Sykes v Minister for Mines and Energy
[2008] QLC 69
•23 April 2008
LAND COURT OF QUEENSLAND
CITATION: Sykes v Minister for Mines and Energy & Anor [2008] QLC 0069 PARTIES: Ian Grant Sykes
(applicant)v. The Minister for Mines and Energy
and
Queensland Gas Co Limited
(respondents)FILE NOS: PGC00086/2007
PGC00114/2007DIVISION: Land Court of Queensland – General Division PROCEEDING: Determination of Preliminary Question DELIVERED ON: 23 April 2008 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER: Mr PA Smith ORDERS: 1. As to the preliminary question “whether or not at any time after 26 April 2000 the applicant had subsisting tenure or the right to tenure in the area of a subject petroleum leases nos. 72 and 73?”. Answer: No.
2. In light of the answer to the preliminary question set out in order 1, it is ordered that actions PGC86/2007 and PGC114/2007 be dismissed.
3. I direct the Registrar of the Land Court to provide a copy of these reasons to the Honourable the Attorney-General, drawing particular reference to my observations set out in paragraphs [86] to [89] above, as to whether or not there has occurred any improper conduct or misconduct regarding the handling of Mr Sykes’s lease rental applications.
4. Parties to be heard from with respect to costs.
CATCHWORDS: PETROLEUM – leases – preliminary question of lease renewal – whether leases exist at a particular date
STATUTORY INTERPRETATION – whether substantial compliance with provisions – Petroleum Act 1923
EVIDENCE – credibility of witnesses – two witnesses found to lack credit in certain aspects
PRACTICE AND PROCEDURE – Misconduct – possible misconduct in dealings with lease renewals – direction for referral to Attorney-General for consideration
APPEARANCES: Mr IG Sykes, in person
Mr GD Sheahan (instructed by the Crown Solicitor), for the Minister for Mines and Energy
Mr JD McKenna SC and Mr D Kelly (instructed by Corrs Chambers Westgarth, Solicitors), for Queensland Gas Company Limited
Background
Ian Grant Sykes (Mr Sykes) has commenced action number PGC 86/2007 against the Minister for Mines and Energy (the Minister) and also, by action number PGC 00114/2007, a separate action against Queensland Gas Co Limited (QGC). In a decision I gave on 19 December 2007 regarding application in a proceeding brought by Mr Sykes[1] I indicated[2] that the issues between the parties in each of the actions are relatively complex. As the parties agreed that both actions were founded on a fundamental question as to the existence, or right to existence, that Mr Sykes may have in petroleum leases no. 72 and 73 post 26 April 2000, it was ordered by consent on 11 October 2007 that there be a preliminary question for both proceedings in the following terms:
“Whether or not at any time after 26 April 2000 the applicant had subsisting tenure or the right to tenure in the area of the subject petroleum leases nos. 72 and 73.”
[1] Sykes v Minister for Mines and Energy & Anor [2007] QLC 0138.
[2] At paragraph 3.
For the purpose of determining the preliminary question both PGC 86 of 2007 and PGC 114 of 2007 were heard together. The hearing took place in Brisbane over a period of three days.
The evidence before me was principally that as contained in various affidavits. A number of witnesses were cross-examined. Mr Sykes self-represented throughout the hearing of the preliminary question, whilst the Minister was represented by Mr GD Sheahan of Counsel, instructed by the Crown Solicitor, and QGC by Mr JD McKenna SC and Mr Kelly of Counsel, instructed by Corrs Chambers Westgarth, solicitors.
At the outset, I should point out that, although Mr Sykes self-represented, he displayed a knowledge of legal processes and conduct before a court. As will become apparent from this decision, Mr Sykes has appeared in person a number of times before the Supreme Court of Queensland and in the Queensland Court of Appeal.[3] Mr Sykes’s material also reveals that he has been involved in a number of High Court actions,[4] although in those actions he was, so far as I can tell from the material provided by Mr Sykes, legally represented.
[3] See for example Sykes v Queensland Gas Co Limited [2007] QCA 277.
[4] See for instance Sykes v Cleary & Ors (1992) 176 CLR 77.
Although, as indicated above, Mr Sykes has a familiarity with the courts, nonetheless the material presented by him in determining the preliminary question suffered from many of the defects which often occur when litigants self-represent. These difficulties were noted by Justice Keane in the Court of Appeal when he said, in reference to Mr Sykes[5]:
“Mr Sykes appears on his own behalf. Allowance must be made for any difficulty which Mr Sykes may experience in doing himself justice as a result. The difficulty which confronts a person who represents himself in litigation is proverbial; but Mr Sykes is very articulate and presented his arguments in this Court with considerable confidence. Mr Sykes’ confidence in the righteousness of his cause was not, however, matched by an appreciation of the role of this Court as a court of appeal, or of the requirements of the UCPR or of the court’s obligation to act in an even-handed way between parties to litigation.
…
His Honour’s observation was plainly correct. In this Court, Mr Sykes was not able to explain how it is that he asserted that these observations were in error. This inability did not deflect Mr Sykes from his determination to persist with this distinctly Quixotic claim.
…
Once again, Mr Sykes fails to appreciate that considerations of fairness to the respondent required that, having regard to the history of the case, some provision should be made to protect the respondent from baseless vexation, and that the order which was made was made as a condition of the refusal of the respondent’s attempt summarily to terminate his second action.
…While it is true to say, as Mr Sykes says, that how Mr Sykes goes about the funding of his action is a matter for him, the Court is entitled, and, indeed, obliged, to ensure that the litigation is conducted fairly to the respondent and not as an exercise in self-indulgence by a litigant who has shown a relaxed attitude to his obligation to adhere to the rules designed to ensure that litigation is conducted fairly to both sides.”[5] Sykes v Queensland Gas Co Limited (2007) UCA 277, at paragraphs [6], [14], [23] and [25].
As I have been requested by QGC to make specific findings of credit regarding certain elements of Mr Sykes’s evidence, further finding regarding Mr Sykes will be made later in this decision.
Facts as determined:
Although this matter relates to the hearing of a preliminary question which should mean a narrowing of the issues in contention between the parties, nonetheless a relatively large amount of material has been placed before me for consideration. To their credit, the parties have attempted to assist me by providing their own summaries of relevant facts, as they see them.
It is clear that the bulk of the evidence in this matter relates to documentary evidence which is not overly in question. However, what is in question is the relevance of various documents. Indeed, documents considered crucial by one party have, in some instances, been totally ignored by another party. Having considered all of the evidence before me, I make the following findings of fact as set out in the following table. Where matters are of particular relevance to the determination of the question in contention between the parties, I have included direct quotes from relevant documents or, in some instances, substantial extracts of the documents themselves.
1 Mar 1979 ATP 260P First Issued to XLX NL
The ATP was originally granted for a period of four years – but it was continuously renewed by XLX NL (in 1983, 1987 and 1991) to extend it for a total of 16 years.
Contained within ATP 260P was an area of 18.4 square kilometres which was later to become PL 72, and an area of 6.11 square kilometres which was later to become PL 73.
1984 Work on PL 72 Area Completed
By 1984, the only drilling work on ATP 260P which was ever conducted on what was to become PL 72 was completed, with the shutting of a single well.
No drilling work was conducted on the PL 72 area thereafter.
1990 Work on PL 73 Area Completed
By 1990, the only drilling work on ATP 260P which was ever conducted on what was to become PL 73 was completed, with the shutting in of a single well. No drilling work was conducted on PL 73 area thereafter.
1993 XLX NL in “Voluntary Liquidation”
By 30 June 1993, XLX NL had ceased to trade and was described as being “in liquidation voluntarily”.
Its two ATPs were held beneficially. Its assets ($5000) were vastly outweighed by its liabilities ($795,000). It had neither income nor expenditure.
6 Aug 93 DME Requested Reduction in Area of ATP
By 1993, XLX NL was not meeting the expenditure commitments on ATP 260. Accordingly, an officer of the DME requested that XLX NL relinquish 3 blocks of the ATP.
24 Sep 93 XLX NL Applied in Writing for Petroleum Leases
XLX NL responded to the Department’s request for a reduced area of the ATP with a written proposal “subject to agreement by your Department and XLX NL” to relinquish the ATP in exchange for “2 production area licences of 21 years duration over the two commercial discoveries it has made on ATP 260P”.
The letter containing this proposal was accompanied by two applications for production area licences over specified areas.
The tenure sought was 21 years.
24 Nov 93 DME Pointed Out Statutory Requirements
A Departmental officer (Mr Kozak) responded in writing to XLX NL’s letter of 24 September 1993.
This response advised that:
“To consider your application, certain requirements need to be met, as specified in the Petroleum Act 1923....These include:
1. The outlines of the areal extent of the deposits of petroleum…
2. The proposed program for developing and producing petroleum..
3. A declaration that the deposits...are payable...
4. Nomination of a period of time, with reasons, for producing in an economically viable way the petroleum...”
12 Dec 93 XLX NL Provided Information
XLX NL provided a detailed response to the letter of 24 November 1993.
In response to paragraph 2 of Mr Kozac’s letter, XLX NL provided a proposed program, describing how PL 72 and PL 73 was to be developed to the point of production:
· The oilfield (PL73) was to have production from the existing well.
· The gasfield (PL72) was to have production from the existing well, with two more wells to be drilled, into a proposed pipeline which will:
“be laid as soon as the Brisbane market requires extra gas and that this will be accomplished within about 6 years at the existing Roma area gas ...are sufficiently depleted; and that the two extra production wells and the necessary gas compressor station will be laid and installed just prior to that.”
As to the issue of timing raised by Mr Kozac’s fourth question, XLX NL:
“nominates periods of time for producing...as within the calendar year commencing 6 years clear after the year commending 1st June 1994: the calendar year 2001, ...”
25 May 94 Internal Department Memo from Mr Kozak to Acting Director of Energy Division
The application by XLX NL was analysed by Mr Kozak in a memo dated 25 May 1994.
The uncertainties relating to the reserves and the production profile led officers of the Department to conclude that only a 5 year lease, rather than the 21 year lease sought, should be proposed.
Mr Kozac sent this internal departmental memorandum to the Acting Director Energy Division and recommended that the applicant be offered PLs for a period of 5 years (not 21 years as applied for).
1 Jun 94 Department Advised of Willingness to Grant 5 Year Leases
Mr Kozac wrote to XLX NL advising of the view reached by the Department.
The letter stated:
“The Department considers that, due to the lack of certainty with respect to producible reserves and production profiles of the fields, the 21 year period of the leases, with production possibly commencing in year 2001 applied for, needs to be reduced.
The Department is prepared to offer 2 Petroleum Leases over areas as described for a period of five (5) years to date from the present.
Please note that Section 31A of the Petroleum Act states that the lessee of a Petroleum Lease who has substantially complied with the Act and terms and conditions of the lease is entitled to a renewal of the lease...
Section 34 of the Petroleum Act states that the lessee shall expend $1550 per square kilometre per year on the lease which is reduced by the value at the wellhead of all petroleum produced. The Minister may grant exemption from this condition.
The security deposit, as per Section 30(1) of the Petroleum Act is set at $10,000 per lease.
Your response to this offer of Petroleum Leases and with attendant conditions is requested.”
13 Jun 94 XLX NL Complained About Duration
XLX NL responded in writing taking issue with the duration of the lease proposed, and seeking a lease expiring on 1 December 2004. XLX NL accepted all other proposed terms for the leases.
The letter advised that “XLX NL feels that it is not probable that gas production would commence in a 5 years period… because… ” of various market reasons. The letter further stated that “XLX N.L. would expect the drilling of additional gas wells on XYLOLEUM in about the period 1997-2003. XLX N.L. needs a rise in oil prices to attract further capital but when this might occur is, necessarily, a guess.”
28 Jun 94 Department Adhered to 5 year Lease Proposal
Mr Kozac wrote to XLX NL in response to its letter of 14 June 1994, rejecting the proposed 10 year term.
This response advised that the DME was adhering to their position:
“After due consideration....I wish to confirm the original offer made by the Department, ie the Petroleum Leases over Xyloleum Gasfield as well as XYL-X Oilfield are to be for a period of five (5) years with right of renewal after that period if substantial compliance with conditions of the lease and the Petroleum Act 1923 has occurred in that time.
