Australian Diatomaceous Earth Pty Ltd & Marsterson, Re [2004] QLRT 49

LAND AND RESOURCES TRIBUNAL QUEENSLAND CITATION: Re Australian Diatomaceous Earth Pty Ltd & Marsterson [2004] QLRT 49 PARTIES: Australian Diatomaceous Earth Pty Ltd (Applicant) and E.J. & M.J. Marsterson (Respondents) FILE NO/S: MLC00085/2003 PROCEEDING: Application to determine compensation DELIVERED ON: 28 May 2004 DELIVERED AT: Brisbane HEARING DATE: 8, 10 December 2003 (Brisbane) 5-7 May 2004 (Charters Towers, “Wyandotte”) PRESIDING MEMBERS: Koppenol P ORDER/S: 1. Compensation determined at $103,543. (at [18]) 2. The Applicant is to pay such sum to the Respondents within 7 days of the grant of the proposed mining lease. (at [20]) 3. I will hear the parties’ submissions on the costs of this application. (at [21]) CATCHWORDS: COMPENSATION – MINING LEASE (DIATOMACEOUS EARTH) – CATTLE PROPERTY – ASSESSMENT METHODOLOGY – VLUATION AND LEGAL EXPENSES Mineral Resources Act 1989, ss 281 Environmental Protection Act 1994 Vegetation Management Act 1999, s. 22A(2)(f) Vegetation Management and Other Legislation Amendment Act 2004, s. 15 The Minister of State for the Army v Pacific Hotel Pty Ltd [1944] StRQd 112 (HC), applied Sharman v Evans (1977) 138 CLR 536, applied Western Australia v Ward (2002) 76 ALJR 1090, applied Commissioner of State Revenue (Victoria) v Pioneer Concrete (Vic) Pty Ltd (2002) 209 CLR 651, applied Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd (1981) 146 CLR 336, applied -- 1 of 7 -- Sullivan v Oil Co of Aust Ltd & Anor [2003] QCA 570, applied Bennett v Fitzroy Shire Council [2003] QCA 444, applied R v The Land Court, ex parte Kennecott Explorations (Australia) Ltd [1989] 1 QdR 335 (FC), applied The Minister v Ryan (1963) 9 LGRA 112, followed Minister for Lands v Ferguson (1969) 48 LVR 9, followed Smith v Cameron (1986) 11 QLCR 64, not followed Zimmerebner v Hawkins (1999) 20 QLCR 11, not followed COUNSEL: A.C. Barlow for the Applicant R.M. Needham for the Respondents SOLICITORS: Hopgood Ganim Lawyers for the Applicant Roberts Nehmer McKee Lawyers (Townsville) for the Respondents AGENT/S: N/A Background [1] This is an application under section 281 of the Mineral Resources Act 1989 MRA) for the determination of compensation for the grant of a mining lease. The mining lease application (MLA 10279) has not yet been heard. [2] The mining lease application seeks the grant of a lease to mine diatomaceous earth (DE) over a part (133ha or 1.33km²) of a grazing homestead perpetual lease (total area 37,520ha or 375.2km²) for a period of 50 years. The subject land (“Wyandotte”) is situated 180km north-west of Charters Towers. The lessees (Mr and Mrs Marsterson) breed, fatten and sell high quality beef cattle and have done so for many years. Section 281 [3] Relevantly, section 281(3)(a) requires the Tribunal to settle the amount of compensation an owner of land is entitled to as compensation for: “(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; (v) any surface rights of access; (vi) all loss or expense that arises; as a consequence of the grant or renewal of the mining lease.” [4] Section 281(4) enables various additional factors to be included in the compensation determination. It provides as follows: -- 2 of 7 -- “(4) In accessing the amount of comp3ensation payable under subsection (3)— (a) where it is necessary for the owner of land to obtain replacement land of a similar productivity, nature and area or resettle himself or herself or relocate his or her livestock and other chattels on other parts of his or her land or on the replacement land, all reasonable costs incurred or likely to be incurred by the owner in obtaining replacement land, the owner’s resettlement and the relocation of the owner’s livestock or other chattels as at the date of the assessment shall be considered; (b) no allowance shall be made for any minerals that are or may be on or under the surface of the land concerned; (c) if the owner of land proves that the status and use currently being made (prior to the application for the grant of the mining lease) of certain land is such that a premium should be applied—an appropriate amount of compensation may be determined; (d) loss that arises may include loss of profits to the owner calculated by comparison of the usage being made of land prior to the lodgment of the relevant application for the grant of a mining lease and the usage that could be made of that land after the grant; (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 not less than 10% of the aggregate amount determined under subsection (3).” [5] Section 281(3)(a)(i)-(vi) identify “heads of compensation”.1 As such, factors including transparency and clarity necessitate separate monetary attribution to each head.2 Naturally, care must be taken to avoid compensating more than once for a particular component. As statutory criteria are the source of the compensation entitlement, primary regard must be had to the term of the statute and not to decisional law or general principles.3 [6] No submissions