About Mininvest (Eppleton) Limited

In 1996 Mininvest plc acquired properties in England and Scotland from British Coal signing the sale contract on 3rd January 1997 for a consideration of £1.3m. The transfer of freehold land (Areas D and E) at Eppleton and Option over further mineral bearing land (Area B) was completed on 4th February 1997.

 

In 1996 the sales particulars supplied by British Coal/Coal Authority show area D with consented mineral and restoration under an "old" pre 1900 permission to quarry floor level.  British Coal in 1996 created a suite of documentation and entered into a Participation Agreement which expressly did not create a partnership and was linked to an option agreement with the Operator which expired in March 1999.

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Area D clawback. It is not in dispute that the Property in area D was governed for the most part by a pre 1900s mineral permission unlimited in time and requiring restoration to quarry floor level.  This raised nice legal arguments as to whether mineral and waste income was subject to clawback and whether the mineral under the colliery spoil heap was subject to clawback and indeed whether the mineral in the colliery spoil heap was in any case "stock" which had been acquired as part of the purchase consideration.

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Area B clawback.  Rents did not arise in respect of Area B as this area was unmined.

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Area F clawback. Be that as it may the Coal Authority ('CA') were clear in 2006 that they were entitled to "clawback" in respect of rents from area F.  In submissions the CA agreed they were mistaken in thinking that they ever owned the freehold in Area F or a third party owned access rights over area B.  Mininvest plc disclosed the income earned in their accounts.

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MEL with the other two landowners entered into an Option Agreement with an operator in respect of Eppleton Quarry and colliery in August 1999 and agreed to split the rent three ways.  Extraction in Areas D E F began in 2001. Extraction from areas outside these in the ownership of the Operator also began in 2001. Rent was received in respect of Operator owned land and split three ways among the landowners.

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MEL was required to make a return of rents subject to clawback and at this stage thought them to be nil.  The volume extracted within the red and green lines was required to be returned.

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The Eppleton property (Areas D, E) was agreed to be transferred to the Operator in 2001. 

 

In 2006 at the conclusion of mineral extraction from Area D MEL had as we thought satisfactory clawback discussions regarding with the Coal Authority and anRICS expert who they named. The position was reserved as to future extraction from Area F. 

 

MEL retained an option over Area B which was exercised in 2017 giving access to the mineral in the extended quarry. In 2001 it was agreed the Option would be exercised but both sides were content to leave the Option then unexercised.

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Mininvest (Eppleton) Limited is a dormant property holding company. As matters concerning MEL are complex involving the constructive input of several stakeholders in Eppleton Quarry (three owners and former owners, the Operator and Sunderland Council) I have added this page of key correspondence and plans for the various parties and their advisers.  This creates a matrix of fact and relevant fact which is ably set out in the 2023 Expert Determination as regards an estimate raised in 2017 of Coal Authority burdens to be paid before the Property can be sold.

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In 2001 MEL notified a potential trigger event at Eppleton Quarry to the Coal Authority. In 2006 production in Area D ceased.  Eppleton clawback was discussed in the Mininvest plc 2006 Board in Newcastle with the following comments

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"Eppleton.  Extraction continues.  Coal Authority clawback limited to small sundry waste receipts.  Sand and gravel extracted under existing mineral permission, coal is in spoil heap overlying freehold.

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Letter dated 21 December 2005 from Coal Authority’s Martin Law tabled noting potential triggering event in planning permission at Eppleton and including by mistake Marsden sold by Coal Authority to Tilcon not to us and Craigs sold by us in 1998."

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The Property in Areas D,E and F had consented reserves on sale of some 400,000 tonnes of Limestone and Sandstone overlain by a colliery spoil heap with some 90,000 tonnes of recoverable Coal. Output from the site from all areas totalled some 6m tonnes by September 2015.

 

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Disclosure.  The total income from Eppleton Quarry, being under common control,  and valuation of the Option over Area B which was MEL's sole asset after 2001 was reported by way of note to the annual Mininvest plc accounts.