As stated in my letter of 1 June 1994 it is the uncertainty with regard to the schedule of commencement of production, reserves and production rates that precludes any extension of the offered lease periods beyond 5 years.
In conjunction wit the grant of the Petroleum Leases, Authority to Prospect No.260P would be relinquished. The $5000 security despot on the Authority is held for a period of 12 months after surrender and is refunded after that time if no claim is received by the Department from relevant landholders for compensation/damage.
Thus a deposit of $20,000 is required...prior to granting of the Petroleum Leases.
Your confirmation of the acceptance of the conditions proposed for the grant of the Petroleum Leases as detailed in my letter of 1 June and confirmed herein is requested within 60 days of the date of this letter”
25 Jul 94 XLX NL Rejects Short Term Lease Proposal
XLX NL rejected the proposal of a five year lease and sought a 21 year term.
27 Oct 94 XLX NL Again Requests 21 Year Lease
As the letter dated 25 July 1995 produced no response from the Department, XLX NL again wrote to the Department seeking a 21 year term.
11 Jan 95 XLX NL Accepted the 5 Year Proposal
Again, the letter from XLX NL of 27 October 1995 produced no response from the Department.
This time, XLX NL wrote to the Department accepting the proposal contained in the letter of 28 June 1994.
This response advised:
“XLX NL accepts the offer of the DME for a period of 5 years* of leasing in respect of the XYLOEUM Gasfield and XYL-X Oilfield and, upon issue, surrender the balance of ATP 260P.
Our cheque for $20,000 is enclosed per our earlier correspondence.”The correspondence was signed by Mr Sykes as chairman of XLX N.L.
The asterisk referred to a footnote initialled by Mr Sykes, which stated:
“* This acceptance in no way is to be construed as to our accepting that the period which is allowed is in fact 21 years”.
31 Jan 95 DME Acknowledged Acceptance
Mr Kozac wrote to XLX NL in response to its letter of 11 January 1995 acknowledging the acceptance.
The response was in the following terms:
“Acknowledgement is made of:
1. your acceptance of the Department of Minerals and Energy offer of Petroleum Leases over the Xyloeum Gasfield and XLX-X Oilfield and conditions contained therein.
2. the application to surrender the balance of Authority to Prospect No. 260P upon issue of the above Petroleum Leases.
3. receipt of a deposit of $20 000.00 under section 30(1) of the Petroleum Act 1923 relating to the above leases.
The Department will be in contact with you in due course regarding the grant of the Petroleum Leases and the surrender of ATP260P.”
11 Apr 95 Memorandums to the Minister
Two memorandums were provided to the Minister from the Director of the Energy Division dated 11 April 1995.
Each memorandum contained a recommendation in clear terms that PL 72 and PL73 respectively be issued for 5 years.
27 Apr 95 Governor-in-Council Granted PL 72 and 73; Leases Entered in Petroleum Act 1923 Register
The Governor-in-Council exercised its power to grant PL 72 and PL 73 for five year terms.
“Each of PL 72 and PL 73 provided that:
(a) the lease was granted for the ‘term of Five years to be computed from the Twenty-seventh day of April 1995’.
(b) the lease for five years was granted ‘(with the entitlement to renew subject to the … terms, conditions, provisions, exceptions, restrictions, reservations and provisos referred to, contained or prescribed by [the Petroleum Act 1923 (Qld)] or any Acts amending the said Act or any Regulations made or which may be hereafter be made under the said Act’.
(c) the lease was also granted subject to the following terms:
‘…provided always-
(i) that the lessee shall work the demised land in accordance with recognised good oilfield practice and in compliance with the said Act, unless exemption or partial exemption is granted in such manner as may be prescribed;
(ii) that the lessee shall comply with the provisions of the [Petroleum Act 1923 (Qld)];
(iii) that the lessee shall use the demised land bona fide exclusively for the purpose for which it is demised and in accordance with the said Act, unless prevented from so doing by circumstances beyond its power and control…’
The leases were duly entered in the register under the Petroleum Act 1923 (Qld).
The only right of renewal was the statutory right, which required substantial compliance with the relevant terms.
The area of the leases was 18.4 sq.k. and 6.11 sq. k. respectively.
Section 34(1) of the Petroleum Act 1923 (Qld) (and its successors) required the lessee to “expend” in each year “in respect of drilling” the sum of $1550 per square kilometre of the lease area, being:
· $28,520 (being $1550 x 18.4) for PL 72 per annum.
· $9470.50 (being $1550 x 6.11) for PL 73 per annum.
No exemptions in relation to this expenditure were granted in writing by the Minister either at this time or subsequently.
No “other work” – work other than drilling – was approved in writing by the Minister, either at this time or subsequently, as being an acceptable form of expenditure.
9 May 95 Attempt to Deregister XLX NL
On 9 May 1995, Mr Sykes filed with the Australian Securities Commission a Form 528 seeking deregistration of XLX NL.
11 May 95 Department Advised XLX NL of Grant and Requested Rental
The Department wrote to XLX NL enclosing the instruments of lease.
The letter advised that:
“...the Governor in Council, pursuant to the provisions of the Petroleum Act 1923, on 27 April 1995, approved that Petroleum Leases 72 and 73 be granted for terms of 5 years.”
Payment of rental from 24 September 1993 (date of application) was requested.
17 May 95 XLX NL Executed Transfer of PL 72 and 73 to Sykes
By instrument which purports to be signed by XLX NL on 17 May 1995, a transfer of PL 72 and PL 73 in favour of Mr Sykes was executed by XLX NL:
“...for the sum of $10,000 in each lease: $20,000 in all such monies having already been paid by Mr Sykes...being the exact sum paid to the [DME] so that these two leases be issued.”
14 Jun 95 Department Repeated Demand for Rental from XLX NL
The Department wrote to XLX NL repeating its demand for $1040 rental.
16 Jun 95 XLX NL Queried Rental Demand
20 Jun 95 Department Explained Rental Calculation
The Department responded to XLX NL’s letter of 16 June 1995, explaining that the rental was calculated from the date of application.
26 Jun 95 XLX NL Paid Rental but Sought Refund
XLX NL responded to the Department by paying the rent but seeking a refund:
“(i) The original eases applied for were for 21 years per the applications of 24 September 93;
(ii) The term offered was 5½ years, and this was accepted, [by XLX]; and
(iii) The term of the leases issued was 5 years not the 5½ years of the offer and acceptance.”
28 Jun 95 ATO Served Statutory Demand on XLX NL
On 28 June 1995, a statutory demand for $88,341.65 was served by the ATO on XLX NL, requiring payment within 21 days.
20 Jul 95 XLX NL Lodged Transfer for Approval
XLX NL forwarded to the Department the instrument of transfer relating to the petroleum leases.
The letter from Mr Sykes stated:
“Please transfer these leases to the name above and let the transferee know of this registration in due course”.
The letter was signed by Sykes as a director of XLX NL “in voluntary liquidation but not yet struck off”.
22 Aug 95 Application to Wind Up XLX NL Filed by ATO
The ATO filed an application to wind up XLX NL for failing to comply with a statutory demand.
11 Oct 95 XLX NL Ordered to be Wound Up
The ATO’s application to wind up XLX NL was heard in the Victorian Supreme Court and a winding up order made.
18 Oct 95 Mr Sykes made a verified report as to the affairs of XLX NL as required by the Corporations Law.
This report failed to disclose the existence of PL 72 or PL 73.
15 Apr 96 PL 72 and 73 Assigned to Mr Sykes
22 May 96 DME Advised Mr Sykes that Transfer Approved
The department advised Mr Sykes that, on 15 April 1996, the transfer of the PLs had been approved and requested delivery of the instruments of lease.
10 Jul 99 XLX NL Deregistered
22 Dec 99 Mr Sykes Applied for Renewal
Mr Sykes wrote to the Department seeking a renewal of the petroleum leases.
The letter advised:
“I hereby apply for the further term of 5 years as allowed for under the terms of Petroleum Production Licenses Numbers 72 and 73.
I enclose rentals for the first year of the renewed term.
In the first period wells were inspected by Mr Haydn Mitchell and the valves on the Xyloleum Gas Well were activated to see that everything was in order. The last such inspection was this financial year and everything was in working order without any leaks or corrosion problems.”
17 Feb 00 Department Requested Statutory Information
Mr Kozak responded by letter to Mr Sykes drawing attention to the statutory requirements for renewal.
This response advised that:
“Prior to progression of your application, the application is required to...lodge a proposed program for producing petroleum from any field within the land and justification for the period for renewal of the lease.
Under Section 48 of the Act, there is a requirement for the lessee to expend an amount of $1500 per square kilometer for each square kilometer contained in the lease. This amount is reduced by the value of all petroleum produced from the lease. If there is no production, this would amount to $28,520 for PL 72 and $9,470 for PL73. The Minister may grant exemption from this requirement on application. (A copy of the relevant Section is enclosed)…
We look forward to receiving the above requested information from you within 28 days of the date of this letter”.
The Departmental letter was in error in referring to a sum of $1500 per square kilometre as section 48 of the Act provided for a sum of $1550 per square kilometre. However, the mentioned sums of $28,520 and $9,470 were correctly calculated using $1550.
The Departmental letter did not point out that the sum of $1550 per square kilometre was required, by section 48 of the Act, to be expended annually. The total amount required to be expended on PL 72 over the 5 year term of the lease was accordingly $142,600, and for PL 73 the 5 year expenditure required was $47,350.
28 Feb 00 Mr Sykes Provided Information
As regards the Department’s request for a program for producing petroleum from each lease, Mr Sykes advised that the fields were “shut in”. Specifically as regards the program for PL 72, Mr Sykes stated that:
“The proposed program in the first renewal term of 5 years is
1. To again approach the Brisbane Gas Distributor to determine if they require any natural gas into the Roma – Brisbane Pipeline in the next 5 years. If their answer is yes then a spur line crossing the Condamine River will be needed, at an estimated costs of some $1,000,000. If further wells are needed these may (for 4) cost the same order.
The Brisbane Fertilizer company would be approached again separately, as they are such a large user they alone might justify a development along the lines above.
2. In 1999 Energy Equity Corporation Limited indicated that they would like to see well logs, the structural map, gas composition, BTU data, and test detail of the Xyloleum Field, upon the approach to them by the undersigned. This is continuing to be actively progressed. Energy Equity specialises in financing of natural gas power plants. If such a plant is installed an investment of the order of $2 million would be expected without any costs associated with the further wells.
3. If both of the proposed developments take place in next term, with further drilling (which would take place in this case) some $4 million would be spent on Petroleum Lease No. 72 in its first renewal term of 5 years.
The field could have a life of some 20 years at a production rate of about 1 Million cubic feet/day. As development would provide infrastructure with the incentive for further drilling it is likely that further gas fields would be found and opened up in the region as small gas wells which have been abandoned to the South exist together with the prospect for others.”
As to the expenditure on PL 72, Mr Sykes represented that:
“Expenditure on the first 5 year term of Petroleum Lease No.72 was $38,000 for marketing reviews, lease inspection, and geological assessments by the applicant and for annual lease inspections and a well test by Mr Haydn Mitchell, the engineer used for this Lease. …
Even without any development of this lease in the 2000-2005 period the estimated expenditure on it will be not less than $40,000 in those 5 years.”
As to the expenditure on PL 73, Mr Sykes represented that:
“Costs allocated to the work on this field during the last 5 years were $15,000 for inspections and work by Mr Mitchell and the undersigned.
If production is not recommenced in the first period of the renewal expenditure on this lease is not estimated to be $20,000 for the 5 years.”
26 Apr 00 Expiry of PL 72 and 73
The terms of PL 72 and PL73 expired on 26 April 2000.
No renewal was ever granted by the Governor-in-Council.
The register showed, and continues to show:
“Status: Granted
Sub-status: Renewal Lodged
Date non-current: 26-Apr-2000.”27 Apr 00 QGC Activities After 27 April 2000
QGC did not commence drilling in the vicinity until:
· 19 January 2001 (on what became PL 179);
· 14 June 2002 (on what became PL 201).
4 Aug 04 Mr Sykes lodged further Applications for renewal of PL 72 and PL 73
21 Mar 06 Department Responded to Application
For an unexplained very lengthy period of time, the Department took no action to deal with the applications for renewal.
