Coal Hub Pty Ltd v NSL Consolidated Ltd [No 4]
[2018] WASC 41
•9 FEBRUARY 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: COAL HUB PTY LTD -v- NSL CONSOLIDATED LTD [No 4] [2018] WASC 41
CORAM: BANKS-SMITH J
HEARD: 18 - 26 MAY, 14, 20 - 21 & 23 JUNE, 31 JULY & 9 10 AUGUST 2017
DELIVERED : 9 FEBRUARY 2018
FILE NO/S: CIV 1202 of 2015
BETWEEN: COAL HUB PTY LTD
Plaintiff
AND
NSL CONSOLIDATED LTD
Defendant
Catchwords:
Contract - Implied terms - Whether breach repudiatory conduct
Assessment of damages - Loss of opportunity - Expert evidence - Prospect of reporting JORC Code Inferred or Indicated Resources
Assignment - Whether bare right to litigate
Legislation:
Nil
Result:
Defendant to pay nominal damages
Category: A
Representation:
Counsel:
Plaintiff: Mr M L Bennett
Defendant: Mr J Garas
Solicitors:
Plaintiff: Bennett + Co
Defendant: Armeli & Molony Lawyers
Case(s) referred to in judgment(s):
Arnesen v Springs Beach Development Pty Ltd [2008] QSC 283
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
British & Commonwealth Holdings Plc v Quadrex Holdings Inc [1989] 1 QB 842
Butt v M'Donald (1896) 7 QLJ 68
Butts v O'Dwyer (1952) 87 CLR 267
Coal Hub Pty Ltd v NSL Consolidated Ltd [No 2] [2016] WASC 257
Coal Hub Pty Ltd v NSL Consolidated Ltd [No 3] [2017] WASC 144
Colley v Overseas Exporters [1921] 3 KB 302
County Hotel & Wine Company Ltd v London & North‑Western Railway Company [1918] 2 KB 251
Director General, Department of Education v United Voice WA [2013] WASCA 287
Douglas v Cicirello [2006] WASCA 226
Earle Cameron (Industrial) Pty Ltd v Comprador Properties Pty Ltd (1985) 3 BPR 97,235
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Equus Financial Services Ltd v Beagle Holdings Pty Ltd [2002] WASCA 273
Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498
Gemini Energy and Minerals Pty Ltd v Luff [2017] WASC 190
GIGA Investments Pty Ltd (in administration); Ex parte Ferguson (1995) 58 FCR 106
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623
Lockrey v Historic Houses Trust of New South Wales [2012] NSWCA 249
Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509
Lustre Hosiery Ltd v York [1935] HCA 71; (1935) 54 CLR 134
Mackay v Dick (1881) 6 App Cas 251
Malec v JC Hutton Pty Ltd (No 2) (1990) 169 CLR 638
Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571
Monk v Australia & New Zealand Banking Group Ltd (1994) 34 NSWLR 148
Ninelen Pty Ltd v Interim Advance Corporation Pty Ltd [2011] WASC 107
Nullagine Investments Pty Ltd v The Western Australian Club Inc (1993) 177 CLR 635
Opera House Investment Pty Ltd v Devon Buildings Pty Ltd [1936] HCA 14; (1936) 55 CLR 110
Peregrine Systems Ltd v Steria Ltd [2005] EWCA Civ 239
Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537
Poulton v The Commonwealth (1953) 89 CLR 540
Primewest (Mandurah)Pty Ltd v Ryom Pty Ltd [2014] WASCA 28
Reid v Moreland Timber Co Pty Ltd (1946) 73 CLR 1
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2004] NSWSC 1041; (2004) 220 ALR 267
Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568
Secured Income Real Estate (Australia) Ltd v St Martins Investment Pty Ltd [1979] HCA 51; (1979) 144 CLR 596
Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332
Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245
Terrell v Mabie Todd & Co Ltd (1952) 69 RPC 234
Thundelarra Ltd v Richmond [No 2] [2013] WASC 392
Trendtex Trading Corporation v Credit Suisse [1982] AC 679
Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (in liq) (1936) 54 CLR 361
WorkCover Queensland v AMACA Pty Ltd [2012] QCA 240
Table of Contents
Summary..................................................................................................................................... 6
The Agreement........................................................................................................................... 7
Issues........................................................................................................................................ 10
Witnesses.................................................................................................................................. 13
Facts.......................................................................................................................................... 14
The Tenements..................................................................................................................... 14
Completion under the Agreement........................................................................................ 14
NSL's capital raising............................................................................................................. 15
The timing of the grant of EPCA 2336................................................................................ 15
After settlement - 2011.................................................................................................... 17
Steps in 2012.................................................................................................................... 18
Steps in 2013.................................................................................................................... 22
Mardigan People's Exploration Agreement - EPC 2337...................................................... 25
Payment of the fourth tranche.............................................................................................. 27
A false issue.......................................................................................................................... 28
No unfettered access............................................................................................................. 32
Financial position to perform............................................................................................... 34
Proceedings issued................................................................................................................ 35
Deed of assignment of debt: 21 August 2015..................................................................... 36
Issue 1....................................................................................................................................... 39
Express terms........................................................................................................................ 39
Implied terms........................................................................................................................ 39
Issue 2....................................................................................................................................... 43
Issue 3....................................................................................................................................... 43
Issue 4....................................................................................................................................... 44
Issue 5....................................................................................................................................... 44
Issue 6....................................................................................................................................... 44
Issue 7....................................................................................................................................... 49
Principles - loss of a chance................................................................................................. 49
The JORC Code.................................................................................................................... 50
Which edition applies........................................................................................................... 50
General background: JORC Inferred Resource and JORC Indicated Resource................. 52
'A minimum of $500,000'..................................................................................................... 55
The experts........................................................................................................................... 56
Mr Biggs............................................................................................................................... 57
Review of historical exploration data for the Tenements................................................. 57
Coal seams and thickness based on adjoining tenements and other results..................... 57
JORC Assumptions.......................................................................................................... 58
Resource risk analysis...................................................................................................... 59
Reasonable prospects........................................................................................................ 59
Hypothetical drilling programme..................................................................................... 60
Mr Biggs' conclusion........................................................................................................ 60
Mr Biggs' role with NSL and International Coal............................................................. 60
Rejection of the Biggs Report and opinion...................................................................... 60
Mr Biggs bought shares in NSL....................................................................................... 61
The Independent Geologist's Report contained an extraordinary error............................ 63
Overstatement of coal seam thickness.............................................................................. 65
Coal seams, the petroleum wells and the cartoon............................................................ 67
Expert Report of Mr Biggs not a report of a competent expert........................................ 69
Reasonable prospects........................................................................................................ 70
Evidentiary issue: NSL documents and International Coal.................................................. 70
Mr Arnott.............................................................................................................................. 71
Mr Arnott's opinion.......................................................................................................... 71
East Energy and Coal Bank.............................................................................................. 75
International Coal............................................................................................................. 77
Other tenements................................................................................................................ 80
Moreton Resources........................................................................................................... 81
Allegation that Glencore mothballed Wandoan Project................................................... 81
Assessment of Mr Arnott's evidence................................................................................ 81
Drilling estimates.................................................................................................................. 82
JORC Code........................................................................................................................... 83
Conclusion............................................................................................................................ 83
Issue 8....................................................................................................................................... 86
Preliminary matters.......................................................................................................... 86
No debt following termination......................................................................................... 86
Trendtex - no commercial interest.................................................................................... 87
No assignment of property rights..................................................................................... 89Determination................................................................................................................... 90
Issue known prior to trial.................................................................................................. 90
Outcome................................................................................................................................... 90
Schedule 1................................................................................................................................ 92
Schedule 2.............................................................................................................................. 104
BANKS-SMITH J:
Summary
In June 2011, Birmanie Nominees Pty Ltd (Birmanie) owned the applications for exploration permits for coal (EPCs) and associated rights relating to four tenements (Tenements) covering some 2,585 square kilometres in the Eromanga Basin in Central Queensland.
