Compensation agreement falls short of the requirements for review by the Land Court

In brief

The case of Exco Resources (Qld) Pty Ltd v Daniels & Ors [2018] QLC 1 concerned an application to the Land Court of Queensland commenced by Exco Resources (Qld) Pty Ltd seeking review under section 283B of the Mineral Resources Act 1989 (MLA) of a compensation agreement, on the basis that the right to review under that section had been enlivened because it was a relevant compensation agreement, and there had been a material change in the circumstances following the issue of a mining lease.

The compensation agreement permitted the Applicant to conduct exploration activities on the Respondent owners of the land and provided that there would be further negotiations following the issue of a mining lease (ML100077) for compensation for the mining activities carried out under ML100077. No agreement had been reached between the Applicant and the Respondents as to the amount of compensation payable for the mining activities.

The Applicant argued that the agreement between it and the Respondents satisfied the requirements under section 283B of the MLA, being that the agreement was a compensation agreement under section 279 of the MLA and that its intention to now conduct mining activities met the requirement that there had been a material change in circumstances (at [15]).

The Court found that the parties had not, in fact, agreed on the compensation payable for the mining activities contemplated under ML100077, and therefore the compensation agreement did not enliven the Court's jurisdiction for review.

The Court found that the parties had not agreed on compensation for a mining lease

The Applicant argued that the compensation agreement entered into with the Respondents was an agreement under section 279 of the MLA for three reasons. Firstly, because it contemplated a compensation agreement be entered into between the parties before the granting of the mining lease. Secondly, because the compensation agreement expressly provided that it was an agreement under section 279 of the MLA. Thirdly, because the agreement was in writing and filed as required under the MLA.

The Court held that whilst the compensation agreement might appear to be an agreement made under section 279 of the MLA, it was limited to exploration activities only and lacked the essential requirement that compensation be agreed for mining activities. The compensation agreement, in fact, expressly stated that the Applicant was "not permitted to remove any soil, sand, rock, gravel or other quarry material from the land", activities inherent to the type contemplated under a mining lease (at [11]).

The material change in circumstances must relate to the circumstances of the mining lease

The Applicant submitted, and the Court agreed, that the relevant "temporal reference point" to resolve whether a material change in circumstances had occurred was to look at the time of the agreement.

The Applicant argued that a material change in circumstances had occurred because its intention to conduct mining activities had materialised since the time the parties entered into the compensation agreement. In rejecting the Applicant's submission, the Court referred to ERO Georgetown Gold Operations Pty Ltd v Henry [2015] QLAC 4, which relevantly states the test for a material change in circumstances as being as follows:

"the condition is satisfied when there is a material difference between the circumstances for the mining lease when the compensation was originally agreed or determined, and the circumstances for the mining lease at the date when the change is said to have occurred, the change relating to circumstances relevant to the agreement about or determination of compensation."

The Court confirmed that the circumstances which are relevant as to whether there has been a material change in circumstances are only the circumstances of the mining lease and not the intentions of the Applicant about whether or not it would conduct mining activities. The Court held that something more was needed to establish a material change in circumstances than the proposition that the Applicant entered into the compensation agreement on the premise that circumstances would materially change "if" it decided to carry out mining activities (at [20]).

The Court gave examples of what may amount to a "material change in circumstances", which included a change to the area of land that could be mined or an "increase in the scale or the intensity of authorised activities" (at [20]-[21]). The Applicant was unable to demonstrate any material change because it failed to submit a copy of the application for a mining lease and could not explain any material change. The Court therefore did not have jurisdiction under the MLA to review the agreement.

Want of jurisdiction could not be overcome because of the Applicant's frustration

The compensation agreement gave the Respondents compensation of $1 for the exploration activities and compensation for the mining activities under ML100077 was to be negotiated. The Applicant submitted that because of the Respondents' perceived unwillingness to meaningfully engage in negotiations for compensation for the mining activities, they were effectively trying to veto the mining activities. As a consequence, the Applicant argued that it would be in a worse position than if it had never entered into the compensation agreement if the Court did not have jurisdiction to intervene and review the compensation agreement.

The Applicant submitted that the Court must interpret section 283B of the MLA to best achieve the purpose of the MLA. In particular, the Applicant pointed to the MLA's objective to encourage and facilitate prospecting and exploring for and mining of minerals.

The Court held that it was required to read the MLA as a whole and that other objectives are relevant, including minimising land use conflict which includes the payment of fair compensation. Whilst there was evidence of a polarity of views about fair compensation, the Court was not satisfied that the Respondents did not want mining operations on their land.

The Court sympathised with the Applicant about its frustration because it could not immediately proceed with its mining activities. However, the Court could see no reason to exercise jurisdiction to review the compensation agreement where no jurisdiction existed.