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Comiskey v Fairhill Coking Coal Pty Ltd [2024] QSC 137 | Case summary | Zoe
ENERGY AND RESOURCES – MINERALS – MINING FOR MINERALS –
MINING LEASES AND LICENCES APART FROM STATUTE – ROYALTIES
– where
the respondent applied for a mining lease under the Mineral Resources Act
Source
Original judgment source is linked above.
Catchwords
ENERGY AND RESOURCES – MINERALS – MINING FOR MINERALS –MINING LEASES AND LICENCES APART FROM STATUTE – ROYALTIES– wherethe respondent applied for a mining lease under the Mineral Resources Act1989 (Qld) (the Act) covering land owned by the applicants – where, bywritten agreement in August 2020 (the CA), the parties agreedthe amount ofcompensation payable to the applicants in respect of the proposed mining leaseas required under the Act – wherethe CA required the respondent to paythe applicants $7.45 million in two tranches, including $4 million within 40days of the grantof the mining lease – where the mining lease was grantedand the respondent failed to pay either tranche by its due date –where,via email correspondence on 3 April 2023 (the April Agreement), the partiesagreed a process where the respondent would paythe outstanding $7.45 million(and interest on the $4 million) by 28 April 2023, or, if the respondent failed
to do so, the parties
would renegotiate the compensation payable to the
applicants – where the respondent paid the outstanding $7.45 million (and
interest on the $4 million) on 20 September 2023 – whether, given the CA
and the parties’ April Agreement to renegotiate
the compensation payable
to the applicants, compensation is determined or there is an agreement as to
compensation for the purposes
of the Act
ENERGY AND RESOURCES – MINERALS – MINING FOR MINERALS –
MINING LEASES AND LICENCES APART FROM STATUTE – ROYALTIES
– where,
by ss 363(2)(f)-(g) of the Act, the Land Court has exclusive jurisdiction to
determine or review compensation and to enforce any agreement or determination
as to compensation under the Act – whether the proceeding is beyond the
jurisdiction of the Supreme Court
Land Court Act 2000 (Qld), s
5(2)
Mineral Resources Act 1989 (Qld), s 279(1), s 283A, s 283B, ss
363(2)(f)-(g)
Freedom Willetton Pty Ltd v Commissioner of State Revenue
(WA) [2021] WASCA 38, cited
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256
CLR 104
[2015] HCA 37, cited
Judgment (14 paragraphs)
[1]
[1] The applicants (the Comiskeys) own a rural property at Capella known as "Old Mount Stuart" (the Land) where they raise cattle. The respondent (Fairhill) is a "corporate vehicle" through which Futura Resources Limited (Futura) owns and operates a coking coal project (the Project). Ben Dunlop is the CEO of Futura. He is primarily responsible for the management of Fairhill's activities, including the development of the Project. He has worked in the Australian resources industry for more than 13 years. Futura owns and operates an adjacent coking coal project (the Wilton Project) through Wilton Coking Coal Pty Ltd. Mr Dunlop is also primarily responsible for the Wilton Project.
[2] In August 2020, Fairhill was proposing to develop the Project, initially through a mining lease. For that purpose, Fairhill had applied for a mining lease under the Mineral Resources Act 1989 (Qld) (the Act). The Comiskeys owned the land the surface of which was the subject of Fairhill's application. They also owned land over which Fairhill proposed to build a haul road to access the land the subject of the mining lease application. The minister could not grant Fairhill a mining lease unless compensation had been determined between Fairhill and each person who was the owner of land the surface of which was the subject of the application and of any surface necessary to access the mining lease land.[1] Compensation could be determined between Fairhill and the Comiskeys by agreement or by a determination of the Land Court. Even with compensation determined, the minister could not grant Fairhill a mining lease unless Fairhill had complied or was complying with the conditions of the agreement or the Land Court's determination.
[3] On 27 August 2020, Fairhill and the Comiskeys made a written agreement about compensation in relation to the proposed mining lease (the CA). By the CA, the parties agreed on compensation in relation to the grant of the mining lease, and in relation to one renewal of the mining lease for a term no longer than 10 years. By the CA, Fairhill promised to pay $7.5 million to the Comiskeys in three tranches, namely:
[2]
(a) $50,000 within 10 business days of the start of the CA;
(b) $4 million within 40 business days of the grant of the mining lease; and
(c) $3.45 million within three months after the $4 million payment was made.
