Lands Tribunal for Scotland

OPINION

S B C Properties Limited
v
Midlothian Council

Summary

The Tribunal has had to determine compensation under the Land Compensation Acts, under the provisions of missives for the sale of the subjects of appeal by the applicants to the respondents’ predecessor authority, following intimation of compulsory purchase. The subjects were a derelict site which formerly comprised a brickworks and which was acquired in furtherance of a scheme for the rehabilitation of the site and some adjoining land. The applicants obtained a Certificate of Appropriate Alternative Development (“the Certificate”) in respect of certain mineral workings, subject to certain conditions. They sought compensation, in addition to the value of the land, in respect of mineral values on the basis of a hypothetical scheme for extraction of various minerals and landfill use. The respondents contended that there was no separate mineral value at the subjects. Parties agreed the value of the land on alternative bases depending whether any mineral value was established.

The Tribunal has concluded on the evidence and submissions that no mineral value has been established, because:-

(i) We are not persuaded in the circumstances of the case that the applicants were entitled to rely on the prospect of obtaining planning permission which, in the view of the Tribunal, went well beyond the planning permission which was to be assumed on the basis of the Certificate; and

(ii) In any event, we consider that various uncertainties and difficulties, particularly in relation to the saleability of clay and sand and the prospects of obtaining a licence for opencast coal mining, taken together with the combination of necessary further investigation, planning procedures and site administration (the cost of none of which was quantified) ruled out any serious interest in purchasing the mineral rights at a site of this size, there also being no evidence of comparable values of mineral rights as opposed to royalty and wayleave rates.

The Tribunal has accordingly determined the price under the missives, on the basis of the parties’ agreement on the land value, at £15,000 as at the relevant date, 21 January 1991.

The Issues

Intimation of compulsory purchase of the subjects, an area of land extending to 2.983 (otherwise 2.930) hectares, comprising Roslin Brickworks, was given in the Lothian Region Roslin Bing and Brickworks Compulsory Purchase Order 1985. The applicants thereafter entered into missives with Lothian Regional Council for the sale of the subjects. The missives provided for alternative circumstances in relation to determination of the price, but the consideration applicable in the situation which transpired was to be as follows:-

“such sum as may be agreed between the parties, or, failing agreement, determined in accordance with the provisions of the Land Compensation Acts by the Lands Tribunal for Scotland on the application of either party”.

The applicants eventually applied to the Tribunal. Their application accordingly takes the form of a voluntary reference to the Tribunal to determine the consideration in accordance with the provisions of the Land Compensation Acts.

The applicants contended for a substantial land value as at 21 January 1991, which is agreed to be the valuation date, and also for mineral values as at that date, the figures contended for at the hearing being:-

a. Brick Clay Reserve   £57,050
b. Sand Reserve   £85,210
c. Coal Reserve   £42,700
d. Fireclay Reserve   £14,950
e. Landfill Void   £122,040
  Total £321,950

By Joint Minute, the parties agreed that in the event that it was determined that the subjects did not have a mineral value, the value of the land was to be taken as £15,000, but if it was determined that the subjects did have such value, the value of the land was to be taken as £5,000. There was thus no outstanding dispute about the land value.

The respondents contended that the subjects had no separate mineral value, and in any event contested the amount of any such value.

The parties agreed that interest was to be added, in accordance with the provisions of Section 40 of the Land Compensation (Scotland) Act 1963, to any figure fixed by the Tribunal.

The issues for the Tribunal were accordingly whether the subjects had any mineral value as at the valuation date, 21 January 1991; and if so, the amount.

Procedure

The applicants were represented at the hearing by Mr J S Bevan, Advocate, instructed by Messrs MacRoberts, Solicitors. The respondents (the successors of Lothian Regional Council) were represented by Mr G M Henderson, Advocate, instructed by Messrs Lindsays, Solicitors.

The applicants called the following three witnesses:-

1. Hudson Findlay Cooper, a director of S B C Properties Limited, who spoke briefly to the ownership of the land, the company structure and certain photographs taken before missives were concluded.

2. Peter Vincent, Consultant Mineral Surveyor, of Messrs Matthews & Son, Crewe. Mr Vincent’s professional career has extended over 40 years during which he has had experience of mining engineering and with the planning and valuation aspects of the mining, quarrying and waste disposal industries. Mr Vincent had valued the mineral rights of the subjects both in 1992 and more recently.

3. Iain Baker, a minerals and waste disposal consultant who had formerly been employed by Tarmac Roadstone, the company which operated Oatslie Sandpit, a mineral operation close to the subjects.

The applicants lodged 18 productions, including, in relation to the dispute about mineral values, in summary: the missives; Mr Vincent’s Minerals Valuation dated October 2001; a Ground Investigation report dated June 2001; the Certificate of Appropriate Alternative Development dated July 1994; photographs; a location plan; and revised figures.

The respondents called the following two witnesses:-

1. John Joseph Proud, a mining engineer and mineral valuer, and a partner for the last 28 years of Messrs J W H Ross & Co, Glasgow. Mr Proud spoke to a report dated 1995 and also addressed Mr Vincent’s more recent report.

2. Mark Kenmuir, a Surveyor in the respondents’ Direct Services Department, who had researched, and spoke to, some contemporary material in connection with the clearance and rehabilitation of the bing site after Lothian Regional Council took entry in 1991.

The respondents lodged 49 productions, including, again in summary: the report spoken to by Mr Proud; geological survey information including maps and coal mine abandonment plans; correspondence with British Coal; a report of a site investigation at the colliery site forming the other part of the bing; correspondence, estimates and an interim account in relation to the 1991 clearance and rehabilitation work; photographs; and plans. There was also lodged correspondence with the Valuation Office, including an expression of opinion by the Mineral Valuer, but as he did not give evidence and his opinion was not relied upon in submission, the Tribunal has not taken that into account. In addition, the respondents lodged a body of planning evidence, including correspondence, reports, development and structure plans, policies and proposals – this material was not directly spoken to in evidence although the planning position in relation to minerals extraction and landfill use was referred to by Mr Vincent and Mr Proud.

Factual Background

(i) Subjects

The site extends to some 2.93 hectares and is the site of the abandoned Roslin Brickworks. It is situated some 2.5 kilometres west of the village of Roslin and some 10 kilometres south of the centre of Edinburgh. The nearest housing is some 250 metres distant.

The land was formerly part of Roslin Colliery. This colliery was closed in January 1969. The brickworks used the fireclay, or seat earth, and spoil from Roslin, and Bilston Glen colliery nearby, for the manufacture of bricks and associated products. The brickworks closed some years prior to 1990 but buildings remained on the site until early 1991.

The subjects, together with the remainder of the colliery site, comprised Roslin Bing until the 1991 clearance and rehabilitation. That work, which was substantially completed in 1992, returned the whole site to agricultural and woodland use.

(ii) Geology

The expert witnesses referred to a variety of sources of geological information. The basic position is not in dispute. The solid strata at the subjects are overlaid with superficial deposits consisting of a layer of boulder clay. There is a thin layer of colliery discard on the surface. Extensive glacial sand deposits, known as the Midlothian Middle Sands, are believed to lie under the higher lands of Roslin. The solid strata are of the Limestone Coal Group laid down in the Carboniferous period. These consist of mudstones and sandstones interbedded with bands of limestone and seams of coal and possibly fireclay. The strata dip at about 55% to the south east. Potentially ten seams of coal may outcrop at the subject along a line trending north-east to south-west. The seams vary in thickness but are generally thin. It is possible that several of these seams have been worked from the adjacent Roslin Colliery Nos. 1 and 2 Pits, but both Mr Vincent and Mr Proud ignored that possibility for the purpose of the present exercise and assumed that the seams remained intact down to a level of 40 metres.

(iii) Planning Position

There had been an Established Use Certificate dated 1982 in respect of the use of the subjects as a Brickworks and Associated Storage. There was then planning permission for the rehabilitation of the bing. That permission involved removal of bing material for use in the construction of a junction at the nearby City Bypass. Beyond that, there was no planning permission for extraction of minerals. There was no planning permission for landfill use. In January 1991 the subjects were in a state of industrial dereliction.

The relevant development plans at that date were The Lothian Region Structure Plan (1985) and the County of Midlothian Development Plan, approved by the Secretary of State in 1963. In the latter plan the subjects and the surrounding area was designated as part of an area of landscape value. The boundary of the Edinburgh Green Belt followed the north eastern side of the access road into the subjects, so that the land to the west and north of the site was in the Green Belt. The Development Plan allocated part of the subjects as a surface area for coal working or collieries and part for the deposit of refuse or waste material. That designation would have reflected the actual use of the subjects at the time when the plan was in preparation.

The Structure Plan was modified by the Secretary of State who required the Regional Council to review the boundaries of the Green Belt. By 1989 that review had been completed as a consequence of which it was proposed to extend the Green Belt round the village of Roslin, including the subjects. The policy of Midlothian District Council and successors, since 1975, has been to control development in the countryside.