Ultimately, on 21 March 2006 the Department wrote to Mr Sykes in response to his applications for renewal:
“Dear Sir
Petroleum Leases (PL) Numbers 72 and 73
I refer to your applications for renewal of the above petroleum leases received on 22 December 1999 and subsequent applications received on 24 August 2004.
In the applications for PLs 72 and 73 received on 24 August 2004, you have applied for a five year renewal term commencing on 27 April 2005. These applications assume that the PLs were previously renewed for a five year term commending 27 April 2000 are still subject to determination.
Your applications are currently being assessed pursuant to section 45 of the Petroleum Act 1923, as to whether they comply with the requirements for renewal.
The following indicates that you have not substantially complied with the terms and conditions of the petroleum leases for the first five year term:
1. No production or development activities have been undertaken on either of the leases since their grant, and as such the initial development plans have not been complied with.
2. The expenditure commitment of $1550 per km² of the leases, pursuant to section 48 of the Act, has not been satisfied and no exemptions have been sought.
3. The reporting requirements under the Act have not been substantially complied with.
Please provide a written submission within twenty (20) business days from the date of this letter detailing how you have substantially complied with the terms and conditions of the Petroleum Leases and why the Petroleum Leases should be renewed.”
28 Mar 06 Mr Sykes’ Submissions
Mr Sykes responded to the request for submissions by letter which stated, in part:
“The expenditure requirements pursuant to section 48...have been met in each and every year...because for the administration of each lease I deem a fee charged of $20,000 per year for PL 73 and $25,000 per year for PL 72 on exactly the same basis as XL Petroleum Pty Limited was allowed to credit against expenses required to be made on Authority to Prospect 260P the sum of $250,000 per year for its National T32 Rig and Equipment used on APT 260P. Furthermore an expense might be claimed for the value of my investment on PL72 and PL73 which even at 5% per year depreciation would be over $100,000 per year on PL 73 and about $60,000 per year on PL72.
Companies and individuals are allowed, as an expense fee for their time and depreciation....
In additional I have paid our (my) Queensland Manager, Mr Haydn Mitchell, significant fees for work on these leases, small rents each year to your department and, recently, fees of the Chinchilla and Murilla Shires. I have also supplied document and other storage…
Accordingly no exemptions were sought for any under expenditure on PL 72 and PL73 as I was in excess of the requirements under Section 48 in each year.”
17 Nov 06 Minister Advises of Proposed Non-Compliance Action
The Minister ultimately wrote to Mr Sykes advising of his intention to take non-compliance action. The letter stated as follows:
“Dear Mr Sykes
I refer to your petroleum authorities Petroleum Lease (PL) Numbers 72 and 73 and advise that I propose to take non-compliance action against you as holder of these petroleum authorities.
Section 80T of the Petroleum Act 1923 (‘the Act’), specifies the types of non-compliance action that can be taken. In this instance, it is proposed that the action to be taken is cancellation of the tenures.
The proposed non-compliance action is a result of your failure to comply with the terms and conditions of the leases and the provisions of the Act. The procedures for non-compliance action are outlined in Part 6P Division 3 of the Act.
The grounds for the proposed non-compliance action include:
1. PLs 72 and 73 were granted to develop and produce payable deposits of petroleum, pursuant to Section 40(1) of the Act. No development or commercial production has occurred on either of the leases since they were granted.
2. The lessee must comply substantially with the current program for development and production, pursuant to Section 50(1) of the Act. At the time that the leases were granted in 1995, the development plan included production from the XYL-X Oil Field and the Xyloleum Gas Field. To date, no development or commercial production has occurred on either of the Petroleum Leases.
3. Section 47(d) of the Act, provides that the lessee shall work the land demised by the lease in good oilfield practice unless exemption or partial exemption is granted. No work has been conducted on the leases since they were granted to extract or produce petroleum and no exemptions have been sought.
4. Section 48(1) of the Act provides that the lessee shall expend $1,500 per year for each square kilometre contained in the lease on drilling for petroleum. The total sum of which is reduced by the petroleum production of the wellhead. As no production has been recorded on either of the Petroleum Leases the total amount of combined expenditure required to date for both PL 72 and PL 73 is approximately $400,000. A submissions made to the Department on 30 March 2006 indicates that $400,000 has been expended on the administration of the tenements and not on drilling as is stipulated in the legislation. Exemption may be granted from this condition, however, no exemption has been sought.
You may, within twenty (20) business days, make submissions to the Department about my proposal to take non-compliance action.
Please be aware that any submission you may wish to make in response to this notice will be required in addition to any earlier submissions that were received from you in response to the information notice sent to you by the Department on 21 March 2006.
If you require further information regarding this matter, please do not hesitate to contact Mr Chris Xavier of the Department of Mines and Energy on telephone (07) 3238 3724.”
21 Nov 06 Mr Sykes’s reply to Minister’s Notice of 17 Nov 06
Mr Sykes provided a lengthy response to the Minister’s notice of 16 November 2006. His response included numbered replies to each of the four grounds contained in the Minister’s notice.
As regards ground 1, Mr Sykes argued that commercial production has occurred. However, his assertions all point to production activity carried out after 26 April 2000, and by entities other than himself.
With respect to ground 2, Mr Sykes stated that he has “already done my development work. I do not necessarily need to do any more.” Mr Sykes also pointed out that 21 years has not expired from 27 April 1995.
Regarding ground 3, Mr Sykes stated that he has always complied with the necessary standard of work on his petroleum interests since 1969 onwards.
As to ground 4, which related to expenditure pursuant to s.48 of the Act in respect of drilling for petroleum, Mr Sykes stated:
“4. Your 4. each of your points is refuted by me. I refer again to the rest of this letter.”
1 Dec 06 Further reply by Mr Sykes to Minister’s Notice of 17 Nov 06
Mr Sykes expanded on his response to the Minister’s Notice by way of a further letter dated 1 December 2006.
Apart from detailing further information regarding the reserves on PL 72, Mr Sykes stated that:
“for reasons I cannot understand, or do not know of, it appears to me that your Department has adopted policies simply aimed at frustrating my title : including no renewals; denial of title [e.g. its letter to me of 21st March 2006], failure to tell me that titles for PL 72 and 73 had been renewed between 21 March 2006 and your letter of 21 Nov. 2006, increases of rent at higher levels than those agreed to on the issue of the titles for PL 72 and 73 this last year and the tolerance of a clear breach of your ACT by QSt.C.L. in respect of their production of gas from their ATP 620.”
30 Mar 07 Decision of Minister to Cancel PL 72 and PL 73
By letter dated 30 March 2007, the Minister wrote to Mr Sykes advising as follows:
“I refer to your letter dated 21 November 2006 in response to my letter of 17 November 2006 in which I gave you, as the holder of Petroleum Lease Numbers 72 and 73, notice in accordance with section 80W of the Petroleum Act 1923 (‘the Act’) that I propose to take non-compliance action against you as holder of these petroleum tenures. The proposed non-compliance action (section 80T of the Act) was the cancellation of Petroleum Lease Number 72 and 73.
I have considered the submission made in your letter of 21 November 2006 in accordance with section 80X of the Act and believe that a ground (as stated in my letter of 17 November 2006) exists to take non-compliance action. As such I have decided to take non-compliance action by cancelling Petroleum Lease Numbers 72 and 73 in accordance with section 80Y of the Act and hereby give you this information notice regarding my decision in accordance with section 80Z of the Act.
The reasons for my decision are that in your submission you have not provided substantive reasons to refute the grounds for non-compliance action as stated in my letter of 17 November 2006.
I draw your attention to section 80Z(3) of the Act which states that this decision does not take effect until the end of the appeal period for the decision. In accordance with section 104 of the Act you are entitled to appeal the decision. Should you decide to appeal this decision , the appeal must be started within 20 business days after receiving, or otherwise becoming aware of, this notice by filing a written notice of appeal with the Land and Resources Tribunal. The legislation relating to appeals is contained within Part 7 of the Act.
A copy of the appeal notice must also be lodged at the following address:
The Chief Executive
Department of Mines and Energy
GPO Box 15216
CITY EAST QLD 4002A stay of decision, the subject of an appeal under this Act, may be applied for under this Act. The Tribunal may grant a stay of the decision to secure the effectiveness of the appeal. A stay may be given on the conditions the Tribunal considers appropriate, operates for the period fixed by the Tribunal, and may be amended or cancelled by the Tribunal.
The period of a stay must not extend past the time when the appeal body decides the appeal. The appeal affects the decision, or carrying out of the decision, only if it is stayed.
Should you have any queries regarding this matter, please contact Mr Andy Kozak of the Department of Mines and Energy on telephone (07) 3238 3739.”
Assessment of credit - Mr Sykes
Mr McKenna SC for QGC has squarely raised in his submissions to the Court the question of the credit worthiness of Mr Sykes. Mr McKenna submits that the Court cannot have any confidence in any of Mr Sykes’s affidavit or oral evidence which is not corroborated by other evidence, and Mr McKenna seeks a specific finding of the Court in that regard.
It is clear from a close examination of the documents and affidavit and oral evidence in this matter that the great bulk of the relevant evidence necessary for determining the preliminary question is to be found in the documentary evidence. However, the case for Mr Sykes is in many respects linked to Mr Sykes’s interpretation of the meaning of certain documents as explained by his testimony, be it in affidavit or oral form.
Having had the opportunity to view Mr Sykes give oral evidence, as well as conduct this litigation in person before me over a number of days, plus numerous interlocutory proceedings, I have mixed views as to the truthfulness of Mr Sykes as a witness. Mr Sykes’s testimony is not such as to warrant, in my view, a finding by this Court that Mr Sykes is never truthful in his evidence before the Court. Rather, I am more inclined to the point of view that most of the time Mr Sykes does provide a truthful account to the Court. However, that does not mean that his evidence is either acceptable to, or to be preferred by, the Court. In certain circumstances, Mr Sykes has demonstrated a willingness to either conceal certain facts from government and other agencies, or to put facts before this Court in a miscued manner.
In this regard, I note the written submissions of Mr McKenna regarding Mr Sykes’s evidence as follows:
“51. The only testimony which is controversial is that of Mr Sykes.
52.Upon proper analysis of the legal questions which arise in this case, it is difficult to identify any evidence given by Mr Sykes which adds anything of relevance to the documentary record.
53.To the extent that the Court has a contrary view, then it is submitted that great caution is required in acting upon the uncorroborated evidence of Mr Sykes.
54.What was obvious from the oral evidence of this witness was that this venture has become something of an obsession for him, which had distorted his ability to deal frankly with other parties and to recount events with accuracy. History is recounted as he would wish it to be – and dealings with third parties proceed without regard to ordinary standards of behaviour.
55.What the cross-examination of Mr Sykes revealed was:
(a) his lack of frankness with the Departmental officers when seeking favourable decisions (eg suggesting that the development of the leases was imminent when in fact the applicant was in ‘voluntary liquidation’; seeking approval of a transfer on the representation that the company was ‘in voluntary liquidation’ when it was about to be wound up in insolvency; seeking to suggest that expenditure had been incurred on the lease when it was a mere fiction);
(b) his lack of frankness with the officials dealing with the deregistration and winding up of XLX NL and its creditor the ATO (eg. Concealing from the ASC the existence of the petroleum tenures, concealing from the liquidator the existence of the petroleum tenures, concealing from the liquidator his efforts to obtain a preference over the creditors by taking a transfer of the tenures in extinguishment of his debt etc).
(c) a propensity to recount events as he would want them to be (eg. His initial evidence that XLX NL had no external creditors; his difficulty in accepting that the XL group of companies was without assets in 1993, his refusal to accept that the ‘counter-offer’ argument was only a recent invention etc);
(d) a propensity to ignore any event which doesn’t suit his case (eg. His profession of ignorance of the fact that XLX NL was wound up in insolvency at the instance of the ATO).
(e) A difficulty in understanding even the simplest communications in a way which does not suit his purposes (eg. his refusal to accept that the text of his letter of 11 January 1995 was an ‘acceptance’ of the department’s offer).
56.In these circumstances, the Court cannot have any confidence in any part of the affidavit or oral evidence given by Mr Sykes which is not corroborated by other evidence. An express finding to this effect is sought.”