[3]
[4] On 21 November 2022, the minister granted the mining lease to Fairhill.
[5] Fairhill did not pay the second tranche of $4 million to the Comiskeys within 40 business days of that grant, which was about 17 January 2023.
[6] On 6 February 2023, the Comiskeys gave Fairhill a dispute notice under the CA, and reserved their rights. By the CA, the parties had agreed that they must "use all reasonable endeavours to meet" within five business days of a Dispute Notice and "resolve the dispute by negotiating in good faith." They had also agreed that, if the dispute was not settled within 10 days of the negotiation commencing, they must refer the dispute to mediation. They had further agreed that neither party could commence any court proceedings, other than for urgent interlocutory relief, unless it had first complied with the Dispute Notice, negotiation and mediation steps.
[7] On 3 April 2023, the day before a scheduled mediation of this dispute, Mr Dunlop wrote to the Comiskeys' solicitors with a without prejudice proposal. About 40 minutes later, the Comiskeys' solicitor replied, also on a without prejudice basis, stating that the Comiskeys would "agree to entertain" only the first two of the three "steps" in the Fairhill proposal. About 50 minutes later, Mr Dunlop responded, stating agreement to "proceed" with the first two parts of his proposal. Less than an hour later, the Comiskeys' solicitor wrote confirming this agreement. The agreement is set out in Mr Dunlop's email in the following terms (the 3 April 2023 agreement):
[4]
"1. on or before 28 April 2023, Futura will pay to the Comiskeys:
[5]
the outstanding compensation of $4,000,000 (plus default interest); and
[6]
if Futura has not paid the above amounts in full by 28 April 2023, the parties agree to participate in a renegotiation process where:
each party will be entitled to engage an independent valuer, and Futura will meet the Comiskeys' reasonable and agreed costs for the valuer;
once each party has obtained its valuation report, the parties will exchange reports and will arrange a meeting to renegotiate the compensation payable to the Comiskeys; ..."
[7]
[8] Fairhill did not make any payment to the Comiskeys by 28 April 2023. Fairhill continued to be in default of its obligations under the CA.
[9] On 2 May 2023, the Comiskeys' solicitors wrote to Fairhill, noting its failure to pay the outstanding compensation, and that the second "step" required the parties to commence the process for renegotiating the compensation. The solicitors advised that the Comiskeys had retained a valuer and instructed the valuer to begin "a further compensation assessment."
[10] On 12 September 2023, the Comiskeys' solicitors advised Fairhill that they had the valuer's report and wished to meet to begin the renegotiation as soon as reasonably practicable.
[11] On 20 September 2023, Fairhill paid $7.45 million to the Comiskeys. Fairhill also paid $476,016.91 "to compensate for the compensation payments having been delayed." That day, Mr Dunlop wrote to the Comiskeys' solicitors saying Fairhill "considered the dispute was now resolved."
[12] On 26 September 2023, the Comiskeys' solicitors replied, asserting the payment did not resolve the dispute and that the parties were bound to follow the process agreed in the 3 April 2023 agreement. The next day, the Comiskeys' solicitors sent the next valuer's report to Mr Dunlop on a without prejudice basis.
[13] On 13 October 2023, Fairhill's solicitors became involved. They wrote to the Comiskeys' solicitors stating that Fairhill would follow the process now that the Comiskeys had confirmed that they intended to do so. The solicitors then corresponded with each other about a meeting or a mediation and other matters associated with the renegotiation.
[14] On 7 December 2023, Fairhill provided its valuation report to the Comiskeys on a without prejudice basis.
[15] On 16 April 2024, the parties participated in a mediation. No agreement was reached.
[16] On 2 May 2024, Fairhill's solicitors wrote to the Comiskeys' solicitors stating the process under the 3 April 2023 agreement had been completed and that Fairhill "now considered that each party's obligations" under it had been fulfilled.
[17] On 10 June 2024, the Comiskeys commenced this proceeding.
[18] On 1 July 2024, the application came before me on the applications list. Early in the course of argument, I queried whether the declarations sought by the Comiskeys were in the correct form. After the lunch adjournment, the Comiskeys proposed a new form of declarations. Given the change to the nature of the declarations sought, I adjourned the application to 31 July 2024 and reserved the parties' costs.
