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Kelly v Chelsea on the Park Pty Ltd (No 2)[2020] QLC 43

Kelly v Chelsea on the Park Pty Ltd (No 2)[2020] QLC 43

LAND COURT OF QUEENSLAND

CITATION:

Kelly v Chelsea on the Park Pty Ltd (No 2) [2020] QLC 43

PARTIES:

Gilbert Errol Kelly

(applicant)

v

Chelsea on the Park Pty Ltd

ACN 165 795 335

(respondent)

FILE NO:

MRA688-19

PROCEEDING:

Application for costs

DELIVERED ON:

18 December 2020

DELIVERED AT:

Brisbane

HEARD ON:

Submissions closed 11 December 2020

HEARD AT:

Heard on the papers

MEMBER:

PG Stilgoe OAM

ORDER:

Chelsea on the Park Pty Ltd must pay Gilbert Errol Kelly’s costs of the hearing on the standard basis.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – where the Land Court determined compensation payable by the applicant in respect of a mining lease over the respondent’s land – where the applicant offered to settle before hearing – where the applicant claims costs on an indemnity basis – whether the respondent’s conduct justifies the award of indemnity costs

Land Court Act 2000 s 27A

Mineral Resources Act 1989 s 279, s 281

Lonergan & Anor v Friese (No 2) [2020] QLAC 4

APPEARANCES:

Not applicable

  1. [1]
    On 6 November 2020, I decided the compensation Gilbert Kelly should pay to Chelsea on the Park due to the grant of ML 20175. Mr Kelly wants Chelsea to pay his costs of the hearing on an indemnity basis. Chelsea submits that I should make no order as to costs.
  1. [2]
    My discretion to order costs is unfettered.[1]
  1. [3]
    As the Land Appeal Court has pointed out,[2] in mining compensation cases referred to the Court by the Department of Resources (formerly the Department of Natural Resources, Mines and Energy), neither party occupies the position of plaintiff or defendant. Therefore:[3]

in accordance with orthodox principle, costs orders ought not be made unless the party seeking the costs order demonstrates it has been “successful” so as to engage the ordinary rule that costs follow the event. 

  1. [4]
    There are three factors that may be relevant to the question of costs. The first is the reasonableness, or lack thereof, of Chelsea’s claim for compensation.[4] The second is whether I accept Mr Kelly’s submission that Chelsea refused to engage meaningfully in ADR. The last relevant factor is that Mr Kelly made an offer to settle.

Was Chelsea’s claim for compensation unreasonable?

  1. [5]
    Mr Kelly points to five factors to show that Chelsea’s conduct was unreasonable. First, he says that Chelsea did not comply with Court directions. Second, he says that Chelsea exaggerated its claim, with no regard to the possibility of “double dipping”. Third, he says that Chelsea claimed for items on the assumption that he would not comply with the environmental authority (EA) conditions, even though there was clear authority from this Court that compensation should be assessed on the basis that a miner will comply with the EA. Fourth, he says that Chelsea did not comply with its obligation to conduct the litigation expeditiously and without undue technicality or expense. Finally, Mr Kelly says Chelsea claimed legal costs, valuation costs and compensation for the landowner’s time in negotiating a compensation agreement even though there was clear authority from the Land Appeal Court that these items could not be recovered.
  1. [6]
    Chelsea submits that there was no one thing, or series of things, that would characterise its conduct as unreasonable. It says that the long line of Struber[5] authorities meant that there was a clear justification for bringing this case before the Court. It says that the matters for my determination were arguable and not easy questions. It says that its reliance on experts was entirely explicable (and, by implication, reasonable).
  1. [7]
    I agree with Chelsea’s submissions that “hiccups” in the pre-hearing procedure – late delivery of material, the late arrival of experts for an inspection – while frustrating and annoying, are not in themselves reasons to make a costs order in Mr Kelly’s favour. The real question for me is whether Chelsea’s approach to its claim was unreasonable.
  1. [8]
    In the last couple of years, the Court has seen an increase in the amount landowners claim for mining compensation. Landowners have consistently argued quantum that is a direct response to their lack of confidence in the EA conditions sufficiently protecting their properties and their inability to impose tighter conditions.[6] However, as Mr Kelly has pointed out, the Court has provided a consistent response to those claims; compliance with the EA conditions is presumed and the Court will not preload compensation based on a possibility of non-compliance.[7]
  1. [9]
    Mr Thompson, the agronomist Chelsea engaged, thought that fencing was necessary to ensure that Mr Kelly complied with his EA conditions. Mr Pearson, Chelsea’s director and manager, adopted this suggestion and costed the fencing required at $119,275. Mr Thompson is not a stranger to this jurisdiction. He should have known that the Court was unlikely to accept his opinion about the need for fencing. Properly advised, Mr Pearson should also have known that the Court was unlikely to order Mr Kelly pay Chelsea for the cost of fencing.
  1. [10]
    Chelsea submits that the claim was made as a factor of how Mr Kelly would comply with his EA conditions, not whether he would do so. I do not accept this submission as it was never explained to me why Mr Kelly’s responsibility to avoid a possible breach of an EA condition should segue into a certain requirement to pay for that possibility.
  1. [11]
    The agronomist and both valuers accepted that two weed inspections per year were reasonable. Chelsea persisted with a claim for four inspection per year, again based on the possibility of Mr Kelly breaching his EA conditions and introducing weeds onto the mining lease (ML). Although the cost of an inspection is a small amount in the overall context of this dispute, Chelsea’s determination to persist with a claim not supported by the expert evidence does it no credit.
  1. [12]
    Chelsea claimed the costs to prepare and negotiate a mining lease compensation agreement. Even a cursory reading of recent Land Appeal Court cases[8] would have demonstrated that it could not recover the amounts claimed.
  1. [13]
    At the hearing, Chelsea also claimed $120,000 for diminution of the use of the balance of Palmerville. The expert valuation evidence showed that this claim was unsustainable.
  1. [14]
    Chelsea ran this case as if Mr Kelly was proposing a new mining lease. It took no account of the prior grant, and it took no account of the fact that a renewal to 2024 had already been granted.
  1. [15]
    Each of the heads referred to above was demonstrably overstated. They also formed the bulk of Chelsea’s claim. The Land Appeal Court has clearly stated that:[9]

