largely about historical context and providing a miscellaneous round-up. The MPFs state that their purpose is primarily to inform the land-use planning process. Neither expert suggested that they were regarded as benchmark publications in the mining or commercial world, or that they were an authoritative source of terminology or vernacular usage. They could not be treated as firm evidence of the vernacular meaning of metals, metallic ores or metalliferous minerals.

Mrs Iwanicki relied on the fact that the London Metal Exchange website and the website of the Minor Metals Trade Association refer to metals commercially traded on global markets but do not include sodium or potassium. This is relevant as to markets for international trading but of more limited weight in understanding the use of the term “metal” in a mining context, especially as there was no evidence that similar information would have been available in 1946.

It was also not conclusive since Mrs Iwanicki referred to lithium as a metal, and noted that lithium compounds are listed on the London Metal Exchange. She acknowledged that lithium is a metal in demand but it is only used commercially in the form of compounds. This reflected the position of potassium, which she also acknowledged was an essential nutrient for plants. This all suggested that the commercial and mining world treats lithium and potassium as mined metallic commodities, even though they do not exist ordinarily in their native state and do not have the typical metallic qualities of being hard and unreactive.

Mrs Iwanicki pointed out that the modern classification for minerals commonly splits them into hydrocarbons, metals and industrial or construction minerals (including gypsum, potash, salt and sand among others). She acknowledged that there was no evidence that this classification (i.e. potash or salt as industrial minerals) would have applied in 1946.

Lonsdale suggests that in 1946 this modern classification would not have been vernacular usage. As regards mining, the main distinction would have been between coal mines and other mines. Slade J refers to the Metalliferous Mines Regulation Act 1872 which related to the inspection and regulation of mines other than those to which the Coal Mines Regulation Act applied. The Metalliferous Mines Regulations Act covered miners’ welfare in mines other than coal mines. Accordingly, contrary to one of the Applicant’s arguments, in the mining world of 1946 a gypsum mine would have been treated as a metalliferous mine as regards miners’ welfare.

There was some evidence of a modern classification between metallic minerals, and industrial or construction minerals. However, there was limited evidence to support an understanding that metalliferous minerals only covered minerals from which “everyday” metals are extracted (or that would have been usage in 1946). This approach would have ruled out all minerals that contained the reactive alkali or alkaline metals (i.e. including any compound of sodium, potassium, lithium, calcium, barium or magnesium). The literature and expert evidence did not support a finding of such a usage.

The literature also provided little support for Mr Sandbrook’s view that potash and salt would be considered metals as a matter of vernacular usage.

The objective purpose of the Reservation was to reserve interests in mining on the land being conveyed. The dispute is as to which interests were reserved, and whether they extended to the potash and rock salt under that land. The intended purpose is apparent from both the wording and context of the Reservation. The late Mr Mark Palmer came from a family that had decades of business experience and significant ownership of mines. The conveyances essentially involved the sale of farm land that may have been formerly mined. Given the well-known terminal decline of the ironstone mines it was unlikely that the sole object of the Reservation was to preserve rights to mine ironstone or iron ore.

There was an issue as to the admissibility and weight of the general remarks in the auction particulars. The Applicant suggested that they were irrelevant prior negotiations, referring to the Supreme Court in Cusack v Harrow LBC [2013] UKSC 40 and that estate agents’ comments were not reliable, whereas the Respondent suggested that they were a relevant part of the overall factual matrix as to what the parties understood was being sold.

The auction particulars did not amount to inadmissible pre-contractual negotiations. They constituted a statement made on behalf of the vendor to all potential purchasers as to what was being sold. While the terms of clause 10 prevail as terms of the sale (and conveyance), the particulars were part of the commonly known basis upon which the land was sold. They provide extrinsic evidence to assist in identifying what the parties reasonably understood was being conveyed or reserved. Any reasonable person reading the particulars would have understood that the sale was subject to a wide reservation covering rights to mine all minerals, and read clause 10 in light of that. This understanding reflected the context of a sale of farm land in this area where the Palmers had significant commercial and mining interests, and where the reservation expressly covered both underground and open mining.