The subjects now lie within the area covered by Midlothian District Council’s Villages and Rural Areas Local Plan (1995). The plan was approved for publicity and consultation in 1989. It then showed the subjects as being within the Green Belt as well as subject to the District Council’s countryside policies. One of these policies was that the District Council would seek rehabilitation of the Roslin colliery and brickworks site with a view to it being restored to agriculture and forestry use.

(iv) Sand: Oatslie Pit

In 1991, there was a sandpit in operation at Oatslie, approximately one mile from the subjects. This was operated by Tarmac Roadstone as a resource for their own aggregates and road surfacing company. That pit had been opened in 1984 or 1985, initially on land owned by Tarmac, and then on an extension to the site, for which they paid the landowner a royalty. As at the subjects, the sand deposit at Oatslie was overburdened with clay. Tarmac had not attempted to either sell or make commercial use of the clay, and thus bore the cost of removal, and subsequent replacement, of the clay. By 1991, the sand reserve at Oatslie was coming to an end. Subsequent to the completion of mineral working Oatslie was used as a site for the deposit of waste material.

(v) Coalmining

Prior to 1991 there had been substantial underground mineworkings at Bilston Glen and Roslin Collieries. Each had been closed for some years, Bilston Glen since 1989. As far as open cast coal mining was concerned, British Coal had themselves indicated an interest in winning coal from the subjects. Their letter of 21 January 1987 to the Landscape Development Unit of the Planning Department of Lothian Regional Council contained this information expressed in the following terms:-

“[The applicants] have for some time pursued the concept of opencasting the outcropping coals in the vicinity of the tip. Approaches have been made by this company to British Coal on a number of occasions, seeking either a licence or the principle that a licence would be granted for such an operation. I can assure you that these approaches have consistently been rejected on the grounds that the coals in question form part of a much larger area of potential reserves which would be available for exploitation by British Coal.

There is therefore no possibility of Scottish Brick or any associated company being granted a licence to work coal by opencast mining methods in this area.

Although British Coal has expressed an interest in this area of substantial shallow coal reserves, I would advise you that we have no plans to work these coals within say the next fifteen years and therefore British Coal would place no impediment in the path of the proposals to rehabilitate this derelict land.”

Certificate of Appropriate Alternative Development

On 29 July 1994, Midlothian District Council granted to the applicants a Certificate of Appropriate Alternative Development under Section 25 of the Land Compensation (Scotland) Act 1963, as amended, in respect of the subjects.

The Council certified that, in its opinion as local planning authority, planning permission would have been granted for the development specified in Schedule 1, viz:

“The extraction of sand, gravel, coal or fireclay, the use of the resultant void for the disposal of colliery waste from the rest of Roslin Bing and the importation of soil for the restoration of the site for agricultural or woodland purposes”.

This was in addition to the use of the land for agriculture or woodland, for which purpose it was acquired, but not for any other development.

It was also the opinion of the local planning authority that such planning permission would only have been granted subject to the conditions specified in Schedule 2, viz.:-

“1. The overall time period for such extraction and restoration work should not have exceeded two years from the date of the commencement of operations on the site.

2. No importation of any waste material onto the site would have been permitted.”

A Statement of Reasons for issuing the certificate was given, as Schedule 3, as follows:-

“1. The District Council, in reaching its decision, took into consideration the representations made by both the applicants and Lothian Regional Council.

“2. The District Council recognised that there was a presumption against mineral working at this site, which is within the Green Belt and within 250 metres from residential properties, in terms of both Structure Plan and draft Local Plan policies.

“3. Because of these planning policy considerations, together with the environmental and traffic impact of the proposal, the Council did not consider that planning permission would have been given for a mineral extraction operation lasting for six years, as the applicants had applied for.

“4. The Council did consider, however, that the possibility of some mineral extraction from the site, as part of an overall rehabilitation programme for the derelict land at Roslin Colliery/Brickworks, could not be ruled out, particularly if it did not unduly extend the period for achieving such rehabilitation.

“5. In the circumstances, it considered that a two-year period for extraction and rehabilitation would be reasonable.

“6. The District Council took into account the fact that the applicants owned only part of the derelict land at Roslin Bing. Whilst this might have affected the technical or economic feasibility of carrying out the mineral extraction from their land alone, the District Council did not consider that this was a material planning issue affecting the basic principle of whether such a development would be acceptable in general planning terms.”

The Certificate contains no indication of the date which was considered relevant to this particular application.

The exact terms of the application for the Certificate were not the subject of evidence before us. In evidence, Mr Vincent acknowledged that in 1991, when he first gave an opinion on mineral values, he did not consider the clay to be saleable. We infer that as a result the application did not refer to extraction of clay.

It appears clear, both from the Certificate’s terms and from references to this in the course of the evidence, that the applicants in their application for the Certificate not only sought a certificate in respect of a longer period than was granted but also in their application referred to importation of waste and landfill use, albeit perhaps of different quantities and over a different period from those envisaged in the scheme spoken to by Mr Vincent.

There was no evidence of any appeal against the terms of the Certificate.

Expert Evidence

Mr Vincent

Mr Vincent was responsible for revising valuation reports prepared for the applicants in December 1990 and January 1992. These reports had been prepared by his colleague Mr P R Deakin who had then inspected the subjects. Mr Vincent visited the subjects in March 2001 when he supervised the drilling of 2 of 3 site investigation boreholes. These holes were located at the periphery of the site.

The earlier reports were based on an assumption, from the geological information available, that sand in recoverable quantities would exist beneath the site. The information for Mr Vincent’s present report was based on the results from the boreholes which were available as a production.

Broadly, the results indicated that below a top layer of soil and fill material there was a layer of clay (varying in thickness from 1.5 to 3.5 metres), a layer of sand (varying in thickness from 3.5 metres to 7.0 metres), and then a layer of mixed clay, sand and silt of about 10 metres in thickness. No gravel was found. At a depth of 20 metres bedrock was established. Mr Vincent confirmed that samples from three boreholes at the edges of the site were not sufficient for a mining operator to proceed, but in appraising the results he relied also on his own experience, available geological information and the comparison which could be made with sand taken from workings at Oatslie about one mile away. No attempt was made to drill into the solid strata below 20 metres but from investigation of the geological information he was confident that there were coal measures outcropping at the subjects at an angle of about 55 degrees to the horizontal.

The opinions in his firm’s early reports, and Mr Vincent’s own first impression, were that the upper layers of clay were boulder clay with no value. In April 2001 Mr Vincent had the clay from two boreholes analysed at a laboratory specialising in materials relevant to the ceramics industry. He had not submitted a sample from the third borehole because he expected to receive a negative result. He obtained a report indicating that the clay from one borehole was suitable for brick manufacture. The sample from the second borehole was found to be slightly siliceous, but the laboratory considered that it could be used in a blend with the material from the other sample. They took no responsibility for the representative nature of the samples in relation to the whole body of clay to be found on the site. Mr Vincent also had the clay tested for permeability in a laboratory and established that the material had a high resistance to migration and was therefore entirely suitable for lining a landfill site, for the prevention of leachate from the landfill material. He assumed that all of the clay would be suitable for brick manufacture.

The shell and augur method of drilling used, whereby the reciprocating action of the drill tubes was lubricated with water, meant that sample material was disturbed. Also, as the drill proceeded downwards clay tended to contaminate the sand below so that the silt fraction in the sand would always be high. Because of the limitations imposed by the small number of boreholes, their location at the periphery of the site and the inaccuracy of the samples, Mr Vincent had to exercise his judgement as to the nature and quality of the minerals located at the subjects.

Because the clay material adjacent to the sand horizons tended to sand, Mr Vincent estimated that there was a 7 metre thick layer of exploitable sand over the whole area of the subjects. The quality of that sand he considered to be comparable to the quality of sand at Oatslie, operating about one mile away in 1991, which was marketable sand.

From the geological information available Mr Vincent was confident that the coal seams identified were present within the site. The general characteristics of the coal in the seams were known from the workings at nearby Bilston Glen colliery. The types of coal varied but they were all likely to be suitable for use in electricity generation. He had calculated that the stripping ratio of coal to waste was 1:15, so that for every cubic metre of coal extracted 15 cubic metres of other material would have to be removed. He expected that the other material would include fireclay or ‘seat earth’ typically found in association with coal seams. That would also be marketable.

Having appraised the nature of the minerals to be found at the subjects, and considering them to be valuable, Mr Vincent then formulated a scheme for their extraction and for the restoration of the subjects upon completion, which he considered could be achieved by using the void created as a landfill site.

The starting point for his scheme was the terms of the Certificate. He accepted the time limitation of two years to work the deposits and restore the site. Although the Certificate did not specify clay as a material the extraction of which was permitted, and although it did not allow for the importation of waste for landfill, Mr Vincent was of the opinion that both these activities could be assumed. The fact that clay had not been asked for when the Certificate had been applied for, because the applicants had then thought it worthless, was not an obstacle because, in his opinion, the local authority would have permitted its extraction if it had been known then to have a value. Therefore its extraction could be assumed to have been permitted by the Certificate. So far as the question of waste disposal was concerned he accepted that the Certificate could not cover that activity and that planning permission would be required. He took the view that faced with a void 40 metres deep and of considerable volume the local authority would grant permission for the disposal of waste because of the shortage of landfill sites at the time. He noted that the extant Structure Plan highlighted the considerable need in the area for sites for the disposal of waste. Because the landfill operation would be the subject of a separate planning permission it was not limited by the time specified in the Certificate. However, if planning permission for landfill were not obtained he accepted that the owner would have to rehabilitate the subjects and that would involve cost.

