Mitchell v Oakhill and Mitchell

[1998] QLC 25

LAND COURT,

BRISBANE

10 March 1998

Re:	Appeal against determination of compensation
by Mining Warden.
(A97-26).

Robert John Mitchell
v.

Robert Roy Oakhill and Martin Gerald Mitchell

(Hearing at Winton)

D E C I S I O N

This is an appeal under the provisions of Section 282(1) of the Mineral Resources Act 1989 (the Act), against the determination of compensation by the Mining Warden before the grant of a mining lease over an area of land held by Mr RJ Mitchell (the appellant).

The appellant is the lessee of Grazing Homestead Perpetual Lease No 45/3608, described as Lot 5 on Plan FM13, Parish of Warnambool, County of Fermoy, containing an area of 16,364.678 hectares. The property is known as "Warnambool Downs" and is used for sheep breeding and wool growing and the grazing of some cattle.
"Warnambool Downs" is situated approximately 61 kms south-west of Winton on the Opalton Road. It comprises open to well shaded downs and timbered country. The carrying capacity assessed by the Department of Natural Resources is 1 sheep to 2.2 hectares, or 8,725 sheep.
One of the better lambing paddocks on "Warnambool Downs" is known as "Front 8 Mile" paddock with an area of 2772 hectares. It has a carrying capacity of 1 sheep to 1.6 hectares, or 1,732 sheep. That paddock is severed by the formed gravel Winton to Opalton Road, which is situated within a one mile wide Stock Route. The paddock's southern boundary is also the boundary between "Warnambool Downs" and "Jalloonda" and is fenced with a six foot netting fence.
Mr RR Oakhill and Mr MG Mitchell (the respondents) applied for Mining Lease No 95241, with an area of 49 hectares, for a term of ten years for the purpose of mining gypsum. The lease area applied for is irregular but roughly rectangular in shape, situated in "Front 8 Mile" paddock, with the southern boundary about 700 metres in length and parallel with and only about 15 metres removed from the "Jalloonda" boundary.

In addition to the lease area, the respondents have applied for an access road area of 2.2 hectares, being a strip of land 2,200 metres long by 10 metres wide. This strip of land is to provide access from the Opalton Road to the north-east corner of the lease area, following an old shot line (or seismic line) which leaves the road near the boundary grid and proceeds in a north- westerly direction at an angle to meet the north-east corner of the lease area, which is about 700 metres from the "Jalloonda" boundary. Part of the access road is on the Stock Route, but the balance of it traverses some of the best grazing country on the property.

At the hearing of the compensation claim in the Wardens Court on 8 April 1997, Mr RJ Mitchell claimed an amount of $50,167, derived by addressing each of the matters set out in subsection (3)(a) and subsection (4)(e) of section 281 of the Act. I will discuss those provisions later in this judgment.

In summary, Mr Mitchell's claim was based on the reasoning that with the granting of the mining lease he will lose control and use of 51.2 hectares of his best lambing paddock for a period of ten years. He was fearful that after mining, it may take many years before the land would return to its normal state, because of the aftermath of the mining operations and erosion. Because of those mining operations and traffic through the paddock, he felt that for the term of the lease, the paddock would have to be converted from a lambing paddock to a wether paddock. Mr Mitchell was also concerned that dust from the traffic on the access road and from the mining operations themselves, would affect the palatability of the grass and disturb the grazing of an area which would extend for a considerable distance (400 metres) from the lease boundary and the road. In addition, he contended that the granting of the mining lease would be a "blot" or encumbrance on the title of the property and would lessen the price that would be obtained if "Warnambool Downs" was to be sold during the term of the mining lease.
The respondents argued that they will control the dust by driving their trucks at lower speeds and gravelling the access road if necessary. They conceded that perhaps 250 hectares of land may be affected by dust, but argued that this would not be over the whole of the term of the lease, as they would not be mining any more than 10 hectares at any one time. Furthermore, there would be probably only one semi-trailer per day using the access road.
The respondents do not intend to fence the lease area or the access road, so there will be no physical severance of the land. They claim that the access road itself will not sever the land, as the sheep will walk across the road as they do across the Opalton Road which runs through the same paddock.
In addition to his other items of claim, Mr Mitchell also claimed an amount of $2,652, comprising $1500 for legal and valuation advice which he received from a Mr Allan Todd, a registered valuer, as well as amounts for the loss of his own time, travelling, telephone, fax, photocopy and typing.
The respondents denied that there would be any losses other than about $2 per hectare per year because of the loss of net profit from 32 sheep per year, or that "Warnambool Downs" would be reduced in value, because the lease area is so small and is at the southern boundary of the property. They had offered to pay Mr Mitchell $10 per hectare per year, well above what they contended was the earning capacity of the lease area.