[8]
[19] At the outset of the hearing today (31 July 2024), Fairhill submitted that the Court had no jurisdiction to decide the matters in dispute. Fairhill's contention was that, by operation of s 5(2) of the Land Court Act 2000 (Qld) and s 363(2)(f) and (g) of the Act, the Land Court has exclusive jurisdiction because the proceeding was with respect to a "determination or review of compensation as provided for" under the Act, and with respect to "the enforcement of any agreement or determination as to compensation" under the Act.
[20] I rejected the submission that the present proceeding was with respect to a "determination or review of compensation as provided for" under the Act. The process for such a determination or review was not before the Court.
[21] I reserved my decision as to whether the proceeding was beyond jurisdiction as being with respect to "the enforcement of any agreement or determination as to compensation" under the Act, and, if it were not such a proceeding, whether the Court should decline to grant relief on the basis that the matter should be determined by the Land Court.
[22] Having heard all the argument and considered all the evidence, I am content to decide the matter. It is not a proceeding with respect to the enforcement of any compensation agreement under the Act. There has been no Land Court determination as to compensation, and this proceeding is certainly not about such a determination.
[9]
The proper construction of the 3 April 2023 agreement
[10]
[23] The matters in issue in this proceeding turn on the proper construction of the 3 April 2023 agreement. The Comiskeys seek declaratory relief from the Court about the consequence of that agreement for events that occurred before 3 April 2023.
[24] As I canvassed with the parties during the hearing, the 3 April 2023 agreement was made between them as commercial parties. One side was legally represented. The other was represented by a senior executive with substantial experience in the industry. It follows that the 3 April 2023 agreement is to be construed as a whole. Its meaning should be determined objectively by reference to the text, context, and purpose of the agreement. The meaning is what a reasonable businessperson in the position of the parties to the correspondence would have understood it to mean.[2] It also should be construed to avoid making commercial nonsense or working commercial inconvenience. Rather, it should be construed practically, to give better effect to its purpose. It is not appropriate to adopt a narrow or pedantic approach to its construction.[3]
[25] The context of the 3 April 2023 agreement includes the fact that Fairhill was in default under the CA and the parties were engaged in the dispute resolution process agreed by them in the CA. The context also includes the statutory regime found in the Act, with the particular importance it gives to compensation and the mechanisms it provides for the agreement, determination, amendment, redetermination and review of compensation.
[26] The conduct of Fairhill after the 3 April 2023 agreement might indicate that it placed no importance on the agreement at all. It might indicate that Fairhill regarded it as merely a means to avoid the (then pending) mediation and to extend the period before it could be made to honour its outstanding promises under the CA. That post-agreement conduct is not relevant for the purpose of determining the proper interpretation of the 3 April 2023 agreement.
[27] On its own terms, the purpose of the 3 April 2023 agreement was to take the parties out of the (then pending) dispute resolution process and instead put them in a different process in which either Fairhill would pay its debt to the Comiskeys of the parties would renegotiate the compensation originally agreed in the CA. To give better effect to that purpose, the second step in the 3 April agreement should be understood as intended to be legally binding on the parties. It should not be understood as an unenforceable or legally pointless process.
[11]
[43] The parties have had mixed success. However, the relief the Comiskeys sought was quite specific and directed at preventing Fairhill from exercising rights under the mining lease. In that, the Comiskeys have failed.
[44] The submission that Fairhill emerges from the engagement with some other scars might be true, but it does not alter the fact that Fairhill has defeated the relief sought against it. So, costs should follow the event.
[2]Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Limited[2015] HCA 37; (2015) 256 CLR 104at [46]-[52] (French CJ, Nettle and Gordon JJ), [109] (Kiefel and Keane JJ) and [112] (Bell and Gageler JJ).
[14]
[3] This summary is drawn from that in Freedom Willetton Pty Ltd v Commissioner of State Revenue (WA)[2021] WASCA 38 at [84] (Buss P, Murphy and Vaughan JJA).
Parties
Applicant/Plaintiff:
Comiskey
Respondent/Defendant:
Fairhill Coking Coal Pty Ltd [2024] QSC 137
Legislation Cited (2)
Resources Act 1989
Court Act 2000
Cases Cited (1)
(2015) 256 CLR 104
[28] Given the statutory regime, to avoid such a nonsensical effect, the parties must have intended the obligation in the second step of the 3 April 2023 agreement to extend to an obligation to cooperate to register any agreed amendment to the compensation in the CA, under s 283A of the Act and so give effect to it.