were made by the landowners in support of an award of compensation for the factors set out in section 281(3)(a)(i), (iii) and (iv) and (4)(a)- (d). The parties agreed that $2,800 should be awarded for surface rights of access (a road) in section 281(3)(a)(v) and that only 10% should apply under section 281(4)(e). I accept that. The landowners made a claim under section 281(3)(a)(vi) for their valuation fees and legal expenses. However, analogous appellate authority persuades me that recovery of such items as compensation should be denied.4 [7] To the extent that Land Court of Queensland decisions5 advocate a different approach from that set out above, they should not be followed in this Tribunal The proposed mining operation [8] DE is a naturally-occurring white chalky or powdery substance made from fossilised marine plant organisms. It is used for various purposes including as a filter aid and an additive in cosmetics and paint. In the present case, it is intended to sell the product into the filter-aid market—eg, beer, wine and fruit juice filtration. The miner 1 R v The Land Court, ex parte Kennecott Explorations (Australia) Ltd [1989] 1 QdR 335, 339 (FC): see also Sullivan v Oil Co of Aust Ltd & Anor [2003] QCA 570, at [18], [21], [22], [31]. 2 Sharman v Evans (1977) 138 CLR 563, 572. 3 Western Australia v Ward (2002) 76 ALJR 1098, 1110 [25]. 4 The Minister of State for the Army v Pacific Hotel Pty Ltd [1944] StRQd 112 (HC), 122, 123, 129; Sullivan v Oil Co of Aust Ltd & Anor [2003] QCA 570, at [36], [37]. Recovery is denied because these items are regarded as part of the costs of preparing the claim. In a compulsory acquisition or petroleum compensation case, these items are irrecoverable as compensation because they are not regarded as damages consequential upon the acquisition or the petroleum lessee’s occupation of land. So in the present case, these items are not therefore loss or expense that arises as a consequence of the grant of the mining lease. 5 Eg, Smith v Cameron (1986) 11 QLCR 64; Zimmerebner v Hawkins (1999) 20 QLCR 11. -- 3 of 7 -- intends to excavate the DE and truck it offsite for processing. Contractors will be used for these purposes. The extraction operations will occur on up to 100 days per year (in a single block or the smallest practicable number of blocks). Up to 200,000t per year will be extracted, comprising 75,000t of topsoil, overburden and interburden (which will be stockpiled on site) and 125,000t of DE. The pits will be fenced and subsequently filled in with the stockpiled material and dried DE sediment from the previous year’s processing. The parties have agreed that the miner will undertake a variety of prescribed safety measures in respect of carrying out activities as part of the mining project. These relate to cleaning vehicles so as to minimise the risk of noxious weeds, dust minimisation, fire, fencing, water extraction and others. Rehabilitation is also required. In addition, the relevant provisions of the code of environmental compliance under the Environmental Protection Act 1994 will apply to this mining lease project and the miner will be required to comply with its terms. It will also be required to comply with the terms of the mining environmental authority issued by the Environmental Protection Agency. For present purposes, full compliance with those obligations, and with the terms of the proposed mining lease, should be presumed. It should not be thought that these requirements are anything other than stringent. [9] The landowner Mr Marsterson seemed to be of the view that DE would have a toxic or adverse effect upon his cattle, pastures, crops, trees and creeks. Whilst I do not doubt that he genuinely holds that belief, I note that no factual basis for it was advanced and no expert evidence was led about it. I must act on evidence and not mere assertion. I am therefore not satisfied that DE has any such effect. Indeed internet searches show that DE is sold as a produce which is deadly to insects but otherwise harmless (unless continually inhaled)—and is even used as an animal feed additive and to dust cops and pastures.6 That is consistent with Mr Prentice’s evidence (which I accept) that DE is used for pasture improvement and is also fit for human consumption. Diminution of value [10] I turn now to the first of the relevant heads of compensation in section 281(3)(a)— namely “diminution of the value of the land of the owner or any improvements thereon”. In this context, “the land of the owner” means the whole property including the balance land.7 The determination of the value of land requires a hypothetical inquiry as to the point at which a desirous purchaser and a not unwilling vendor would come together.8 In that regard, a comparison of the “before” and “after” valuations of the land is used.9 [11] The mining operation is proposed to be conducted on 1 paddock on the lessees’ land. That paddock is a miniscule area compared with the total property area (about 0.35%). It is also somewhat remotely located from the homestead and nearby irrigated fodder-growing paddocks (lucerne and sorghum). However I accept 6 Eg, hydromall.com. 7 R v The Land Court, ex parte Kennecott Explorations (Australia) Ltd [2989] 1 QdR 335, 340 (FC). 