Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd - [2000] WASCA 27

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION: ANACONDA NICKEL LTD -v- TARMOOLA AUSTRALIA PTY LTD [2000] WASCA 27

CORAM: PIDGEON J
IPP J
ANDERSON J

HEARD: 22 NOVEMBER 1999

DELIVERED : 17 FEBRUARY 2000

FILE NO/S: FUL 30 of 1999

BETWEEN: ANACONDA NICKEL LTD (ACN 060 370 783)
Appellant
AND
TARMOOLA AUSTRALIA PTY LTD (ACN 009 138 523)
Respondent

Catchwords:

Contract - Certainty - Completeness of terms - Intention to contract - Illegality - General principles

Mining law - Mining Act 1978 s 64 - Whether agreement conferred legal or equitable interest contrary to s 64 Mining Act 1978

Legislation:

Mining Act 1978 s 62, s 64, s 66, s 82, s 85

Result:

Appeal allowed

Representation:

Counsel:

Appellant: Mr C L Zelestis QC & Mr C G Colvin & Mr A R Beech
Respondent: Mr M J McCusker QC & Mr P D Evans

Solicitors:

Appellant: Huston Partners
Respondent: Freehill Hollingdale & Page

Case(s) referred to in judgment(s):

Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
Ampol Ltd v Caltex Oil (Australia) Pty Ltd (1986) 60 ALJR 225
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
B Seppelt & Sons Ltd v Commissioner for Main Roads (1950-80) 1 BPR 9147
Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647
Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) ANZ Conv Rep 681
Bridle Estates Pty Ltd v Myer Realty Pty Ltd (1977) 51 ALJR 743
Butt v M'Donald (1896) 7 QLJ 68
Clifton v Palumbo [1944] 2 All ER 497
Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1
Commonwealth of Australia v WMC Resources Ltd (1998) 194 CLR 1
Farmer v Honan and Dunne (1919) 26 CLR 183
Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1950-80) 1 BPR 9251
Fitzgerald v Masters (1956) 95 CLR 420
Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551
Godecke v Kirwan (1973) 129 CLR 629
Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68
Lennon v Scarlett & Co (1921) CLR 499
Love & Stewart Ltd v S Instone & Co Ltd (1917) 33 TLR 475
Masters v Cameron (1954) 91 CLR 353
McDermott v Black (1940) 63 CLR 161
McKay v Dick (1881) 6 App Cas 251
Meehan v Jones (1982) 149 CLR 571
Niesmann v Collingridge (1920-21) 29 CLR 177
Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601
Perry v Suffields Ltd [1916] 2 Ch 187
Prints for Pleasure Ltd v Oswald‑Sealy (Overseas) Ltd [1968] 3 NSWR 761
Ravinder Rahini Pty Ltd v Kriziac (1991) 30 FCR 300
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310
Summergreene v Parker (1950) 80 CLR 304
Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699
Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486
Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144
Thorby v Goldberg (1964) 112 CLR 597
Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd (1994) 2 VR 106
Trustees Executors & Agency Co Ltd v Peters (1960) 102 CLR 537
Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429
Von Hatzfeldt‑Wildenburg v Alexander [1912] 1 Ch 284
Wade v New South Wales Rutile Mining Co Pty Ltd (1969) 121 CLR 177
Whitlock v Brew (1968) 118 CLR 445
Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc [1986] WAR 253

Case(s) also cited:

Abcos v Jones (1997) 150 ALR 488
Allen v Carbone (1975) 132 CLR 528
ANZ Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695
Aotearoa International Ltd v Scancarriers A/S (1985) 1 NZLR 513
Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104
Bell v Lever Bros Ltd [1932] AC 161
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363
Braham v Walker (1961) 104 CLR 366
Breen v Williams (1996) 186 CLR 71
Brenner v First Artists' Management Pty Ltd (1993) 2 VR 221
British Steel Corporation v Cleveland Bridge & Engineering Co [1984] 1 All ER 504
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
Caltex Properties Ltd (In Liq) v Love (1997) 95 LGERA 132
Coal Cliff Collieries Pty Ltd v Sijehama (1991) 24 NSWLR 1
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981-1982) 149 CLR 337
Commonwealth v Verwayen (1990) 170 CLR 394
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
Fibrosa Spolka Akcyjna v Fairbairn Lawson Barbour Ltd [1943] AC 32
Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215
Glentham Pty Ltd v Perth CC [1986] WAR 205
Grundt v Great Boulder Minesi (1937) 59 CLR 641
Heimann v The Commonwealth (1938) 38 SR(NSW) 691
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Masters v Cameron (1954) 91 CLR 360
McDermott v Black (1940) 63 CLR 161
Meates v Westpac Banking Corp (1991) 3 NZLR 385
Nelson v Nelson (1995) 184 CLR 538
O'Keefe v Williams (1910) 11 CLR 171
Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221
Radaich v Smith (1959) 101 CLR 209
Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880
Stone James v Investment Holdings Pty Ltd [1987] WAR 363
Swan Resources Ltd v Southern Pacific Hotel Corporation Energy Pty Ltd [1983] WAR 39
Toyota Motor Corp Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106
Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32
Walsh v Lonsdale (1882) 21 ChD 9
Walton Stores (Interstate) Pty Ltd v Maher (1987) 164 CLR 387
William Lacey (Hounslow) v Davis [1957] 1 WLR 932
Wilson International Pty Ltd v International House Pty Ltd [1983] WAR 243; (1981) 52 LGRA 216
WJ Green & Co (1981) Pty Ltd (trustee WJ Green Family Trust) v Wilden Pty Ltd (trustee Balfa Bazaar (1985) unit trust), unreported; SCt of WA; Library No 970186; 24 April 1997

PIDGEON J: I agree with the reasons of Ipp J. The essence of the agreement is contained in cl 2. Anaconda for the money it is required to pay to Mount Edon, and for the money it is required to spend in exploration, earns 100 per cent interest in metals discovered. Anaconda has the obligation to spend money in exploration and it is implicit under the clause and the rest of the agreement that it has the right to enter the tenements to carry out the exploration. If base metals are discovered there are a number of alternate steps Mount Edon can take to give Anaconda a 100 per cent interest. The tenements themselves can be transferred to Anaconda. If this were done Anaconda would assume obligations incident of a title. The other alternative is for Mount Edon to retain the title and permit Anaconda to win the metals. If this step were taken obligations and advantages incident to the title would remain with Mount Edon. The fact that Mount Edon has the option of taking two available steps to give effect to the agreement would not make it void for uncertainty. Mount Edon may at its option give effect to the agreement by one of two ways.
IPP J:

The principal issues in the appeal

On 24 April 1996, Mr Andrew Forrest, the chief executive of the appellant, wrote to Mr David Prentice, the business development manager of the respondent, proposing an agreement between the appellant and the respondent concerning the exploration and mining of certain mining tenements ("the Tenements") held by the respondent. The Tenements comprised an area about 60 kilometres sited east of Leonora, then known as Wilson Creek West. On 26 April 1996, Mr Prentice signed the document, which had been sent to him, thereby intending to bind the respondent to its terms. The document so signed was described as the "heads of agreement". From an early stage, however, the respondent referred to this document as the "Letter Agreement" and I shall adopt the same nomenclature.
The Letter Agreement recorded that, after signature, the parties would "proceed to a fuller agreement". The parties commenced negotiations but they were fruitless and a "fuller agreement" was not concluded. Eventually, the respondent refused to negotiate further. The appellant commenced proceedings for a declaration that the Letter Agreement constituted a binding contract. The claim was dismissed by the learned trial Judge. The appellant appeals against this dismissal.

The principal issues raised by the appeal involve the intention of the parties to create binding legal relationships, certainty and completeness of contract, and illegality of contract. The respondent relied on these matters for its assertion that it was not bound by the Letter Agreement.
The appellant relied, additionally, on arguments based on estoppel and unjust enrichment but, in the light of the conclusion to which I have come, it is unnecessary for me to deal with them.

