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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> MMC Midlands Ltd v HM Revenue & Customs [2009] EWHC 683 (Ch) (03 April 2009) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2009/683.html Cite as: [2009] STC 1969, [2009] BTC 8071, [2009] EWHC 683 (Ch), [2009] STI 1095, [2009] NPC 61

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE VAT AND DUTIES TRIBUNAL

		Royal Courts of Justice Strand, London, WC2A 2LL
		3 April 2009

Mr Justice Lewison:

Introduction

1. Fluorspar is the material from which fluorine is produced. It is a chemical which has several industrial uses. There are important deposits within the Peak District National Park without which the United Kingdom would be dependent on imports. Chemical grade fluorspar contains not less than 97 per cent fluorite (properly, calcium fluoride, or CaF₂). The term "fluorspar", or "fluorite" is sometimes used to mean the mineral itself, but more often the ore, that is the fluorspar and the rock to which it is attached. The ore is most commonly found within limestone, often together with other minerals such as barytes. Fluorspar ore is found in differing levels of purity varying from about 5 per cent (below which it is of little value since the cost of recovery of the mineral is too great) to as much as 60 per cent and occasionally more.
2. MMC Midlands Limited ("MMC") has extracted fluorspar and limestone from two sites in Derbyshire, within the Peak District National Park: Backdale (over which it has a lease) and Wagers Flat (over which it has a licence). The issue before the VAT & Duties Tribunal (Chairman Mr Colin Bishopp) was the extent to which the extracted limestone was subject to aggregates levy. The Tribunal concluded that only limestone which had been physically separated from rock to which it was bound by a breaking of a mechanical or chemical bond was exempt from the levy; and that MMC was subject to compulsory registration. MMC appeal against that decision. The appeal is restricted to a question of law. Since some of the criticisms of the Tribunal involve challenges to what are, on the face of them, findings of fact, it is worth repeating Lord Radcliffe's familiar explanation in Edwards v Bairstow [1956] AC 14 of what counts as an error of law:

"If the case contains anything ex facie which is bad law and which bears upon the determination, it is, obviously, erroneous in point of law. But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene. It has no option but to assume that there has been some misconception of the law and that, this has been responsible for the determination. So there, too, there has been error in point of law. I do not think that it much matters whether this state of affairs is described as one in which there is no evidence to support the determination or as one in which the evidence is inconsistent with and contradictory of the determination, or as one in which the true and only reasonable conclusion contradicts the determination."

3. There is no need to resort to the principles of judicial review. There are four main grounds of appeal; but I will deal with them in a rather different order from that in which they were presented.

The facts

4. The Tribunal found the following relevant facts:

i) MMC has been in business since 1998, and is a joint venture between two mining and quarrying companies.

ii) MMC extracts by direct digging or by blasting (§ 10). At Backdale some fluorspar could be extracted by digging with an excavator, but for the most part it was necessary to liberate the material by blasting. MMC's records showed that 68 per cent of the blasts led to the recovery of some fluorspar, while the remaining 32 per cent did not (§ 26).

iii) MMC undertakes on its sites the actions or operations of direct digging, blasting, picking out of rock piles, "coning" of rock piles and passing of rock material over a screen (§ 10). Once material had been extracted it was sorted. Some fluorspar (that is, ore) could be easily separated from the limestone by an excavator, and that material was put on the fluorspar stockpile. Other material was "coned", that is heaped up in a cone shape. The coarser material tends to gravitate to the outside of the cone, and the finer material (in which fluorspar is found) to the centre. Coned material was then separated and added to the stockpiles. Further separation was carried out mechanically, using a crusher with what is called a "grizzly screen". A grizzly screen is a series of bars which act rather like a sieve. Fluorspar recovered by these means was also added to the stockpile, awaiting blending and sale, and the limestone from which it had been separated was crushed. The crushed limestone was then sorted according to the different sizes of the resulting fragments, and sold (§ 27).

iv) All the limestone sold by MMC is subject to at least one of those actions or operations (§ 10).

v) The proportion of fluorspar within the extracted rock can vary considerably from one location to another; veins differ greatly in width and mineralogy, and fluorspar varies in its physical characteristics and quality (§ 10).

vi) Glebe Mines Limited ("Glebe"—MMC's only customer for fluorspar) set a target of 30 per cent and minimum of 20 per cent fluorspar content for the material it accepted (§ 10).

vii) MMC has blended fluorspar extracted from both Backdale and Wagers Flat and sold it to Glebe between August 2006 and February 2007 (§ 10).

viii) Much more limestone than fluorspar has been sold: from Backdale, 700,000 tonnes of limestone to 250 tonnes of fluorspar, and from Wagers Flat 132,000 tonnes of limestone to 2,000 tonnes of fluorspar (§ 12). MMC sold, or had available for sale, small quantities of fluorspar (small, that is, by comparison with the total volume of material extracted) and it was of poorer quality than most, though not all, of the material sold to Glebe by MMC's competitors, or extracted by Glebe from its own workings (§ 31).

ix) Without the substantial limestone sales which MMC had made its workings would be uneconomic (§ 23).

x) However, MMC set out to exploit the fluorspar it had found, and it did not do so merely as a means of securing exemption from the levy (§ 38).

