Wilgarning Holdings Pty Ltd v Newage Metals Pty Ltd
[1995] QLC 48
•16 June 1995
LAND COURT BRISBANE 16 June 1995
[1995] QLC 48
Re: Appeal under Mineral Resources Act 1989.
MC93-1.
Wilgarning Holdings Pty Ltd v.
Newage Metals Pty Ltd
and
In the matter of costs
Newage Metals Pty Ltd v.
Wilgarning Holdings Pty Ltd
J U D G M E N T
These are appeals 1) by Wilgarning Holdings Pty Ltd (Wilgarning) against the determination of the Mining Warden of compensation arising from an application (ML50038) for the grant of a mining lease to Newage Metals Pty Ltd (Newage) over freehold land described as Lots 99 and 102, parish of Normanby and 2) by Newage against the order for costs made by the Warden on the hearing in the Wardens Court.
The matters came before the Court by way of appeal under the provisions of
s.7.39 of the Mineral Resources Act 1989 (the Act). Under sub-section 6 of that section, further evidence upon an appeal may be admitted inter alia if "(b) the appellant and respondent agree to its admission". In the hearing of the appeal, further evidence was received by agreement. Such evidence included an amendment of the area covered by the application; evidence from Mr DO Peacock, husband of a director of the Wilgarning, and valuation evidence from Mr RG Brown, registered valuer, who revised the valuation he had put before the Wardens Court.
Lots 99 and 102 are adjoining lots having a combined area of 109.1 hectares. The ownership of the fee simple is in Wilgarning of which Mrs DO Peacock is a director. She is "one of the Gilmours" who "operate Flinders Dolomite" - a company which is engaged in mining in the area. The land is encumbered by a mining lease (ML 4630) with about 14 years to run at the date of hearing over an area of about 28.3 hectares situated in the north-eastern corner of the combined area. The original application was for the entire area exclusive of the area under lease. The lease which is held by
"Gilmour" had not been mined at the date of hearing. The location of the lease and the areas which have been abandoned by further application are shown on annexure "A". The subject land is situated a few kilometres south of the town of Peaks Crossing and to the west of Limestone Ridges Road. The topography generally falls from a high knoll in the centre which affords 360° views. The property is improved with fencing, water facilities, dwelling and out buildings, etc. The property in the opinion of Mr Brown and not in dispute has a highest and best use for residential/hobby farming purposes.
The application which was the subject of the proceedings before the Wardens Court covered an area of about 80.8 hectares and was made for the purposes of "mining of dolomite and clay and associated purposes" and for a term of 50 years based on "estimated economic life of deposit on initial exploration estimates and drilling program (1970)". In his recommendation to the Minister upon a hearing of all matters with respect to the application, the Warden (Exhibit 8) recommended that the lease be granted for a term of 20 years subject to "the usual terms and conditions" with special conditions, one of which reads:
"3. The applicant confirm in writing the areas that will remain
undisturbed, e.g. native flora, geodetic station, improvements, dwelling etc, and confirm this undertaking in the Mine Working Plan when lodged. "
Notwithstanding that the provisions of s.7.6 of the Act protect improvements, the application as originally made remained when the Warden considered compensation. The frustration caused thereby and reflected in his decision (in the alternative) has since been removed by amendment of the application. The dwelling shed and other outbuildings are situated in the south-eastern part of the lots from which access is obtained from Verralls Road which runs easterly from the southern boundary of the property to Limestone Ridges Road. The property has been in the ownership of Wilgarning since 1974 and has been used for grazing purposes in conjunction with other land. The dwelling has been let to various tenants over the period of ownership with the current tenant paying a rental of $80 per week. The land is zoned "Rural" and the property has no electricity connected.
It is noted in the recommendation of the Warden that dolomite is inert and non- toxic; that no chemicals are used in the mining or processing of the resource; that the deposits are at ground level; that the method of mining is basically the extraction crushing, loading and transportation of the mineral and that plant currently on adjoining land (in the south-east) operated by Newage could be shifted onto the subject application area. The extent of the resource or the rate of extraction is not known.