The conduct of the appellant in advancing, at first instance and on appeal, a claim for compensation which was exaggerated or demonstrably inflated, constitutes conduct which is plainly unreasonable, thus warranting an indemnity order as to costs.

  1. [16]
    I accept this comment was made in appeal proceedings where the appellant argued that every finding of the Court below was wrong and relied on the same evidence and same arguments. The current circumstances are slightly different and lead me to consider the other two factors.

Did Chelsea fail to engage meaningfully in ADR?

  1. [17]
    Section 279(1)(a) of the Mineral Resources Act 1989 gives the Court jurisdiction only if the parties cannot agree compensation. The Land Court Act 2000 and the Land Court Rules 2000 have extensive provisions for ADR and the Court has established a panel of mediators and case appraisers with expertise in compensation. A failure to engage meaningfully in ADR is, therefore, a matter which I can consider when considering the issue of costs.[10]
  1. [18]
    Mr Kelly submits that Chelsea based its initial negotiations on a desk top assessment by Mr Hill that was demonstrably wrong. Mr Kelly submits that Mr Hill’s desk top assessment meant that the parties were too far apart to meaningfully engage in negotiations.
  1. [19]
    Mr Kelly’s submission does not acknowledge the fact that Chelsea did modify its approach to valuation once Mr Hill had an opportunity to visit Palmerville and revise his opinion. However, Mr Hill’s high level, broad brush approach to the initial assessment highlights a significant problem for this Court across its jurisdictions; expert opinions that are in “draft” or on a preliminary basis can anchor parties expectations unreasonably so that negotiations are doomed to fail.
  1. [20]
    Mr Kelly also submits that he proposed mediation to Chelsea on 10 September 2020, a day after the parties received the valuation joint expert report. He says, and Chelsea does not deny, that he received no answer to that invitation. He says that Chelsea made a verbal offer on 24 September which was subject to a pared back compensation agreement, a copy of which he never received. Again, Chelsea does not deny these facts, and at the hearing Mr Pearson conceded[11] that negotiations between the parties prior to a referral to this Court were limited to a commercial lease.
  1. [21]
    All these facts tend to show that Chelsea was not interested in a mediated solution unless that solution was wholly or substantially on its terms.

