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[1905] HCA 38
mixed. The Supreme Court decision was varied; unless the respondents consented to a reduction, a new trial was ordered for reassessment of damages on the stated principles, without disturbing the trial...
The High Court held that the landowners could claim compensation even though the mining company was the party with the immediate right to work the coal. The owners retained an interest in coal not already covered by the £700 annual fixed payment, and the prohibition affected that interest. The compensation was to reflect the present value of the affected coal-related profits, valued as at 23 December 1901. But the calculation had to deduct the appropriate share of the £700 payment and could not include interest from the prohibition notice to the assessment. The matter was sent back for recalculation unless the owners agreed to a reduced award.
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2,492 words · generated 28/09/2026
The Railway Commissioners of New South Wales constructed a railway through coal-bearing land owned by the Perpetual Trustee Company Limited. The Commissioners resumed a strip of the surface for the railway, while the minerals remained the respondents' property. The land comprised about 2,000 acres.
No linked legislation citations have been extracted yet.
The minerals had been leased to a colliery company under two leases dated 8 July 1887 and 28 January 1897. The leases were treated as substantially identical, and the case was considered as though they formed one lease over the whole area. As at 23 December 1901, about 30 years remained on the lease terms. The lessees could mine under any part of the land. They were required to pay fixed rent totalling £700 per year, as well as additional rent or royalty on minerals worked beyond the quantity treated as covered by that fixed payment. The lease provisions also allowed a deficiency in the amount worked in one year to be made up in the following year.
In October 1901, both the lessees and the landowners gave notice of their intention to work coal under the railway land and within 40 yards of its boundary. Section 135 of the Public Works Act 1900 (NSW) required notice before working mines in that location. On 23 December 1901, the Commissioners prohibited mining there, except to the extent needed to connect workings on either side of the railway strip. They indicated willingness to pay compensation.
The landowners brought an action for compensation. The trial judge found that the inhibited area contained 700,000 tons of coal. The royalty on that amount, if calculated on the whole quantity, would have been £16,203. The judge found that, having regard to the mine's other probable work, it would take ten years to work the coal. He divided the royalty into ten annual instalments, calculated their present value as at the time the first instalment would have fallen due, and added interest to the date of judgment. The award totalled £14,368 7s. 5d.
The Commissioners challenged both the landowners' right to compensation and the method of assessment. The High Court accepted that the landowners could claim for an interest that remained theirs under the lease, but found defects in the arithmetic and valuation approach. The decision was varied, and a new trial for reassessment was ordered unless the respondents consented to a reduction of the verdict. The Court did not disturb the trial judge's substantial factual findings.
The first question was whether only the lessees could claim. Section 135 focuses on the owner, lessee or occupier who wants to work the mine and gives notice. The Court accepted, however, that this did not make the person giving notice the sole possible claimant. It relied on Smith v Great Western Railway Co., 3 App. Cas. 165, where the House of Lords had considered a corresponding statutory arrangement. The High Court explained that the Public Works Act 1900 did not contain a provision exactly like the English statute's general compensation provision, but the appellants conceded that s 95 and following sections provided the respondents with a corresponding compensation right.
The important question was whether the lessors could identify an interest of their own that remained after the leases were granted. The Court applied the principle from Smith that a lessor may claim if the lessor shows an interest beyond the lessee's interest that is affected by the prohibition. It also referred to Gowan v Christie, L.R. 2 H.L. Sc. 273, for the characterisation of a mining lease as, in substance, a sale of minerals for the stipulated rent or royalty.
The Court analysed the particular payment terms. It treated the coal corresponding to £700 of annual royalty as, in effect, coal sold and paid for through the fixed payment. For coal beyond that amount, the lessors retained a beneficial interest equivalent to the royalty payable. The leases therefore did not, on the Court's analysis, leave the lessors with no possible interest in coal that might be prevented from being worked.
The Court then considered when the lessors' loss should be valued. The Commissioners argued that the lessors would receive the £700 fixed payment and royalties from other parts of the mine during the lease term, so any loss might arise only after the lease ended. The Court rejected that approach on the facts and assumptions used for this assessment. The parties had intended to work the coal in the inhibited area, and the prohibition interfered with a present right to sell and take that coal. The Court described the case as “a present interference with present proprietary rights”. It therefore accepted an assessment based on the present value of profits from coal about to be worked, rather than the reversionary value of the coal at the lease's end.
That conclusion did not permit the landowners to recover value already covered by the £700 fixed payment. Compensation could not exceed restoration of the position they would have occupied without the notice prohibiting work. The Court reasoned that the fixed payment should be allocated to the coal first taken in each year, or, where coal was being taken from different areas at the same time, divided between those areas according to their respective output. Since the inhibited area was assumed to account for only part of total mine output, the entire £700 could not simply be deducted from the inhibited coal's royalty. Nor could none of it be attributed there. The award therefore had to deduct the proportion of £700 corresponding to the inhibited area's share of probable output.
