Bereth v Lehmann - [2011] WASC 144

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: BERETH -v- LEHMANN [2011] WASC 144

CORAM: ALLANSON J

HEARD: 8 MARCH 2011

DELIVERED : 1 JUNE 2011

FILE NO/S: GDA 21 of 2010

MATTER :The Mining Act 1978 (WA)

BETWEEN: GREGORY WALTER BERETH
First Appellant
DAYNE GREGORY BERETH
Second Appellant
AND
RODNEY SCOTT LEHMANN
First Respondent
JOHN ARTHUR BELINGHERI
Second Respondent

ON APPEAL FROM:
Jurisdiction              :  THE WARDEN'S COURT OF WESTERN AUSTRALIA
Coram  :WARDEN T WATT
Citation  :RODNEY LEHMAN v GREGORY BERETH, DAYNE BERETH AND JOHN BELINGHERI [2010] WAMW 16

Catchwords:

Appeal from Warden's Court - Appellant seeking to depart from admissions at hearing - Construction of joint venture agreement - Ownership of ore

Legislation:

Mining Act 1978 (WA), s 85(2), s 132, s 142(4), s 147

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

First Appellant              :     Mr J M Healy
Second Appellant          :     Mr J M Healy
First Respondent           :     Ms C A McKenzie
Second Respondent       :     Ms C A McKenzie

Solicitors:

First Appellant              :     Middletons
Second Appellant          :     Middletons
First Respondent           :     McKenzie & McKenzie
Second Respondent       :     McKenzie & McKenzie

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

Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492
Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2001] WASC 87

ALLANSON J: In 1998, Rodney Scott Lehmann and John Arthur Belingheri, entered into a joint venture agreement with Philip Rocky Vergo to mine for gold on two leases in the Coolgardie area. Mining ceased in 2003. The ore mined was not immediately treated, but was stockpiled on the leases and on an adjacent general purpose lease.
In 2008, Gregory Bereth and his son Dayne Bereth (the appellants) agreed to purchase Mr Vergo's interest in the various leases, and his interest in the stockpiled ore. They arranged for the ore to be taken to a mill and the gold extracted.
Mr Lehmann applied to the warden for orders that he and Mr Belingheri were each entitled to one‑third of the proceeds of the treated ore. The appellants agreed that Mr Lehmann and Mr Belingheri were each entitled to one‑third of the proceeds of the ore mined by the joint venture, but said that the ore treated included additional ore that Dayne Bereth had mined. Mr Lehmann and Mr Belingheri were accordingly entitled to less than a third of the total proceeds that had been realised.
After all of the evidence had been presented, and after written submissions, the appellants applied to amend their case so as to argue that Mr Lehmann and Mr Belingheri had no right to any of the ore or its proceeds. The warden refused the application to amend. Despite that refusal, the appellants maintained the argument that Mr Lehmann and Mr Belingheri had demonstrated no right to a share of the ore and its proceeds. That argument is now the basis of their appeal.