There was a dispute as to the date by which the mining, commercial and landowning world would have recognised that the North Yorkshire potash beds could be commercially exploited for the purpose of profit. While the Applicant appeared to acknowledge that potential was recognised by late 1950 (following Dr Fleck’s article) it maintained that such potential would not have been recognised in 1946, suggesting that nothing had happened following the discovery until late 1947.

However, this part of the Applicant’s case did not reflect the evidence as to what would have been recognised by the mining, commercial or landowning world. Those worlds would reasonably have known the following matters in 1946.

At that time anyone in the commercial, mining or landowning world in this part of the North East of England would have been aware of exploration by boreholes made by D’Arcy Exploration Company around 1938-1939, including the borehole in Aislaby and the overall outcome of that exploration.

ICI considered that the results relating to potassium minerals merited a report to the Government in 1943. These communications may not have been in the public domain but this was of somewhat limited relevance as to the state of knowledge from September 1946 since the findings made by ICI and BP’s forerunner were in the public domain from 1945.

The results also justified significant further exploratory measures being taken by ICI after the war ended (in 1948 to 1950) which resulted in extraction of potassium minerals in 1952-1954. This led to later exploration in the 1960s leading to mining of potash that has taken place since 1973.

In 1946 people in the mining, commercial or landowning world in the area would not have known that potash and salt could be commercially exploited under the Parcels. The results did not relate to that land (although they related to land close by) and were not conclusive as to economic exploitation. However, the possibility of such extraction would have occurred to a person in the mining, landowning or commercial world interested in buying or selling land in that area. They would have known that significant modern exploratory drilling for hydrocarbons had taken place in the area, and while oil had not been reported a substantial quantity of polyhalite had been located, together with the presence of other forms of potash.

Overall, I prefer the Respondent’s case that potash was recognised by the mining, commercial and landowning world as a commercially viable mineral resource in 1946, and the possibility for extraction in this area was known by people in those worlds in this part of the North East.

Having reviewed the evidence I conclude that there is no direct evidence of a vernacular meaning or usage for the term “other metals”, or the wording, “the mines beds and quarries of ironstone and iron ore and other metals”.

The dictionary meaning given to “metal” suggested that it meant metallic elements and alloys of such elements. However, the dictionary meaning was not decisive in identifying the meaning of “other metals” since it was common ground that the term in the Reservation was not a reference to metallic elements and alloys in their native state.

For similar reasons the Applicant’s reliance on literature and Mrs Iwanicki’s evidence suggesting that potash and rock salt (or other minerals that are compounds of sodium potassium) were not treated in the vernacular as “metals” was of limited weight. On the Applicant’s own case the phrase “other metals” in the Reservation did not mean metals in their native state.

On the Applicant’s case minerals which are compounds containing tin, copper or lead would fall within the Reservation wording of “other metals”. The vernacular literature relied on by the Applicant did not treat those minerals as metals either, or suggest that they had the qualities that define metals. In this respect the evidence relied on supported neither side’s case. It only suggested that a vernacular meaning for “metals” was metallic elements (or alloys as mixtures of metallic elements) in their native state and neither side was putting forward this construction.

Mrs Iwanicki’s evidence was that the word metal meant a solid material which is typically hard, shiny, malleable, fusible and ductile with good electrical and thermal conductivity (and was also a mining term for shale used in the north east). The primary definition would reflect ordinary understanding of the main typical qualities of a metal.

However, this definition was obviously not exhaustive for the mining and commercial world, or more generally. Both experts agreed that sodium and potassium are metals even though they are reactive. This was agreed evidence as to the application of the word “metal”. It was not technical scientific evidence of a chemist. It came from mineral surveyors taking an expert view of the language of the mining, commercial and landowning world. This evidence would reflect ordinary understanding and application of the word “metal” as relating to metallic elements (as also supported by the dictionary meaning relied on by the Applicant) and I prefer that agreed evidence.

An ordinary person (and especially those from the mining, commercial and landowning world) would agree with that evidence. They would know that there are many metals, and not every metal has the typical metallic qualities listed by Mrs Iwanicki (again as supported by the dictionary meaning).