The evidence of Mr Sykes does, in my view, certainly give support to the submissions made by Mr McKenna. I will deal in detail with two elements of Mr Sykes’s evidence.
As the chronology of facts set out above shows, a significant issue in determining whether or not Mr Sykes substantially complied with the terms of PLs 72 and 73 relates to the expenditure required by Mr Sykes on each lease. Following Mr Sykes’s application for a renewal of the leases on 22 December 1999, the material shows that Mr Kozak of the Department wrote to Mr Sykes on 17 February 2000 bringing to Mr Sykes’s attention the statutory requirements for renewal. I find the letter from Mr Kozak to be Mr Sykes to be misleading in as much as the letter did not make it clear that under s. 48 of the Act, Mr Sykes was required to expend a certain amount ($1,550) per square kilometre per year on each lease. The clear impression that a reasonable person would gather after reading Mr Kozak’s letter was that the expenditure amount set out by Mr Kozak in the letter was the total required for the five year duration of the leases. I am without doubt that Mr Sykes has read Mr Kozak’s letter this way. I should of course note that Mr Kozak did include with this letter of 17 February 2000 a copy of s. 48 of the Act which, had Mr Sykes read such document, would have made it clear to Mr Sykes what his expenditure obligations in fact were. It is also noteworthy that by a letter as far back as 1 June 1994, Mr Kozak advised XLX NL (effectively Mr Sykes) that the expenditure requirements were yearly.
No doubt relying upon the literal statements in Mr Kozak’s letter of 17 February 2000 and not on the statutory provisions of s. 48, Mr Sykes wrote to the Department on 28 February 2000 providing details which in his view met the statutory requirements for renewal. As regards PL 72, Mr Sykes stated that the expenditure for the first five years of that lease was $38,000, and for PL 73, $15,000. Of course, both these sums are in excess of the total sums referred to by Mr Kozak in his letter of 17 February 2000, being $28,520 and $9,470 respectively for the leases, but such sums are yearly expenditure requirements. By letter dated 21 March 2006 from the Department to Mr Sykes, Mr Sykes was advised that, on a number of grounds, he had not substantially complied with the terms and conditions of PLs 72 and 73. One of the stated areas of non-compliance was the expenditure commitment of $1,550 per square kilometre for the leases. Mr Sykes’s reply of 28 March 2006 is at odds with his earlier advice of 28 February 2000. I note in particular that Mr Sykes now refers to an amount expended per year. Further, Mr Sykes deems an expenditure amount for PL 72 of $25,000 per year and $20,000 per year for PL 73. In addition, Mr Sykes stated in his letter that “furthermore an expense might be claimed for the value of my investment on PL 72 and PL 73 which even at 5% per year depreciation would be over $100,000 per year on PL 73 and about $60,000 per year on PL 72”.
In my view, Mr Sykes’s letter of 28 March 2006, insofar as it relates to s. 48 expenditure, is at odds with his submission to the Department of 28 February 2000 on the same issue, and clearly indicates a propensity by Mr Sykes to change the facts to suit his own interests. Despite all of the evidence given in this regard by Mr Sykes, one point does remain clear, and that is that on any reading of the material and evidence, including all the evidence of Mr Sykes, it is clear that given the best possible interpretation to Mr Sykes’s evidence, his expenditure for each of PL 72 and PL 73 during the five year term of those leases has been almost all for administration purposes and not on drilling as stipulated in the legislation, and that Mr Sykes, for reasons know only to himself, at no time sought any exemption to the expenditure condition.
The other aspect of concern to me regarding Mr Sykes’s evidence relates to his documentation at the time of the liquidation of XLX NL. From the evidence before me, there would seem to be little doubt that as at 11 May 1995, when the Department advised XLX NL of the grant of PL 72 and PL 73, that XLX NL was affectively not trading and had not been trading for a period of approximately two years. I note that only two days earlier, on 9 May 1995, Mr Sykes filed with the Australian Securities Commission a form 528 seeking deregistration of XLX NL. Six days after advice of the grant of the petroleum leases, XLX NL executed a transfer of both leases to Mr Sykes for consideration of $10,000 for each lease. I note that the transfer instrument states that the consideration was “for the sum of $10,000 in each lease: $20,000 in all such monies having already been paid by Mr Sykes … being the exact sum paid to the [DME] so that these two leases be issued.”
Just over a month later, on 28 June 1995, the Australian Taxation Office served a statutory demand on XLX NL for the sum of $88,341.65. Payment was demanded by the ATO within 21 days. Payment was of course not made by XLX NL to the ATO, so on 22 August 1995 the ATO filed an application to wind up XLX NL. XLX NL was subsequently wound up by order of the Victorian Supreme Court on 11 October 1995. However, in the time period after service of the demand by the ATO and the application to wind up by the ATO, being 20 July 1995, XLX NL lodged the transfer application with the Department for approval. In my mind, doubt clearly exists as to the actual execution date of the transfer lodged by XLX NL. Given the speedy nature in which Mr Sykes tends to reply to all correspondence as detailed in the chronology set out earlier in this decision, I find it unreliable that Mr Sykes would not have forwarded a transfer executed on 17 May 1995 within days of its execution had that document actually been executed on 17 May 1995. In all likelihood, that transfer document was actually executed on or about 20 July 1995, being the date that XLX NL forwarded the transfer to the Department. The inescapable conclusion is that the transfer was undertaken by Mr Sykes as the sole shareholder and director of XLX NL to himself as an individual in order to divest ownership of the petroleum leases from the company to himself at a time when XLX NL was under the very real prospect of being wound up.
Perhaps even more damning to Mr Sykes is the evidence regarding the returns lodged by Mr Sykes relating to the assets of XLX NL.[6] Whatever the truth may be as to Mr Sykes’s intentions when completing the documentation, it is clear to me that he did not wish to disclose any value for PL 72 and PL 73 over and above that of the security deposits paid for such tenements. This of course is clearly at odds with Mr Sykes’s evidence as to the rich resources to be found within PL 72 and PL 73, which evidence must lead to a conclusion that, even give the economic conditions as existed, according to Mr Sykes, from 1995 to 2000, each of the PLs must have been worth substantially more that the $10,000 each.
[6] My view does not change even if regard is had to the additional material lodged by Mr Sykes subsequent to the hearing. In this regard, see [2007] QLC 0138.
In the circumstances, I agree with the submissions made by Mr McKenna SC. The credibility of Mr Sykes as a witness is such that whenever there is a conflict between the evidence of Mr Sykes and any other evidence before me in these proceedings, I prefer the other evidence to that of Mr Sykes’s evidence. Where the only evidence is that as provided by Mr Sykes in either affidavit or oral form, then I find such evidence to be reliable only when consistent with other documentary evidence.
Assessment of credit – witness Andy Kozak
Through the respondent Minister, Mr Kozak provided two sworn affidavits to the Court by way of evidence. Mr Sykes chose to call Mr Kozak to give evidence on his behalf. Mr Kozak is a petroleum engineer with the Department of Mines and Energy, a position he has held for approximately 21 years. Over that time, he has had a number of meetings with Mr Sykes. It is apparent from Mr Kozak’s testimony that he authored many of the departmental letters sent to Mr Sykes or to XLX NL, and that he also played varying roles in the preparation of internal departmental memoranda, as well as memoranda to the Minister. In short, I find Mr Kozak’s knowledge of the events in dispute concerning PL 72 and PL 73 in this matter extensive.
Mr Kozak was subject to extensive questioning by Mr Sykes, such questioning following more the nature of cross-examination than examination-in-chief. I should stress that no issue flows from this due to Mr Sykes’s lack of legal qualifications. Neither respondent took issue specifically with Mr Sykes on this aspect of Mr Kozak’s testimony. That said, however, Mr Kozak was in the witness box for a considerable period of time given the overall length of the hearing, and much of that time was as a direct result of difficulties encountered by Mr Sykes in properly questioning Mr Kozak.
In the main, Mr Kozak answered questions in a direct, to the point manner. I am generally satisfied with his credibility as a witness. I note that there was one occasion where Mr Kozak did not recall getting a letter which Mr Kozak had himself included in his affidavit of 30 August 2007 and that, after Mr Sykes pointed this out to Mr Kozak, he corrected himself and could then recall receiving the said document.[7]
[7] See transcript pp 71-72.
Aside from Mr Kozak’s evidence with respect to his recollection of a document included in his affidavit, there are other elements of his evidence which give me some cause for concern. With respect to his answers to the great majority of questions, his responses were short, sharp and crisp. He was clearly in command of the situation and on firm footing with his answers. However, this was certainly not the case when he was asked the relatively simple question by Mr Sykes of what the normal response would be of the department to an application to renew a lease. One would have thought, given his knowledge and experience, that Mr Kozak would have been in a position to give evidence as to what occurred administratively for the renewal of a lease at the relevant times. However, Mr Kozak’s actual evidence was as follows:[8]
“The renewal of a lease under that legislation was – the – the procedure for renewal of a lease is unclear. If you look at the legislation that’s in force at that time, it said if – and I basically paraphrase – that if – if you had complied with the requirements of the legislation and the lease conditions, you are entitled to the renewal of the lease.
Yes?—Now, if I may just add, it did not state what the mechanism was for lease renewal. Whether it needed to be renewed by the Minister, the Governor-in-Council, or anyone else – it has – it has been unclear in the legislation.
Yes?—But the renewal of the lease was predicated by compliance with the lease conditions-----
Yes?— -----and submitting a later development plan – or a plan for the development of-----
Yes?—-- -----the resources.
And you had to accept or reject that plan, did you not?—It is unclear who actually had that power to accept or reject that.
Yeah. Did you reject my development plan?—I hadn’t – I believed I did not have the power to accept or reject it.
So you left it in abeyance?—It was not my decision to make that abeyance, but no further action was taken by the department.”
[8] Transcript day 1 p.76.
I note from Mr Kozak’s evidence referred to above that he says that it was not his decision “to make that abeyance”. As is apparent in this matter, there has been, in my view, a totally unacceptable period of delay and failure to acknowledge correspondence by the Deopartment and by the Minister with respect to Mr Sykes’s first and second applications to renew PL 72 and PL 73. Mr Kozak’s evidence referred to above certainly does not shine any light on the reasons for the failure to consider Mr Sykes’s applications for such a lengthy period of time. Mr Kozak’s evidence indicates that the decision to place the determination of PLs 72 and 73 into abeyance was made by someone other than himself.
Mr Kozak’s evidence in this regard contrasts somewhat with detailed evidence which he gave the following day in this matter whilst still being questioned by Mr Sykes. Mr Kozak was asked[9] a series of questions by Mr Sykes which detailed a rather lengthy list of correspondence that Mr Sykes forwarded to the Department which received no reply. Mr Kozak acknowledged that no reply was provided to Mr Sykes’s correspondence as listed.
[9] Transcript day 2 p.43-45.
Mr Sykes’s examination of Mr Kozak on this point concluded in the following way:
“So to your knowledge, with all the submissions of development plans I made from the – from December to – 1999 to the present time, no – no real acknowledgment or – or rejection was ever made. Is that not so?—That’s correct, I believe, yes.
Yes. Can you give a reason as to why the department neglected all this correspondence?—No.”
It is also worth noting various aspects of Mr Kozak’s affidavit evidence in this matter. At paragraph 3 of his affidavit sworn 30 August 2007, Mr Kozak states on oath that:
“during my work with the department I was involved in assessing the applications for petroleum leases number 72 and 73 (the leases), lodged by Ian Grant Sykes (Mr Sykes), and his subsequent applications for renewal of the leases.”
Mr Kozak’s evidence with respect to the negotiations and correspondence that passed between the Department and Mr Sykes relating to the initial grant of the petroleum leases is consistent with his oral testimony and in this regard I find his evidence credible and preferable to that of Mr Sykes. This is particularly relevant with respect to various oral arrangements that Mr Sykes alleges that he had with the Department.
As regards the question of renewal of the leases, Mr Kozak’s affidavit evidence is notable in that he only makes scant reference to the administrative processes involved with renewal when he said, at paragraph 18 of his affidavit of 30 August 2007 that:
“The leases were not renewed.”
