Super royalty and front-end payment
73 In reviewing the decision of the Tribunal, I will deal first with the rejection by the Tribunal of Nardell's claim that the Board erred in failing to bring to account Nardell's asserted loss in relation to super-royalty and in relation to front-end payment.
74 In assessing the compensation to which Nardell is entitled, the Board brought to account Nardell's prospective income in relation to the prescribed royalty which became payable under the Bloomfield coal lease, but not prospective income in relation to the super royalty and front-end payment. So far as is presently relevant, the Tribunal dismissed Nardell's appeal in those respects. The Tribunal's reasons for disallowing those parts of Nardell's claim were as follows:
The Appellant [Nardell] claims that before 1 January 1982 it had a reasonable expectation that, if a coal lease were granted in the future, it would be entitled to a share of any "front-end payment" made under Sections 32 or 33 of the Coal Mining Act 1973 and payable pursuant to Section 128(4) of that Act. That may have been the case before the commencement of the CAA, but that Act and the introduction of the cognate Coal Mining (Amendment) Act 1981 (the CMAA) swept away that expectation along with Sub-sections (3) and (4) of Section 128 of the Coal Mining Act 1973 when, at the same time, the Crown acquired the subject coal.
The decision of the Court of Appeal in Gilder's case (CA 40732/96, 29 July 1997, unreported) relates to a claim for pecuniary loss resulting from a front-end payment that was in progress before the operation of the CAA and the CMAA, which repealed provisions for distribution of front-end payments to persons other than the Crown. Saving provisions of the CMAA reserved to private coal owner's payments made prior to 1.1.1982. In the Appellant's case there was no mining lease until 20 October 1989 (Exhibit 37). The Tribunal cannot accept that the Appellant is entitled to any share of the "front-end payment" referred to in that lease, payment of which to private coal owners was based on legislation repealed in 1982. Nor can it have entertained a claim for pecuniary loss based on Clause 9(2) of the 1985 Arrangements in respect of front-end payments for a lease that did not come into existence until 20 October 1989.
The Appellant claims that the amount of super-royalty paid as a result of a condition inserted in a lease pursuant to Section 41(7) of the Coal Mining Act 1973 should be part of the determination of the variable "r" and not excluded as has been done by the Respondent [the Board] in this case. The Appellant argues that the purpose of the variable "r" is to "provide the best estimate" of the actual nominal [notional?] royalty that Nardell would have received (net of all tax effects) if the coal which it owned had not been acquired compulsorily by virtue of the CAA.
The Coal Mining Act, 1973 contained provision for the Minister to distribute seven-eighths of any royalty received from private coal to the owner of that coal. However, in 1981 the CMAA repealed that provision of the 1973 Act and there has been no subsequent reinstatement of such a provision.
In this regard the Appellant submits that "r" should be calculated on the basis that, had the CAA not operated upon its title, the Appellant would have received a share of any super-royalty paid pursuant to Section 41(7) of the Coal Mining Act, 1973 in addition to the base-royalty [prescribed royalty] payable under Section 77(1) of the same Act. If that were the case, that right would have been eliminated when the Coal Mining Act, 1973 was amended as "a consequence of the enactment of the Coal Acquisition Act 1981" (preamble, CMAA) and the CAA set in place a scheme, under the 1985 Arrangements, to compensate private coal owners for the loss of royalty income.
The scheme which emerged from the 1985 Arrangements, was that the value of the coal acquired by the CAA was determined as an amount of money, calculated in accordance with the formulae found in Clause 18 of the 1985 Arrangements, paid to the former owner which is the NPV of the income stream that would have derived from continued ownership of the coal.
Prior to the 1997 order, the Appellant had been eligible under Clause 9(2) of the 1985 Arrangements to make a claim for pecuniary loss under Clause 12. It was the practice of the Respondent to determine amounts of compensation that related to coal ownership in accordance with the formulae provided in Clause 18 of the 1985 Arrangements, and the Respondent did so in its 1997 determination.
