Australian Granites Pty Ltd v Venlock Pty Ltd

[2013] QLC 27

LAND COURT OF QUEENSLAND

CITATION:	Australian Granites Pty Ltd v Venlock Pty Ltd [2013] QLC 27
PARTIES:	Australian Granites Pty Ltd (applicant)
v.
Venlock Pty Ltd (respondent)
FILE NO:	MRA645-12
PROCEEDING:	Claim for compensation for mining renewal.
DELIVERED ON:	24 May 2013
DELIVERED AT:	Brisbane
MEMBER:	Mr BR O’Connor, Judicial Registrar
ORDERS:	1.    An amount of Three Hundred and Seventy-Five Dollars ($375) shall be paid to the respondent by the applicant within two months of the renewal of the subject lease.
CATCHWORDS:	Mining lease – Renewal – Claim for compensation.
APPEARANCES:	Not applicable - Heard on the papers

1. The applicant miner is the holder of Mining Lease No. 95014 in the Townsville/Mount Isa Mining District and has applied to renew such mining lease for a further term, commencing on 1 June 2012, for a period of 11 years.  The mining lease is held over land owned by the respondent landowner and which land is described as Lot 3 on SP 117500 in the Parish of Farncombe, County of Waverley.  The area of the mining lease is approximately 39.89 hectares.

2. The parties have been unable to agree on compensation payable for the renewal of the lease and the matter has been referred for Court determination, such determination to be on the papers without an oral hearing.  Both parties have consented to this procedure. 

3. Both parties have made written submissions to the Court detailing how the valuation exercise should be approached.  The respondent obtained a valuation report from Alan Matson, a valuer with very extensive rural valuation experience.  Due to the relatively small level of the compensation claim, Mr Matson provided a desktop valuation report only, without undertaking any “onsite” inspection.  This approach is considered most reasonable in the current circumstances.  Evidence for the respondent was provided by Paul Gleeson, a director of the applicant company.  Mr Gleeson also has extensive mining interests and related experience and is an accountant.

4. The issue of costs for lodging the claim has been canvassed by both parties and I will deal with it as a separate issue later in this decision. 

Submissions of the respondent

1. Mr Matson deals in his valuation with the current mining lease and also Mining Lease 95011 which is also situated on the subject property and is subject of a related but separate decision of the Court. 

2. Mr Matson describes the country, gleaned from aerial photographs and details supplied by the owner, as being of granite forest country with exposed surface stone and rocky ridges with intersecting local watercourses.  The vegetation is likely to be snappy gum and box, together with turpentine and wattle and with spinifex, course native grasses and colonizing buffel grass.  The country is suitable and used for breeding and growing beef cattle.  Mr Matson states that, while the areas from which the granite is extracted may have less vegetation cover than other areas of the surrounding country, the granite ridges are an important part of the overall grazing operation.  He states that cattle use the granite outcrops and associated areas during and after the wet season for the more stable ground conditions under foot and when the coarser native grasses are softer and more palatable to stock.

3. Mr Matson concedes that the miner proposes to use only a small part of each lease area for extraction purposes at any one time.  However, he bases his calculations on the whole of the lease area as the whole area is available to the miner for mining and related purposes. 

4. Mr Matson has provided in his report some five recent sales.  The two most relevant sales appear to be “Squirrel Hills” (Sale 1) sold for $3,500,000 in January 2012, (the sale reflects a land value of $35 per hectare) and “Malbon” (Sale 2) sold for $3,000,000 in March 2011 (reflecting a land value of $32 per hectare). 

5. Detailed analysis of the sales were not provided but, given the nature of this case, such would not be reasonably economic to do so. 

6. Mr Matson has used the reflected per hectare rates from these sales evidence and applied a figure of $40 per hectare to the mining lease area now before the Court. This results in a calculation of $1,596. To this is added a nominal amount for access track ($20). A further additional 10% reflecting the compulsory nature of the determination was also added, as is required under s.283 of the Mineral Resources Act 1989 (the Act).

Applicant’s submission

1. Mr Gleeson states that he made an earlier offer of compensation to the respondent in May 2012 of $150 per annum for each lease; this offer was not accepted at the time and has now been withdrawn.  I have extracted the key points from Mr Gleeson’s submission which was tendered to the Court after he had the opportunity to peruse Mr Matson’s valuation.  These points are:

   ·The value of the lease area must be assessed as part of the market value of the property as a whole, with value assigned to various classifications of land by carrying capacity. 

   ·The applicant acknowledges the use of the property for grazing purposes.  What is in dispute is the impact of the mining activity on the grazing activity and the financial impact such has on the respondent.  The respondent has failed to detail the extent of use made of the leased area. 

   ·No meaningful evidence as to what volume of fodder would have been unavailable to the respondent’s cattle due to mining operations which have been acknowledged are carried out on granite pavements. 

   ·It is highly unlikely there would be any activity on the leases during, or for a reasonable period after the wet season. 

   ·Mr Matson acknowledges that only a small part of the lease is used for extraction purposes but has based his calculations on the whole of the leased area on the basis that is available to the miner.  Mr Matson must not have been briefed as to the mining lease conditions restricting the disturbed area to 4 hectares for the ML 95014 and 8 hectares for the related lease. 

