EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Osborne Lord Wheatley Lord Reed	[2009] CSIH 42 XA154/07 OPINION OF THE COURT delivered by LORD OSBORNE in Appeal by THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS Appellants; against JOHN COLUM BUTE Respondent: Against a decision of the Special Commissioners, dated 13 September 2007, communicated to the Appellants on 13 September 2007 _______

Act: Artis; acting solicitor (Scotland), H.M. Revenue & Customs

Alt: Ghosh; Anderson Strathern W.S.

27 May 2009

The background circumstances

[1] The respondent is the beneficiary of various interests conferred by trusts created by the Fifth Marquess of Bute and varied by several later instruments. The respondent is himself the Seventh Marquess of Bute and the Fifth Marquess' grandson. The details of the trust settlements are immaterial for present purposes. It is sufficient to record that the legal ownership of the estate assets remains with the trustees acting thereunder as bare trustees for the beneficial owners. The respondent's beneficial interest extends to a one half share of the settled estate.

[2] The assets of the estate include land and buildings and, importantly for this appeal, mineral rights, some of which extend to land the surface of which is no longer owned by the trustees. Several wayleaves have been granted by the trustees to various mining companies, in order that the coal under the surface might be worked. Some of these wayleaves have expired, while others remain extant. A number of assessments have been issued upon the respondent for the tax years 1993/94 to 2002/03 inclusive. These assessments have been made upon the basis that the receipts to which they relate do not fall to be treated as mineral royalties under mineral leases or agreements.

[3] The present respondent appealed against these assessments to the Special Commissioners. The appeal came before a Special Commissioner, sitting in Edinburgh on 26 June 2007. By a decision dated and released on 13 September 2007, the Special Commissioner resolved these appeals in favour of the present respondent. From that decision, the appellants have appealed to this court.

[4] The issue in the appeals before the Special Commissioner was the application of sections 119 and 122 of the Income and Corporation Taxes Act 1988, "the 1988 Act", to the payments receivable by the respondent in return for rights to drill, prospect and explore for coal, to extract coal by open cast mining and to disturb other minerals for the purpose of mining coal. Those rights were granted by the trustees of settlements in which the respondent has an interest, over various lands in respect of which the trustees own the mineral rights, even though they do not own the coal and, in some cases, do not own the land. The present appellants contended before the Special Commissioner that the payments concerned fell within section 119 of the 1988 Act and that they were therefore fully taxable as income. The present respondent maintained that section 122 of the 1988 Act applied to them, with the consequence that half of these payments was taxable as income, while the other half was taxable as a chargeable gain. The Special Commissioner resolved that issue in the respondent's favour. The Special Commissioner was not asked to determine the amounts of tax actually due, but merely to resolve the issue of principle which had arisen between the parties. That approach was maintained before us.

The relevant contractual arrangements

[5] It is appropriate at this stage to notice, at least in outline, the contractual arrangements under which the payments, the taxation of which is in controversy, were made. It was a matter of agreement that there were several such contractual arrangements, but two in particular were examined as specimens of the others. The first was the Coal Prospecting Agreement between the Fifth Marquess of Bute's 1929 Settlement Trustees and L.A.W. Mining Limited, relating to the lands of High Garleffan, dated 22 December 1998 and 11 January 1999, document 6/7. Under this contract there was granted to the mining company

"...the exclusive right to drill prospect and explore so as to test for coal, ironstone, bituminous shale, fireclay and limestone, (being minerals which are vested in The Coal Authority and which minerals are hereinafter referred to and comprehended within the expression 'Coal Authority Minerals')..."

It was provided as part of the grant that the mining company

"shall not be entitled to remove from the Prospecting Area anything other than samples of Coal Authority Minerals which the [mining company] shall be bound and obliged to use for testing and analysis only and not for any commercial purpose."

The Coal Prospecting Agreement also conferred upon the mining company an option to enter into a Wayleave Agreement or Wayleave Agreements in respect of the Prospecting Area or such part of parts thereof as the [mining company] might specify.