Finally, the Court corrected the valuation date and interest treatment. The trial judge had calculated present value as of the date the first royalty would have been payable. The High Court said the value should instead be calculated as at 23 December 1901, the date of the notice prohibiting work. It also followed In re Richard and Great Western Railway (1905) 1 K.B. 68, holding that interest should not be awarded for the period between that notice and the making of the assessment.
The judgment addressed how statutory compensation for prohibited mining applied where the landowner had leased minerals to a mining company. The relevant statutory framework in the case was s 135 of the Public Works Act 1900 (NSW), dealing with notice and prohibition of mining near an authorised work, and s 95 and following sections, which the parties accepted provided the general compensation right.
Before this decision, the immediate statutory process under s 135 might have appeared to centre on the person entitled to work the mines and give notice. The High Court's reasoning, applying Smith v Great Western Railway Co., clarified that the identity of the person giving notice did not necessarily exclude a separate claim by a lessor. The lessor had to establish a distinct retained interest that was affected. This was not a rule that every lessor automatically recovered compensation: the judgment focused on whether an interest remained beyond the lessee's interest and whether the prohibition affected it.
The decision also clarified the valuation basis in this particular setting. The Commissioners' proposed reversionary approach treated the lessors' loss as arising only at the end of the lease. The Court instead treated the planned mining as an intended present exercise of rights, and accepted a current-value assessment of the profits from coal that was about to be worked. The relevant distinction was between a present interference with an existing proprietary interest and a claim confined to a future loss after a lease expired.
The judgment placed limits on that compensation. The fixed payment could not be ignored, because it represented payment for a portion of the coal. At the same time, it could not simply be assigned entirely to the inhibited area or entirely to other areas. The required apportionment reflected the assumed proportions of probable output. The Court also fixed the date for present-value calculation at the date of the prohibiting notice and, following In re Richard, excluded interest for the period between notice and assessment.
The supplied judgment does not provide material about later appellate history or subsequent judicial treatment of this decision. It therefore supports describing the rules stated and applied in 1905, but not making claims about how later courts have interpreted or limited them.
The report supplied here does not contain numbered judgment paragraphs. The passages below are therefore identified by their wording rather than by paragraph number.
“The case is dealt with as a present interference with present proprietary rights.” In plain English, the Court treated the prohibition as affecting rights the parties were ready to exercise then, rather than treating the owners' loss as something arising only when the lease ended.
The Court said the lessors could support a claim if they showed “over and above the interest which the lessee had in these mines” an “ulterior interest” belonging to them. In plain English, the lessee's right to mine did not automatically exhaust every interest the landowner might have. The landowner had to identify what remained and how the prohibition affected it.
On the fixed payment, the Court said “the obvious answer is that it should be attributed to the coal first taken in each year”. In plain English, the £700 payment had to be allocated across the mine's output in a way that followed the lease terms. If coal came from more than one area, the payment was shared according to the amount taken from each.
The Court held that “the present value should, therefore, have been calculated, as at 23rd December, 1901”. In plain English, the valuation date was when the Commissioners gave the prohibition, not the later date when the first hypothetical royalty instalment would have been due.
Referring to In re Richard and Great Western Railway, the Court concluded that interest could not be awarded for the interval between notice and assessment. In plain English, the amount had to be corrected for the valuation date, but the Court did not permit a separate interest addition for the period before the amount was assessed.
The judgment is most directly relevant to a fact pattern with several features present in this case: minerals are subject to a lease; a public authority prohibits mining under or near a public work; the lessee has a right and intention to work the affected minerals; and the lessor claims that the lease left the lessor with a separate interest affected by the prohibition.
The decision's reasoning depends on the lease terms. Here, the lessees owed a fixed payment of £700 a year and additional royalty on output beyond the amount treated as covered by that payment. The Court distinguished the coal treated as paid for from the additional coal in which the lessors retained a beneficial interest. A different lease structure might require different analysis; the judgment does not establish that the same result follows for every mineral lease.
The case also depended on the intended and probable timing of mining. Both the lessees and lessors had given notice of an intention to work the coal. The trial judge found that it would take ten years to extract the inhibited coal, taking account of other probable mine output. Those factual findings supplied the basis for the staged royalty calculation. The High Court required a further output comparison to apportion the fixed payment, but did not disturb the substantial findings already made.
The decision is less directly apt where the claimant has no distinct retained interest, where the affected minerals were not to be worked during the relevant period, or where the lease transfers the whole economic interest in the minerals for fixed payments. The Court discussed that, if the lessees had paid a fixed rent for a right to take as much coal as they chose, the landowners might suffer no loss so long as the fixed amount continued to be paid. Its conclusion turned on the actual lease terms and the interest the lessors retained.
The supplied judgment itself identifies three authorities relevant to its reasoning. It applied Smith v Great Western Railway Co., 3 App. Cas. 165, to the possibility that parties other than the person giving mining notice could have compensation claims for distinct interests. It referred to Gowan v Christie, L.R. 2 H.L. Sc. 273, in describing a mining lease as, in substance, a sale of minerals for the stipulated rent or royalty. It followed In re Richard and Great Western Railway (1905) 1 K.B. 68, on the exclusion of interest between notice and assessment.