The usual conditions referred to by the Warden have their authority in the Act -
generally in s.7.33 which are expressed in more detailed form as annexures to this ML 50038. In s.7.33, it is provided that each lease shall be subject to conditions that
(a)the holder shall use the land bona fide for the purpose for which the
lease was granted;
(b)the holder shall submit to the Minister a plan of operations as prescribed by s.7.48 "for the carrying out in accordance with this Act and the conditions of the mining lease, of the purposes for which the mining lease is granted;
(d)the holder shall undertake rehabilitation;
(e)the holder shall remove buildings etc on termination of the lease unless otherwise approved by the Minister;
(f)without prior approval of the Minister, the holder shall not obstruct or interfere with any right of access had by any person in respect of the land encumbered by the mining lease;
(m)a condition that the holder shall comply with the provisions of the Act and (such other conditions as are prescribed) and
(o) such other conditions as the Governor-in-Council determines.
The plan of operations must be submitted to the Minister not less than two (2) months before commencing operations and from time to time thereafter at intervals of no more than five (5) years or such longer period as the Governor-in-Council in granting the mining lease determines. Section 7.48(2B) provides that "the plan of operations for the time being current shall form part of the conditions of the mining lease". Failure to comply with any condition of a lease by the holder enables the Minister to cancel the lease or impose on the holder a penalty - s.7.63. It is noted in the recommendations made by the Warden that Newage holds two tenements in the immediate area and that no detailed working plan had been drawn up or was available in respect of the subject application. This position remained in the hearing of the appeal. Mr CM Jones, solicitor, who appeared on behalf of Newage described the application as being in the nature of a resource application in that one of the purposes of it was "to enable the miner to have sufficient supply to be able to enter into long-term planning of that side of his business". Hence, if the lease is granted it may be some time before a mining plan comes to the surface. This part then of the operation under the lease is speculative. I turn then to the conditions found in the annexure to the proposed lease. Apart from conditions requiring the miner to preserve access roads, fencing, waters and generally to minimise interference or disturbance to stock and the residential amenity, the conditions which were called in question were conditions 8, 22 and 23. These conditions read as follows:-
"8. Unless otherwise approved, the holder shall remove from all areas
to be disturbed (including areas for the deposition of overburden, waste rock and tailings), the surface material to a depth of one
hundred millimetres (100mm) plus any additional arable soil, and shall stockpile such surface material and arable soil separately in a manner such that it will not erode and will be available for the rehabilitation of the lease and for no other purpose.
22.The holder shall rehabilitate all mined areas, plant sites, roads, tailings and sludge dams, overburden and waste rock dumps and other disturbed areas progressively and without delay. Unless otherwise approved such rehabilitation shall aim to create a landform with vegetation and land-use capability similar to that of the land prior to disturbance, and shall be carried out by -
(a)shaping the area so that it conforms as far as reasonably practicable with the surrounding topography;
(b)reforming all drainage lines, waterways and creek beds to stable contours and as near as reasonably practicable to the situation existing prior to mining;
(c)returning any surface material or arable soil removed pursuant to Special Condition 8 herein to the contoured surface, except where that surface is frequently inundated by water flowing in a stream; and
(d)stabilising the restored areas against the natural forces of erosion, and establishing appropriate vegetation, in order that ongoing maintenance after termination of the lease is not required.
23.The holder shall ensure that the area of the lease disturbed for mining and not rehabilitated in accordance with Special Condition 22 herein at any time does not exceed five (5.0) hectares.
Much of the apprehension as to the application of these conditions in practice held by Mr Peacock and expressed in the valuation of Mr Brown, was removed in the hearing of the appeal. In the hearing before the Warden, Mr Brown formed the opinion that the property was "a write off". He thus assessed compensation at full market value of $264,300 excluding any other item of claim; i.e. the premium. In the exercise, land as improved with timber treatment, fencing and water was valued at $2,500 per hectare. The structural improvements were valued at
Dwelling $55 000 Buildings $ 1 000 Yards $ 4 300
For Newage, evidence was given by Mr S McNeilly, registered valuer, and by Mr WJ Bailey, Managing Director of Newage. Mr McNeilly finally assessed compensation in the sum of $33,000. Land was valued at a rate of $1750 per hectare. The evidence of Mr Bailey was to the effect that Newage will operate on the subject lease in a similar way to the operations conducted by Newage on adjoining land where the area worked at any one time had not exceeded 2 hectares. Basically, this and what I have recited from the Warden's recommendation was the extent of the evidence before the Warden covering the nature of the mining operations proposed to be conducted on the subject land.