Mr Kozak then goes on in his affidavit of 30 August 2007 to set out the various statutory requirements of production, etc required of Mr Sykes as leaseholder and the various respects in which Mr Sykes has not met his statutory obligations. Again, Mr Kozak’s evidence in this regard is consistent with his oral testimony and is, in my view, reliable.
Despite the above findings of reliability of Mr Kozak’s evidence, I am not satisfied as to Mr Kozak’s reliability regarding the administrative processes carried out by the Department at the relevant time in 2000 and subsequent years for renewal of petroleum leases. As set out above, Mr Kozak was directly, and clearly, asked by Mr Sykes what the process was for renewal of mining leases, and his answer was, at best, evasive. It would seem to be beyond the credible that a significant department of the state government, charged with the responsibility of administering the Petroleum Act 1923, which no doubt has had numerous petroleum leases both granted and renewed under such legislation, had at the relevant times no administrative processes for dealing with renewal applications. In this regard, I find Mr Kozak’s evidence,[10] where he stated that “it was not my decision to make that abeyance” telling. In my view, Mr Kozak knows only too well the administrative processes undertaken by the Department upon application being made by a petroleum leaseholder for renewal of a petroleum lease at the relevant time. Further, I am in no doubt that Mr Kozak knows much more than what he was willing to reveal as regards the reasons why no action was taken by the Department with respect to Mr Sykes’s renewal applications for such an intolerable length of time.
[10] Transcript day 1 p.76.
I also note the evidence of Tanya Cooney as set out in her affidavit of 14 September 2007. The clear inference to be drawn from Ms Cooney’s affidavit is that the Department currently has, and at the relevant time had, an administrative process for renewals. Ms Cooney has worked with the Department since 1989 and has been the Registrar (Gas and Petroleum) since January 2006. Relevantly in her affidavit Ms Cooney said:
“16.The register shows that the renewal applications lodged by the applicant have not been determined in favour of renewal. This is shown by the heading “Sub-Status: Renewal Lodged” which appears in the reports. Had the renewal applications been determined, this heading “Sub-Status: Renewal Lodged” would not appear in the reports. Had the renewal been granted, the “Date Non-Current” on page 1 of the reports would have been a later date.
17.Until an administrative decision is made not to renew a lease or it is cancelled, or if a court declares a lease to have expired, the practice of the Department is to maintain the details pertaining to that lease on the MERLIN system.
…
19.Had PL 72 and 73 been renewed, there would have been an endorsement on the instruments of lease, and this would evidence that the applicant had held tenure in PL 72 and 73.”
Submissions
The Court in these matters had the benefit of receiving both written and oral submissions from each of the parties. As Mr Sykes in his submissions has effectively agreed with a large number of the submissions made by Mr Sheahan, Counsel for the Minister, I will first set out a summary of Mr Sheahan’s submissions.
Submissions on behalf of the Minister for Mines and Energy
Mr Sheahan commenced his submissions by evaluating the concept of petroleum and mining titles in general. In particular, Mr Sheahan noted that mineral and petroleum statutes provide for registration of title rather than title by registration. Mr Sheahan then turned to the question of entitlement to renewal of a petroleum lease under s.45 of the Petroleum Act as it existed at the relevant time in early 2000. Mr Sheahan noted that s.45 did not allow for an automatic right of renewal of a lease, but only where an applicant has “substantially complied with this Act, and the terms and conditions of the lease, in relation to that lease, at the expiry of the lease”. Mr Sheahan then goes on to submit that if in fact an applicant is not entitled to renewal of a lease at the time of its expiry, the consequence follows that the lease is not renewed and, if the lease is not renewed, it must expire. Mr Sheahan notes that there is no provision in the Act which provides for any residual right to occupy the subject lands or enjoy rights by the leasee other than those relating to renewal of the lease.
On the question of determining whether an applicant for renewal has “substantially complied” as per s.45 of the Act, Mr Sheahan submits that such enquiry is not vested in a minister or any person. He submits that “the assessment as to the substantiality of compliance should be considered objectively”.[11]
[11] Submissions paragraph 18.
After considering various authorities and the evidence in this matter, Mr Sheahan submits that on the facts of both PL 72 and PL 73, Mr Sykes has not substantially complied with the requirements of s.45 and therefore both leases were not renewed and expired on 26 April 2000.
Mr Sheahan considers two other aspects of Mr Sykes’s claim. The first aspect can be dealt with in short order. Mr Sykes had originally submitted that the leases he received for both PL 72 and PL 73 were in fact for a period of 21 years and not five years. Mr Sykes supported such allegation on the basis of the footnote that he placed on his acceptance letter for the leases as well as oral conversations between himself and departmental representatives.
Again, after closely evaluating the statutory provisions relating to the original grant of the petroleum leases and relevant authorities, Mr Sheahan relies upon the terms of the grant made by the Governor-in-Council with respect to each of the petroleum leases and strongly asserts that each petroleum lease was granted to Mr Sykes for a period of five years as set out in the leases.
The final aspect of Mr Sheahan’s submissions relates to the so called “development plans” argument raised by Mr Sykes. Mr Sheahan notes that this line of argument was only raised by Mr Sykes shortly before the hearing of the preliminary question. Mr Sheahan submits that Mr Sykes’s submissions are misconceived in fact and in law. As Mr Sheahan’s submissions in this regard are concise, I will let them speak for themselves:
“44.In the ‘Notice of fact and correlative argument’ document filed by the applicant on 16 November 2007 the applicant asserts:
‘5. Neither the respondent :the Minister for Mines and Energy nor his Department ever requested a Development Plan for either or both of the said Leases: PL 72 and 73 before or after the acceptance of my offer, through XLX NL., dated on or about the 11th January 1995 for the said leases. No Development Plan approval or any other approval for any work program or expenditure was ever given by the respondent at any time.’
45.Based on that assertion Mr Sykes contends that he was ‘prevented’ from expending any money on the leases. Yet this was not what raised as an issue in any of the communications Mr Sykes had with the DME at the relevant times when he was informed of the Minister’s intentions to take non-compliance action.
46.In any event Mr Sykes was requested to provide a proposed program for developing and producing petroleum from the fields contained in the area of his original application for the leases, pursuant to the then s.28(1A) of the Act. Mr Sykes subsequently provided the program.
47.At the time of application for the leases there was no requirement for the Minister or anyone else to approve any such program. By amendments to the Act in 2004 the requirement to have ‘development plans’ was introduced. But this was well after the leases expired according to their term and could not have affected Mr Sykes’ ability to perform work on the leases between 1995 and 2000 in accordance with the program he submitted or otherwise.”
Mr Sheahan then submits that Mr Kozak’s affidavits establish the necessary facts from which the legal contentions submitted by him follow, which leads to the result that the preliminary questions with respect to each petroleum lease should be answered in the negative. Mr Sheahan then goes on to submit that an answer in the negative to the preliminary question effectively brings Mr Sykes’s claims against both the Minister and QGC to an end. Mr Sheahan submits that to continue with the actions in such circumstances would only be wasteful of both the parties and the Court’s resources. Mr Sheahan therefore seeks orders that the application against the Minister in PGC 86/2007 be dismissed.
Submissions of Mr Sykes
The applicant has provided to the Court a large amount of material with respect to his contentions in both matters. He has at times mixed submissions in with affidavits, but the Court makes no adverse finding against Mr Sykes in this regard. Despite the voluminous amount of material produced by Mr Sykes, it is to his credit that, at the end of the day, he was able to reduce his written submissions on the preliminary question down to but a few pages. Out of an abundance of caution, I can summarise Mr Sykes’s contentions no better than repeating his written submissions of 28 November 2007 as follows:
“ONE SENTENCE CONSPECTUS
In its distilled essence the applicant failed to make applications for exemptions for drilling expenditure in 5 years ending 26th April 2000, at the rate of some $37,500 per year when the evidence is that no relevant well could be drilled for more than 10 times that amount.
The applicant adopts the whole of the outline of submissions of the respondent: the Minister of Mines and Energy which are relevant to his submissions.
In relation to the above the only default of the applicant was the almost ‘hypothetical’ one of not gaining an exemption from drilling which would cost about $400,000 [sworn evidence of Mr. Kozak late in his examination by the applicant], for one hole: more than three times as much as the expenditure requirements for PL 72 which is 18.4 square kilometres in area at $1,550 per square kilometre for the first 5 years of this PL, and would cost some nine times as much as the drilling expenditure requirements on PL 73 which is 6.11 square kilometres: ‘considered on an annual basis, as leases are, the costs would be, for a well on PL 72 over 16 times the annual expenditure requirement and over 40 times the annual expenditure requirements for PL 73.’
The applicant says in the end it would not be in the public interest to stop person from holding relatively ‘very’ small areas of Crown Land because they would attract huge costs per square kilometre if economically efficient drilling had to be carried out on them every single year.
The evidence is that exemptions can be sought from the Minister, who may agree to them in writing but that the applicant did not apply for these.
In relation to 9, 10, 11, 12, 13, 14 and especially 15, 16, 17, 19, 20, 21, 22, 23 and particularly 24 (in view of Mr. Kozak’s evidence on the 27th November 2007 on drilling costs), and 25; which comprise the heart of the respondent Minister’s submissions; the applicant says he did substantially comply in a most practical and economical way with the real meaning and intent of the Petroleum Act 1923 and the terms and conditions of each PL: ‘although he did not apply in writing for exemptions of the work commitment, in view of the evidence before the Land court on drilling costs, it would be hard to see how this could be refused and therefore why any formal application was needed because it would only be a waste of the Department’s time and resources to pester the Minister for Mines and Energy who, [I think the Court may accept], has more important things: matters of real significance to deal with rather than ridiculous and unnecessary paperwork generated because the applicant’s holdings are so tiny, say, in relation those of Queensland Gas Company Limited which, as can be seen from the evidence holds two leases of many times the size of the applicant’s PL 72 and 73.’
[One map is Document 1 in key Document File. Please note that the 1 sub-block marked PL 226 on that map is part of PL 226 which is marked again with that same number and so is really part of a bigger PL. PLs 179 to the East of XYLOLEUM 1 and PL 201 to its West were said in evidence to be those of Queensland Gas Company Limited. PL 179 appears so large that is Southern limits may not be determined from Map 1].
The evidence of Mr. Kozak was that an application to drill some 10 wells in PL 72 was received by the Department of Mines and Energy about 2006 from the applicant, which Mr. Kozak said would cost some $400,000 each, but that the Department, as with applications before this, from 1999 –in evidence- had never replied to any of them and that the applicant had no Power and Control to require these to be considered.
Alleged agreement for 21 years.
The respondent’s submission, in relation to the learned arguments of the Council for the Respondent: Mr. G D Sheahan, in his 37 to 41, is accepted in full by the applicant.
Establishment of the Necessary Facts and Contentions
The submission 42, as above is also accepted by the applicant save and except that the argument of the applicant remains that the Land Court cannot ignore, for the purposes of answering the questions as to whether the applicant had title to PL 72 and 73 after 26th April 2000 that on the 30th March 2007 the Honourable The Minister of Mines, adopted the position of cancelling PLs 72 and 73 of the applicant’s, subject to the right of the applicant to obtain an element of natural justice, by having what is now the Land Court confirm or reject his decision.
The applicant submits that, because cancellation presupposes title to exist at the time of cancellation:-
(a) Titles to each of PL 72 and 73 existed as at 30th March 2007 when the Ministers letter of cancellation letter was written or
(b) Titles existed as at 10th April 2007 when the letter was received or
(c) Titles existed when the applicant filed, within time as specified by the said Ministers letter: Key Document 42; his application to what is now the Land Court in Matter PGC 00086 of 2007 or
(d) Titles existed when a stay was granted to determine these proceedings or
(e) Titles exist until the Land Court finds that the Minister was justified in cancelling them on 30th March 2007 or(f) alternatively titles exist because of the Land Court’s Powers, as set out, under section 109 of the Petroleum Act 1923; until the Land Court makes some alternative proposal to the Minister who is the original decider to cancel these or
(g) The Land Court fails to confirm these cancellations: in which the titles will simply continue to existIn respect of each of these alternatives the fact is that the applicant’s titles to each of PL 72 and 73 continued to exist until at least until 30th March 2007: so the answer to the Question is Yes.