Those are authorities discussed by the High Court in this judgment, not evidence of later treatment of this 1905 decision. The material supplied does not identify later cases applying, distinguishing, approving or disapproving Railway Commissioners of New South Wales v Perpetual Trustee Company Limited. No account of its subsequent history can safely be given from this source alone.
For professional research purposes, the important source-grounded point is the distinction between the rules this Court applied and the later status of those rules. The judgment records its own reliance on earlier authorities and sets out the approach to the facts before it. Whether later legislation, decisions or changes to statutory compensation schemes affected that approach is not addressed in the supplied text.
The decision required the matter to return for calculation of the proportion of the £700 fixed payment attributable to the inhibited area's output. The necessary inferences about probable output from the inhibited area compared with total mine output had not been made by the trial judge. The judgment did not state the resulting revised amount.
The Court also proceeded on assumptions about mining sequence and quantity. It explained that the fixed payment should be allocated to coal first taken in each year, and proportionally between areas if coal was taken from them simultaneously. The actual allocation would depend on the probable output pattern. The judgment did not set out a universal method for resolving every evidential dispute about that pattern.
The result was also tied to the form of the leases and the distinction between the fixed payment and additional royalties. The Court did not decide how compensation should be calculated under materially different terms, such as a lease under which all minerals were effectively sold for an unconditional fixed sum, or a lease with a different royalty mechanism.
Finally, the supplied text does not address the decision's later interpretation, the effect of subsequent legislation, or the present status of the statutory provisions discussed. Those matters cannot be inferred from the judgment alone.
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DEFENDANTS, AND THE PERPETUAL TRUSTEE COMPANY, | Ree ; LIMITED e 7 . i : an ESPONDENTS. PLAINTIFFS,
Resumption - Coal mines - Prohibition of work - Compensation - Claim by lessors - H. C. or A. Basis of assessment - Deductions - Interest - Public Works Act (N.S.W.), 1905, (Vo. 26 of 1900), sec. 135. mae
ie Sypyey, When land under lease for coal mining purposes has beon resumed for an 1, 9 94
authorized work under the Public Works Act, 1900, and the working of the - 95, 29.
mines has been prohibited, the lessees, although they may be the only persons _
desirous of working the mines, and entitled to give notice of their intention Grimith 0.J.,
to do so under sec. 135 of that Act, are not necessarily the only persons iirton and,
entitled to compensation. If the lessors are able to show that, over and above
the interest which they have conveyed to the lessees, they retain an ulterior
interest, which is immediately and injuriously affected by the prohibition,
and in respect of which they may receive compensation, they kave a claim to
compensation under sec. 95 and the following sections of the Act.
The principles governing the rights of lessors and lessees to compensation in such cases, as stated in Smith v. Great Western Railway Co., 3 App. Cas., 165, applied.
Coal-bearing land was leased by the owners to a colliery company for a term of which about 30 years had still to run. 'The lessees were at liberty to mine under any part of the land, and to pay a "fixed rent" of £700, and "rent or royalty" at a specified rate on all coal &c. over and above such quantity as might be worked in respect of the fixed rent, and might work such quantity of coal, &¢,, as should, at the specified rate of royalty, produce £700 without paying rent or royalty in respect of it, with permission to make up any deficiency in the amount worked in any year in the succeeding year. Astrip of the land was resumed by the Railway Commissioners, and the lessors and lessees gave notice of their intention to work the coal under and within forty yards of the boundary of the strip. The Commissioners forbade such working
except so far as might be necessary to connect the workings on either side the strip. The lessors brought an action for the assessment of compensati for loss and injury caused by the prohibition. The Judge who tried the having estimated the quantity of coal within the inhibited area, and number of years that it would take to work it out, having regard to the other probable work of the mine, divided the royalty payable on that quantity of coal into equal annual instalments, and awarded as compensation a sum equal to the present value of these calculated as of the day when the first would have been payable, together with interest from the date of the notice to judgment. His decision was affirmed by the Full Court, on appeal.
Held, that the lessors were entitled to compensation as for a present interference with a present proprietary right, and that therefore the basis of assessment was right so far as it proceeded upon the present value of the profits to be derived from the coal which was about to be worked immediately, and not upon the reversionary value of that coal at the expiration of the lease; but that the present;value should have been calculated as at the date when the notice not to work was given ; and a deduction made from each annual instal- ment of a sum bearing the same proportion to £700, as the probable output from the inhibited area would have borne to the total output from the mine; and, (following In re Richard and Great Western Railway (1905) 1 K.B., 68), that interest should not have been awarded in respect of the period between the giving of the notice and the making of the assessment. .
Decision of the Supreme Court (unreported), varied, and a new trial ordered for re-assessment of damages, on these principles, unless the respondents consent to a reduction of the verdict.
AppEAL from a decision of the Supreme Court of New South Wales.