8 Commissioner of State Revenue (Victoria) v Pioneer Concrete (Vic) Pty Ltd (2002) 209 CLR 651, 667[44], applying Spencer v Commonwealth (1907) 5 CLR 418, 432. 9 Bennett v Fitzroy Shire Council [2003] QCA 444, at [10], [12]. -- 4 of 7 -- Mr Marsteron’s evidence that it is currently used as an area where his cattle (up to 400 head) are grazed and fattened prior to sale. There is no doubt that the mining operations, the pit sizes (up to 6 football fields) and the stockpile areas (up to 10 football fields) will have a substantial and adverse effect upon the landowners’ capacity to use that paddock for cattle grazing. However, it will not prevent cattle grazing in parts of that area. Mr Marsterson also told me that because it is necessary to spell his principal fodder-growing paddocks from time to time, he intended using part (30ha) of the subject paddock in about 6 years time for fodder-growing.10 He said that to do that, he would have to substantially clear the trees11 and rocks (the paddock is very rocky) and then transport one of his long pivot irrigators to that paddock. Water would be piped by arrangement from an adjoining property. I accept that evidence. Although no precise soil suitability testing has been conducted on that paddock, I accept Mr Marsterson’s evidence (which was supported by the landowners’ valuer Mr Eales) and find that an adequate soil quality and depth should be presumed on the basis of the paddock’s generally similar appearance to the current fodder-growing paddocks in their earlier uncleared state. The evidence of the miner’s soil expert (Dr Butler) is not inconsistent with that approach. [12] In summary, Mr Eales assessed the “before” value of the whole property (excluding structural improvements etc) at $8.7m and the “after” value at $8.18m. However, Mr Brown, the miner’s valuer, did not assess the value on that basis but rather by the “piecemeal” method—which in my opinion is not appropriate for MRA purposes. Nevertheless, I am not required to accept the evidence of the only valuer who gives evidence on a particular point.12 Both valuers agreed that the appropriate value for the property’s grazing land should be $250/ha. However they disagreed about the value of the potential irrigable/arable land. Mr Eales’ opinion was for $2,500/ha and Mr Brown’s was $1,000/ha. [13] It is important to note that valuation is a matter of estimation and discretionary judgement.13 As such, there will usually be a range of figures within which valuations by competent and experienced valuers will fall. I have examined the comparative sales data proved by each valuer. They should individual characteristics (size, location, quality, prices, etc) of other properties—which can then be used as a guide to the value of the subject land.14 Having done so, I am satisfied that a valuation of $1,000/ha is rather on the low side, but that $2,500/ha is too high. Two of the sales concerned properties which were regarded as having comparable-located, or superiorly-located, potential irrigable/arable land—which was valued at $2,000/ha.15 Although the land was said to be slightly inferior to the subject land, the properties concerned were considerably smaller, with better access and closer to town. Those are significant balancing features. In my opinion, that figure of $2,000/ha more 10 It is probably the only available area for that purposes which could be pivot-irrigated on the whole property. 11 This activity is permitted by section 22A(2)(f) of the Vegetation Management Act 1999, as amended by section 15 of the Vegetation Management and Other Legislation Amendment Act 2004. 12 The Minister v Ryan (1963) 9 LGRA 112, 114; Minister for Lands v Ferguson (1969) 48 LVR 9,11. 13 Federal commissioner of Taxation v St Helens Far (ACT) Pty Ltd (1981) 146 CLR 336, 381. 14 The valuers’ opinions about the value of potential irrigable/arable land on other properties ranged from $1,250/ha to $8,250/ha. Opinions were also expressed about the relevance of those figures, having regard to the size and perceived inferiority or superiority of the land being compared. 