Queensland Land Court awards costs against landholder

Aug 2021 | Energy & Resources

Introduction

In the recent Land Court decision of Hail Creek Coal Holding Pty Limited & Ors (Hail Creek) v Michelmore (Mr Michelmore) (No 2)1 (Hail Creek (No 2)), the Land Court ordered Mr Michelmore to pay Hail Creek its costs (as agreed or assessed on the standard basis):

  1. of the proceedings;
     
  2. of and incidental to: 
  1. the hearing on 4 December 2020;
  2. the hearing on 11 December 2020; and
  3. the application brought 1 March 2021; and
  1. thrown away by the adjournment of the hearing on 14 December 2020. 

This recent judgment delivered by the Land Court provides useful guidance in understanding what factors the Land Court will consider when exercising its discretion to order costs under s 281(7) of the Mineral Resources Act 1989 (Qld) (MRA) and s 27A(1) of the Land Court Act 2000 (Qld) (LCA) in certain compensation proceedings. 

Background 

The Facts 

In Hail Creek Coal Holding Pty Limited & Ors v Michelmore,2 the case concerned the amount of compensation payable by Hail Creek to Mr Michelmore in relation to the grant of a mining lease for 138 ha of land (ML), which was to be utilised to accommodate workers at the Hail Creek Mine. The parties had attempted to negotiate a settlement before the proceedings came to Court on the following occasions: 

  1. Mr Michelmore originally sought compensation in excess of $14,850,000;
     
  2. on 1 December 2020, Hail Creek offered to settle for $2,200,000 with each party bearing its own costs (the Calderbank offer); and
     
  3. Mr Michelmore made a counter-offer of $8,140,000.00.

At the hearing, Member Stilgoe OAM acknowledged that 'there is only one issue – what is the value to be given to the surface of the land?'.3 The Land Court ultimately ordered Hail Creek to pay Mr Michelmore compensation in the sum of $530,530, inclusive of the statutory 10% uplift fee to account for the compulsory nature of the acquisition, within 14 days of the grant of the mining lease. 

In Hail Creek (No 2), the Land Court had to consider which party was to pay the other party’s costs in respect of the proceedings. 

The Application 

In determining whether to exercise a discretion to order costs, the Land Court considered the factors referred to in Lonergan & Anor v Friese (No 2)4 as relevant in determining whether to exercise a discretion to order costs. In examining each factor in turn, the Land Court:

  1. reinforced that the default position under the LCA is that in the absence of an offer, each party should bear its own costs.5 However, in circumstances such as this where a party made an offer to settle and that party was successful in making that offer, then the default position no longer applies and the ordinary rules of civil litigation apply, namely, the successful party is entitled to its costs of the proceedings.6  
     
  2. then considered on balance, which party was the 'successful' party so as to potentially engage the rule that costs follow the event and which party was acting 'unreasonable' in attempting to reach an agreement. It was found that: 
  1. judging success can be difficult in such cases, and offers to settle can play an important role. In this case, the rejection of an offer (significantly in excess of what was allowed) demonstrated 'success', as Hail Creek made a subsequent Calderbank offer which was significantly higher than the costs awarded by the Court to Mr. Michelmore on 27 May 2021. Interestingly, notwithstanding a Calderbank offer was made by Hail Creek in this matter, the Court ordered Mr Michelmore to pay costs in respect of the proceedings on a standard basis rather than on an indemnity basis. 
     
  2. Mr Michelmore’s initial claim in excess of $14,000,000 was clearly unreasonable as:
  1. none of his valuer’s evidence supported his initial claim; and
     
  2. he failed to engage in any settlement negotiations after receiving the valuer’s supplementary joint expert report.7 
  1. noted that this matter was referred to the Court by the Chief Executive so there was no plaintiff or defendant. Under the MRA at the time, mining lease compensation matters were referred to the Land Court by the Chief Executive for determination after a set period of time, unless the matter had already been referred by one of the parties. It should be noted that the introduction of the Mineral, Water and Other Legislation Amendment Act 2018 (Qld) removed this automatic referral process under the MRA. Under s 279A of the MRA in its current form, the Minister may refuse to grant the mining lease if:  
  1. if a person makes an application for the grant of a mining lease; and 
     
  2. compensation in relation to the mining lease has not been determined by agreement between the applicant and each owner of land or by determination of the Land Court; and 
     
  3. an application under s. 281 of the MRA has not been made to the Court for a determination of the amount of compensation in relation to the mining lease; and
     
  4. three months have lapsed since one of the matters referred to under s 279A(1)(d) have occurred.  
  1. accepted that this matter was a compulsory acquisition case, and that an affected party should be allowed access to the Court without being deterred by the prospect of a costs order. However, this is premised on the affected party presenting an 'arguable and well organised case'.8  

The decision of this case also highlights that: 

  1. the timing of proponents to make compensation offers to landholders will be important, in that Mr Michelmore’s 'refusal of Hail Creek’s offer was not unreasonable because the valuation evidence was incomplete at the time' and that 'Mr Michelmore was entitled to await the outcome of the additional reports'.9  
     
  2. the Court believes that it has a role to protect unsophisticated landowners and may be very reluctant to award costs against them in that context. However, where the landholder has similar negotiating power as proponents (such as in this case), the Court may not intervene to protect the landholder.10 

What does this decision mean? 

The case conveyed a number of important messages for parties involved in compensation proceedings and their advisers, including that:11  

  1. '(l)andowners should be careful not to be taken in by overenthusiastic advice from which it is difficult to depart with dignity';
     
  2. '(m)iners should not be stingy in their early negotiations for compensation'; and 
     
  3. 'lawyers for parties should give appropriately considered advice'.


1 [2021] QLC 23.
2 [2021] QLC 19.
3 Ibid [4].
4  [2020] QLAC 4.
5 Hail Creek Coal Holding Pty Limited & Ors v Michelmore (No 2) [2021] QLC 23 [9].
6 Ibid [30].
7 Ibid [28].
8 Ibid [13]. 
9 Ibid [24]. 
10 Ibid [32].
11 Ibid [39]. 

This article may provide CPD/CLE/CIP points through your relevant industry organisation.

The material contained in this publication is in the nature of general comment only, and neither purports nor is intended to be advice on any particular matter. No reader should act on the basis of any matter contained in this publication without considering, and if necessary, taking appropriate professional advice upon their own particular circumstances.

Andrew Shute

Andrew Shute

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