Barrett v Weir and Gregcarbil Pty Ltd [2009] QLC 182

"281 Determination of compensation by Land Court

(3) Upon an application made under subsection (1), the Land Court shall settle the amount of compensation an owner of land is entitled to as compensation for -

(a) in the case of compensation referred to in section 279 -

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

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

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

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

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

(4) In assessing the amount of compensation payable under subsection (3) -

(e) an additional amount shall be determined to reflect the compulsory nature of action taken under this part which amount, together with any amount determined pursuant to paragraph (c), shall be no less than 10% of the aggregate amount determined under subsection (3).

(5) In any case the Land Court may determine the amounts and the terms, conditions and times when payments aggregating the total compensation payable shall be payable.

(7) The Land Court shall give written notice of its determination to all parties and may make such order as to costs between the parties to the determination as it thinks fit"

[7] In assessing compensation under s.281, regard must be had primarily to the words of the section.[1] Section 281 of the Act neither prescribes nor suggests a method of assessment of valuation and the selection of an appropriate method is a matter for the relevant expert who should be careful not to duplicate items by simply accumulating figures assessed independently under each of the items listed in s.281(3)(a)(i) to (vi).[2] The assessment of compensation may be made by the before and after method or the summation or piecemeal approach.[3]

[8] In this matter the only evidence led by the parties adopts the piecemeal approach. In the absence of any other evidence, I consider it to be an appropriate method of valuation in the circumstances and, accordingly, that methodology will be adopted.

[9] The history of the compensation payable in respect of the original mining lease and the first renewal over the applicants' property is relevant. As explained above, Mining Lease 70211 straddles two properties, that owned by the applicants and the property adjoining owned by the Sloans. There was no direct evidence before me as to the precise area of the lease on each of these properties. However the evidence does indicate that part of the lease affecting the applicants' land has been surrendered. There is no dispute between the parties that the balance area of the lease affecting the applicant's land is 15 ha and that compensation is to be determined in respect of that area.

[10] Mining Lease 70211 was originally granted on 1 July 2002 for a period of 3 years expiring on 30 June 2005. The Land and Resources Tribunal (Smith DP) determined compensation payable in respect of the grant of the portion of Mining Lease 70211 over Mr Barrett's land at $10,890.00.[4]

[11] Mining Lease 70211 was renewed on 1 July 2005 for a further period of 3 years expiring on 30 June 2008. The compensation payable in respect of that lease over Mr Barrett's land was determined by the Land and Resources Tribunal (Windridge MR) on 2 June 2006 at a total of $686.40.[5] An appeal from the decision was dismissed.[6]

[12] Perusal of the decisions of the Land and Resources Tribunal referred to above indicates that the differing amounts of compensation determined on the original grant of the lease and the renewal in 2005 are attributable primarily to the different evidence before and methodology adopted to determine compensation by Smith DP, the decision-maker in 2001, as compared with the decision made in 2006 by Windridge MR.

[13] In 2001, compensation was determined on an all up basis at $9,900 to which was added 10% (pursuant to s.281(4)(e) of the Act) making a total award of compensation of $10,890.[7] In coming to that conclusion, Smith DP took into account the following items -

Impact of the mining lease on the land the subject of the mining lease $3,000

Impact on the balance area of the land - $1,750/pa for 3 years $5,250

[14] In the 2006 decision, compensation was assessed on the piecemeal approach, Windridge MR commenting that that appeared to be the only useful method of assessment based on the nature of the mining operation and the possible or probable effect on the pastoral operations of the landowner. He said that the only viable use of the land other than mining was low intensity grazing under favourable pasture and weather conditions. Windridge MR rejected the method of assessment adopted by Smith DP in the earlier case saying that it would be highly inequitable to require the miner to pay the full (or a discounted) freehold value for every renewal of a short term lease. He considered that the only equitable method of assessing compensation was on an agistment basis and compensation was calculated accordingly.

[15] Windridge MR assessed compensation for the renewal of the mining lease at 1 beast at $4 per week for 156 weeks, or $624.00. Ten percent was added pursuant to s.281(4)(e), making the total amount $686.40.

[16] The applicants in this matter have claimed compensation as follows: -

Section 281(4)(e) additional amount - 10% $1,000

swearing of Mr Jinks' affidavit of 28 April 2009 in

reply to the respondent's photographic material $110

[17] The respondents have submitted that the total compensation payable should be $1,155. That submission is based on the evidence of registered valuer Mr PJ Lyons who calculated compensation on two approaches -

(a) diminution in value of land 1.752 ha at $1,000 per ha

(b) loss of grazing for one beast at $208 per annum for 5 years $1,040

Mr Lyons considered that approach (b) resolved all doubts in favour of the applicant and therefore adopted the value reflected by the latter approach, $1,050. He added 10% under s.281(4)(e) of the Act, $105, making the total compensation payable $1,155. The approach adopted by Mr Lyons in his second methodology reflects that adopted by Windridge MR in the 2006 determination of compensation.