The Coal Prospecting Agreement went on to specify that the option was to be subject to the following terms and conditions:

"(a) [The mining company] shall be bound and obliged before exercising the option in respect of any part of the Prospecting Area.....

(i) to complete its full programme of test bore holes on the Relevant Area and analysis of the quality and quantity of the Coal Authority Minerals therein....with a view to establishing whether there are reserves of Coal Authority Minerals of suitable quality, quantity and location within, on or under the Relevant Area to allow the same to be exploited for the [mining company].

(ii) to obtain planning permission to work, win and carry away the Coal Authority Minerals (and, if necessary, other minerals) from the Relevant Area and for the restoration thereof ('the planning permission').

(iii) to obtain an Opencast Operating Licence and Lease from the Coal Authority or its statutory successor whomsoever to work, win and carry away Coal Authority Minerals from the Relevant Area......; and

(iv) to obtain such (if any) other consents....as may be necessary to permit the [mining company] to work, win and carry away Coal Authority Minerals and (if necessary, other minerals) from the Relevant Area.....".

[6] As a specimen of a wayleave agreement, reference was made to the Wayleave Agreement between the Fifth Marquess of Bute's 1929 Settlement Trustees and L.A.W. Mining Limited, dated 22, 29 and 30 November 1999, document 6/8. Under clause One of that agreement, the proprietors of the land in question, in consideration of the payments and on the conditions specified, granted to [the mining company]

"....an exclusive wayleave over the Site and that for the purpose of excavating by opencast working methods so as to extract the coal, and (if any) ironstone, bituminous shale, fireclay and limestone (being minerals which are vested in the Coal Authority and which minerals are hereinafter referred to as and comprehended within the expression 'Coal Authority Minerals') located in, on or under the Site...".

Clause Three of this agreement made provision for the quantification of the wayleave payments. The formula employed was that the mining company should make a specified payment for every metric tonne of each of the coal authority minerals removed from the site. The rate specified applied to the first 350,000 tonnes removed; a different rate was specified for each tonne over and above the 350,000 tonnes. In clause Five of the agreement, [the mining company] was obliged to pay and discharge all royalties due to the Coal Authority in respect of the Coal Authority Minerals removed from the site. It was also obliged to comply with

"...all conditions contained in the Opencast operating Lease and Licence granted or to be granted by the Coal Authority.....as owners of the Coal Authority Minerals within the Site....and with the conditions attached to the planning consent dated 9 September 1999 and issued by East Ayrshire Council....".

Under clause Nine of that agreement, [the mining company] was given an option to work, win, carry away and market or sell any minerals other than Coal Authority Minerals of any kind uncovered during its mining operations, which might be economically worked along with the Coal Authority Minerals. Royalties were to be paid in respect of such other minerals to the proprietors at the rate of 10 per cent of the ex-site sale price obtained for the same.

The relevant statutory provisions

[7] It is necessary, first of all, to recognise the statutory arrangements applying to deposits of coal themselves. Under the Coal Industry Nationalisation Act 1946, "the 1946 Act", an Act to establish public ownership and control of the coal mining industry, the assets described in Part I of the First Schedule to the Act, by virtue of section 5, vested in the National Coal Board, "the Board". In terms of paragraph 1 of Part I of that Schedule, among the assets transferred to the Board were "(1) interests in unworked coal, and in mines of coal,...". Thus since the passing of the 1946 Act, "unworked coal" has been in public ownership. For the purposes of the present appeal, it was agreed that the statutory structure created by the Coal Industry Act 1994, "the 1994 Act", should be seen as applying. Under section 1 (1) of that Act there was established

"...a body corporate to be known as the Coal Authority....for the purpose of -

(a) holding, managing and disposing of interests and rights in or in relation to the unworked coal and other property which is transferred to or otherwise acquired by it by or under this Act;

(b) carrying out functions with respect to the licensing of coal-mining operations;......".

Under section 25 of the 1994 Act it is provided:

"25 (1) Subject to subsection (3) below, coal-mining operations to which this section applies shall not, at any time on or after the restructuring date, be carried on by any person except under and in accordance with a licence under this Part.

