Public Authority Review - May 2008
Welcome to the latest edition of our Public Authority Review.
In this issue:
What lies beneath - a summary of the recent Court of Appeal decision concerning minerals.
LINKS - what’s it all about?
Disclosure: where do the boundaries lie in light of the recent Merseytravel decision?
Property searches - HIPs drive revised Government guidance
What lies beneath
LINKs - what is it all about?
Disclosure: where do the boundaries lie?
Property searches - HIPs drive revised Government guidance
A Decision of the Court of Appeal in early February 2008 in the case of Coleman and Lim versus Ibstock Brick Limited has implications for those involved in the mineral extraction industry and other landowners and developers, including Local Authorities.
This article is written by Jonathan Jefferies (pictured), Commercial Dispute Resolution Partner at Freeth Cartwright LLP, who successfully defended this case in the Court of Appeal.
Where minerals have been excluded from land the freeholder, who owns the surface, does not own minerals on or underneath the land. They cannot extract them, dig into them, sell them or deal with them without breaching the rights of the mineral owner, who can take steps to protect their property. The owner of minerals has to address the question of what substances they own and how to protect their property in the context of land development and use.
The difficulty for both sides is that “minerals” is not a definite term. In this case the Court was asked to decide what substances had been retained by the seller of a farm in 1921 who had agreed with the purchaser that there would be an exception and reservation of “the mines, beds and seams of coal and ironstone and other metals and minerals… with all necessary and proper powers, rights and easements for searching for winning, working, getting and carrying away the same by underground workings only…”
The original seller having died many years ago, the beneficiaries under her will claimed that “minerals” included brick shale, clay and fire clay.
Some years previously a brick company had opened a quarry and brickworks on neighbouring land. Mines working the Barnsley seam of coal were being opened in the area. The purchaser was a wholesale fruit and potato merchant and it was accepted that he purchased the land in order to grow produce on it. These facts would have been known to the original seller and purchaser who would also have known or suspected that the Barnsley Seam would be likely to present underneath the farm.
Put simply, the Claimants contended that the seller and purchaser would have known or suspected that brick shale would extend under the farm and in order to sell the farm without substantially affecting its value it was sold reserving the minerals, including the brick shale, but only with a right to work the minerals by underground means.
This meant that in the case of the brick shale and other minerals near the surface the purchaser would have to consent to any extraction and could therefore farm the land undisturbed unless and until he was persuaded to give part of it up for mineral extraction.
Again put simply, the Defendants denied that “minerals” included brick shale for the purposes of this agreement.
Part of the farm from which the minerals had been reserved had since been quarried and large quantities of brick shale extracted. Most of the cases go back to the late 19th and early 20th centuries and were reviewed in a 1982 case. This is the first reported case since.
Early case law had held that “minerals” could include “every substance which can be got from underneath the surface of the earth for the purpose of profit unless there is something in the context or nature of the transaction to induce the court to give it a more limited meaning.”
This obviously potentially covers a range of substances. The principle may still apply in an appropriate context. Usually, however, the Court will have to interpret what the parties intended. To do this the Court will apply the usual rules of interpretation to the document. If what the parties meant is not expressly clear from the terms of the agreement, then the Court has to ascertain what the phrase meant in the vernacular of the mining world, the commercial world and landowners at the time of the agreement, taking into account the commercial background and purpose of the transaction.
The Courts have identified a number of pointers, which were used in this case, to evaluate when deciding what was intended. These include whether the materials were exceptional in use, in value and in character; the general state of knowledge of the relevant material at the date of the agreement and the way in which it was then regarded and treated; and the nature of any express powers of working the material.
The agreement in this case was not clear as to what “minerals” was intended to include. Neither party was able to adduce direct contemporaneous evidence of what the mining, commercial or landowning communities would have considered to have fallen within the definition of “minerals” in 1921. The parties adduced substantial expert evidence regarding a range of matters including geology, the conditions on site and mining and quarrying practises over time.
The Judge looked at various pointers. He found that there was some evidence that “minerals” was capable of including brick shale. The parties produced considerable evidence as to whether or not the materials were exceptional in use, in value or in character and whether or not they formed part of the soil or sub-soil of the district. The Judge gave some support for the Claimants’ case from these pointers but found them to be inconclusive on the question of brick shale.