By a tenement acquisition agreement dated 15 June 2011 (Agreement), Birmanie sold the assets to NSL Consolidated Ltd (NSL). Payment was by four tranches (which were paid), with potential fifth and sixth tranches payable on establishment by NSL of Joint Ore Reserves Committee (JORC) Inferred or Indicated coal resources of at least 500 million tonnes or 250 million tonnes respectively across all or any of the Tenements. The reference to establishing JORC Inferred or Indicated Resources is a reference to inferring such resources in accordance with the JORC Code, being the Australasian Code of Reporting of Exploration Result, Minerals Resources and Ores Reserves. The JORC Code sets minimum standards for public reporting relating to exploration.
NSL needed to secure unfettered access to the Tenements in order to commence drilling. Under the Agreement it was then obliged to incur a minimum $500,000 spend on drilling. It is not in issue that in this case without drilling it is not possible to establish JORC Inferred or Indicated coal resources.[1]
[1] ts 624; exhibit 9 [104]; exhibit 12, page 2.
NSL says despite its efforts it did not obtain unfettered access. Coal Hub Pty Ltd (Coal Hub) claims that NSL engineered a delay in obtaining unfettered access. NSL did not conduct a drilling programme. Birmanie alleged NSL repudiated the Agreement and Birmanie accepted the repudiation and terminated the Agreement by issue of the writ and by the statement of claim. Accordingly, on Coal Hub's case the Agreement was terminated on at the latest 23 March 2015.
By these proceedings Birmanie sought damages, including for the loss of the opportunity to receive the further payments.[2]
[2] Coal Hub's claim for specific performance was abandoned at trial.
NSL says that as it did not obtain unfettered access, it had no obligation to undertake drilling and in any event, it would not have established Inferred or Indicated coal resources of 500 or 250 million tonnes respectively. Accordingly, it says that even if it breached the Agreement (which it denies) there is no loss. NSL's case proceeded on the basis that as there was no repudiatory conduct on its part, there has been no valid termination and the Agreement remains on foot. It continues to hold the Tenements.[3]
[3] Defendant's opening submissions [74]; defendant's closing submissions [6], [436], [549]; ts 1224, 1244, 1227.
Birmanie later assigned its interests in the litigation to the current plaintiff, Coal Hub. The validity of that assignment is in issue.
The Agreement
Relevant terms of the Sale Agreement are as follows:
2.1Conditions
The obligations of the Parties to complete the sale and purchase of the Assets are subject to and conditional upon:
(a)the Purchaser completing due diligence on the Tenements to its sole and absolute satisfaction; and
(b)as at the Settlement Date, the Tenements which are granted (if any) being in Good Standing, full force and effect and free of Encumbrances.
2.2Benefit of Conditions
The conditions in clause 2.1 are for the exclusive benefit of the Purchaser and may only be waived by the Purchaser (by notice in writing to the Vendor), in its absolute discretion.
2.3Best Efforts
Each Party must use their best efforts and co-operate with the other Parties to procure the satisfaction of the conditions precedent set out in clause 2.1 in a timely manner.
...
4.CONSIDERATION
4.1Consideration
The Consideration payable by the Purchaser to the Vendor (or its nominee) is:
(a)the payment of $50,000 contemporaneously with the execution of this Agreement;
(b)the payment of $150,000 on or before 5pm (Perth time) on 22 June 2011;
(c)the payment of $100,000 at Settlement;
(d)the payment of $200,000 and the issue of the Consideration Securities on the date that the last of the Tenements is granted;
(e)the payment of $1.25 million on establishment of a JORC Inferred Resource of coal of at least 500 million tonnes across any or all of the four Tenements; and
(f)the payment of $1.25 million on establishment of a JORC Indicated Resource of coal of at least 250 million tonnes across any or all of the four tenements.
4.2Non-refundable payments
In the event that the Purchaser does not pay to the Vendor any payment required by clauses 4.1(a) or 4.1(b), the Vendor may write to the Purchaser confirming default under this Agreement (Default Notice). If the relevant payment remains unpaid for a further 3 Business Days after the Vendor has sent the Default Notice, the Vendor may then elect to terminate this Agreement and, after any such termination, the Purchaser shall forfeit any payments that have been made to the Vendor prior to that date, with the parties having no other recourse to each other in respect of the default.
4.3Exploration by the Purchaser
The Purchaser covenants to spend a minimum of $500,000 on drilling the Tenements over the 12 months immediately following the date that the Purchaser has unfettered access to commence drilling on all of the Tenements (i.e. all of the Tenements have been granted and the Purchaser has received all Native title, cultural heritage and landowner access approvals).
...
5.3Obligations After the Settlement Date
After Settlement:
(a)the Purchaser must make the payments and issue the Consideration Securities as contemplated by clauses 4.1(d), 4.1(e) and 4.1 (f); and
...
8.2Transfer of title for Tenements that are Applications
...
(b)Following Settlement, the Purchaser shall at its own cost be responsible for pursuing the grant of the application.
(b)The Vendor shall, at the cost of the Purchaser, provide any reasonable assistance that the Purchaser may request with respect to the application.
...
11.FURTHER ASSISTANCE
11.1Vendor to do all reasonable acts
Subject to the due performance of the Purchaser's obligations under this Agreement, the Vendor shall execute all such transfers, assurances, declarations and notices and do all such acts and things as the Purchaser may deem necessary to effectually vest the beneficial and legal title in the Assets in the Purchaser free from encumbrances and enable the Purchaser to have the full benefit of this Agreement.
...
14.DEFAULT BY EITHER PARTY
Subject to clause 4.2, if any of the Parties (Defaulting Party) shall make default in the due observance or performance of any of its obligations under this Agreement the observance or performance of which is or becomes essential and such default shall continue for 14 days after the receipt of a notice in writing from the other Party (Non Defaulting Party) to remedy the default then the Non Defaulting Party may, without further notice to the Defaulting Party:
(a)rescind this Agreement and be entitled to such damages as to which the Non Defaulting Party would be entitled at common law or in equity; and/or
(b)sue the Defaulting Party for specific performance.