The terms of the Letter Agreement and their effectiveness

The issues raised cannot be determined without an appreciation of the terms to which the parties agreed by the Letter Agreement. I shall therefore immediately proceed to deal with this aspect. The Letter Agreement was as follows:
"WILSON CREEK WEST ‑ EXPLORATION AREA
I refer to our conversations today, regarding an agreement of the above‑mentioned project and propose the following as a heads of agreement.
1.Anaconda Nickel NL ("Anaconda") will make three payments totalling $250,000 to Mount Edon Gold Mines (Aust) Limited ("Mount Edon"). The first payment of $25,000 will be payable within 14 days of the execution of this heads of agreement, the second payment of $100,000 will be payable on a date which is nine months from the date of execution of this heads of agreement and the final payment of $125,000 will be payable on a date which is eighteen months from the date of execution of this heads of agreement.
2.Anaconda will spend $500,000 over three years on exploration within Exploration Licences 37/200, 37/412 and Mining Leases 37/403 to 405 inclusive and 37/462 ('the Tenements'), to earn a 100% interest in any base metals discovered on the Tenements, subject to item 3, below. Anaconda will further agree to provide Mount Edon with copies of all exploration results, including any aerial photography and aeromagnetics acquired by Anaconda.
3.Mount Edon will retain a 1% Gross Royalty on revenue derived from any base metals produced from the Tenements, and this royalty will be capped at $10 million.
4.Mount Edon will retain a 100% interest in any precious metals discovered within the Tenements.
5.In the event that either of the parties identify an area within the Tenements capable of sustaining a commercial mining operation for both precious and base metals then the priority of such a development will be determined by the mineral with the greatest recoverable value. The party with rights to first mine and treat such ore will undertake to treat the ore as a discrete batch and to store residues in a separate tailings compound.
The above forms a heads of agreement which constitutes an agreement in itself intended to be replaced by a fuller agreement not different in substance or form. On return of this signed agreement Anaconda will proceed to a fuller agreement.
Kind regards
Andrew Forrest
Chief Executive
I, David Prentice, for and [sic] behalf of Mt Edon Gold Mines (Aust) Ltd, do hereby agree to accept the terms and conditions set out above.
David Prentice
Dated at Balcatta This 26 day of April 1996"
I shall commence by examining each of the five clauses of the Letter Agreement in the light of the parties' respective contentions.
Clause 1 provides for the payment by the appellant to the respondent of four amounts totalling $500,000. It is not said that cl 1 contains any ambiguity.
Clause 2 is important. The clause requires the appellant to spend $500,000 on exploring the Tenements and to give the respondent copies of all its exploration results. The clause stipulates further that "[the appellant] will spend $500,000 over three years on exploration … to earn a 100% interest in any base metals discovered on the Tenements … " This provision requires elaboration.
Significantly, the appellant's right is to earn a 100 per cent interest in base metals discovered. The clause does not (at least, expressly) give the appellant any right to earn an interest in any of the Tenements. Further, in my opinion, according to the ordinary meaning of the words used, the appellant earns its 100 per cent interest in the base metals discovered only when it completes its expenditure of $500,000 on exploration. That sum is to be expended "over three years".
Thus the appellant's right to earn the 100 per cent interest is conditional and cl 2 gives the appellant no immediate proprietary rights to the base metals discovered. Rather, the clause confers upon the appellant a contractual right to require the respondent to confer upon it title in the base metals upon their discovery. That may be done in a number of ways. If the base metals are discovered on an exploration licence, the respondent may apply for a mining lease in its own name and assign that to the appellant. If the base metals are discovered on one of the mining leases, the respondent may assign the mining lease to the applicant. On the other hand, as is contemplated by cl 5, the respondent may allow the appellant to carry out mining operations on the tenement concerned (that is, a tenement held by the respondent) and then do whatever is necessary to pass title in the base metals once they have been extracted from the ground. In this regard the rule expressed by Griffith CJ in Butt v M'Donald (1896) 7 QLJ 68 at 70 – 71 (approved by Mason J in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 263) is pertinent:
"It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract."
It is as well to note that in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd Mason J also approved the rule in McKay v Dick (1881) 6 App Cas 251 at 263, namely:
"As a general rule … where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect."
Mr McCusker QC, senior counsel for the respondent, submitted that the Mining Act did not permit the respondent to allow the appellant to carry out mining operations on a tenement held by the respondent in its name. He relied on s 85(1), which relevantly provides:
"(1)Subject to this Act, a mining lease authorises the lessee thereof and his agents and employees on his behalf to –
(a)work and mine the land in respect of which the lease was granted for any minerals;
(b)take and remove from the land any minerals and dispose of them."
Mr McCusker submitted that if the appellant were to mine for its own account on the respondent's mining lease, it would not be an agent of the respondent. Therefore, mining operations so carried out would not be permitted by s 85(1).
Undoubtedly, in such circumstances, the appellant would not be an agent at common law. Nevertheless, the Mining Act appears to contemplate a party other than the holder of a mining lease carrying out mining operations. Such a conclusion is to be drawn from s 82(1)(d), which provides:
"(1)Every mining lease shall contain and be subject to the prescribed covenants by the lessee and in particular shall be deemed to be granted subject to the conditions that the lessee shall …
(d)not assign, under‑let or part with possession of such land or any part thereof without the prior written consent of the Minister, or of an officer of the Department acting within the authority of the Minister."
It is not possible to assign land; therefore, "land" in s 82(1)(d) must mean something else. In its context, it can only mean the rights to the mining lease over the land concerned. "Under‑let" has a like meaning; namely, the under‑letting of the mining lease concerned. It follows that s 82(1)(d) contemplates that the holder of a mining lease, with the prior written consent of the Minister or an officer of the Department acting with the Minister's authority, may lawfully assign its rights to a mining lease or under‑let the mining lease (and part with possession of the land the subject of the mining lease). If that be correct, and in my view s 82(1)(d) cannot be otherwise construed, the word "agents" in s 85(1) must have an extended meaning. Without such an extended meaning, it would not be possible for the holder of a mining lease to "assign, under‑let or part with possession" in the way contemplated by s 82(1)(d). Mr Zelestis QC, senior counsel for the appellants, submitted that "agents" must mean persons authorised by the lessee of a mining lease. In my view, this submission must be accepted.
It follows that, under the Mining Act, the respondent would be permitted to authorise the appellant to mine for base minerals on mining leases of which the respondent was the holder. Further, the respondent would be entitled to do whatever was necessary to pass title to the appellant in minerals extracted by the appellant from the ground pursuant to mining operations so authorised by the respondent. Accordingly, there is more than one way under which the respondent could discharge its obligation to confer upon the appellant a 100 per cent interest in base metals discovered (should that obligation arise). It would be open to the respondent to choose whichever way it preferred: as long as thereby the appellant earned its promised interest.
As regards cl 3, the respondent submitted that there was uncertainty as to how the "gross royalty" referred to therein is to be calculated. I deal with this issue below when considering aspects of uncertainty, generally. At this stage, it is unnecessary to say more than that, by cl 3, the appellant undertook to pay a royalty to the respondent on revenue derived from any base metals produced from the Tenements.
Clause 4 confers no rights on either party; it merely recognises the respondent's existing rights, as tenement holder, to the precious metals on the Tenements.
Clause 5 is an important clause and for the sake of convenience I shall set it out once more:
"In the event that either of the parties identify [sic] an area within the Tenements capable of sustaining a commercial mining operation for both precious and base metals then the priority of such a development will be determined by the mineral with the greatest recoverable value. The party with rights to first mine and treat such ore will undertake to treat the ore as a discrete batch and to store residues in a separate tailings compound."
It is implicit in cl 5 that, by the Letter Agreement, the appellant is given the right to mine. This is the inevitable inference to be drawn from two provisions in the clause. The first is the provision that should an area be identified as being capable of sustaining commercial mining operations for both base and precious metals, the mining operation relating to the "mineral with the greatest recoverable value" would have priority. The second is the acknowledgment that the appellant could be a party having "rights to first mine".
The provision for "priority" of mining operations and the acceptance that in the given circumstances the appellant would have the rights "to first mine" are significant. They lead to the conclusion that, if circumstances arise whereby the appellant has the right to first mine, the appellant is entitled to exercise that right fully and absolutely, and the respondent, in turn, is obliged to subordinate its rights to enable the appellant to exercise its rights to first mine in such a fashion. Of course, should the respondent establish that it has priority for mining operations for precious metals, then by cl 5 the appellant's rights to mine are subordinated to those of the respondent.

In summary, therefore, the Letter Agreement confers upon the appellant the right to explore the Tenements for base metals. The consideration for this right is specified. The amount of money the appellant is required to spend on exploration and the time over which the sum in question is to be expended is stipulated. The appellant is afforded the right to mine for base metals over the Tenements. This is effective as, under the Mining Act, the respondent is able, effectively, to confer such rights upon the appellant without transferring to it any title in the Tenements and there is no need for the Letter Agreement to deal with title to the Tenements. The Letter Agreement confers upon the appellant the right to earn a 100 per cent interest in any base metals discovered, upon the expenditure of the stipulated sum over the stipulated period. In the event of there being any conflict between the appellant and the respondent in regard to areas to be mined concurrently for base metals and precious metals respectively, the Letter Agreement provides for priority of mining.