Under the provisions of s.7.38 of the Act, the Court in assessing compensation is required to have regard to numerous matters such as the effects of deprivation of possession of the surface of the land of the owner. It follows that unless there is sufficient evidence of the nature and extent of the proposed mining activity before the Court, it can make no useful assessment of compensation. In the subject case, I am satisfied that there is sufficient evidence to enable the Court to gauge the effects the proposed activity will have upon the value of the land for its highest and best use.
In the period between the hearing by the Warden and the hearing by this Court, the dwelling on the property had been renovated in certain respects by re-stumping in part and replacement of the verandah and the market had risen. One recent sale relied on by Mr Brown is that of a parcel of 56.66 hectares situated in Limestone Ridges Road just to the north-east of the subject land. This land sold in May 1994 for $260,000 and resold in April 1995 for $304,000. Excluding structures on the sale land the sale showed a price of $3,530 per hectare and $3,860 per hectare respectively. On this evidence which was unchallenged in terms of comparability, Mr Brown valued the subject land ex structures at $2,750 per hectare. After hearing evidence during the proceedings of the restrictions on mining under this proposed lease (Condition 23 in particular) which does not apply in respect of ML 4630, he reviewed his assessment of compensation as follows:
Before
28.3 ha ML 4630 @ $275 = 7 780
80.81 ha Balance @ $2750 = 222 200
229 980
Structures:
Dwelling Buildings
Yards 63 000
TOTAL 290 280
After
28.3 ha ML 4630 @ 275 7 780
51.9 ha ML 50038 @ 550 28 545
28.9 ha @ 2750 79 475
115 800
Structures 30 150
TOTAL 145 950
LOSS: $ 144 330
These allowances for depreciation were the only items under challenge. They are governed by the opinion that the dominant value in the subject land lies in its rural residential site value. In the opinion of Mr Peacock, the property in an average season and as an entity would run around 60 head of breeder cattle. Not enough, in his opinion, for a living but attractive, he agrees, as an adjunct to rural residential/hobby farm usage. On a market value of $290,280 applied by Mr Brown this carrying capacity would reflect a price per beast area of about $4,800 which is sufficient to confirm his opinion as to where the dominant value of the property lay.
I turn then to the view I have taken on the evidence dealing with the nature of the operations. Photographic evidence was tendered of the operations of Newage on adjoining land. Access to the dwelling on the subject land is taken from Verralls Road winding in a north-easterly direction which continues in that direction as a farm track beside the dwelling and the hay shed. It is suggested and it seems logical to me on the evidence that access to the mining areas will parallel this access road and swing around to the north near the hay shed. Under Condition 23, no more than 5 hectares of the leased area is to remain disturbed at any one time. I accept the reasoning that this is not likely to exceed two areas at any one time - one in the beginning which may be in the process of being rehabilitated, whilst the second is begun. I accept the evidence of Mr Bailey that crushing, screening, etc., is likely to take place on the property. It is settled that the owner/stock will have access to any land not being used for mining. The areas of principal concern to the owner cover nuisances such as dust, etc., and the anticipation through lack of depth of topsoil that rehabilitation will not return the land to its former state and productivity. He also has concern that mining may affect the aquifer
supplying one mill. Apart from these specific issues, there is of course evidence of the effect of the general nuisance of having the operations on the property. Mr Peacock, who could speak with experience in the rehabilitation of land with shallow topsoil mined for dolomite, said that it took a long time to establish grass on land rehabilitated with a mixture of topsoil and dolomite. Because the land is prone to erosion, care in his opinion has to be taken in the provision of access roads. He can foresee erosion eventuating if numerous access tracks are cut throughout the property. Whilst he obviously felt a degree of frustration in speaking about these matters (having no idea where mining would take place or the sequence of areas which would be worked), he appeared to be more comfortable with the application of the conditions in practice than the evidence would show in previous hearing. Mr Brown was also of the opinion that some permanent damage will result to the land which has been mined, or affected by access roads. He substantiates the opinion of Mr Peacock that mining may interfere with the aquifer supplying a windmill and he believed (reasonably) that there will be storage on site of some infrastructure such as vehicles, fuels, etc. On hearing the evidence about the limitations placed on the miner under Condition 23 and how that condition will work in practice in conjunction with other conditions, he conceded that the impact would be less than otherwise envisaged. He reviewed the depreciation factor to 50% of the unencumbered value.