5. The Tribunal heard evidence from Mr Taylor, MMC's operations manager. He expressed the view that that the limestone was properly regarded as the spoil from the process of recovering fluorspar since it was generated as the inevitable consequence of extracting and separating out the fluorspar. It was, he said, impossible to recover the fluorspar without producing the limestone, all of which had been subjected to one or more of the processes he had described in order to separate the fluorspar from it. Mechanical separation, coning and screening were not undertaken in limestone quarries, but only where minerals were available to be recovered (§ 29). They also heard evidence from two experts: Professor Doyle and Dr Cobb. These two gentlemen expressed the view that in the light of their experience and of their observations, particularly of the quantity and quality of MMC's fluorspar (even allowing for the better material obtained at Wagers Flat), both sites were limestone quarries to which the extraction of fluorspar was merely incidental (§ 32). The Tribunal preferred the evidence of Professor Doyle and Dr Cobb to that of Mr Taylor. It expressed its conclusion as follows (§ 39):

"… there does not seem to us to be any real room for doubt that MMC is in truth carrying on the business of limestone quarrying. In that we accept the contentions of the Commissioners and the opinions of Professor Doyle and Dr Cobb, and reject Mr Taylor's view to the contrary. The enormous disparity between the volumes of limestone and fluorspar which have been sold, … the fact that the available fluorspar is, overall, of fairly poor quality and was sold for only about seven months while the operations were carried on for, altogether, nearly four years and the admitted fact that without the limestone sales the fluorspar operation was not financially viable (while the reverse was not the case) can lead only to that conclusion. It would be possible to take a different view only if fluorspar fetched several times more per tonne than limestone, but the value of fluorspar, as was not disputed, has at best been approximately the same as that of limestone, and often much less. The notion that this is a fluorspar mining business supported by incidental sales of a limestone by-product does not reflect the reality. The operation at Wagers Flat comes closer to fluorspar mining than that at Backdale, but even there the extensive nature of the excavations and the balance between saleable fluorspar and saleable limestone can lead only to the conclusion that it is fluorspar sales which are incidental to the main purpose."

The legislation

6. Aggregates levy was introduced by the Finance Act 2001 which, as amended, remains the relevant legislation. Section 16 imposes the charge:

"(1) A levy, to be known as aggregates levy, shall be charged in accordance with this Part on aggregate subjected to commercial exploitation.

(2) The charge to the levy shall arise whenever a quantity of taxable aggregate is subjected, on or after the commencement date, to commercial exploitation in the United Kingdom.

(3) The person charged with the levy arising on any occasion on a quantity of aggregate subjected to commercial exploitation shall be the person responsible for its being so subjected on that occasion…"

7. Accordingly, liability to the charge arises when (a) there is taxable aggregate; (b) it is subjected to exploitation and (c) the exploitation is commercial. Thus a person may escape liability by showing either that the aggregate is not taxable, or that taxable aggregate has not been exploited; or that, although taxable aggregate has been exploited, it has not been commercially exploited.
8. Section 17 defines "aggregate" and "taxable aggregate". It says, so far as material:

"(1)     In this Part "aggregate" means (subject to section 18 below) any rock, gravel or sand, together with whatever substances are for the time being incorporated in the rock, gravel or sand or naturally occur mixed with it.

(2)     For the purposes of this Part any quantity of aggregate is, in relation to any occasion on which it is subjected to commercial exploitation, a quantity of taxable aggregate except to the extent that—

(a)     it is exempt under this section;…

(3)     For the purposes of this Part aggregate is exempt under this section if—

(a)     . . .

(b)     it consists wholly of aggregate won by being removed from the ground on the site of any building or proposed building in the course of excavations lawfully carried out—

(i)     in connection with the modification or erection of the building; and

(ii)     exclusively for the purpose of laying foundations or of laying any pipe or cable;

(c)     it consists wholly of aggregate won—

(i)     by being removed from the bed of any river, canal or watercourse (whether natural or artificial) or of any channel in or approach to any port or harbour (whether natural or artificial); and

(ii)     in the course of the carrying out of any dredging undertaken exclusively for the purpose of creating, restoring, improving or maintaining that river, canal, watercourse, channel or approach;

(d)     it consists wholly of aggregate won by being removed from the ground along the line or proposed line of any highway or proposed highway and in the course of excavations carried out—

(i)     for the purpose of improving or maintaining the highway or of constructing the proposed highway; and

(ii)     not for the purpose of extracting that aggregate; . . .

(da)     it consists wholly of aggregate won by being removed from the ground along the line or proposed line of any railway, tramway or monorail or proposed railway, tramway or monorail and in the course of excavations carried out—

(i)     for the purpose of improving or maintaining the railway, tramway or monorail or of constructing the proposed railway, tramway or monorail; and

(ii)     not for the purpose of extracting that aggregate;

(e)     it consists wholly of the spoil, waste or other by-products, not including the overburden, resulting from the extraction or other separation from any quantity of aggregate of any china clay or ball clay; or

(f)     it consists wholly of the spoil from any process by which—

(i)     coal, lignite, slate or shale, or

(ii)     a substance listed in section 18(3) below,

has been separated from other rock after being extracted or won with that other rock."

9. If, therefore, material falls within one or more of the paragraphs of section 17 (3) it is not taxable aggregate. Accordingly it does not matter what happens to it: no aggregates levy need be paid. However, if aggregate is taxable aggregate, it is necessary to go on to consider what happens to it after it has been removed from the ground.
10. This is dealt with by sections 18 and 19. The purpose of section 18 is to define certain exempt processes. Section 18 provides:

"(1)     In this Part references to aggregate—

(a)     include references to the spoil, waste, off-cuts and other by-products resulting from the application of any exempt process to any aggregate; but

(b)     do not include references to anything else resulting from the application of any such process to any aggregate.

(2)     In this Part "exempt process" means—

(a)     the cutting of any rock to produce stone with one or more flat surfaces;

(b)     any process by which a relevant substance is extracted or otherwise separated (whether as part of the process of winning it from any land or otherwise) from any aggregate;

(c)     any process for the production of lime or cement from limestone or from limestone and anything else."