(2) This section applies to any coal-mining operations in so far as they -

(a) consist in the winning, working or getting (with or without other minerals) of any coal, in the treatment of coal in the strata for the purpose of winning any product of coal or in the winning, working or getting of any product of coal resulting from such treatment;....".

[8] Section 26 of the 1994 Act provides:

"26 (1) Subject to subsection (6) below, it shall be the Authority which shall have the power to grant a licence under this Part.

(2) An application for a licence under this Part may be made by any person who has acquired, or is proposing to acquire, (whether from the Authority or some other person) -

(a) such an interest in land comprised in the area with respect to which the application is made, or

(b) such rights in relation to coal in that area,

as, apart from the need for a licence, would entitle him to carry on the coal-mining operations to which the application relates......".

[9] Turning next to the provisions of the 1988 Act, the interpretation of which is directly in issue in this appeal, we note first those of section 119. It provides:

"119 (1) Where rent is payable in respect of any land or easement, and either -

(a) the land or easement is used, occupied or enjoyed in connection with any of the concerns specified in section 55 (2) [section 55 (2) specifies, inter alia,

(a) mines and quarries......].......the rent shall, subject to section 122...., be charged to tax under Schedule D, ......

(3) For the purposes of this section - 'easement' includes any right, privilege or benefit in, over or derived from land; and "rent" includes a rent service, rentcharge, fee farm rent, feuduty or other rent, toll, duty, royalty or annual or periodical payment in the nature of rent, whether payable in money or money's worth or otherwise."

[10] As regards section 122 of the 1988 Act, the relevant parts are as follows:

"122 (1) Subject to the following provisions of this section, a person resident or ordinarily resident in the United Kingdom who in any year of assessment or accounting period is entitled to receive any mineral royalties under a mineral lease or agreement shall be treated -

(a) for the purposes of income tax, or as the case may be for the purposes of corporation tax on profits exclusive of chargeable gains, as if the total of the mineral royalties receivable by him under that lease or agreement in that year or period and any management expenses available for set-off against those royalties in that year or period were each reduced by one-half;......

and this section shall have effect notwithstanding any provision of section 119 (1) making the whole of certain kinds of mineral royalties chargeable to tax under Schedule D, ......

(5) In this section references to mineral royalties refer only to royalties receivable on or after 6^th April 1970 and the expression 'mineral royalties' means so much of any rents, tolls, royalties and other periodical payments in the nature of rent payable under a mineral lease or agreement as relates to the winning and working of minerals; and the Board may by regulations -

(a) provide whether, and to what extent, payments made under a mineral lease or agreement and relating both to the winning and working of minerals and to other matters are to be treated as mineral royalties; and

(b) provide for treating the whole of such payments as mineral royalties in cases where the extent to which they relate to matters other than the winning and working of minerals is small.

(6) In this section - 'minerals' means all minerals and substances in or under land which are ordinarily worked for removal by underground or surface working but excluding water, peat, top-soil and vegetation; and 'mineral lease or agreement' means -

(a) a lease, profit à prendre, licence or other agreement conferring a right to win and work minerals in the United Kingdom;

(b) a contract for the sale, or a conveyance, of minerals in or under land in the United Kingdom; and

(c) a grant of a right under section 1 of the Mines (Working Facilities and Support) Act 1966 other than an ancillary right within the meaning of that Act."

[11] Finally, it is necessary to note certain parts of the Mineral Royalties (Tax) Regulations 1971 (S.I. 1971 No.1035), "the 1971 Regulations". Regulation 2 of those Regulations provides:

"Subject to Regulation 3 below, where a payment is made on or after 6^th April 1970 in respect of a sum receivable on or after that date under an agreement which relates both to the winning and working of minerals and to other matters, then, notwithstanding any allocation of the payment under the terms of the agreement, so much but no more of the payment is to be treated for the purposes of the principal section [section 122 of the 1988 Act] as mineral royalties as might reasonably have been expected to be provided for by the agreement if -

(a) it conferred only the right to carry out specified operations in relation to minerals in or under the land to which the agreement relates; and........Provided that no such payments are to be treated as mineral royalties unless minerals in or under the land are being or have been won and worked pursuant to rights conferred by or under the agreement, or there is reasonable prospect of their being so won and worked."