The plaint and response in the Warden's Court

In an amended plaint dated 9 June 2008, Mr Lehmann claimed:
1.That he and Mr Belingheri were joint venture partners with Mr Vergo in a joint venture known as the Mungari Joint Venture.
2.The Mungari Joint Venture was carried out under a joint venture agreement dated 7 September 1998 and was to mine and treat gold‑bearing ore from mining leases M15/544 and M15/312.
3.Mr Lehmann and Mr Belingheri were to be liable for the costs of mining the ore. Each of the joint venture partners were to be equally responsible for the costs of transportation of the ore from the tenement to treatment, the cost of treatment and the cost of all insurance.
4.The parties were entitled jointly to the net proceeds of the Mungari Joint Venture equally after the deduction of transport and treatment costs.
5.Mr Lehmann and Mr Belingheri carried out the mining of ore and produced 7,800 tonnes of ore by October 2003. The ore was approximately 2.2 g of gold per tonne and, at the completion of mining, it was not then economical to transport and treat the ore.
6.Mr Lehmann and Mr Belingheri applied for, and were granted, a general purpose lease, G15/18, adjacent to mining lease M15/312 for the purpose of stockpiling mined material. In August 2006, Mr Lehmann moved two‑thirds of the ore mined pursuant to the joint venture to G15/18.
7.On 14 July 2006 Mr Belingheri transferred his half interest in G15/18 to Mr Vergo, and on 5 September 2006, Mr Vergo transferred that interest to Gregory Bereth.
8.In April 2008, Mr Vergo transferred his interest in M15/544 and M15/312 to Dayne Bereth.
9.Between 13 March 2008 and 13 May 2008, the ore from G15/18 was removed and transported to Greenfields Higginsville Treatment Plant. The one‑third of the original stockpile still on M15/312 was also transported to Greenfields Higginsville Treatment Plant at the same time.
10.The ore was processed at the plant in or about the week ending 6 June 2008.
Mr Lehmann sought orders including:
The proceeds of the ore be distributed as follows:-
(a)In payment of the transportation costs of the ore from the Mining Tenement to Higginsville Treatment Plant.
(b)In payment of the treatment costs of the ore to Higginsville Mining Pty Ltd.
(c)Of the balance remaining: -
(aa)One third to Rodney Scott Lehmann.
(bb)One third to Gregory Walter Bereth or Dayne Gregory Bereth.
(cc)From the remaining one third share of [Mr Belingheri's] payment of the sum of $65,300 to [Mr Lehmann] and the balance then remaining to [Mr Belingheri].
The appellants filed a response to the plaint. The grounds of their defence included:
1.That on or about 23 June 2006 Mr Vergo advised Mr Lehmann and Mr Belingheri in writing that he intended to assign his interests in M15/312 and M15/544 to Gregory Bereth and if consent to the assignment was not received within 14 days he would withdraw from the joint venture and it would be terminated.
2.Neither Mr Lehmann nor Mr Belingheri consented and the joint venture thereafter terminated from on or about 8 July 2006.
3.Mr Lehmann moved approximately two‑thirds of the ore contained in the stockpiles on M15/312 to G15/18. The ore moved by Mr Lehmann weighed approximately 4,675 tonnes and the total ore extracted by Mr Lehmann and Mr Belingheri weighed approximately 7,012.5 tonnes.
4.In June 2006 Mr Gregory Bereth and Mr Vergo made an oral agreement under which Mr Vergo agreed to transfer his interests in M15/312 and M15/544 and to sell his interest in the ore stockpiled on M15/312 and M15/544 to the appellants for $50,000 plus GST. The appellants paid Mr Vergo in or about January 2008.
5.In February or March 2008 the appellants mined and extracted ore from a different location on M15/312 than the area mined by Mr Lehmann. The ore mined by the appellants had a higher grade than the ore mined by Mr Lehmann and Mr Belingheri.
6.M15/312 and M15/344 were transferred to Dayne Bereth on or about 28 April 2008.
7.Between 30 April and 9 May 2008, the ore extracted by Mr Lehmann and Mr Belingheri which was originally contained in the stockpiles on M15/312 and the additional ore mined by the appellants, was transported for treatment.
8.The ore transported weighed approximately 8,966.41 tonnes.
9.It was treated as one parcel between 31 May 2008 to 4 June 2008.
10.The grade of the ore was higher than the grade of the ore extracted by Mr Lehmann and Mr Belingheri because it was combined with high grade ore extracted by the appellants after the joint venture had terminated.
In July 2008, the warden had made interim orders varying an interlocutory injunction to the following effect:
(a)sufficient of the gold recovered be released to satisfy the Mill's invoice for $256,132.80 for treatment of the ore and the transport invoice for $59,734.29 for transport costs;
(b)one‑third of the gold recovered be transferred to Mr Lehmann's gold account;
(c)one‑third of the gold recovered be transferred to the gold account of G&D Mine Services Pty Ltd (G&D Mine Services) (the appellants' company); and
(d)one‑third of the gold recovered be held in trust for Mr Belingheri pending resolution of this plaint.
The appellants sought orders that, from the one‑third of the gold transferred to Mr Lehmann's gold account, he be required to give restitution of either approximately $219,000 or approximately 165 oz of gold ‑ the adjustment being to allow for the higher grade ore mined by the appellants and processed in the same batch as the ore mined in the joint venture. The appellants also sought a declaration that they and Mr Lehmann and Mr Belingheri, were each entitled to one‑third of the remaining ore currently stockpiled on the mining leases and requiring the respondents to remove their portion of that ore to another location.
Finally, the appellants sought a declaration that Mr Lehmann and Mr Belingheri were each liable to contribute one‑third of the cost of rehabilitating and restoring the two mining leases.

