What has happened?

The NSW Land and Environment Court has delivered an important judgment on the treatment of publicly-owned minerals in land valuations carried out by the Valuer General under s 6A(1) of the Valuation of Land Act 1916 (NSW) (VL Act). 

In Perilya Broken Hill Limited v Valuer-General (No 6) [2015] NSWLEC 43, the Court decided that such valuations should be conducted on the assumption that minerals on the land are privately owned.

Background

Perilya Broken Hill Limited (Perilya) owns land at Broken Hill on which is it mines lead, zinc and silver under mining leases granted under the Mining Act 1992. It not disputed that these minerals are publicly owned.

Under s 6A of the VL Act the Valuer-General valued the land at $20.9 million as at 1 July 2007. Section 6A(1) of the VL Act relevantly provides:

… The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require ...

Perilya sought to challenge the 2007 valuation in proceedings commenced in the Land and Environment Court. These proceedings have a relatively complex procedural history the details of which are not relevant for present purposes. In the present proceedings, the Court was only asked to determine a single question being:

Under [s 6A of the VL Act] is the land value of land containing publicly owned minerals, as defined in the Mining Act 1992, to be determined on the assumption that the minerals are privately owned?

The Court answered this question in the affirmative.

Reasons for decision

The case turned on the proper interpretation of the words 'fee simple of the land' in s 6A.

The Court held, based on a series of principles distilled from a broad range of case authorities, that these words do not refer to the actual fee simple in the land as vested in the current owner of the land (which may be subject to reservations including in respect of the title to minerals). 

Rather, these words refer to a hypothetical 'absolute' or 'pure' fee simple title to the land unencumbered and subject to no conditions or reservations.

Implications

This decision is potentially significant for any company or individual owning freehold title to land where title to the minerals on the land is reserved by the Crown. The decision has the potential to increase the value of such land for the purposes of, for example, calculating any land tax or local council rates payable in respect of the land.