In introducing the Coal Acquisition (Re-acquisition Arrangements) Order 1997 the then Minister said (referring to the discrepancy between the value of the coal to the Crown and the value to the owner);
A further component of the discrepancy is that an additional royalty of $0.50 per tonne may be levied on Crown coal mined from open-cut mines. This levy is not applied on coal from private coal titles. Acquisition of private coal will achieve the collateral benefit of removing this anomaly and providing a level playing field for mining companies. The major component of the discrepancy is the fact that compensation is calculated at $0.90 per tonne to reflect the tax-free nature of compensation compared to $1.70 per tonne royalty as taxable income. Estimates show that the State will capture about $100 million in net present value terms which would otherwise be diverted to the taxation office if royalty at $1.70 per tonne was paid to the claimants.
(Second Reading Speech. 27 May 1997 @ Hansard - Assembly 9252)
The Tribunal is of the view that the Minister's statement clearly indicates that it was never the intention of the Government that owners of private coal should receive any portion of a super-royalty.
It is also the view of the Tribunal that there is a clear intention of the Government, in providing in the 1997 Order that "… r is $0.90 or such other amount as the Board considers just and equitable in the circumstances of the case" (Schedule 1 Clause 2), that "r" should related to the base royalty (in nominal terms) of $1.70 per tonne.
The Tribunal is not persuaded that the reasoning of the Court of Appeal in NSW Coal Compensation Board v NSW Coal Compensation Review Tribunal (Gilder's case) (Unreported 29 July 1997), which applied to front-end payments, applied equally to a coal owner's loss of the entitlement to share in the super-royalty. Even if such an entitlement existed, Gilder's case is to be distinguished on the basis that it applied to a front-end payment provided for in Section 128 of the Coal Mining Act 1973 which excludes royalties from the provisions of the Section and on the basis that the expectation of the Appellant that it would share in super-royalties is not, for the reasons given above, a reasonable one.
The Mining Act 1992, in repealing the Coal Mining Act 1973, included coal in the definition of "mineral" and rendered coal subject to the provision of Part 14 - Royalty - of that Act, and re-introduced the requirement that the Minister pay 7/8th of the amount paid to the owner of a private mineral (Section 284(2)). However, at the same time, the effect of Section 285(a) is to restrict the payment of royalty on privately owned coal to the base royalty only. There is no provision for the payment of any additional royalty on coal above the base rate.
75 I have first to say that the assessment of compensation did not turn on Nardell's expectations as at 1981, reasonable or otherwise. (See my earlier discussion of the concept of compensation adopted by the 1997 Arrangements.)
76 As to Nardell's prospective share in the front-end payment received by the Crown upon the grant of the 1989 lease, that was a loss resulting from the expropriation on 1 January 1982 (no less than the loss of Nardell's prospective share in the prescribed royalty collected by the Crown in relation to coal extracted under that lease, which the Tribunal was bound to allow). That the prospect of receiving a share of the front-end payment was swept away by the CAA 1981 is the foundation of Nardell's claim for that loss, not a reason for rejecting it. So much was established by the decision of the Court of Appeal in New South Wales Coal Compensation Board v New South Wales Coal Compensation Tribunal & Ors (22 April 1997, unreported) (Gilder's case). The distinction sought to be made by the Tribunal between Gilder's case and the present case is one without a different in principle.
77 But for the acquisition of privately owned coal by operation of the CAA 1981, Nardell would have been entitled to a share in the front-end payment received by the Crown in 1989 when the Bloomfield Collieries lease was granted. That was a loss resulting from the acquisition of Nardell's coal on 1 January 1982. It is true that such an entitlement on the part of private coal owners was removed by the CMAA 1981 but that was because there were to be no more private coal owners. Removal of the statutory entitlement to a share of front-end payments would not have occurred but for the acquisition of private coal under the CAA 1981.
78 The Tribunal was bound to find that it was just and equitable that Nardell receive compensation for the loss of its entitlement to a share of the front-end payment received by the Crown in relation to the Bloomfield Collieries lease in 1989. No other view was reasonably open. Allowance for that loss should have been included in the process of assessment at the point where the "total base compensation amount" was to be adjusted so as to be just and equitable.
79 To some extent, the arguments advanced by counsel on behalf of the Board in justification of the Tribunal's decision in relation to super royalty apply to the Board's disallowance of the claim in relation to front-end payment as well. But the position in relation to front-end payment is so clear that I will not take further time over it.