…
18.FURTHER ASSURANCE
Each Party shall sign, execute and do all deeds, acts, documents and things as may reasonably be required by the other Party to effectively carry out and give effect to the terms and intentions of this Agreement.
...
22.4Time
Time shall be of the essence in this Agreement in all respects.
Issues
The issues arising for my determination were identified as follows.
Issue 1
Whether on a proper construction of cl 4.1(e), cl 4.1(f), cl 4.3, cl 5.3(a), cl 8.2(b), cl 18 and cl 22.4 or alternatively as a term implied at law, NSL was obliged to use its reasonable endeavours to:
(a)negotiate and obtain all relevant Native Title, cultural heritage and land access approvals in a timely manner;
(b)comply with statutory requirements or administrative directives in respect of the Tenements in a timely manner;
(c)commence and continue a drilling program in a timely manner following the grant of the Tenements and obtaining Native Title, cultural heritage and land access approvals;
(d)spend a minimum of $500,000 on drilling over the 12 months immediately following the date NSL obtained unfettered access to commence drilling on all Tenements;
(e)take reasonable and necessary steps to achieve the commercial objectives of the agreement in a timely manner; and
(f)progress and secure the grant of the EPCAs in a timely manner from the date of the Agreement.
Issue 2
Whether NSL breached the alleged obligations in pars (a), (b), (e) and (f) of the first issue, by failing or neglecting to obtain the grant of EPCA 2336 at or around the same time as EPCA 2198, 2337 and 2338.
Issue 3
Whether on the proper construction of cl 4.3, NSL obtained unfettered access to commence drilling the Tenements from 26 November 2013.
Issue 4
Whether NSL breached the alleged obligations in pars (c), (d) and (e) of the first issue, and whether it repudiated the Agreement, by failing or neglecting to:
(a)commence and continue a drilling program in a timely manner following 26 November 2013;
(b)spend a minimum of $500,000 on drilling over the 12 months immediately following 26 November 2013; and
(c)take reasonable and necessary steps to achieve the commercial objectives of the Agreement in a timely manner following 26 November 2013.
Issue 5
If the fourth issue is decided in favour of Coal Hub, whether NSL is obliged to pay both the Fifth Tranche and the Sixth Tranche.
Issue 6
If NSL never had unfettered access and was not obliged to commence drilling, whether NSL breached express or allegedly implied terms of the Agreement, and whether it repudiated the Agreement, by failing or neglecting to use reasonable endeavours to:
(a)obtain the grant of EPCA 2336 at or around the same time as EPCA 2198, 2337 and 2338, or, alternatively, in a timely manner from the date of the Agreement;
(b)do all things necessary to obtain unfettered access within the meaning of cl 4.3 by 26 November 2013, or, alternatively, in a timely manner from the date of the Agreement; and
(c)take reasonable and necessary steps to achieve the commercial objectives of the Agreement in a timely manner from the date of the Agreement.
Issue 7
Whether, by reason of breach or repudiation of the Agreement (if established), Birmanie suffered loss and damage in:
(a)the loss of the payment of the Fifth and Sixth Tranches upon the establishment of the respective minimum specified JORC Resource; or
(b)the loss of a chance or opportunity to receive those payments upon the establishment of the respective minimum specified JORC Resource.
Material questions to be resolved in order to resolve the issue of loss and damage are:
(a)whether, on a proper construction of the Agreement, the 2004 or 2012 JORC Code applied for the purposes of cl 4.1(e) and (f), and when each applied;
(b)whether, on a proper construction of cl 4.3, NSL was obliged:
(i)to spend a minimum of, but no more than, $500,000 on drilling the Tenements (over the 12 months following such unfettered access); or
(ii)to spend at least $500,000, and so much more than $500,000 as was reasonably required to obtain sufficient geological evidence to determine whether or not it was required to pay the Fifth Tranche and the Sixth Tranche;
(c)whether NSL would have spent only, and no more than, $500,000 on drilling (over the 12 months following such unfettered access);
(d)whether JORC Code compliant coal resources equal to or greater than the minimum amount necessary to trigger the respective liabilities under cl 4.1(e) and (f) would not have been established, based on exploration by NSL that satisfied the minimum expenditure requirements in cl 4.3 or any expenditure that exceeded those minimum requirements;
(e)whether the chance of establishing either or both of those minimum coal Resource tonnages was negligible; and
(f)if the chance of establishing either or both of those minimum coal Resource tonnages was not negligible, the amount of damages.
Issue 8
Whether, the assignment is in respect of a bare right to litigate and invalid as offending the rules of champerty or maintenance by reason of the absence of a genuine commercial interest.
Witnesses
Coal Hub's main lay witness was Clive Triplett, a director of Birmanie. Some of his evidence was clearly embellished and tailored to advance what he considered to be Coal Hub's interests. However, he did make some appropriate concessions. Examples are identified in the reasons. I do not consider he was dishonest but nor was he frank. To the extent there are conflicts as between his evidence of events and that of NSL's lay witness, Cedric Goode, I prefer to rely on the documentary evidence and the evidence of Mr Goode. I have made particular determinations to that effect in the reasons but it is also the position more generally.
All of Coal Hub's other lay witnesses gave evidence in a straightforward and honest manner and I accept their evidence. Jim Lang is a senior economist, working with TradeData. He gave impartial evidence about export commodity prices and volumes, some of it on unduly short notice. He was an impressive witness.
Eden Hodson is a tenement manager. She acted on behalf of Birmanie and to a more limited extent, for NSL. She was not cross‑examined.
Matthew Bull managed a drilling programme for International Coal in 2011 and 2012. It was his first experience with coal. His evidence was given impartially and objectively: ultimately it was not of any particular significance in determining the proceedings.
Veronica Jumeaux was the solicitor who dealt with a particular deed of assignment: she was not called and there was no issue with her evidence.
Coal Hub also called one expert witness, Mr Mark Biggs. I found him to be an unsatisfactory witness and out of his depth. I deal with this further below.
As mentioned, NSL called Mr Goode. He gave evidence in a defensive but responsive manner. Ultimately, I have accepted his evidence on matters that are central to the proceedings. There was some evidence that caused me some concern but it did not change my reasoning. For example, I do not consider all of his correspondence with third parties was entirely candid, but nor was it dishonest. I have noted such matters below.
NSL's expert witness was Mr Arnott. I have accepted his evidence. I deal with my reasons in detail below.
Facts
The Tenements
The Tenements are referred to by their government permit application numbers as EPC 2198, EPC 2336, EPC 2337 and EPC 2338. The applications for the permits are referred to as EPCA 2198, EPCA 2336, EPCA 2337 and EPCA 2338 respectively. Three of the Tenements are contiguous: EPC 2336, EPC 2338 and EPC 2337, listed from north to south. The fourth, EPC 2198, is separate and to the east. Regrettably, the scale of the area is such that it is not possible to incorporate into these reasons a useful map.
In geological terms, the Tenements are within the Eromanga Basin. They are located over layers of different aged sedimentary rocks, but the target for exploration purposes are two underlying formations, being the Winton Formation, and beneath that the Mackunda Formation.