Having made these assumptions Mr Vincent then proposed a scheme whereby the clay and sand would be extracted over a period of one year and the coal and fireclay would be extracted in the second year. He allowed for one year’s preparation from the valuation date before the commencement of working. At the end of the two-year working period, and three years after the valuation date, landfill operations would commence, planning permission for that purpose having been secured by that time. Landfill would continue for a period of eight years.

The applicants’ mineral valuation, as spoken to by Mr Vincent, is shown in the Appendix to this Opinion.

In valuing the subjects for the present purpose, Mr Vincent chose not to approach the exercise as one of determining the residual capital amount available to purchase the site by an operator purchaser who would calculate his costs and expected profit to arrive at that sum. Such an operator could have been the applicants. Instead he chose to value the mineral rights in the subjects by reference to the royalties and other payments which an investor purchaser would receive as a return on capital.

He envisaged different specialist operators for the several elements of the scheme. Each operator would provide all the capital, machinery and labour and bear all of the other overheads in connection with each activity from obtaining any additionally necessary licences or permissions and physical activities such as making access provision or lining the void prior to landfill. He accepted that the owner of the subjects would manage the landfill stage but he envisaged the owner using a contractor for the actual operation.

He did not make any allowance for clearing the site of buildings and other materials at the commencement of operations because he had understood the site to have been cleared at the valuation date. Any other work normally undertaken for site reclamation would be done as part of the mining operations. If provision did have to be made for site preparation of that kind he made a rough estimate of £30,000 as perhaps being appropriate, at about 10% of the value of the minerals.

One operator would remove the clay from above (and later below) the sand. A second operator would remove the sand. Both these operations, to a depth of 20 metres, would be completed in one year. A third operator would remove the coal and fireclay, from 20 metres to a depth of 40 metres, in one year. A fourth operator would manage the disposal of waste over a period of eight years.

In considering the functional feasibility of these operations Mr Vincent allowed for a 5 metre buffer area round the whole of the site. He then allowed for a uniform batter with a ratio of 1:1 (45 degrees to the horizontal) for the slopes at the sides of the workings as excavation proceeded downwards to 20 metres. From the estimated thickness of the clay and sand and the sectional profile for each material at its highest and lowest depth he was able to calculate its volume in situ. By a similar exercise he was able to determine the volume of the coal making assumptions as to its thickness and anticipating a 55 degree angle to the vertical within the working space defined by the upper and lower levels and the 45 degree batter of the edges. That amount deducted from the volume of the working area gave the mass of waste material of which a proportion was assumed to be fireclay.

To these volumes Mr Vincent applied conversion rates to establish the available tonnage of each type of material. This was necessary because royalty and other payments are based on that measure. The conversion rates he used, relative to a cubic metre of material, were as follows:-

Clay: 2.2 tonnes
Fireclay: 2.0 tonnes
Sand: 1.7 tonnes
Coal: 1.4 tonnes

For the landfill Mr Vincent then converted the known volume of the resultant void, to its depth of 40 metres to tonnage, by applying a conversion factor of 1.5 tonnes per cubic metre, which he considered appropriate for inert waste.

Given the tonnages of materials and their rate of depletion (or accumulation in the case of landfill waste) he then had to apply a rate per tonne as a royalty or wayleave payment in order to determine the income available to the owner of the subjects.

The applicants did not produce comparables in order to justify these rates in advance of the hearing. Mr Vincent relied mainly on his experience and on assumptions he made as to local circumstances as to the marketability of the various minerals.

In respect of the clay Mr Vincent explained that since clay was generally worked by the owners of land there was scarce evidence from leases as to royalty payments. His estimate of royalty here was not therefore based on comparables. He had regard to the quality of the clay for brick making purposes. Such clay in his opinion sold for some £6-7/tonne. Royalties are typically 5-10% of selling price. He had taken 2.5% of the £6 selling price; a conservative figure of 15p/tonne. To his knowledge royalty rates for clay ranged between 10 and 50p/tonne.

As to the marketability of the clay he explained that close proximity between sources and process plant was no longer typical. Brick making facilities now handled larger quantities of material and accepted it from further away than previously. He gave the example of clay which was transported from Brockley to South Shields, a distance of some 15 miles. He was not aware of any brickworks within 15 miles of the subjects, but he thought that the clay could be purchased by Ibstock in Hamilton, who would also be willing to stock it at their premises in order for the required tonnage of material to be cleared from the site in one year. He believed that it would be possible to arrange for haulage of the material in the timescales required although he admitted that might depend on a suitable network of arrangements being established by the haulier to enable return cargoes thus reducing the cost. If this were possible he would estimate the cost of transportation to Hamilton at £3/tonne. He agreed that there was not a physical shortage of clay in Scotland but thought that there might be a shortage of sites for working clay with planning permission.

Regarding the marketability of the sand Mr Vincent referred to a site in Kent where sand had been extracted on payment of a royalty of 67p in 1988 for a period of 10 years. He knew of a price of 80p/tonne paid as royalty for the taking away of sand, agreed 10 years ago. He relied on his experience in selecting a figure of 40p/tonne. He considered this to be a conservative figure. In his opinion the sand would have been attractive to the operator of Oatslie pit, because it was nearing the end of its working life and the operator would have welcomed continuing use of his plant there by processing imported material. He accepted that the sand would require to be processed. It was a common practice to have satellite pits feeding material to plant in a different location. He accepted that the amount of sand proposed to be extracted within a single year could not be absorbed in the market, but he expected that the purchaser would be willing to process and stockpile it themselves.

So far as the coal was concerned he explained that national policy in respect of the licensing of coal had evolved rapidly in the last 15 years. Private operators could only work with a licence from the Coal Authority. Since 1988 the wayleave charged for coal had dropped rapidly in value. In 1988 it had been £16/tonne. It was now £2/tonne. In 1990 it was £3.50/tonne. Prior to 1989 there may have been difficulty in obtaining a licence for open cast at the subjects because Bilston Glen was then operating and the reserves at the subjects were from the same seams as were worked there. But Bilston Glen closed that year and although British Coal had expressed an interest in developing the whole area for open cast in the medium to long term, there would be no objection to the subjects being exploited in the meantime. He believed that it would have been difficult for British Coal to object to open cast operations at the subjects if they were in the position of having to seek planning permission for the same type of operation later. In any case he did not believe that planning permission would be given in this locality to large scale open cast mining. He disagreed with the opinion of the Mineral Valuer (in his letter of 1 May 2002 to the respondents) that “… opencasting of the coal and fireclay reserves within the subject land would not have been considered a viable proposition”, after examining his 1992 and Mr Proud’s 1995 reports. He also explained that policy in respect of the volume of coal to be removed at private open cast sites had changed. In 1988 only sites with reserves of less than 25,000 tonnes of coal were licensed. The limit had subsequently increased to 250,000. Now there was no limit.

For all these reasons he was of the view that a licence to work coal would have been issued by the Coal Board in 1991. He accepted that the application for the licence would require much greater detail in respect of proven reserves and methods of working than was available.

He estimated that the owner of the subjects could reasonably expect in 1991 a wayleave payment of £4/tonne. He reasoned that amount to be available by a producer who would then be receiving a price of £37.50/tonne delivered for the product. The operator would be able to extract the coal for a figure of £15/tonne and haulage would cost £5/tonne. That left a gross profit of about £17.50 of which about one quarter would be expected to go to the landowner. While he was again unable to provide comparable evidence he was confident that a figure of about £4/tonne would be the income available to the land owner.

Mr Vincent said he was aware of small open cast mines, similar to that proposed, operated by Law Mining in the vicinity of Hamilton. He saw no difficulty in an arrangement being made for a contract to supply coal for one year to, say, Cockenzie power station nearby. He did not consider it necessary to provide a road for vehicles as a means of extracting the coal and fire clay. He reasoned that it would be possible to cut across the face of the workings or to crane machinery in and out and to use a conveyor to lift the material to the surface.

Mr Vincent said that fireclay fetched a levy of £1/tonne in the midlands of England,. He did not produce comparables and admitted that he was not aware of the position in Scotland. The fireclay was removed with the coal. He thought his choice of figure was conservative.

Having appraised the quantity of material, its method and timescale of working, its marketability and the likely income for the owner of the land, Mr Vincent was then able to place a value on the mineral deposits of the subjects.

For this purpose he treated the income as payable as an annual amount in arrear and he calculated the present value, as at the date of valuation, by applying a rate of interest, for the additional risk to each source of income, relative to the prevailing general rate of interest.

For the brick clay, sand, coal and fireclay he applied a rate of 12%. For the landfill he applied a rate of 25%. That rate reflected the greater risk to that operation of there being a refusal of planning permission. The income from the waste material was taken as received on acceptance of the material and was not therefore deferred. The calculation of present value then proceeded as shown in the Appendix.