The following statement of the facts and the proceedings is taken from the judgment.
The respondents in this case were owners of a tract of coal- bearing land about 2000 acres in extent, through which the appellants constructed a railway, having resumed a strip of the surface for that purpose. The minerals remained the property of the respondents. By two indentures, dated respectively 8th July, 1887 and 28th January, 1897, the minerals under the land were demised to a colliery company for terms of which about thirty years had still to run on 23rd December, 1901, which is a material date for the purposes of the present case. The con- ditions of the two leases were substantially identical, and the case was treated throughout on the same footing as if there had been one lease only comprising the whole of the land. The
lessees were entitled under the leases to mine and take the minerals under any part of the land without payment of any royalty except as expressly stated. Rent was reserved under both leases at the respective rates of £200 and £500 per annum, £700 in all - described as "fixed rent," and a further "rent or royalty " calculated at a specified rate on all coal and like minerals wrought in the mines over and above such quantity as might be worked in respect of the fixed rent, and it was stipulated that the lessees might work such quantity of coal &.,as should at the specified rate of royalty per ton produce the sum of £700 without paying any rent or royalty in respect of it, with permission to make up any deficiency in the amount worked in any year in the succeeding year.
In October, 1901, notices were given by both the lessees and the respondents to the appellants of their intention to work the coal under the land taken for the railway and within 40 yards from the boundary of the land so taken, and on 23rd December, 1901, the appellants forbade such working except so far as might be necessary to connect the workings on either side of the inter- vening strip of land.
Section 135 of the Public Works Act 1900 provides as follows :
"(1) If the owner, lessee, or occupier of any mines or minerals lying under any authorized work or any work connected there- with, or within forty yards from the boundary thereof, is desirous of working the same, such owner, lessee or occupier shall give the Constructing Authority notice in writing of his intention so to do, thirty days before the commencement of working.
"(2) Upon the receipt of such notice the Constructing Authority may cause such mines to be inspected by any person appointed by him for that purpose.
" (8) If it appears to the Constructing Authority that the work- ing of such mines or minerals is likely to damage the authorized work, and if the Constructing Authority is willing to make com- pensation for such mines or any part thereof to such owner, lessee
or occupier, then he shall not work or get such minerals.
"(4) If the Constructing Authority and such owner, lessee or occupier do not agree to the amount of such compensation, the
rat which compensation to the respondents should be determined, -
same shall be settled as in other cases of disputed compens as provided in Division 2 of Part VII. hereof."
The appellants signified their willingness to make compensa under this section to the lessees and also to the respondents, the question arising for determination was the principle
royalties on an estimated quantity of 1,993,000 tons of co situated within the inhibited area, and estimated to produc £44,000, of which the present value was stated to be £27,68 The claim, which was not sent to the appellants until June, 190 not being admitted, they brought their action in the Sup Court, which was heard before Owen J. without a jury. respondents case was based upon the assumption that tenants had a right to work, and were prepared to work, coal in the inhibited area, that in the ordinary course of th working it would have taken several years to work it out, durin y
The learned Judge found as facts - and his decision on this po was not impeached - that the quantity of coal within the inhibited area, was 700,000 tons, on which a royalty (if calculated on the total amount) of £16,203 would have been payable, and that it would have taken ten years to work the coal out, having regard to the other probable work of the mine. He accordingly treated this royalty as divided into ten equal annual instalments, and awarded to the respondents a sum of £13,667 19s. 10d., which was intended to represent the present value of those instalments, calculated as of the day when the first would have been payable together with interest to the date of judgment, 31st March, 1905, making in all £14,368 7s. 5d.
The appellants moved before the Full Court for a rule nisi for a new trial, which was refused, and from that decision they no appealed.
C. B. Stephen and Scholes, (Pilcher K.C. with them), for the appellants. The allowance of interest was wrong. There was
no interest accruing unti! the amount of compensation was ascer- tained: In re Richard and Great Western Railway (1).
As to the main point, the claim of the respondents is not properly a claim for compensation, but for damages. It is only the lessees who are entitled to compensation. They were the only persons immediately affected by the prohibition to work, and to them only was notice given. The respondents are reversioners and are only at present concerned with rent and royalty. They can only claim damages for diminution of income owing to the resumption. The evidence does not disclose any such loss. During the whole 30 years the lessors would receive the full rent of £700, and just as much by way of royalty as if there had been no prohibition. It was therefore a matter of indifference to them which part of the mine field was worked during the term, and their claim is confined to compensation for loss during the term. But the only parties who will suffer loss or injury during that term are the lessees: Smith v. Great Western Railway Co. (2). The difference between the positions of the lessors and the lessees is plain, because it might be that the whole of the coal in a lease would be worked out during the term. A prohibition from working part of the coal would in such a case injure the lessees, but would not necessarily attect the lessors at all. It was therefore for the respondents to show that the injury to the value of the mine would continue till after the end of the term. In that event they will be entitled to damages, not com- pensation, and the damages cannot be computed until the expira- tion of the term. [They referred to Rust v. Victoria Graving Dock Co. and London and St. Katharine Dock Co. (3).] For the purpose of the present inquiry the lessees are the owners of the coal, and may take it all. There was no evidence of a satis- factory nature as to the number of years it would take to work out the coal in the leased land. It was essential to prove that in order to assess the damages: Buillfa and Merthyr Dare Steam Collieries (1891) Ltd. v. Pontypridd Waterworks Co. (4). No evidence has been given of any diminution of income since the prohibition, and it cannot be assumed that there ever will be.