The Judge found considerable assistance from the nature of the working rights. Having found that in 1921 brick shale was not extracted commercially by underground means (except as a contaminant or by-product) the Judge concluded that a reasonable person in the position of the parties in 1921 would have considered that a seller who could only work the reserved materials by underground means would not be entitled to substances such as brick shale which was only extracted by surface methods. The Claimants sought to argue that there was a deliberate creation of a stand-off but the Judge was unpersuaded. This pointer outweighed the support that the Claimants’ case derived from other pointers and led the Judge to conclude that brick shale was not a mineral for the purpose of the 1921 Conveyance so it did not belong to the Claimants but rather belonged to the landowner-Defendant.
The Claimants appealed to the Court of Appeal against the Judge’s decision relating to brick shale. The Court of Appeal however upheld the Judge’s decision and dismissed the Appeal. The case demonstrates how the modern Courts deal with disputes over what substances fall within an exception and reservation of minerals and the range of matters and evidence that will have to be researched, examined and put before the Court. It is clear that each individual exception and reservation must be considered on its own merits taking into account the circumstances of the case and not only identifying and considering the terms of the agreement itself but the full factual background behind the making of the agreement. Furthermore when that background is understood, the weight to be given to the various factors has to be considered - the fact that some factors lean one way may be outweighed by a single factor more heavily leaning the other way.
Landowners and developers concerned about an exception and reservation of minerals, and mineral owners concerned to protect their rights, should seek advice on their position.
Jonathan Jefferies, Partner
Direct line: 01332 546 104
jonathan.jefferies@freethcartwright.co.uk
Stephen Pearson (pictured above), reports:
Further to a widespread concern felt at a local and national level that there is a lack of democratic accountability concerning the NHS, the Local Government and Public Involvement Health Act 2007 is setting up local involvement networks (or LINKs) which are meant to establish the views of the local community about their experience of the NHS and what it should be offering within local communities.
LINKs will replace the heavily criticised Patient and Public Involvement forums, which in turn replaced the old Community Health Councils.
LINKs are expected to become operational from 1 September this year and local authorities have been given £84m to support their implementation. Directions concerning their organisation were issued by DoH on 1 April 2008.
Some areas are organising LINKs through NHS Primary Care Trusts, (PCTs) and several local authorities are advertising OJEUs for the appointment of organisations to act as ‘hosts‘.
Interestingly, LINKs representatives will be able to enter and view health services, and commissioning contracts between Hospital Trusts and PCTs will protect LINKs rights to obtain information relating to services. Will LINKs be ‘talking shops’ or a valuable way in which to ensure that health services reflect the needs of the community in an accountable way? Time will tell.
Stephen Pearson, Partner
Direct line: 0115 985 3206
stephen.pearson@freethcartwright.co.uk
Disclosure: where do the boundaries lie?
We are receiving an increasing amount of interest in the obligation to disclose, particularly related to legal advice concerning major contractual, outsourcing and shared services arrangements. This is by no means a straightforward issue. As a reminder, the Freedom of Information Act 2000 provides that various information is exempt from disclosure, including personal information, information provided in confidence, commercial information and anything protected by legal professional privilege.
2 of our partners, Stephen Pearson and Deryck Houghton (who is pictured here) explain:
Some of these exemptions are absolute, some are subject to a “public interest” test such as those relating to commercial and privileged information. The Public Contracts Regulations 2006 (relating to all major supply and construction contracts) provide at Regulation 43 that:
“A Contracting Authority is not permitted to disclose information forwarded to it by an economic operator where that economic operator has designated (reasonably) that information as confidential. This includes technical or trade secrets and the confidential aspects of tenders.”
Just when matters appear to be clarifying themselves, particularly in terms of the conflict between Freedom of Information and the EU Procurement Regime, the recent decision of the Information Tribunal in the Merseytravel case is something which a number of authorities will find interesting.
This was a decision made by the Information Tribunal in a case brought by the Mersey Tunnel Users Association and the Information Commissioner concerning Merseytravel.
The Mersey Tunnel Users Association were unhappy over the level of tolls for users of the Mersey Tunnels. Merseytravel have an ability to operate a pre-set levy on District Councils in Merseyside to recover their losses involved in operating the Mersey Tunnels, which were operating at a loss.
When the tunnels began to make a profit due to an increase in traffic, legal advice was obtained from Counsel concerning whether the operating surplus of the tunnels should be used to reduce tolls for travelling public or to repay the District Councils for monies they had previously paid under this precept.