Completion under the Agreement
On 16 June 2011, NSL announced to the ASX that the parties had reached a conditional agreement.[4] On 23 June 2011, NSL announced that it had completed legal due diligence over the Tenements and had found no significant legal issues.[5]
[4] TB 7.
[5] TB 9.
On 10 July 2011, Birmanie executed a letter of authority empowering NSL to deal with any government agency or other entity on behalf of Birmanie to manage all matters related to the grant of the Tenements and their transfer to NSL. According to NSL's solicitors, there could be no assignment of EPCAs until a grant was made and accordingly Birmanie at all material times during the application process was identified as the applicant for the grants.[6]
[6] TB 11.
Settlement took place on 15 July 2011, and NSL announced the settlement to the ASX on 18 July 2011.[7] The ASX announcement referred to a technical due diligence report undertaken by Mr Biggs of the Moultrie Group.
NSL's capital raising
[7] TB 12.
On 29 July 2011, NSL initiated a capital raising process for $4.3 million, which was completed on 15 September 2011. The announcement to the ASX stated:[8]
The Company intends to use the funds raised to support the development of the Kurnool Beneficiation Strategy which will process low grade iron ore from the existing Kuja and Mangal iron ore mines in Kurnool (Andhra Pradesh, India), plus take an additional off-take supply from the significant low grade iron mines in the Cuddpah basin which is currently unusable by these mine owners.
In addition, funds will be applied towards exploration of NSL's recently acquired Queensland coal exploration permits (when granted). Work has already commenced on the requirements for expediting the granting of the Queensland exploration permits for coal and front ending native title and land access negotiations. These four EPC applications in Queensland … are uncontested.
[8] TB 13.
On 15 September 2011, NSL announced that it had completed its capital raising.[9] The announcement quoted Mr Goode, who stated that NSL would use the funds to develop an iron ore beneficiation plant in India, and that:
Proceeds will also be applied to further expedite NSL's permitting and approval process [for the Tenements].
The timing of the grant of EPCA 2336
[9] TB 19.
The EPCs were granted on the following dates:[10]
[10] TB 45; TB 55; TB 59; TB 84.
EPC Lodged Granted Period (approximately) 2198 30.8.2010 2.8.2012 1 year 11 months 2338 17.1.2011 22.10.2012 1 year 9 months 2337 17.1.2011 21.11.2012 1 year 10 months 2336 17.1.2011 26.11.2013 2 years 10 months
Coal Hub does not complain about the length of time to the grant of the EPCs for EPC 2198, EPC 2338 or EPC 2337, but only EPC 2336. The additional year has attracted Coal Hub's criticism.
At a general level, there would seem to be no rule of thumb for the time it takes for an EPC to be granted. Ms Hodson prepared a spreadsheet which records EPCs and the grant date for a range of tenements in an area surrounding the Tenements.[11] The following examples lifted from the spreadsheet were put to Mr Triplett in cross‑examination:[12]
[11] TB 107.
[12] ts 267 ‑ 269; defendant's closing submissions [146].
EPC
Applicant
Lodged
Granted
Period (approximately)
1125
RMA Energy Ltd
23.1.2007
18.2.2010
3 years 1 month
1127
RMA Energy Ltd
23.1.2007
19.2.2010
3 years 1 month
1128
RMA Energy Ltd
23.1.2007
19.2.2010
3 years 1 month
1942
RMA Energy Ltd
28.9.2009
14.1.2013
3 years 3.5 months
2296
Coal Face Resources P/L
10.12.2010
4.11.2013
2 years 11 months
2297
Coal Face Resources P/L
10.12.2010
5.11.2013
2 years 11 months
2298
Coal Face Resources P/L
10.12.2010
28.11.2013
2 years 11.5 months
2484
Coal Face Resources P/L
7.4.2011
16.9.2013
2 years 5 months
2485
Coal Face Resources P/L
7.4.2011
16.9.2013
2 years 5 months
2510
Jems Exploration P/L
21.4.2011
19.7.2012
1 year 2 months
2544
Jems Exploration P/L
17.5.2011
8.4.2013
1 year 10 months
2577
Jems Exploration P/L
24.5.2011
19.7.2012
1 year 1 month
2693
Geomex Natural Resources P/L
25.7.2011
11.2.2014
2 years 6 months
2819
Mark Mining and Resources P/L
27.9.2011
11.2.2013
1 year 4.5 months
Mr Triplett's evidence initially was to the effect that, based on his experience, if an applicant were actively working on an application for an EPC in Queensland it would normally take six to eight months from the time of application to the time of grant. When taken to the above information in cross‑examination, he conceded that there is no standard time for a grant, that there are different procedures that might apply, that it is the Department's decision (a reference to the Queensland Mines Department) and whilst some applications are expedited, some take longer.[13]
[13] ts 269 ‑ 270.
NSL's conduct is to be viewed against that backdrop.
It is necessary to consider NSL's conduct with respect to EPCA 2336 over the relevant 2 year 10 month period. This also involves some consideration of the steps undertaken during that time with respect to the three other EPCAs.
After an EPCA is lodged, an applicant must comply with procedures in various areas, including Native Title. The process commenced by NSL required it to first pay for notice of the proposed grant to be advertised. If there is no objection, the application may be granted with Native Title protection conditions. If there is an objection, it is open to the parties to negotiate a non‑confidential s 31 agreement (a reference to s 31 of the Native Title Act1993 (Cth)) and execute an ancillary agreement with Native Title holders including a cultural heritage management strategy.[14]
[14] Defendant's closing submissions [203].
According to Mr Goode, it was NSL's preference to attempt to negotiate s 31 agreements rather than proceed by acceptance of the Native Title protection conditions because the former involves greater involvement with the community.[15]
[15] Exhibit 48 [68].
There were two relevant groups with which NSL needed to deal: the Bidjara People and the Mardigan People.
After settlement - 2011
On around 15 June 2011, Mr Goode instructed a law firm in Queensland, McCullough Robertson, to act on NSL's behalf and liaise with the Department, including working with the Department to fast track the grant of the four EPCs to seek to have all four granted within 12 months.[16]
[16] Exhibit 48 [39].
In June 2011 and July 2011 NSL arranged with Birmanie to obtain the appropriate authorities to act on Birmanie's behalf and provided them to the Department.[17]
[17] TB 8; TB 10; TB 11.
In around August 2011, the Bidjara People signed an authority to Mr Greg Phillott to execute documents on their behalf relevant to Native Title protection conditions (it is limited to execution of those specific types of documents).[18]
[18] TB 16.
On 19 October 2011, the Department issued notices of the proposed grant of EPC 2198 to particular interested parties, including the Native Title Tribunal and the Bidjara People's lawyers.[19]
Steps in 2012
[19] TB 21 ‑ TB 23.
On 13 February 2012 McCullough Robertson wrote to the Department enclosing cheques for advertising in relation to EPCAs 2336, 2337 and 2338.[20] The notices were advertised by the Department on 21 March 2012.[21]
[20] TB 31.