[29] For the same reason, the parties must have intended the obligation in the second step to include an obligation to cooperate to enable the Land Court to review the original compensation agreed in the CA under s 283B of the Act, in the event that the parties were unable to agree on amended compensation. This aspect of the 3 April 2023 agreement involves some difficulty. For the Land Court to review such a matter under s 283B of the Act, there must also have been a material change in circumstances for the mining lease since the CA was made.
[30] The conduct of the parties in agreeing to renegotiate the compensation, as plainly evidenced by the 3 April 2023 agreement, assumes that there has been a material change in circumstances relevant for the compensation amount. It assumes that that change in circumstances has occurred since the amount was agreed.
[31] The circumstances relevant to the compensation amount are not separate from the circumstances for the mining lease. Logically, they are the same.
[32] If the 3 April 2023 agreement is not construed in this way, it would work commercial inconvenience. Indeed, if the 3 April 2023 exchanges between the parties are not construed in such a way, they would work commercial nonsense. The alternative construction, urged by Fairhill, implies that Fairhill was not genuine in its offer of compromise, perhaps even that it was seeking to mislead the Comiskeys into giving up their right to a mediation and subsequent enforcement of the debt, in exchange for an empty and unenforceable promise that Fairhill did not intend to honour. Unless compelled, I would decline to take an adverse view of Mr Dunlop's correspondence.
[33] The fixing of compensation payable by the holder of a mining lease to a landowner is a critical statutory process under the Act. When experienced and legally represented parties engage in discussions about these things, they must ordinarily be taken to understand what they are doing.
[34] The commercial agreement reached by these parties should not be construed so that the Act makes the agreement ineffective. Rather, their commercial agreement should be understood in the context of the Act.
[35] The Comiskeys submit that reaching an agreement to renegotiate compensation had the effect of undoing the CA and leaving the parties in a position as if no agreement about compensation had been reached. This cannot be accepted.
[36] The 3 April 2023 agreement must be construed within the context of the mechanisms of the Act. The fixing of compensation is critical under the scheme of the Act. I reject the Comiskeys' claim for a declaration that compensation "has not been agreed" for the purposes of the Act. It has been agreed. It was agreed, by the CA, on 27 August 2020. I similarly reject the claim for a declaration that there is no agreement for the purposes of the Act. There is. It is the same agreement.
[37] The exchanges between the parties that evidence the 3 April 2023 agreement, indicate that the parties were then at one in thinking that if not paid by 28 April 2023, the circumstances of the mining lease had materially changed, so that the compensation Fairhill should pay for it should be different to the compensation they had agreed in the CA. Since then, they have been unable to agree on what that different compensation should be.
[38] Neither of these facts can undo the reality that, at an earlier point in time (27 August 2020) and conscious of the processes under the Act, the parties reached agreement about compensation which they found to be acceptable in the then circumstances.
[39] The provisions in the Act about amendment and review are clear. Until the parties either reach agreement on an amendment to the compensation in the CA and cooperate to have it registered, or until they cooperate to allow the Land Court to review the compensation payable under the CA in light of changed circumstances, the CA will, by operation of the Act, continue to be in force.
[40] It follows that Fairhill is entitled to exercise the rights it has under the mining lease which has been granted on the basis that the registered CA. I decline to grant any interim injunction sought by the Comiskeys, in aid of clauses in the CA, because the application for the injunction is premised on the assumption that the CA is not effective until some further agreement is reached. I have rejected that construction of the CA, so the application is dismissed.
[41] Having considered the Comiskeys' request that the Court entertain an application for a different declaration, following the effect of the 3 April 2023 agreement as here construed, I am of the view that these reasons ought to be sufficient. I accept Mr Thompson's submission that Fairhill, having had the matter tested in court, understands what the Court says is the effect of the 3 April 2023 agreement. It is not necessary at present to risk the hazards involved in precisely formulating a different declaration.
[42] The Comiskeys say they wish to go to the Land Court. On this Court's analysis of the 3 April 2023 agreement, the Comiskeys should have the cooperation of Fairhill in doing so. A declaration could probably be sought and made in the Land Court. One has to be very cautious about approaching matters that may be in the Land Court's jurisdiction.