Buchanan Borehole Collieries Pty Ltd v NSW Coal Compensation Review Tribunal

9 BPR 16253

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(Judgment by: Handley JA) Court:

Judges:
Handley JA Stein JA
Grove AJA

Hearing date: 21 April 1997
Judgment date: 5 August 1997

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Judgment by:
Handley JA

This is the last of three appeals heard by the Court as presently constituted from decisions of Hamilton AJ dealing with claims under the Coal Acquisition (Compensation) Arrangements 1985 made pursuant to s 6 of the Coal Acquisition Act 1981 (the Acquisition Act).

The Acquisition Act came into force on 1 January 1982 (the appointed day). On that day Buchanan Borehole Collieries Pty Ltd (the company) was the freehold owner of a parcel of land forming part of Lemington Colliery. This land, described in the proceedings as the company's land, was acquired by the company on 4 August 1980. Its title included the coal. The company made a claim to the Coal Compensation Board (the Board) under cl 10 of the Arrangements for loss of its rights to the saleable coal situated in this land. This was estimated at 207,014 tonnes, for which the compensation was $334,932.21. This assessment is not in dispute but the Board claimed that an amount of $94,925.70 should be deducted pursuant to cl 17 C of the Arrangements to reflect a benefit derived by the company from the discharge of its obligation to pay wayleave royalty under a lease. This claim was substantially overruled by the Tribunal but upheld by Hamilton AJ. Clause 17 C relevantly provides:

" ... the Compensation Board may make such reduction as the Board determines to be equivalent to the money value of any benefit obtained by the claimant from the discharge of any trust, lease, licence, obligation, estate, interest or contract by virtue of section 5 of the Coal Acquisition Act 1981 , or from the operation of the Coal Acquisition (Transitional Provisions) Regulation 1982 or clause 4 of Schedule 2 to the Coal Mining (Amendment) Act 1981. (emphasis supplied)"

The clause has two limbs, each introduced by the word "from". It authorises a reduction in compensation otherwise payable to reflect both the money value of any benefit obtained by the claimant " from the discharge of any ... lease etc by virtue of s 5 of the Acquisition Act" and also the money value of any benefit "from the operation of" the associated legislation. The second limb refers back to any benefit obtained by the claimant, and thus covers any benefit, and is not limited to benefits obtained from the discharge of any lease etc by the operation of the associated legislation.

The dispute about this deduction requires consideration of what has been described as the Comeleroi land. On 22 September 1970 Mrs Nichols the then owner of that land leased to the company "all the mines, beds, veins and seams of coal lying in and under the said land" (the coal lease). Such a lease "is in effect a sale of the minerals to the lessee for the stipulated rent or royalty", as Lord Cairns pointed out in Gowan v Christie (1873) LR 2 HL (Sc) 273 at 283-4, referred to in Railway Commissioners v Perpetual Trustee Co Ltd (1905) 3 CLR 27 at 35. On 28 February 1978 she transferred the land to the company subject to the coal lease reserving in her favour "all coal and other minerals in and under the said land". Separate Certificates of Title then issued for the land and the coal.

On 23 March 1979 Mrs Nichols transferred the coal to Comeleroi Pty Ltd, subject to the coal lease. On the appointed day therefore the company owned the freehold of the Comeleroi land other than the reserved minerals, and was tenant under the coal lease. Comeleroi was the owner of the coal subject to the coal lease.

Clause 7 of the lease provided:

"The lessee shall pay a wayleave rent or royalty of one cent for every ton of coal and other minerals the produce of any mines not hereby demised which is led or carried by underground workings through or under the said lands or any part thereof under the authority of these presents".

After the company acquired the company land on 4 August 1980, it was able to move coal from that land to the surface through the Comeleroi land. Coal mined from other land within the colliery was also moved to the surface through the Comeleroi land. The Board estimated that 4.4 million tonnes passed through the Comeleroi land which would have attracted the wayleave royalty between the appointed day and the expiration of the coal lease on 21 September 1990. All but 207,000 tonnes came from outside the company land. The deduction made by the Board represented the benefit derived by the company from the termination of its obligation to pay wayleave royalty in respect of the 4,460,861 tonnes. The deduction allowed by the Tribunal represented that benefit in respect of the 207,000 tonnes for which the compensation was payable.

The first submission by Mr Heydon QC for the company was that it derived no "benefit" within cl 17 C because its obligation to pay wayleave royalty was extinguished by merger on 28 February 1978 when it acquired the fee simple in the Comeleroi land (except the coal and other minerals). The doctrine of merger, whereby a lesser estate merges in and is extinguished by a greater when they come into the same ownership is governed by s 10 of the Conveyancing Act , which provides that the rule in equity is to prevail. Merger therefore depends on the intention of the parties. This may be found in the instruments themselves, in other acts or declarations made before or after the transaction, or it may be inferred from the existence of a relevant duty or interest. See Thorne v Cann [1895] AC 11 at 19, and In re Fletcher (1917) 1 Ch 339 at 342, 347, 348.