After considering what little evidence had been presented, the Warden concluded that Mr Mitchell's claims for compensation were not supported by any evidence from an independent source, except for some rather generalised material from the Department of Primary Industries. He concluded that compensation under the various heads of claim allowed under the Act, including the compulsory nature of the taking of the land for a term of ten years (or less if surrendered, cancelled or forfeited earlier) should be a nominal amount.

He determined the amount of compensation under all heads set forth in Section 281(3) of Mitchell elaborated in oral evidence. They also tendered a series of photographs showing the area where gypsum mining operations had been conducted by Mr MG Mitchell at "Cork" station further to the west. In addition they tendered extracts from a number of publications, the purpose of which was to demonstrate the earning capacity of land in Central Western Queensland. particularly the findings in respect of the various matters set out in Section 281(3) of the Act. In summary, his submissions were to the effect that the Warden failed to give any or sufficient weight to the evidence on each of those aspects. the Act at $10 per hectare per annum, to be paid yearly in advance.

Mr Mitchell appealed to the Land Court against that determination under the provisions
of Section 282(1) of the Act. The grounds of appeal were that the decision of the Warden was
against the evidence and the weight of the evidence; that the Warden failed to give any or
sufficient weight to the various matters referred to in Section 281(1)(a) of the Act; and that the
decision of the Warden that an amount of compensation should be paid only on an annual basis
is detrimental to the landowner.
When the appeal came on for hearing at Winton, the appellant appeared on his own
behalf, while Mr Oakhill appeared on behalf of the respondents. They agreed to the admission of
further evidence, so that it was unnecessary for me to consider the provisions of Section
282(7)(a) of the Act. It was obvious, however, that the parties did not envisage a hearing de
novo, as they both relied heavily upon the record of proceedings before the Warden. The appeal
therefore became a re-hearing on the record, with the addition of further evidence.
Mr Mitchell tendered a further statement, which was principally his submissions on
various aspects of the decision of the Warden. In addition, he tendered an account from Allan G
Todd, registered valuer, dated 24 March 1997, for an amount of $1500. That account was for
fees for "advice re compensation for ML Application on part `Warnambool'." Mr Mitchell also
tendered a series of photographs showing the dust raised by trucks on various roads on
"Warnambool", "Weona" and near Winton. He also gave further oral evidence.

The appellant challenged many of the details of the Mining Warden's decision,

The statement by the respondents and their oral evidence, was generally in elaboration of

their evidence before the Warden.
The difficulty which confronts this Court in this appeal, as it did the Warden at first
instance, is that the unrepresented parties have produced virtually no objective evidence to
support their contentions. Their "evidence" consists largely of written and oral statements which,
although no doubt given sincerely and honestly, was partisan and cannot carry the weight that
would be given to the evidence of independent experts.
Before this Court on appeal, as was the case before the Warden, there is therefore little
evidence of a substantive nature. There is simply, in the main, expressions of opinion by the
parties. The appellant attempted to rely upon the advice he had received from the valuer, Mr
Todd. However, Mr Todd was not called either in the Land Court or in the Wardens Court to
explain that advice or to be cross-examined upon it.
Before proceeding further I will set out the legislative requirements in respect of the
determination of compensation under the Mineral Resources Act 1989. The relevant parts of
Section 281 are as follows:

The Warden said at page 9 of his determination:

"	I take into account that the only suitable and likely use of the land is low intensity grazing under favourable conditions, but there is little value to be placed on the land in its current state, bearing in mind the nature of the lease area, that the deprivation of the loss of the surface area is likely to have little effect on the overall grazing operation, and there will be no permanent severance. "
"(1)	At any time before an agreement is made pursuant to section 279 or 280, a person who could be a party to such agreement may apply in writing to the mining registrar to have the Wardens Court determine the amount of compensation and the terms, conditions and times of payment thereof.
(2)	The Wardens Court is hereby authorised to hear and determine matters referred to in subsection (1).
(3)	Upon an application made under subsection (1), a Wardens Court shall settle the amount of compensation an owner of land is entitled to as compensation for -
(a) in the case of compensation referred to in section 279 -

(i)         deprivation of possession of the surface of land of the owner;

(ii)        diminution of the value of the land of the owner or any improvements thereon;

(iii)       diminution of the use made or which may be made of the land of the owner or any improvements thereon;

(iv)       severance of any part of the land from other parts thereof or from other land of the owner;

(v)        any surface rights of access;

(vi)       or loss or expense that arises;

as a consequence of the grant or renewal of the mining lease; and

(b) ...

(4)

in assessing the amount of compensation payable under sub-section (3) -

(a)	where it is necessary for the owner of land to obtain replacement land of a similar productivity, nature and area, or resettle himself or herself or relocate his or her livestock and other chattels on other parts of his or her land or on the replacement land, all reasonable costs incurred or likely to be incurred by the owner in obtaining replacement land, the owner's resettlement and the relocation of the owner's livestock or other chattels as at the date of assessment shall be considered;
(b)	no allowance shall be made for any minerals that are or may be on or under the surface of the land concerned;
(c)	if the owner of land proves that the status and use currently being made (prior to the application for the grant of the mining lease) of certain land is such that a premium should be applied - an appropriate amount of compensation may be determined;
(d)	loss that arises may include loss of profits to the owner calculated by comparison of the usage being made of land prior to the lodgment of the relevant application for the grant of the mining lease and the usage that could be made of that land after the grant;
(e)	an additional amount shall be determined to reflect the compulsory nature of action taken under this part which amount, together with any amount determined pursuant to paragraph (c), shall not be less than 10 percent of the aggregate amount determined under sub-section (3).

(5)

In any case the Wardens Court may determine the amounts and the terms, conditions and times when payments aggregating the total compensation payable shall be payable. "

Section 279 applies where the surface of the land is the subject of a mining lease application. Section 280 applies where the surface of the land is not included in the application. In this case the surface of the land is the subject of the application.

In Smith v. Cameron (1986) 11 Q.L.C.R. 64, the Land Court considered provisions similar to those of Section 281(3)(a) of the present Act, which were contained in its predecessor, the Mining Act 1968. In that case, the Court likened the use of land for mining purposes to compulsory acquisition of land for a limited period and applied the various principles and practices of valuation which are applied in determining compensation for the taking of limited rights over land for public purposes.

In this regard the Court said at pp.73/74:

"	These similarities are evident in the principles laid down by the Land Appeal Court for consideration in the latter and no better set out than in the case of P. Joyce v. The Northern Electric Authority of Queensland (1974) 1 Q.L.C.R. p.171 were in dealing with the taking of an easement for electric line purposes the Court at page 177 said -
` The test is the attitude of the hypothetical prudent purchaser and the extent to which in the opinion of such a person the claimant has suffered diminution in the value of his property resulting from the erection of the transmission line over his land and the creation of the easement including where appropriate severance and injurious affection damage.'
and at page 178 -

`Each case must be considered according to the terms and conditions of the easement created and the frequency and magnitude of the disturbance likely to result in consequence to the claimant's proprietary rights.' "

The Court recognised that the Mining Act did not use the same terminology as was generally applied in relation to compensation for compulsory acquisition of land. The Court said at p. 74:

" I should say however in qualification of my use of the words injurious affection and disturbance which are not used in the Act that paragraphs (a) to (d) of Section 431A(5) appear to recognise diminution in value of the other lands of the owner. But if they are not wide enough to specifically cover this form of damage which in some instances is used in the alternative of the headings mentioned then such would appear to me to be provided for in paragraph (g) - ... "

The provisions of Section 431A(5) of the Mining Act 1968 referred by the Court do not differ materially from those contained in Section 281(3)(a) of the present Act.