 

 

 

 

 

 

 

 

 

 

 

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In 2004 a truce was reached with the Operator with their abandoning a claim to control the access rights over Area B and the transfer of the Property to the Operator.  MEL's only asset was then the Option to acquire Area B which formed the greater part of the mineral bearing land. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Directors.  My own skills are non legal and I take independent professional legal advice on the decisions I reach. 

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Legal advice to the Board on clawback extent and limitation was provided by independant solicitors who reviewed the Transfer definitions and regarding limitation from Counsel.

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Operations.  In fairness the MEL directors, accounting, financial legal and operational skills and workers were such that the Operator realised that if they were evicted MEL had the ability to operate the quarry themselves should the Option be exercised.  The cost of exercise of the Option in 2017 was estimated to be some £400,000. 

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National Audit Office.  In 2005 the National Audit Office enquired as to Coal Authority clawback typically a sharing of income arising from grant of planning permission within 20 years of purchase and the Coal Authority wrote to MEL.  The Coal Authority appointed RICS Expert Mineral Agents Wardell Armstrong. No doubt the Coal Authority reported the clawback position at Eppleton Quary to the National Audit Office in 2006 when mineral output in area D ceased.  Wardell Armstrong engage with the operator and act for the Landowners producing an annual report which was shared with the Coal Authority in 2014 at their request. 

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Fiduciary duties.  Putting it in Victorian terms the fiduciary duties of Directors (whether of MEL or the Operator) are to get as much as they can and give as much as they can.  The 2014 discussions with the Coal Authority were prompted by another trigger event the 2015 planning permission.  Clawback over area B was for 20 years and expired in July 2015.  It should not come as a suprise that planning permission for the expansion of the quarry into areas C and B was obtained in September 2015 and there was therefore no trigger event for clawback.

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Property.  Area D and E.  MEL remains the registered owner of the Property (Areas D and E) at Eppleton Quarry Hetton Le Hole Sunderland "The Property".  MEL acquired the Property in areas D and E of Eppleton Quarry from British Coal/Coal Authority in 1997 for £1. In 2001 MEL signed a mining contract with the Operator following a 2001 planning permission and s106 agreement. The Property transferred to the Operator in 2004.

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2006. The activity in Area D in 2001-6 was discussed and as I thought it was agreed there was no clawback.  The position as regards adjoining land was reserved.  Here the coal Authority were looking to any share of total income.  MEL's position as discussed in the 2006 Board minutes was that the terms of the 1997 Transfer required MEL only to report activity within the redlines of the Property.  Independent advice from Stephensons Solicitors in 2016 confirmed this interpretation.

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The Definition of Royalties, Property and Minerals

When the Directors met as a Board in February 2006 to consider the Coal Authority correspondence and Coal Authority burdens we read aloud the definitions of Royalties, and "Mineral" and "Property"to make sure we werent missing anything and took independent advice from Solicitors on them but apparently we were all mistaken. 

 

See what you think.

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Minerals are defined as .....

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Property is defined as .......

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Ownership.  MEL transferred the Property (Areas D and E) to the Operator in 2004 pursuant to a Court order of District Judge Robertson in Bishop Auckland County Court dated 15th June 2004.  The Land Registry were ordered to register the transfer of the Property but the Property is subject to a restriction in favour of the Coal Authority regarding agreement and payment of clawback. As noted above working of Area D finished in 2006.  Waste input occurred in 2006-10 and there is no dispute as to Waste Clawback.  The parties however remained far apart on agreement of Mineral Clawback.

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It was hoped the Legal Expert determination would assist the Coal Authority formulate and pursue their claim in 2023.  Unfortunately the costs of the Legal Expert Determination of £118,000 (estimate £8,000) render the company insolvent.  

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The Legal Expert saw the ownership of the Property in simple terms or at least not relevant to the dispute to be resolved.  I have consulted leading liquidators who advise that in view of the uncertain environmental liability the issue of who owns the Property must be resolved before a liquidator can be appointed to MEL whether  Shareholders or Creditors liquidator. 

