Key trends in Land Court compensation determinations

Key Insights

• In Summerville v Skelton [2022] QLC 7, the Land Court noted that, while the Court is not bound by rules of evidence, a lack of evidence does not assist the Court in assessing the substantial merits of a case.  The Court also re-iterated that in mining compensation matters legal costs are generally not recoverable, and that a landowner's administrative time spent negotiating compensation is not itself compensable. 
• In NQ Marble Pty Ltd v Commonwealth of Australia [2021] QLC 42, the Land Court adopted a low-risk valuation approach to calculating compensation, preferring the Commonwealth's methodology over the landowner's, which was found to pose a greater risk to accuracy of the land's valuation as it had more room for error.
• In Australian Asiatic Gems Pty Ltd v Grabbe & Anor [2021] QLC 25, the Land Court confirmed that the costs of a valuation report prepared prior to Land Court proceedings could not be categorised as "loss or expense that arises as a consequence of the grant of renewal of the mining lease."  This was because grant or renewal could not occur until after compensation had already been determined, and so it would not be correct to suggest that the valuation report was a consequence of the grant or renewal.
• In Sawyer v Grabbe & Anor [2021] QLC 27, the Land Court accepted that, where an application is for renewal of a mining claim where the productive potential of the land had already been reduced, the value for compensation for deprivation of possession of the surface of the land should be reduced as well.  However, the Court also clarified that it will look at the end result of a work program and the total effect it will have on the production potential of the land, as opposed to considering only the impact the work will have at any given time.

Summerville v Skelton 

Summerville v Skelton [2022] QLC 7 concerned the compensation payable by Ms Summerville, an opal miner, to the landowner Mr Skelton.  

The parties exchanged several proposed compensation agreements.  Prior to the matter being heard by the Land Court, their proposals were as follows:

• Ms Summerville: $10 per hectare per year ($1480 for the 10 year term of the lease).  Her offer included several relationship commitments as well as an open invitation to Mr Skelton to visit the tenement to discuss issues and inspect the camp.  Ms Summerville stated that "[t]here will be no compensation for biosecurity inspections". 
• Mr Skelton: $500 for 10 years and $132 per year for biosecurity inspections ($1820 for the 10 year term).  Mr Skelton's proposed agreement also contained extensive relationship and conduct terms. 

In reply submissions, Mr Skelton referred to Washington v Skelton [2021] QLC 11 (a previous case he was involved in), in which Member Stilgoe OAM based compensation for loss of use of the land on a land earning value of $27.95 per hectare per annum.  

He then sought orders for: 

1. $28 per hectare per annum as compensation for deprivation of use of the land; 
2. $400 per annum in biosecurity inspection costs, indexed to CPI; 
3. costs for his legal advice and representation; and
4. costs for his administration time.

The Land Court assessed compensation with reference to the specific heads of claim under the Mineral Resources Act 1989 (Qld). 

Member McNamara noted that there was no evidence to quantify Mr Skelton's claims for loss of use of the land, biosecurity inspections and legal advice and representation costs.  He stated that while the Court is not bound by the rules of evidence, "that does not mean that a statement made without sourcing the information supporting it can be taken on its face.  A lack of evidence does not assist the Court in assessing the substantial merits of a case".

While Mr Skelton's claim for biosecurity inspections was rejected in the absence of evidence explaining the need for them, Member Stilgoe OAM noted that it has been accepted that the existence of a mining interest and activities warrants observation and checking from time to time.  On that basis, he allowed $50 of compensation for an annual one-hour inspection. 

The Court also re-iterated the established principles that, in mining compensation matters:

• unless there are exceptional circumstances, professional expenses incurred in carriage of a matter are generally not recoverable; and 
• the time spent by a landowner negotiating with a miner about compensation is not a loss or expense that arises as a consequence of the grant of the mining tenement.