Canons of construction

The Applicant submitted that although the list of materials before “other metals” is short (i.e. “ironstone and iron ore”) the principle of ejusdem generis applied and these terms provide a guide as to how “other metals” is to be construed. Since ironstone and iron ore are extracted in order to produce pig iron and steel, “other metals” should be construed similarly, i.e. by reference to raw materials which are extracted in order to produce pure or near pure metals which have the typical metallic qualities, i.e. hardness, ductility, and ability to conduct heat and electricity and so on.

It submitted that the separate canon that “meaning is known by context” serves much the same purpose and suggests that “other metals” falls to be construed having regard to the fact that it is prefaced by “ironstone and iron ore”. Rock salt and potash are only extracted in order to use the compound rather than as feedstock for producing a pure metal.

It is accepted that the meaning of the Reservation will be known by context and the earlier parts of the clause may colour the meaning of the later terms. To that extent these canons of constructions were useful pointers within the ordinary approach to construction. The parties’ objective intention was to extend the scope of the reservation beyond the mining of iron ore and ironstone. This reflected the choice of an additional head of reservation, and the use of a wide term “other metals” that would not ordinarily describe an iron ore or iron. However, the principle ejusdem generis provided limited additional assistance and did not support the Applicant’s case.

The Applicant also relied on the canon of construction contra proferentum. It suggested that there are two variants of the rule, first construing against the party who has put forward a clause and secondly construing against the party who benefits from a clause. It submitted that it could invoke both variants in this case. However, it correctly acknowledged that this principle is only to be applied where there remains genuine doubt having applied the other principles of interpretation. It also correctly referred to Lord Neuberger’s reference to this doctrine as being “very much a last refuge” in BNY Mellon Corporate Trustee Services Ltd v LBG Capital No. 1 Plc [2016] UKSC 29 at [53]. Here it was not necessary to resort to the principle of construction contra proferentum since the ordinary rules of interpretation were sufficient to understand what the parties meant.

Finally, the Applicant argued that the First Respondent was trying to argue that the reservation was for minerals and this did not reflect the wording. If Mr Palmer had wanted to have a wider reservation or to have included non-metalliferous minerals he could easily have used the words “other minerals” but he made a deliberate choice not to do so. In this respect it relied on the existence of earlier conveyances made by his father in the1920s which included the term “other minerals” and a contract of sale he made in around 1964 which had crossed this term out.

The conveyances were separate transactions decades earlier than the 1964 contract. There was no suggestion that the conveyances were on a standard form or that words in them had been deleted. For similar reasons the earlier contracts from the 1920s had limited weight as aids to construction. The better approach was to construe the words the parties had chosen.

Conclusions on meaning of the Reservation and its application

There was no conclusive evidence as to vernacular usage (whether applied today or in 1946). This makes it necessary to draw inferences and construe the wording of the conveyance in light of the surrounding circumstances and taking account of the relevant principles of construction set out above.

The wording reserving “other metals” was ambiguous and open to several meanings which are summarised below.

The remaining potential meanings were those put forward by the parties. The question to be decided was whether the ambiguity in the wording “other metals” should be resolved to construe “other metals” as restricted to metalliferous minerals from which everyday metals, or metals in a simple form, are extracted (the Applicant’s case), or whether it covered all minerals which are a source of metal, or yield a metal of particular utility (the Respondent’s case). Both sides’ case still begged the question as to the meaning of “metal”. However, it was notable that at that point both sides were referring to metallic elements.

The Applicant used various ways to identify the distinguishing features for its case on the meaning of “other metals”, including “conventional”, “everyday”, “simple form”, “typical metallic qualities”. While these distinguishing features might be applied very easily to identify iron (and its alloys such as steel) they were not found in the literature relied upon. There was no evidence of their vernacular use in identifying metals more generally. Indeed, in her evidence Mrs Iwanicki had referred to the minor metals trade association and she had not categorised metals as “everyday”; she had described everyday uses of metals.