Intention to contract, uncertainty and incompleteness: general principles

The respondent's primary contention was that the Letter Agreement was not a binding contract as, when signing the document, the parties did not intend to create legally binding relations. In this regard, Mr McCusker relied particularly on the remarks of Gleeson CJ in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 (at 548 – 549):
"The problem which arises is that [the parties] have exchanged communications which, on the one hand, use the language of agreement but, on the other hand, disclose an expectation that at some future time a document embodying the terms of their contractual arrangement will be brought into existence."
And (at 551):
"The communications relied upon by the appellant as constituting a contract, construed with regard to the subject matter of the negotiations and the surrounding circumstances, and in the light of subsequent communications between the parties, do not appear to me to evidence an intention to make a concluded bargain. Rather, they show that, in a context where it was contemplated that there would be express agreement on a number of important matters which the parties had not yet got around to discussing, or in respect of which their discussions were still at a very incomplete stage, the parties had made an agreement on the most important subject of the transaction, that is, the price, in the confident expectation that they would in due course come to terms on the other issues that needed to be addressed. The important matters to which I refer include, in particular, the definition of the rights which the appellant was to have (that is to say the subject in respect of which the appellant stated its 'expectations' … ) and the matter sometimes loosely referred to as the possibility of a boycott."
Mr McCusker submitted that this was an analogous case. He accepted that the parties contemplated that there would be an agreement, expressed their intention to be bound by the document that they signed, and agreed on some important matters. Nevertheless, they had omitted so many important matters from the document they signed, and described so many others in such uncertain terms that, objectively speaking, the inference is to be drawn that they did not intend to bind themselves to a legally enforceable contract. Mr McCusker also relied on what was said in the prior negotiations and what took place by way of subsequent conduct and submitted that matters of this kind supported the argument he was advancing.
Thus, in dealing with the overall submission, it is not possible to divorce issues of completeness and uncertainty from the intention to contract. As the matter was put by Mr McCusker, issues of this kind are bound up in the entirety of the question whether there was an intention on the part of the parties to contract when signing the Letter Agreement. Where some terms are uncertain, or where terms which one would expect to be in a contract of the kind entered into are missing, inferences may be drawn that the parties lacked the requisite intention to contract. Of course, in considering questions of uncertainty or incompleteness for this purpose, the inquiry is not the same as that conducted in order to ascertain whether the contract which the parties in fact intended to enter into is void because of uncertainty or incompleteness.
Whether parties intend to enter into a contract binding at law is a question to be determined objectively. The respondent asserts that the Letter Agreement falls within the third class of case referred to in Masters v Cameron (1954) 91 CLR 353 at 360, namely, a case "in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract" (per Dixon CJ, McTiernan and Kitto JJ). The appellant argues, on the other hand, that the case falls within what McLelland J (in Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) ANZ Conv Rep 681 at 686) described as the "fourth class of case additional to the three mentioned in Masters v Cameron". His Honour observed that such a fourth class of case was recognised by Knox CJ, Rich and Dixon JJ in Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 at 317 as being one in which:
"the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms."
An example of a contract falling within such a class was discussed in Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 at 494–495.
It is well recognised that parties may enter into a valid contract containing a limited number of terms comprising those terms essential to the bargain that they wish to conclude, in the expectation that at a later date a further contract will be arrived at containing additional terms that would facilitate and clarify the initial contract. That is to say, a binding contract may be arrived at even though it leaves unresolved many matters which might arise in future. As Kennedy J said in Terrex Resources NL v Magnet Petroleum Pty Ltd (1988)] 1 WAR 144 at 159:
"An agreement does not have to be worked out in meticulous detail. A bargain can be made containing certain terms, regarded as essentials, whilst the parties recognise that a formal document will eventually be drawn up in the full expectation that a number of additional terms will, by consent, be included in that document."
See also the remarks of Lord Loreburn in Love & Stewart Ltd v S Instone & Co Ltd (1917) 33 TLR 475 at 476, and Ravinder Rahini Pty Ltd v Kriziac (1991) 30 FCR 300 at 310. As McFarlan J observed in Prints for Pleasure Ltd v Oswald‑Sealy (Overseas) Ltd [1968] 3 NSWR 761 (at 765):
"It is obvious, in my opinion, that in dealings between business people there cannot always be certainty or predictability about the future course of events arising out of or in the performance of a business relationship which they desire to, and may lawfully, create. The course of business often means that this must be so and it would, as Lord Tomlin said [in Hillas & Co Ltd v Arcos (1932) 147 LT 503] be a reproach upon the law if parties who intended to agree, and believed they had agreed in this way, should be told that their agreement for legal reasons had never come into existence … In a business relationship of this kind, which was intended to exist throughout some time in the future, it is, in my opinion, inevitable that the shifts and changes of events, over many of which the parties could not have any control, would produce unpredictable influences upon such a business relationship."
Where parties have executed an instrument in writing but it is uncertain whether in so doing they intended to create legal relations, the court may have regard to all the relevant circumstances to determine, objectively, what the parties' intention was. "Intention" in this sense means intention to contract, not what the parties intended by the terms of the contract. The relevant circumstances may include prior negotiations and subsequent conduct: Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647; Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68, Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd, Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551. In accordance with the general rule, however, direct expressions of intent, made after the contract was arrived at, are not admissible.
The context in which the contract is arrived at may be relevant to questions of incompleteness. The Letter Agreement was entered into in the context of the mining industry. The court is not able to take judicial notice of relevant matters in this environment and will ordinarily be reliant on expert testimony. In Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd Gleeson CJ said at 548:
"In many cases, however, of which the present is a good example, there is a need for evidence in one form or another as to what subjects would be regarded as requiring agreement between the parties. In this case the best evidence on that subject is to be found in the actual communications between the parties and, in particular, in the issues which they in fact addressed when they set about drafting their detailed contract."
The learned Chief Justice remarked further:
"[I]n the ordinary case, as a matter of fact and common sense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention."
Those remarks indicate how matters of completeness can bear upon the determination of whether the parties intended to contract.
Once the court has determined that the requisite intention is present, it is then necessary to go on to consider whether the contract is so incomplete or uncertain as to be void. The following statement by Sugerman J, approved by Menzies J in Thorby v Goldberg (1964) 112 CLR 597 at 607 is often cited in this connection:
"It is a first principle of the law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least its essential and critical terms, have been agreed upon. So, there is no concluded contract where an essential or critical term is expressly left to be settled by future agreement of the parties. Again, there is no binding contract where the language used is so obscure and incapable of any precise or definite meaning that the court is unable to attribute to the parties any particular contractual intentions."
As Barwick CJ stated in Upper Hunter County District Council v Australian Chilling & Freezing CoLtd(1968) 118 CLR 429 at 436 – 437, "a contract is affected by uncertainty only if its essential terms are uncertain or lacking."
It does not follow that any omission will make a contract incomplete or uncertain in the sense of rendering it invalid. It is only the omission of an essential term that will have that effect. As to the meaning of "essential" in this context, the following words of Lloyd LJ (with whom the other members of the Court of Appeal agreed) in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 (at 619) are helpful:
"It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word 'essential' in that context is ambiguous. If by 'essential' one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by 'essential' one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by 'essential' one means only a term which the court regards as important as opposed to a term which the court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether they are important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, 'the masters of their contractual fate'. Of course, the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so‑called 'heads of agreement'."
In determining whether essential terms are uncertain, it is important to bear in mind that ambiguity does not mean uncertainty: see McDermott v Black (1940) 63 CLR 161 (at 175). The approach to be adopted was expressed by Barwick CJ in Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd at 436:
"But a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. … So long as the language employed by the parties, to use Lord Wright's words in Scammell (G) & Nephew Ltd v Ouston [1941] AC 251 is not 'so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention', the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved."
In Meehan v Jones (1982) 149 CLR 571 Gibbs CJ pointed out at 58 that the fact that opinions may differ as to which of two possible meanings is to be given to the words of a clause in a contract does not mean that the clause is uncertain. "It is only if the court is unable to put any definite meaning on the contract that it can be said to be uncertain."
In this regard, it is to be emphasised that the number of arguments that may be raised on both sides when a point of construction is raised are usually irrelevant to whether the clause is certain. A good example of this is again Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd, a case involving a contract to build a bridge at cost. Barwick CJ pointed out (at 436) that the arguments, for and against, as to whether or not some item of expenditure is a cost may be "endless" but, generally speaking "the concept of a cost of doing something is certain in the sense that it provides a criterion by reference to which the rights of the parties may ultimately and logically be worked out, if not by the parties then by the courts". For a contract to be uncertain, the language must be "so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention".
Finally, in determining whether contracts are void for uncertainty "courts should be astute to adopt a construction which will preserve the validity of the contract" (per Mason J in Meehan v Jones) and "courts should be the upholders of bargains and not their destroyers": Geebung Investments Pty Ltd v Varga Group Investments No. 8 Pty Ltd (per Kirby P at 14570). A striking example of this approach is Ampol Ltd v Caltex Oil (Australia) Pty Ltd (1986) 60 ALJR 225, where parties entered into an agreement described as an "agreement in principle". The instrument in question recorded:
"For various reasons … some time may elapse before a formal document can be prepared. Accordingly, it is requested that you kindly review the following statement of broad principles, and, if in agreement, sign and return a copy of this letter which will then become the basis for drafting of the final document."
Among the clauses in the letter was one which provided that products "will be exchanged barrel for barrel or ton for ton, as shall be mutually agreed". Another clause stated that exchange "of non‑like product, if any, shall be separately negotiated". The High Court concluded that the letter had contractual effect even though a formal document was not agreed. Mason, Brennan and Dawson JJ said (at 227):
"Because the agreement reflected an understanding which was described as an "agreement in principle" it is couched in vague and general terms. Indeed the nature of the obligation cast on each party to supply is by no means clearly spelled out. However, as we read the provisions they impose an obligation on each refiner to supply refinery products, by way of exchange of like products which are surplus to its own requirements, to the other party at its request."
See also at 233 per Wilson J.

Intention to contract: pre-contractual negotiations, the terms of the Letter Agreement and subsequent conduct

In September 1994, Mr Forrest began negotiating with Mr Tony Brennan, managing director of the respondent, in relation to the Tenements. Negotiations continued for several months, and, on 19 April 1996, the appellant sent a fax to the respondent which commenced:
"Subsequent to our conversation today, we propose the following heads of agreement. This heads of agreement constitutes an agreement in itself, but is intended to be replaced by a fuller agreement not different in substance or intent."
The respondent replied by facsimile whereby it proposed "the following as a basis for a formal agreement". The facsimile concluded by recording that Andrew Forrest, for and on behalf of the appellant, "hereby agree[s] to negotiate a formal agreement including the terms and conditions set out in this document". The appellant responded on 24 April 1996 with the facsimile which became the Letter Agreement.
In my view, there is nothing else in the pre‑contract negotiations that is of significance to the parties' intention to contract. The course of negotiations to which I have referred demonstrates that the appellant wished from the outset to conclude an agreement that would be binding and which would be followed by a more detailed formal agreement. Initially, the respondent appears to have been unwilling to agree to this course, hence the facsimile referring to the proposed agreement "to negotiate a formal agreement". The appellant, however, persisted in its desire to conclude what it termed the "heads of agreement" which was to constitute "an agreement in itself", on the basis that the parties would thereafter negotiate a "fuller agreement". By signing the Letter Agreement the respondent concurred in this proposal and consensus was arrived at in this respect.
There are powerful indications from the Letter Agreement that the parties intended that the document should be a legally binding contract. The statement therein that the document "forms a heads of agreement which constitutes an agreement in itself" speaks for itself. The plain meaning of these words is reinforced by the words immediately above Mr Prentice's signature, namely, "I, David Prentice, for and [sic] behalf of [the respondent], do hereby agree to accept the terms and conditions set out above." The statement that the Letter Agreement is "intended to be replaced by a fuller agreement not different in substance or form" does not detract from the clear expressions of intent to which I have referred. On the face of the document, the parties intended to be bound.