Mr Vincent said that he had considered the question which would arise if there were to be no value for clay allowable in the claim. Even although the clay would then have to be removed, stored and replaced, the values of the other minerals would remain as they were because the rates of income were sufficiently conservative to cover the cost involved of double handling the clay. However, he agreed that the income from the landfill operation would be affected because the void would be reduced by 250,000m3 and the volume available for fill material would become 130,000m3.

Mr Baker

Mr Baker was employed as a technical service manager for Tarmac in 1991. One of his responsibilities was to secure sand for the company, which is the largest aggregates and road surfacing company in the country.

He said that Oatslie pit had been opened in 1984 or 1985. There had been an overburden of clay on the sand deposit of a thickness of some 4-5 metres (similar to the subjects). Tarmac had not attempted to sell the clay at Oatslie so that there was a cost to the operation of the removal of the overburden. The cost of removing and replacing overburden he estimated at 20 pence per tonne of sand yield. He said that clay was a good material for landfill, both for lining the void and for creating bunds between the cells. There was a market for clay for landfill engineering where no clay was available on the site. That market could be within 10-15 miles of the source.

Mr Baker’s evidence was that the sand at Oatslie was typical of the sand to be found in the area. Little gravel was found with it. It was not of good quality because of a significant proportion of clay in the sand, but it was used for the making of asphalt, mortar and concrete. The sand at Oatslie had reduced in quality as it was worked down to lower level, and the element of sand useful for concrete making gradually diminished. Unlike Oatslie the sand at the subjects had traces of coal some and that which could not be washed out would always remain.

He agreed that, assuming it was found to be financially viable, it would be practical to process sand from the subjects, as a satellite pit to Oatslie. He considered the sand at the subjects to be less good (“slightly finer”) but that it could be blended with the material at Oatslie. While larger coal elements could be washed out, a residue would remain excluding the material as suitable for mortar sand and some building sand applications, but remaining suitable for asphalt production. The sand could be transported by road. In 1991 the resource at Oatslie was running out and alternative sources had not then been identified. Sand from the subjects could have extended the life of the Oatslie project.

The royalty rate paid for the extension to Oatslie was 35 to 40p/tonne. That rate was before the winning and working of the material. If sand from the subjects were to be processed at Oatslie then an analysis of the financial feasibility of the operation would be required.

His company would not consider extracting sand from the subjects otherwise than on this satellite basis because the scale of the resource would not warrant the investment in processing plant. Such investment would require a throughput of 100,000 tonnes/annum of sand over a 10-year period to be justified.

He was not aware of operations using cranes for the extraction of materials from mineral bearing sites. He agreed that open cast coal mining required an access road with a gradient of 1:8, although he believed that 1:6 might be possible.

He had had involvement with landfill sites and believed that it would be practically possible to use a void at the subjects for landfill. In the 1980s and 1990s landfill had been the primary means of disposal of waste. Other worked out pits in the area, including Oatslie, had been given over to landfill operations.

He expected a batter of 45-55% to be allowed for at the edges of the workings for sandy material. That was its natural angle of repose and it was safe to leave it at that angle. It was only necessary to leave it at that angle at the end of working. During working near vertical faces could be exploited.

Mr Proud

In his evidence Mr Proud rejected the suggestion that there was any value attributable to minerals in the subjects. His opinion was based on the relatively small scale of the site and the deposits, the lack of adequate information about the deposits, the practicality of working the deposits and, in certain cases, the marketability and value of the materials themselves.

He had perused the same geological information in the public domain and he had also examined the logs from four bore holes driven into the adjacent Roslin bing site by Lothian Regional Council in 1990. These boreholes were driven to establish whether there were old mine workings and they were directed at obtaining information about the solid strata. They were therefore relatively insensitive to information about the superficial geology. They indicated a thick layer of boulder clay from 5 to 10 metres deep. They confirmed that there were ‘steep dip’ coal seams, in the expected locations, interleaved with sandstone, mudstone and some sandy fireclay.

Mr Proud was of the opinion that the quality of the clay at the subjects should be as determined in the original reports prepared for the claimants in 1990 and 1992 which indicated that the clay was not of a marketable quality. That was the view of expert opinion at about the valuation date. In any case there was no permission in the Certificate for the extraction of clay, and the extraction of clay had not been sought in the application for the Certificate. However, in cross examination he said that, in practice, it might be realistic to accept that the Certificate would allow the sale of any valuable mineral from the site.

There are few operating brickworks in Scotland. He named Raeburn at Blantyre, Wemyss near Cupar and Ibstock near Hamilton and an unknown operator at Shotts. Each had its own reserves of clay. Ibstock were reliant on Law Mining, but there were abundant reserves of clay at Hamilton. Brickworks sought to have long term supplies of clay for uniform production of bricks in respect of aspects such as colour. Brickworks were prepared to stockpile, and to blend clays, in order to achieve consistency. They would not be interested in a supply of clay that was only available for one year. In 1991 brick makers locally would be using their own stock. Local brickworks made common brick for local markets. They would not be interested in this source which was for facing brick for which there was then little demand in Scotland. The cost of haulage to these locations would, anyway, be prohibitive. There were no brickworks within 10 miles of the subjects in 1991 and that distance was critical because anything over that meant that the cost of transport would exceed the price of the product which was characterised as being bulky and of low value.

Mr Proud accepted that the volume of material would have been sufficient to be of interest to a brick maker, but not over a period as short as a year. While it was theoretically possible to stockpile the material for release over a longer period of time, there was no actual place for it to go off-site where planning permission and owner control could be assured. But his unshakeable opinion was that there would simply be no interest in 1991 in that product from the subjects.

Mr Proud thought that the overburden of clay, which could not be sold, ruled out economic extraction of the sand below. The sand was not uniform across the site and there was silt within it, which would have to be sorted out and piled somewhere. The quality was not the same as Oatslie because of its contamination with coal. Because the sand was classified in the bore hole reports as of a type which will “flow when wet” he considered that the angle of repose would be lower and that the edges of the workings would have to have batters of 1:1.5 or even 1:2.

He disagreed with the estimate of volume of recoverable sand. He considered that only a thickness of 5 metres would be recoverable. He considered that the conversion rate for sand (m3 to tonnes) should be 1:1.25 or 1.5. His estimate for maximum recoverable reserves was 160,000 tonnes. He would expect this material, if marketable, to command a royalty of no more than 30p/tonne.

So far as the suggestion that the sand at the subjects might be purchased by Tarmac at the Oatslie pit was concerned, Mr Proud was of the view that the marketing of contaminated sand was unlikely and that the operator at Oatslie would hardly be likely to take out a contract for the purchase of such sand particularly where it would enable the operation there to continue for months only rather than years. Contamination of sand with coal was not common, although he agreed that it could be washed and the less contaminated product could be used for asphalt production.

Principally he was of the view that there was no market for the sand.

Carrying forward his assumption that a batter with a ratio of up to 1:2 would be required around the perimeter of the site meant that the area of the site at 20 metre depth, available for coal extraction, would be seriously reduced in comparison with the assumptions made by the applicants. The area available for open cast mining would be about 1.5 hectares which was tiny in terms of the industry and would not be of interest to any open cast operator. When challenged as to the need for such a high ratio on the batters (22.5%) compared with the 1:1 ratio (45%) successfully adopted at Oatslie, Mr Proud said that his concern was not simply with the stability of the material as a facing round the perimeter of the sand pit, but as a potential avalanche threat to the open cast coal workings below. He had witnessed the effect of such avalanches where material such as this had liquefied and knew that the consequences could be devastating. However, the edges of the workings below 20 metres could be at a steeper angle.

He therefore assumed a lesser volume of material than Mr Vincent and he used a lower ratio, 1:1.35, to convert the volume of coal to tonnes. On his calculation there could be 12,000 tonnes of recoverable coal available to work between 20 metres and 40 metres at the subjects. Although he did not consider the difference in estimates of coal reserves at this stage to be significant, either figure brought a potential operation right at the margin of economic feasibility. He had never seen an open cast operation in a site as small as this.

Mr Proud also saw practical problems for an open cast project. He was firmly of the opinion that a means of access would be necessary for large earthmoving equipment to and from the floor of the open cast workings to the surface. He believed that a roadway 20 metres wide at a gradient of 1:10 would be insisted upon. That would require a road 400 metres long which was an obvious problem where the width of the site was only 200 metres. Much of the minerals including the coal would be sterilised by the footprint of this necessary facility. He did not know of any open cast site where cranes or conveyor belts were used as an alternative to road access.

He accepted that the ratio of coal to waste material below 20 metres was 1:15, but pointed out that since the clay was unsaleable the actual ratio of coal to overburden was 1:40. Even if a favourable assumption were made permitting the sale of sand, the ratio would still be 1:28. He had not carried out a calculation of the ratio on the assumption that all overburden above 20 metres was removed, but he guessed that it would be about 1:20. While there were a larger number of smaller open cast operators in 1991 compared to the small number of large operators today, and while the critical ratios for operational feasibility at 1:20 were less then than now (1:14), the combination of small scale and high overburden ratio meant that this site would not be considered viable for open cast production.