It is accepted by the parties that the assessment may be made in the manner applied by Mr Brown. In Shaw v. Heritage Holdings Pty Ltd (1992-93) 14 QLCR 139, the Court at p.14 said:
"The method of assessment remains a matter which will be
governed by the facts and circumstances of each case in which event emphasis may shift from one method to another. For land having a highest and best use for residential/hobby farm purposes it would appear that the effect of the grant of the mining lease upon the amenity of the land for that use would be more relevant than the effect it may have upon any use incidental to that use - for example, grazing. "
It is apt to apply this reasoning in the circumstances of the subject case. Secondly, in appreciating the effect the mining activity may have upon the mind of a hypothetical prudent purchaser of the land, it is also apt to repeat what the Court said in Shaw about the effect of conditions requiring rehabilitation. This is found at p.151:
"The first calculation has its source in condition 23 which
calculation is deficient only in that it would be unrealistic to assume that the pit areas could be restored to the condition they were in prior to excavation. Nevertheless the areas
relatively speaking are small and there is evidence that surface rock already exists in numerous places. "
I hasten to add that in Shaw the mineral to be extracted was marble with pit areas up to 30 metres deep. There is no suggestion that such will occur in respect of the subject property. By contrast, the evidence of Mr Peacock is that if rehabilitation takes the form required by the conditions of lease, the work will involve smoothing over the worked areas with overburden and dolomite. It is in that context in which he says, and I accept, that he has doubts whether the land will return to its former productivity. In similar vein and in terms of the conditions requiring the minimisation of nuisances such as noise, dust, etc., he is of the opinion that the prudent person can be comforted only to the extent that there is a duty on the miner to operate insofar as is reasonably practicable to minimise such effects, in contrast, say, with a miner who showed wanton disregard of the existence of the occupier, stock on the property and of the environment. The assumption finally made by Mr Brown in the absence of direct evidence to the contrary is that notwithstanding that an area of 5 hectares only may remain disturbed at any given time, the whole of the area applied for could be taken as being, during the period of the lease, subjected to some form of mining activity including access roads. These are all matters which the Warden found will be catered for in the environmental management overview study (EMOS). He pointed out correctly that failure on the part of the miner to comply with the conditions of lease carries with it several penalties, including the possibility of forfeiture of the lease. But that cannot be read nor do I think he intended it be read as excusing the Court from consideration of such issues (for example, the effects of dust) in the assessment of compensation if the Court is satisfied on the balance of probabilities that some damage will occur notwithstanding that the miner in the real and practical sense will (which must be accepted by the Court) comply with the conditions of the lease.
In the subject case it is submitted by Mr Jones that the application is in the nature of a resource-based project. It follows that specific detail as to the nature of the operations may not be finalised until the time comes when the applicant/miner intends to mine the site. Indeed, when the extent of the resource has been determined and evaluated, it may be found that parts of the area applied for under the lease may not be required or be subject to such environmental constraints as to render it sterile for mining purposes. In this latter context, it may be seen in the evidence that parts of the area included within the application are (on district standards) heavily timbered. Koalas are said to inhabit (or pass through) the area and Mr Peacock said that he has planted trees for the purpose of engendering their habitat.