The course of proceedings before the warden

The trial began on 23 March 2009 and continued over various dates. There were five days of evidence, with the evidence concluding on 4 November 2009. The court then ordered written submissions to be filed by 24 November 2009.
Unfortunately not all of the evidence has been reproduced in the appeal book. In particular, there is reference to an affidavit of Mr Vergo sworn 12 January 2009 (exhibit 38 at trial). While the transcript of Mr Vergo's oral evidence is available, his affidavit is not.
The principal witness for the plaintiff was Mr Lehmann. He said that during the course of mining from 2003, he and Mr Belingheri created two stockpiles of ore on M15/312 ‑ the stockpiles contained what was considered to be low grade ore and high grade ore. Mining was completed on or about 17 October 2003. During the mining operations it became apparent to the venturers that there was not sufficient space in the mining leases to stockpile the mined ore, and Mr Lehmann and Mr Belingheri then pegged and acquired a general purpose lease which was intended to be used to store stockpiled ore.
Mr Lehmann deposes to two conversations with Gregory Bereth in 2006 and an agreement between them that if the ore was transported for milling, the proceeds after deduction of the cost of transport and treatment would be distributed two‑thirds to Mr Lehmann and one‑third to Mr Bereth. In August 2006, solicitors on behalf of Mr Vergo wrote to Mr Lehmann recording an agreement which included, relevantly, that Mr Lehmann move his two‑thirds share of the ore to the neighbouring general purpose lease, following which Mr Vergo intended to assign the mining lease to a third party (presumably, Mr Bereth).
In about August 2006 Mr Lehmann moved about two‑thirds of each of the stockpiles to the general purpose lease. In about May 2008 Mr Lehmann discovered the stockpiles of ore had been removed from both G15/18 and M15/312.
Finally, Mr Lehmann referred to the rehabilitation he carried out on the tenements entirely by himself, and sought reimbursement to the extent of approximately $17,000 from each of his joint venture partners.
In October 2009 Mr Lehmann filed a further affidavit sworn 23 October 2009 addressing the question of mining activity on the lease after the joint venture ceased.
The appellant Dayne Bereth swore two affidavits. In the first, dated 27 January 2009, he gave evidence that he carried out mining on the leases in about late February or March 2008. That evidence was rejected by the warden. Mr Bereth's second affidavit, dated 9 March 2009, was directed predominately to the appellants' assertion that the ore that was processed included ore which they had mined.
Dayne Bereth gave evidence on behalf of the appellants at the trial; his father did not give evidence and no affidavit was filed on his behalf.
Mr Vergo was called by the appellants at trial. He gave some evidence relating to the joint venture agreement. He said that Gregory Bereth approached him in 2006 and asked if he would be interested in selling the area of the mining leases. He said that he told Mr Bereth at that time that he did not own all of the ore on the tenement 'it was Rodney and John's two thirds, and a third was mine.' He made that clear to Mr Bereth from the outset.
The first hint that the case had changed came after the evidence had closed and the appellants (defendants to the plaint) applied to amend their response. Counsel for the appellants then said, 'I was only instructed in relation to this matter at a very late stage and as part of that process brought a new set of eyes to the case'.
The appellants applied to include the following alternative plea:
(a)the amended plaint discloses no cause of action against the first and second respondents because:
(i)neither the first nor second respondent have ever been party to the Mungari Joint Venture Agreement (as defined in paragraph (v) of the amended plaint) made between the plaintiff, the third respondent and Philip Rocky Vergo;
(ii)the plaintiff has never owned any interest in the ore mined pursuant to the Mungari Joint Venture Agreement; and
(iii)the plaintiff has never owned an interest in the mining leases M15/312 r M15/544.
In an interlocutory decision, the warden determined not to allow the amendment. As the warden pointed out, the appellants had conceded on the first day of the trial that each of the parties was entitled to one‑third of the ore after the deduction of transport and milling costs, and that the issue to be tried was whether the appellants had mined additional ore which was added to the stockpiled joint venture ore before it was treated. In their written submissions, they claimed that they were entitled to restitution of gold distributed to the respondents to the extent of the difference between the amount they were allocated under the interim order, and the amount they were found to be entitled to at trial.
Further, it was only on 16 November 2009 that the appellants filed an interlocutory application and affidavit seeking to amend their response. No explanation had been given for the delay. As her Honour said:
The amendments sought goes to the heart of the proceedings itself and contradicts entirely the filed response, opening statement and concessions made at the outset of the trial by the applicants. Allowing the amendment would necessarily require the court to allow the plaintiff to reopen their case and call further evidence, substantial evidence. The plaintiff clearly relied on the pleadings and concessions made by the respondents at the outset of the trial and was entitled to do so.
In her final decision ([2010] WAMW 16) the warden found as follows:
1.The ore milled between 31 May and 4 June 2008 at Higginsville was, at least in part, ore mined by Mr Lehmann and Mr Belingheri pursuant to the Mungari Joint Venture Agreement.
2.The Joint Venture Agreement not only gave Mr Lehmann a clear contractual right to share in the profits made pursuant to the Joint Venture Agreement, but also conferred a proprietary right by virtue of the definition of the project (referring to cl 1(b), 4.6, 6.2 and 7.1 of the Joint Venture Agreement).
3.That property right had been confirmed by Mr Vergo who had, in particular, confirmed that he assigned to the appellants his interest in a one‑third entitlement in the joint venture ore only.
4.The real question for the court to determine was one of quantum as had been conceded by the appellants at the outset of the trial.
5.While Mr Lehmann had said that the joint venture had mined 7,800 tonnes of ore that was, as he accepted, only an estimate and no clear measurement was taken.
Her Honour rejected the appellants' evidence that they had carried out additional mining and that the ore which had been processed included the product of that mining. She rejected the evidence of Dayne Bereth, who gave evidence on behalf of the appellants, and found that the whole of the ore milled at Higginsville between 31 May and 4 June 2008 was ore mined in the course of the Mungari Joint Venture. None of those findings of fact is challenged.