15 McIntosh to Stralow, June 2001; Ogilvie to Ramage, November 2001. -- 5 of 7 -- accurately reflects the value of this 30ha parcel, having regard to all relevant considerations. [14] Mr Eales’ “before” and “after” valuation can now be revisited. The relevant points for present purposes are the components where the monetary figures attributed to them differ in the “before” and “after” assessments. There are only 2: first, the “after” figures show that there has been a drop of 30ha in the total rea of potential irrigable/arable land. I accept that. It is obviously attributable to the subject parcel. However when a valuation of $2,000/ha is applied to that area, the “after” assessment is only $60,000 (not $75,000, ie, 30ha @ $2,500/ha) less than the “before” figure. Secondly, Mr Eales reduced his valuation of the 17,000+ha of grazing land (red and black basalt country) —from $250/ha to $225/ha, and in the case of the mining lease area—to only $10/ha. That reduced figure of $225/ha is doubtless intended to reflect Mr Eales’ perception (or perhaps his perception of the hypothetical prudent purchaser’s perception) of the effect on the value of the grazing land of the mining lease and its operations. Whilst I am prepared to accept that approach with respect to the area of the mining lease (133ha @ $10/ha = $1,330), I am not satisfied on the evidence adduced that there should be any reduction in the value of the balance of the grazing land (some 17,137ha or 17.137km²) or that the DE-mining operation would lead to any loss of utility to the surrounding land.16 In my view, a hypothetical prudent purchaser of a large cattle property such as “Wyandotte” would conduct due diligence enquiries about the property and the mining operations. Even the most cursory internet search for DE would reveal its chemical properties and uses. On the evidence in this case, I do not accept that any such person would then regard the DE- mining lease or operations as negatively impacting (or “injuriously affecting”) the balance of the grazing land or its value. [15] It follows that the monetary difference between the “before” and “after” valuation of “Wyandotte” is $61,300—namely 30ha of potential irrigable/arable land at $2,000/ha ($60,000) plus 133ha of former grazing land (the proposed mining lease area) at $10/ha ($1,330). I therefore find that the appropriate figure for diminution of value is $61,330. Loss or expense [16] The landowner also claimed for 2 items as “disturbance”. Although that term is not used in section 281 of the MRA, I apprehend that the claim is made under section 281(3)(vi)—all loss or expense that arises as a consequence of the grant of the mining lease. The sum of $50,000 is claimed for risk of fire. However as the parties have agreed that the miner will be responsible for any mining-related fire damage, I am not satisfied that any specific monetary amount for this item should now be awarded. [17] The landowner also claimed $208,000 for his time in checking and dealing with issues relating to the mining operation. Both parties agreed that some amount should be awarded but they differed on the details. I accept that the landowners will incur 16 Although a buffer area will exist within the boundaries of the proposed mining lease and dust control measures will be adopted by the miner, some airborne DE dust will still probably fall onto adjoining pastures. However I am not satisfied on the evidence before my that any such dust will negatively impact upon the adjoining pastures. -- 6 of 7 -- some expense in that regard. Each valuer spoke about this point. Mr Marsterson said that it would take one day for an employee (at $150/day) to do that work. He said that checks should be done twice a week during mining and that the need to check would reduce over time. He already checks fences etc in that area about 3 times a year. The mining operation will be conducted for a maximum of 100 days (say 15 weeks) a year. Having regard to all of those factors and to the term of the proposed mining lease (50 years), I am not satisfied that any more than 12 visits per year would be necessary year after year. More than 12 visits may well be necessary in year 1 but as experience and understanding of the mining operation grows, I would expect (consistently with Mr Marsterson’s evidence) that the number would be considerably reduced over time. On that basis, 12 visits @ $150/day in perpetuity (50 years) @ 6% (the capitalisation rate applied by each valuer) = $29,319.23, say $30,000. Determination [18] Having regard to the foregoing, I determine compensation as follows: (a) Diminution of value (s. 281(3)(a)(ii) $ 61,330 (b) Surface rights of access (s. 281(3)(a)(v)) $ 2,800 (c) Loss or expense (s. 281(3)(a)(vi)) $ 30,000 $ 94,130 (d) Additional 10% (s. 281(4)(e) $ 9,413 Total $103.543 [19] Counsel for the landowners (Mr Needham) submitted that the determined compensation should be paid by the miner upon the grant of the mining lease. That was because the loss was said to crystallise at that time. Counsel for the miner (Mr Barlow) submitted that the $2,800 for access and the additional 10% should be paid upon the grant. He advocated periodic payments for the balance due to the length of the mining lease. I accept Mr Needham’s argument. The diminution of value figure represents a crystallised loss upon the grant, as does the $30,000 for inspections because it represents the present value of the inspection expenses over the term of the lease. [20] I will therefore order that the determined compensation of $103,543 be paid by the miner to the landowners within 7 days of the grant of the proposed mining lease ML 10279 Costs [21] I will hear the parties’ submissions on the costs of this application. -- 7 of 7 --