11. Section 18 (3) (which is referred to in section 17 (3) (f)) lists some nineteen substances, including barytes, fluorspar and metal or the ore of any metal.
12. The definitions in section 18 feed into section 19. That section defines what is meant by "exploitation" and "commercial exploitation". It is sufficient to note that aggregate is exploited if it is removed from its originating site (section 19 (1) (a) and 19 (2) (a)); but it is not commercially exploited if it is removed to a registered site for the purpose of having an exempt process applied to it on that site (section 19 (3)(c)). If aggregate is exploited only for the purpose of having an exempt process applied to it, then the exploitation does not count as commercial exploitation. If exploitation is not commercial exploitation, then no aggregates levy need be paid.

The issues before the Tribunal

13. MMC's argument was that all the limestone that it extracted from Backdale and Wagers Flat was exempt from aggregates duty because it was "spoil" from a "process" by which fluorspar is separated from other rock after being extracted or won with that other rock. It thus fell within section 17 (3) (f). Thus the two main legal questions that the Tribunal had to consider were the meanings of "spoil" and "process by which [fluorspar] is separated from other rock" in their respective contexts. Mr Howell Williams, appearing with Mr Honey for MMC, did not suggest that these were the wrong issues either before the Tribunal or on appeal. But he did suggest that on their way to dealing with these two issues the Tribunal asked and answered some irrelevant questions (and got the answers wrong to boot).
14. The Tribunal concluded:

i) The word "process by which [fluorspar] is separated from other rock" is used to connote physical separation: that is the breaking of a mechanical or chemical bond. The phrase "separated from other rock" implies the application of a degree of force. Sorting by excavator or coning is not enough. By contrast, separation by means of a "grizzly screen" and crusher, if that breaks a bond, would be sufficient (§ 44).

ii) The word "spoil" means the residue after the breaking of a bond. Any other interpretation would make it all too easy to avoid the imposition of the levy by "dressing up" an aggregate quarrying operation and would give those selling large quantities of limestone and small quantities of minerals a competitive advantage (§ 45).

iii) Limestone without any fluorspar content in it could not, in any event, be exempt, because it was not separated from any fluorspar (§ 46).

iv) Only so much of the limestone as had been physically separated by the "grizzly screen" from fluorspar to which it was bound, on extraction, can be regarded as exempt (§ 47).

The policy underlying aggregates levy

15. There was considerable agreement between the parties about the policy underlying the imposition of aggregates levy. Much of this derives from the judgment of Moses J in R v HM Treasury ex parte British Aggregates Ltd [2002] EWHC 926 (Admin). I think that I can sufficiently summarise it as follows:

i) The levy is intended to increase the market price of certain types of aggregate as compared with other types of aggregate, so as to encourage the use of the latter in the interests of preventing environmental damage;

ii) The latter types of aggregate are exempt from the levy;

iii) The primary distinction between taxable aggregate and exempt aggregate is that the latter is either aggregate that has been used before and is being recycled, or is secondary aggregate such as waste from the extraction of clay or slate or blast furnace slag;

iv) The levy does not seek to discourage the production of minerals that cannot be used as aggregate. It recognises that in producing such minerals, the processes often involve the unavoidable creation of waste materials that can be used as aggregate. The use of such unavoidable waste materials is encouraged because their use is an alternative to the use of virgin aggregates. So they are exempt.

Extracted or won with other rock

16. In order to fall within the exemption the limestone must be "spoil from any process by which [fluorspar] has been separated from other rock after being extracted or won with that other rock." As Mr Howell Williams submitted, it is important to keep in mind that it is the totality of the phrase that must be interpreted, rather than its constituent parts in isolation. It is, I think, common ground that the process in question is one which separates fluorspar from limestone (the "other rock").
17. Whatever the process is, it must take place after the fluorspar has been "extracted or won with" the limestone. There are two component parts to this phrase. First, the fluorspar must be "extracted or won". Second, it must be extracted or won "with" the limestone. The word "extracted" means, in this context, removing the material in question from the ground. There was some discussion before me of the meaning to be given to the word "won", which is usually found in mining parlance in the phrase "winning and working" or "winning or working".
18. Lewis v Fothergill (1869) 5 Ch D 103 concerned an agreement for lease of a coal mine. The agreement provided for a dead rent, which was not to be charged for the first three years provided that the lessee took the necessary steps to win and work the coal. Lord Hatherley LC said:

"There is also a dispute about what is the meaning of the word 'winning'. I conceive that the coal is won when it is put in a state in which continuous working can go forward in the ordinary way. It is not when you first dig down to the seam of coal and come to water immediately, but when you have got the coal in such a state that you can go on working it, and make provision, if provision is necessary, for sufficient drainage ....."

19. Thus digging down to the coal seam is not itself "winning" the coal: it had yet to be won.
20. In Lord Rokeby v Elliot (1879) 13 Ch D 277 the Court of Appeal considered a licence of coal which allowed the licensee to deduct from the profits, out of which he was to pay a royalty, the expenses of winning the coal. James LJ, giving the judgment of the court, said:

"We think the definitions of winning given in the case of Lewis v Fothergill are accurate, as accurate as definitions can be of a term like winning, which probably is itself as intelligible and plain as any definition can be.

A coal-field is won when full practicable available access is given to the coal hewers so that they may enter the practical work of getting the coal."