(1) (1905) 1 K.B., 68. (3) 36 Ch, D., 113. (2) 3 App. Cas., 165, at p. 191.
The lessors cannot get less than £700 a year, and ten years of would easily cover the royalties on tbe coal in the prohibi d area. In any case that area would have been wholly worked at the end of the term, and the respondents, having been paid it, will be no worse off for having lost it in this way than if ji had merely been worked out by the lessees.
Even if the respondents were entitled to compensation to the extent of the present value of the coal in the prohibited area, there should have been a deduction of £700 from the amount allowed for each year. That amount is assured to the lessors and is not affected by the resumption. Up to that amount therefore there is not, and cannot be, any loss. If the gross royalties during those ten years would have amounted to more than £700, but for the resumption, then the loss caused each year by the resumption is represented by the difference between £700 an . the amount of royalty that would have been earned. It is that - balance only to which they are entitled. Taking the calculation - of ten years made by His Honor as correct, he has allowed them - not only the full royalty for those years, but also the £700 which would have covered the value of the prohibited coal in each year, and consequently has allowed them twice over for the same coal. The whole £700 should have been treated as royalty on which the resumption had had no effect whatever.
Want K.C., and Knox (with them Ferguson), for the respon- dents. The appellants' argument proceeded on the assumption that the whole mine would be worked out in 30 years, and that the lessors would therefore exhaust the revenue producing capacity of their property during the term. But the Judge's finding is inconsistent with that, and can not be impeached here. The - appellants are not entitled to set off the coal outside the prohibited _ area against the coal in that area. The two areas should be dealt with separately. The resumed area is worth the royalty payable on the coal it contains, irrespectively of the rent of £700. This is not a case of the sale of all the coal fora fixed rent. The returns depend upon the amount of coal available and wrought, with a proviso that not less than £700 is to be paid in each yeur by way of royalty. When the time for compensation comes the
respective interests of lessor and lessee must be determined and the compensation apportioned in accordance therewith.
The lessors are entitled to be placed in the same position as if there had been no resumption. It is no answer to say that the lessors have other land which may contain coal. That might be a good answer if all the coal in the leasehold area had been sold to the lessees, and it would have been all worked out by the end of the term. The Judge rightly dismissed from con- sideration the possibilities of the rest of the area, in respect of coal bearing. It was for the appellants to cut down the claim, and they brought no satisfactory evidence as to the relative richness of the different areas. [They referred to Bwllfa and Merthyr Dare Steam Colleries (1891) Ltd. v. Pontypridd Water- works Co. (1).] The respondents were entitled to compensation for the particular piece of coal land actually resumed, and no question of damages or diminution of income can arise. Even if it was merely a question of damages, the onus was on the appellants to satisfy the Judge that the respondents had not suffered any, and his finding that they had, being one of fact, will not be interfered with. The division of ownership can make no difference in the total amount of compensation. The lessors were entitled under the lease to compel the lessees to work the mine in a proper manner. There was evidence that to leave the prohibited area unworked would not have been working it in a proper manner. The lessees could have been com- pelled to work that area first, and thus to leave a corresponding amount of coal in the unresumed area at the end of the term. The resumption has deprived the lessors of that right, and there- fore has diminished their royalties to that extent. They have in effect been prevented from selling that particular portion of their coal. [They referred to Gowan v. Christie (2); Smith v. Great Western Railway Co. (3); and In re Barrington; Gamlen v. Iyon (4)). That is a present loss which should be assessed as at the date of the resumption, making allowance for the time which would be spent in extracting the coal. The £700 was royalty, not rent. But, if it can be deemed rent in any sense, the lessees
(1) (1903) A.C., 426, at pp. 428, 432. (3) 3 App. Cas., 165. (2) LR. 2 HLL. Se., 273. (4) 33 Ch. D., 523.
are by the resumption relieved pro tanto from liability to pay and therefore no deduction should be made from the amount compensation in respect of that sum. f As to the interest, the lessors were entitled to compensatior January 1902. If, therefore, the value of the coal is assessei at that date, there should be an allowance of interest up to da Pilcher K.C. in reply. The coal taken by the appellants w not the property of the respondents, it had passed to the lesse under the lease, and the £700 per annum is the payment for That is in no sense a royalty. It has to be paid whether eo worked or not. The effect of the covenant is that up to £7 worth of coal the lessees pay no royalty, but their rent whatever happens, as long as the lease subsists. The lessors h no interest remaining over and above the rent and royalty, are not entitled to be placed in a better position now than would have been in if there had been no resumption. There) no finding on the question of diminution of income. That the vital point in the case, for it is purely a question of com) sation for loss, not purchase of the coal: Bullfa and Me Dare Stem Collieries (1891) Ltd v. Pontypridd Waterworks 0 (1). The Judge was bound to come to some decision on that
go back to him for a finding on that point. [He referred Smith v. Great Western Railway Co. (2).] .