The depreciation factors contended for by Mr Brown seem to have been
questioned by Mr Jones in this form. Firstly, whilst accepting the latest sale as evidence of value at the date of hearing, he appears to argue that the sale land has comparability with the subject land in the sense that the sale land is within or on the fringe of limestone ridges running through the subject land and beyond (both the subject land and the sale land have been mined in part in the past) and hence any depreciation for that the land may be subject to an application for a mining lease is already reflected in the market value of the property. This reasoning he would submit is strengthened by the presence of mining activity in the immediate surrounds of the subject land, particularly the operations of Newage which must be passed in accessing the property. Secondly, he argues that the allowances made by Mr Brown are excessive when considered in the light of what is required to be done under the conditions of the proposed lease. I can see logic in the first submission. The dampening effect of the awareness of the resource in the area and the activity in extracting it would not in my opinion be excluded from consideration by any hypothetical prudent purchaser. (See, for example, Crown v. Murphy and Covehouse Australia Pty Ltd (HC)(1990-91) 13 QLCR 90. That consideration can be expected to have passed through the minds of the purchasers of the sale land who reside in the area but it does not necessarily follow that the sale price of the property nor of its application to the subject land would eliminate any depreciation from the effects of the grant of the lease. Indeed, this is not suggested by Mr Jones. All he seems to be saying is that the first proposition should not be overlooked when considering the attitude a hypothetical prudent purchaser would take in the circumstances. Such a purchaser is deemed to be cognisant of all matters which might affect value (Spencer v. The Commonwealth (1908) 5 CLR 418) and it has been held in applying the same principle that he must act reasonably. (Pejama Pty Ltd v. The Commissioner of Main Roads (1988-89) 12 QLCR 278.) At the conclusion of the evidence it was apparent to me, having regard to the location of the dwelling and outbuildings (including access thereto) that this component of the property would suffer most. A depreciation of 40% will be applied to the dwelling as a reflection not only of the effects upon the amenity of living in the dwelling itself and its immediate surrounds, but also as a general reflection of the disturbance to the enjoyment of the amenity of the block as a whole. With respect to the grazing land, it is conceded both by Mr Peacock and Mr Brown that the impact will not be as great as at first contemplated. On the evidence dealing with rehabilitation it is reasonable to conclude that if rehabilitation is effected in accordance with the conditions of the lease, it will take time for the land to return to its former state of productivity. I am also of the opinion that the land would suffer some permanent damage. Some disturbance to stock can be expected and pastures affected by dust will not be as palatable. The structural
improvements on the property there to service the stock should retain their utility. A broad depreciation factor of 20% over the whole of the application area will in my opinion cover all relevant depreciatory effects and resolve the strong doubts I have as to whether the whole area will in fact be mined. Compensation in this form working on the method as used by Mr Brown is as follows:
Before Value
Land
28.3 ha encumbered by ML4630 (open cut dolomite) @ $275/ha $ 7,780
80.81 ha @ $2,750/ha $222,200
$229,980
Improved Structures
Dwellings $55,000
Buildings $ 1,000
Yards $ 4,300 $ 60,300
$290,280
After Value
Land
28.3 ha encumbered ML4630 @ $275/ha $ 7,780
51.9 ha encumbered ML50038 @ $2200/ha $114,180
28.9 ha unencumbered @ $2,750/ha $ 79,475
Improvements
$201,435
Dwelling $33,000
Buildings $ 1,000
Yards $ 4,300 $ 38,300
$239,735
Loss $ 50,545
In applying the provisions of s.7.38(4)(e) of the Act, a premium at the minimum rate of 10% is applied. Compensation under all relevant headings is therefore determined in the sum of Fifty-five thousand, six hundred dollars ($55,600).