Mr Proud was also critical of the apparent minimisation by the applicants of the difficulties inherent in working edge coals in an open cast mining situation. Mr Vincent had suggested a ‘double dig’ method which, as a mining engineer, he did not understand but which in practice must involve double or treble handling of waste material.

He agreed that the quality of the coal at the subjects might well prove to have a calorific value suitable for power generation use. It would need to be proved, but subject to that he considered that a contract could be obtained to sell the coal at a rate of about £37/tonne to, say, Cockenzie power station. If a ratio of 1:20, coal to overburden, were assumed he thought that there could be profit after expenses to the operator of about £5/tonne and that a wayleave payment of £4/tonne would be affordable as one of the expenses.

Mr Proud confirmed that a licence would be required for the development of the coal (and fire clay) in an open cast mine operation from the Coal Board. The licensing procedure was onerous. Extensive bore hole investigation would have to be carried out. It would be necessary to submit a plan of the geology of the area based on the bore hole results. Sections would need to be prepared showing the exact locations of the coal seams. A programme of work would have to be submitted explaining the working method, phasing of workings, grading of haul roads etc. Financial statements would have to be provided, independently certified by accountants. An indication of wayleave payments would have to be given and plans produced indicating the extent of excavation and reclamation on completion. This process was time consuming and expensive.

By 1991, with Bilston Glen (which was a deep mine) closed, there ought to have been no practical problems with extracting coal near the surface at the subjects by means of open cast mining. However, the Coal Board themselves had indicated an intention to establish a large open cast mine in the area as part of their longer term planning. They had expressed an interest in this site for that purpose. Mr Proud knew of no instance where the Coal Board had issued a licence for open cast coal mining in an area within which they had an interest. He said that British Coal were antagonistic to private opencast coal mining operators at that time. He considered the letter of 21 January 1987 ruled out any possibility of a private coal operation at the site.

He considered the value of the coal reserves to be nil.

Mr Proud disagreed with Mr Vincent’s estimate of the amount of fire clay likely to be found alongside the coal seams. He observed that the information from the four bore holes on the adjacent site, and the three bore holes on the subjects was insufficient to rely on as determinative of the amount of fire clay. Nor was it possible to come to any view as to the quality of the material. In any case there was no demand for fire clay in Scotland. The collapse of the steel industry had meant that there was no local demand for fire bricks for lining furnaces and the like. Even if there had been a demand the wayleave payment suggested of £1/tonne was high. The selling price of fire clay in Scotland was about £2.50/tonne and the wayleave would be about 10% of that, or 25p/tonne.

He did not consider that there was any value in fire clay at the subjects.

Mr Proud noted some practical problems in respect of utilizing the volume of void space identified by the applicants for landfill. The volume assumed was too large because of the need for a shallower batter at the edges of the pit than had been allowed for. The cavity would require to be lined with clay to a thickness of about 1 metre. Clay would also be needed for the bunds to form cells as part of the land fill operational process. This meant that the volume of clay sold had to be reduced or clay purchased for the purpose at £1.50/tonne. Means of access to the floor of the void was required. None of this had been allowed for in the applicants’ scheme.

He thought that the assumption that landfill could start immediately after open cast operations ceased, three years after the valuation date, was over optimistic. He did not think that an operator of the site would enter into an agreement with the landowner before the void was fully excavated so that it was known without doubt what the capacity and other characteristics of the proposed landfill site were. Before that date surveyors and health and safety inspectors who wished to determine the nature of the landfill site would not be permitted entry by the open cast operator. He considered that it was possible that planning permission would be granted, because there would be a need for a waste disposal site and the local authority would want a large void dealt with. But he believed that the process of obtaining planning permission would be at least one year longer than had been assumed. He referred to an instance where it had taken eight years to get planning permission for landfill after mineral working had been completed. The fact that the void was only 250 metres from the nearest housing would be an issue, and there would be a need for reports to be prepared and approved such as an environmental impact analysis. However, even if it went to appeal, he accepted that there was a real possibility of planning permission being granted, but only after a period of delay.

In the light of these concerns he thought that the rate of 25% applied to the deferred income from landfill was too low to allow for the risk of not obtaining planning permission after three years. At that risk-rate additional time should be allowed. He agreed that the rate proposed, of £1.5/m3 (for a start date in 1994), was correct.

Mr Proud had more fundamental reasons for arriving at the conclusion that there was no value to be found in the prospect of winning minerals at the subjects.

Looking at the Certificate, and the reasons for the limited grant in comparison with the application, it was clear that the prohibition on imported waste, and the absence of permission for the removal of clay, pointed to a scheme where there could be some mineral extraction with the consequent void being filled with the colliery waste from Roslin bing immediately adjacent to the site. Given that the site is 250 metres from residential property and no landfill had been permitted then the prohibition against the importation of waste was understandable. He did not agree that because Roslin bing was technically ‘off-site’ in terms of the Certificate there was any intention other than use of that specified source as fill for the void. In his opinion the local authority did not anticipate a void larger than that which could be filled with waste in Roslin bing. He believed that the Certificate was granted after consideration had been given as to whether the material from the bing would fill the void. Two years would be a sufficient timescale for that scale of operation with less traffic. Restoration with imported soil, as permitted, could be achieved in that time frame.

In practical terms Mr Proud considered the scheme underlying the applicants’ valuation to be unworkable. The clay had no permission and no value and presented a formidable degree of overburden bringing into question the financial feasibility of working the sand and anything beneath. Because of the nature of the sand a shallower batter would be required limiting the volume available for extraction which in any case had been overstated. The sand was contaminated with coal and high in silt and it could not be automatically assumed that it would be taken at Oatslie at the price supposed. No allowance had been made for proper working with access roads, a factor which additionally affected the scale and economics of the open cast coal operation. While a future planning permission for the filling of the resultant void with waste was possible no such permission existed within the Certificate which required restoration of the site without recourse to materials other than those on-site or from Roslin bing. The timescales proposed were unworkable as was the requirement of co-ordination of four different operators to an impossibly tight timescale. No allowance had been taken of the time and expense required to obtain necessary licences and other approvals. All the costs were taken to be borne by the operators and no management costs of any kind had been allowed for. Although the grant of a certificate was theoretical in so far as the work would never be implemented, this scheme could not be accepted because it was defective in detail and practicality and did not therefore provide adequate guidance as to what a purchaser would consider to be the value of the minerals at the subjects in the real world.

Mr Kenmuir

Mr Kenmuir gave evidence that the subjects had been restored to, mainly, woodland use by the local authority. He had not been employed by the respondents at the date of valuation but he spoke to those historical records which were relevant and available. He spoke to photographs lodged as productions which had been taken by a Mr Neil Hunter, then employed by the respondents’ predecessors, on Friday 18 January 1991. They showed a number of brick buildings in existence on the site at that date.

He was referred to correspondence submitted between by the Landscape Development Unit, a division of the local authority’s planning department, and the Scottish Development Agency. The Agency was to give financial support to the reclamation of the subjects and adjacent derelict land and a letter of 27 December 1990 gave information on tenders received. The successful tender was in the sum of £213,553.27. Mr Kenmuir was unable to say how much of that sum was in respect of work proposed to be carried out at the subjects. Nor was he able to say when the successful tenderer moved on to the site although he knew the date to be after the conclusion of missives for the sale of the subjects to the respondents’ predecessors.

The contract had been awarded to Bill Hendry Limited and one document, ‘Interim Measure No.5’ dated 31 August 1991, was available as evidence of the cost of works actually carried out as part of the reclamation project. This financial statement included for works of demolition and clearance, including the removal of brick buildings which, although referenced, were not from any identifiable part of the whole area. The total cost of demolition was in the sum of £13,121.46. There were also ‘additional costs’ for the removal of brickwork and concrete amounting to several thousand pounds. These figures while interim appeared to be cumulative. However, they would not represent a final cost.

Mr Kenmuir was also referred to a memo of the Landscape Development Unit dated 24 June 1993 which included an estimate of site development costs for establishing the subjects as an industrial site in 1991. These included demolition costs in the sum of £5,500. Mr Kenmuir was unable to say what had been included in that estimate.

Applicants’ Submissions

Mr Bevan submitted a most helpful written submission mainly outlining the expert evidence, identifying the areas of agreement and the areas of dispute, submitting that the Tribunal would be entitled to accept the evidence of Mr Vincent and giving reasons why we should do so where it differed from that of Mr Proud.

Mr Vincent had agreed that ideally there would have been one more borehole in the centre of the site but there was sufficient investigation, having regard to economic considerations.

In relation to brick clay, there was no challenge to Mr Vincent’s assessment of the quantity. The evidence as to its quality was sufficient: Mr Proud had merely taken it to be of no value because it was not included in the Certificate. It could have been transported to Ibstock in Hamilton and there would have been an emerging market for such good quality brick in Scotland in 1991. Although Mr Vincent had taken the view in 1991 that there was no commercial value in the clay, a prospective purchaser might be more likely to have investigated further. Mr Vincent’s evidence as to the timescale of extraction of clay – one year – should be accepted.