21. Again, it seems to me that the emphasis is on having access to the target mineral.
22. In English Clays Lovering Pochin Ltd v Plymouth Corporation [1974] 1 WLR 742 the Court of Appeal considered the meaning of the phrase "the winning or working of minerals" in the Town and Country Planning General Development Order 1963. The mineral in question was china clay, which was described as being mechanically associated in the ground with much else, in consequence of which it needed to be separated out. The separation was effected by detaching china clay and its associates by high pressure hose and then by refining the resulting slurry. Giving the judgment of the court Russell LJ said:

"It is perhaps not necessary to be dogmatic on the point in this case: but our present view is that to "win" a mineral is to make it available or accessible to be removed from the land, and to "work" a mineral is (at least initially) to remove it from its position in the land: in the present case the china clay is 'won' when the overburden is taken away, and "worked" (at least initially) when the water jets remove the china clay together with its mechanically associated and other substances from their position in the earth or land to a situation of suspension in water."

23. These observations were considered by Sullivan J in the context of fluorspar (as it happens in relation to the two sites in issue in the present case, as well as other sites) in Bleaklow Industries Ltd v Secretary of State for Communities & Local Government [2008] EWHC 606 (Admin). That case concerned the interpretation of a planning permission. The essential issue was the extent to which the extraction of limestone was permitted by a planning permission "for the winning and working of fluorspar and barytes and for the working of lead and any other minerals which are won in the course of working these minerals." Sullivan J quite rightly said that one cannot uncritically apply definitions of "winning" and "working" formulated in the context of one mineral to what might be the very different geological conditions in which a different mineral may be found (§ 54). As he also pointed out, it is difficult to draw a bright line distinction between "winning" a mineral on the one hand and "working" it on the other. I might also add that the phrase with which I am concerned is not the traditional phase "winning and working" but the statutory phrase "extracted or won". It is also noticeable that in other paragraphs of section 17 (3) the draftsman has used the phrase "won by being removed from the ground" or "won … by being removed from the bed of any river…". In section 18 (2) (b) the draftsman uses the phrase "the process of winning it from land". This usage may suggest that the draftsman had in mind something more akin to the traditional meaning of "working"; and that in section 17 (3) (f) "extracted or won" were intended to be synonymous. Mr Puzey submitted that in the context of section 17, that was indeed the meaning of the phrase. However, I do not base my reasoning on that ground. In order for me to be able to reach that conclusion it would, I think, be necessary to know rather more about how the eighteen different minerals to which section 17 (3) (f) applies are in fact processed. If, for example, some are alluvial deposits which do not need to be "extracted", then the word "won" may have a wider meaning than "extracted". As Mr Howell Williams submitted I should take a cautious approach.
24. That said, Sullivan J had no difficulty in distinguishing between winning and working limestone on the one hand, and winning and working fluorspar on the other. He said (§ 31):

"Since fluorspar is a vein mineral and the host rock within which the vein (rakes) and stratabound deposits (flats) are contained is limestone, which itself is overlain by shales, it is clear that a planning permission for winning and working fluorspar also grants permission, by necessary implication, to remove – i.e. to win and work, applying the definitions in English Clays (above) - so much of the host rock as is necessary to win and work the fluorspar. While limestone may not be won and worked as an end in itself, it may be removed (won and worked, see English Clays) to the extent that it is reasonably necessary to do so in order to win and work the fluorspar."

25. The Tribunal were referred to and quoted this paragraph in their decision in the instant case. In this passage it is to my mind clear that Sullivan J was distinguishing between winning and working the host rock (the limestone) and winning and working the fluorspar. Winning and working the host rock may be a necessary preliminary in order to win and work the fluorspar, but it is not the same thing. This is, in my judgment, borne out by other passages in Sullivan J's judgment:

"… both the first respondent and the second respondent either conceded or did not feel able to dispute the proposition that in order to win and work one tonne of fluorspar under the first limb of the permission it would be necessary to remove – i.e. to win and work - more than two tonnes of limestone" (§ 32)

"Thus the first limb of the permission permits the removal of as much or as little limestone as is reasonably necessary in order to win and work the fluorspar. If the geological conditions are such that a substantial amount of limestone has to be removed in order to win and work a much smaller amount of fluorspar, it would not be consistent with the underlying purpose of the permission to place some arbitrary limit on the amount, or ratio, of limestone extraction if to do so would prevent or inhibit the winning and working of fluorspar." (§ 38)

"This approach to the interpretation of the condition does not mean that the appellant and the interested party have, in effect, a permission to win and work limestone. Whether the limestone has been won and worked as an end in itself or as a means to an end - to enable the winning and working of fluorspar pursuant to the permission - will, in the absence of any relevant limitation or condition, necessarily be a question of fact and degree." (§ 39)

"Applying the definitions in English Clays (above), before the limestone can be "removed" in order to get at the fluorspar it must first be "won", i.e. made available to be removed from the land; for example, by removing any overlying shale. Once the limestone has been "won", it will then have to be "worked", i.e. at least initially removed from its position in the ground above and around the fluorspar vein." (§ 52)

"Once the limestone has been removed (won and worked) in order to win and work the fluorspar, it must be for the operator to decide how to dispose of it; for example, by selling it or by disposing of it as waste in accordance with condition 3. If saleable material is won and worked in order to win and work fluorspar, not only is there no sensible reason why it should not be sold rather than disposed of as waste, there is a positive reason why the permission should be interpreted as permitting rather than preventing its sale." (§ 53)

26. Thus over and over again Sullivan J distinguished between winning and working the limestone on the one hand, and winning and working the fluorspar on the other. The Tribunal made the same point:

"It may be, as Mr Taylor insisted, that its removal was necessary in order to allow MMC access to further deposits of fluorspar, but separation from that fluorspar, if the action of removing it for that purpose can be regarded as separation, was carried out in the course of working the limestone, and not afterwards" (§ 46)