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The Legal Expert saw this in simple terms as the environmental liability being dealt with by the reworking of the Colliery spoil heap.  This operation  did so partially as the removal of Coal dealt with the issue of ignition to which the Colliery spoil heap had been prone.  However there remains environmental liability as a result of the legacy deposit of toxic materials and waste import there extent of which remains to be seen.

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Here we are in 2023.  It is unfortunately also a fact that time is of the essence in commercial matters and it is unlikely the Coal Authority have now the commercial leverage over the Operator on the matter of clawback that they had in 2015 as planning permission was granted in 2015 after clawback expired on the greater part of the site. If it happens at all the transfer of the Property to Sunderland Council will be simultaneous with the agreement and settlement of the clawback and that requires some commercial compromise.

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Area B.  MEL's only asset was an Option to purchase over Area B which formed a substantial mineral bearing part of the quarry.  Being a company under common control the income of MEL was accounted for in the annual Mininvest plc accounts (disclosed in related parties notes) as was the value of the Option right over Area B of £370,000. 

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By virtue of this Option MEL ("Area B option") owed its position commercially in the royalty income of the quarry which was split three ways between the landowners.  Area B had its own "clawback" provisions separate and distinct from areas D and E.  Clawback expired in 2015 after which permission was granted for an extension of the Quarry so no clawback was due on this agreement. 

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MEL could not agree half its income was subject to clawback as its different interests (Area D,E) on the one hand and Area B on the other were subject to different clawback provisions.

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Plan.  The two distinct areas are marked red and blue on the plan accompanying the British Coal 1996 sale particulars.

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Environmental liability.  The sale consideration reflected the environmental liability attaching to the site.  The area then was part of a dormant quarry and disused colliery and overlain by a colliery spoil tip.  Such sites had the potential for significant environmental liabilities hence the consideration was £1.  This site had particular challenges as the colliery spoil heap was coal and volatile chemical rich and had ignited.  Working of the Colliery spoil heap has mitigated but not eliminated the environmental liability.

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Transfer to Sunderland Council.  The land is to be transferred to Sunderland Council free of British Coal/Coal Authority "clawback" liability.  This however requires the agreement of a commecial clawback liability and release of the Coal Authority restriction on transfer.  If no agreement is reached the matter rests with the Property remaining in the ownership of MEL.

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The purchasers solicitors did not register the transfer in 2004 as they undertook to do as in view of the environmental liability it is likely agreement and payment of the clawback liability and the transfer of the property to |Sunderland Council will take place in a single simultaneous transaction or matters will rest as they have since 2004.

 

Substantial sums of clawback have been paid to the Coal Authority on other sites where the position is clearer.

 

The clawback position here was not obvious to MEL as the "Property" (as defined) in Area D formed but a small part of the wider quarry "Site".  The Property was consented on sale in 1996 under an "old" pre 1900 mineral permission.  In any case the site transferred to the Operator in 2004 and with it went the environmental and "clawback" liability.    

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The Legal Expert characterised MEL's position as my personal view in which I was mistaken however I am an experienced managing director and always take advice - in this case Solicitors, Counsel and mineral agents.  Unfortunately the Expert Determination though costly happened without the parties meeting which might have helped a better understanding of the factual position.

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RICS Expert.  Letter advice from Wardell Armstrong mineral agents who acted for the Landowners and Coal Authority (see letter of 4th April 2006) with legal input from Stephensons solicitors on the definitions of "Property" and "Minerals" and so the extent of the Transfer Clawback terms indicated mineral claw back of £25,865 and waste clawback of £32,835 in 2018.  Clearly the parties were far apart.

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Dispute.  The parties went into dispute on 24th November 2014 over the quantum of clawback due from MEL and consulted an RICS Expert Wardell Armstrong. A claim estimate to half of all income was received. A serious obstacle to concluding the estimate raised by the Coal Authority in 2017 was valid is the Coal Authority letter received dated 4th April 2006 or at least that was the position until 2023 when the issue of has been resolved by the Legal Expert determination. The Legal Expert admitted the letter of 4th April 2006 offered some support to the position of MEL prior to the determination.