The judgment of the Court was read by Grurritu C.J, [His Honor having stated the facts and re to the terms of the leases as already set out, continued.]
produce a royalty of £700 a year calculated at the specified the lessors were in the same position as to beneficial ownet if they had agreed to sell that quantity of coal to the less the fixed price of £700. We will speak of this coal as the £7 worth of coal. With respect to the rest of the coal, the less
(1) (1903) A.C., 426, at p. 428. (2) 3 App. Cas., 165.
had agreed to sell to the lessees for the agreed royalty so much of it as might be brought to bank during the term of the lease. With regard to the excess, therefore, beyond the £700 worth, the lessors retained a beneficial interest in the coal equal to the amount of the royalty. For, as pointed out by Lord Cairns L.C. in Gowan v. Christie (1), a mining lease is in effect a sale of the minerals to the lessee for the stipulated rent or royalty. The leases contained a stipulation that if the mines were worked out during the term the rent should cease.
See. 135 of the Public Works Act 1900 provides as follows: [His Honor read the section, and proceeded]: That section does not in express terms provide for compensation to any persons except the person, whether owner, lessee or occupier, by whom the notice of the intention to work the mine is given, but it was held in Smith v. Great Western Railway Oo. (2), that under a corresponding section (78) of the English Railways Clauses Consolidation Act 1845, when such a notice is given by the person immediately entitled to work the mines, and compensation is offered to him, all other persons interested in the mines are also entitled to compensation, while on the other hand their right to work the mines is also inhibited. This result was arrived at by calling in aid sec. 6 of that Statute, which provided that "the company shall make to the owners and occupiers of, and all other persons interested in, the lands taken or used for the purposes of the railway, or injuriously affected by the construction thereof, full compensation for the value of the lands so taken or used." The Public Works Act 1900 does not contain any section in terms identical with sec. 6 of the Railways Clauses Consolidation Act, but it was conceded by the appellants that sec. 95 of the Act and the following sections conferred on the plaintiffs a corresponding right.
The principle governing the right of lessors and lessees to compensation in such cases is thus stated by Lord Cairns L.C. in the case just cited (3). "It appears to me that what is intended by the legislature with regard to mines under a railway is this: the railway company is to be under no obligation to compensate
(1) LR. 2 HL. Se. 273, at pp. (2) 3 App. Cas., 165. 283, 284, (3) 3 App. Cas., 165, at p. 179.
~ come to an agreement or settlement with that person, and to @
any person until there is someone who has a right to work, who is prepared to work, the mines. When that person gives t notice of his intention to work the mines, the directors a1
be; if the rights of that person are to take away the exhaust it entirely, and if he has a tenure the length of w will enable him to take away the coal and to exhaust it enti the railway directors may be bound, and, I should think, wou be bound, to compensate that person to an extent equal to whole value of the minerals. If his right is not so great; cannot take away the whole, or if the extent of his tenure is. such as would enable him to take away the whole, the dit would have to compensate him to an extent less than the value the whole. Then,as it seems to me, the Statute makes, in the 6 section, another provision which is to be read along with this 7 section as to the lessee, and which, as I really think, entirely prc tects the right of the reversioner." His Lordship then read the 6 section, and proceeded : "Of course 'lands' includes mines, a x read this therefore as a general provision that all other perso interested in the mines shall be compensated for the amount: their interests therein." After again referring to the 78th section he went on (1): " My Lords, that appears tu me to be the sol of the whole of this case - Mr. Smith (the landlord) may be to show that over and above the interest which the lessee had these mines, an interest which would enable him, the les work and take away the whole of the coal, there was farther, some ulterior interest, which he, Mr. Smith, was enti to, and in respect of which he may receive compensation ; he is able to show that, he may support a claim for compensat under the 6th section."
In the same case Lord Penzance said (2): "There is furthe be observed, that the directors are not only to arrange with # lessee, but, if he is a person who is entitled to take all the co the compensation for preventing him from taking the coal, u
(1) 3.App. Cas., 165, at p. 181. (2) 3 App. Cas., 165, at p. 185.