27. In my judgment they were right to do so. To put the same point in a slightly different way, the Tribunal found that the limestone was not extracted or won "with" the fluorspar. It was extracted or won separately.
28. After the hearing of the appeal before me the Court of Appeal gave judgment on the appeal from Sullivan J in Secretary of State for Communities & Local Government v Bleaklow Industries Ltd [2009] EWCA Civ 206. Both sides made written submissions on the effect of this decision. The Court of Appeal reversed the judge, holding that his interpretation of the planning permission was wrong. Keene LJ recorded the appellants' submission as follows (§ 22):

"Both Mr Morshead and Mr McCracken accept that substantial amounts of the host limestone have to be removed from their original position in order to win the fluorspar. But they argue that the judge was wrong to equate that with "winning and working" limestone. In so doing, it is submitted, he misinterpreted the English Clays case, which only used the words "winning" and "working" in respect of the target minerals, that is to say, the minerals which the operations were intended to extract, not those which had to be removed simply because they were obstacles to the extraction of the target minerals. One does not win or work the overburden which has to be removed before the target mineral can be worked, and the same is true of the limestone through which the veins of fluorspar run, whether one describes that limestone as overburden or host rock. Once removed in the process of winning the fluorspar, such limestone is waste. Consequently, the judge was wrong, it is said, to have treated limb one of the permission, which permitted the winning and working of fluorspar and barytes, as impliedly permitting the winning, working and subsequent export from site for commercial purposes of limestone, merely because the latter had to be got out of the way in order to get to, i.e. win, the fluorspar."

29. Commenting on the meaning of the words "winning" and "working" Keene LJ said (§ 29):

"The meaning of each of those two words was adequately spelt out by this court in the English Clays case. I need not repeat the relevant passage: it appears at paragraph 8 of this judgment. The meanings attached there to "winning" and "working" did not break new ground – they were not some novel approach originating in that decision of 1974 but drew instead on earlier authorities. Those meanings must, of course, then be applied in an appropriate fashion to the mining of fluorspar as opposed to the mining of china clay or coal, but in principle it must be the case that "winning" as used in the 1952 permission refers to the process of achieving access to the desired mineral, so that it can then be worked, and "working" refers to the process of removing the desired mineral from its position in the land. When the fluorspar is contained in a vein embedded in limestone, "winning" will consist of obtaining access to the vein and "working" will describe the process of extracting the fluorspar from the vein." (Emphasis added)

30. Later in his judgment Keene LJ said (§ 32):

"I find the appellants' arguments compelling. The concept of "winning" a mineral involves achieving access to the desired mineral, the "target mineral" as Mr Morshead describes it, not obtaining access to overburden or to host rock which simply has to be removed as part of the process of winning the target mineral, which in the case of the first limb of this permission is fluorspar and barytes. In the present case, in making the fluorspar available, so that it can be worked, one has to get the host limestone out of the way, but one is not seeking to make the limestone available, any more than one is seeking to make overburden available. Likewise any minerals, whether limestone or any other rocks, which have to be removed in that process are not being "worked" in the sense used in planning law. In my judgment Sullivan J misunderstood the English Clays case. The host rock, whatever it is, on this site may have to be removed in substantial quantities from its original location, but it is not being won or worked."

31. This reinforces the conclusion to which I would have come anyway, based on the different language of the Finance Act 2001. The fluorspar is not "won" (past tense) until after the host rock has been removed as part of the process of winning the fluorspar. Consequently the limestone cannot be said to be won "with" the fluorspar.
32. Mr Howell Williams said that the parties had agreed before the Tribunal that the fluorspar was "won" as soon as the overburden was removed. I disagree. I will assume (although I think it is a dubious assumption) that it was open to the parties to agree what the word "won" means in the Act. But what the parties agreed was that rock was won when the overburden was removed; not that fluorspar was won at that time. To the extent that any agreement went further, it is inconsistent with the decision of the Court of Appeal in Secretary of State for Communities & Local Government v Bleaklow Industries Ltd, and therefore wrong in law.
33. Mr Howell Williams submitted that section 17(3)(f) applied to rock not only after extraction from the ground but also at a prior stage, after the winning of the rock (i.e. the removal of the overburden), and that therefore the exemption was not limited to the separation of fluorspar which occurs after extraction from the ground. He argued that this would act to render exempt any particular batches of limestone extracted which did not have fluorspar in them. This was on the basis that the processes of direct digging and blasting were part of the process of separating fluorspar from the host rock once the overburden had been removed.
34. I reject this submission. Even adopting the traditional meaning of "winning", in the context of mining, digging down or blasting to reach the fluorspar does not mean that the fluorspar has been won while that process is ongoing. The decision of the Court of Appeal in Secretary of State for Communities & Local Government v Bleaklow Industries Ltd also reinforces this point. The fluorspar has only been won when that process has been completed. In reality what is happening is the working of the limestone. It cannot in any real sense be said that digging or blasting which removes some limestone, while leaving other limestone under or behind it, is separating fluorspar from the host rock. It is separating host rock from host rock. Moreover, the Act uses the phrase "extracted or won". Both verbs are in the past tense. Section 17 (3) (f) is therefore looking to a process that has occurred after the fluorspar has been "won" and not at a process that occurs in the course of winning it. The Tribunal rightly made this point too (§ 42). In addition, digging and blasting cannot in my judgment be described as a process by which limestone is separated from fluorspar. Even if the product of the digging or blasting contains both fluorspar and limestone, they still have to be separated.
35. Once one appreciates the importance of the requirement that the specified mineral and the other rock must have been extracted or won, and extracted or won together, it is possible to understand what the section means by "separated" and, for that matter, what it means by "spoil". I deal with "spoil" first.

Was the nature of MMC's business relevant?