On sand, the disputes about quantity related to the depth of sand derived from the borehole samples and the conflicting views about batter. Mr Vincent’s evidence on both was supported by Mr Baker, speaking from his experience of Oatslie. There was disagreement about the working method and thus further limitation of the quantity recoverable, but it would be unlikely for Mr Vincent to suggest a method which was impractical. The sand was of at least sufficient quality for use to make asphalt. It would in 1991 have been of interest to the operators of Oatslie. There was evidence to support the royalty rate of 40p/tonne. There did not appear to be much dispute about the timescale of the sand operation. The evidence of Mr Baker supported the economic viability of this.

On coal, there was little disagreement between the experts that there was a recoverable quantity of edge coal, nor about its quality. Mr Vincent had great mining experience and would be unlikely to suggest a totally impracticable method of working. There was evidence of a market for the coal. If the superficial deposits were removed by working clay as well as sand, there was a viable stripping ratio. There was no disagreement with the proposed royalty figure. Mr Vincent’s evidence as to the timescale with proper organisation was to be preferred.

It was not disputed that the size of operation would have been eligible for an opencast licence. The letter from British Coal of January 1987 was not supported by any evidence as to their attitude in 1991, and Mr Vincent had given reasons why by that date there would have been a good chance of securing a licence. Increases in permitted tonnages and decreases in licence fees amounted to encouragement of opencast.

On fireclay, Mr Vincent’s evidence on quantity was not really contradicted. There was a dispute about the royalty rate, and on this matter the Tribunal might wish to split the difference between Mr Vincent’s £1/tonne under reference to English rates and Mr Proud’s 25p.

Finally, in relation to landfill use, there was evidence from both experts that following extraction of the minerals the owner would be likely to secure planning permission to fill the void with waste, albeit there was disagreement about the likely timescale. There was no disagreement about the royalty rate and Mr Vincent’s annual discount figure of 25% made due allowance for planning uncertainty.

Mr Proud had accepted that the royalty approach was a valid method of calculation of mineral value in this case. Although brickclay had not been included in the Certificate Mr Proud had said that the Certificate allowed the sale of any saleable mineral extracted from the pit. The valuation should therefore be accepted on the basis that the brickclay would have been sold and in all probability the applicants would have secured permission for landfill. Mr Bevan referred to Para. 10.29 of the Lothian Region Structure Plan 1985, which referred to shortages of tipping space in Edinburgh and Midlothian in particular. In any event, a determination should be made that a mineral value attached to the sand, coal and fireclay deposits.

One item which had not been taken into consideration by Mr Vincent and admittedly required a deduction from his values was the demolition of the buildings on the site (Mr Vincent having mistakenly understood that they had previously been demolished). A figure of £5,500 for this was justified by evidence on the interim measurement by the 1991 contractors, in respect of the whole bing site, together with the figure contained in the estimate from Landscape developments, which did relate to the appropriate date.

In answer to a question by the Tribunal, Mr Bevan indicated that the type of purchaser of the mineral rights to be envisaged was a person experienced in mineral operations.

Mr Bevan’s legal submissions on the issues raised by the Certificate were as follows. Firstly, he submitted that clay was a ‘mineral’ as defined in the Town and Country Planning (Minerals) Act 1981, and therefore a planning permission for extraction of minerals carried the right to work such valuable minerals as they occurred, at least if their removal was required to work the minerals specified in the permission. The Certificate had to be construed on a pragmatic basis. Secondly, he considered whether there was ‘any contrary opinion’ in terms of Section 22 of the Act of 1963 as amended. The Certificate did not indicate that clay extraction would be prohibited. He accepted that the condition in Schedule 2 in relation to landfill was more difficult. Thirdly, he submitted that ‘regard shall be had’ meant no more than that: the opinion should be considered but might not be regarded as sufficiently strong to rule out valuing on the prospect of obtaining a different permission. In any event, he said, Mr Vincent’s valuation of the landfill had been very considerably reduced by application of his discount reflecting this factor. Given the evidence that in all probability consent would have been given in due course, the claim was consistent with the Certificate.

Mr Bevan further pointed out that, on the evidence, the volume of the bing material on the whole bing site – 83,000 square metres – was less than the volume of sand, coal and fire clay on Mr Vincent’s evidence and conversion rates – 178,200 square metres. Operating the site in accordance with the Certificate produced a void. On any view, therefore, the Certificate must have allowed for imported fill.

Respondents’ Submissions

Mr Henderson referred to a written outline of his submissions, broadly under six headings: sufficiency; the clash of experts; hurdles to success; how realistic is the alternative history?; the effect of the Certificate; and quantum.

In relation to sufficiency, Mr Henderson suggested that there was very little evidence about what would have happened if the land had been marketed in 1991 and about who would consider purchasing the site.

The evidence of Mr Proud should be preferred because although Mr Vincent had considerable experience he was unable to deal in sufficient detail with matters such as open cast mining, the market for minerals in Scotland including potential customers, operators, hauliers and contractors. He was not armed with sufficient or reliable information. He had not been aware of the actual condition of the site in 1991. The borehole investigation was inadequate. He was not aware of prices in Scotland and had not produced comparables. He made unwarranted assumptions: that there were no buildings on the site; that there would be no cost implications for the owner of the site; that clay extraction would be permitted; and that British Coal would grant a licence for open cast mining. He was not, therefore, a convincing witness. Although Mr Vincent was qualified to value minerals, Mr Proud had better knowledge of those factors relevant to this valuation.

Mr Henderson then drew attention to the various hurdles which stood in the path of the scheme as proposed by the applicants and which had not been allowed for. The cost of demolition had not been allowed for, nor had the cost of site investigation and necessary licence processes. Mr Proud had suggested that these costs could be in the region of £100,000, which might suggest that the scheme was not workable at a site of this size and nature.

In respect of clay, the applicants had disregarded the Certificate. It was said that permission to work clay could now be inferred, but no such inference could be drawn. The clear intention of the Certificate was to allow just as much excavation of material as would accommodate the fill from the remains of Roslin bing, and restoration of the surface to agricultural use by dressing it with soil. At the time the applicants did not consider that the clay had any value. They had not asked for permission to extract clay, and in 1991 they would not have marketed the site as one having clay of any value. It is now, with hindsight, said to be valuable but no evidence was led that anyone would be interested in the product. Ibstock were said to be a potential customer but no member of that firm gave evidence. There was no evidence of clay actually being in demand where transport costs were a significant factor. No local brickworks were identified that would be interested. No one in the industry thought that the clay was worth anything at that time. Tarmac did nothing with the clay at Oatslie and neither Mr Vincent nor Mr Deakin, as mineral valuers, attached any value to the clay at the relevant date.

In any event the environmental impact caused by 43,396 journeys by 22 tonne trucks into and out of the site over one year in this location would take the operation well beyond that envisaged by the planning authority, remembering that sand in large quantities would be transported from the site during the same period. It was difficult to accept that a haulage contractor would be available and willing to undertake such a huge operation over such a short time scale. These real concerns were matters that Mr Vincent seemed to think were simply matters of detail. Together with the non-marketability, this rendered the clay valueless and instead presented it as an overburden in respect of the minerals below.

Mr Henderson submitted that the clay, as overburden, rendered the whole of the proposed scheme non-viable. He pointed to the evidence of Mr Baker, which was that his company would not have been interested in purchasing sand from the subjects if the overburden had to be removed. His expression of possible interest in purchasing the sand for processing at Oatslie on the assumption that the overburden was removed was just that, a noted interest at best. However, an interested party does not necessarily translate into a purchaser. The facts were that there was no market for contaminated sand of such low quality where transport costs would again be a relevant factor.

Regarding the coal reserves, Mr Henderson rejected the assumption that a licence would have been granted in 1991 by British Coal for open cast workings. Given the overburden ratios, even allowing for extraction of all of the sand, the operation would be non-viable. In any case there had not been adequate demonstration of a method of extraction and transportation from the site, a matter which was relevant to the exploitation of edge coals in a small area. There was no local demand for fireclay, the transport costs of which would be prohibitive.

The proposed landfill operation was expressly excluded by the Certificate. If the clay could not be removed there would be no hole to fill since that material had the largest volume of those at the subjects. Referring to the figures relied on by Mr Bevan on the basis of removing only sand, coal and fire clay, Mr. Henderson pointed to the respondents’ lower converted volume figures, particularly in relation to sand; to the Certificate’s requirement of a reasonable level of imported soil for the restoration of the site; and also to the question of the level of the restored surface: on the evidence, Mr Bevan’s assertion was not established. In any case the costs of obtaining planning permission, and other costs such as lining the site and landscaping, had been ignored within the scheme, being simply left to be paid for by some unidentified individual.

Mr Henderson questioned how realistic the scheme was. He referred again to the likely unacceptability of the environmental impact of the transport of materials from the site. He doubted the logistical feasibility of entering into contracts with a relatively large number of contractors who would be required to dovetail their operations over a very short time scale. It was not clear that they would all make a profit in implementing the scheme, and that raised doubt as to what would happen to the scheme if one contractor failed for any reason. The two year timescale for mining was doubtful.