On 8 May 1996, two weeks after the Letter Agreement was entered into, the appellant paid $25,000 to the respondent, as required by cl 1 thereof. In October or November 1996, the appellant commenced ground‑disturbing exploration for base minerals on the Tenements.
Shortly thereafter, negotiations commenced between the parties as to the "fuller agreement" contemplated by the Letter Agreement. By June 1996, a draft agreement had been prepared and was under consideration. The draft dealt with a variety of matters, some of importance and some matters of detail. On 26 July 1996, the chief geologist of the appellant sent a facsimile to Mr Prentice in the following terms:
"Further to our discussions over the past week … I would like to formalise the agreed amendment to the heads of agreement of the letter dated 24 April 1996 as stated below.
Clause 1 to be amended to the sums of $100,000 and $125,000 to be payable on dates nine and eighteen months respectively from the execution of a full agreement, rather than from the execution of the heads of agreement (i.e. 26 April 1996)"
On 15 August 1996, Mr Prentice signed the facsimile of 26 July 1996 under the words "I, David Prentice, for and on behalf of [the respondent] do hereby agree to the amendment set out above."
The respondent submitted that the amending agreement of 15 August 1996 indicated that the parties did not intend to enter into binding relations when they signed the Letter Agreement. The argument was that the parties' willingness to tie the payments totalling $225,000 to the later agreement then in contemplation indicated that they did not accept that they were bound by the Letter Agreement. In my view, there are two answers to this argument. First, the inference the appellant sought to draw is not the only one that is open. Another is that the parties recognised that they were bound by the Letter Agreement, but wished to amend it. They chose to fix the date for the payments in question by reference to the entering into of the contemplated later agreement because they were confident that such an agreement would be concluded. The latter, it seems to me, is the more likely inference.
Secondly, as was stated in Perry v Suffields Ltd [1916] 2 Ch 187 at 192 by Lord Cozens‑Hardy MR:
"It would seem clear that if the letters of proposal and acceptance in fact contain all the terms agreed on at the time, and were written with the intent of binding the writers, this complete contract could not be affected by subsequent negotiations not resulting in a new contract."
That statement, in effect, was approved by the High Court in Lennon v Scarlett & Co (1921) CLR 499 at 509. In accordance with this approach, the amendment effected on 15 August 1996 cannot have any bearing on the validity of the Letter Agreement.
As 1997 commenced, negotiations continued. Important differences emerged between the parties as to what the respondent was required to do in regard to various securities that it had given to third parties in respect of the Tenements. The appellant, by letter dated 12 March 1997, required the respondent "to approach its lenders with a view to releasing these tenements from their security." As far as the respondent was concerned, the principal difficulty concerned the terms on which title to the Tenements would pass from it to the appellant, and at what stage that would occur.
On 18 April 1997, the respondent's solicitors wrote to the appellant's solicitors concerning the latest draft deed that had been submitted and complained that it did not "reflect very well the terms of the Letter Agreement". At that stage both parties were referring to the heads of agreement as "the Letter Agreement". On 23 April 1997, the appellant's solicitors wrote to the respondent's solicitors noting that there were "significant differences" between the parties in relation to "important commercial points". They complained that the respondent's solicitors were "trying to renegotiate the commercial terms of a deal that your client has already agreed to". The appellant's solicitors concluded:
"We can go on arguing these points for a long time. However, we will achieve little, if any, progress unless the commercial terms of the deal are confirmed. We have suggested to our client that it should discuss the important points in issue directly with your client in an effort to move this matter along".
By April 1997, the shares of the respondent were acquired by Reachwest Pty Ltd, a company jointly owned by Camelot Resources NL and Teck Corporation, a Canadian company. The management of the respondent was replaced, and in August 1997 the appellant was advised that future negotiations in relation to the project would be handled by Mr Steven Dean, the managing director of Camelot Resources NL.
As the learned trial Judge observed:
"By the end of September 1997 [the appellant] had expended a little more than $120,000 in carrying out preliminary evaluation work at the … site. That work revealed the potential of large lateritic deposits [i.e. surface deposits] of nickel and cobalt. The findings were conveyed to [the respondent]. Mr Dean and other senior executives of Camelot Resources NL were informed by Mr Rod Fripp, a geologist who was working as a consultant to their company, that the project had the potential for say half, two thirds or more a Murrin Murrin, with possibly similar metallurgical characteristics."
Thus, by October 1997, it had become apparent – by reason of exploration work carried out by the appellant pursuant to the Letter Agreement – that the Tenements were now far more valuable than they were when the Letter Agreement was entered into. By then, the Letter Agreement had been implemented for some 16 months. As mentioned, the sum of $25,000 had been paid by the appellant. The appellant had carried out exploration work in regard to base minerals, and this had not deterred the respondent from exploring for precious minerals. The actual situation on site was reflected by a memorandum dated 3 October 1997, signed by the exploration manager of the respondent, who referred to the project area as being "operated on jointly between [the respondent] and [the appellant]". In that memorandum (which was intended for internal use only) the exploration manager referred to "our concerns over the Letter Agreement". These concerns appeared to relate to whether, under the Letter Agreement, the respondent was entitled to recover from the appellant the full amount of the statutory expenditure requirement the respondent was required to make, and whether the appellant was obliged, under the Letter Agreement, to meet those statutory requirements itself (i.e. rather than the respondent). The memorandum concluded, "I believe we would be in a stronger position if [the respondent] undertook some substantive exploration in its own right."
In a letter dated 13 October 1997, Mr Dean referred to difficulties concerning native title in regard to the Tenements (apparently native title claimants were not responding to settlement approaches). There were also difficulties in regard to expenditure requirements. According to Mr Dean, the respondent "could not allow the [appellant] to have full control of the exploration program and expenditures". Mr Dean was concerned that:
"[the respondent should] control all exploration activity from the ground particularly in the light of the sacred site issues, as these may seriously jeopardise our title to this ground and incur claims for future compensation. This is the case regardless of whether there might be a binding agreement between [the appellant] and ourselves. Even in the instance where there is a binding agreement, we must protect our rights on these tenements in relation to our precious metals rights."
He expressed the view that "this is yet another reason why the current form of multi‑metal joint venture will have difficulty working". It is apparent that by "not working", Mr Dean meant that the arrangement was not working to the respondent's advantage.
On 23 October 1997, Mr Dean wrote to the appellant, stating:
"As the proposal in relation to the Joint Venture regarding these tenements is not yet agreed, [the respondent] feels that it should retain the conduct of exploration on the tenements."
That may be regarded as a disingenuous statement. Mr Dean had earlier, in internal correspondence, recognised that there was a real question as to whether a binding agreement had been arrived at by the Letter Agreement.
By letter dated 23 October 1997, Mr Dean advised the appellant that:
"[The respondent's] main areas of concern are to ensure that, as tenement holder, the exploration programs being carried out meet the Department of Minerals and Energy requirements, and secondly, that any sacred sites on the tenements are not disturbed during the course of exploration and give rise to challenges to title or compensation. As the obligations in connection with Department of Minerals and Energy requirements and sacred sites currently rest with us as title holder, [the respondent] must control and manage exploration activity. Accordingly, we cannot allow [the appellant] to conduct exploration on the tenements at this stage."
By letter dated 30 October 1997, the appellant replied, stating:
"The situation is that there is a Heads of Agreement, dated April 24, 1996, and as amended by the letter of July 26, 1996, between [the appellant] and [the respondent] which is legally binding and in operational effect."
In an internal memorandum dated 14 November 1997, Mr Dean stated:
"We inherited an incomplete joint venture negotiation between [the respondent] and [the appellant]. A heads of agreement was signed in April 1996, with formal documentation to be negotiated. A copy of the heads of agreement is attached. The former [respondent's] executives and subsequently more recently our … executives have sought to finalise this documentation. It is clear that the deal was not well thought through …"
Mr Dean went on to say that the appellant had spent approximately $100,000 over the last 12 to 15 months evaluating the property and assessing heritage and environmental attributes of the area. He then noted:
"Drilling has confirmed the potential for significant mined laterite resources of up to 50 ‑ 100 million tonnes at 1% nickel, 0.6% cobalt …"
He observed:
"I should add that it is my view that … [the respondent's] executives … were either distracted or naïve in formulating this agreement. [The appellant] ha[s] however acted in a consistent manner and probably in good faith since the signing of the Heads of Agreement. This is not, however, surprising given the commercial advantage they have sought to achieve in the agreement."
By letter dated 14 November 1997, the appellant wrote to Mr Dean, stating:
"[The appellant] is of the view that the Heads of Agreement dated 26 April 1996 (as amended) … are legally binding. Indeed, the Heads of Agreement has been substantially performed by both parties … It is obvious to me that you are simply trying to change the deal because, in the 18 months since it was negotiated, [the appellant] has experienced commercial and exploration success for its high‑risk exploration efforts."
On 30 November 1997, the respondent replied, "There is no concluded agreement."
During the last quarter of 1997, Mr Dean telephoned Mr Forrest, seeking to change the terms of the Letter Agreement in order to provide a better commercial result for the respondent and "wishing to switch it to a joint venture". Mr Dean stated that the Letter Agreement "could be made unworkable". The conversation finished "with the likelihood that the matter would go to court".
In my opinion, nothing in the subsequent conduct of the parties detracts from the clear statements of intent to contract contained in the Letter Agreement. In expressing this opinion I have not taken into account the arguments as to incompleteness and uncertainty set out in some of Mr Dean's letters and the respondent's memoranda: I shall deal with these separately. I have, however, had regard to the inferences to be drawn from the parties' conduct concerning their intention to contract at the time the Letter Agreement was concluded. I should say that I consider the conduct in question to be of little value. Certainly, the partial implementation of the Letter Agreement supports the appellant's contention that the document was intended to be a binding contract. But the fact that the parties entered into further negotiations after the Letter Agreement was executed carries no weight. That, after all, is what the Letter Agreement contemplates. On its face, the Letter Agreement reflects the kind of contract referred to in Sinclair, Scott & Co Ltd v Naughton as being one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms. Accordingly, the fact that further negotiations took place is entirely neutral, as is the fact that the negotiations were unsuccessful.
The existence of significant differences in relation to important commercial points does not necessarily mean that there was no intention to agree, contractually, on the terms set out in the Letter Agreement. According to the appellant's solicitors, the "commercial points" in question related to matters already agreed which the respondent sought to re-negotiate. Other differences concerned issues not touched upon by the Letter Agreement. Mr Dean's arguments and protestations, in my view, are merely ex post facto reactions to be seen in the context of his employers having taken over the respondent after the event and the commercial advantage the respondent would achieve were it to be held that the Letter Agreement was not a binding contract. They, too, carry no weight.
The change in management that occurred in the respondent in 1997 seems to have resulted in a change in the respondent's attitude regarding the question whether they were bound by the Letter Agreement. This change in approach appears to have gathered force after the appellant had discovered what appeared to be a valuable base in metals resource. The complaints by the respondent that the Letter Agreement is "unworkable" have to be seen in this light, as does the commercial decision that appears to have been taken by the respondent's management that it was in the respondent's interests to negotiate better terms than those contained in the Letter Agreement.
It is to be noted that many of the statements made by both parties after the Letter Agreement was entered suggest that they both believed that a binding contract had been arrived at. The complaint that the respondents were "trying to renegotiate the commercial terms of a deal that your client has already agreed to" falls into that class. The same comment can be made about the comments by the respondent's exploration manager concerning the respondent's "concerns over the Letter Agreement".
In my view, the Letter Agreement, the pre‑contractual negotiations and the parties' subsequent conduct indicate that the parties intended the Letter Agreement to have binding contractual effect. It remains to consider whether this prima facie view is displaced by the respondent's arguments based on uncertainty and incompleteness.