36. Mr Howell Williams complains that the Tribunal wrongly embarked on a consideration of the general nature of MMC's business. That, he said, was irrelevant to anything that the Tribunal had to decide. I have already quoted the Tribunal's conclusion on that question. Mr Howell Williams said that in reaching that conclusion the Tribunal had ignored relevant parts of the evidence and has failed to give adequate reasons for its conclusion.
37. I do not consider that the nature of MMC's business was irrelevant. In my judgment it was potentially relevant to the question whether the limestone could properly be described as "spoil". It was common ground that words in an Act of Parliament should be given their ordinary meaning. But the ordinary meaning of words can vary according to the subject matter with which the Act deals. In this case the subject-matter is mining and the getting of minerals. The word "spoil" must therefore be read and understood in that context. Mr Puzey, for HMRC, submitted that in the context of mining (and in particular in the context of the Act) "spoil" meant something that was either waste or a by-product of getting minerals, but which was not something that was sought for its own sake. Mr Howell Williams, on the other hand, submitted that read in context, "spoil" was anything that was thrown up by the process of separating fluorspar from other rock. Whether it was valuable in its own right was neither here nor there.
38. Although "spoil" is not defined by the relevant part of the Finance Act 2001, it is a word used in several places. In section 17 (3) (e) it forms part of the phrase "spoil, waste or other by-products". In section 18 (1) (a) it forms part of the phrase "spoil, waste, off-cuts and other by-products". In each of those two cases, the word "spoil" takes its colour from the other words in the list. Where the same word is used in section 17 (3) (f) it has, in my judgment, the same colour. In the context of an Act dealing with mining operations and mineral extraction the word "spoil" means, in my judgment, a substance produced as a result of mining or mineral extraction which is not the primary target of the operations. This coincides with the relevant meaning in the Oxford English Dictionary which is:

"Earth or refuse material thrown or brought up in excavating, mining, dredging, etc." (My emphasis)

39. This meaning is also consistent with the primary legislative policy which is to encourage the use of what would otherwise be waste. As Moses J put it in the British Aggregates case:

"Spoil from most of the minerals to which s 18(3) refers will not be of the same substance as the mineral it is sought to extract. For example, spoil which consists of rock derived from the extraction of fluorspar or semi-precious stones will not itself consist of fluorspar or semi-precious stones. But it could be used as aggregate and is referred to as aggregate, which includes a reference to such spoil by virtue of s 18(1)(a) and s 18(2)(b). It is waste resulting from a process by which fluorspar or semi-precious stones are extracted from any aggregate as defined in s 17(1). But although such spoil consisting of rock is aggregate, it is exempt aggregate under s 17(3)(f)(ii)." (My emphasis)

40. If, therefore, the primary target of MMC's operations was the quarrying of limestone, that limestone could not, in my judgment, be called spoil, and would not become spoil merely because, in the course of and as incidental to the quarrying of limestone, MMC came across valuable fluorspar deposits, any more than it would become spoil if, in the course of and as incidental to the quarrying of limestone, MMC came across valuable fossils. Mr Howell Williams' formulation also begs the question: was the limestone "thrown up" in the "process of separating fluorspar from other rock"? In the first place, the expression "thrown up" suggests something incidental to the main purpose of the excavation, rather than the objective of the exercise. Second, whether the process can fairly be described as separating fluorspar from other rock again depends on the purpose of the exercise. If the main purpose of the exercise is the recovery of limestone then the process is that of recovering limestone, to which the separation from it of anything else (whether fluorspar or organic material) is merely incidental.
41. The Tribunal's conclusion was that MMC were carrying on a limestone quarrying business, and were not carrying on a fluorspar mining business. That was a relevant finding, because it was relevant to the question whether the limestone quarried by a person who carries on a limestone quarrying business can sensibly be said to be "spoil".
42. Were the Tribunal justified in reaching that conclusion? The question under this head is not whether the Tribunal were right or wrong; but whether they made an error of law in reaching their conclusion. The Tribunal expressly preferred the evidence of Professor Doyle and Dr Cobb to that of Mr Taylor. On the face of it that is a pure finding of fact. Moreover, the Tribunal went on to give reasons for that preference. After observing that both Professor Doyle and Dr Cobb had "extensive experience in the mining industry" (§ 32) and that Dr Cobb was "very familiar with the nature of MMC's operations" (§ 30), the Tribunal set out the main factors that led them to their conclusion. They are listed in paragraph 39 of their decision:

i) The enormous disparity between the volumes of limestone and fluorspar which have been sold;

ii) The fact that the available fluorspar was, overall, of fairly poor quality;

iii) The fact that fluorspar was sold for only about seven months while the operations were carried on for, altogether, nearly four years;

iv) The fact that without the limestone sales the fluorspar operation was not financially viable (while the reverse was not the case).

43. Mr Howell Williams directed particular criticism at the Tribunal's statement that:

"It would be possible to take a different view only if fluorspar fetched several times more per tonne than limestone, but the value of fluorspar, as was not disputed, has at best been approximately the same as that of limestone, and often much less."