The offer to settle

  1. [22]
    Mr Kelly made a Calderbank[12] offer to settle on 29 September. The offer was for $15,031.98 including two joint weed inspections.
  1. [23]
    Mr Kelly’s offer as to the weed inspections was less generous than my award; he allowed for two inspections only once whereas I have allowed for two inspections annually.
  1. [24]
    Mr Kelly correctly submits his offer was more generous in his calculation of the diminution in the value of the land. He offered $835.11 per annum, being a total of $15,031.98, whereas I allowed a total of $2,697.93.
  1. [25]
    In normal circumstances, the “success” of an offer in this way would be a powerful factor in a decision to order costs. However:
  1. This was a novel case which had the potential to, and did, set aside a long line of Court authority for Palmerville;
  1. The per hectare rate Mr Kelly applied, even though it was supported by Mr Dickinson, did not reflect the actual value of the land;
  1. The offer did not properly reflect my award for weed inspections and was manifestly inadequate in that regard;
  1. The offer did not reflect my decision to require a contribution to surveillance; and, consequently
  1. It was not an offer by which a party could compare apples with apples.
  1. [26]
    Further, I note that the offer was made just before the hearing.

Conclusion

  1. [27]
    None of the three factors I have considered, by themselves, justify an order for costs in Mr Kelly’s favour. Certainty, there is no justification for an order for indemnity costs.
  1. [28]
    However, I am persuaded that an order for costs is appropriate in this case. Chelsea unreasonably persisted with claims for fencing and negotiation costs in the face of Land Appeal Court authority that those items were unsustainable. It relied on Mr Hill’s desk top assessment without giving the assessment the caution it warranted. It did not meaningfully engage in ADR. Instead, Chelsea attempted to impose “commercial lease conditions that the Crown requires”[13] which were significantly more onerous than the EA conditions, possibly unenforceable and clearly inappropriate. Such a heavy-handed approach is to be discouraged.
  1. [29]
    It is not appropriate that Chelsea pay all of Mr Kelly’s costs given the novelty of the arguments placed before the Court. The Calderbank offer, although ineffective as an offer to settle under the UCPR,[14] creates a logical waypoint. By that time, Counsel had been fully briefed, had time to examine the evidence closely and could have made appropriate concessions. Therefore, I order that Chelsea pay Mr Kelly’s costs of the hearing on the standard basis.

Order

Chelsea on the Park Pty Ltd must pay Gilbert Errol Kelly’s costs of the hearing on the standard basis.

Footnotes

[1]Land Court Act 2000 s 27A; Mineral Resources Act 1989 s 281(7).

[2]Lonergan & Anor v Friese (No 2) [2020] QLAC 4 [27].

[3]Ibid [29].

[4]Ibid [29].

[5]See, eg, Gosper & Ors v Struber & Anor [2019] QLC 11; Markert v Struber & Anor [2019] QLC 7; Fitzgerald v Struber & Anor [2019] QLC 6; Wellington Mining & Exploration Pty Ltd v Struber & Anor [2018] QLC 50; Markert v Struber [2018] QLC 44; Plethora Pty Ltd v Struber [2018] QLC 26; Pavey & Anor v Struber & Anor [2018] QLC 24; International Parts & Equipment Pty Ltd v Struber & Anor [2018] QLC 23; Aurum Vale Pty Ltd v Struber & Anor [2018] QLC 19; Fitzgerald v Struber & Anor [2018] QLC 18; Wellington v Struber & Anor [2017] QLC 64; Pavey & Anor v Struber & Anor [2017] QLC 63; Markert v Struber & Anor [2017] QLC 62; Brown v Struber [2017] QLC 34.

[6]See, eg, the comments of the Land Appeal Court in Lonergan & Anor v Friese (No 2) [2020] QLAC 4 [16].

[7]See, eg, Valantine v Henry [2018] QLC 21 [69]; Agnew v DWAJ Pty Ltd [2020] QLC 14.

[8]Lonergan & Anor v Friese (No 2) [2020] QLAC 4.

[9]Ibid [16].

[10]Ibid [26].

[11]T 2-10, line 44.

[12]Calderbank v Calderbank [1975] 3 All ER 333.

[13]T 2-29, lines 31 to 34.

[14]Uniform Civil Procedure Rules 1999 ch 9 pt 5.

Close

Editorial Notes

  • Published Case Name:

    Kelly v Chelsea on the Park Pty Ltd (No 2)

  • Shortened Case Name:

    Kelly v Chelsea on the Park Pty Ltd (No 2)

  • MNC:

    [2020] QLC 43

  • Court:

    QLC

  • Judge(s):

    Member PG Stilgoe OAM

  • Date:

    18 Dec 2020

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.
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