The Court continued at p. 74:

" It is well recognised that where damage by way of severance of injurious affection is involved the assessment of compensation may be made on a `before' and `after' method of valuation of the property in which the cumulative effect is reflected in the `after' valuation or alternatively by the summation or piecemeal assessment of all relevant effects. ... The section in my opinion merely identifies matters which shall be taken into consideration in making the assessment. It does not prescribe a method of valuation. No doubt each case will depend on its own facts and circumstances but it seems to me that either method is open to the valuer. "

In my opinion the same reasoning can be applied to the provisions of Section 281(3) of the present Act. Although the section of the Mining Act directed the Warden to take those matters into consideration and the Mineral Resources Act provides that an owner of land is entitled to compensation for those particular matters, the latter section does not prescribe a method of valuation. In my view, as long as the amount of compensation finally determined sufficiently accounts for each of the matters referred to in the sub-section, it is not necessary to quantify an amount in respect of each of the matters referred to.

Therefore, the "before" and "after" method of valuation is still open under section 281(3) of the Mineral Resources Act. As explained in Smith v. Cameron, the "before" and "after" method would adequately provide for each of those matters.
However, in this case, I do not have the advantage of valuation evidence. The appellant sought the advice of a registered valuer and the calculations contained in his submission to the Warden were at least in part based on that valuer's advice. However, the valuer was not called to give evidence, therefore the calculations are, at best, the opinions of the appellant. They are not the result of a "before" and "after" method of valuation. They purport to be a piecemeal valuation addressing each of the matters set out in sub-paragraphs of sub-section (3)(a).

I will comment briefly on each of the matters addressed by the appellant:

(i)         Deprivation of the possession of the surface of the land of the owner:

The amount of $16,434 claimed purported to be the present value of a loss of $1920 per annum for 15 years at 8% calculated on a productivity basis of total loss of 32 ewes and lambs at $60 per ewe and lamb per year for a period of 15 years. In my opinion that is not an appropriate method of assessing the loss.

(ii)        Diminution of the value of the land of the owner or any improvements thereon:

The claim was for $15,150, based on 15 percent of the unimproved value of $101,000 determined under the Valuation of Land Act 1944, by the Chief Executive, Department of Natural Resources. I cannot understand the basis for that reasoning. If it purported to be loss in the value of the property upon the granting of the mining lease, it cannot be added to the loss determined on a productivity basis.

(iii)       Diminution of the use made or which may be made of the land of the owner or any improvements thereon:

This was combined with sub-paragraph (iv).

(iv)       Severance of any part of the land from other parts thereof or from

other land of the owner:

Here the amount claimed was $4354, being the present value of $610 per annum for 11 years at 8%. The reasoning was based on the dust from mining activities and the traffic on the access road affecting the palatability of the grass for a distance of 400 metres, in addition to the severance of that part of the paddock south of the access road and east of the leased area to the main road. It was reasoned that dust and severance would reduce the carrying capacity of the area totalling 250 hectares by 25 percent. The use of the paddock would be changed from lambing ewes to wethers and would represent a reduction in carrying capacity of 39 head of wethers to which add an agistment rate of 30 cents per head per week would amount to an annual loss of $608.40, say $610.

This is not a method of assessment which I can accept, certainly not in addition to any of

the other assessments under (i) and (ii). expenses which were incurred in the preparation of the claim, which has been previously mentioned and which amounted to $2,652.