In apply the provisions of s.7.38(5) of the Act, the Court may determine the terms, conditions and times when payments aggregating the total compensation shall be payable. In the subject case, the lease is sought at this stage for the purpose of
reserving the right to extract the mineral and there are admitted concerns as to the date when the lease will be granted, due to the viability of Newage at this time. In these circumstances, the parties have agreed that an inflation factor should be built into the award so as to compensate for the loss in the value of money (or anticipated rising market conditions) between the date of the determination and the date of the commencement of the lease. Secondly, the question arises as to what proportion of the sum determined should be paid on the grant of the lease if payment is to be made progressively. In respect of the initial period, I propose to award interest on the sum determined at 2 percent per annum expiring on the day preceding the date the lease is granted. It is obvious with this lease that it may be some years before mining actually takes place and the disturbances commence. Nevertheless, as said by the Court in Shaw supra, some diminution in value of the property as a whole will take effect on the grant of the lease. There is no argument that the initial payment should be of a substantial nature. I propose to follow the reasoning of the Warden in this respect and to order that about 60% or $33,000 be paid within 60 days of the grant of the lease and that the balance be payable over three yearly instalments with interest applied at the rate of 9%.
Before making such orders, I should deal with the appeal on costs. Included in the order made by the Warden of $12,390.20 is an agreed sum of $5,864 covering legal and valuation fees incurred in the preparation and filing of the claim for compensation. The Court has held that fees of this kind should take the form of compensation and accordingly should form part of that award. The discretion to award costs vested in the Warden and in this Court is unfettered but must be exercised judicially and for reasons that can be considered and justified. Reasoning which influenced the Warden in coming to his conclusion included the lack of any serious offer of settlement by the miner before the parties came to Court. He went on:
"and 2, the miner can expect the landowner, in the absence of any
meaningful negotiations or offers to appear, and protect his legitimate interests. "
These reasons may be supplemented by the observations made by Wells J. in Minister for the Environment v. Florence (1980-81) 45 LGRA 127 and quoted in Dellow v. Council of the Shire of Livingstone (1992-93) 14 QLCR 66. At pp.149-50, Wells J. said
-
"Compulsory acquisition cases differ of course from ordinary claims dealt with in the general jurisdiction in one significant respect: the claimant, unlike the ordinary plaintiff, had no choice whether to make a claim or not; the mere acquisition by compulsory process gave him, by virtue of s.18 of the Act, a claim to compensation which he could hardly be expected to
renounce.
Upon an ordinary claim in the general jurisdiction it is, generally speaking, obvious who has won and who has lost, and correspondingly clear why costs usually follow the event. Upon a claim for compensation for land compulsorily acquired, it is not, generally speaking, appropriate to speak of one party as having won; compensation is awarded to one who had already been given, by statute, the right to receive it. It is therefore as just to say of the latter sort of case that the claimant ought, in the absence of special circumstances, to receive his reasonable costs of obtaining the compensation that is, ex hypothesi, his due, as it is to say of the former sort of case that prima facie costs follow the event in favour of the party who has won. But costs are, as always, discretionary, and no hard and fast rule will ever be allowed to occupy part of an area controlled by a discretion, however predictable the result of its exercise may be in certain sorts of cases. "
The reasoning applied by the Warden with which I agree is equally applicable to the proceedings before this Court where the award has been increased and is, apart from the preceding issues, substantially in excess of the assessment of compensation put before the Warden on behalf of the applicant miner. Having so concluded and in having regard to the peculiar circumstances of the subject case, costs incurred in legal and valuation fees will remain within the order as to costs.
In the circumstances, the appeal is allowed and the determination of the Wardens Court is varied. I make the following determination and orders:
Compensation for the right to the grant of the lease is determined in the sum of Fifty-five thousand, six hundred dollars ($55,600). It is ordered that interest on the said sum at the rate of 2 percentum per annum shall be paid from and including 16 June 1995 to and including the day preceding the date the mining lease is granted.
It is further ordered that the sum of Thirty-three thousand dollars ($33,000) (together with interest calculated aforesaid), shall be paid within 60 days of the grant of the lease and that the balance shall be payable with interest calculated at 9 percentum per annum in equal annual instalments over a period of three years on the anniversary of such date.
The appeal by Newage against the order for costs of the Wardens Court is dismissed. Costs of the appeal are awarded the appellant. Such costs shall be taxed.
(DM White)
President of the Land Court
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