80 As to Nardell's prospective share in the super royalty received by the Crown in relation to coal extracted under the 1989 lease, the Tribunal rejected that claim on three grounds. First, the figure of $0.90 was said to indicate an intention to limit the compensation for royalty to loss of the prescribed royalty. I disagree. That figure was to be substituted, if necessary, with whatever "other amount" would produce a just and equitable assessment of the applicant's loss for the year.
81 If, contrary to that approach, the "other amount" was restricted to prescribed royalty, then there was an obligation to bring any annually recurring loss other than prescribed royalty to account by adjustment to the "total base compensation amount" (the aggregate of year by year assessments) in order to make that figure just and equitable. Adjustment at that stage would require a reworking of the figure for each year in relation to the other loss, either in isolation or in conjunction with the loss relating to prescribed royalty. The result would then be the same as including the other loss in the year to year assessment in the first place.
82 The second reason for rejecting the claim in relation to super royalty appears to be that the entitlement to a share of super royalty received by the Crown was removed by the CMAA 1981 and never reinstated. That is the same reason for disallowing compensation as the Tribunal gave in relation to the loss of Nardell's entitlement to a share of the front-end payment received by the Crown on the grant of the Bloomfield Collieries lease. It involves the same error. And the CMAA 1981 had no more relevance to super royalty than it did to prescribed royalty, which the Tribunal was bound to allow as a comparable loss.
83 The third reason given by the Tribunal for rejecting Nardell's claim in relation to super royalty was an asserted disclosure of parliamentary intention, said to be apparent from the Minister's speech when introducing the 1997 compensation scheme, namely, that the scheme was not intended to give rise to an entitlement to compensation for loss of a share in prescribed royalty. It seems that the Tribunal has misread the speech. First, the quotation is from a speech by the Minister supporting the Coal Acquisition Amendment Bill which became the CAAA 1997, not the 1997 Arrangements as stated by the Tribunal. More importantly, it appears that the Minister's comments were directed to a perceived anomaly under the CORA 1990, namely, that the miners of coal restored to the original coal owners under the CORA 1990 were charged only the prescribed royalty (super-royalty on privately-owned coal having been abolished in 1992), whereas the miners of publicly owned coal could be charged a super-royalty as well. It does not appear that the Minister was adverting either to compensation for the re-acquisition of restored coal under the proposed CAAA 1997 or to compensation for the acquisition of coal under the CAA 1981.
84 But, however that may be, the CAAA 1997 and the 1997 Arrangements were intractable in their requirement that just and equitable compensation be provided. If compensation for a loss in relation to prescribed royalty is mandated by that rubric, the intentions of the government as conveyed by a speech in the Parliament counts for nothing.
85 Nardell's argument in the proceedings before me was that such compensation was mandated if the award was to be just and equitable. But for the acquisition in 1982 and the associated legislation, it was said, Nardell would have had a statutory entitlement to seven-eighths of both the prescribed and super royalty once the extraction of coal commenced under the lease granted to Bloomfield Collieries in 1989. And the entitlement in relation to super royalty was lost no less than that in relation to the prescribed royalty when the coal was acquired by the Crown in 1982.
86 Counsel for the Board sought to justify the Board's decision to disallow the claim in relation to prescribed royalty on two independent bases, fortified by a third.
87 The first basis of justification was that the "triggering event" was the refusal of Nardell's application for restoration in 1997, not the acquisition of its coal in 1982.
88 That is correct in a sense. It was the refusal of Nardell's application for restoration in 1997 which made Nardell eligible for redetermination of its claim for compensation under the 1997 Arrangements. But the argument went on to assert that compensation was to be assessed by reference to the situation in which Nardell would have been if its application for restoration had been successful.
89 It is unnecessary to trace this argument further. It fails at the threshold. Refusal of Nardell's application for restoration made Nardell eligible for compensation under the 1997 Arrangements. That circumstance had no further effect. Once eligible on that ground, Nardell was entitled to a redetermination of its claim for compensation for the acquisition of its coal in 1982. That is clear from the nature of the claim under the 1985 Arrangements which was to be redetermined, from the base date specified for such a claim, and from the contrast between the terminology of paragraphs (a) and (b) of s6(7).
