A recent decision in the Land Court of Queensland has highlighted the importance of giving landowners appropriately considered legal advice, and parties making reasonable offers to settle early in the negotiation process.
In this article, Damian Roe and Jacinta Cafe discuss how the decision in Hail Creek Coal Holding Pty Limited & Ors V Michelmore (No 2) [2021] Qlc 23 encourages parties to resolve compensation matters by agreement wherever possible to avoid the risk of a costs order if compensation is determined by the Land Court.
Background
On 27 May 2021, Member Stilgoe of the Land Court awarded Ian Ferguson Michelmore (Michelmore) $530,530 in compensation for a 138-hectare mining lease held by Hail Creek Coal Holding Pty Limited (Hail Creek) despite Michelmore claiming $14,850,000.
The Court accepted the value of the land as assessed by Hail Creek’s valuer, Mr Cavanagh. Michelmore’s valuer, Mr Caleo, valued the land at $11,242,300 using a valuation approach which Member Stilgoe noted as having “significant difficulties”. Mr Caleo later revised that value to $8,144,700.
Application for costs
On 19 July 2021, Member Stilgoe of the Land Court of Queensland handed down a decision in Hail Creek Coal Holding Pty Limited & Ors v Michelmore (No 2) [2021] QLC 23 on an application by Hail Creek that Michelmore pay its costs.
It was ordered that Michelmore pay the following costs of Hail Creek on the standard basis:
- of the proceedings;
- of and incidental to:
- the hearing on 4 December 2020;
- the hearing on 11 December 2020;
- the application brought 1 March 2021; and
- thrown away by the adjournment of the hearing on 14 December 2020.
Costs on the standard basis, previously referred to as “party and party” costs, under the Uniform Civil Procedure Rules 1999 (UCPR) means costs are assessed to include “all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed”1. This generally constitutes approximately 65% of the legal fees charged by a party’s legal representatives.
Successful party
In deciding the issue of costs, Member Stilgoe applied the factors considered in Lonergan & Anor v Friese (No 2) [2020] QLAC 4. It was determined which party was “successful” by looking at the Calderbank offers made by the parties and whether such offers were reasonable in attempting to reach agreement2. Mr Michelmore made an offer of $6,000,000 and soon after Hail Creek made an offer of $2,200,000. Both offers included the parties bearing their own costs.
Mr Michelmore rejected Hail Creek’s offer, a decision which Member Stilgoe commented “may seem unwise in hindsight, but [Michelmore] was entitled to rely on the professional advice he had received, even if that advice was poor.”
It was Michelmore’s original position that he should be awarded $14,850,000, an amount Member Stilgoe refers to as “clearly unreasonable” and not supported by Michelmore’s valuation evidence. Hail Creek’s position was that $461,037.50 compensation be awarded, on the basis that the highest and best use of the land was as an accommodation village.
As Michelmore was awarded just $530,530 and Hail Creek had made an offer of $2,200,000, it was determined that Hail Creek was the successful party.
Scale of costs
In determining from what date and on what scale costs should be awarded when one party has been successful, Member Stilgoe applied the ordinary rules of civil litigation by awarding costs of the proceedings on the standard basis.
The Court considered the reasonableness of the parties and, in doing so, Member Stilgoe referred to the matter as one “which was closer to a commercial contest between parties with similar negotiating power than of an unsophisticated landowner overborne by a financial behemoth”.
At a late stage in the proceedings, Michelmore’s lawyers advised they were seeking further expert evidence, with no notice to Hail Creek, and which resulted in an adjournment of the hearing. Further evidence was later filed by Michelmore in support of an additional claim of $582,955.32. That claim was for professional costs incurred by Michelmore, including valuation costs from nine years prior to Hail Creek applying for a mining lease.
It was ordered that Michelmore pay Hail Creek’s costs which were “precipitated solely by the actions of Mr Michelmore’s lawyers and in breach of Court orders”.
Closing remarks
In concluding her reasons, Member Stilgoe made the following remarks:
“…this decision is a salutary lesson to all involved. Landowners should be careful not to be taken in by overenthusiastic advice from which it is difficult to depart with dignity. Miners should not be stingy in their early negotiations for compensation. Lawyers for parties should give appropriately considered advice”.
This decision provides critical guidance to the parties and legal representatives in compensation matters, not only on the issue of costs but also the approaches taken and conduct throughout proceedings. Parties should bear in mind Member Stilgoe’s remarks when making or considering an offer to settle. In addition, legal representatives must remain mindful of the best interests of their client and of the potential effects an offer to settle may have for their client when providing legal advice.
If you would like any further information, please do not hesitate to contact ourResources and Energy team.
Footnotes
1 UCPR, Reg 702
2 Lonergan & Anor v Friese (No 2) [2020] QLAC 4 [27]