Warwick Brick Works Pty Ltd v Dollar

[1994] QLC 51

[1994] QLC 51

 

 

LAND COURT

BRISBANE

26 August, 1994
Re: Appeal under Mineral Resources Act 1989 -
  Section 7.39.
  MC93-2.

Warwick Brick Works Pty Ltd
  v.
  Muriel M Dollar

D E C I S I O N

This is an appeal under the Mineral Resources Act 1989 (the Act) by Warwick Brick Works Pty Ltd (the applicant for a mining lease) against the determination of the Mining Warden of compensation payable for the grant of a mining lease over an area of land in the fee simple ownership of M M Dollar (the respondent in these proceedings).
           The application for a mining lease was lodged with the Mining Registrar's office on 3 November, 1992.  The lease was sought for the purpose of mining clay shale.  The application covered an area of 7.36 hectares situated in Lot 588, Lot 1882 and Lot 2214, County of Merivale, Parish of Rosenthal.  Lot 588 is in the ownership of the respondent.  The remaining lots are in the ownership of the applicant or subject to existing compensation agreements.  The subject application (No 50065) includes an area, the subject of an existing lease, conditionally surrendered pending the grant of a lease pursuant to the present application which was granted for a term of 21 years expiring in the year 2001.  This former lease (ML 6011) included an area of .749 ha of Lot 588.  The application extends that area by 1.219 ha to 1.968 ha.  The term of lease applied for and recommended by the Warden is 50 years.  The location of the area applied for and its location within Lot 588 are shown on Annexures A and B which were taken from the determination of the Warden and the report and valuation written by Mr R G Brown, registered valuer, put in evidence in these proceedings on behalf of the respondent.  On hearing the matter the Warden determined compensation in the sum of $11,000 and ordered that compensation be paid as follows:

"(a)the sum of $2200 within 60 days of the notification of grant of the lease by the Hon. the Minister; and

(b)the balance in equal annual instalments of $2200 on the anniversary of such date over a period of four years, together with interest at the rate of 9% on the balance of the compensation outstanding.

If the applicant miner elects to pay the compensation as a lump sum (in which case interest will not accrue), such payment of the lump sum shall be within 60 days of the notification of grant of the lease by the Hon. the Minister.  "

He further ordered that the applicant miner pay the respondent's costs in the sum of $712.
           In those proceedings neither party tendered express valuation evidence.  With leave of this Court such evidence has been tendered through Mr Brown for the respondent and through Mr A H Ott, registered valuer, for the appellant.
           The assessment of compensation made by Mr Ott is in the sum of $2,500 representing in simple terms a loss of 2 hectares of land valued at $1200 per hectare.  The assessment made by Mr Brown on a "before" and "after" method of valuation resulted in an assessment of compensation in the sum of $13,627 plus disturbance items.  As I find it necessary to speak to this valuation, I set out the workings in full.
           Before Valuation

- 91.36 hectares @ $1,200 per hectare  $109,633
           - Mining Lease 6011 area
  Land  0.749 hectares @ $1,200 per ha    $   900
  Dam   10,000 cubic metres say  $10,000
  $10,900

Present value of $19,900 in nine years

@ 10% (0.42410)  $  4,620
           - Dwelling  $ 20,000

Before Value of Property  $134,253

After Valuation

- 90.142 hectares @ $1,140/ha  $102,762
           - Mining Lease 50065
  Land  1.968 ha @ $1,140/ha  $ 2,243
  Dam  $10,000
  $12,243
             Present value of $12,243 in 50 years
             @ 10% (0.00842)  $103
           - Dwelling (depreciated 5%)  $19,000
           After Value of Property  $121,865

Loss  -  $134,253 - $121,865  $12,388

Plus Statutory Items
  Under Section 7.38 (4) paragraphs (c) and (e)
  assessed @ 10% of $12,388  $  1,239
  $13,627