Uncertainty and incompleteness: the respondent's arguments and the trial Judge's findings

The respondent argued that the Letter Agreement was void for uncertainty and incompleteness and in the alternative that uncertainty and incompleteness in the document indicated that the parties did not intend to bind themselves contractually. The arguments raise similar issues and it is convenient to deal with them at the same time.
The matters said to give rise to uncertainty and incompleteness were those that were the subject of negotiations after the Letter Agreement was entered into, including those identified by the parties in the draft deeds, correspondence and internal memoranda (Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd at 548), and those the subject of expert evidence. I shall first set out the relevant material in this regard.
The more significant topics dealt with in the various draft deeds were the obtaining of ministerial consent to the parties' agreement, the passing of title in the mining tenements to the appellant, responsibility for the expenditure requirements under the Mining Act, the rights and procedures that would obtain should the parties wish to exercise their respective rights concurrently or simultaneously or where the exercise of rights by one might affect the rights of the other, the steps that each party would take before mining any part of the tenements, and the resolution of disputes as to the parties' rights. Other matters dealt with included various warranties and indemnities to be provided by each of the parties, details of the manner in which the appellant was to exercise its rights as to base minerals and as to how the respondent was to exercise its rights concerning precious minerals, rights to pass and re‑pass over the tenements, the payment of royalties, and other matters of detail.
In correspondence between the parties, the main controversial issues were control over exploration, title to the Tenements, responsibility for statutory expenditure requirements and responsibility for responding to native title claims.
In his internal memorandum dated 14 November 1997, Mr Dean asserted:
"Our greatest concern is simply that even if there was a binding agreement in place, the mechanics of the arrangement are unworkable. Almost certainly they represent a recipe for further dispute some time in the future."
In that memorandum he identified the problem areas in the Letter Agreement as being:
"(i)The mechanics of how the base metal (nickel) rights will work vis-à-vis the precious metal rights over the same tenements or indeed the same area of prospective mineralisation in both the exploration and development/operational phases;
(ii)which party has the obligation to maintain the mining titles in good standing, given that the Department of Minerals and Energy expenditure covenant is plus A$400,000 pa, and the [appellant's] minimum expenditure under the agreement is significantly less at approximately A$170,000 pa;
(iii)how the native title and Aboriginal heritage sites risks will be managed when the activities of both parties will impact on the title to the leases holding both gold and base metal prospectivity; and
(iv)…."
At the trial, the respondent's principal argument as to uncertainty and incompleteness was based on difficulties that could occur in the event that the parties wished to explore or mine in the same area. Other arguments raised concerned various aspects of the Letter Agreement that were said to be uncertain.
The respects in which the Letter Agreement was said to be incomplete and uncertain can be summarised as follows:
(a)It did not deal with the parties' respective rights to title in the Tenements, should base minerals be discovered.
(b)It did not stipulate who would have control over exploration.
(c)It did not adequately define the parties' rights to explore or mine, especially where concurrent exploration or exploitation might occur.
(d)It did not provide means for defining the area in which mining by the appellant could take place.
(e)It did not provide for the Ministerial consent that was necessary to entitle the appellant to mine.
(f)It made no provision for the responsibility for statutory expenditure required to be outlaid in regard to the Tenements, or in regard to the responsibility for providing performance bonds to the Department of Minerals and Energy.
(g)It made no provision for dealing with native title claims.
(h)It did not contain provisions that would enable disputes to be resolved quickly.
(i)It contained various terms that were inherently uncertain.
(j)It did not contain all essential terms.
(k)Generally, it was "unworkable".

The learned trial Judge considered that the Letter Agreement gave rise to a potential for conflict in the exercise of the parties' respective rights, even at the exploration stage. This conflict, the learned Judge found, was most likely to occur if an ore body containing nickel and cobalt were to be found coinciding with an ore body containing precious metal. In his Honour's view, the Letter Agreement provided no mechanism whereby disputes as to priority in exploration and mining could be resolved. His Honour gave the following example:
"When exploration is being carried out by more than one party there is a real possibility that vehicle use and surveying activities will mix, disturb or destroy samples or that sampling by one party might cover or disturb any previous sampling by another party."
The learned Judge considered that the Letter Agreement did not deal with issues of this kind. He was also of the opinion that the Letter Agreement made no provision for according to a particular party priority to explore over a particular area. This meant, in his opinion, that there was no effective mechanism for dealing with a situation where precious and base metals are mixed together or where ore bodies are so close together that one cannot be mined without disturbing the other. His Honour concluded:
"Because the Heads of Agreement do not contain all of the essential terms of the agreement I find that in this case there is no concluded agreement."

Uncertainty and incompleteness: conclusions

The omission to deal with rights to title

Section 66 of the Mining Act authorises the holder of an exploration licence, to enter the land the subject of the licence "with such agents" as may be expedient for the purposes of exploring for minerals. In my view, the word "agents" in s 66 has to be construed in the same way as the word "agents" in s 85(1). In my view, it could not have been the intention of Parliament to give the same word different meanings in sections dealing with different kinds of mining tenements. I have held that "agents" in s 85(1) has an extended meaning; namely, persons authorised by the lessee of a mining lease. In my view, "agents" in s 66 has an equivalent meaning; namely, persons authorised by the exploration licence. Thus, the Mining Act enables effect to be given to the respondent's obligation under the Letter Agreement to afford to the appellant the right to explore the Tenements.
The right to explore so given to the appellant is absolute, in the sense that it is not qualified by any provision that renders it subject to any rights of the respondent (whether to explore for precious metals or otherwise). Thus, under the Letter Agreement, the appellant has priority (in the sense explained) in respect of exploration. In my view, that right is implicitly subject to considerations of reasonableness. I did not understand the appellant to contest this. Thus, the appellant must exercise its right to explore reasonably. But, for example, if in so exercising its rights in an area where the respondent has discovered precious metals, some precious metals are destroyed in the reasonable exploration process undertaken by the appellant, then so be it ‑ that is a consequence of the priority afforded the appellant. The respondent, in effect, has agreed to that occurring. There is no incompleteness in the Letter Agreement in this respect. All questions of priority in regard to exploration are to be so construed.
It is therefore unnecessary for the Letter Agreement to deal with rights to title in regard to exploration licences.
During the course of argument, Mr McCusker postulated the situation where the respondent has already commenced, say gold mining operations. What rights would the appellant then have to explore for base metals over the area where mining operations are being carried out? The Letter Agreement deals expressly with priority where the appellant may wish to undertake mining operations for base metals in an area the respondent may wish to mine for precious metals (and vice versa). But the Letter Agreement does not deal expressly with the situation postulated, namely where the appellant seeks to explore over an area being mined by the respondent.
It is arguable that the criterion of reasonableness to which the appellant's rights are implicitly subject applies. On this basis, if, by reason of mining operations already being carried out by the respondent on a particular area, it would be unreasonable for the appellant to explore on that area, the respondent would be precluded from exploring. Alternatively, it is arguable that it is implicit in the Letter Agreement that the right to explore does not extend to areas already being mined by the respondent. The point is that, whatever approach is adopted, the answer to the question postulated is capable of being found by construing the Letter Agreement.
As regards the right to mine, I have pointed out that, upon the expenditure of the stipulated sum over the stipulated period, the Letter Agreement confers upon the appellant the right to mine for base metals over the Tenements and to earn a 100 per cent interest in any base metals discovered. I have expressed the view that this is effective as, under the Mining Act, the respondent is able, in effect, to confer such rights upon the appellant without transferring to it any title in the Tenements and there is no need for the Letter Agreement to deal with title to the Tenements. In the event of there being any conflict between the appellant and the respondent in regard to areas to be mined concurrently for base metals and precious metals respectively, the Letter Agreement provides for priority of mining and, as I have mentioned, cl 5 deals further with the issue.
Control over exploration
It follows from what I have already said that under the Letter Agreement the appellant would have sole control over exploration for base metals in the Tenements. I see no element of incompleteness or uncertainty in this respect.
Concurrent exploration or mining over the same area
In my opinion, the views I have expressed as regards to priority and implied considerations of reasonableness cater perfectly adequately for any situation involving concurrent exploration or mining. I shall demonstrate this by reference to some of the examples referred to by the respondent.
The respondent relied on the evidence of an expert, Mr Noakes, whose statement of evidence read as follows:
"18.In a split commodity arrangement like the one between Tarmoola and Anaconda, certain key matters would have to be addressed. The agreement would have to contemplate, for example, the situation where one party declared that it had found a resource. The parties would have to decide whether the other would then be given a certain period of time to check that there were no deposits in that same area of its particular mineral interest. In this case, for example, if Anaconda carried out shallow drilling and found lateritic nickel, Tarmoola would logically need to have the opportunity to carry out deep drilling over the same area, to ensure it was 'sterilised', that is to ensure that no gold could be located within or below the nickel deposit. The parties would then need to deal with the position if there was found to be no gold present (when that portion could perhaps be carved out from the main tenement and made the subject of a separate mining lease and agree how that would be organised in fact) or if there was another ore body.
19.The parties would also have to work out what would happen if, for example, Tarmoola did not have the money at the time to carry out the check drilling. They might agree that Tarmoola had to carry out the drilling within a certain time. Or Tarmoola might be given the option to either drill or accept an amount in recognition of its decision to accept the risk that there might be gold beneath the surface, but that it will not carry out the drilling to establish that.
20.Then the parties would have to work out what they would do in the eventuality that Tarmoola did check drill for gold and there was a deposit underneath. They could agree that nickel could be mined first and gold second. They would have to consider whether, if that was the case, Anaconda had to commence and finish within a certain time. Otherwise, Anaconda might plan the mining of the resource as part of the feedstock for its very large Murrin Murrin project, a project with a very long operating life, and be quite content to wait until that operation is well under way. In the meantime, Tarmoola might be understandably anxious to start mining for the gold."
The first issue raised concerns the procedure that applies if one party declares that it has found a resource. Assume that that party is the appellant. In the light of the priority granted to the appellant, the respondent would have no right to conduct any prospecting activities over the area reasonably required for the appellant to prospect further or even to mine. Again, I point out that the appellant's rights to prospect and mine are implicitly subject to the criterion of reasonableness. This may possibly afford the respondent some right to be allowed to take steps to protect any precious metal deposit in the area, or to require the appellant to take such steps. It is not necessary to decide whether this is so. If such a right exists the content is to be determined by an objective standard (that is, the criterion of reasonableness). While the position may not be entirely clear it is not uncertain in the legal sense. I have above referred to the governing principles in this respect and, in particular, to McDermott v Black, Meehan v Jones and Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd.
If it is the respondent who declares that it has found a precious metals resource in a particular area, the position again is not entirely clear. It may be that in accordance with the conferral upon the appellant of the right to explore for base metals, the appellant would have the right to explore the area concerned, subject to considerations of reasonableness in regard to protecting the precious metals deposit. On the other hand, it may be that the criterion of reasonableness may be extended so that, once the respondent has declared a precious metal resource and has declared an intention to commence mining operations, the appellant would not be entitled to explore the area concerned if such exploration would constitute an unreasonable interference with the respondent's activities. Alternatively, it is arguable that, it is implicit in the Letter Agreement that the right to explore does not extend to areas in regard to which the respondent has declared a precious metal resource and has declared an intention to commence mining operations. These questions, once again, are matters of construction or implication. They are capable of being resolved. The lack of clarity does not mean that the Letter Agreement is uncertain or incomplete.
As regards the question whether a party would be given time to verify the existence of deposits in the same area of its particular mineral interest, that is once more a matter of construction and implication and is capable of resolution. It is arguable that upon a party discovering a mineral resource, a reasonable time would be afforded to the other party to carry out its own investigations. It is unnecessary to express an opinion as to whether such an argument would succeed. Either way, the Letter Agreement is neither incomplete nor uncertain. It is merely ambiguous in this respect.
As to whether the parties would have to commence mining within a reasonable time of finding a resource, that ‑ prima facie ‑ is, in my view, implicit in the Letter Agreement. Similar comments to those already made apply as to the absence of any express provision concerning this issue.
Mr Noakes testified that should the respondent explore for gold and discover a deposit underneath a base mineral deposit, the parties would have to consider whether the appellant first had to commence and finish its mining within a certain time or whether the appellant would be entitled to delay mining while the respondent would not be able to commence mining for gold. In my view, these issues are to be resolved by the same criterion. It is strongly arguable that if (in the circumstances postulated) the appellant had the first right to mine, it would be required to commence and complete mining operations within a reasonable time. If it did not, the respondent would be entitled to mine.
It was pointed out that situations may arise where drilling programs for base minerals and precious minerals might be scheduled to take place at the same place and time. Who would have priority? As I have mentioned, the Letter Agreement provides expressly for such an occurrence. Where drilling programs for base minerals and precious minerals are scheduled to take place at the same place and time, the appellant as the party having priority to explore would have the right to drill first. The fact that this might result in restrictions to drilling programs and financial loss is irrelevant. It is an inevitable consequence of the terms agreed by the Letter Agreement.
It was said that programs of rehabilitation in one area could be disrupted due to another program of drilling taking place in the same area by a different party. Drilling by one party could contaminate another's exploration results. Exploration by one party in one area might result in exploration by another in the same area becoming more expensive. These practical problems are incentives to the parties to enter into a more detailed agreement. They do not, however, lead to uncertainty or incompleteness. If disruption occurs to the respondent's drilling program by the appellant properly exercising the right to explore conferred upon it by the Letter Agreement, then that is simply a consequence of the parties' agreement. If contamination of drilling results occurs because one party, in properly exercising its rights under the Letter Agreement, explores a particular area before another, then that is merely a consequence of the terms of their contract. The same may be said about exploration by one party that results in exploration by the other in the same area becoming more expensive. The Letter Agreement may in these respects be to the disadvantage of one or even both parties. That, however, makes it neither incomplete nor uncertain.
Mr Noakes said that there might be problems with water. Both parties might need to obtain access to water for their operations. If a bore is sunk and it is pumped dry, further problems will ensue. None of these matters is addressed by the Letter Agreement. In my view, the omission to deal expressly with potential water problems does not render the Letter Agreement incomplete or uncertain. These issues can similarly be resolved by processes of construction and implication. I think it relevant to point out that water problems were not dealt with in the draft deeds, nor were they raised in negotiations. They fall into the category of "shifts and changes of events" over which the parties could not have any control, and which would, as McFarlan J observed in Prints for Pleasure Ltd v Oswald‑Sealy (Overseas) Ltd, produce "unpredictable influences upon … a business relationship" (at 765).
Mr Noakes said that safety aspects needed to be considered. In this context, vehicle movements had to be coordinated. The Letter Agreement said nothing about these matters. Again, the omission to deal with these issues is an incentive to enter into a more detailed agreement. But the Letter Agreement can "work" without them. Without co‑operation it may be more difficult and more expensive to ensure that operations are safe, and to ensure that vehicles are able to move freely about the Tenements. But the evidence does not explain how the omission of the Letter Agreement to deal with coordination of safety measures makes it impossible for one or both of the parties to carry out its operations safely, and I am unable to see how this consequence would necessarily follow. After all, it would be the independent duty of each party to ensure that nothing it did would result in unsafe conditions to its own employees or anyone else in the vicinity.
As regards vehicle movements, it seems to me that this issue would be covered to the extent that the Letter Agreement deals with priority of exploration (in the sense to which I have explained) and priority of mining. That is to say, the party having priority to explore or mine would have priority in regard to vehicle movements (subject, arguably, to considerations of reasonableness).
Mr Noakes raised many other difficulties of a practical nature. All of them, in my view, relate only to issues of construction or implication. Some are indeed not without complexity and good commercial reasons exist for the parties to come to a more detailed agreement in regard thereto. It does not follow, however, that these ambiguities constitute incompleteness or uncertainty.
Defining the mining area
The Letter Agreement makes no express reference to the means of defining or identifying the area over which a party would have the first right to mine. Nevertheless, in my opinion, the criterion of reasonableness must again be inferred. Thus, the "area" referred to in cl 5 would be an area reasonably necessary for the purposes of carrying out mining operations in regard to the resource, reasonably identified by exploration.
Ministerial consent
The respondent argued that the omission to obtain the prior consent of the Minister to the Letter Agreement rendered it void for illegality. The respondent relied on s 64(1) and s 82(1)(d) of the Mining Act for this submission. I deal with this argument below. I did not understand Mr McCusker, in these proceedings, to submit that the omission to provide for ministerial consent in the Letter Agreement results in the contract being void for incompleteness or uncertainty. In my view, such an argument would be untenable. The omission of any provision as to the obtaining of the consent of the Minister has no bearing on the completeness of the contract constituted by the Letter Agreement, or its certainty.
Responsibility for statutory expenditure and performance bonds
There is no question of uncertainty or even incompleteness arising out of the omission to deal with statutory expenditure requirements. The relevant provisions of the Mining Act are s 62 and s 82(1)(c). Section 62 obliges the holder of an exploration licence to comply with prescribed expenditure conditions unless exemption is granted. Section 82(1)(c) provides that every mining lease shall be deemed to be granted subject to the condition that the lessee shall comply with the expenditure conditions applicable to the land, the subject of the lease, subject to any exemption that may be granted. The Letter Agreement is silent as to the responsibility for statutory expenditure requirements relating to the Tenements. It follows that the respondent is obliged to comply therewith. That is its statutory obligation. No uncertainty, or even ambiguity, arises. The Letter Agreement requires the appellant to pay various sums as consideration for the rights it receives thereunder and also to expend $500,000 on exploration. The inference is that the respondent bore that in mind, as well as its own obligations in regard to statutory expenditure requirements, when it agreed to the terms contained in the Letter Agreement.
Similar considerations apply to the fact that the Letter Agreement is silent about the parties' obligations concerning the lodging of performance bonds with the Department of Minerals and Energy. These bonds are required "as a guarantee for (largely) environmental rehabilitation". In consequence of the statutory regime under the Mining Act, the respondent, as the holder of the Tenements, is obliged to lodge the performance bonds.
Native title claims