The appeal

Under s 147 of the Mining Act 1978 (WA) an appeal lies as of right to a 'party aggrieved by any final judgment, determination or decision' of the warden.
There is no appeal, either by right or by leave, from an interlocutory decision, such as the decision of 23 June 2010 to not allow the amendment. To the extent that the interlocutory ruling affected the final decision, the appellants could have challenged it in the appeal from the final decision. They do not challenge the warden's decision to refuse the amendment and do not submit that she was wrong.

The grounds of appeal

The appellants appeal under eight grounds. The first three grounds reflect different facets of the same argument. The appellants argue, in effect, that Mr Lehmann was required to discharge his burden of proving a cause of action against the appellants and that the warden could not rely on the concessions made by the appellants 'without considering whether the first respondent had established on the facts a cause of action against the first appellant and/or the second appellant'. Specifically, ground 3 argues that the warden should not have found that the respondents had any proprietary right in the ore.
The central premise of the appellants' case is that the warden was not bound to accept the admissions made by the appellants at trial and should not have acted on them. The appellants rely on the principle discussed by Heydon JA in the Court of Appeal of New South Wales in Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492 [148] ‑ [160], summarised as follows:
In short, the courts are averse to pronouncing judgments on hypotheses which are not correct. To do so is tantamount to giving advisory opinions and to encouraging collusive litigation. On the other hand, the courts will act on admissions of or agreements about matters of fact where there is no reason to doubt their correctness. But they are reluctant to do so where there is reason to question the correctness of the facts admitted or agreed.
The first question on appeal is whether, following Damberg v Damberg, the warden could not act on the admissions made by the appellants at trial because there was a reason to question the correctness of those admissions.
In my opinion, the warden was entitled to act on the admissions. The joint venture agreement was in evidence. It was made on 7 September 1998. Under the agreement the parties formed and agreed to engage in an unincorporated joint venture for the purpose of carrying out a project of the development of the tenements (M15/544 and M15/312) for the commercial production of ore. Under cl 2(b) the interests of the parties in the joint venture were one‑third each. By cl 5, each party was to contribute his own labour to the project. Further, it was agreed that the parties would treat all ore mined as soon as reasonably practicable.
Clause 6 dealt with costs of mining. In particular, save for the costs of transporting the ore to treatment, treating the ore and insurance, Mr Belingheri and Mr Lehmann were liable for the whole of the costs of the project including the mining of the ore. They were required to contribute all plant and equipment and were responsible for the costs of acquiring, maintaining and repairing all such plant and equipment. They were obliged to pay all statutory obligations relating to rates and all licence fees and permit costs. The parties agreed to bear the costs of transportation, treatment and insurance in equal shares.

