Do resources companies have to compensate land owners for their time?

29 April 2013

While resources companies must compensate land owners in Queensland for the impact of resource projects on their land, they do not have to pay compensation for the time owners spend negotiating a conduct and compensation agreement. [1]

A contentious debate has arisen about whether compensation for landowner time should or ought to be paid. But this argument is quite different to the legal position about whether landowners must be compensated for their time. On this, the law is clear – compensation is not payable.

Resource tenement holders must pay the eligible claimant (which in most cases is owners and occupiers of land[2]) for the “compensatable effect” that the tenement holder’s activities have on the land.

“Compensatable effect” means any or all of the following:

a. all or any of the following relating to the eligible claimant’s land: 

  1. deprivation of possession of its surface;
  2. diminution of its value;
  3. diminution of the use made or that may be made of the land or any improvements on it;
  4. severance of any part of the land from other parts of the land or from other land that the eligible claimant owns;
  5. any cost, damage or loss arising from the carrying out of activities under the tenement on the land;

b. accounting, legal or valuation costs the claimant necessarily and reasonably incurs to negotiate or prepare a conduct and compensation agreement, other than the costs of a person facilitating ADR;

c. consequential damages the eligible claimant incurs because of a matter mentioned in paragraphs (a) or (b).

Significantly, the scope of compensation does not extend to all loss or damage suffered by the owner or occupier. It is limited to the above list of effects and there is no requirement for the tenement holder to compensate for all loss or to provide an absolute indemnity to the eligible claimant. The end result is that some costs, losses, damage and impacts are not recoverable by way of compensation.

This is consistent with the position that holders of resources tenements are concurrent users of the land alongside owners and occupiers. There isn’t a hierarchy in which owners’ and occupiers’ rights are paramount to those of the holder of the resources tenement (nor vice versa).

It may well be that a perceived hierarchy in some quarters placing the rights of owners and occupiers above those of tenement holders is what is driving the idea that resource tenement holders ought to pay for all impacts or provide an absolute indemnity including for landowner time.

If landowner time is recoverable at law, the only provisions under which it could be paid are paragraphs (a)(v) or (c) in the definition of compensatable effect.

Paragraph (a)(v) can be quickly eliminated as the compensation under that paragraph only applies to cost, damage or loss arising from the carrying out of activities under the ‘relevant tenement’. The negotiations preceding any agreement are not the carrying out of the activities themselves nor do they arise from it.

This only leaves paragraph (c), i.e. that landowner time is consequential damage incurred by the eligible claimant because of a matter mentioned in paragraphs (a) or (b). It’s unlikely that time spent by an owner or occupier in negotiating with a person with concurrent rights in the land is consequential damage to diminution in value of the land or any of the other matters listed in the definition.

Unlike the payment of lawyers’ fees or valuers’ fees, the time taken by a eligible claimant in reading agreements, meeting with advisers and meeting with tenement holders does not involve an actual outlay of funds. Rather, the time spent in doing these things is an incident of ownership (or occupiership) of the land.

This is consistent with other circumstances where an owner or occupier is impacted simply as an incidence of ownership of the land and cannot claim compensation.

For example, if a landowner is temporarily unable to access their property because of a temporary road closure (e.g. road resurfacing), any impact (such as extra time parking around the corner and walking to get home) lies with the landowner.

Similarly, if a landowner takes action against a development application made by a neighbour, the time spent in taking such action is not recoverable against the neighbour.

In these cases, and in the case of negotiating with tenement holders, its fair to say that a landowner wouldn’t like the disruption and they may feel someone should compensate them. However, mere interruption doesn’t give rise to a right to compensation.

The Queensland Government’s response to the 2012 Land Access Review Panel report is instructive on the issue of landowner time. The Government recommended a review of the scope of “compensatable effects” in response to at least some submissions pushing for landowner time to be compensable.

The assumption underlying the Government’s response (and the submissions themselves) is that landowner time is not compensable under current legislation (or else a review considering landowner time or a change to allow recovery of landowner time would not be needed). If the law was changed so that landowner time was payable, several issues would need to be considered, including how that time is calculated and what rate is payable.

In 2012, Queensland’s Land Court awarded a landowner $1,050 for their time in the case of Peabody West Burton Pty Ltd & Ors v Mason & Ors [2012] QLC 0023. However, this should not be taken as authority that landowner time is payable under the legislation. There is nothing in the legislation that prevents the parties going beyond the legislative requirements and agreeing for the payment of landowner time on a commercial basis in appropriate circumstances. As an amount was actually agreed between the parties in this instance, the Land Court was not called upon to consider whether compensation for landowner time is payable as a matter of law.

Although landowner time in relation to resources tenement is not compensable as a matter of law, others may continue to hold the opposite view until confirmed by a Land Court decision or some other avenue.

However, the danger with expectations around landowner time is that they are expectations. When reality intrudes, someone will be disappointed. That disappointed person may view it as a right that has been taken away even though the right never existed in the first place.

If this is the case with landowner time, then it may only serve to deepen existing resentment between some people in the agriculture and farming sector and those in the resources sector.

 [1] Landowner time can be divided into two categories. The first is the time spent by the eligible claimant in dealing with the resources company prior to the carrying out of activities, e.g. negotiating any agreement. The second is the time spent in implementing the agreement, e.g. time spent by the eligible claimant to relocate stock prior to resources activities being carried out. This thinking piece only deals with the first category of landowner time, i.e. whether time spent by a landowner in negotiations prior to carrying out the activities forms part of the compensation payable to the landowner.

 [2] The main exception is for mining leases where only the owner is entitled to receive compensation.

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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