The Applicant’s case was effectively that the wording meant “ironstone, iron ore and other metalliferous (or metallic) ores from which everyday metals can be extracted”. This construction depended upon the parties having a common objective understanding of the meaning of metalliferous (or metallic) ores, and also what would be understood by “everyday” metals (or metals in a simple form). This understanding was not supported by the literature or the wording of the Reservation. It still left open a difficult question as to what an everyday metal would be. It ignored Mrs Iwanicki’s uncontroversial evidence that potassium was a metallic element which is an essential constituent of plant and animal life. It also ignored the fact that sodium and potassium (and other reactive metals such as lithium, calcium or magnesium) are regarded as metals in everyday language including in the commercial and mining world.

As explained above, the evidence of the surrounding facts and vernacular understanding of the mining, commercial or landowner’s world (in 1946 and today) did not support the Applicant’s restrictive approach. The Applicant’s construction of the clause was complex and changed throughout the hearing. It depended on distinctions that were not clear from the evidence. Its construction was also inconsistent with the more likely purpose of the clause (to provide a general reservation of mining rights) and its simple language.

The experts agreed that the reserved working rights (i.e. for the right to sink shafts and pits) reflected local mining practices seen at the time when the Parcels were sold in 1946. Mrs Iwanicki accepted that the wording was a wide one and would cover many types of mining. Slade J in Lonsdale found that pointers as to the meaning of a phrase may be derived from the express powers of working that are conferred. Here, unlike in Lonsdale, the Reservation allowed drilling, mining or quarrying on the surface of the land. This express wording was more consistent with the Respondent’s case. It suggested that the Reservation should be construed broadly as a wide reservation agreed between a vendor with long business experience of mining and a purchaser buying farm land without the intention of mining.

Taking account of the language used throughout the Reservation and the evidence of the factual context, the wording in question reserved ironstone, iron ore and other minerals which are a source of metal. The meaning of metal in that context would mean a metallic element in any form. This construction makes sense of the wording of the Reservation (which referred to metals and also minerals), the accepted expert evidence, the literature on vernacular language and the context against which the conveyances were concluded.

Do potash and salt fall within the Reservation?

Both potash and salt are a source of metal. However, a threshold question arose as to whether potash or rock salt would fall outside the reservation because they are not minerals within the vernacular meaning of that term. Existing case law means that minerals in this context do not include every substance that may be extracted from land. It covers substances that are exceptional in use, in value and character (Waring v Foden).

The Applicant relied on the treatment of limestone and gypsum by the literature and also by Mr Sandbrook as not being metallic ores. However, this was of limited weight in addressing the separate question as to whether potash and rock salt fell within the reservation. If anything, the varying treatment of different minerals highlighted the absence of any vernacular classification of minerals according to metal content. Limestone is not an evaporite mineral and back in 1855 it was not treated as a mineral in Darvill v Roper, in a similar way mudstone fell outside a reservation in Wynne-Finch as its use was not exceptional.

Potash is undoubtedly exceptional in value and use. As explained above, it was also recognised by the mining, commercial and landowning world in 1946 that it could be extracted commercially for the purpose of profit.

Rock salt is much less exceptional than potash and less valued for its metal content. The Applicant rightly acknowledged that it could be commercially extracted as a by-product and it was of sufficient value to count as a mineral. The MPFs and Dr Fleck’s article show that salt is a mineral resource commercially extracted in England (and elsewhere) and it had important industrial uses quite apart from its use on roads, both now and in 1946. Given the ubiquity of salt its main commercial use is for de-icing roads. Its industrial uses as a sodium compound are of very much less economic importance than those of potassium or lithium but remain of commercial interest.

While the rock salt present at Boulby at depths of 1000m would not have been commercially profitable for extraction on its own, the relevant test is not whether the mineral can be extracted at a profit (which may depend on market values and long term developments), but whether it is extracted for the purpose of profit. Here, the extraction of rock salt as a byproduct was of potentially worthwhile at the depths involved, and more generally it was commercially extracted as a resource as at 1946. Both potash and salt would accordingly count as minerals.

Conclusions

For reasons set out above:

For all these reasons, the Reservation covers potash and rock salt on its proper construction. The First Respondent owns, or has an interest in, the existing mines beds and quarries of potash and salt and related rights and easements in the onshore areas B, C, Q and V identified in the claim form.