In relation to sub-paragraph (v) any surface rights of access, no claim was made, as it was reasoned that it had been covered in sub-paragraph (i).
In respect of section 281(4)(e), an additional amount shall be determined to reflect the compulsory nature of the action taken, Mr Todd had advised the appellant that a 30 percent premium over his claim would be reasonable.

In summary, the claim is set out as follows:

Section 281(3)(a)	(i)	$ 16,434
(ii)	$ 15,150
(iii) & (iv)	$ 4,354

(v)    Nil

(vi)   $ 2,652

Total $ 38,590

Section 281(4)(c) 30%

Final Total $ 50,167

In my opinion, that piecemeal assessment of compensation by separately addressing each of the matters for which Section 281(3) provides that an owner of land is entitled, is not validly based. The assessment of the individual matters is inconsistent and, in part, represents a doubling-up of some claims. For example, paragraphs (i) and (ii) are calculated on the basis of productivity on one hand and percentage loss on the other. Such a piecemeal assessment demonstrates to me the difficulty of attempting to address each of the matters separately, rather than by an accepted method of valuation, preferably the "before" and "after" method. If circumstances force a valuer to adopt a summation approach, then care must be taken to ensure that there is no over-lapping or doubling-up in the assessment of compensation.

Having rejected the appellant's claim, I am again faced with some difficulty, as the respondents did not seek valuation advice, but relied upon what they considered to be the loss of the earning capacity of the lease area and the access road for a period of ten years. They assert the earning capacity of each hectare would not be more than $2 per annum and that therefore their offer of $10 per hectare per annum is, if anything, generous.

In my opinion that is not a proper assessment of compensation in this case. It does not address the matters to which the Act states that an owner of land is entitled as compensation. A "before" and "after" valuation of "Warnambool Downs" would have been appropriate in these circumstances. Such a method of valuation would have addressed each of the matters required to be assessed under the provisions of Section 281(3)(a). Then the matter of a premium under sub- section (4)(e) could be addressed.

I do not have the advantage of an expert valuer's assessment of the "before" and "after" value of "Warnambool Downs". However, the parties have agreed that "Warnambool Downs" would have sold for about $17 per acre, or $42.50 per hectare, prior to the grant of the mining lease. The area of the property (excluding Stock Route) is 16,364.678 hectares, making the likely improved value $695,500, say $700,000.
It is well established that compensation for the loss of land (even temporarily) cannot be resolved by simply saying that the appellant has been deprived of approximately 50 hectares of land at $42.50 per hectare and compensation assessed at $2,125. That does not compensate the landowner for having mining activity on his land. I return to the decision of the Land Appeal Court in Joyce's case, particularly the extracts from the decision quoted at pages 177 and 178. Applying those tests to the present case, the question arises as to the attitude of a hypothetical prudent purchaser and whether such a person would consider that the property would suffer diminution in value because of the granting of the mining lease. Unfortunately, I have no expert evidence in that regard. All I have is the evidence of the appellant, seemingly based on the advice from Mr Todd, that the diminution in value is considerable. However, for the reasons expressed earlier, I have rejected that opinion.
Understandably in the circumstances, the Warden came to the conclusion that he had no evidence in relation to the various items set out in section 281(3)(a) and based his determination upon the amount offered by the respondents. However, I have formed the opinion that compensation of $10 per hectare per annum will not adequately compensate the landowner.
In arriving at that conclusion I have tried to place myself in the position of a hypothetical prudent purchaser. In my opinion such a person would not simply reason that with the granting of the mining lease the property has been reduced in area by approximately 50 hectares for a term of ten years. A potential purchaser would also take into account the fact that the mining lease will be situated in the best lambing paddock and that the dust, noise and nuisance will necessitate a change in the management of at least that part of the property from breeding ewes to wethers. This could result in a change to the whole management strategy.

Perhaps most importantly, a potential purchaser would realise that with the granting of the mining lease, the owner would lose control not only of the use of the lease area, but also would lose control of who and what comes on to the property by means of the access road and the mining lease. This would raise understandable concerns about strangers being on and passing through the property. A potential purchaser would also be concerned about the possibility of the mining lease being extended beyond the ten year period.