[18] Section 281(3) of the Act provides that the Land Court shall settle the amount of compensation an owner of land is entitled to as compensation under s.279 for a number of specified heads. Those heads will be considered in turn.

Section 281(3)(a)(i) and (ii) - Deprivation of possession of the surface of owner and Diminution of the value of the land of the owner or any improvements thereon

[19] Valuation evidence was submitted on behalf of the applicants in a written report prepared by registered valuer Mr PJ Jinks. Mr Jinks stated that, in law, the renewal of the lease effectively deprived the owner of the use of the surface area of the lease for the term of the lease. He assessed the value of the lease area at $1,000/ha, relying on one sale which he analysed to $991/ha. Mr Jinks assessed the effect of the deprivation of possession as leading to a loss in land value of one third, and calculated that loss as follows:

[20] As a check, Mr Jinks assessed loss of value based on an agistment rate of $4.00 per week = $208 per head per annum. At a carrying capacity of 1 beast to 3.2 ha, the loss of the 15 ha to the mining lease = 4.7 head x $208/pa x 5 years = $4,888. Adopt $5,000.

[21] Using his first methodology, Mr Lyons for the respondents calculated the diminution in the value of land by adopting a land value of $1,000/ha relying on his sales evidence of three properties. Mr Lyons said that was no loss in the utility of the remainder of the lease area, which could still be used for grazing purposes without interference. In his opinion, the only compensation payable related to the disturbed area of land, which, under the mining lease plan of operations, is 1.752 ha. Mr Lyons' opinion was that, taking into account previously mined areas after rehabilitation and the 5 year term of the lease, a 50% diminution of the disturbed area would be generous. Such a calculation would equate to a 6% reduction in value of the entire mining lease area of about 15 ha on the applicant's property. He assessed diminution in the value of the land as follows - 1.75 ha at $1,000, depreciated by 50% = $876.

[22] Using his alternative methodology, Mr Lyons assessed the carrying capacity of the mining lease area at 1 beast to 3.2 ha. On that basis, he said, the carrying capacity would be reduced by less than 1 head in the proposed disturbance area of .752 ha in any one year or 1.752 ha overall. Agistment rates for this type of country, he said, range from $3.50 to $4 per head per week. On that basis he calculated compensation as loss of grazing for one beast - 1 beast at $280 per annum for 5 years = $1,040.

[23] It is evident from the material set out in the previous paragraphs that the parties are agreed that the value of the land the subject of the mining lease is $1,000 per ha and that the carrying capacity of that land is 1 beast to 3.2 ha. The difference between the valuers comes down to a difference as to whether the applicants are entitled to be compensated for the impact of the whole of the mining lease area for the term of the lease, or only for the area which is the subject of the mining disturbance from time to time.

[24] Mr Houen submitted that the compensation sought was in effect for the blot on title and encumbrance arising from the renewal of the lease, notwithstanding that part of the total sum had been arrived at by reference to lost grazing. He also submitted that the effect of the lease was to deprive the applicant of possession of the whole of the lease area for the term of the lease. The miners are, he said, potentially able to mine any and all of the lease. While the miners are limited by their current place of operations to disturbing 1.75 ha, they could apply at any time to amend that plan. Further, the Livestock Production Assurance scheme raised quality and safety issues if the cattle were in contact with mine machinery or chemicals.

[25] In my opinion, the landowner is entitled to be compensated for the loss of control over the mining lease area as evidenced, for example, by the fact that the mining area may shift from time to time to various parts of the lease without the consent of the landowner. Further, the lease may be regarded as an encumbrance or blot on title so that the applicant's land with the lease in place is worth less than it would be if unencumbered by the lease.[8]

[26] However, I do not accept that the impact of the lease is to deprive the owner of the use of the whole of the lease area for the term of the lease. The effect of s.235 of the Mineral Resources Act is that the lessee is entitled to go on to and remain on the mining lease area for purposes connected with mining only. The mining lessee is not given a right to exclusive possession of the lease area. Section 403 of the Act creates certain statutory offences in relation to unauthorised entry onto the lease area. Neither section grants exclusive possession rights to the lessee nor enables the lessee to prevent unauthorised entry onto the lease area. It is clear from the respondents' submissions that they do not object to the applicant's cattle continuing to graze on those parts of the mining lease area that are not from time to time disturbed by the mining operations. Thus in assessing loss suffered from the deprivation of possession of the surface land as a result of the lease under s.281(3)(a)(i) the fact that the landowner may continue to graze his cattle on the undisturbed area of the mining lease should be taken into account. I do not accept therefore that the applicant is entitled to compensation for loss of carrying capacity or agistment for the whole area of the mining lease.