But this is not really the point. What is presently under consideration is the issue of contractual intention and the point is that these parties were not tyros in the business of mineral exploration and it is extremely unlikely that they would have intended to conclude a split commodity exploration agreement in which there was no provision at all to regulate concurrent exploration activities. You would think that, along with the question of title, it would be one of the first things to be tackled when they sat down to do what Mr Forrest, in his evidence, anticipated that they would have to do; that is, "negotiate in good faith a fuller agreement".
Nor does the heads of agreement say what should happen if one party should make a discovery of minerals in which that party was interested on land within the tenements not yet explored by the other party. Heenan J referred to the evidence of one of the experts called on behalf of the respondent, in which the very real and practical nature of these matters is referred to. The evidence of one of the experts, Mr Noakes, on this subject is set out in the judgment of Ipp J and I do not set it out again.
I do not think expert evidence is required to show that there are other matters forming the substance of an arrangement of this kind which were dependent on the further agreement of the parties. For example, the heads of agreement assume that there are only two categories of minerals that may be found upon the tenements: "base metals" and "precious metals". Those terms are not defined. It may be thought to be a small matter, and easy to resolve, but still I think it is very unlikely that the parties intended to finally divide up the respective mineral interests in such an ill‑defined manner. It is clear from the evidence of subsequent negotiations that they were never content to do so.
Returning to the question of title, mining may not be undertaken on an exploration licence. The right to mine is not one of the rights conferred on the holder of an exploration licence. Mining can only be undertaken on a mining lease. Mining Act s 66, s 85. It is entirely unlikely that the parties intended to enter into a concluded contract of this kind which did not provide for the obtaining of appropriate mining titles in the event of successful exploration. As I have observed, the heads of agreement is completely silent on that matter. It is not as if there is a single way to do it. Depending on the wishes of the parties, which no doubt would be governed by commercial considerations, title might be retained altogether by the respondent, or there might be a subletting or a transfer from the respondent to the appellant solely or to the parties jointly.
Questions such as whether the appellant should mine as agent, or should get title in its own name and mine on its own account and, if so, whether the title should be by way of transfer or by way of subletting, are questions which were all left over. It is difficult to accept that the parties intended to conclude a contract by heads of agreement which was altogether silent on these matters.
I have already referred to the matter of the maintenance of the tenements, but something more need to be said about this. Holders of mining tenements are required to work them. Holders of exploration licences are required to explore and holders of mining leases are required to mine unless exemptions are obtained. The Act ensures that this will be done by imposing minimum expenditure conditions on holders. Section 62 imposes that obligation in respect to exploration licences and s 82(1)(c) is the relevant section in respect to mining leases. As appears from reg 21 and reg 31 of the Mining Regulations 1981 the minimum expenditure requirements are prescribed having regard, in part, to the area of the tenement and therefore the minimum expenditure requirements will vary from tenement to tenement. Failure to expend the prescribed minimum may result in loss of the tenement by forfeiture. Section 63A(b), s 82(1)(g). The evidence is that the minimum expenditure conditions applicable to the six tenements in question in this case amounts to $431,200 per annum. See exhibit C, folio E464. It is as well to set out the minimum annual expenditure condition in respect to each tenement:

Tenement Number	Tenement Area	Minimum Annual Expenditure Condition
E37/200	1603 hectares	$50,000
E37/412	280 hectares	$10,000
M37/403	967 hectares	$96,700
M37/404	773 hectares	$77,300
M37/405	974 hectares	$97,400
M37/462	998 hectares	$99,800