Submissions of the Appellants

[12] Counsel for the appellants explained that the issue in the appeal was whether the respondent was entitled to the relief in respect of income tax, conferred by the provisions of section 122 of the 1988 Act. There was no dispute that the provisions of section 119 of the 1988 Act applied to the facts here involved. Counsel explained that the assessments in question related to income payable under several agreements. It was not necessary to have regard to all of these agreements. It was sufficient for the court to understand the general nature of the agreements involved. There were two types of agreement, first, coal prospecting agreements, and second, wayleave agreements. He then proceeded to explain the terms of specimen agreements, to which we have already alluded. It had to be understood that no payments had been received in respect of minerals other than coal. In some cases coal prospecting agreements had been made where the proprietors owned the minerals in the area in question, but not the surface of the land.

[13] Counsel went on to draw our attention to the relevant legislation; the effect of enjoyment of the relief provided for by section 122 of the 1988 Act was that the Taxation of Capital Gains Act 1992, sections 201 and 203, took effect in relation to that part of the receipts of the respondent that were not to be treated as taxable income. The controversial question was to what extent were the sums received payable under a "mineral lease or agreement", as defined in section 122 (6) of the 1988 Act. In terms of section 122 (5) of that Act, for relief to be available, two conditions had to be satisfied. The first was that the payments had to be made under "a mineral lease". The second condition was that the payments had to be such "as relates to the winning and working of minerals".

[14] Counsel submitted that the respondent failed at both of these hurdles in relation to coal. Were it to have been the case that minerals other than coal had been involved, the position would have been different. The proviso to Regulation 2 of the 1971 Regulations prevented the respondent obtaining relief. That was because, in the submission of the appellants, the royalties were not payable in respect of "minerals in or under the land.....won and worked pursuant to rights conferred by or under the agreement". The only basis upon which the agreements involved in this case could be seen as falling within the definition of "mineral lease or agreement" would be if they satisfied the requirements of section 122 (6) (a), that is to say that they were leases or other agreements "conferring a right to win and work minerals". The respondent's submission was that the contracts involved could not be so described. In the context of this submission counsel referred to Minerals and the Law of Scotland, Robert Rennie, paragraph 5.1.

[15] The Special Commissioner had erred in paragraphs 17 and 19 of his decision. In paragraph 17 he rejected the argument advanced by counsel for the present appellants "that, since the trustees do not own the reserves of coal, they cannot grant the right to work them, meaning a facility enabling them to put themselves in a position to extract the coal from the ground." In paragraph 18 he had also erred. He had there said:

"....the words in subsection 122 (5), by which mineral royalties are defined as receipts under 'a mineral lease or agreement [which] relates to the winning and working of minerals' does not, in my view, demand any more than that the agreement has a clear connection to the winning and working. Without the trustees' wayleave, the intending miner could not, as the Court of Appeal put it in Rokeby v Elliot [(1879) 13 Ch.277], win the coal field and thereafter work it."

[16] Counsel went on to discuss the rationale for the relief created by section 122 of the 1988 Act. Its enactment had had the purpose of encouraging the deep mining of certain minerals, particularly potash in the 1970's. In this connection he referred to Regina v The Secretary of State for the Environment, Transport and the Regions, ex parte Spath Holme Limited [2001] 2 AC 349, particularly at page 398. That case was concerned with statutory interpretation and, in particular, the circumstances in which resort might be had to statements made in Parliament, following the decision in Pepper v Hart [1993] AC 593, which permitted the use of Parliamentary materials as an aid to statutory construction where certain conditions were satisfied.