Clause 7 then provided as follows:
7.1The parties agree that each of them shall be entitled jointly to the net proceeds of sales of ore at the rate of one third thereof. The parties agree that the said net proceeds shall be calculated, divided and paid to each party within seven days of the date on which payment for the ore is received by them or any of them.
Clause 7.2 defined the net proceeds of sale as the gross revenue actually received by the parties from sales of ore, from which was to be deducted the costs of transportation, costs of treatment and any other costs which the parties agreed to bear equally.
Clause 8 dealt with withdrawal and termination. Any party could by notice withdraw from the joint venture, 'whereupon there shall be a calculation, division and payment of the proceeds of ore mined up to the date of the withdrawal in accordance with clause 8 above' (the reference to cl 8 is clearly an error and intended to refer to cl 7). Clause 8.2 also provided for termination of the joint venture should Vergo withdraw, Belingheri and Lehmann withdraw, or the parties agree in writing to terminate. Under cl 8.3:
Upon termination of this agreement the rights and obligations of the parties shall cease except to the extent that there is any outstanding liability or obligation on the part of any party owed to the other parties which arose prior to the termination of this agreement.
On the appellants' construction of the joint venture agreement, Mr Vergo could at any time terminate the agreement and claim wholly for himself the benefit of any ore that had been mined by the others, but that had not yet been treated and sold. Clause 7 is to be read not only as conferring an entitlement on each of the other recipients to one‑third of the proceeds of sale, after deduction of expenses, but as limiting their interests to that payment. That construction, in my opinion, is not consistent with the commercial purpose of the joint venture agreement. The construction which her Honour accepted, that the joint venturers jointly held the ore in equal shares until such time as it had been treated, is consistent with the admissions that had been made, is consistent with the commercial object of the joint venture agreement, is consistent with cl 8, and is not inconsistent with the other terms of that agreement.
Further, upon the ore being mined, it was lawfully owned by Mr Vergo as lessee of the mining lease: Mining Act s 85(2); Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2001] WASC 87 [153]. On sale of the tenement, Mr Vergo (on his evidence) told the appellants that he only owned a third of the ore and sold them only his one‑third interest. By the time of the sale, Mr Lehmann had moved two‑thirds of the ore mined pursuant to the joint venture onto the general purpose lease, G15/18.
For those reasons, in my opinion, her Honour was not obliged to question the correctness of the matters that had been admitted.
Ground 4 alleges that the warden erred in law and denied natural justice in that the relief granted by the court 'dealt with the property of G&D Mine Services Pty Ltd [which] was not a party to the proceedings'. G&D Mine Services had been responsible for transporting the ore from the leases to the treatment plant. The appellants do not submit that there was any evidence before the warden, that G&D Mine Services owned the ore, or had any entitlement to the proceeds of sale. On the issue that was to be determined at the hearing ‑ whether the appellants had added ore to the stockpiled ore ‑ there was no reason for G&D Mine Services to be a party, and no denial of natural justice.