The heads of agreement is silent on which party should have the obligation to maintain each tenement in good standing. Whilst the heads of agreement oblige the appellant to expend a total of $500,000 "over three years", there is no allocation of that expenditure as between tenements or from year to year, and, in the aggregate, it is insufficient to satisfy the minimum expenditure conditions overall. The heads of agreement impose no obligation on the respondent (save one that might be implied) to top up the appellant's expenditure in any given tenement year; nor does the heads of agreement contain any machinery that would enable the respondent to do so by knowing in advance of the expiration of the tenement year how much the appellant had spent on any tenement so as to know, in plenty of time, what additional amount if any was required to be expended to fulfil the expenditure conditions. In short, there was no provision for exchange of information on exploration expenditure or exploration budgets. This, of course, assumes a matter not stated in the heads of agreement; namely, that the expenditure made by the appellant will be of a kind that satisfies the expenditure conditions to be fulfilled by the respondent. I say this because it is clear from reg 31 that expenditure on mining leases must be expenditure on mining and the question arises whether expenditure on mere exploration (which on the face of the heads of agreement is all the appellant intended to do) would satisfy that condition.
Of course, in the absence of further agreement, the respondent, as owner, must carry the full burden of the annual statutory expenditure conditions throughout the three‑year period. One of the points made on behalf of the appellant was that the agreement was therefore not uncertain. That is true. But if this is the agreement, the respondent is required to expend the whole amount necessary to satisfy the minimum expenditure conditions (in the first year $431,200) while the appellant may also be expending large sums on exploration. The point is that these parties surely did not intend to enter into such an agreement. It makes no commercial sense; and this is a powerful reason to reject the proposition that the heads of agreement was intended to be their concluded bargain.
Assuming it was intended that, for some period, perhaps the early stages, none of the appellant's exploration expenditure was to be included by the respondent on the report which it was required to file each year pursuant to s 68(3), that is "a report of all work done on, and money expended in connection with, exploration in the area the subject of the licence … ", surely it was not intended that this should continue indefinitely. It could not have been intended that the respondent must continue on its own to bear the whole burden of expenditure conditions even after the appellant had earned its full entitlement to the base metals in the ground.
Whether or not these matters go to uncertainty (which in my opinion they do, as I shall later try to explain), they do go to contractual intention. In my opinion, it is entirely unlikely that these experienced mining companies intended to conclude a farm‑in agreement with such matters unresolved.
In this respect, the case is not unlike Barrier Wharfs Ltd v W Scott Fell & Co Ltd (supra), which concerned an agreement for the use of a wharf. There was an exchange of letters which appeared to end in a consensus as to important matters such as wharfage rates and the like. In its last letter, the plaintiffs said they would "arrange a contract accordingly". The High Court held that the correspondence did not constitute a binding contract and in his judgment at 666 Griffiths CJ said:
"There are a great number of details incident to a contract of that sort, and it might be anticipated that the parties would come to some understanding about them before a formal agreement was entered into. They were matters of detail as to which there would probably be little or no difficulty, but still they were matters to be settled, and not left at large to be determined from time to time as occasion might arise."
Then, there are the surrender requirements. By s 65, it is provided:
"(1)Subject to this section, the holder of an exploration licence shall at the expiration of -
(a)the third year of the term for which the licence was granted, surrender not less than half the number of the blocks that are subject to the licence;
(b)the fourth year of the term for which the licence was granted, surrender not less than half the number of the blocks that are then subject to the licence,
but so that after each surrender the graticular sections that constitute the blocks that remain subject to the exploration licence form not more than 3 discrete areas each consisting of -
(c)a single graticular section; or
(d)a number of graticular sections each having a side in common with at least one other graticular section in that area."
As things stand, it is exclusively for the respondent to decide what to surrender because there is nothing in the heads of agreement which gives the appellant any say. Expert evidence is not required to inform the court that opinions might differ as to what ground may be worth holding and what ground is not. Therefore, even acting reasonably, the respondent might wish to surrender ground which the appellant might wish to retain. I do not suggest that in their final contract the parties would have gone so far as to actually delineate the ground to be progressively surrendered in compliance with the surrender provisions in the Act. No contract of this kind could be expected to look that far ahead. But, surely, they intended to agree upon a procedure in their final agreement, whereby the appellant would have a voice in the selection of ground to be surrendered. To what extent each party should control or influence the selection of the ground to be surrendered was a matter for agreement, whichever of them had the legal title.
As Barton J said in Farmer v Honan and Dunne (1919) 26 CLR 183 at 192 ‑ 193:
"The absence of terms normally to be expected in a binding contract strengthens the inference that a contract of sale was, before finality would be attained, to be executed, embodying those matters, which were to be expected, and, indeed, to any reasonable man were necessary to the completion of a contract of the kind. It is true that the mere reference 'to the preparation of an agreement by which the terms agreed upon would be put into a more formal shape does not prevent the existence of a binding contract'. (See per Lord Thesiger in Bonnewell v Jenkins 8 Ch D at 74). The question is always one of construction of the words of the alleged contract, but they must be taken in relation to the surrounding circumstances. There may be a binding contract even where a formal agreement is intended. But if the offer is made subject to such an agreement, or if it can be gathered from the terms expressed, or even from the absence of terms necessary to or even usual in a binding contract, that the future document is to contain provisions material to an agreement fairly and fully expressing the intentions of the parties, then I think it cannot be concluded that the offer, if accepted, is intended by the parties to be the final expression of their compact."
That the nature and subject‑matter of the transaction is relevant to the question whether the parties intended to be immediately finally and exclusively bound to a brief and informal document has been accepted in a number of cases. Clifton v Palumbo [1944] 2 All ER 497 per Lord Green MR at 499; B Seppelt & Sons Ltd v Commissioner for Main Roads (1950-80) 1 BPR 9147; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1950-80) 1 BPR 9251 at 9256; Geebung Investments Pty Ltd v Varga Group Investment (No 8) Pty Ltd (supra), especially per Kirby P at 14,566 and 14,569. In this last case at 14,569 Kirby P said:
"It is necessary in every case to consider the nature and importance of the transaction which the parties contemplate. Where the agreement concerns a large sum, or concerns a significant transaction, it is less likely to have been intended to be presently binding. Depending on the subject matter, where the parties have not used solicitors but intended to do so for the drawing up of their formal agreement, that may also be a factor which will point to the non‑existence of a binding agreement until the contemplated formalities have been agreed."
See also Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310, especially at 316 and Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd (1994) 2 VR 106, especially per Brooking J at 138.
All these cases show that the magnitude, subject‑matter or complexity of the transaction and the importance of the terms that have been omitted may suggest that the informal agreement was not intended to constitute a binding contract, notwithstanding that the parties may have used the language of agreement in their informal document.
For the reasons that I have tried to explain I agree with the learned trial judge that although the heads of agreement was signed with the intention that it record a consensus between the parties, the intention was to record a limited consensus only, limited in the manner described by Mr Forrest himself; that is to say, limited to the "broad commercial parameters of an agreement". Appeal book 138 D.

Was the agreement complete in its terms?

Even if I am not correct in concluding that the parties lacked the requisite contractual intention, there is another difficulty for the appellant. On its own case, as I have said, the agreement alleged to be the binding agreement contains, as one of its terms, an obligation on the parties to execute a "fuller agreement" containing, according to par 5A of the statement of claim, "such terms as may be reasonable and such terms as may be usual having regard to mining industry practice in Western Australia". If there was a concluded agreement, it was an agreement of the kind under consideration in Summergreene v Parker (supra) in which there was a term which positively obliged the parties to enter into a further agreement. The question is whether the obligation to do that is specifically enforceable. There may be a binding obligation to enter into a formal contract or to negotiate in good faith. This area of the law is comprehensively discussed by Kirby P in Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1. An example of an enforceable obligation to enter into a formal contract is provided by Niesmann v Collingridge (1920-21) 29 CLR 177. That case involved an offer and acceptance for the sale of land which contemplated that there would be a formal contract, inasmuch as the offer and acceptance provided that portion of the purchase price would be payable "on the signing of contract". The court held that there was a binding contract for the sale of the property and that the plaintiff was entitled to a decree for specific performance of that contract, the first step being the settlement and execution of the formal contract. The court held that it was a term of the bargain that the parties execute a formal contract and the plaintiff was entitled to specific performance because the term could itself be specifically enforced. That parties may enter into an agreement that contains a binding obligation to execute a further contract containing additional terms is also shown by Godecke v Kirwan (supra) at 639; Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699 and Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc [1986] WAR 253 at 261. However, the cases also show that the further terms must not be terms that "depend upon or require any further agreement". Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc (supra) per Burt CJ at 261.
The question in any given case, whether or not the terms which the parties have left unformulated do require further agreement, may be debatable; but if they do, the agreement to enter into that final agreement is not capable of specific enforcement. Summergreene v Parker(supra) especially per Latham CJ at 315-316. This will be so unless the term obliging the parties to agree to the further term or terms is severable. Whitlock v Brew(1968) 118 CLR 445; Fitzgerald v Masters(1956) 95 CLR 420; Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486.
When parties have agreed to include in their formal contract terms which are "standard" or terms which are "reasonable" and have agreed that such terms are not to be inconsistent with the agreed terms, the court has a criteria by which it can resolve any dispute concerning the precise content of the unformulated term or terms. In so doing, the court is not making an agreement for the parties, but adjudicating on the content of the agreement the parties themselves have made. Thus, in Godecke v Kirwan the term was (at 634):
"If required by the Vendor/s I/we shall execute a further agreement to be prepared at my cost by his appointed Solicitors containing the foregoing and such other covenants and conditions as they may reasonably require."
In that case, Walsh J said (at 643):
"Clause 6 does not mean that the purchaser is making an agreement to agree later upon additional provisions to govern the bargain. It means that he is agreeing presently to accept as part of the bargain such additional provisions, if any, as are required, provided that they satisfy the requirements of consistency with the other terms and of reasonableness to which I have referred."
As Burt CJ said in Woodside Offshore Petroleum (at 261) "It is the requirement of reasonableness which enables the court in the case of disagreement to settle the term and the term so settled does not depend upon or require any further agreement".
It is to these cases that the appellant appeals by par 5A of the statement of claim. However, even if the provision in the heads of agreement for a fuller agreement is interpreted to mean what par 5A pleads that it means, ie, that the parties will enter into a fuller agreement containing "such terms as may be reasonable and such terms as may be usual having regard to mining industry practice in Western Australia", the evidence is that there are no standard or usual terms in such agreements as this. See exhibit J "Memorandum of Agreement following experts conference on 27 November 1998" reproduced at appeal book 291.
In my opinion, the conclusion is inescapable that the heads of agreement are incomplete and too uncertain to be capable of specific enforcement.
I should say that there was no suggestion in this case that the clause in question could simply be ignored or could be severed from the heads of agreement. By its defence, the respondent pleaded, by par 3A, that "there are no terms of such currency and general acceptance within mining industry practice in Western Australia … as to … (b) render the Heads of Agreement capable of being given effect to according to their terms ... ". In its reply, the appellant did not plead to that plea. The learned trial Judge did not hold that this term of the heads of agreement could be severed (cf Tern Minerals NL v Kalbara Mining NL (supra)) and it was not contended in the appeal that he ought to have so concluded.

Therefore, even if I am wrong in the conclusion I have reached that the parties never intended to be finally and exclusively bound to the heads of agreement, I would hold that there was no concluded contract sufficiently certain so as to be capable of specific enforcement.

Did the parties agree on all essential terms?