Merseytravel argued (some would say quite sensibly) that the advice given was both subject to protection under Section 36 of the Freedom of Information Act relating to prejudice affecting conduct of public affairs, and Section 42, which protects legal professional privilege.
The Tribunal took the view that notwithstanding legal professional privilege, which is normally held to be a strong argument, because such privilege is for the protection of the public interest, if there is a stronger public interest in disclosing the information, then that disclosure should be made. Even in a situation where the public interest in disclosure is equally weighted with maintaining the exception, the Tribunal took the view that disclosure should still be made. What seems to have been a major factor in the decision is that nothing within the Legal Opinion related to confidential personal information (as there might be for example in child care or criminal proceedings), and the content of the Opinion was very much something of live political debate in the Mersey area.
A difficult issue for us is that under the 2007 Code of Conduct for Solicitors, we are being told that client confidentiality overrides disclosure at all times. Will a local authority solicitor in making a disclosure, perhaps in the face of a strong lobby from a pressure group, be faced with a decision of either being challenged by the Information Commissioner or, alternatively having action taken against him by the Solicitors Regulation Authority?
How would this decision have been made if the effect of disclosure would reveal confidential commercial information passed by the private sector in respect of discussions on a major contract?
Our view is that the Public Interest in not disclosing confidential advice will need to be carefully considered by those advising public sector bodies, and external opinions obtained in high profile matters.
Property searches - HIPs drive revised Government guidance
In response to complaints investigated under the Competition Act 1998, in 2004 the OFT launched a market study leading to the “Property Searches - A Market Study” report in September 2005. The report identified concerns about the limits placed on availability of property information by some local authorities.
Shama Gupta, an Assoicate at Freeth Cartwright explains:
A search of the Local Land Charges Register and a Local Enquiries search are compulsory elements of HIPs, which are required for all homes marketed from 14 December 2007 - The Home Information Pack (No. 2) Regulations 2007 prescribe the information that is required for a search to be valid for inclusion in the HIP. Although many sellers use official searches guaranteed by local authorities, some rely on personal searches for speed and price.
Local authorities are obliged to allow access to records open to public inspection, but there are issues:
* Not all information is available to the public as of right - local authorities can decide whether to make this available - which places personal searchers at a competitive disadvantage, forcing them to rely on insurance for those parts of the search for which they cannot access data
* Fees are not prescribed for accessing certain types of information - local authorities can decide the level of charge; some inevitably overcharge or undercharge, preventing a level playing field between local authorities and personal search sectors
* Clear information is not always given to personal searchers on the means of accessing information - quality and access to data and premises varies, sometimes leading to unreasonable delays in the production of HIPs
To deal with these concerns, in May 2007 the Government consulted on draft guidance to improve access to information held by local authorities.
This led to the Government issuing revised guidance on 18 January 2008 on good practice, designed to provide a foundation upon which working arrangements should be based and reviewed by local authorities (LAs) and personal search representatives on a regular basis: “Personal searches of the local land charges register and other records held by local authorities: Good practice guidance for local authorities and personal searches.”
The guidance recommends LAs:
* provide an information note for personal searchers, with information such as data available, opening hours and charges
* provide personal searchers with sight of the actual entry on the register
* operate the same opening hours for all record-holding departments
* provide access to records normally no later than the next working day
* provide assistance to personal searchers on how to access data kept in electronic form
* supply an office copy of documents relating to a registration
“Central Government should provide clear guidance for LAs on how they should recover the costs of providing property information in compiled and unrefined forms and, if LAs are to set their own prices for these two services, how they should set charges to avoid distorting competition in the supply of local property services.” “Property Searches - A Market Study” (OFT)
This guidance also contains recommendations for personal searchers designed to assist working arrangements with local authorities, such as giving advance notice of visits.
The Government is also consulting on how local authorities should set their charges “Local Authority Property Search Services: Charges for Property Search Services - A consultation paper.” The closing date was 18 April 2008. The Government aims to introduce guidance on this in the summer.
Local authorities are well advised to consider this guidance (in the light of the charging structure under consultation) with a view to implementing its recommendations as quickly as possible. The Government will keep this issue under review and introduce legislative change if the best practice approach fails.
“Personal searches of the local land charges register and other records held by local authorities: Good practice guidance for local authorities and personal searches” and “Local Authority Property Search Services: Charges for Property Search Services - A consultation paper” can be viewed on www.communities.gov.uk