be the full value of the coal left :" and again (1), referring to the particular circumstances of the case: "I have had the greatest difficulty in seeing, from the beginning to the end of this case, how (I take it on the supposition in the first instance that the rent was paid) the lessor could have any interest in the question whatever. The lessor ascertained what the value of the coal was, and entered into an agreement by which he handed over to the lessee the right to take the whole of the coal. He granted him a lease which was so caleulated in point of time as to enable him to take the whole of the coal, and he took a rent which represented the whole value of the coal, and supposing that rent had been paid to him, it passes my comprehension to see what possible interest the lessor had remaining. He got the value of his coal, the whole value of his coal had been paid in the shape of rent, and it would be absolutely immaterial to him whether the tenant had taken out the coal, and sold it, or whether the tenant had, under the 78th section of this Act, been obliged to leave the coal there, and received the value of it as compensation from the railway company. The position of the lessor in either the one event or the other would have been precisely the same. There- fore I really do not see what interest remained in the lessor." Lord O'Hagan said (2): "In the case before us the lease of Hodgkins constituted, substantially, a sale of the coal. Its value was estimated on the face of the instrument, and the payment was, as for rent, arranged with the plain understanding that the whole of it should be removed, within a term of fifteen years. As Lord Justice Mellish said : 'In the case of minerals, if a man is the lessee of minerals, and has time to take the minerals, and has the right to take the minerals, he does take the minerals, however limited his interests may be; and, when he has once taken and got the minerals and sold them, the person who has to come in after him is just as much deprived of the minerals as if the person who got them had been the owner in fee simple.' Here the lessee had the right and the time to take the minerals, and therefore a property in them over which he had full control. He sold that property and got the worth of it in the way indicated by my
(1) 3 App. Cas., 165, at p. 187. (2) 3 App. Cas., 165, at p. 191.
H. C. oF A. 1905.
noble and learned friend who last addressed your Lordships, a n with him I confess I have difficulty in discovering the existen of any real loss of which the reversioner can complain. The co was disposed of, purchased, and paid for; and there was an e to any claim to it, save on the part of the compensating company. It was not, as has been well put at the Bar, the case of a farm on of a house, to be used during a term and go back to the owner the end of it. Here the lessee bought the coal and sold it, got the price of it, and the offer of the respondents, which will b made effective by your Lordships' judgment, seems to me to have given the appellant more than he has any right todemand. But, even if it be otherwise, and, either with reference to royalties or anything else, he has a title to any further compensation he m; enforce that title effectually by a proceeding ynder the 6th sec' of the Railway Clauses Act."
The duty of the Court in the present case is to apply doctrines thus laid down to the circumstances appearing by the documents and facts. [His Honor having made further reference
The first objection taken is that the learned Judge adopted the wrong principle in the assessment of compensation. It is con- tended that, having regard to the area of the land under lease, | the length of the term, the probable quantity of coal available, and the probable output of the mine, the actual return to the plaintiffs, by way of rent and royalty together, during the residue _ of the term was not likely to be diminished by reason of th inhibition, and that they would, therefore, not sustain any actual loss until the expiration of the term, when they would get the land back from the lessees subject to the inhibition as to the in question. There was evidence from which the learned Jw might have drawn this inference if he had accepted the evide In this view, the plaintiffs would only be entitled to compensati for the future loss which they would sustain from their inability to work this coal after the termination of the lease. But this, the appellants contended, should be estimated at the pre value of what it would have been worth as coal in situ at termination of the lease. The plaintiffs, on the other hand, con-
' tended that the case should be considered as one of a present
interference with a present proprietary right which the plaintiffs and their lessees were about to exercise, on the one hand by selling, and on the other by purchasing and taking away, the coal in the area in question. Now, primd facie, the owner of property is entitled to do what he likes with his own, and to dispose of it at such times and on such terms as he pleases. A mining lease is, as already pointed out, in substance a sale of the minerals. In the present case the foundation of the rights of both lessors and lessees is an interference with a present right of which they were prepared to take, and intended to take, immediate advantage. The power exercised by the Commissioners, for the exercise of which they have offered to make compensation, is conferred by law. Their act is therefore not unlawful, but they must make compensation. Now, when one person is authorized to take the property of another against his will on the terms of paying the value, it is not competent for the person exercising this authority to claim that a diminution should be made in the price on the ground that, if he had not taken the property, the owner would probably not have been able to sell it for some time, and that therefore the price should be estimated at the present value of a sum payable in futuro, when another purchaser might be expected to be forthcoming. Nor is it competent to him to claim a diminution of price on the ground that the market for the particular kind of property is limited, and that by acquiring the property in ques- tion, and so taking it out of the market, the taker has conferred on the owner an opportunity, which he would not otherwise have had, of disposing of other property of the same kind. Such con- siderations are too remote. The case is dealt with as a present interference with present proprietary rights, and no allowance by way of set off or reduction of price can be rightfully claimed in respect of incidental advantages which the owner deprived of his property may acquire in respect of other property which he has an equal proprietary right to use and dispose of at his will. In some cases the legislature has by express enactment made pro- vision for reducing the price or compensation to be paid in respect of land taken for public works by an amount representing the enhancement in value of other property of the owner, but in the
Rattway Commusston- ERS OF N.S. W. v. Perpetual TrustEE Co. Lrp.
absence of such express enactment it is clear that no such allo: ance can be made.