POSITION OF QUEENSLAND GAS COMPANY.
Queensland Gas Company Limited proposed these separate Question proceedings, which the applicant opposed as the question could not arise because QGC could not stand in the shoes of the Minister and alter what amounts to his terms of reference to the Judicial Power, which, in these matters, is the Land Court standing alone. This argument and the fact that the applicant had no power or control under QGCs outline of arguments and contentions (as answered in the applicant’s sworn EXHIBIT 16) still stands as he had not the power and control to make the Department of Mines and Energy accept or reject the various further development plans which the applicant tendered in evidence, one after the other, towards the end of Mr. Kozak’s examination by the applicant as his witness. Thus that circumstances existed which were beyond his power and control to spend money on the PLs (which, averaged would have been far in excess of $1,550 per tenure year per square kilometre for all of the period 1995 – 2007) is attested to by the evidence of Mr. Kozak; e, g. that a later development plan with some 10 wells at some $400,000 per hold was among those simply not answered by the Department of Mines and Energy.
The applicant submits that Queensland Gas Company Limited, on the 27th April 2007, acted entirely improperly in putting through its council a false question which was tantamount to having the applicant declare to the Land Court that he was a criminal. The applicant adopted the policy, as he always has, that the document should go in before the Court but he was perplexed by the question which concerned some dates. In the witness box the applicant rechecked the dates then the words put to him by QGC’s barrister. These words were not those quoted by the barrister because the applicant had attested in the document concerned not that XLX N.L. had No assets but that it had ‘No assets net’, which was entirely true and a proper thing to say.
Upon the applicant finding this he declared what he had attested to was proper. Counsel for QGC went white in the face and tried to argue on. The applicant then said he could read his own writing. The Counsel concerned then went on to mount an attack on the applicant which was tantamount to saying that the applicant was paranoid about PLs 72 and 72. In all that time the counsel for QGC was staring at me with a white face and offered no apology to any entity for his behaviour.
On each of the occasions I have been concerned in matters with the counsel concerned I have had complaints about his behaviour, which, I think, was improper, as it was designed towards victory regardless: as I have observed in life before those people who accuse others of a specific type of behaviour are really specifying what they themselves really are.
The above constitutes all that I have had time to set out in relation to the QGC’s submissions. I have read these but I think none seem germaine to answering in law the question put.”
Submission of QGC
Mr McKenna SC and Mr Kelly of Counsel provided the Court with extensive written submissions as well as oral submissions. In general terms, the submissions by Mr McKenna are consistent with those made by Mr Sheahan for the Minister.
Counsel for QGC provided a useful short synopsis of their submissions in the following terms:[12]
“ PART III: SYNOPSIS: THE ANSWER TO THE QUESTION IS ‘NO’
QGC submits that the separate question should be answered in the negative essentially for these reasons:
(a)The only petroleum leases held by Mr Sykes were PL72 and PL73;
(b)Those leases were written and expressed to be for a term of ‘Five years to be computed from the Twenty-seventh day of April, 1995’;
(c)Each of those leases expired on 26 April 2000;
(d)At the time of their expiry, Mr Sykes had no entitlement to a renewal of either lease;
(e)There has in fact been no renewal of either lease.”
[12] Submissions of QGC paragraph 48.
As noted earlier, Counsel for QGC also sought specific findings as to credit against Mr Sykes. I have already dealt with that issue. Further, QGC seeks an order that Mr Sykes pay its costs.
Determination
In considering the submissions made by each party with respect to the preliminary question, a convenient starting point is the reply by QGC to the statement of facts and contentions by Mr Sykes. By its reply of 23 November 2007, QGC sought to identify the issues which have been raised by Mr Sykes in his documentation.
The issues identified by QGC were as follows:
Issue 1 - duration of lease
Issue 2 - compliance with lease 1995-2000
Issue 3 - lodgement of new program and nomination (2000)
Issue 4 - payment and acceptance of rent
Issue 5 - effect of Minister’s decision
Issue 6 - relevance of the registerThe “development plans” argument as raised by Mr Sykes and articulated by Mr Sheahan in his submissions on behalf of the Minister is addressed under issues 3 and 4.
I will now deal with each of the above issues in turn.
Issue 1 – duration of lease
Although the question of the duration of the original PL 72 and PL 73 was the subject of much evidence before the Court, at the end of the day Mr Sykes in his written submissions has indicated that he agrees with the submissions of Mr Sheahan for the Minister in this regard.
PL 72 and PL 73 both speak for themselves. With respect to both petroleum leases, they were granted by the Governor-in-Council for five year terms from the date of the grant, which was 27 April 1995.
Issue 2 – compliance with lease 1995-2000
As at 27 April 1995, the Petroleum Act 1923 provided for the renewal of a lease in the following terms:
“Entitlement to renewal of lease
31A.(1) The lessee of a lease who has substantially complied with this Act, and the terms and conditions of the lease, in relation to that lease, at the expiration of the lease, is entitled, subject to subsection (2), to a renewal of the lease.
(2)A lessee referred to in subsection (1), before the expiration of the lease, is to—
(a) declare whether deposits of petroleum, that the lessee believes on reasonable grounds to be payable, exist within the land the subject of the lease; and
(b) lodge with the Minister a proposed program for producing petroleum from any field within the land.
(3)The renewed lease must be for a term no longer than the period nominated (with reasons for the nomination) by the lessee as an appropriate term for producing in an economically viable way the petroleum from the fields within the land the subject of the lease.
(4)The law relating to the amount and payment of royalties and of rent in force at the time of renewal applies to the renewed lease.”
It should be noted that, although s.31(A) of the Petroleum Act was renumbered, as at 26 April 2000 (being the end of the five year term of the leases) s.45 of the Petroleum Act, the renumbered s.31A of the Petroleum Act and was in identical terms to that as in force as at the commencement of the leases.[13] For simplicity, where there have been no substantive amendments to relevant legislation between the date of commencement of the lease and the expiration of the five year term, I will refer to the sections of the Petroleum Act by reference to the section numbers as in force as at 26 April 2000.
[13] See Petroleum Act 1923 reprint no. 4.
The provisions of s.45 are clear. So far as Mr Sykes is concerned, provided he has substantially complied with the Petroleum Act and the terms and conditions of each lease, then, at the expiration of each lease, he is entitled to a renewal of each lease. The clear question then arises. Has Mr Sykes “substantially complied” with the Petroleum Act and the terms and conditions of each lease?
There are a number of authorities on the meaning of the expression “substantially complied with”. As Mr Sheahan said in his submissions:[14]
“In MYT Engineering Pty Ltd v Mulcon Pty Ltd the New South Wales Court of Appeal considered the term ‘substantially complied’ in the context of a requirement again under the then Corporation Law, for the execution of a deed of company arrangement within 21 days of the meeting of creditors. Section 445G(3) provided that the court may declare a deed to be valid despite a contravention of that Part of the statute, if satisfied that the provision was substantially complied with.
The majority considered that the requirement for execution was not one which could be substantially complied with. Either the deed was executed within time or it was not.”
Mr Sheahan then went on to consider the judgement of Handley JA in MYT Engineering where His Honour considered a number of other authorities which, in effect, referred to whether or not there had been substantial compliance in any given matter as being a question of degree.
[14] At paragraphs 24 and 25.
I note that the decision of the New South Wales Court of Appeal in MYT Engineering was overturned by the High Court.[15] Unfortunately, I am unable to find any notation of any of the parties taking me to the High Court decision in MYT. Although the High Court overturned the New South Wales Court of Appeal decision in MYT by majority,[16] the majority did so on the basis of reasons not related to the substantial compliance argument. Justice Kirby in his dissenting decision also proposed orders that the decision of the New South Wales Court of Appeal be set aside. Further, as His Honour put it, he arrived at that conclusion “by a different route”[17] to that of the majority. In his reasons, Justice Kirby made a number of observations regarding the proper meaning to be applied to the term “substantially complied with”. As His Honour noted, the majority of the New South Wales Court of Appeal in MYT Engineering:[18]
[15] See MYT Engineering Pty Ltd v Mulcon Pty Ltd (1999) 195 CLR 636.
[16] Gleeson CJ, Gordron, Gummo and Hayne JJ.
[17] At page 664.
[18] At pages 660-662.
“ … concluded that a prerequisite to the application of s 445G of the Law was the lawful execution of a deed of company arrangement as a deed. Such an instrument was either executed in accordance with the Law or it was not. If it was not, s 445G was of no avail. There could not be ‘substantial compliance’ with the legal requirements of execution of a deed. Such requirements were simple, clear and important. …
I acknowledge the force of this reasoning. However, it seems to be that the correct approach was that suggested by Burchett J in Re Asset Risk Management Ltd:‘[S]ubstantial compliance is a matter of degree. What the court is concerned with is the practical effect of what has been done, which should be compared with the practical effect the legislature appears to have sought to achieve. But each case is likely to raise its own problems, and it will always be necessary to apply afresh the statutory language.’
This approach was accepted by Carr J in Federal Commissioner of Taxation v Comcorp Australia Ltd when, with the concurrence of Lockhart J, he said:
‘I should not be taken as suggesting that the matter of substantial compliance with each of these provisions is clear-cut or obvious. In each case the matter is one of degree. However my view is that, in respect of each relevant provision of the law concerned the practical effect of what has been done substantially equates with the practical effect which the legislature appears to have sought to achieve.’
By providing as it did in s 445G of the Law, Parliament recognised the fact that, in this area, slips are likely to occur including in the execution of deeds of company arrangement. Discovered belatedly and raised (as in this case) without any apparent merit by a creditor seeking to secure an individual advantage, such defaults could occasion serious inconvenience and substantial injustice and loss to the company as a whole (and to its creditors, its employees and the public). On the face of things, then, s 445G would appear to be addresses to the very kind of problem that is presented by this case. …
Whilst, upon one level, there may be no ‘doubt’ about the validity of the execution, considered apart from s 445G, the enactment of that provision, and its clear purpose, denies such an absolute approach to the question of the validity of the deed. That question must, instead, be considered in terms of the criteria provided by s 445G(3). The ‘doubt’ for which the Law provides a remedy must be tested against the dual criteria of substantial compliance with the applicable provision of Pt 5.3A and consideration of whether ‘no injustice will result for anyone bound by the deed if the contravention is disregarded’. The judicial discretion, by order, to disregard the contravention necessarily accepts that a legal contravention has occurred.
In the context, therefore, and give the purpose of s 445G of the Law, there is no reason to withhold its validating operation from slips or mistakes in the execution of a deed of company arrangement. There seems no reason of principle why the section should not apply to such a case. There is every reason why it should. As Dunford A-JA pointed out, the juxtaposition in s 445G(1) between the cases of doubt provided for, namely as to whether the deed was ‘entered into’ and as to whether it ‘complies with’ the Part, points to a construction which covers otherwise invalidating conduct in a genuine attempt to ‘enter into’ the deed by executing it within the time stipulated.”
The issue of substantial compliance was also addressed by the Land and Resources Tribunal of Queensland in the case of Mitchell Gas Pty Ltd & Ors v Minister for Natural Resources and Mines and Water & Anor.[19] In that decision, President Koppenol of the Tribunal (as he then was) made the following observations:[20]
“[8] The parties accepted that substantial compliance is a matter of degree which depends upon the facts of the particular case. That is consistent with the approach endorsed by Kirby J in MYT Engineering Pty Ltd v Mulcon Pty Ltd [1999] HCA 24; (1999) 195 CLR 636, 661 [58]. His Honour also accepted that a court is concerned with the practical effect of what had been done compared with the practical effect the legislature appeared to have sought to achieve. On that basis, minor or inconsequential departures from that which was required would be of no moment, whereas the non-performance of more material or essential requirements would be determinative.”
[19] [2006] QLRT 75.
[20] At paragraph [8].
In my view, determining in any particular case whether or not there has been substantial compliance is not necessarily as clear cut as set out by then President Koppenol in Mitchell Gas nor as quoted from the New South Wales Court of Appeal or High Court decisions in MYT. However, for the purposes of the case currently before me, the fact that the comments of Justice Kirby arise in a dissenting decision do not alter the result.