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Mineral ownership.  A long running issue which may explain the length of time the parties have been in dispute was the ownership of the mineral excavated within and outside area D on adjoining land.  The Coal Authority were mistaken and kindly amended their submission in 2022 to the Legal Expert in this respect as they have no title to mineral other than Coal stocks which in any case formed part of the purchase consideration.  

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In 2001 reclamation and mineral excavation began and will likely continue until 2045.  Excavation in area D ceased in 2006 when the issue of clawback of income received by Mininvest was discussed with the Coal Authority and their named mineral agent Wardell Armstrong.  Wardell Armstrong  also produced an annual report for the Landowners.  The 2014 annual report was shared with the Coal Authority in 2014.  

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In turn the expert found MEL was mistaken in the view it too of the scope of clawback as being restricted to the red and green lines of the Property extent which a prima facie reading of the transfer provisions indicated to myself and advisers was the case.  Be that as it may the Expert has found otherwise and on 13th July 2023 the Coal Authority made a claim for the estimate sum on MEL.

 

The other factor in the impasse since the Court ordered the transfer of the Property to the Operator in 2004 and now in 2023 is the need for simultaneous appointment of a liquidator if one can be found in view of the environmental liability, agreement and payment of clawback liability, removal of the Coal Authority restriction on transfer, transfer of the property to the Operator or Sunderland Council  

 

The Legal Expert who determined the matter of the validity of the Estimate of clawback liability the Coal Authority was entitled to make was provided with comprehensive representations and documents by MEL including the RICS Expert reports with input from Stephensons solicitors and Counsel. 

Expert determination - MEL representations and additional documents 46-60

Expert determination - CA submissions -MEL counter submissions

MEL Costs submissions

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Very little material was provided by the Coal Authority who provided no witness statement or correspondence in particular with the Operator on the subject of clawback.

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Unfortunately I dont have my 2nd March 2006 letter to which the Coal Authority refer in their reply with the words "I agree" but I do have a board minute extract summarising the position as we saw it at that time which remained the same until 2023.

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I am confident that clawback in respect of Area D was discussed in 2006 when excavation ceased as I thought satisfactarily after the Coal Authority consulted a named expert in mineral agents Wardell Armstrong.  MEL has a letter from the Coal Authority dated 4th April 2006 with the words "I agree" and has consistently maintained that mineral within Area D was subject to an "old" planning permission which was not time limited and that stocks of minerals formed part of the purchase consideration.  Be that as it may MEL was very keen to compromise the matter.

 

A further issue is who owns the Property.  In 2004 the site was transferred to the Operator pursuant to the 2001 Contractual arrangements and Court order.  The Land Registry did not register the transfer which it appears was sent to them as the purchasers solicitors undertook to do because the title had a restriction in favour of the Coal Authority requiring payment of clawback before the purchasers registration could be completed.  Mineral operations in Area D ceased in 2006 and waste was input in the 2006-2010 period.

 

The following documents have been placed online.  I am now 65 and keen that should the matter be "taken on" others will have the basic factual information available.  No criticism is expressed or implied of the Directors of the various stakeholders or their agents.  As directors they owe fiduciary duties not to MEL but their own owners and shareholders.

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Documents

Transfer agreement dated 3rd February 1997

Land Registry entries 4th April 2023

RICS Expert Planning Permissions Plan

1999 Option Agreement plan

 

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The Eppleton Reclamation Scheme is sited on Areas DE and F.

The ERS is longstanding proposal to restore the disused Eppleton Colliery site.  The Colliery closed in 1986 and the Quarry though consented on sale was dormant.

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Mineral was won from Area D in the 2001-6 period and waste was input in the 2006-10 period.