The Court ordered the following compensation:

1. $462 as a lump sum for diminution of the value of the land (section 85(5)(b)).  This was based on Member Stilgoe's methodology in Washington v Skelton, in which compensation was assessed only in relation to the area diminished, not the total area of the mining claim; and
2. $55 per annum for monitoring costs (section 85(5)(f)).

Both sums included the usual uplift of 10%. 

NQ Marble Pty Ltd v Commonwealth of Australia 

The Land Court decision in NQ Marble Pty Ltd v Commonwealth of Australia [2021] QLC 42 is yet another recent compensation case in which the Court adopted a low-risk valuation approach to calculating compensation for landholders.  The applicant, NQ Marble Pty Ltd (NQ Marble) held an existing mining lease over land approximately 50 km south west of Greenvale in north Queensland.  NQ Marble had identified two additional commercial styles of marble on and around its existing mining lease and sought to replace it with a new mining lease for a term of 10 years.

This matter related to compensation payable to the landholder, the Commonwealth of Australia, before the new mining lease could be granted.  The land was purchased by the Commonwealth through the Department of Defence and is subject to an agistment agreement until June 2022.

NQ Marble's valuer adopted a two-step approach to valuation.  Assessing the land as grazing land, he determined the carrying capacity (by calculating stock numbers of 2000-3000 over 51,800 ha) and then determined a per annum amount based on dollar value per head for the disturbed area under the lease.  A statutory premium, under section 281(4)(e) of the Mineral Resources Act 1989, was then added.  The Commonwealth's valuer adopted the "Direct Comparison" approach in conjunction with a combined "Piecemeal" approach and "Before and After" approach to assess compensation under the lease.

The Court preferred the valuation methodology adopted by the Commonwealth.  While acknowledging that the approaches of both valuers included "a degree of speculation and estimation", the two-step approach used by NQ Marble's valuer posed a greater risk to the accuracy of the land's valuation, with more room for error resulting from the calculation's 'inputs' and their reliability.  The Court also considered that, while the land was subject to the agistment agreement at the time of determining compensation, once the agistment agreement terminates then the land would be used for grazing purposes.

The Court then applied a premium of 20%.  This represented a "more than token" premium for the potentiality of the land, while acknowledging that:

• the highest and best use of the land is likely to be for military training purposes, with the potential that further approvals may be needed to achieve this use; and

• although the Commonwealth is likely to be the only purchaser of the land for the highest and best use, that does not mean only a token amount should be added to its market value.

The Court further adjusted the amount, as follows:

• a 35% discount, due to the interest the Commonwealth would retain in the land pursuant to conditions of the mining lease; 
• a further 50%, due to the temporary nature of the mining lease; and
• 3% for deferral of compensation until the agistment agreement ends.

Based on the above, the Court determined that the compensation payable to the Commonwealth totalled $34,735.62.  This included a final amount of $22,203.44 per ha, $9,374.40 in loss or expenses and an additional 10% to reflect the compulsory nature of the action taken at $3,157.78.

Australian Asiatic Gems Pty Ltd v Grabbe & Anor 

Another important decision was recently handed down in Australian Asiatic Gems Pty Ltd v Grabbe & Anor [2021] QLC 25.  This matter concerned an issue where the originating application referenced the renewal of only one mining lease, rather than the intended two mining leases.  However, the parties agreed that the two matters could be joined without need for filing of further material.  

The Court noted that Member Stilgoe of the Land Court had previously considered a similar application in Land & Anor v Grabbe & Anor [2021] QLC 1, with the same respondent and a different applicant over nearby tenements, in January of 2021.  The Court considered that the underlying facts and circumstances were very similar and thus generally agreed with Member Stilgoe's findings in the earlier decision that $100/ha in circumstances of total loss should be compensation for the deprivation of possession of the surface of the land.  Further, the Court found that no compensation could be given for any alleged diminution in the value of the land due to the renewal of the mining lease. 