Ground 5 alleges an error in law in failing to finally determine whether the first respondent had proved at trial sufficient grounds for the granting of the injunction that had been originally granted on 11 June 2008, and later varied on 1 July 2008. I can see no basis upon which the correctness of the final decision of the warden is affected by whether or not she revisited the grounds for the granting of the injunction.
Ground 6 alleges error of law in granting relief other than in accordance with the quantum of damages claimed in the first respondent's plaint in the Warden's Court. It arises in this way. The first respondent claimed relief (that is for one‑third of the proceeds after treatment and deduction of expenses) in relation to approximately 7,800 tonnes of ore. The appellants say the amount of ore transported and processed was more than that ‑ 8,966.41 tonnes (if wet tonnes) and 8,316 tonnes (if dry tonnes), and her Honour should have awarded to Mr Lehmann one‑third of the proceeds of 7,800 tonnes only.
The warden found, however, that the appellants had not mined and added to the stockpile. That is, she expressly found that the whole of the ore treated was the stockpiled ore. Had it been necessary, her Honour could at the time have amended the plaint under s 142(4) of the Mining Act, which permits 'all such amendments as may be necessary for determining in the existing proceedings the real question in issue.' In my opinion ground 6 should fail.
Ground 7 alleges error of law by granting relief in favour of the second respondent, Mr Belingheri, when he had not made a claim in the proceedings. It is asserted that the warden had no jurisdiction to grant such relief.
The jurisdiction of the warden was set out in s 132 of the Mining Act. It included jurisdiction to hear and determine all actions, suits and other proceedings cognisable by any court of civil jurisdiction as arising in respect of
the partition, sale, disposal, or division of any mining property, or the proceeds thereof, held by two or more persons having conflicting interests therein, and generally all rights claimed in, under or in relation to any mining tenement or purported mining tenement, or relating to any matter in respect of which jurisdiction is under any provision of this Act conferred upon the Warden's Court.
Mr Belingheri was a party to the proceedings before the warden, as a defendant to the plaint. Mr Lehmann sought orders that the proceeds of the ore be distributed including a one‑third share to Mr Belingheri, after the deduction of the sum of $65,300 payable by Mr Belingheri to Mr Lehmann. There is, in my opinion, no basis for the claim of want of jurisdiction. There is no substance in the ground.
Finally, in ground 8 the appellants allege that the warden erred in law in failing to require that the first respondent pay his share (a third) of the rehabilitation and restoration costs of M15/312 and M15/544 under the joint venture agreement. Clause 9.2 of the joint venture agreement provided that notwithstanding termination of the joint venture, each party is equally liable for the costs borne by any party in the rehabilitation and restoration of the tenements. The mining activity on the two leases pursuant to the joint venture had ceased in 2003. Mr Lehmann gave evidence that he had carried out rehabilitation on the tenements and incurred significant costs in doing so. That evidence was not challenged. Apart from Mr Lehmann's claim, there was no evidence before her Honour that any party to the agreement was liable for any rehabilitation and restoration costs that had not then been met. There was no evidence before her Honour upon which it was necessary or indeed appropriate for her to make the order regarding costs of rehabilitation. For those reasons the appeal on ground 8 should be dismissed.

Conclusion

In my opinion, none of the grounds of appeal have been made out. The appeal is dismissed.