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There was no guarantee the ERS would be permitted or would proceed or be a commercial success for the Operator given the uncertainties of process, markets and geology. Be that as it may in 1997 the Property was thought to contain 90,000 tonnes of recoverable Coal and be underlain by 400,000 tonnes of Limestone and Sandstone. Planning permission was achieved in 2001.  Under the terms of a mining contract Areas DEF were to be transferred in 2001 to the Operator in return for income.  MEL was to exercise its option over Area B.

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MEL was advised Limitation applies and any liability to the Coal Authority no longer exists.  I cannot see that advice is plainly wrong. Be that as it may the expert has now made a determination in 2023 and limitation runs for six years from the date of that.

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There is good reason for limitation.  Disputes over clawback impede the marketability of sites and in the present case impede the transfer of the areas D and E to Sunderland Council which is a condition of the planning consent.  The Coal Authority have not pursued their claim for many years and declined to attend a mediation of all the issues with the other stakeholders.  The expert determination has in a sense resolved the impasse of whether the estimate was a bona fide estimate but opened up another potential impasse to the transfer of the Property to Sunderland Council which mayneed to be resolved by Court Order confirming the Land Registry is to register the transfer irrespective of the restriction in favour of the Coal Authority. 

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The Land in Areas A, B and C to the North of the scheme site has also been worked for limestone and sandstone.  This has resulted in substantial income for MEL in the 2006-2014 period.  The Coal Authority have claimed clawback in respect of MEL's total income but not pursued that claim until 2023. 

 

MEL claims clawback is more narrowly confined by the terms of a Deed of Transfer dated 3rd February 1997 and in any case this is subject to limitation. I signed the Deed in 1997 and am confident its terms at prima facie limit clawback on mineral to the Areas D and E or at the very most DE and F.  Area B is subject to different clawback provisions.

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The dispute was subject to expert determination and the expert found MEL became indebted to the Coal Authority for all mineral income irrespective of where the mineral was extracted across the site in June 2017.  The Coal Authority claimed the determination estimate sum on 16th July 2023.  While an estimate has been made it remains to be seen what the actual clawback liability sum is as this depends on which areas minerals have been extracted or it doesnt and all income is subject to clawback. 

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I remain a Director of the company and I own it.  I therefore now owe fiduciary duties to the Coal Authority as a creditor. I am taking insolvency advice and the Liquidator will deal in the property if a Liquidator can be found able to deal with the environmental liability of the Property.  The Company has had few transactions in the last three years save to pay professional costs.  My personal retirement style is a 2 bed shared ownership house so I am not in a position to assist financially with a compromise however the various stakeholders will no doubt deal pragmatically with the Liquidator in relation to the Property. 

 

I am sorry it has come to this as over the years a deliverable compromise sum has been offered which fairly reflects the plain wording of the Transfer clawback provisions and the definition of the words Property and Minerals and Royalty.The Coal Authority have heavily litigated the expert determination (which process is intended to avoid heavy costs).  Costs estimated to be £8,000 have turned out to be £118,000.  The costs award alone is sufficient to render the company insolvent.  The Coal Authority are well aware of this limitation in the Company's resources.

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The various stakeholders have over the years 2001-2023 proposed compromise sums and provided Mineral Agents reports but the Coal Authority have declined to accept them.

16.  Wardell Armstrong letter report regarding clawback dated 18th March 2018

https://drive.google.com/file/d/16ocirjMtOayVdZZIPoyIA96JQoOOYULF/view?usp=share_link 

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This lack of compromise is perhaps at the urging of the National Audit Office which has taken a keen interest in "clawback".  It is however a fact that purchasers will usually await the expiry of the 20 year clawback period before triggering clawback with a planning permission.  This is what happened here in relation to Area B.

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As a landowner of the Property we have no public or private funds to draw on so we have respectfully left the other stakeholders to it. However I have placed information on this page as regards MEL so it may be available to the Court and for the convenience of RICS Mineral and Legal professionals in due course.  It has been a pleasure to deal with all concerned over 27 years of successful projects at the Eppleton site and Coalfield Communities.  

 

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