Lot 588 has an area of about 92.11 hectares.  The lot is situated about 9 kms south-westerly of Warwick with frontage to the New England Highway on its northern extremity.  The lot is used for rural residential and/or hobby farm purposes and possesses a carrying capacity in the opinion of Mr Ott of about 20-25 breeder cattle.  The home is situated in the northern area (refer Annexure B) and about 800 metres from the mining pit.  The home was moved onto the site by the owner who purchased the land in 1983 and she is presently adding to it and converting it into a place for retirement.  Water facilities on  the lot comprise a dam and an equipped bore, both situated in the northern area.  From the position of the home the land rises to the pit area which area is accepted as inferior land timbered with narrowleaf ironbark and black wattle.  A photograph tendered in evidence shows that the pit is visible from the home through trees but not starkly visible - using my own terminology.  Mr Ott was of the opinion that with the location of the mine on the boundary; with access from the highway through land in the ownership of the applicant miner and with the mine being situated on poorer quality land with no effect on  the carrying capacity of the lot and some 800 metres from the home, the effects of the granting of the lease would account for no greater loss than the loss of 2 hectares of land.  He conceded that when mining operations ceased the pit area (spread over land owned by the miner and the respondent) could provide a water facility which could enhance the value of the lot.  Mr Brown took the view that with the period for which mining may take place being extended and over a greater area, the property (both land and home) was diminished in value by 5%.  He viewed the pit as providing on cessation of mining a water hole which at the date of application (1992) would possess an added value of $10,000, assuming that it was then available to the owner of Lot 588.  His calculation follows by taking the present value of that sum deferred for 9 years in the "before" valuation at 10% and deferred for 50 years in the "after" valuation at the same interest rate. 
The Court has held that the granting of a lease for mining purposes is in the nature of a compulsory acquisition of land for a limited period and that the various principles and practices of valuation applied in determining compensation for the taking of land under the Acquisition of Land Act 1967 (the Acquisition Act) are applicable in the assessment of compensation under the Act. See Smith v. Cameron (1986-87) 11 Q.L.C.R. 64. These principles find statutory expression in s.7.38 of the Act which in substance are similar to those contained in the Acquisition Act. In the latter area it is well entrenched that enhancement is a matter calling for consideration both in ascertaining the value of the land taken and as a set off or abatement of compensation where severance and injurious affection is involved. See Pointe Gourde Quarrying and Transport Company Limited v. Sub-Intendent of Crown Lands (1947) A.C. 565; Melwood Units Pty Ltd v. Commissioner of Main Roads (1978) 5 Q.L.C.R. 145; and Zoeller v. Brisbane City Council (1973) 40 C.L.L.R. 198.  Thus it is reasonable to conclude that the possibility or probability of a water point arising and benefiting a property on cessation of mining is a matter which may be considered as a set off or abatement of compensation payable under the Act.
           In the subject case there is evidence as to the amount of compensation paid for the granting of ML 6011.  There is no evidence as to whether in making that assessment or agreement regard was had to the issue which is now in point.  However, in the peculiar circumstances of the subject case it appears to me that it matters not whether enhancement was or was not considered as a set off or abatement of compensation in the first instance.  For the purposes of assessing compensation, the land must be taken as it exists at the relevant date - 1992 - encumbered by a mining lease which would have expired in the year 2001.  If it can be shown that the property possessed a potentiality to obtain a water point in the future, the value of that possibility or potentiality is an element for consideration.  Likewise in considering the value of the property after the grant of the lease, the subject of this application, the deferment of that possibility is an element for consideration.  Accordingly, I find that the approach taken to the assessment of compensation by Mr Brown has support in law.  The question, however, as with any assessment of compensation, turns upon the attitude which the hypothetical prudent purchaser would give to the possibilities and probabilities of obtaining in this case a water facility in years to come.  It is obvious that with the continued operation of a mining pit, the closer the lease gets to expiry the more realistic the possibility and hence its marketability.  In the "before" and "after" valuations, Mr Brown has taken an interest rate of 10% which as at November 1992 is on the verge of a return on gilt edged security.  There appears to be no allowance for risk nor for the possibility of that which has occurred (deferment) in the subject case apart from any question as to whether a purchaser of this land for rural homesite and/or hobby farm purposes would pay an added value of $10,000 for a water point.  Mr Ott seems to be of the opinion that a potential purchaser of the subject land would pay little for the possibility unless he could see some reality in it.  Foreseeability in real estate terms is generally taken as a period not exceeding ten years.  With mining leases, through volatility of markets and so forth, there is always a possibility that the operations may not run the full term nor the land finish in the form that was expected when the lease was granted.  In the subject case, a potential purchaser on making reasonable enquiry at the relevant date could have ascertained details of the extent of the resource and formed opinions upon the likelihood of those operations continuing beyond the life of ML 6011.  On the assumption that the sum of $10,000 was correct, an interest factor of 20% would bring up a present value of about $2,000 in round figures.  Even at that sum I have serious doubts as to whether a purchaser could be convinced to part with the money in the expectation of obtaining a water facility in 9 years time.  In the exercise "after" the resumption, that facility, assuming that it eventuates and has an added value of $10,000 at 1992, is given a present value of about $84.  This exercise highlights the points I have been making.  In my consideration of the matter, compensation for this heading of claim will be assessed in the nominal sum of $500.  I am satisfied, after hearing the valuers and perusing photographic evidence with opinion evidence, that with the additional area which will be used for stockpiling purposes the home would be diminished in value to the extent contended for by Mr Brown (5% of $1,000).  However, I tend to agree with Mr Ott that with the lease covering about 2% of the property and on the boundary in poorer quality country compensation for the effects on the land value of the property would be less than that contended for by Mr Brown.  I have adopted $3,500 which is roughly 3% of the value of the whole.  On these workings compensation would equate $5,000 which with an additional allowance of 10% as a reflection of the compulsory nature of the taking would yield compensation in round figures in the sum of $5,500.
           Under principles stated in Smith v. Cameron supra, legal and valuation fees incurred in the preparation and lodgment of the claim are claimable as compensation.  The Warden has determined costs in favour of the land owner in the Court below.  Legal and valuation fees incurred for the purposes of the appeal do not fall into that category.  Such costs are costs which follow the event. 
           In the circumstances, the appeal is allowed, the determination of the Mining Warden is set aside and compensation for the grant of Mining Lease No 50065 is determined in the sum of $5,500.
           Counsel for the respondent seeks an order that compensation be paid in a lump sum.  I can find no reasons to refuse the request.
           Accordingly, it is ORDERED that compensation in the sum stated be paid within 60 days of the notification of grant of the lease by the Minister.

(D.M. White)     
  President of the Land Court