Even if the proper conclusion is that the parties did intend to enter into the heads of agreement as a binding contract and even if the clause obliging them to enter into the fuller agreement is not destructive of the contract, in my opinion the learned trial judge was correct to decide that the parties had not agreed on all the essential terms of the contract. I have already said this was not simply a sale of an interest in mining tenements, nor was it simply an exploration agreement by which one party might, by doing certain exploration work, earn a co‑ownership interest in the tenements. The agreement is much more complicated than that. It is an exploration and mining agreement contemplating concurrent exploration and mining activities on the same ground on a large scale for an indefinite time. The agreement contemplated that the appellant might find "base metals" in sufficient quantity to warrant the starting of a commercial mining operation. The agreement contemplated that commercial mining operations would then commence. But they could not, as things stood, unless the mining operations were to be confined to the mining leases as distinct from the exploration licenses. If it was desired to mine in ground covered by the exploration license a mining lease would have to be obtained. Its boundaries would have to be defined and the lease would have to be applied for and granted. But at what stage and to whom? The arrangements contemplated by the parties could not be implemented without further agreement on these critical points. This is because, of the various ways in which the matter of tenure might be dealt with, what might suit the appellant and its financiers might not suit the respondent and its financiers. As Burt CJ said in Woodside Offshore Petroleum (at 262), "no doubt 'business efficacy' could be achieved in many ways dependent upon many circumstances. And whether it had been achieved would, no doubt, depend upon which of the two parties was making that judgment".
In my opinion, upon the proper construction of the heads of agreement, an agreement as to how - that is to say, by what title arrangements - the parties were to exercise their respective rights to mine the minerals in which they claimed an interest had not been agreed. The necessary term cannot be supplied by implication or by resort to standard terms or usual provisions or the like. It is an essential matter that remains to be agreed. It is important to bear in mind that this was not a contract for the sale of the tenements in which perhaps an obligation to convey title on payment of the purchase price might possibly be implied.
The evidence as to the conduct of negotiations after the signing of the letter agreement confirms that there was no agreement about title and that the parties regarded it as an essential matter upon which it was necessary to reach agreement. The evidence also shows that the parties regarded other matters to which reference has been made as important and as requiring agreement. I will not detail the negotiations as they developed in respect to all of the matters, but I will take the time to give a brief account of the negotiations in respect to the matter of title. I have already referred to the evidence which shows that prior to the signing of the heads of agreement the respondent's stance was that it would retain legal title to all tenements. I have also referred to the evidence of Mr Forrest to the effect that when the heads of agreement was signed the question of title had not been resolved. Certainly, there is no evidence that the appellant agreed that the respondent should retain legal title. On 17 June 1996, after the signing of the heads of agreement, Messrs Hunt & Humphry, the appellant's solicitors, prepared a draft document entitled "Wilson Creek West Farm‑In Deed". It contained a cl 4.1 headed "Passing of Title" which provided (exhibit E112):
"(a)Subject to the terms of this Deed, legal title to and in the Mining Tenements free from Encumbrances shall pass from Mt Edon [the respondent] to Anaconda [the appellant] when the payment referred to in clause 2.2(c) is made by Anaconda to Mt Edon … "
The payment was the payment of $125,000, being the last portion of the consideration of $250,000 mentioned in the heads of agreement. In other words, for its part, the appellant wanted to obtain legal title to all of the tenements upon payment of $250,000, which was contemplated to be "on or before 26 October 1997". Not surprisingly, that was not acceptable to the respondent. It would mean that the tenements would pass out of the ownership of the respondent and into the hands of the appellant long before the appellant had expended the amount which it had agreed to expend on exploration ($500,000) and regardless of whether the appellant's exploration was successful. There might be the ridiculous situation that there was no nickel worth mining, but a valuable gold resource discovered by the respondent; yet the respondent would have to transfer all the tenements to the appellant. Various alternative proposals were exchanged in the ensuing months. Whilst ultimately the respondent was prepared to consider a transfer of title to the appellant, it was not prepared to transfer title until the appellant had completed all of its financial obligations, including expenditure of the full amount of $500,000 and until the appellant had completed a "successful feasibility study". The appellant's counter‑proposal was that it should be given legal title as soon as it had paid the consideration of $250,000, upon the condition that, should it not spend $500,000 on exploration, it would retransfer the titles without payment. This was unacceptable to the respondent. The appellant then, in April 1997, put forward a proposal that it should get title once it paid the $250,000 and completed its exploration expenditure, but that it should not have to first complete a successful feasibility study. Facsimile from Hunt & Humphry to Stark, Swann & Nolan, 9 April 1997, item 7 (exhibit E345).
On 18 April 1997, Stark, Swann & Nolan, replied in the following terms (exhibit E353):
"The question of title passing after completion of a successful feasibility study is … not negotiable. It is more logical for title to the tenements to pass to the party which has best demonstrated the viability of a Commercial Mining Operation, rather than to a party which has simply expended a certain amount of money on exploration. Furthermore, if our client is also spending money on the tenements at the same time as yours, or possibly completing a feasibility study itself, why should your client obtain title simply on the strength of having expended a certain amount on exploration?"
So far as appears, the matter was never resolved. This evidence shows plainly that at the time when the heads of agreement was signed no consensus had been reached concerning a most important matter - title - on which the parties were in negotiation.
As Heenan J found, negotiations completely broke down in October 1997. Concerning the manner in which the negotiations had been conducted, his Honour stated his findings in the following terms (at 19):
"At least for the first year or thereabouts of that time [the time between the signing of the heads of agreement and the breakdown of negotiations] it seems that the representatives of the parties were on good terms and co-operating fully with each other in the exploration process. Even so there were differences between them which negotiations 'in good faith' had not resolved."
In my opinion, the learned trial Judge was correct to conclude that, when they signed the heads of agreement, the parties did not intend to bind themselves to a concluded contract and, anyway, the heads of agreement is uncertain and incomplete.
I do not think that the question of title was the only essential matter missing from the arrangement contained in the heads of agreement.
In the appellant's written submissions, it is put that exploration by the appellant on these tenements was for the respondent's benefit because "the [appellant's] expenditure helped fulfil the respondent's expenditure obligations". No doubt, this is why a tenement owner, who has the considerable burden of a statutory expenditure condition to fulfil each year, requires a prospective farminee, as part of the consideration for the acquisition of an interest in the tenements, to expend a specified sum on the tenements. Theoretically, money spent by the farminee in exploring the tenements is money the owner does not have to spend. So it is, as the appellant's submissions make clear, that the exploration expenditure agreed to be expended by the farminee is intended to be part of the valuable consideration moving from the farminee to the owner for the acquisition of the interest that is to be earned. But the farminee's expenditure cannot "help fulfil the respondent's expenditure obligations" if all that the farminee has promised to do is (and I quote from the heads of agreement) "spend $500,000 over three years on exploration within" the six tenements. Compliance with that bare obligation in those general terms would not enable the respondent to make any use whatever of the appellant's exploration expenditure for the purpose of helping to fulfil the respondent's expenditure obligations. The consideration would therefore be illusory. What is required is a term or terms, the implementation of which would provide the respondent with sufficient information to enable the respondent to use the appellant's exploration expenditure for the contemplated purpose. The term is essential, it seems to me, because otherwise the respondent will not obtain the real benefit which it is intended that the respondent will obtain arising from the appellant's exploration expenditure.
The evidence of the course of negotiations following the signing of the letter agreement shows that the appellant tried to get an agreement with respect to the spread of expenditure by the appellant, but no agreement could be reached. I will refer briefly to some of that evidence. In their letter to Messrs Hunt & Humphry of 20 March 1997 (exhibit E328), the respondent's solicitors suggested the inclusion of a clause in the formal document providing that the appellant "must spend at least one‑third of the $500,000 amount during each year of the Earning Periods". The reason for that request seems plain. It would enable the respondent to know, although only very approximately, the amount which for its part it would have to expend in order for both lots of expenditure to fulfil the aggregate minimum expenditure conditions.
By their facsimile of 9 April 1997 (exhibit E344), Hunt & Humphry replied saying "This was not previously agreed and is unacceptable." By their facsimile of 18 April 1997 (exhibit E353), the respondent's solicitors inquired "Why is it unacceptable?" To this they received the reply, on 23 April 1997 (exhibit E374), "The explanation given is sufficient. This is not negotiable." Negotiation never progressed beyond that stage.
I have not overlooked the evidence that in fact the respondent and the appellant did co‑operate on the matter for a time, inasmuch as the respondent did include expenditure by the appellant in reporting pursuant to s 68 (and s 82(1)(e)) as regards its expenditure on the tenements. This does not mean that a term which obliged the appellant to provide the respondent with the necessary information to enable the respondent to make use of the appellant's exploration work was not an essential term of the contract. It is not a term that can be supplied by implication. As the failed negotiations show, there is ample scope for disagreement as to the form which such a term should take.

Illegality

If the heads of agreement is a binding contract, it is not tainted by illegality. It does not purport to be a dealing, even an indirect dealing, with a legal or equitable interest in or affecting an exploration licence, within the meaning of s 64(1). The parties never got as far as agreeing what rights the appellant would acquire or had acquired in or affecting the mining titles. The heads of agreement does not purport to effect an assignment, underletting or parting with possession of the land in respect of which the mining leases are granted, within the meaning of s 82(1)(d). Anyway, to do so would be simply a breach of a statutory covenant, not an illegal act. Section 82(1)(d) has no coercive effect except as a covenant in a mining lease actually granted. It does not itself, by its own force, proscribe conduct.

Unjust enrichment and estoppel

I appreciate that this is a minority judgment and that the majority decision of the court is that the heads of agreement is a binding agreement, specifically enforceable. No purpose is therefore to be served by undertaking a detailed analysis of the appellant's alternative claim for restitution based upon doctrines of unjust enrichment or its claim of an estoppel. It is, I think, sufficient for me to say that I am not persuaded that the conclusions reached by the learned trial Judge to the effect that no such claim would have been made out contains any error. It seems to me that this is simply a case in which the parties were in negotiation and, in anticipation that final agreement would be reached, the appellant conducted itself in a certain manner. The learned trial Judge's finding that the appellant simply took the commercial risk to commence work on the tenements before the contract was finalised without any inducement by the respondent, save that arising out of the mutual expectation of the parties that final agreement would be reached, is entirely justified. That does not provide the basis for an estoppel. Assuming, without deciding, that the respondent has benefited from the appellant's exploration work conducted at the appellant's expense, the benefit was not obtained in circumstances which render retention of the benefit unjust.
For the above reasons, I would dismiss the appeal.