The same principles apply to the compensation payable in # present case. There is, indeed, no question of enhancement value to any part of the plaintiffs' coal by reason of the inhibiti The effect of it is that they are prevented from selling to their lessees coal which they would otherwise have sold to them, and the fact that they are at liberty to sell to the lessees a corres- ponding quantity of other coal is quite irrelevant. If, indeed, the rent payable by the lessees had been a fixed rent, and the lessees had been entitled on payment of the rent to take as much coal as they thought fit during the term of the lease, there would have been in effect a sale of all the coal, and the lessors, so long as they received the full price, that is the rent, would sustain no loss by reason of the inhibition, but the loss would fall entirely - on the lessees, and would be considered in estimating the compen- a sation payable to them. If the result of the inhibition were to bring about a cessation of payment of rent by reason of the exhaustion of the coal before the end of the term, this would 0 doubt be a loss for which the lessors would be entitled to com-
pensation, but the amount would be only the reversionary value
of the future rent which they would probably lose. But that is not this case. For these reasons we are of opinion that the basis - adopted by the Supreme Court was right so far as it proceeded - upon the present value of the profits to be derived from the coal which was about to be worked immediately, and not upon the - reversionary value of that coal at the expiration of the lease. The appellants took the further objection that, so far as the E £700 worth of coal was concerned, the plaintiffs had sustained no loss, since, on the basis on which the case was treated, they would continue to receive this amount undiminished, and that therefore E the sum of £700 a year should be deducted from the probable total annual payments of £1620, which were the basis of the learned Judge's assessment. It has been already pointed out that, so faras regards the £700 worth of coal, it is purchased and paid for. The - plaintiffs ought not, therefore, to be paid for it over again. But F which part of the output of the mines ought to be regarded asso _ paid for? The appellants seek to attribute this rent entirely to
the coal within the inhibited area. The respondents claim to be entitled to attribute it entirely to coal obtained from the rest of the mine. Now, the basis of the assessment of compensation,
which cannot be more than a restitutio in integrwm, is that the ©
plaintiffs are to be put in the same position as if the notice not to work had not been given. In that case they would have received rent and royalties in respect of the coal in question, and also in respect of coal from other parts of the mine. To which part of the coal so taken should the fixed rent of £700 be attributed ? Having regard to the terms of the lease, the obvious answer is that it should be attributed to the coal first taken in each year, and, if coal was simultaneously being taken from different parts of the mine, should be attributed to those different parts in proportion to the quantity taken from them respectively. If all the coal would have been taken from the inhibited area, the whole should have been attributed to the coal from that area. If none would have been taken from it, then none of the £700 should be attributed to it. Now, it was assumed throughout the case that the coal which would have been taken from the inhibited area would have formed part only of the total output during the ten years adopted by the learned Judge as the basis of the assessment. It follows that the whole of the £700 cannot be deducted from the gross royalties calculated on that coal. On the other hand it cannot all be attributed to the output from the rest of the mine. The only way, therefore, to do complete justice is to divide the £700 between the output from the inhibited area and the rest of the output in proportion to their probable respective quantities, and to treat the coal represented by the proportion of the £700 attributable to each as paid for in full, and the residue as subject to royalty. It follows that a deduction should have been made from the annual instalments of £1620 of a sum bearing the same proportion to £700 as the probable output from the inhibited area would have borne to the total output from the mine. This calculation was not made by the learned Judge, nor were the necessary inferences of fact upon which it must be founded made by him. The case should therefore be remitted to him for that purpose.
The learned Judge, as already stated, calculated the pres value of the future royalties as of the date when the first of thi would have been payable. -This was apparently through in: vertence, since it is admitted that the compensation should estimated as of the date when the notice not to work, whieh i the act entitling the plaintiffs to compensation, was given. present value should, therefore, have been calculated, as at 2; December, 1901, of future instalments, the first of which w: payable at the time when the first royalty would have been pay- able after that date. This is a mere matter of arithmeti calculation.
Another point was taken by the appellants as to the inter allowed by the learned Judge on the sum arrived at as the present _ value of the instalments. In the case of In re Richurd andl Great Western Railway (1), decided by the Court of Appeal in November, 1904, it was held that interest cannot be awarded in respect of the period between the giving of the notice not to work - a mine and the making of the assessment of the amount of com- pensation payable. This case was apparently not cited in the Supreme Court, but its authority was not contested before us, and - we think we ought to follow it.
On these three points, therefore, the amount of damages requires - correction. '
Unless the plaintiffs consent to a reduction of the verdict in accordance with the principles which we have indicated, it will be | necessary formally to set aside the verdict and grant a new trial so far as may be requisite for a re-assessment of the amount of damages on those principles, but without disturbing the findings of the learned Judge on the substantial questions of fact determined by him.
The parties should bear their own costs of this appeal.
Solicitor, for the appellants, J. S. Cargill. Solicitor, for the respondents, F. Davenport.
The Supreme Court decision was varied; unless the respondents consented to a reduction, a new trial was ordered for reassessment of damages on the stated principles, without disturbing the trial judge’s findings on substantial questions of fact. Each party was to bear its own appeal costs.