The Court accepted the decision of Member Stilgoe that the appropriate liability for the applicant is one third of the value of the land.  As both mining leases in question are accessed by the same track, the Court found that compensation in this regard is to be apportioned evenly between the two tenements.  Further, the Court agreed with the Land Court's finding that one additional hour of inspection time, at a rate of $78.12 per hour, should be paid as compensation.  However, no compensation would be given for an increase in management or inspection time as a result of the second tenement.  

Consequently, compensation payable to the respondent was calculated to be $1,031.18.  This consisted of $78.12 (the hourly rate) x 12 months + 10% uplift, which should be paid annually and indexed to CPI.  These amounts were held to be payable until the mining leases expire which, under the resource authority's public reports, will be in 2025 and 2035 for the two tenements, respectively.  The Court also stated that if one mining lease ended prior to the other and was not renewed, the holder of the mining tenement is to be responsible for the full amount under s 281(3)(a)(vi).  

Costs associated with the valuation report in the Land Court were claimed, but were dismissed.  Member Stilgoe had held these costs were part of litigation and not incurred due to the application for renewal.  

The Court agreed.  The Court noted the decision of the Land Appeals Court in Lonergan v Friese [2020] QLAC 3, in which it was held that the costs of negotiation cannot properly be characterised as "loss or expense that arises as a consequence of the grant or renewal of the mining lease".  This is because the grant or renewal cannot occur until an agreement on compensation is reached or a determination is made by the Land Court under s 281.  In other words, because the grant or renewal must occur after compensation is determined, it cannot be said that the legal expenses in negotiation occurred as a consequence of the grant or renewal.

The Court also noted that the claim for legal expenses was not itemised in any way to enable the Court to consider it further, and so it was dismissed.

Sawyer v Grabbe & Anor 

Lastly, Sawyer v Grabbe & Anor [2021] QLC 27 concerned a decision regarding the compensation for the renewal of an existing mining claim and the fresh grant of a mining claim.  It dealt with similar subject matter to the Australian Asiatic Gems decision summarised above, as well as the Land decision referenced in that case, and thus the Land Court saw little reason to depart from many of the findings in those decisions.  Material which was filed and relied upon in Australian Asiatic Gems was also "recycled" by the respondents for the purposes of this case.

The Court once again applied the findings of Member Stilgoe in the Land decision in determining that $100/ha was appropriate in circumstances of total loss for deprivation of possession.  The total amount of compensation was reduced to one third for the renewal, as the productive potential of the land had already been lost due to previous activities on that claim.

The applicant contended, relying on the decision in Kelly v Chelsea on the Park Pty Ltd [2020] QLC 36 (summarised on page 21 of our Queensland Land Access and Resource Approvals Year in Review for 2020–2021) that only the area of disturbance should be subject to consideration, rather than the whole surface.  The applicant also noted that the claims would be worked for only six to seven months of the year.

The Court rejected this submission.  The Court considered that, based on the work program for the claims, the production potential for the whole area of the claims would be significantly impacted once that program was completed.  Accordingly, the Court did not apply any discount for deprivation of the surface of the land.  However, the Court also noted that this conclusion meant that any future renewal over the same area would not raise a liability for compensation.

As in Australian Asiatic Gems, because the access track is common to both claims, the Court held that the compensation payable be split evenly under the two claims.  However, should either claim cease to exist, then the holder of the remaining claim would be liable for the combined annual access track compensation payment under both claims.

With regard to compensation for loss or expenses arising out of additional inspection time, the Court (consistent with Australian Asiatic Gems) allowed compensation for one hour per month at $78.12 with a 10% uplift.  This was again to be split between the two claims, as the claims were adjoining, and so the Court considered the management time required would not be duplicated – but again, should one claim terminate before the other, then the holder of the remaining claim would be liable for the total amount.  

The applicant again made the submission that because the claims would be worked only six to seven months a year, the management costs should be reduced to that timeframe.  The Court was not satisfied that these increased management obligations would be limited to the time the tenements remained 'live', and so declined to reduce this amount.