[17] The appellants' position was that there was no obscurity requiring resort to Parliamentary materials in this case, since the meaning of the statutory provisions was plain. Nevertheless, if resort were had to Parliamentary materials, they tended to confirm the appellants' position. In that connection counsel drew our attention to the report in Hansard upon a Parliamentary debate on the Finance Bill on 5 May 1970 in which the Chief Secretary to the Treasury, Mr Diamond, spoke. Columns 277 and 278 were relevant to the rationale for the relief. Reference was also made to the report of proceedings on 27 May 1970, columns 1897 and 1898; also to the summary Notes on Clauses relating to clause nine of the Bill under discussion, provided for the minister.

[18] Counsel submitted that the foregoing materials gave comfort to the view that the relief was intended for mineral owners. There was no reference in the materials to coal. No support could be derived from that source for the conclusion of the Special Commissioner.

[19] Counsel went on to draw attention to the terms of the Mines (Working Facilities and Support) Act 1966, particularly sections 4 and 8. The purpose of the structure created by that Act was to advance the national interest. That might have justified Parliament in making no special provision in respect of coal in 1971. The rights conferred under the present agreements were of an ancillary nature. The Coal Authority conferred the primary right. If one were to accept the Special Commissioner's approach there would require to be a factual enquiry relating to the clear connection perceived by him. That approach would create uncertainty as to where the line should be drawn.

[20] In all of these circumstances counsel moved the court to allow the appeal. The Special Commissioner had not posed a particular question, but it would be sufficient if the court reversed his decision.

Submissions of the respondent

[21] Counsel for the respondent said that there were two controversial issues: first, whether the payments involved were made under mineral leases; and, second, whether the payments were "mineral royalties". The expression "mineral lease or agreement" was defined in section 122 (6) of the 1988 Act. The relevant part of that definition was to be found in the words "a lease.....or other agreement conferring a right to win and work minerals in the United Kingdom." It was indisputable that coal was a "mineral". "Minerals" was a word defined in section 122 (6) of the 1988 Act as meaning "all minerals and substances in or under land which are ordinarily worked for removal by underground or surface working but excluding water, peat, top-soil and vegetation."

[22] Counsel submitted that there was no controversy surrounding the expression "winning and working" in section 122 (5) and "win and work" in section 122 (6) (a) of the 1988 Act. The word "win" in this context meant to search for and get access to a mineral. The word "work", in the context, meant to extract the mineral. In that connection reliance was placed upon the observations of Lord Ross in Occidental Inc v Assessor for Orkney; Assessor for Orkney v Occidental Inc 1978 S.C. 231, at pages 257 to 258. There could be no dispute about that. It followed from what had just been said that the right to "win" minerals embraced a right to obtain access to a relevant area, to prospect for the minerals, to test the mineral deposits and to dig for them. The "working" of minerals required a continuing right to occupy land and to extract and remove the target mineral. Thus, to grant a right to "win and work" was to grant an entitlement to undertake the above mentioned operations and to have continued access to the relevant area to extract the mineral concerned. That some party consents to the operation, whether a proprietor or non-proprietor of land, need not be relevant to the question of whether the right to win and work had been conferred. A right to "win and work" had to involve a right to extract the mineral concerned. It was submitted that the Coal Authority could not give that right. Nor could the surface proprietor. What the Crown appeared to be saying was either that no one was the grantor of the right, or the Coal Authority was. The fact was that the right to take coal was granted by the Coal Authority, but coal could not be extracted save with the consent of the surface proprietor.

[23] It had to be appreciated that, as a matter of plain language, the licence granted by the Coal Authority to a miner was quite separate from a wayleave granted by the surface proprietor. The system of licensing by the Coal Authority did not create a transfer of property. There was no "conveyance" in such a licence. What the licence did was to enable a transfer of ownership to take place; the licence was analogous to planning permission. Thus, there was no magic in the proprietorial right of the Coal Authority in "unworked coal", to use the expression appearing in section 1 of the First Schedule to the 1946 Act. Identical words were used in section 1 (1) (a) in relation to property transferred to the Coal Authority in terms of the 1994 Act.