[27] Further, I do not accept that the applicant has proved that he has suffered or is likely to suffer any loss caused to the cattle by exposure to the mining activity or chemicals, as it is to be assumed that the respondents will conduct their mining operations lawfully. Therefore I have not made any allowance for this aspect of the claim.

[28] My conclusion is that on the evidence presented in this case, the compensation as calculated by the respondent is inadequate because the landowner's loss will be greater than loss of grazing capacity over the permissible area of mining disturbance. In his first method of assessment, Mr Jinks assessed the effect of the lease as leading to a loss in land value of one-third. He provided no evidence to support that opinion. On the face of it, I consider that is too high for the renewal of the mining lease for a term of five years only. In the absence of any other evidence, and doing the best I can, it seems to me that an allowance of 25% would provide for adequate compensation to the owner for the impact of the renewed term of five years.[9]

[29] On that basis, I consider that compensation under this head should be calculated as follows -

Section281(3)(a)(iii) - Diminution of the use made or which may be made of the land of the owner or any improvements thereon

[30] No specific or separate claim was made for loss under this head and it is considered that any such loss has been adequately compensated for by the award under s.281(3)(a)(i) and (ii).

Section 281(3)(a)(iv) - Severance of any part of the land from other parts thereof or from other land of the owner

[31] The applicant has claimed $5,000 for severance. This claim was originally quantified at $7,000 but was subsequently reduced to $5,000 when it was acknowledged by Mr Jinks that he had made a mistake as to the route used by the applicant to access the cattle yards on his property, which are in close proximity to the boundary of the mining lease.

[32] The claim of $5,000 is based on Mr Jinks' evidence that the applicant would incur additional mustering costs because of the mining operations. Mr Jinks said that while the landowner might not be prevented from accessing the yards, the possibility of future fencing or the extent of mining operations outside the buffer area but close to the yards may make the business of putting cattle into or leaving the yards more difficult. If the ability to handle cattle was impeded by mining operations, either active or in the form of pits, trenches or mullock heaps, there would be an additional time and cost factor involved. There was a possible additional cost of the manager's time and additional labour employed. He estimated the potential costs as follows - an allowance of 1 hour per time extra at a minimum of 14 times per year. Adopt 2 extra days per annum at $500 per day = $1,000 = $5,000 for the term of the lease.

[33] In an affidavit filed on 20 April 2009, Mr Jinks sought to supplement his evidence by reference to the nature of the soils in front of and to the east of the yards stating that erosion damage could affect that land if disturbed by the miners, no matter how carefully it was rehabilitated. Mr Houen submitted that the potential scale and spread of mining disturbance had major implications for the efficient use of the yards and was a major cause of concern and uncertainty in the mind of the landowner and the prudent purchaser.

[34] Mr Houen also referred to the fact that the respondents had said they would not fence the boundary of the lease and pointed out that such an assurance would not bind an assignee of the lease. While this may be technically correct, I do not consider that it is reasonable to award compensation for what seems to be an unlikely loss. There is no evidence that any lessee would fence the mining lease given the cost of fencing and the comparatively short term of the lease.

[35] Special Condition 4 of Mining Lease 70211 states that

"the miners shall at all times observe a 50 metre buffer zone around improvements including the principal stockyards, and ensure that at all times the landowner has access to all yards for the working of stock or transporting stock from the yards by truck."

[36] Mr Houen suggested that that condition purported to negate s.403 of the Act. This is a misunderstanding of the effect of the lease because the effect of the condition is that the grant of the lease does not include a grant to the lessee of unconditional rights of access to the buffer zone around the mining lease.

[37] I am not satisfied that loss attributable to severance has been established by the applicant in this matter. There is no evidence that the landowner to date has suffered any loss or inconvenience of the type referred to either by Mr Jinks or Mr Houen despite the fact that the lease was originally granted on 1 July 2002. Given the content of Special Condition 4, it is clear that the landowner is to be given access to the yards and that the miners are to observe a 50 metre buffer zone around the yards. Again, it is not to be assumed that the lessees will operate in breach of the terms of their lease. In those circumstances I am not prepared to allow the claim under this heading.

