Australian Zircon NL v Austpac Resources NL [No 2]

In the matter of Australian Zircon NL versus Austpac Resources NL [No 2], the dispute revolves around the interpretation of clauses within farm-in and sale agreements, specifically focusing on the ability to declare a trust over an agreement that is not assignable at law. The case was heard in the New South Wales Court of Appeal. The central legal issues that the Court had to address were whether a farm-in agreement contained an express or implied term prohibiting the transfer of the agreement or a declaration of trust over it, and whether the rights and obligations under the agreement were personal and incapable of transfer and vicarious performance.

The Court examined the arguments presented by Australian Zircon, who contended that clause 9 imposed an obligation on both parties to negotiate a more definitive agreement and joint venture arrangement. The Court also considered the judgment in United Group Rail Services Ltd v Rail Corporation New South Wales, which was cited to support the contention that clause 9 was personal in nature. However, the Court found that the proposition, as stated in the judgment of Buss JA, that a trust can be declared over a contract that is not assignable at law, was accepted as good law. This proposition was affirmed in the decision of Lightman J in Don King Productions and not doubted in Barbados Trust. The Court noted that although there are suggestions that the proposition is confined to a trust over the benefit of the contract, the citation of Lord Shaw's judgment in Lord Strathcona immediately before the accepted proposition in Secure Parking required the Court to find that the declaration of trust could cover the entire contract.

Ultimately, the Court concluded that the declaration of trust in clause 10.4 of the Sale Agreement would be effective unless prohibited by clause 7 of the Farm-in Agreement. The Court held that it was bound by the earlier decision in Secure Parking and found that there could indeed be a trust over the entire contract. The effect of the declaration of trust would then depend on the proper construction of both clause 7 of the Farm-in Agreement and clause 10.4, read with 10.1, of the Sale Agreement. This finding effectively resolved the central issue of whether the declaration of trust could be enforced, subject to the constraints imposed by clause 7.

The Court's final orders would likely involve a detailed analysis of the clauses in question to determine the extent to which the declaration of trust could be enforced, considering the prohibitions and permissions set out in the Farm-in Agreement and the Sale Agreement. The outcome of this case has significant implications for the enforceability of trust declarations over contracts that are not assignable at law.