Resource companies operating in Queensland are required
to compensate land owners for the reasonable legal costs they incur
as part of negotiating or preparing a conduct and compensation
agreement. But what are "reasonable legal costs" in this
"Reasonable legal costs" sounds like a perfect
solution to a problem where one party is required to pay the legal
costs of another in order to avoid any actual or perceived excess
or abuse of the payment obligation.
However, while sensible in theory, there is little practical
guidance about what "reasonable legal costs" means and
there is often a considerable gulf between the views of the
different parties about what needs to be paid.
In Queensland, resource authority holders are generally required
to compensate owners and occupiers of land for, among other things,
"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 an ADR".1
As yet, there is no determination by the Land Court relating to
the scope of "reasonable legal costs" in the context of
resources legislation and so the extent of such costs remains
However, cases in other areas of law, namely acquisition of land
cases and proceeds of crime legislation cases, do offer valuable
guidance where the court has been called upon to consider what
amounts to reasonable legal costs in those contexts.
Such cases, together with a first principles analysis of the
legislation, suggest the following factors will be considered when
assessing "reasonable legal costs":
the need for the legal work must have been reasonable;
the cost of doing the legal work (whether the rates involved or
another basis of payment) must have been reasonable (and in this
regard, issues around "care and consideration" as a
component of legal fees may need to be considered);
the time taken to do the legal work;
the work must have been related to the issues in question (in a
resources context, the work must have been related to the
negotiation of the conduct and compensation agreement); and
the merits of the position adopted or the arguments advanced
must have some basis or prospects of success.
While not the subject of any cases, it is also arguable that the
quality of the work done may be another relevant factor. Work that
is particularly poor quality may not be within the scope of
"reasonable legal costs" and may not be payable by a
third party payer. This is because the client may not have been
required to pay for work of that nature in the first instance.
Other issues that arise in the case law suggest that:
what constitutes "reasonable legal costs" may not be
the same as an amount that is determined by way of a costs
there may not be a single value of an hourly rate which is
reasonable as what is reasonable will depend on a number of
circumstances (e.g. a larger law firm with higher overheads may
have higher rates than a sole practitioner, but those rates are not
necessarily unreasonable even if the standard of the work is the
"reasonable legal costs" will depend on all the facts
and circumstances of the case; and
"reasonable legal costs" will be determined by the
judge in the case not by a party or their legal advisers.
All of this means there is no magic number which will be
considered reasonable legal costs in every situation. There is also
no simple formula that can be applied as the particular
circumstances in each case will determine what is reasonable.
Although, it is equally true that for each particular circumstance,
there will ultimately be an amount, or a range, which would be
reasonable in that instance.
While the ultimate line defining "reasonable legal
costs" is not black and white, knowing the factors which are
relevant to what is "reasonable" will allow resources
companies to arm themselves with relevant and reasonable questions
when being presented with a higher than expected bill for a
landowner's legal costs.
1Mineral Resources Act 1989 (Qld), Schedule 1,
section 13(4)(b); Petroleum and Gas (Production and Safety) Act
2004 (Qld), section 532(4)(b).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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