In the recent case of Perilya Broken Hill Limited v Vauler-General (No 6)  NSWLEC 43, the Land and Environment Court (LEC) was asked to consider whether the minerals in or under land were assumed to be privately owned when determining land value under section 6A(1) of the Valuation of Land Act 1916 (VoL Act).
Despite minerals almost always being excluded from a Crown grant of land, and not in fact owned by the person holding the estate in fee simple of the land, the LEC held that for the purpose of determining land value under section 6A(1) of the VoL Act, all minerals in or under land are assumed to be privately owned.
Because of the royalty "rebate" provisions of sub-sections 284(2) and (2A) of the Mining Act 1992, this finding has significant impacts for owners of land subject to mining.
The applicant, Perilya Broken Hill Limited (Perilya), owned land at Broken Hill used for mining lead, zinc and silver (Land).
The minerals in the land are publicly owned because the land is:
- the subject of Crown grants made since 1890, which reserve minerals from the grants; and/or
- subject to the operation of Crown lands statutes, which also reserve minerals for the Crown.
Perilya mines the minerals under mining leases from the Crown, which had been granted under the Mining Act 1992 (Mining Act).
As part of the statutory land valuation process, the respondent Valuer-General valued the Land at $20.9 million as at a base date of 1 July 2007 assuming that the minerals were privately owned. Perilya objected to this valuation, which objection was determined by the Valuer-General by way of refusal.
Perilya was successful on appeal to the Land and Environment Court (LEC) and the LEC redetermined the value of the Land at $4.9 million1.
The Valuer-General then appealed to the NSW Supreme Court of Appeal (Court of Appeal) claiming that the LEC had erred in law by:
"... failing to take into consideration that the capital value of the fee simple of the Land included the title to the minerals in the land and in failing to take into account that Perilya, as the owner of the Land, would be entitled to receive royalties from the State of New South Wales in respect of the value of the minerals recovered from the Land by the notional operator of the mines."
The significance of the difference between private and public ownership of minerals relates to the payment of royalties under sections 282 and 284 of the Mining Act. While royalties are payable to the Crown for both publicly owned minerals (section 282(1) of the Mining Act) and privately owned minerals (section 284(1) of the Mining Act), seven-eighths of all royalties recovered by the Crown in respect of privately owned minerals must be paid to the owner of the mineral (see sub-sections 284(2) and (2A) of the Mining Act). On this basis, land with privately owned minerals will have a higher value if the royalty "rebate" provisions of sub-sections 284(2) and (2A) are taken into account.
While the parties had agreed for the purpose of the LEC proceedings that the minerals were privately owned, neither the parties nor the LEC had regard to sub-sections 284(2) or (2A) of the Mining Act. Accordingly, the Court of Appeal determined that the LEC had erred in law and remitted the proceedings for redetermination in accordance with law.
That remitter first required the determination of the preliminary question relating to the ownership of the minerals.
The LEC was asked to determine the following question:
"Under s 6A(1) of the Valuation of Land Act 1916, is the land value of land containing publicly owned minerals, as defined in the Mining Act 1992, to be determined on the assumption that the minerals are privately owned?"
Section 6A(1) of the Valuation of Land Act 1916 (VoL Act) is as follows:
(1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made.
Perilya submitted that section 6A(1) of the VoL Act did not require land value to be determined on the assumption that minerals are privately owned because:
- mineral reservations in a Crown grant (such as for the Land) are exceptions to the Crown grant and are not treated in law as part of "the land" granted; and
- Crown lands statutes that have reserved certain minerals to the Crown in New South Wales, in all Crown grants since 1894, are "public laws of general application" which must be taken into account in determining land value pursuant to section 6A(1) of the VoL Act.
In response, the Valuer-General submitted that the phrase "fee simple of the land" in section 6A(1) of the VoL Act means full ownership in the eyes of the law free of all restrictions and encumbrances on title.
HISTORY OF LAND "OWNERSHIP"
In its consideration of the preliminary question, the LEC noted at the outset that the exercise of determining the land value of the "fee-simple of land" is a highly artificial one. Those "real world" aspects of the valuation process under the VoL Act are introduced by way of section 6A(2) of the VoL Act, which was not relevant to the current proceedings.