Section 281(3)(a)(v) - Any surface rights of access

Section281(3)(a)(vi) - All loss or expense that arises

[40] Compensation is determined in the sum of $3,750. An additional amount of 10% or $375 is to be added under s.281(4)(e) to reflect the compulsory nature of action taken under this part. The total award of compensation is $4,125.

[41] It is acknowledged that the amount of this award differs from both the previous awards concerning this property. The differing awards flow from the fact that different evidence has been adduced in each case. I am bound to take into account all the relevant evidence put before me and I cannot take into consideration the evidence that may have been adduced in the earlier cases. My determination is made on that basis.

[42] The applicant has sought payment of the compensation as a lump sum within one month of the Court's determination. The respondents have asked that the compensation be payable on an annual basis because the economic situation has led to a downturn in sapphire sales.

[43] I have decided to accede to the respondents' request that the compensation be paid on an annual basis by instalments of $825. As the due date for renewal of the lease was 1 July 2008, the first two instalments ($1,650) are to be paid within one month of the date of this decision. The remaining compensation is to be paid by annual instalments of $825 each on or before 1 July 2010, 1 July 2011 and 1 July 2012.

[44] The applicant has claimed the sum of $3,145 as costs of the application pursuant to s.281(7) of the Act. The costs claimed are $3,035 for valuation fees and an additional $110 for preparation and swearing of Mr Jinks' affidavit of 20 April 2009.

[45] Section 281(7) of the Mineral Resources Act provides that the Land Court may make such order as to costs between the parties to the determination as it thinks fit. I consider the effect of that provision is that the Court has a complete and unfettered discretion as to the order to be made. It has been held, in relation to similar statutory provisions, that the discretion is not to be exercised arbitrarily, but judicially, that is for reasons that can be justified or considered.[10]

[46] The valuation fees incurred by the applicant result from the renewal of the mining lease and the consequent need for a determination of compensation. Mr Jinks' evidence was partially relevant and useful in my determination but I have not accepted his evidence concerning severance. Further, the claim as originally quantified, included an additional $2,000 for the costs of rerouting the access to the stockyards. The respondent incurred the additional cost of $880 in commissioning a surveyor to answer that claim which, the applicant conceded, had been made in error. Taking all these matters into consideration, I consider that the award of costs to the applicant in this matter should be limited to $750. This sum is to be paid within one month of the date of this decision.

[47] The applicant has also claimed an unspecified amount for interest backdated to the date of renewal of the lease. As there was no submission as to the Court's power to make such an award of interest, nor any quantification of the amount payable, I have not acceded to this request.

1. Compensation is determined in the sum of Four Thousand, One Hundred and Twenty-Five Dollars ($4,125).

2. The respondents are ordered to pay One Thousand, Six Hundred and Fifty Dollars ($1,650) to the applicant within one month of the date of this decision.

3. The respondents are ordered to pay the balance compensation of Two Thousand, Four Hundred and Seventy-Five Dollars ($2,475) to the applicant by three instalments of Eight Hundred and Twenty-Five Dollars ($825) each, on or before 1 July 2010, 1 July 2011 and 1 July 2012.

4. The respondents are ordered to pay the applicant's costs of and incidental to this application, fixed in the sum of Seven Hundred and Fifty Dollars ($750), within one month of the date of this decision.

[1] Wills v Minerva Coal Pty Ltd [No. 2] (1998) 19 QLCR 297 at 313.

[2] Wills v Minerva Coal Pty Ltd [No. 2] (1998) 19 QLCR 297 at 313.

[3] Smith v Cameron (1986) 11 QLCR 64 at 74.

[4] Weir v Barrett [2001] QLRT 95.

[5] Re Barrett v Weir [2006] QLRT 51.

[6] Barrett v Weir [2006] QLRT 96.

[7] [2001] QLRT 95.

[8] See Zimmerebner v Hawkins (1999) 20 QLCR 71 at 89.

[9] See Zimmerebner v Hawkins (1999) 20 QLCR 71 at 89. It is noted that in Weir v Barrett [2001] QLRT 95 at [11], Smith DP found the value of the land to be diminished by one third, by the grant of a lease for three years. However, in this case, I consider that a depreciation of 25% is sufficient.

[10] Wyatt v Albert Shire Council [19876] 1 Qd.R 486; BHP Queensland Coal Investments Pty Ltd v Cherwell Creek Coal Pty Ltd (No. 2) [2009] QLAC 008.