By Mr Sykes’s own submissions as set out earlier, he did not undertake drilling activities during the five year terms of each petroleum lease as he was required to do. Mr Sykes provides various reasons for his default in this regard. Further, Mr Sykes also acknowledges that the opportunity existed for him to obtain certain exemptions from the Minister with respect to his expenditure requirements, but that he never at any time sought those exemptions. At the end of the day, much of Mr Sykes’s evidence in this matter relating to substantial compliance goes to the very reasons that could properly have been placed before the Minister by Mr Sykes in seeking an exemption on expenditure. I cannot accept Mr Sykes’s submission that he did not seek the exemptions from the Minister because “it would be a waste of the department’s time and resources to pester the Minister for Mines and Energy”[21] with an application for exemption for PLs 72 and 73.
[21] Submissions Mr Sykes page 2.
Clearly, in my view, Mr Sykes has not substantially complied with the provisions of the Petroleum Act or with the terms of the leases for PL 72 or PL 73, irrespective of the test to be applied for substantial compliance. The simple fact is that Mr Sykes did not comply in any way with the expenditure requirements set out in the Petroleum Act, nor did he apply, as he was perfectly entitled to, for a Ministerial exemption in this regard.
Issue3 – lodgement of new program and nomination (2000)
As referred to earlier, s.45(2)(b) of the Petroleum Act as in force at the time that PLs 72 and 73 were first applied for and granted, and also at the time that Mr Sykes sought the first renewals of both petroleum leases, required Mr Sykes, prior to the expiration of the lease, to “lodge with the Minister a proposed program for producing petroleum from any field within the land”.
Mr Sykes contends that he has complied with this requirement pursuant to his letter to the department dated 28 February 2000. In the alternative, Mr Sykes contends that such requirements were excused by the department because the department did not ask for any such documents.
In their written submissions,[22] Counsel for QGC state that Mr Sykes’s contentions fail because:
[22] Paragraph 95.
“(a)by letter dated 17 February 2000, the Applicant was provided with a copy of s.45 and asked to comply with it;
(b)the only response from the Applicant prior to 26 April 2000 was a letter sent on or about 28 February 2000;
(c)this letter did not satisfy the statutory requirements;
(d)there was simply no period nominated as an appropriate term for producing petroleum – merely a request for another five years, with no suggestion that petroleum would be produced within that time frame;
(e)nor was there any ‘proposed program for producing petroleum’ – the letters merely advising that the wells would remain undeveloped unless there was a change of events.
(f)if the statutory requirements are not satisfied, the Applicant cannot avoid the consequences by complaining that the Department did not advise him that the requirements had not been satisfied.”
I do not agree with QGC’s submissions in this regard. Both the evidence of Mr Kozak and of Mr Sykes is consistent on the point that Mr Sykes never received any reply to his correspondence dated 28 February 2000.
Of course, it is clearly open to argument whether or not the program supplied by Mr Sykes on 28 February 2000 was consistent with the program required under the Act. In this regard, there is clearly an element of “degree” as to whether or not Mr Sykes has complied, or substantially complied, with this requirement. I note in particular that the Petroleum Act, as at 28 February 2000, contained the following provision:
“Compliance with and modification of program for development and production
50.(1) The lessee must comply substantially with the current program for development and production of petroleum lodged with the Minister under section 40(2)(b) or 45(2)(b) or subsection (2).
(2) The lessee may, from time to time, lodge with the Minister a program in substitution for that program.”
Of course, s.45(2)(b) was the section under which Mr Sykes provided his proposed program. Does this program substantially comply with the Act? I note that, not only did s.45(1) refer to substantial compliance with the Act, but also s.50(1) referred specifically to substantially complying with the program. The issue of substantial compliance in this matter is therefore double headed. It is sufficient for a holder of a lease to substantially comply with a program pursuant to s.50(1) and then that program, which may be found to have been substantially complied with by the lessee, itself is then subject to evaluation as to whether or not the lessee has substantially complied with the Act pursuant to s.45(1).
The situation with respect to the program lodged by Mr Sykes on 28 February 2000 is, in my view, different to that of the expenditure requirements required for substantial compliance as discussed above, not only because of the wording of s.50(1) of the Act, but also in light of the Minister’s letter to Mr Sykes dated 17 November 2006.
The Minister’s letter of 17 November 2006 was attached to a briefing note to the Minister. That briefing note is numbered M106/08343 and has a date in the top right hand corner of the first page of 13 November 2006. The background to the briefing note makes reference to the Department’s letter of 17 February 2000 to which Mr Sykes replied on 28 February 2000. The briefing note states that “the holder responded to the letter addressing all the issues, however, no further action was taken by the Department to validate and assess the applications any further”. In the issues part of the Ministerial briefing note, it is noted that the proposed development plan for the renewal period is “heavily dependent on favourable economic and market conditions, and it is possible that no development or production will occur during the proposed renewal period”. The next issue on the briefing note sets out that pursuant to s.47(d) of the Act, a lessee is required to work the land demised by the lease in good oil field practice unless an exemption or partial exemption is granted. The briefing note further states that “however, to date no work has been done on the leases to extract petroleum and no exemptions have been sought”.
When the Minister’s letter to Mr Sykes of 17 November 2006 is carefully considered in light of the underlying facts referred to earlier in this decision and the contents of the briefing note of 13 November 2006, the Minister’s intentions as conveyed in his letter of 17 February 2006 become clearer. The Minister stated four grounds for proposed non-compliance action against Mr Sykes. Ground 2 was that the lessee must comply substantially with a current program for development production, pursuant to s.50(1) of the Act. Interestingly, the Minister’s letter then goes on to refer to the development plan as at 1995, and notes that no development or commercial production has occurred on either of the petroleum leases. It is significant that the Minister’s grounds do not include failure to provide a program for the renewal of the lease as Mr Sykes claims to have done by his letter of 28 February 2000. This situation is in marked contrast to ground 4 of the Minister’s letter of 17 November 2006 which refers specifically to the expenditure requirements under s.48(1) of the Act, noting that Mr Sykes did not meet the expenditure requirements for production with respect to either lease, and further noting that Mr Sykes did not make application for any exemption from this condition.
As regards issue 3, I am therefore of the view that on the bare evidence currently before me, there is evidence that Mr Sykes did lodge a development program pursuant to s.50(1) with respect to his renewal application pursuant to s.45(2)(b). In order for this Court to determine that the provisions of both s.50(1) and s.45 have not been substantially complied with by Mr Sykes with respect to this specific issue, much more evidence would be required before I could be satisfied, objectively, that Mr Sykes neither substantially complied with the Petroleum Act by lodging the program that he lodged in support of his application for renewal of the leases, or that the Minister, as evidenced by his letter of 17 November 2006, has given any specific consideration to the question whether or not Mr Sykes has substantially complied with his requirements in this regard.
Issue 4 – payment and acceptance of rent
This issue relates to a claim by Mr Sykes in effect that the department acknowledged that his leases remain in existence post 26 April 2000 by accepting payments of rent with respect to both petroleum leases. Mr Sykes also points to his payment of local authority rates with respect to both petroleum leases subsequent to 26 April 2000.
One can certainly sympathise with Mr Sykes for drawing the conclusion that both leases were renewed or, at the very least, going through a process of renewal at the time that Mr Sykes made his rent payments to the department. However, unfortunately for Mr Sykes, consideration of factors such as this after the relevant period of the leases is, in effect, a classic case of attempting to ‘pull one up by one’s own boot straps’. As submitted by QGC, the basic proposition at law is that, post 26 April 2000, the leases either existed or they did not. Mr Sykes either had continuing rights to enter on the areas of each lease and extract petroleum products from the lease areas pursuant to the leases post 26 April 2000, or he could not. The acceptance or non-acceptance by the department of rental payments cannot alter this position.
As Counsel for QGC pointed out,[23] what is involved in renewing a petroleum lease is the performance of a duty or exercise of a discretionary power according to law. In this regard, I note the decision of Mason CJ in Attorney-General (NSW) v Quin:[24]
“The Executive cannot by representation or promise disable itself from, or hinder itself in, performing a statutory duty or exercising a statutory discretion to be performed or exercised in the public interest, by binding itself not to perform the duty or exercise the discretion in a particular way in advance of the actual performance of the duty or exercise of the power….accordingly, it has been said that ‘a public authority…cannot be estopped from doing its public duty.’ ”
[23] At paragraph 109 of their submissions.
[24] (1990) 170 CLR 1 at 17.
I also agree with the contention of Counsel for QGC that, to recognise the payment and acceptance of rent as giving rise to an entitlement to a petroleum lease in the present case would be tantamount to permitting a departmental officer to override a law of the Parliament.[25]
[25] See Collector of Customs v Palmer Steel Trading [2003] QSC 434 at [7].
In my view, the contentions made by Mr Sykes with respect to issue 4 do not further or assist his argument that PLs 72 and 73 continued to exist subsequent to 26 April 2000.
Issue 5 – effect of Minister’s decision
As can be clearly seen from Mr Sykes’s written submissions set out earlier, Mr Sykes is of the view that the Minister, by his proposal to take non-compliance action against Mr Sykes as holder of PL nos. 72 and 73 by his letter of 17 November 2006, was acknowledging that the said petroleum leases remained, at least at that date, in existence. Mr Sykes’s submissions in this regard are enhanced by the Departmental letter to him dated 12 March 2007 which enclosed public enquiry reports for the petroleum leases and noted that “as you can see by the reports, you are the current 100% holder for PLs 72 & 73”. Furthermore, by letter dated 30 March 2007, the Minister advised Mr Sykes that he had “decided to take non-compliance by cancelling petroleum lease nos. 72 and 73 in accordance with section 80Y of the Act and hereby give you this information notice regarding my decision in accordance with section 80Z of the Act”. The Minister’s letter went on to refer Mr Sykes to his right of appeal against the decision, and his right to seek a stay of the decision through what was then the jurisdiction of the Land and Resources Tribunal.
Acting in accordance with the Minister’s letter of 30 March 2007, Mr Sykes commenced proceeding no. PGC86/2007 in the Land and Resources Tribunal. The record shows that Mr Sykes appeared before then President Koppenol of the Tribunal on 3 May 2007 and sought orders for a stay of the Minister’s decision with respect to each petroleum lease. On 3 May 2007, President Koppenol ordered that:
“a stay of the Minister’s decision, as conveyed in his letter dated 30 March 2007, is granted until the determination of the appeal or further order of the Tribunal”.
Although Mr Sheahan did not directly address this issue in his written submissions on behalf of the Minister, he had the following to say in his oral submissions:[26]
“Well, one must look at what non-compliance action is expressed to do and the non-compliance provisions deal with the Minister’s entitlement to take non-compliance action in respect of a 1923 tenure holder, including cancelling the lease. Now Mr McKenna’s submissions on that point, with which I agree, are that a lease could mean there may be a lease in existence, but no right to occupy or other rights to exploit the resource. I agree with that. There’s a certain element of room to import common law principles involving these types of tenures. It’s limited, but there is, nevertheless, some – in terms of construing particular provisions, there is room to import common law principles into these types of questions.
So there is a lease in existence. The lease is in existence, but only, in my submission, in respect of the fact that Mr Sykes is the holder of the lease. As far as the Act is concerned, has been named on the register as being the holder of the tenure. That’s as far as his rights extend, in my submission.”
In their written submission, Counsel for QGC submitted that, firstly, that it is a matter of objective fact whether or not Mr Sykes had substantially complied with the provisions of the Petroleum Act and the leases and was thus entitled to a renewal and that, if as a matter of objective fact, the Petroleum Act and the conditions of the leases had not been substantially complied with, “then Mr Sykes simply has no right to a new lease – and the Minister has no statutory powers which can affect this position”.[27]
[26] Transcript, day 3, page 34.
[27] Submissions Counsel for QGC paragraph 117.
Counsel for QGC make out a number of other submissions as to why Mr Sykes’s contentions regarding the effect of the Minister’s notice cannot be relied upon, including the fact that for a lease to be renewed, a discretionary decision is required to fix the duration of the new term for the renewed lease, and in the current circumstances no such term for a new lease has been fixed which, in QGC’s submission, must be a function of the Governor-in-Council. QGC also submits, inter alia, that the right to determine whether or not the preconditions to renewal of the leases has been met is not vested by statute exclusively in the Minister. In QGC’s view, any relevant court or tribunal with the requisite jurisdiction can determine this question and, accordingly, the Land Court has jurisdiction.
