COALMINING AGREEMENT.

New Zealand Herald, Volume LXIV, Issue 19808, 1 December 1927, Page 14

COALMINING AGREEMENT.

I QUESTION OF ROYALTIES. SUPREME COURT ARGUMENT. The legal effect of a clause in a mining agreement between Adit, Limited (Mr. Meredith and Mr. F. C. Gould) and Renown Collieries (Mr. J. B. Johnston), was argued before Mr. Justice Reed m the Supreme Court yesterday. The action was a friendly one to find out exactly what were the rights of the parties under the agreement. All the relevant facts were agreed upon. Adit, Limited, held two mining options obtained over adjoining land from Thomas Tapp and W. C. Broughton, and under these options certain royalties were reserved. Adit, Limited, transferred these options to the Renown Collieries. In the agreement Adit, Limited, was to receive Is a ton royalty in the second year on the basis of an output of 35,000 tons, subject to deduction of the amount payable as royalty to Tapp and Broughton undei' the original options. The disputed clause further provided for the payment of royalties computed on a basis of an outut of not less than 50,000 tons in the third year and not less than 80,000 tons in the fourth and subsequent year 3 After the completion of the second year no coal had bean won, and so no royalties were payablo to Tapp or Broughton. Tlie point was whether Adit, Limited, was to get the full shilling without deduction or whether deduction had to be made on a supposed amount of coal or fireclay won, and if so, how much ? Mr. Meredith claimed that Adit, Limited, was entitled to royalty on 35,000 tons. He contended there was no ascertainable basis for deduction in the existing circumstances. The clear and natural meaning of the agreement was that Adit, Limited, was to be paid royalty at the rate of Is a ton on 35,000 tons. The first part of the clause provided what deductions were to bo made. No royalties actually were payable, and therefore the whole shilling stood free from deduction. There was no hardship because the company had the remedy in its own hands by proceeding with the work of mining. Mr. Johnston submitted the language of the agreement was very ambiguous, and the interpretation most favourable to the company was the one that should be adopted. There was nothing in the agreement to bind the company to carry on mining operations. The words of the clause were: "computed on the basis of an output of not less than 35,000 tons," but there had been no output. His Honor intimated he would take time to answer the question in regard to the construction of the clause.