Turning to his legal submission on the effect of the Certificate, Mr Henderson noted that it was the foundation of the applicants’ case. They had the option to base their claim alternatively on the hope of development value, but had elected not to do so. That route was risky, and hope value claims tended to be discounted. Instead they had the advantage of the certainty of the Certificate. The purpose of the Certificate was to put hope value on one side and to establish, for the purpose of compensation, a clear planning assumption. Having accepted the Certificate the applicants had denied themselves any hope value and could not now construe the Certificate in ways that made it look ridiculous or meaningless. The grant of planning permission had not taken place and never would. For the purpose of assessing compensation the tribunal should look at the letter of the Certificate only.

He agreed that section 22(3)(a) of the 1963 Act admitted the possibility of hope value beyond the Certificate. It was legitimate to ask whether such hope value existed, but in the circumstances of this case there was no development value which was not obtainable without contradiction of the Certificate. For example, the claim that there would be a void suitable for landfill with off site waste at the end of the project depended upon the extraction and removal of the clay which was not allowed for in the Certificate. The Certificate was not the ‘low water mark’ of a claim for hope value. The applicants could not now seek admission of additional benefits into the Certificate. Effectively that was an appeal by the back door. That would go beyond what Parliament envisaged for the Certificate.

Mr Henderson submitted that ‘regard shall be had’ in section 22(3) meant that the reasoning in the Certificate must be applied, and nothing contradictory could be considered. He did not accept the contention that planning permission to win certain minerals could carry permission to win others.

He further submitted that the granting of the Certificate did not of itself mean that the land had any value.

In relation to quantum, Mr Henderson invited the tribunal to accept Mr Proud’s calculations. However, in the absence of the ability of the applicants to extract clay the rest of the claim disappeared. There was an absence of market evidence and it was difficult to see who would be interested in the subjects at the relevant date. Accordingly the Tribunal should find that there was no value in the minerals at the subjects.

Tribunal’s Consideration

(i) The Certificate

The procedure for certification of appropriate alternative development, under Part IV of the Land Compensation (Scotland) Act 1963, as amended by the Community Land Act 1975 and continued in the Local Government Planning and Land Act 1980, provides one means whereby a claimant for compensation can establish an alternative development value. Planning permission is to be assumed for the development or class of development which, according to the certificate, would have been granted permission if the land were not being acquired for public purposes. There is a right of appeal to the Secretary of State against the terms of the Certificate.

Section 22(3A), as amended by Schedule 17, para. 7(2) of the Planning and Compensation Act 1991, provides:-

‘(3A) In determining-

(a) for the purpose referred to in subsection 1 of this section whether planning permission for any development could in any particular circumstances reasonably have been expected to be granted in respect of any land;

regard shall be had to any contrary opinion expressed in relation to that land in any certificate issued under Part IV of this Act.’

Section 23(5), as amended by Schedule 10, para. 5(2) of the Community Land Act 1975, provides:-

‘(5) Where a certificate is issued under the provisions of Part IV of this Act, it shall be assumed that any planning permission which, according to the certificate, would have been granted, in respect of the relevant land or part thereof if it were not proposed to be acquired by any authority possessing compulsory purchase powers would be so granted, but, where any conditions are, in accordance with those provisions, specified in the certificate, only subject to those conditions and, if any future time is so specified, only at that time’

We were not referred to any authority on the meaning of ‘regard shall be had’ in this particular statutory provision. In our opinion, the context and the words used make clear that the opinion given on the application for the certificate cannot be conclusive. The provision applies to a determination whether planning permission could in any particular circumstances reasonably have been expected to be granted. No such determination would be required if the opinion was conclusive. Section 23(5) creates a statutory assumption (‘shall be assumed’) where the certificate is positive (but subject to any conditions expressed), which contrasts with the language in Section 22(3A).

However, the provision, as it seems to us, at least involves addressing the reasons in the certificate. If the reasons are not addressed, it will normally be difficult for the Tribunal to reach a view that planning permission could reasonably have been expected to be granted.

In the present case, it is evident that the Certificate contemplates extraction of certain minerals, clay not being specified, on the basis that the resultant void will be filled by colliery waste from the bing and importation of soil, but not waste materials, to restore the site, the whole operation to be completed within two years. This is, in several respects, clearly different from the hypothetical scheme advanced to us by the applicants. There was apparently no appeal against the terms of the Certificate. We also have to point out that although the planning prospects in relation to clay and landfill, on the assumption that there existed a permission in the Certificate’s terms, were addressed by the two mineral valuers who no doubt have experience of such situations, neither the applicants nor the respondents really addressed the planning reasons for the Certificate’s terms. We have grave doubts whether a Certificate, with its fictional assumed permission, can be used in this way, i.e. as a stepping stone to assuming development which goes well beyond its terms.

We reject the applicants’ submission that the assumed planning permission carries with it permission to extract clay for commercial purposes. We do not consider that permission for specified minerals carries permission for commercial exploitation of any other minerals, even where, as here, it may be necessary, in order to win the specified minerals, to disturb the clay. We can well understand that in practice there may sometimes be no problem with the planning authority, but that does not assist us in interpreting the assumed planning permission, particularly where, as in the present case, it is evident that removal and sale of the clay would leave a far larger void than that contemplated in the Certificate.

Although it might be said, as regards clay, that there is no ‘contrary opinion’ in the Certificate, this would leave the applicants in the position of having to establish otherwise than from the Certificate that permission for the commercial extraction of clay might reasonably have been expected. Even disregarding the terms of the Certificate, we do not consider that the applicants have led evidence which establishes that. The applicants did not in their evidence address the traffic impact involved, a matter highlighted by Mr Henderson in his submissions. It can be added, although we were not addressed on this, that so far as we can see the applicants are not in a position to rely on any of the other statutory assumptions, for example those under the development plan.

As regards landfill use, involving the importation of waste, the applicants’ position in relation to the Certificate seems to us to be even more difficult. Again, the Certificate does not cover this. Again, there were indications in the evidence, and indeed a measure of support from Mr Proud, to the effect that on the assumption that there was permission as specified in the Certificate, the result, at least if the clay was sold, would be a large void and eventually permission for landfill use would be granted. In this case, the applicants could point to a shortage of landfill sites. It is, however, evident that the applicants applied for a certificate including this and the Certificate refused it and also fixed an overall time period which is inconsistent with several years of landfill use. Section 22(3A) requires us to have regard to that and to the reasons given. As well as not having been appealed, the reasons were not really addressed in any planning evidence before us.

The reasons given in Schedule 3 of the Certificate refer to planning policy considerations, to environmental and traffic impact, and to the overall rehabilitation programme. While we have some doubts about the appropriateness of the third of these considerations, which seems to us to reflect the same purpose as that involved in the compulsory purchase, we do not consider that we have heard evidence which would enable us to reach any different view on the first two considerations.

In these circumstances, we do not consider it is open to us to proceed on the view that a prospective purchaser of the mineral rights at the subjects could either assume or reasonably anticipate permission to exploit the subjects for profitable landfill use after extraction of the minerals, even if such a purchaser could reasonably anticipate being allowed to make commercial use of the clay. Rather, the assumption which we think has to be made is that planning permission would have been granted for extraction of sand and gravel, coal and fireclay with restoration from colliery waste from the rest of the bing and importation of soil not waste, all within the Certificate’s two year timescale.

We should add that we appreciate another possibility in a case of refusal or partial refusal to certify appropriate alternative development. A claim based on ‘hope value’, in the sense of a value in a market for purchasers accepting that there would not be planning permission but relying on the hope or prospect of some future change in that position, would still be competent. A claim on this basis was allowed by the Tribunal in Young v EdinburghCity Council, LTS/COMP/2000/2, 27.3.2001. In that case, no application had been made for a Certificate of Appropriate Alternative Development, but we would be inclined to accept that a negative certificate would not be fatal to such a claim. Despite the additional discount, allowed in the applicants’ claim relating to landfill use, for uncertainty in relation to planning permission, this claim was not presented in that way and there was no evidence before us of the existence of such a market.

(ii) Value

A Certificate of Appropriate Alternative Development does not determine either the existence of market demand or the level of value of the land rights carrying the assumed planning permission. An actual, not a theoretical, market demand has to be proved. We have therefore had to consider whether there would have been a market for the mineral rights of the subjects on the basis of planning permission for extraction of sand and gravel, coal and fireclay with restoration otherwise than by commercial landfill use. We have also, however, lest we be wrong in our conclusions about the Certificate, considered two other possibilities: (a) there was a good prospect of extraction of clay for sale also being permitted; and (b) permission for landfill use with imported inert waste might also have been expected (which also involves consideration of the timescale for obtaining such permission).

We have felt a degree of difficulty with the valuation approach. To arrive at a calculation of the value of the subjects at the agreed date of valuation, the Tribunal is to have regard to what a purchaser would pay as a capital sum for their possession. The requirement of rule (2) of the 1963 Act is that the amount is to be that which would be paid in the open market in agreement between a willing seller and a willing purchaser. Mr Vincent and Mr Proud agreed that interest in potentially mineral bearing land would be from operators of mines who would take steps to establish the quantity and quality of the minerals and the feasibility of extraction prior to making any bid. They would operate the enterprise as a whole.