[24] Counsel then went on to consider the terms of the specimen wayleave agreement, document 6/8. In clause One it was made clear that the wayleave was being granted over the site "for the purpose of excavating by opencast working methods so as to extract the coal". Under clause Three, the payments specified therein, determined by the quantity of coal removed from the site, went to the trustees as proprietors of the site. Clause Four specified the powers of the miner. In clause Five, obligations were imposed upon the miner which included under paragraph (d), the obligation to "comply with all conditions contained in the Opencast operating Lease and Licence granted or to be granted by the Coal Authority....". There was also an obligation in that paragraph to comply with the conditions attached to the relevant planning consent. The important right conferred by the wayleave agreement was to be found in clause Four (a) which involved occupation and operation of the site on an exclusive basis to enable the miner to

"expose the seam or seams of Coal Authority minerals under the surface and generally to carry out any operations on the Site necessary to enable the [miner] to win, work and carry away the Coal Authority Minerals by opencast methods by excavations open to the air and that in a proper and satisfactory manner."

It was plain from these provisions that the grant of the Coal Authority licence could not empower the miner to extract and remove the coal. In connection with these submissions counsel relied upon observations in the article on Energy in the Stair Memorial Encyclopaedia of the Laws of Scotland, re-issue 2000, paragraphs 95 to 97.

[25] Support could be obtained for the respondent's position from the provisions of the 1994 Act. Section 25 made it plain that coal mining operations could not be carried on by any person except under and in accordance with the provisions of a licence from the Coal Authority granted under that Act. That section applied to any coal mining operation in so far as it consisted in "the winning, working or getting... of any coal." Section 26 also was instructive. It made plain that an application for a licence might be made by any person who had acquired, or was proposing to acquire:

"(a) such an interest in land comprised in the area with respect to which the application is made, or

(b) such rights in relation to coal in that area, as, apart from the need for a licence, would entitle him to carry on the coal mining operations to which the application relates."

That provision demonstrated that the licence itself was not to be seen as a conveyance. What was important was the wayleave agreement which conferred the specified entitlement upon the miner. The way in which the matter had to be seen was that it was the working of the coal itself that created a right of property in the coal in the miner. It was for these reasons that the proviso to Regulation 2 of the 1971 Regulations created no problem for the respondent; the coal could plainly be said to be "won and worked pursuant to rights conferred by or under the agreement", that is to say, the agreement between the proprietors and the miner.

[26] There had been a hint in the submission of the appellants that the success of the respondent's arguments would open floodgates to a range of other claims for relief under section 122 of the 1988 Act. That was a misconception. There was no difficulty in identifying what was involved in the right to win and work coal. However, there might be other operations which could not be seen as comprised within that operation, where relief would not be available. Other rights to carry on other operations than that of winning and working were of an ancillary nature and simply enhanced the right to win and work. Indeed, section 2 (1) of the 1966 Act specifically recognised and defined "ancillary right". The right to work a mineral had, as an inherent element in it, a right of access; that was not ancillary. In that connection reliance was placed on Lewis v Fothergill (1869) 5 Ch.103 at page 109.

[27] Reliance had been placed by counsel for the appellants on passages from Hansard. There was nothing in those passages which bore upon the issues in this case. In any event, resort to Hansard would be illegitimate in the context of this case, since there was nothing obscure or ambiguous in the legislation applicable.

The decision

[28] The relief in respect of mineral royalties in controversy in this case is the creature of section 122 of the 1988 Act. The terms of that section are therefore crucial to its resolution. Subsection (1) is the primary provision defining the circumstances in which the relief is to be available. Subject to certain requirements which create no issues in this case, if a person is to qualify for the relief, he must be "entitled to receive any mineral royalties under a mineral lease or agreement."

[29] There is no dispute that the present case is concerned exclusively with coal. No payments are the subject of assessments here which were not made in consequence of the extraction of coal by mining interests. Accordingly the question arises of the status of coal in relation to the other provisions of section 122, which refer to "minerals". In subsection (6) a definition of "minerals" is provided; the word is to be taken as meaning "all minerals and substances in or under land which are ordinarily worked for removal by underground or surface working but excluding water, peat, topsoil and vegetation". Having regard to the broad and clear terms of that definition, in our view, coal is quite indisputably within the definition quoted.