   ·The disturbed areas noted above are the maximum areas and include waste and storage of granite blocks; any increase in these areas would result in a renegotiation of the compensation agreement.

   ·It is not physically possible, practical or the intention of the applicant to exclude the respondent’s cattle from the leases.  Compensation should not be allowed for access tracks as the lease abuts the Diamantina Development Road.

   ·The unimproved value applied to the property by the Valuer-General at 1 October 2010 was $3,400,000 or an average of $13.93 per hectare. 

   ·QVAS data shows there has been no change in the unimproved value since 2005.

   ·The subject property when purchased in 2004 revealed an unimproved value of $13.45 per hectare.  Given the lease has a large area of granite pavements with nil carrying capacity and the area of disturbance is limited to 4 hectares, the result of any calculation of compensation would be miniscule. 

Consideration

1. Given the relatively small amount of compensation involved in the dispute, the amount of valuation detail placed before the Court obviously had to be somewhat abbreviated.  This, together with the lack of oral hearing, has made the Court’s task somewhat difficult to decide with any great precision.  However, I have considered both sides’ submissions carefully and make the following observations. 

2. It is likely that the areas required for the mining lease would be classified on the below average rate per hectare of the overall property; however Mr Matson does point to the mining area being of some use despite the relatively barren nature. 

3. The applicant derives figures per hectare from the unimproved value as applied by the Valuer-General.  However, these are unimproved figures and the Court is here to determine an improved figure for the subject lease. 

4. The applicant correctly points out that only 4 hectares may be used at any one time for mining purposes and that cattle would not be excluded from the balance of the mining lease area when not in use.  However, there would be a certain area that would be being rehabilitated at any one time and some allowance should also be made for this factor.  I note in the recent decision of the Land Court in Slater v Appleton[1] the Court has accepted that the applicant’s claim that compensation should only be based on the amount entitled to be mined at any one time plus rehabilitation allowance.  I propose to follow this case. 

   [1] [2012] QLC 007.

5. Giving the benefit of doubt to the landowner as regards compensation (in accord with standard compensation valuation practice), I am prepared to accept Mr Matson’s improved figure per hectare of $40, but only for the area of the lease permitted to be used at any one time (is 4 hectares) plus an additional 4 hectares to be allowed for rehabilitation purposes. 

6. This figure comes to $320.

7. A small allowance for access of $20 claimed is also to be included. 

8. Allowing the 10% for compulsory nature of the process, under s 281(4)(e) of the Act the rounded final figure is $375 compensation. 

Costs

1. The respondent has included amounts for legal and valuation fees (totalling $7,528, for the two leases) as part of its overall claim.  These appear to be costs incurred in preparation of the claim as opposed to wider legal costs of the proceedings.  The applicant submits that these are not properly claimable as costs of the claim and cites a number of authorities in support.  (The issue here is not whether the amounts claimed are reasonable in the case circumstances rather whether they are legally claimable at all).

2. In Sullivan v Oil Company of Australia Ltd(No. 2)[2] the Court of Appeal held that legal fees paid by the owner in preparation of a claim for compensation were not compensable under the Petroleum Act 1923 because such fees could not be properly characterised as damages consequential upon the occupation of land under the relevant mining authorities issued under that Act.  In Matrix Metals Limited v North Australian Pastoral Company Pty Ltd [2007] QLC 0075 the Land Court adopted the reasons of the Court of Appeal in Sullivan to reject an “other costs” claim under Mineral Resources Act s.281(3)(a)(vi).

   [2] (2004) 2 QdR 105 at paras [36] – [37].

3. The Court stated:

   “The claim could only succeed if its elements reasonably fell within the description "loss or expense that arises as a consequence of the … renewal of the mining lease".[3]  In Sullivan the Court of Appeal considered that valuation and legal fees incurred in the preparation of a claim for compensation should not be treated any differently from costs in any other form of litigation.[4] The wording of s.281(3)(a)(vi) does not, in my opinion, allow me to reasonably distinguish and depart from the reasoning of the Court in Sullivan.”

   [3] Section 281(3)(a)(vi).

   [4] At [37].

4. It is of interest to note that Schedule 1 Part 3 s.13(4)(b) of the Mineral Resources Act 1989 (enacted at 2010 No. 31 s.465) specifically allows as a compensable effect to include:

   (b)     “accounting, legal or valuation costs the claimant necessarily and reasonably incurs to negotiate or prepare a conduct and compensation agreement, other than the costs of a person facilitating an ADR;

   Examples of negotiation—

   an ADR or conference”

5. However, this Schedule is limited to access and compensation provisions for exploration permits and mineral development leases and does not extend to the standard mining leases or renewal of such as the present case concerns. 

6. I also note that the extended disturbance provisions of the Acquisition of Land Act introduced in 2008 (s.20(5)) specifically allow for claims for legal and valuation fees incurred in the preparation of a claim.  However, this also does not apply to the current situation. 

7. My conclusion is that legal and valuation fees are not legally claimable as part of the compensation claim here lodged. 

Order

1.An amount of Three Hundred and Seventy-Five Dollars ($375) shall be paid to the respondent by the applicant within two months of the renewal of the subject lease. 

BR O’CONNOR

JUDICIAL REGISTRAR