[21] TB 33.
The position was slightly different with EPCA 2198. On 26 March 2012 the Department wrote to Birmanie and NSL notifying them that as no objections were lodged by Native Title parties, EPCA 2198 could proceed to grant with Native Title protection conditions (or a s 31 deed). It also requested an amount for financial assurance and the first year rent.[22] On the same day, the authorised representative of the Bidjara People wrote to the Department asking that prior to the grant of EPC 2198, the Department obtain an undertaking from the applicant that it meet with the Bidjara People with a view to achieving a cultural heritage agreement.
[22] TB 34.
On 1 May 2012, McCullough Robertson emailed the Department, saying that they were attending a meeting with the Bidjara People where there may be a possibility of having s 31 deeds for each of EPCs 2198, 2336, 2337 and 2338 executed. McCullough Robertson asked if the s 31 deeds could be issued.[23]
[23] Exhibit 54 [2.3].
On 2 May 2012 the Department provided s 31 deeds and noted that EPC 2336 appears to overlap the Mardigan People's claim.[24] That was an error on the Department's part. EPC 2336 did not overlap the Mardigan People's claim. It was EPC 2337 that overlapped both the Bidjara People's claim and the Mardigan People's claim. The parties to the respective deeds were therefore incorrect.[25]
[24] Exhibit 54 [2.3].
[25] TB 128; TB 129.
Between May and July 2012, the State of Queensland, Birmanie and representatives of the Bidjara People executed the s 31 deed for EPC 2198.[26] An ancillary agreement was also executed by NSL Coal Pty Ltd (a subsidiary of NSL[27]) and representatives of the Bidjara People.[28]
[26] TB 41; exhibit 48 [34].
[27] TB 119; exhibit 48 [53] ‑ [55].
[28] STB 39B; exhibit 48 [34].
On 30 May 2012, Mr Goode reported to the Board of NSL that he had received all Native Title notices, had met with 16 Native Title parties and received their signatures, and was speaking to geological providers to obtain costing for budget purposes.[29]
[29] STB 39A.
It appears that by 4 June 2012 the incorrect s 31 deed for EPC 2336 had been executed by Birmanie and the Bidjara People.[30]
[30] Exhibit 54 [2.3].
NSL made an announcement to the ASX on 13 June 2012 in which it incorrectly said that EPC 2337 had a completed s 31 deed and associated agreement relating to Native Title and cultural heritage.[31]
[31] TB 40; exhibit 48 [38].
On 22 June 2012, McCullough Robertson emailed the Department informing it of the error regarding the s 31 deeds for EPCs 2336 and 2337 and asked for the deeds to be re‑issued.[32]
[32] Exhibit 54 [2.3].
The Department re‑issued the correct s 31 deeds to McCullough Robertson on 25 June 2012, stating, 'Can you please make sure the incorrect deeds are not accidentally circulated'.[33] The replacement deed was otherwise identical to that which had been executed.
[33] Exhibit 54 [2.3].
Around the same time (May 2012 to June 2012), Mr Goode made contact with Mr Biggs about coal exploration planning.[34]
[34] Exhibit 51.
On 24 July 2012 NSL wrote to the Department enclosing cheques for the financial assurance and first year rent for EPC 2198.[35]
[35] TB 42.
On 1 August 2012 the Mines Department undertook an internal 'grant process control/approval' for EPCA 2198.[36]
[36] TB 44.
On 2 August 2012 the Queensland Minister for Natural Resources and Mines granted EPC 2198.[37]
[37] TB 45; exhibit 48 [42].
Between May and August 2012, the s 31 deed for EPC 2338 was executed by the State of Queensland, Birmanie and various representatives of the Bidjara People.[38]
[38] TB 46; exhibit 48 [36].
On 21 August 2012 the Department wrote to Birmanie and NSL notifying them that as no objections were lodged by relevant Native Title parties, EPCAs 2336 and 2338 could proceed to grant with Native Title protection conditions, requesting $2,500 for financial assurance (covering EPCs 2336, 2337 and 2338) and the first year rent for each tenement. The letter noted that alternatively, if they were obtaining a s 31 deed, 'do not accept the conditions mentioned above and please advise the Department that you are negotiating an agreement'.[39]
[39] TB 48; exhibit 48 [43].
On 27 August 2012, Mr Goode wrote to the Department in respect of EPC 2338, enclosing a cheque for $2,500 for financial assurance and a cheque for rent for the first year of the term of EPC 2338.[40]
[40] TB 18.
On 3 September 2012, Mr Goode wrote to the Department in respect of EPC 2336, stating that NSL was then in discussions with the Bidjara People to finalise a s 31 deed. He requested more time to finalise arrangements with the Bidjara People and said he would advise further in that regard.[41]
[41] TB 49; exhibit 48 [44].
Coal Hub contends the statement was false and that there was no evidence that negotiations were underway, but the statement has to be viewed in the context of the Department's letter of 21 August 2012 in which it in effect invited information about any s 31 deed.
The Mardigan People lodged an objection to EPCA 2337.[42] Subsequently, McCullough Robertson and the Queensland South Native Title Services (QSNTS) on behalf of the Mardigan People began negotiating a s 31 deed, ancillary agreement and cultural heritage management strategy.
[42] TB 50 ‑ TB 52; exhibit 48 [45] ‑ [47].
QSNTS indicated it would take some weeks before the Mardigan People could execute any agreements.[43] Accordingly, it was agreed that the Mardigan People would withdraw their objection to EPCA 2337 on the basis that NSL would, in due course, enter into an ancillary agreement and so EPC 2337 could be granted subject to the Native Title protection conditions.[44] The ancillary agreement later became the exploration agreement and is discussed further below. The Mardigan People did not provide the executed exploration agreement until July 2013.[45]
[43] TB 52; exhibit 48 [45] ‑ [47].
[44] TB 51 ‑ TB 52; exhibit 48 [45] ‑ [47].
[45] STB 67A.
On 22 October 2012, the Queensland Minister for Natural Resources and Mines granted EPC 2338.[46]
[46] TB 55; exhibit 48 [48].
On 23 October 2012, Mr Goode wrote to the Department in respect of EPC 2337, enclosing a cheque for rent for the first year of the term and accepted the proposed conditions of grant.[47]
[47] TB 56.
On 14 November 2012 the Department undertook the internal grant process approval for EPCA 2337.[48]
[48] TB 58.
On 21 November 2012 the Minister granted EPC 2337.[49]
Steps in 2013
[49] TB 59; exhibit 48 [49].
On 20 March 2013 Birmanie wrote to NSL requesting an update concerning the progress and alleged delay in the grant of EPCA 2336.[50] Birmanie alleged that, based on a 'tenure application status tracking', rent was outstanding and that according to its tenement manager's assessment, the grant should have been made in September 2012. It alleged that NSL might be in breach of the Agreement. In fact the relevant 'tenure application status tracking' described the status of the application as follows:
Technical assessment, environmental assessment and native title searches have been completed, Department issued proposal to holder requesting commencement of native title process (if applicable) or payment of rent, financial assurance and acceptance of conditions to proceed.