The LEC traced the concept of "fee-simple of land" to the Norman conquest of England, and the premise that all land was then owned by the highest lord, William the Conqueror, and then subsequent monarchs of England. Land was occupied by other persons as tenants, with either a direct or indirect holding (through an intermediate lord) from the Crown.
Fee-simple, the "highest" or most complete form of land ownership, granted to the holder of the estate in fee-simple all the advantages of absolute ownership, except the form. The LEC quoted Brennan J in Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635 at 656, who stated:
"While the theory of our land law is that the radical title of the Crown lies between the physical land and a freehold estate in it, the ownership of the freehold estate has long been, for almost all practical purposes, the equivalent of full ownership of the land. As a result, the freehold estate is, as a matter of legal and popular language, commonly treated as the land itself."
Under statute, the LEC referred to the Interpretation Act 1987 (NSW), where "land" is defined in section 21 as:
"messuages, tenements and hereditaments, corporeal and incorporeal, of any tenure or description, and whatever may be the estate or interest therein."
The LEC noted that "corporeal hereditaments" means "land and things that are part of fixed to land, including minerals"3 and that the statutory definition of "minerals" has "included silver and galena at all times since 1884 and has included lead and zinc at all times since 1922", by reference to an analysis of Crown lands statutes commencing with the Crown Lands Act 1884 and ending with the Crown Lands Act 1989 (CL Statutes).
THE ARTIFICIAL CONCEPT OF "THE FEE-SIMPLE OF LAND" AND PERILYA'S SUBMISSIONS
The phrase "fee-simple of land" in section 6A(1) of the VoL Act is "a hypothetical and artificial concept adopted for rating and taxing purposes." It does not mean the estate in fee-simple that has been granted. Rather, it means "the hypothetical fee simple as the highest state unencumbered and subject to no conditions or reservations".
On this basis, Perilya's first submission that mineral reservations in a Crown grant are not treated in law as part of "the land" for the purpose of section 6A(1) of the VoL Act failed.
In relation to Perilya's second submission that CL Statutes were "public laws of general application" which must be taken into account in determining land value pursuant to section 6A(1) of the VoL Act, the LEC referred to the decision of Sydney City Council v Valuer-General (1956) 1 LGRA 229, which applied Royal Sydney Golf Club v Federal Commissioner of Taxation (1955) 91 CLR 610, in which Sugerman J held that:
- restrictions imposed by a planning law were part of "the laws of the State which affect the value of land" and must be taken into account for valuation purposes; and
- restrictions on land arising from the treatment of land pursuant to statutes, such as the declaration of land to be a public park under statute, were "nothing but an encumbrance or a condition or restrictive obligation affecting the titles of specific parcels of land", which must not be taken into account for valuation purposes.
The LEC applied this principle, holding that under section 6A(1) of the VoL Act:
"...statutes affecting value by affecting enjoyment or use of land independently of all questions of title or ownership are to be taken into account, but restrictions on title or ownership are not. Planning statutes comprise, or are the prime example of, the former category and therefore have to be taken into account. Planning statutes do not affect title or ownership. In contrast, the Crown lands statutes under discussion affect a restriction on title or ownership. Therefore, in my opinion, regard cannot be had to them under s 6A(1)."
CONCLUSION AND IMPLICATIONS
Having regard to a detailed consideration of case law and statutory interpretation of section 6A(1) of the VoL Act, the LEC determined that the land value of land containing publicly owned minerals, as defined in the Mining Act, is to be determined on the assumption that the minerals are privately owned.
The effect of the LEC's judgment is that the value of land containing mined minerals will be significantly higher. This is because the valuation of such land will need to have regard to the receipt of royalties, which the owner of the fee-simple would enjoy pursuant to sub-sections 284(2) and (2A) of the Mining Act.
1Perilya Broken Hill Ltd v Valuer-General  NSWLEC 215.
2 Valuer-General v Perilya Broken Hill Ltd (2013) 195 LGERA 416;  NSWCA 265 at .
3 Citing Harpum, Bridge & Dixon, Megarry & Wade The Law of Real Property (8th ed, 2012, Sweet & Maxwell) 8.
4See Royal Sydney Golf Club v Federal Commissioner of Taxation (1955) 91 CLR 610 at 623.
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