[30] Turning then to the first of the two requirements for relief under subsection (1), the entitlement to receive "mineral royalties", it is necessary to consider the application of the definition of that expression in subsection (5). The definition opens with a reference to the type of payments included, being "rents, tolls, royalties and other periodical payments in the nature of rent". We have no difficulty in accepting that the payments involved in the present case fell within the very wide scope of those words; indeed no attempt was made to argue otherwise. However, the payments must be payable under "a mineral lease or agreement" and "[relate] to the winning and working of minerals". Reserving for a moment the issues raised by the requirement that the royalties should be payable under "a mineral lease or agreement", we consider the question of whether they can be said to "[relate] to the winning and working of minerals". Before us there was no dispute concerning the expression "winning and working of minerals". We are content to proceed upon the interpretation given to that expression by Lord Ross in Occidental Inc v Assessor for Orkney. At pages 257 to 258 of the report, Lord Ross said:

"The words 'winning and working' are frequently used in mineral leases, but there do not appear to be any very satisfactory definitions of these activities. 'Winning' appears to cover searching for the mineral and obtaining access to it so that it can be effectively worked. 'Working' appears to cover extraction of the mineral."

[31] Thus the question is whether the periodical payments involved in this case were such as related to those activities, both of which were plainly involved. Looking at the terms of the specimen wayleave agreement, document 6/8, in our view it is plain that those payments did relate to the winning and working of minerals. Under clause One, it is provided that:

"The Proprietors in consideration of the wayleave payments and other prestations hereinafter stipulated and on the conditions after specified hereby grant to the Second Party [the miner] an exclusive wayleave over the Site and that for the purpose of extracting by open cast working methods so as to extract the coal....".

In our view, not only were the periodical payments related to the winning and working of the mineral coal, but the making of those payments was a necessary precondition of any entitlement on the part of the miner to carry on the activities.

[32] On the basis of our conclusions so far, the next, and, indeed the central, issue, is whether the contracts involved in this case can be said to fall within the definition of "a mineral lease or agreement". That is the result, not only of the terms of subsection (1) itself, but also of the language of subsection (5) of section 122 of the 1988 Act.

[33] The expression "mineral lease or agreement" is defined in subsection (6) in a tripartite definition. In order to satisfy the definition it is necessary only that the contract should fall within one of the three specified alternatives. The relevant provision here was accepted to be that in sub-paragraph (a), which refers to "a lease....licence or other agreement conferring a right to win and work minerals....". The controversial issue in this case is whether the relevant agreements can be said to be agreements "conferring a right to win and work minerals". The appellants' contention is that, because of the fact that there is vested in the Coal Authority property in certain coal, no agreement between a proprietor of land and minerals and a miner could be said to confer such a right. In these circumstances, it is necessary, in our view to examine, first the position of the Coal Authority and, secondly, the terms of the wayleave agreements involved here.

[34] Turning then to the position of the Coal Authority, it was created by and had provided for it the purposes and powers set out in the 1994 Act. It is important to note that, in section 1 (1) (a), it was provided that one of its purposes was the holding of interests and rights in "unworked coal", which was transferred to it under that Act. In our view, the adjective "unworked" is important. So long as coal remains unworked in the ground, it is plainly vested in the Coal Authority. However, the other provisions of the Act, for example sections 25 and 26, authorise the exploitation of that coal by others, who may engage in mining operations. It is, of course, a requirement of the conduct of any coal mining operations that they should be licensed by the Coal Authority, as appears from section 25 of the Act. However, following upon the extraction of coal in pursuance of licensed coal-mining operations, the mined coal must be seen as the property of the miner, in whose interest the operations are conducted, yet the granting of a licence under section 25 of the Act does not entail the making of any legal conveyance of property in the coal to the miner. As we see it, when the coal ceases to be "unworked coal", by virtue of having been "worked" by the miner, ipso facto it is no longer vested in the Coal Authority under section 1 (1) (a) of the 1994 Act. In regard to the granting of the licence for the coal-mining operations, by the Coal Authority, we accept the submission of counsel for the respondent that the licence for the operations is no more than a necessary permission required to render those operations lawful. In that respect, in principle, it could be said to be comparable with planning permission. Of course, it must be recognised that the miner will be required to make payments to the Coal Authority in consideration of obtaining the appropriate licence.