[50] TB 61.
Rent was noted as now due. In short, the tracking reflected the Department's letter of 21 August 2012.
On 2 April 2013 NSL replied to Birmanie's letter setting out the content of the Department's 21 August 2012 letter and its 3 September 2012 response, noting that the s 31 deed had not yet been fully executed and stating that its solicitors had been instructed to finalise the execution.
By email of 10 June 2013 Birmanie requested a further update on progress and copies of all relevant correspondence.[51]
[51] TB 66.
By email of 24 July 2013 to the Department, McCullough Robertson noted that NSL and the Bidjara People were settling arrangements to have the s 31 deed finalised and requested EPC 2336 not be granted subject to Native Title protection conditions in the interim.
Replacement s 31 deeds for EPCA 2336 (including in mark‑up) were sent to the Bidjara People's lawyers (Creevey Russell) on 31 July 2013.[52]
[52] Exhibit 54 [2.3].
On 2 August 2013 Creevey Russell emailed McCullough Robertson saying his clients would be prepared to sign a further s 31 deed provided he reviewed it and explained it to them, and raising the question of payment of their legal costs.[53]
[53] Exhibit 54 [2.3].
On 5 August 2013 McCullough Robertson informed Creevey Russell that NSL would contribute $1,000 to the legal costs of reviewing the amended deed.[54]
[54] Exhibit 54 [2.3].
On 9 August 2013 McCullough Robertson followed up on execution with Creevey Russell.[55]
[55] Exhibit 54 [2.3].
By covering letter of 22 August 2013 Creevey Russell returned the executed s 31 deeds for EPC 2336 and noted the absence of three signatures; one person could not be located, one was incapacitated and one had died.[56]
[56] Exhibit 54 [2.3].
On 23 August 2013 McCullough Robertson emailed Creevey Russell confirming receipt.[57]
[57] Exhibit 54 [2.3].
On 30 August 2013 lawyers Culshaw Miller (Perth), who appear to have acted for Birmanie, sent a letter to NSL setting out various options it understood might be available to procure the grant of EPC 2336 in the absence of all signatures on a s 31 deed, including stating that it could procure the grant by accepting the Native Title protection conditions or by applying to the native Title Tribunal for a consent determination.[58]
[58] STB 70A.
On 3 October 2013 the Department wrote to NSL and Birmanie notifying them that EPC 2336 was ready to be granted, requested payment of the first year rent and acceptance of the proposed conditions of grant by, in effect, 1 November 2013.[59]
[59] TB 72; STB 73A.232; exhibit 48 [57].
On 23 October 2013 Mr Goode on behalf of NSL wrote to the Department stating:[60]
NSL and the Bidjara People agreed to pursue the negotiation of a section 31 Native Title Act 1993 deed (Section 31 Deed) and ancillary agreement, rather than have EPC 2336 proceed to grant with the native title protection conditions.
NSL and the Bidjara People have agreed to the terms of the Section 31 Deed and ancillary agreement and the parties are currently in the process of finalising the execution of the Section 31 Deed.
Through McCullough Robertson, we have received an email from Chris Rawlings, Project Officer, Native Title Services, dated 22 October 2013. This email states that:
'...I advise that if signed section 31 deeds are not received by the Department within 20 days of the date of this email, the native title process will be considered completed and the Department's recommendation will be that the above EPC be granted subject to the NTPCs.'
This is a great fall-back as it allows the EPC to proceed, and it gives us until 11 November 2013 (being the date 20 days from 22 October) to provide the executed deed if the native title parties are able to arrange signing. As a result, NSL is unable to accept the EPC terms and conditions until then (as they will be dictated by whether or not the executed deed is available).
[60] TB 78; STB 75A; exhibit 48 [62].
Mr Goode also sought an extension for payment of rent until the end of November 2013.
Coal Hub challenges Mr Goode's honesty as to this letter. It says the only outstanding signature was NSL's and there is no evidence of difficulties in procuring signatures from the Bidjara People. As noted, the letter from Creevey Russell dated 22 August 2013 had said that three signatures had not been obtained and whilst it is true that there is no evidence of ongoing steps being undertaken to secure the remaining signatures (for the two living members), I am not persuaded Mr Goode's statement was dishonest.[61]
[61] Exhibit 54 [2.3].
On 30 October 2013, the Department allowed an extension until 11 November 2013 for the rent and acceptance of the conditions of grant, to 'bring it in line with the [Native Title] requirements'.[62] It rejected any further extension of time for payment of rent past 11 November 2013.
[62] TB 78; exhibit 48 [66].
On 11 November 2013 Mr Goode wrote to the Department enclosing a cheque for rent for the first year of the term and accepted the Native Title protection conditions for EPC 2336.[63]
[63] TB 80; exhibit 48 [67].
On 26 November 2013, the Department undertook its internal grant approval process for EPCA 2336.[64]
[64] TB 83.
On 26 November 2013, the Minister granted EPC 2336.[65]
[65] TB 84; exhibit 48 [69].
NSL announced the grant to the ASX on 19 December 2013.[66] On 23 December 2013, NSL again referred to the grant of EPC 2336 in an ASX announcement, attaching background and technical information on the Tenements.[67] It made a similar announcement on 15 January 2014. The January announcement indicated that NSL had not yet commenced drilling on the Tenements and was 'reviewing a potential future work program' that 'will potentially involve geophysical surveys'.[68]
[66] TB 85.
[67] TB 87.
[68] TB 88.
It is clear from the above chronology that work was being undertaken with respect to the other EPCAs until about November 2012. Work regarding EPCA 2336 was certainly ongoing from July 2012 onwards. McCullough Robertson were not simply responding to matters but followed up execution on behalf of NSL.
However, there is a gap between around November 2012 and July 2013 where there is no evidence of work being undertaken to secure execution of the s 31 deed. There is a degree of exaggeration in the correspondence that suggests 'negotiations' are going on around execution of the deed.
Whether or not such conduct comprised a breach of the Agreement is the subject of Issue 6.
Mardigan People's Exploration Agreement - EPC 2337
This issue is of particular relevance to the question of whether and when NSL obtained unfettered access to the Tenements, as referred to in cl 4.3 of the Agreement.
As noted above, the Mardigan People lodged an objection to the grant of EPC 2337. They agreed to withdraw it on the basis that the parties would enter into an ancillary agreement and a cultural heritage management strategy. They withdrew their objection to the grant in anticipation of those matters on 20 September 2012.[69]
[69] TB 51; TB 52.
Consistent with the terms upon which the Mardigan People's objection to the grant of EPC 2337 was withdrawn, McCullough Robertson drafted an ancillary agreement between NSL Coal Pty Limited (a wholly owned subsidiary of NSL), Birmanie and the Mardigan People (Exploration Agreement).[70] It included by way of schedule a cultural heritage management strategy. The drafts were provided to QSNTS, on behalf of the Mardigan People, by 17 September 2012.[71]
[70] TB 67; TB 121.
[71] TB 51.