44. He characterised that as a clear and free-standing point which led the Tribunal to its conclusion; and described it as an irrational conclusion. I reject both those submissions. First, the Tribunal's conclusion was based on four separate but cumulative reasons which in my judgment are well supportable. Second, the last of these reasons, namely that MMC's business was not financially viable without the extensive sale of limestone was an important reason, and it was that reason towards which the Tribunal's impugned comment was directed. Third, not only was the Tribunal's comment not irrational, it was a natural conclusion to draw from undisputed evidence. Mr Howell Williams' more detailed complaints were all based in what, in my judgment, was a mis-characterisation of the Tribunal's reasoning, namely that they determined the nature of MMC's business by reference to the relative values and tonnages of limestone and fluorspar alone. Those were undoubtedly factors that the Tribunal took into account, but they were not the only ones. They also took into account the poor quality of the fluorspar (would it have been the primary purpose of a business to engage in a search for material of poor quality?) and also the shortness of time for which fluorspar was sold, as compared to limestone (would it have been the primary purpose of a business to engage in a relatively fruitless search for a material of poor quality, whose value per ton was often less than the value per ton of the abundant limestone?).
45. Mr Howell Williams relied on the Tribunal's finding (§ 38) that MMC had set out to exploit the fluorspar it had found, and that it had done so not merely as a means of securing exemption from the levy. But that is not a finding that MMC's primary objective was to find fluorspar, or even a finding that one of its objectives was to find fluorspar. It is merely a finding that when MMC did find fluorspar it exploited what it found. As the Tribunal rightly said in the same paragraph:

"The mere fact that care has been taken to exploit such fluorspar as is available does not transform a limestone quarry, if that is what it is, into a fluorspar mine."

46. Mr Howell Williams also forcefully submitted that because of the geology of the sites within which fluorspar is found it is not possible to mine the fluorspar without removing large quantities of limestone. In that respect he relied on the decision of Sullivan J who held that the planning permission authorising the winning and working of fluorspar also authorised the removal of limestone to the extent that it was reasonably necessary to do so in order to win and work the fluorspar. He submitted that Mr Taylor's evidence before the Tribunal was that all the limestone removed from the two sites was "generated as the inevitable consequence of extracting and separating out the fluorspar. It was, he said, impossible to recover the fluorspar without producing the limestone... " (§ 29). However:

i) Although the Tribunal recorded Mr Taylor's evidence it is by no means clear that they accepted it in full, given their preference of the evidence of Professor Doyle and Dr Cobb, and their statement in paragraph 46: ("It may be, as Mr Taylor insisted, that its removal was necessary …").

ii) The issue before Sullivan J (and the Court of Appeal) was whether the removal of limestone was lawful. No one disputes in this case that the removal of limestone was lawful: the question is what are the taxation consequences of removing it? The Tribunal themselves made this very point (§ 37).

iii) Sullivan J's decision was that if it is lawful to mine fluorspar, it must also be lawful to take whatever additional steps are necessary to mine it. In so deciding, he was recognising that a planning permission must be capable of implementation. Even so, as I have shown, he distinguished between winning and working the limestone and winning and working the fluorspar.

iv) Sullivan J's more liberal interpretation of the planning permission was in any event reversed by the Court of Appeal.

v) Sullivan J also decided that under the terms of the planning permission limestone may not be won and worked as an end in itself (§ 31); and that whether the limestone has been won and worked as an end in itself or as a means to an end is a question of fact and degree (§ 39). This necessarily involves an examination of the operator's purpose in carrying on his activities.

47. The Tribunal considered that question of fact and degree and arrived at an answer unfavourable to MMC. They decided, in effect, that limestone was being worked and won as an end in itself. An error of law would only be revealed if either there was no evidence to support the Tribunal's conclusion (which is plainly not the case) or if the only reasonable conclusion from the facts found was contrary to the Tribunal's conclusion. All the points that the Tribunal made are telling points, and the last (financial viability) is a particularly strong one. In my judgment they are adequate reasons for the Tribunal's conclusion; and they reveal no error of law. In my judgment Mr Howell Williams' attack on this conclusion was an illegitimate attempt to re-open the facts.
48. In my judgment the Tribunal's conclusion on the facts that MMC's main purpose was the quarrying of limestone and that sales of fluorspar were incidental to that purpose is unassailable in this court.
49. Having reached that conclusion, the Tribunal nevertheless said that it was not determinative. There is no cross-appeal or Respondent's notice in relation to that part of the reasoning. Thus Mr Puzey's point (that if MMC's main purpose was to quarry limestone then none of the limestone could be exempt aggregate because none of it is spoil) is not one that is open to him on this appeal, even though to my mind it has considerable force.
50. I should explain that even if Mr Puzey were right on this point it would not necessarily follow that all the limestone recovered by MMC would be subject to the levy, because that part of it which is sent to Glebe for further processing (although taxable aggregate) is not commercially exploited by reason of section 19 (3)(c).

Separated from other rock

51. The Tribunal went on to consider the meaning of "separated from other rock". The arguments recorded by the Tribunal seem to have focussed more on the meaning of the word "process" than on the end result of the process. However, as the Tribunal rightly observed, the whole phrase has to be understood in context. Before me the parties agreed that a "process" was a systematic series of operations and that the real issue was whether the end result of MMC's operations could be properly described as separating the fluorspar from other rock with which it had been extracted or won.
52. For the purpose of section 17 (3) (f) the separation must take place after the specified mineral has been excavated or won "with" that other rock. The two rival meanings that the Tribunal considered were:

i) MMC's argument that separating fluorspar from other rock meant no more than sorting or segregation; so that putting limestone containing fluorspar on one pile and pure limestone on another satisfied the condition for exemption;

ii) HMRC's argument that sorting was not sufficient since what the legislation envisaged was the process of separating the fluorspar from the rock to which it was bound, and not simply segregating it from the other material with which it happened to be found, but to which it was not bound in some way (either chemically or mechanically).