If the open market is typically populated by such potential purchasers then the value of the land should properly be determined by reference to the bids that such purchasers would make. However, the method adopted by the applicants was to determine the demand for land derived from the demand for the right to extract the different minerals from several operators. Moreover, Mr. Vincent applied a mixture of royalty rates. His rates in respect of clay, sand and fireclay were free from the type of price determining calculations which such individual operators would make, but his rate of wayleave payment for coal was on the basis of calculating the residual amount which an operator would be able to afford. He was generally unable to produce evidence of comparable transactions.

Mr Proud accepted Mr Vincent’s general approach as legitimate. The Tribunal is therefore guided, as to the estimated prices of royalties and wayleaves payable by the various operators for the respective rights to extract the minerals, almost entirely by the opinions of the experts.

Both the mineral surveyor experts have considerable experience. Given the limited detail as to the quantity and quality of the material underlying the surface of the subjects, there is clearly room for differences in interpretation. We are in no doubt that both witnesses were sincere in their views as to the probabilities regarding the amounts and nature of materials to be found there and as to the practical methods of working the minerals. Where questions relating to the viability of a scheme of recovery of these minerals were concerned we are of the opinion that Mr Proud had an advantage in having local knowledge of the relevant characteristics of the markets for these materials. He was also better placed to comment on the mechanics of any scheme for the proposed extraction of the minerals. We accept his view that the applicant’s proposal of a scheme for the extraction of the minerals was not viable for the reasons which he gives. That opinion appears to us to be supported by the evidence. On the other hand Mr Vincent’s support for the scheme required him to make some speculative assumptions and to make light of potential difficulties. While the scheme is theoretically possible it is over optimistic. As a practical logistical exercise it is burdened with too many difficulties and uncertainties. For example, even allowing for the possibility of its practical implementation it is difficult to accept that cohesive contractual arrangements for the payment of royalties and wayleaves, necessary at the outset, could be arranged.

Clay

Even if it were lawful in terms of the Certificate, or reasonable to assume permission to remove the clay from the subjects, there are factors within the assumptions made by Mr Vincent which are unsatisfactory in providing firm evidence of value.

Even if the quality of the clay is accepted as being suitable for making facing bricks, the demand by the building industry in Scotland for such bricks, on the evidence, was very much less in 1991 than at present. Mr Vincent also assumed that the clay would be sold to an industry which today accepted deliveries of the product from further away than previously had been the practice. He spoke of distances of 15 miles as being economically justified today. However, he was only able to identify one location for a possible consumer of the product. That was Ibstock near Hamilton. The Tribunal was not given the actual distance from the subjects to this facility but we can safely assume that it would be not less than 40 miles. Mr Vincent did not give any examples of clay being transported economically to brickworks over distances of more than 15 miles. Mr Proud was adamant that such a high volume but low value product such as clay could not be economically transported more than about 10 miles, and Mr Vincent conceded that in order to make the delivery of clay to Hamilton economically viable a network of return deliveries would have to be available and in place for the exercise to work.

There was no suggestion of demand for the clay within the vicinity of the subjects in 1991. There was real doubt as to whether there was any demand for the clay, for the particular purpose for which it was suited, at that time. No reason was given why this clay should be preferred by a processor to any more local source of such a material which Mr Vincent admitted was commonly found throughout the country.

These flaws which the Tribunal finds in Mr Vincent’s assumptions are sufficient for us to conclude that it was highly improbable that there was a market for the clay at the subjects in 1991. We find Mr Proud’s evidence more convincing. He has the advantage of local knowledge and he was in no doubt that the clay was unsaleable.

We also take it as significant that a commercial organisation such as Tarmac, as owners and operators of the sand pit at Oatslie had accepted the cost of removing the overburden clay at that site and had not attempted to market it. It is improbable that such an organisation would ignore the possibility of reducing the cost of working sand at Oatslie if there had been a local market for clay.

Further, while the applicants’ approach to valuation was on the basis of royalty payments, no evidence was given of the likely identity of any operators prepared to pay to work the clay at the subjects. While accepting the difficulty in valuing mineral subjects where there is limited information about transactions of interests in respect of mineral bearing land, where the approach to valuation is instead based on the derived demand for the minerals then it is helpful to have evidence to support a contention that the necessary actors are in the market place.

For all these reasons we do not accept that the clay at the subjects had any value at the relevant date.

Sand

We are also not satisfied that Mr Vincent’s conclusion as to the value of the sand at the subjects is soundly based. His assumption that the sand would be of interest to the operator at Oatslie, occurring as they did towards the end of the life of the workings there, was generally accepted as reasonable. Mr Baker’s evidence supports that. However, Mr Vincent translated that assumption of real interest into a royalty figure. He claimed that his figure of 40 pence was conservative. But figures in the range of 30 to 40 pence given in evidence suggest that it may have been towards the top of the range of market prices for that product in 1991. On the evidence, there was not a general market for the sand from the subjects at that date. Because the sand is contaminated with coal it would require to be processed using the plant at Oatslie. The operators at Oatslie, particularly as asphalt producers, were the only potential purchasers of the product given also the volume of material and time scale for its delivery.

The assumption that the sand would be readily marketable to the operators of the Oatslie pit may therefore be reasonable, but the assumption as to the price which may be paid for it by that operator is not, in our opinion, reasonable.

On the facts, the producer of the sand at the subjects needed the outlet at Oatslie, with its processing facilities. But the operator at Oatslie did not need the product from the subjects to anything like the same degree of necessity. In fact it was not necessary at all to that operation. Mr Baker spoke of the levels of royalty paid at Oatslie by his company, and generally. He was careful to say that an interest by his firm in sand available from the subjects at the relevant date, while likely, would be expressed in terms of an offer of royalty which would depend upon an appraisal of the economic circumstances obtaining.

These circumstances reveal a monopoly purchaser who would be in a very strong position to offer a minimum price, since he could walk away from the negotiation, while the producer would have no other potential purchaser available with the same interest and no other outlet for contaminated sand.

While the sand is of poor quality and of limited use there might be some modest market for its consumption if the clay were removed. However, on the evidence, we are confident that the value of the sand would not be sufficient to justify the expense of removal of the overburden.

Coal and Fire Clay

Even if the applicants’ estimate of the area available at 20 metres depth for the working of coal is accepted, the scale of operation for open cast mining is very small and we accept Mr Proud’s opinion that it would be below the practical threshold for viability. In any case the question of how the edge coals could actually be worked was in considerable doubt. The licensing procedure is demanding in terms of the information required and since that would need physical investigation the cost and time needed were factors not easily accepted as being affordable and achievable in the time scale of the applicants’ scheme. More significantly, we accept Mr Proud’s evidence that in 1991, as well as in 1987, it was highly unlikely that British Coal, given their attitude then to private mining and their declared interest in developing the greater area for open cast mining, would have granted a licence. British Coal’s control in this matter was in practice unlimited, and we are not persuaded that any concern in relation to their own future planning position would have led them in 1991 to grant such a licence.

Accordingly, although there was agreement between the experts that the coal would be marketable, with no dispute about the price level, and that some amount of associated fireclay could be sold at some price, we find that the resource had no value at the relevant date.

Landfill

The expert witnesses agreed that if there were a ‘hole in the ground’ as a consequence of mining operations at the subjects planning permission might be achieved for the deposit of waste, because the local autority would wish the void to be filled and there was at the time scarcity of sites for land fill purposes. It was also agreed that a commercial rate of £1.5/m3 could be demanded. Mr Proud, noting that the subjects were within 250 metres of the nearest dwellings, thought that planning permission could only be expected following local objection on appeal, and that in any case there would be delay in receiving any eventual planning permission.

The problem for the applicants, however, in attempting to establish a value in respect of such an operation is that the void has first to be created. It is therefore dependant on the viability of the mineral extraction scheme, which we have not accepted.

Moreover, any permission to extract minerals at the subjects would carry with it the requirement to restore the surface.

Conclusion on Value

Apart from our conclusions about particular parts of the Scheme, starting with the conclusion on clay which itself deals an almost fatal blow to the applicants’ valuation, we have to add that in our opinion that valuation did not adequately reflect the operator’s costs in relation to investigation and other preliminaries such as obtaining planning permission, in relation to overall management and in relation to the final obligation to make good the land. We appreciate that some of these costs are, legitimately, attributed to the individual operators and therefore said to be reflected in the royalty rates, but we note that no attempt has been made to relate the incidence of such costs to the scale of the scheme. Further, the applicants’ scheme involves the land owner or other overall manager in administrative expense.

We also consider that the scheme requires the identification of mineral operators prepared to work over a particularly tight timescale. We doubt the practicality of that.

Accordingly, even if we were in a position to proceed on the prospect of planning permissions which the applicants’ case requires, we would not have been able to ascribe any mineral value to the subjects.

Decision

In all these circumstances, we determine the price under the missives at £15,000 as at 21 January 1991. In accordance with parties’ agreement, interest is to be added from said date in accordance with the provisions of Section 40 of the Land Compensation (Scotland) Act 1963.

We did not hear submissions on the expenses of the application. In accordance with the Tribunal’s normal practice, we propose to deal with this matter on the basis of written submissions unless otherwise requested. Any submissions in relation to expenses should be submitted to the Tribunal within 28 days.