The appellant touched on these matters when he said in his evidence in chief in this

appeal:

"

... the effects on `Warnambool' are

(1)	I will lose the option of using this paddock for lambing ewes;
(2)	I will lose entirely for ten years the use of 51 hectares of lease and

access area;

(3)	I will have diminished use of 150 hectares of very good pasture because of dust;
(4)	I will have diminished use of a further 100 hectares of very good pasture because of dust and severance;
(5)	`Warnambool' will be effectively devalued by at least 50 percent of the unimproved value; and
(6)	After mining ceases I will be handed back responsibility for a 49 hectare of disturbed void which will have the potential to become a 49 hectare eroded washout with the added potential of causing severe damage to the boundary netting fence. " (Transcript pages 9 and 10).

There is also the fact that the mining lease will become a "blot" or encumbrance on the title of the property. Any prospective purchaser will be able to ascertain that there is mining activity on the property. That alone may well deter some potential purchasers.

On the other hand, those negative aspects must be balanced against the fact that the mining lease will be situated on the southern boundary of the property and will occupy only approximately 50 hectares out of a total area of over 16,000 hectares. The lease is for only ten years, it will not be fenced and the owner will have the right to graze sheep over it, apart, of course, from the area being mined. In addition, the respondents have undertaken to restore the area to its natural condition and to compensate the owner for loss of stock or damage.
It is impossible on the state of the evidence to arrive at a definitive conclusion as to just how the granting of a mining lease would affect the mind of a prudent purchaser of "Warnambool Downs". However, I have no doubt that it would affect the price that such a person would pay. Any prudent purchaser would prefer to purchase a property without a mining lease on it, no matter how innocuous it seemed to be. In the present state of the property market in western Queensland, where there are many good properties for sale, the presence of a mining lease may deter a potential purchaser from buying the property unless that purchaser felt that the price was such that he or she was getting a bargain. A vendor may well have to drop the asking price. However, I have no valuation evidence to indicate just how much that may be.

In the circumstances, therefore, I can do no more than to arrive at what I consider to be a somewhat nominal figure of $20,000 to cover compensation which takes into account the matters provided for in Section 281(3)(a)(i) to (v). To this I will add an additional 10 percent under the provisions of sub-section (4)(e) to reflect the compulsory nature of the action taken. Therefore compensation will be $22,000.

In respect of the amount of $2652 claimed by the appellant under sub-paragraph (vi) - all loss or expense that arises - I agree with the reasoning of the Court in Smith v. Cameron at p.82 that legal and valuation fees incurred in the preparation and lodgment of a claim for compensation should be allowed. The appellant relied on the advice of Mr Todd and I will allow the amount of $1500. However, in respect of the other items claimed by the appellant, it is well established in cases of compulsory acquisition that such items are not compensable. (See Thirty- Fourth Philgram Pty Ltd v. The Crown (1993) 14 Q.L.C.R. 13 at pp.45-52 and the cases referred to therein.)

The amount of compensation under all heads of Section 281(3)(a) will be $23,500.

The appellant argued for a lump sum payment of compensation. However, the respondents argued that such an award would be unfair if the mining activities proved to be not viable and the lease was surrendered, cancelled or forfeited before the completion of the ten year term. I can see merit in both arguments. Section 281(5) allows the Warden (and this Court on appeal) to determine the terms, conditions and times when payments aggregating the total compensation shall be payable.
Accordingly, the appeal is allowed and the determination of the Wardens Court is varied. Compensation is determined in the sum of Twenty-three thousand, five hundred dollars ($23,500).

It is ordered that compensation be paid in the following manner:

The sum of $13,600 shall be payable within 60 days of the grant of the mining lease and the balance of $9,900 shall be payable in equal annual instalments of $1,100 for the remaining 9 years, commencing on the day of the first anniversary of the date of the grant of the mining lease. In relation to the matter of costs, both the appellant and the respondents have indicated that they forego any right to costs of the appeal. Therefore, I make no order as to costs.

President of the Land Court