53. The Tribunal expressed its decision on this point as follows (§§ 44 and 45):

"Although we were invited to focus on the word "process" it is in our view necessary to consider the context in which it appears, and the phrasing of the provision. As we have indicated, the draftsman has referred to the separation of the mineral from the rock or aggregate. While "separated" can, depending on the context, mean no more than "segregated" or "sorted from", in the sense that the fluorspar and the other rock are merely put in different piles, we are satisfied from the language used that the draftsman did not intend such a wide meaning in this context. That is more clear when the wording of section 18(1)(a) is considered; despite the difference between that provision and section 17(3)(f) it must, we think, be assumed that the draftsman intended (since there is no indication to the contrary) that "process" was to have the same meaning in both cases. In our judgment, Mr Puzey is right that the word is used to connote physical separation, that is the breaking of a mechanical or chemical bond; "separated from other rock" implies the application of a degree of force. Sorting by excavator or coning is not, in our view, enough. By contrast, separation by means of a "grizzly screen" and crusher, if that breaks a bond, would be sufficient.

That conclusion seems to us all the more compelling when the word "spoil" is brought into the equation. Though it, too, is a word whose meaning may be dependent on its context, it is difficult to imagine that the draftsman intended it to include material which had been put in one pile rather than another, after nothing more than sorting by visual inspection or by gravitation, as in coning. Again, we are satisfied that what is meant is the residue after the breaking of a bond. Any other interpretation would make it all too easy to avoid the imposition of the levy by "dressing up" an aggregate quarrying operation and would give those selling large quantities of limestone and small quantities of minerals, as MMC does, a competitive advantage over those doing essentially the same thing, that is selling aggregate, but without the benefit of sales of small quantities of minerals."

54. Their ultimate conclusion (§ 47) was that:

"Our conclusion is that only so much of it as has been physically separated by that process [i.e. the grizzly screen] from fluorspar to which it was bound, on extraction, can be regarded as exempt."

55. Mr Howell Williams submitted that the Tribunal's interpretation of the word "separate" as meaning the breaking of a mechanical or chemical bond was a peculiar and unusual meaning of the word. I do not agree. The first meaning of the word given in the Oxford English Dictionary is:

"To put apart, set asunder (two or more persons or things, or one from another); to disunite, disconnect, make a division between."

56. In effect the Tribunal adopted the meanings of "disunite" (i.e. to take one thing that was united and to break the unity) or to "disconnect" (i.e. to take two things that were connected to each other and to sever the connection). Each of those meanings, in the particular context of the Act, implies the breaking of a chemical or mechanical bond. Each is well within the ordinary or conventional meaning of the verb "separate". As Mr Puzey put it: that which is joined together must be put apart. ("Those whom God has joined, let no man put asunder"). Whether the meaning adopted by the Tribunal is dignified with the adjective "wide" or "narrow" is beside the point. It is a contextual meaning. In reaching their conclusion the Tribunal were also right to consider:

i) The consequences of adopting MMC's construction. Even if MMC themselves were not "dressing up" an aggregate quarrying operation merely to avoid the levy, the Tribunal were right to consider that MMC's construction would facilitate others to "dress up" what was in truth an aggregate quarrying operation in order to avoid the levy. An examination of the consequences inherent in one interpretation rather than another is a familiar technique of testing an argument. It was this that led to the Tribunal's comment that an operator who "dressed up" a limestone quarry as a fluorspar mine would have a competitive advantage. Mr Howell Williams rightly said that part of the point of the levy was to give some operators a competitive advantage (because their aggregate would be exempt); but what the Tribunal plainly meant was that an operator who "dressed up" a limestone quarry as a fluorspar mine would have a competitive advantage that he was not intended to have.

ii) How their construction fitted with the concept of "spoil". I agree with the Tribunal that it is difficult to accept that the draftsman meant that limestone (whose recovery was the main or one of the main purposes of digging and blasting) would escape the levy merely by being put into a different pile. The policy underlying the levy (viz. the encouragement of the use of what would otherwise have been waste material) was relevant to this point. The Tribunal were right to seek an interpretation that served rather than undermined the legislative policy.

57. I do not, myself, derive much (if any) assistance from section 18. But I do not accept that the Tribunal's partial reliance on that section in the course of its reasoning undermines its ultimate conclusion. The fact that the process must be applied to fluorspar that has been extracted or won "with" the other rock adds force to the Tribunal's conclusion. In my judgment the Tribunal came to the correct conclusion.
58. Mr Howell Williams said that assuming that the Tribunal was right in its interpretation and that force was required to separate a mechanical or chemical bond, there was no reason why the force of gravity should not be a sufficient force. Thus the placing of material in cones was enough. The Tribunal's finding about "coning" was (§ 27):

"Other material was "coned", that is heaped up in a cone shape. The coarser material tends to gravitate to the outside of the cone, and the finer material (in which fluorspar is found) to the centre. Coned material was then separated and added to the stockpiles."

59. There is no finding here that coning breaks a chemical or mechanical bond, or that it disunites or disconnects that which had previously been united or connected. Moreover the finer material is no more than material in which fluorspar is found: the fluorspar still has to be separated from that finer material. I do not consider that Mr Howell Williams has succeeded in demonstrating that the Tribunal made any error of law in this respect.
60. Mr Howell Williams' final point was that even if the Tribunal's interpretation of "separated" was correct, some of the operations carried out by MMC fell within that interpretation. In particular, in addition to separation by crushing and the grizzly screen, MMC also carried out direct digging and blasting. These activities broke a mechanical bond, and were therefore a process of separation of fluorspar from other rock. It is true that these activities did break a mechanical bond. But when? For the reasons I have given the answer in my judgment is that they broke the mechanical bond in the course of extracting or winning the limestone (and if the digging or blasting brought up fluorspar, in the course of extracting or winning fluorspar) and not after the fluorspar had been extracted or won. Since the exemption in section 17 (3) (f) only applies to a process carried out after the fluorspar and limestone have been extracted or won, it does not apply to digging and blasting.

Result

61. I dismiss the appeal.