There can be no doubt that when Mrs Nichols transferred the Comeleroi land to the company on 28 February 1978 she intended to keep the coal lease alive and that it was for her benefit to do so. The transfer was expressed to be subject to the lease and she reserved for herself the coal and other minerals in the land. When she transferred the coal to Comeleroi, she did so subject to the coal lease. The subsequent conduct of the company, Mrs Nichols and Comeleroi in paying and receiving wayleave royalties until on or after the appointed day confirms the intention evident in the 1978 transfer.

Section 10 applies to land under the Real Property Act 1981 (s 6 (1)) but where, as here, the leasehold and freehold estates are registered, merger will not occur until notified by the Registrar-General on the register. See Shell Co of Australia Ltd v Zanelli (1973) 1 NSWLR 216 at 220-1 and Real Property Act s 12 (1) (i) added in 1970. However the subsistence of separate freehold and leasehold estates on the register vested in the same person would not prevent a merger in equity if that was intended and an interested party could enforce the recording of that merger. The coal lease remained on the register at the appointed day and in my opinion there was no merger in equity.

Mr Heydon's second submission was that the wayleave through the Comeleroi land, which by definition was through air space created by the removal of the coal and other material, was not part of the "coal or other minerals" reserved to Mrs Nichols by the 1978 transfer, but was part of the fee simple transferred to the company.

The coal lease leased "all the mines, beds, veins and seams of coal lying in and under the said land". The evidence does not disclose whether the "underground workings" referred to in cl 7 then included the whole of the way over which the 4.4 million tonnes was later carried. If the whole of that way already existed, it was part of "the mines" leased to the company. If some or all of that way was created by further mining the way, to that extent, represented the space occupied by coal which was leased to the company and mined under the lease.

The reservation of the coal and other minerals in the 1978 transfer did not in terms reserve the existing mines or underground workings. However long standing authority establishes that such a reservation carries existing underground mines. See Batten Pooll v Kennedy (1907) 1 Ch 256 at 262-5, especially at 265, where Warrington J held that that a reservation of "coal and limestone" amounted in construction to a reservation of the coal and limestone mines.

The coal lease contained a demise of "all the mines" as well as the coal, and there is no doubt that it included the existing underground workings although all winnable coal had been removed. See Batten Pooll v Kennedy at 267. The 1978 transfer to the company was subject to the lease meaning, in my view, the landlord's interest in the lease. This, read with the reservation of the coal and other minerals, left the landlord with a reversionary interest commensurate with the lease or else created such an interest by estoppel. In my opinion therefore Comeleroi as assignee of the reversion remained entitled to the benefit of the wayleave royalty payable under cl 7 until the coal lease was determined as a result of the Acquisition Act and associated legislation.

The next question was whether the company obtained a benefit within either limb of cl 17 C. This Court decided in NSW Coal Compensation Board v NSW Coal Compensation Tribunal (40035/96, 29/7/97, unreported) (the Bloomfield Collieries case) that the Acquisition Act and associated legislation discharged the private coal lease there in question on 30 April 1982. The reasoning and decision in that case are directly applicable and establish that the obligation to pay the wayleave royalty under cl 7 terminated on 30 April 1982. The wayleave royalty was not a royalty in respect of "coal" within cl 4 (1) of Schedule 2 of the Coal Mining Amendment Act . The coal there referred to was coal as defined by the Coal Mining Act 1973 , that is coal in its natural state on or below the surface of the land. The coal on which the wayleave royalty was payable was mined coal. The obligation in cl 7 therefore was not determined by cl 4 (1) but continued in force under cl 4 (2) until discharged on 30 April 1982 pursuant to cl 4 (2) (b) on the grant of a Crown lease of the coal pursuant to the Coal Acquisition (Transitional Provisions) Regulation 1982. The reasoning and decision of the Bloomfield Collieries case establish that the company derived a benefit within both limbs of cl 17 C.

The remaining issue concerns the amount of the deduction authorised by cl 17 C in this case. The Tribunal held that the benefit must be linked or related to the claim and reduced the deduction to the benefit obtained by the company in respect of the 207,000 tonnes of coal from its own land. Hamilton AJ upheld the decision of the Board that a deduction should be made for the whole of the coal on which wayleave royalty would have been payable. The company sought the restoration of the Tribunal's decision.

The question turns on the language of cl 17 C. Mr Heydon's argument focussed on the words "In the calculation ... of the amount in respect of the claim" at the beginning of the clause, which he submitted required the deductible benefit to be related to, or "in respect of" the claim. However the later provisions define the deductible benefits in language of complete generality. The Board may take into account "any benefit" from the discharge of "any trust, lease, licence, obligation, estate, interest or contract", or "any benefit ... from the operation of" the associated legislation. There is no basis in the language or context of the clause for reading down these wide and general words.

Mr Heydon however submitted that the construction supported by the Board would enable it to deduct the same benefit more than once from claims by the same claimant. The clause should not be given an interpretation producing such unjust and capricious results if another interpretation is fairly open. The text does not specifically forbid double deductions, but it does not specifically authorise them either. On principle, double deductions should be forbidden unless specifically authorised. Moreover, double counting would be contrary to the Board's duty under cl 6 (c) of Schedule 2 of the Arrangements to "act according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms".

Mr Hall QC for the Board acknowledged that the same benefit could not be deducted twice under cl 17 C. In my judgment this is correct and I would reject this last submission by Mr Heydon.

The appeal fails and should be dismissed with costs.