90 The second way in which the counsel for the Board sought to justify the Tribunal's rejection of the claim for compensation in relation to super royalty accepted, for the purpose of the argument, that Nardell was entitled to just and equitable compensation for the loss of its interest in the coal acquired in 1982. There were then two limbs to this argument. First, it was said that receipt of a share of super royalty was a contingency as at 1982, not a certainty, because, as at 1982, the lease was a contingency not a certainty. The question of compensation was to be decided accordingly. Again, it is unnecessary to trace the argument through because it fails at the threshold. The concept of compensation inherent in the 1997 Arrangements requires, as I have said, that known events occurring prior to determination are to be taken as certain. That answers the first limb of the argument.
91 The second limb of the second approach accepted that intervening events are to be taken as certain. Attention was then directed to the repeal of the CMA 1973 in 1992 and the enactment of the MA 1992 in its place. The case has been argued on that basis that this effectively removed the liability of a lessee to pay super royalty under a current lease relating to privately owned coal. (I am not sure that this is so. In relation to such a lease, no statutory obligation to pay a super royalty arose under the MA 1992. A contractual obligation under an existing lease may nonetheless have continued. However, I will decide the case as it has been argued.) Therefore - so the argument runs - if Nardell's coal had not been compulsorily acquired in 1982, it would have ceased to be subject to super royalty in 1992 and Nardell would have lost its share of that royalty at that time. On that account, it is said, loss of a share of super royalty as from 1992 does not result from the 1982 acquisition, because the loss would have happened as from 1992 in any event.
92 The difficulty about this argument is the underlying assumption that, irrespective of the comprehensive acquisition of coal in 1982 and what followed from that, super royalty under existing leases over privately owned coal would have been abolished, as (it is common ground) occurred by the enactment of the MA 1992 in place of the CMA 1973. That assumption I have to say is misplaced for the following reasons.
93 The CAA 1981 operated to confiscate all privately owned coal in the state. The 1985 Arrangements provided for somewhat limited compensation. The CORA 1990 provided for restoration but selectively. Applications for restoration were confined to "eligible claimants". They were prior owners (mostly) who had made a successful claim for compensation under the 1985 Arrangements. (The compensation had to be refunded as a condition for any grant of restoration.) When the definitions are worked through, applications were also confined to coal on which extraction had not commenced as at 1 January 1986. Grant of an application was then in the discretion of the Minister.
94 The context in which the legislation was enacted and the policy considerations which actuated it are apparent from the second reading speech of the Minister introducing the legislation (Hansard, 16 May 1990, the Assembly):
When this Government was elected extensive reviews were made of the legal, financial and administrative aspects of the coal compensation scheme. It became clear after seven years of operation that this scheme was in an unmanageable state and the problems associated with it would not be solved by a repealing of the Coal Acquisition Act. … The option of restitution of coal rights will be offered to claimants whose land was outside a colliery holding as of 1st January, 1986, so that, where practicable, coal will be handed back to its former owners. … [T] he Coal Compensation Board will determine the compensation payable and offer a choice to claimants whether to elect to receive compensation or to apply to have their coal rights restored.
95 The context was as follows. By 1992, the CORA 1990 would have produced or was likely, in the near future, to produce a mix of publicly owned and privately owned coal. The abandonment of super royalty in relation to privately owned coal under the MA 1992 involved a concession to miners at the expense of the Crown and private coal owners. But mostly that was at the expense of private coal owners who would otherwise have received seven-eighths of the super royalty. By contrast, in relation to coal not restored to private ownership, which included all coal deposits as to which extraction had commenced by 1 January 1986, the Crown would continue to receive the whole of the prescribed and super royalty levied on that coal, as it had done since 1 January 1982. The commercial considerations were not the same in 1992 as they would have been but for the comprehensive 1982 acquisition of privately owned coal.
96 In the circumstances as they existed, the removal of super royalty on privately owned coal had a limited effect on the Crown's royalty income. That situation is to be contrasted with the situation as it would have been in 1992 if the CAA 1981 had not been enacted. If there had been no wholesale acquisition of coal by the Crown in 1982, the abandonment of super royalty on privately owned coal would have had a very much greater effect on the Crown's income from super royalty than it did as the situation was in 1992.
97 Having regard to that consideration, it is unlikely in the extreme that super royalty on privately owned coal would have been abolished as it was in 1992 but for the CAA 1981 and what followed in its wake.
