Queensland's Land Court has delivered a salutary lesson on costs, reminding all involved of the importance of acting reasonably, particularly with offers and negotiation of a settlement, or risk having salt rubbed into your wounds (Hail Creek Coal Holding Pty Limited & Ors v Michelmore (No 2)  QLC 23).
Hail Creek (No 2) involved an application for costs by Hail Creek Coal Holding Pty Limited (HCCH) following the Land Court's earlier decision and order for compensation for the grant of a mining lease.
In the earlier proceedings, Mr Michelmore's claim for compensation was in excess of $14m whereas HCCH's position was that the total compensation should be $460,000. Following receipt of the first joint expert report HCCH made a Calderbank offer to settle for $2.2m. The Land Court awarded $530,530 in compensation.
Land Court proceedings and costs: the legal framework
Both the Mineral Resources Act 1989 (Qld), for claims for a mining lease, and the Acquisition of Land Act 1967 (Qld), for claims for a compulsory acquisition, contain costs provisions, which give the Land Court a discretion to order costs for a proceeding.
In addition, the Land Court Act 2000 gives the Land Court a general discretion to orders costs as it considers appropriate, subject to other legislation. If, however, the Court does not make an order, each party must bear their own costs of the proceeding.
Compulsory acquisition = compulsory claims before the Land Court
The Courts have recognised that proceedings involving compensation claims for a compulsory acquisition or mining lease differ from ordinary claims in that the claimant, unlike the ordinary plaintiff, has no choice whether to make a claim or not. This often creates a higher threshold for obtaining a costs order in favour of the respondent where the effect of making that order is to erode the benefit of the compensation.
Having said that, they have also recognised that this position is premised on the claimant presenting an arguable and well organised case. It is not intended to be a shield for those "who pursue a vexatious, dishonest or grossly exaggerated claim, or present their case in a way as to impose unnecessary burdens on the [other party] or the Court" (Banno v Commonwealth of Australia (1993) 81 LGERA 34).
Exercising the Land Court's discretion to order costs
Hail Creek (No 2) provides guidance on the matters the Land Court will consider when exercising its discretion to order costs, including the following factors enunciated in Lonergan & Anor v Friese (No 2)  QLAC 4:
- the default position under the Land Court Act is that, in the absence of an offer, each party bears its own costs;
- in accordance with the orthodox principle, costs orders ought not be made unless the party seeking costs demonstrates that it has been "successful" so as to engage the ordinary rule that costs follow the event;
- where a matter is referred to the Court by the Chief Executive, neither party occupies the position of plaintiff or defendant;
- in the absence of offers to settle, it cannot be concluded whether either party was "successful"; and
- one factor may be taken into account is the reasonableness, or lack thereof, in attempting to reach agreement.
In Hail Creek (No 2) Mr Michelmore submitted that he was the "successful" party because he was entitled to, and was successfully awarded, compensation. Member Stilgoe rejected that submission, noting a landowner will not always be successful simply because a court has determined the compensation payable.
In awarding HHCH costs on a standard basis, Member Stilgoe also had regard to HCCCH's offer to settle, which was much higher than the ultimate award for compensation. While Mr Michelmore submitted his refusal of the offer was not unreasonable because the valuation evidence was incomplete at the time, Member Stilgoe noted Mr Michelmore:
- had been provided with a clear basis for HCCH's offer;
- had been provided notice of the significant difficulties of his valuation expert's use of the net present value approach;
- did not attempt any further negotiations; and
- instead increased his claim for compensation.
Member Stilgoe also held that Mr Michelmore did not act reasonably by:
- having an initial claim of over $14m, which was not supported by his valuation evidence; and
- failing to engage in any settlement negotiations after receiving the valuers' supplementary joint expert report.
Lessons for those involved in Land Court proceedings
The decision in Hail Creek (No 2) is a reminder for parties and legal representatives involved in compensation matters before the Land Court to carefully consider negotiations throughout the course of the matter and the potential consequences of a costs order where a compensation matter is litigated. Parties should reflect on this decision when making or considering any offer to settle, in particular, the timing of offers and the evidence available at the time, including any weaknesses in the evidence.
In concluding her judgment, Member Stilgoe stated "this decision on costs may be rubbing salt into his wounds. But this decision is a salutary lesson to all involved" and provided the following cautionary reminders:
- landowners should be careful not to be taken in by overenthusiastic advice from which it is difficult to depart with dignity;
- miners [and constructing authorities] should not be stingy in their early negotiations for compensation; and
- lawyers for parties should give appropriately considered advice.