Counsel for QGC have made the following further written submissions regarding the Minister’s decision to cancel the petroleum leases as follows:
“The fact that the Minister has decided to cancel the same tenures simply does not affect the position because: …
(c)the Minister, in any event, has no statutory power to override the requirements of s.45 of the Petroleum Act 1923 (Qld). If, objectively speaking, there is no right of renewal, then the Minister’s decision cannot change the position and create a right which had not previously existed.
(d)However, the Minister does have power to cancel leases, even after the term of the lease has expired. This is because:
(i)s.80S(1) of the Act provides that Part 6P ‘provides a process for non-compliance action against the holder of any 1923 petroleum tenure’.
(ii)The term ‘holder’ is simply defined to mean the ‘person recorded in the petroleum register as its holder’.
(iii)A person does not cease to be a ‘holder’ merely because the term of their petroleum lease has expired. They remain a holder whilst their name remains on the register as a ‘holder’ – albeit as one which is ‘non-current’.
(iv)Thus these provisions provide a convenient way for holders to be removed from the register. It also allows action to be taken against lessees for failure to comply with obligations which persist after the actual term of the lease has expired (eg. dealing with petroleum products).
(v)Put differently, the decision to cancel a tenure for non-compliance does not have the rather paradoxical and absurd result of creating a tenure which does not exist.
(e)Alternatively, if it is found that the Minister simply does not have power to cancel a lease if its term has expired, then (as the Applicant has alleged in its pleadings), the decision is simply void.”
A close examination is required of the above submissions by QGC, as well as the oral submission by Mr Sheahan referred to above that currently, there are leases in existence, but only in respect of the fact that Mr Sykes is the holder of such leases. On their face, such submissions could be taken as necessitating an answer of “yes” to the preliminary question.
The term holder as referred to by both Counsel for the Minister and for QGC is defined in s.2 of the Petroleum Act 1923 in the following way:
“Holder, of a 1923 Act petroleum tenure means each person recorded in the petroleum register as its holder.”
Relevantly, however, the definition of holder was only inserted into the Petroleum Act by Act no. 26 of 2004, s.4(2). Prior to such amendment, no legislative definition of holder was to be found in the Petroleum Act. The amendment of course postdates the term of petroleum leases 72 and 73 by a period of four years.
In my view, the form of the Petroleum Act as at the grant of the petroleum leases and at the time that Mr Sykes sought the renewal of the petroleum leases, and at the time that the term of such leases came to an end, is crucial. The Petroleum Act at those relevant dates consistently referred to the person or entity who received the grant of a lease as either “the lessee of a lease”[28] or as the “lessee”.[29]
[28] See, for example, ss 45(1), 46(1).
[29] See, for example, ss 45(2), 47, 48, 49, 50, 51, 52 and 53.
During the term of the petroleum leases, the Petroleum Act provided the following definition of lessee:
“Lessee, means the holder of a petroleum lease.”
Clearly, in my view, if Mr Sykes has not substantially complied with the provisions of the Act and his leases, then: he is unable to satisfy the prerequisites for renewal of his leases; his leases cannot be renewed; and subsequent to 26 April 2000, he is no longer the holder of a petroleum lease and is therefore no longer a lessee as defined and referred to in the Act. As at 27 April 2000, the definition of holder referred to by Counsel for QGC and the Minister was not in existence, and accordingly there was no tie, in a statutory sense, of a holder by definition to the petroleum lease register. In short, the Minister had no power to cancel the leases as he purported to do by his letter of 30 March 2007 as Mr Sykes, subsequently to 26 April 2000, ceased to be the lessee of the petroleum leases and accordingly never could become a holder of a petroleum lease as defined in 2004.
Issue 6 – relevance of the register
Mr Sykes contends that the continued existence of the references to PLs 72 and 73 in the departmental register prove the existence of his tenures. I have substantially dealt with this issue in a number of the issues referred to above, as well as in the findings of fact that I have made. For completeness, I again note that for both petroleum leases 72 and 73, the register notes the leases as having the status of GRANTED, with the sub-status of RENEWAL LODGED. I further note that the register refers to each lease as date non-current: 26-Apr-2000.
I agree with the submissions made on behalf of the Minister and QGC that, as a matter of law, mineral and petroleum statutes provide for registration of title rather than title by registration.[30] Accordingly, the continued existence at a department level, of the register references to petroleum leases 72 and 73 do not assist Mr Sykes. Had the terms of Mr Sykes’s original petroleum leases extended past the date of amendment of the Petroleum Act in 2004 when the definition of holder was inserted into the Act, Mr Sykes may indeed have had legislative support for his contentions. That situation however, is not the case. There is nothing in the 2004 definition of holder to indicate that that definition was intended to operate retrospectively with respect to leases that have expired prior to that date. Indeed, if that were the case, what I expect is a very large number of petroleum leases granted since the coming into existence of the Petroleum Act in 1923 and which have long since expired, would be caught up in the new definition of holder. Certainly, had Parliament intended that such expired leases were to afford the defined rights of a holder of a petroleum lease as defined in 2004, then Parliament’s intention of such retrospectivity would have been clearly spelt out. I note that neither the explanatory memoranda nor the Minister’s second reading speech provide any support for such a contention as regards the 2004 insertion of the definition of holder.
[30] See Crommelin, M “Mining and Petroleum Titles” (1988) 62 ALJ 863 at 876.
Conclusions
After this lengthy examination of the facts and law relevant to petroleum leases 72 and 73, it is my view that, looked at objectively, and as conceded in effect by Mr Sykes, Mr Sykes did not substantially comply with the provisions of the Petroleum Act or the terms of the lease insofar as he was required to expend a set amount per annum with respect to each petroleum lease or, in the alternative, to obtain an exemption from the Minister in that regard. Mr Sykes neither expended the required amounts on a program of drilling, nor sought an exemption from the Minister. Accordingly, in my view, looked at objectively, the pre-condition essential for renewal of each lease was not met. Accordingly, on a strict interpretation of the Petroleum Act 1923 as in force at the time of expiry of the original term of each petroleum lease, the petroleum leases could not be renewed. Accordingly, as at 27 April 2000, Mr Sykes was no longer the lessee of either petroleum lease, those leases having expired on 26 April 2000.
Further observations
Although the conclusions I have reached under the proceeding heading effectively bring these matters to an end, nonetheless I consider it appropriate to make some observations regarding the conduct of the Department and the Minister in considering, or perhaps more correctly the long time period of failing to consider, Mr Sykes’s applications for renewal of his leases.
It is appropriate that I refer to the closing oral submissions of Mr Sheahan for the Minister[31] as follows:
[31] Transcript, day 3, pages 40-41.
“MR SHEAHAN: Well the question is whether or not the Minister had any right to consider whether or not to grant a renewal. He’s not vested with that power under the Act.
MR SMITH: Well, who is?
MR SHEAHAN: No-one.
MR SMITH: How can you say ---
MR SHEAHAN: In my submission there’s ---
MR SMITH: See, that gets back to the key question, then, of how you have a renewal. How has any other petroleum lease ever been renewed in the State? If it’s only been by way of the Minister writing a letter saying ‘your lease is renewed’ ---
MR SHEAHAN: The only evidence on that is Tania Cooney’s. I accept QGC’s position that there is a fresh grant by the Governor-in-Council
MR SMITH: I understand your hesitancy because probably there are a lot of renewals sitting out there that haven’t gone that way.
MR SHEAHAN: That’s not the basis of it. My hesitancy is because I’m looking at the four corners of the Act. I can’t see that and I can’t submit that. That’s not my submission and I have no instructions to make that submission. That is the process. But QGC makes that submission and I’m not saying it’s wrong. But Tania Cooney simply gives the evidence of there would have been an endorsement on the Instruments of Lease if there had been a renewal. As best as I can appreciate the situation, an application for renewal is made to the department. It is assessed by someone to see whether there is compliance of s.45 and a decision is made. There is no power, then, in any nominated individual under the terms of the Act to grant a renewal. The effect, in my submission, is that, administratively, the department in administering this Act, there are then endorsements on the lease and presumably the applicant is notified that the leases have been renewed for a further term of five years. That is my presumption based on what Ms Cooney says, but I can’t point to a provisions in the Act where anyone has any particular power to grant a renewed lease or grant a renewal or anything of that nature. The only provision for the grant of a lease is governed by now s.40 – that is, the Governor-in-council has a vested power to grant a lease. If QGC’s submission is accepted, then presumably that might be the consequence for a decision made to renew the lease.
MR SMITH: If you have a statutory right of renewal, that right of renewal can be up to 30 years, I gather, dependent upon the programme that is put in for the works. So are you saying that, in effect, the statute says nothing about the decision making process on that application so there would be no way, following the Act, for anybody to actually search to find even the term of the renewed lease?
MR SHEAHAN: No, in my submission. It would be recorded on the register. If a decision was made, it ---
MR SMITH: But prior to 2004 it wouldn’t have to be recorded on the register.
MR SHEAHAN: No. I can’t answer the question as to what was the process within the department prior to 2004.
MR SMITH: And we are looking at 2000.
MR SHEAHAN: We are from the prospective of substantial compliance. I can’t answer the question in terms of what was the process as at 2000, but ---
MR SMITH: One can hardly blame Mr Kozak for not knowing what to do.
MR SHEAHAN: No. His evidence was as to the unclarity of the situation. There are no documents that I can recall put into evidence recording what the situation was immediately post what we say is the expiry of the leases on 26 April. There’s no recoding of ‘They’ve expired now. We’d better do something.’ or any recording of what was going on in the department. We’re left to speculate about that, but that shouldn’t be the subject of any findings, in my respectful submission. The situation should be confined to the question of substantial compliance and the clear effect of the Act.”
I agree with Mr Sheahan’s submission that it is not appropriate for me, in determining the preliminary question, to speculate about what did or did not occur internally in the Department or in the office of the Minister as a consequence of Mr Sykes’s applications for renewals of his leases. However, I am left in little doubt that the failure of the Department to respond for a period of some seven years to Mr Sykes’s original applications for renewal of the leases received by the Department on 22 December 1999 is totally unacceptable, on any objective view. The Department and the Minister clearly had a responsibility, in administering the legislation, to respond to Mr Sykes’s applications for renewal in a timely fashion. Moreover, not only has the Department accepted rent from Mr Sykes during those intervening years, but Mr Sykes has also paid local authority rates. He is clearly entitled to a refund of his rental payments and his rate payments and, I expect, any other payment expended by him in that regard. Additionally, the fact that the Minister took so long to consider Mr Sykes’s applications for renewals, and, when action was ultimately taken, the Minister, in error, proceeded to treat Mr Sykes as a holder of a petroleum lease as defined by the 2004 amendments, caused to be set in motion a sequence of events which quite understandably led Mr Sykes to commence his proceedings against the Minister (as the Minister advised him he was entitled to do), and even to the extent of having the then Land and Resources Tribunal grant a stay of the Minister’s decision.
Whilst it is not my function for the purposes of this decision to make findings or to speculate as to the reasons behind the omissions by the Department and the Minister with respect to Mr Sykes’s applications, nonetheless in my view sufficient questions arise so as to warrant the referral of my decision in this matter to the Honourable the Attorney-General for investigation and possible action, if the Honourable the Attorney-General considers it appropriate, as to whether or not any improper conduct or misconduct has occurred with respect to the handling, or lack of action in handling, Mr Sykes’s renewal applications.
Orders
1. As to the preliminary question “whether or not at any time after 26 April 2000 the applicant had subsisting tenure or the right to tenure in the area of a subject petroleum leases nos. 72 and 73?”. Answer: No.
2. In light of the answer to the preliminary question set out in order 1, it is ordered that actions PGC86/2007 and PGC114/2007 be dismissed.
3. I direct the Registrar of the Land Court to provide a copy of these reasons to the Honourable the Attorney-General, drawing particular reference to my observations set out in paragraphs [86] to [89] above, as to whether or not there has occurred any improper conduct or misconduct regarding the handling of Mr Sykes’s lease rental applications..
4. I will hear from the parties with respect to costs.
P A SMITH
MEMBER OF THE LAND COURT
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