The Exploration Agreement executed by the Mardigan People was returned to McCullough Robertson on 2 July 2013, and provided to Mr Goode sometime after 25 July 2013.[72]
[72] STB 67A, 67B; Exhibit 48 [52].
Mr Triplett says that he received a copy of the Exploration Agreement by email from Tim Lee, the Financial Controller of NSL, on 2 October 2013.[73] The only explanation given for the delay in forwarding the documents to Birmanie was that Mr Goode was spending a lot of time in India between June 2013 and October 2013.[74]
[73] Exhibit 3 [99].
[74] ts 1140.
On 4 October 2013, Mr Triplett emailed Mr Lee to request the inclusion of an indemnity by NSL in favour of Birmanie.[75] He said that his lawyers had advised it may be prudent to include a clause whereby NSL indemnifies Birmanie for any loss or damage it suffers as a result of NSL not complying with its obligations. He asked for such a clause to be included, 'for review and execution soonest'.
[75] TB 71.
Mr Triplett sent a follow up email to Mr Lee on 14 October 2013. Mr Goode replied to Mr Triplett on 22 October 2013, saying that '[n]ow Pete Wall is back on deck I will work through this with him to get something to you'.[76] Mr Wall is a solicitor.
[76] TB 75.
Mr Triplett says that he did not receive any further correspondence from anyone on behalf of NSL in relation to the indemnity clause. Nobody expressed to him that NSL could not include an indemnity clause in the Exploration Agreement.[77]
[77] Exhibit 3 [109] ‑ [110].
On 20 January 2014, QSNTS followed up the whereabouts of the executed Exploration Agreement with McCullough Robertson, requesting it urgently. It asked for confirmation that NSL had not undertaken any exploration on EPC 2337.[78]
[78] TB 89.
McCullough Robertson forwarded QSNTS's email to Mr Goode, who replied to QSNTS later on 20 January 2014. Mr Goode said that the delay in executing the Exploration Agreement had been caused by his travel commitments and a number of commercial issues and that he was arranging to have the agreement executed at the end of January 2014. He confirmed that NSL had not undertaken any exploration activities on EPC 2337. He said he would attend to execution as a priority upon his return from travelling: he made no reference to the indemnity issue.[79]
[79] TB 89.
Mr Goode says that Mr Triplett never sent him a proposed indemnity clause or explained the reason for the clause. He also says that Mr Triplett did not mention the clause in three meetings that they had during June and August 2014.[80] There is some documentary evidence that is consistent with the fact that there were meetings in at least August 2014 to discuss various matters relating to the Tenements.[81] Mr Triplett originally accepted that there were meetings in late 2013 and 2014, but then diluted his evidence, saying he could not recall meetings in 2014. Mr Triplett also said that he recalled unfettered access being referred to at a meeting.[82] I consider it more likely than not that there were such meetings and accept Mr Goode's evidence in that regard, taking into account the documentary evidence.
[80] Exhibit 48 [63] ‑ [64]; ts 1151.
[81] TB 95; TB 93A.
[82] ts 270 ‑ 272.
In the end, Mr Triplett accepted that there was inaction on both sides as to the indemnity clause.[83] Mr Goode did not pursue it as requested by Birmanie. Birmanie did not follow it up. Presumably QSNTS took some comfort from the confirmation that NSL had not undertaken any exploration on EPC 2337 and did not pursue the executed Exploration Agreement again.
[83] ts 276.
Again, whether NSL's conduct in this regard comprised a breach of the Agreement is the subject of Issue 6.
Payment of the fourth tranche
The grant of EPC 2336 triggered the obligation on the part of NSL to pay the fourth tranche of the consideration under cl 4.1(d) of the Agreement on 26 November 2013. It failed to do so. Birmanie issued a statutory demand under the Corporations Act2001 (Cth).
On 21 December 2013 the parties entered into an agreement whereby Birmanie agreed to withdraw the statutory demand and NSL agreed (relevantly) to make the payment of $200,000 by three instalments: $40,000 by 31 December 2013; $40,000 by 31 March 2014; and $120,000 by 30 June 2014. A Deed of Settlement was entered into (Deed of Settlement).[84]
[84] TB 86.
In June 2014, the parties and Subiaco Capital Pty Ltd (Subiaco Capital) agreed to further vary the terms of payment of the fourth tranche.
Subiaco Capital is an entity that appears to have provided consulting services to Birmanie. Its role is discussed further below in the context of the assignment issue. At all material times its directors were Jason Osborne and Troy Warrick.
The parties agreed to a schedule of payments whereby $100,000 was to be paid by 30 June 2014 and $70,000 was to be paid by 31 August 2014.[85]
[85] TB 93.
According to Mr Triplett, on 30 June 2014 NSL paid Birmanie $120,000 and on 31 August 2014 it paid Birmanie $70,000.[86] It does not seem to be in issue that although there is some discrepancy in those numbers, the fourth tranche was paid by 31 August 2014.
A false issue
[86] Exhibit 3 [119], [121].
According to an email of 1 September 2014, Mr Goode and Mr Osborne of Subiaco Capital (and there may have been others) met during the last week of August 2014.[87] The Agreement must have been discussed. I infer this because Mr Osborne writes as follows:
Hi Cedric
This is the clause (below) in the sale agreement that we discussed last week. It's important that NSL plans for this drilling now as it will need to be completed this calendar year. We could possibly assist with some further capital raising support if required. There is a good article in the Australian today saying coal prices are about to rebound and noting that Whitehaven have put on 35% in the last month.
(b)[sic]the payment of $1.25 million on establishment of a JORC Inferred Resource of coal at least 500 million tonnes across any or all of the four Tenements (with the Purchaser) covenanting to a minimum spend of $500,000 on drilling the Tenements over the first 12 months following the date of grant of the last of the Tenements); and
(c)the payment of $1.25 million on establishment of a JORC Indicated Resource of coal of at least 250 million tonnes across any or all of the four Tenements. (original emphasis)
[87] TB 95.
It is immediately apparent that this email misrepresents NSL's obligation under the Agreement. The trigger for the 12 months to run for the spend obligation was not the date of the last grant of the EPCs (26 November 2013) but unfettered access to commence drilling on all of the Tenements.
The email, not unsurprisingly, triggered a debate about the obligations under the Agreement.
The most relevant of the emails are as follows:[88]
[88] TB 96.
(a)1 September 2014 - Mr Osborne to Mr Goode (copied to Mr Triplett and Mr Warrick):
Thanks Cedric.
We just double checked the exact date that the tenure will need to be drilled with a minimum expenditure of $500k and it's the 23/12/14. Given that this is entering into the wet season we would strongly suggest that NSL start the tender process for drilling now with a view of meeting its obligation soon.
(b)1 October 2014 - Mr Warrick to Mr Goode:
'Without Prejudice'
Hi Cedric
Thank you for meeting with me last week in regards to NSL obligation on their coal tenements which were purchased from Birmanie Nominees. As per our conversation Birmanie Nominees is interested in helping NSL out by potentially extending the time on drilling which is due to expire on the 23/12/14. In doing so Birmanie would require a compensation fee for the delay in drilling.