98 Nardell had a clear case for compensation for loss of a seven-eighths share in the super royalty received by the Crown under the 1989 lease up to the enactment of the MA 1992. As to the period thereafter to the date of determination and continuing into the future, it was for Nardell to establish that the loss resulted from the acquisition of its coal under the CAA 1981. But it had a strong prima facie case that this was so. The Board relied on the enactment of the MA 1992 as an event which would have caused that loss in any event. It was unlikely, however, that that event would have occurred as and when it did but for the 1982 acquisition and what followed from that. The Board's argument fails for that reason.
99 The first main argument advanced by the Board and its second main argument were said to be fortified by considerations of parity with other classes of affected individuals.
100 Counsel specified three other categories of affected persons none of whom, it was said, would recover a share of front-end payment under a lease granted after the CAA 1981 or a share of super royalty after the MA 1992, or compensation for loss of such interests.
101 It was not entirely clear, in all cases, that exclusion from such income or lack of compensation for the loss of it was a secure assumption. But, given the assumption, there are a number of major problems with the approach.
102 First, criteria in the statutes relating to restoration, refusal of restoration and reacquisition, produce results which are by no means even-handed. In some instances, movement from one status to another or refusal of movement are decided in the interests of the Crown rather than in the interests of the individual. Then, movement from one status to another or not doing so will, in some instances, have been a matter of choice on the part of the individual for reasons unrelated to entitlement to share in front-end payments or super royalty. For example, for the coal to be free from super royalty might be a selling point when it comes to interesting a mining company in extracting the coal.
103 So it by no means follows that individuals who may be in a class without the benefit of participation in front-end payment or super royalty are in a worse position on that account when one takes a broader view.
104 Then, as to compensation under the 1997 Arrangements, there is the marked difference between the basis on which s5A applicants and s7(1A) applicants - the latter beings Nardell's category - are dealt with having regard to the date from which compensation is assessed. Whether a s5A applicant for compensation will have done better or worse than a s7(1A) applicant will depend, among other things, on how the s5A applicant has fared during the period of restored ownership which such an applicant will have enjoyed. How that balances out against the assumption that a s5A applicant would not recover compensation relating to loss of a share of a front-end payment or loss of a share of super royalty is likely to vary considerably from case to case.
105 The argument is so fraught with conjecture that it provides no secure basis on which to conclude that the executive government, when promulgating the 1997 Arrangements, did not intend applicants in Nardell's situation to recover compensation of the kind now in question on the ground of parity with other affected individuals.
106 For these reasons, the Tribunal's determination disallowing the claim in relation to front-end payment and super royalty was one which could not reasonably be made. In that respect, the determination of the Tribunal should be quashed, and the proceedings should be remitted to the Tribunal for redetermination.
107 Nardell had a further argument relating to both front-end payment and super royalty, which has particular relevance to its claim in relation to super royalty. It was along the following lines. On 1 January 1982, Nardell's interest in the coal which it owned was transferred compulsorily to the Crown. That interest was, relevantly, the value to it of a proportion of such front-end payment, prescribed royalty and / or super royalty as came to be levied on the coal at such time as a lease was granted and the coal extracted. The transfer of that interest to the Crown was not just the loss of the interest to Nardell but the gain of that interest by the Crown. The lease was granted, the front-end payment was made and prescribed and super royalty were received by the Crown, unaffected by subsequent legislation. The Crown thereupon retained the whole of such payments.
108 The argument was then that, to provide just and equitable compensation for that loss, the Crown should now account to Nardell for what the Crown had taken from Nardell for its own benefit. The argument involves a concept of restitution.
109 The value of the argument is that it potentially avoids any problem arising from the enactment of the MA 1992 because, under this approach, it may not matter that the loss would have occurred anyway if that be the fact. If a thief goes into a house that has been left open and steals a television set which he sells, is it an answer to a claim for damages that, if the thief had not taken the television set, someone else would have? If A defrauds a company of $1,000, is it an answer to a claim for damages by the company against A that the money would have been lost anyway because next day the managing director cleaned the company out and flew to South America?
110 I have to say that this argument impresses me. That may be sufficient, without further analysis, if the question is really one of causality, because causality is (on authority) a matter of commonsense and normative judgment. But, being satisfied that Nardell is entitled to the relief sought on other grounds and in the interests of a prompt judgment, I have not taken further time in refining my thoughts about this approach.