[35] We turn now to consider the nature of the contracts under which payments were made that are now the subject of the claim for relief under section 122 of the 1988 Act. We proceed upon the basis that the specimen wayleave agreement, document 6/8, can be seen as typical. Clause One of that agreement is of importance, to the terms of which we have already referred. The wayleave is granted in consideration of the relevant payments "for the purpose of excavating by open cast working methods so as to extract the coal....located in, on or under the Site, including the exclusive right to enter upon and occupy the surface of the Site with vacant possession and the exclusive right to locate plant, machinery and equipment thereon for such purposes." Clause Four is also pertinent in the present context. It confers power upon the miner:

"(a) to occupy and operate the Site to the exclusion of all other parties with power to break the surface and carry out such excavations as may be necessary to enable the [miner] to expose the seam or seams of Coal Authority Minerals under the surface and generally to carry out any operations on the Site necessary to enable the [miner] to win, work and carry away the Coal Authority Minerals by opencast methods by excavations open to the air and that in a proper and satisfactory manner."

In our view, these particular provisions of this contract demonstrate that what is being granted by the proprietors is in fact "a right to win and work minerals", to quote the crucial words in the definition of "mineral lease or agreement" in section 122 (6) of the 1988 Act.

[36] Looking then at the position of the Coal Authority, with which we have already dealt, and the contractual terms just considered, under which the relevant payments were made, we conclude that the controversial issue relating to the definition of "mineral lease or agreement" must be resolved in favour of the respondent.

[37] We are confirmed in that view by the fact that it appears to us to be recognised in statute, in particular in section 26 of the 1994 Act, that the right to carry on coal-mining operations, subject, of course, to the requirement to obtain a licence from the Coal Authority, is derived from a party other than that Authority, typically the owner of the proposed mining site. Section 26 (2) specifies the qualification necessary for an applicant for such a licence. The application may be made by

"...any person who has acquired, or is proposing to acquire, (whether from the Authority or some other person) -

(a) such an interest in land comprised in the area with respect to which the application is made, or

(b) such rights in relation to coal in that area,

as, apart from the need for a licence, would entitle him to carry on the coal-mining operations to which the application relates."

The words "such an interest in land...as...would entitle him to carry on the coal-mining operations to which the application relates" are important. They suggest to us that Parliament considered that the "right to win and work minerals" derived from the granter of the interest in land, not the Coal Authority. In this case that party is the trustees who had the right to grant the Wayleave Agreement.

[39] During the course of the debate before us, there was some discussion concerning the provisions of Regulation 2 of the Mineral Royalties (Tax) Regulations 1971 and in particular the proviso to it, which enacts that payments are not to be treated as mineral royalties unless minerals in or under the land are being or have been "won and worked pursuant to rights conferred by or under the agreement". In our view, the terms of that proviso raise no separate issue from that with which we have already dealt in relation to the interpretation of section 122 (6) of the 1988 Act.

[40] In paragraph 17 of his decision, the Special Commissioner made certain observations relating to the interpretation of section 122 of the 1988 Act. There he said:

"Parliament must be taken to have known when, in 1970, it enacted the precursor of section 122, and again in 1988 when section 122 was enacted, that coal reserves were vested in what is now the Coal Authority. It seems highly unlikely that Parliament would have enacted provisions with which in the case of coal, no landowner, or mineral rights owner, could ever comply. Had it been intended to exclude nationalised minerals from section 122, it would have been simplicity itself to say so; section 122 (6) excludes water, peat, topsoil and vegetation, but makes no mention of coal. I am not willing to conclude that Parliament intended a concealed exclusion."

With these observations we are in complete agreement.

[41] For all of these reasons, we are satisfied that the Special Commissioner did not err in law in any way. He was satisfied that the respondent's receipts fell within the terms of section 122 of the 1988 Act and accordingly that the relief provided by that section was available. We would affirm that decision and refuse the appeal.