Could you please advise us at your soonest if this is of interest to NSL?
(c)17 October 2014 - Mr Goode to Mr Warrick:
'Without Prejudice'
Hi Troy thanks for your email. Please find below the excerpt of the clause Jason has eluded [sic] to in an earlier email and the basis for your discussion and email with me.
As at this time NSL do not have unfettered access, therefore the obligation in the above has not yet arisen.
NSL intend to honour the agreement in accordance with its terms.
(d)1 December 2014 - Mr Warrick to Mr Goode:
Dear Cedric
Further to my emails on 17/10/14 and 3/11/2014 [seeking response] we have not received a reply confirming what has been done to meet your obligation to spend $500k on the Birmanie tenure by the 23/12/14.
If this work is not carried out it will severely prejudice our position to earn the milestone payments in the sales agreement. We would like to remind you that you raised $4.3 million on 29/7/11 and stated that 'funds will be applied towards exploration on NSL's recently acquired Queensland coal exploration permits (when granted). Work has already commenced on the requirements for expediting the granting of the Queensland exploration permits for coal and front ending native title and land access negotiations. These four EPC applications in Queensland (EPCA 2336, 2337, 2338, 2198) are uncontested'.
As mentioned previously we are keen to resolve this matter amicably and move forward, however if we do not hear from you prior to the 23/12/14 we will be initiating legal proceedings without further notice.
(e)1 December 2014 - Mr Goode to Mr Warrick:
'Without Prejudice'
Hi Troy thanks for your email. Please find below the excerpt of the clause Jason has eluded to in an earlier email on the basis for your discussion and email with me.
As at this time NSL do not have unfettered access, therefore the obligation in the above has not yet arisen.
NSL intend to honour the agreement in accordance with its terms.
(f)1 December 2014 - Mr Warrick to Mr Goode:
Thank you Cedric, again can you please inform us what steps NSL have undertaken to gain land access. We have been active in Queensland in the past with coal assets and have not encountered problems gaining land access.
(g)2 December 2014 - Mr Goode to Mr Warrick:
'Without Prejudice'
Hi Troy thanks for your email. I would like to clarify what I think is the perception that 23/12/14 is the date whereby NSL covenants to spend $500,000 on drilling on the tenements.
As per the excerpt of the clause below, the covenant to spend $500,000 in 12 months commences immediately following the date that NSL have unfettered access to all tenements, not the date of grant of the last tenement.
As of now NSL do not have unfettered access on all tenements, therefore this covenant as of date has not commenced.
Please find below the excerpt of the clause Jason has eluded to in an earlier email and the basis for your discussion and email with me.
NSL intended to honour the agreement in accordance with its terms.
Happy to catch up and discuss.
(h)2 December 2014 - Mr Warrick to Mr Goode:
Thank you Cedric, we would be happy to meet with you at your earliest convenience, however before we meet once again I'll ask you the question what steps NSL have undertaken to gain unfettered access?
Clearly, NSL did not engage on the question of what steps had been taken to obtain unfettered access. However, on Birmanie's part (or at least via Subiaco Capital), there were further misstatements and what appears to be an opportunistic attempt at seeking a further payment. Even by its first email of 1 December 2014 it maintained the position that the drilling spend was due by 23 December 2014 and was threatening proceedings and had suggested an additional payment for any extension of time. Mr Triplett in cross‑examination still appeared to be operating under a false assumption that unfettered access was not relevant.[89]
[89] ts 273.
Further, the suggestion that the ASX announcement was to the effect that all moneys raised were to be applied to the Tenements misquotes the announcement (copied above) which clearly indicates the funds raised were also for the purpose of NSL's Indian project.
NSL's pleaded case relies on the failure of Birmanie to execute the Exploration Agreement as the fact that delayed unfettered access.
On the above facts, NSL took no steps to progress securing unfettered access from about January 2014.
Whether or not such failure comprises a breach of any obligation is considered below, but it is relevant to note the following:
(a)from January 2014 the parties were in communication about the payment of the fourth tranche and that was not finalised until August 2014;
(b)from September 2014 the parties were in communication about Subiaco Capital's assertion that the second obligation on drilling expired in December 2014; and
(c)NSL was indicating a contrary view from October 2014 and stating that it intended to comply with the terms of the Agreement.
No unfettered access
NSL asserts it did not have unfettered access to any of the Tenements at the time the writ was issued.
It pleads that as a matter of construction or by implication NSL would not have unfettered access for drilling until after it had access approvals from easement holders, environmental authorities, overlapping authority to prospect holders, petroleum and mining lease holders and approvals for an exploration program of works from the Department in relation to all Tenements.
Ms Hodson acknowledged that permission would be required from landowners to access the EPCs. Ms Eden collected a list of the landowners, which ran to some 24 different entities or family groups.[90] Ms Eden had dealt personally with only two of those landowners and was able to say she obtained consent for one and entered into a compensation agreement with the other to secure access.[91]
[90] TB 108.
[91] ts 340.
Ms Hodson explained that the process for landowner approval involves issuing notices of entry to landowners 10 days prior to entry for non‑ground disturbing work, and then a notice of intention to negotiate if ground‑disturbing work is involved. It is then necessary to enter into an agreement with the land owner in order to drill, and that process sometimes involves payment. If agreement cannot be reached, it is possible to go to mediation in an attempt to resolve access issues.
During cross‑examination, Mr Goode raised a number of issues (albeit at a high level of generality) that he said were relevant to access.
The exchange was as follows:
To get unfettered access, even if you have a native title agreement, you still, then, need to go through a process with the native title proponents to get access and so that process includes a notification process and they have a period of time, whereby they can object, still. They have a period of time where you can agree for them to - for you and them to meet and then you go through an investigation process to - collectively together to determine if there's any cultural significance in areas that you're going to - to disturb. So it's too simplistic to say, just because you've got native title over a tenement, that you have access, from a native title perspective, because there's all these other requirements for unfettered access, that you can, actually, get on there and start exploring.
The ancillary agreement had annexed to it a cultural heritage agreement. The culture heritage agreement gave a structure of how you obtained approval.
What steps did you take with the Bidjara People to obtain their approval for access, for exploratory work?---We did not have unfettered across all tenements. So - - -
Why - what was it (indistinct) - - -?---The company took the view that - and, hence, my recollection of the - of the clause in the agreement. The company took the view that we would have to determine, at a point of time in the future, where was the best place for us to drill, and it didn't, necessarily, mean that it was on the first tenement that was granted. This was a block of - clearly, was part of a package of tenements, and the company would form the view, once we had the ability to then have all the tenements, have unfettered access on them because we may not be able to get access to certain areas that we like for - that we think are prospective for whatever reason.
Mr Goode also said NSL wished to obtain Native Title access before then moving to the next step of identifying and obtaining landowner access approvals: he did not want to spend time and money on steps further down the process until there was Native Title access.[92]
Financial position to perform
[92] ts 1147.
Coal Hub alleges that NSL did not meet its expenditure obligations with respect to the EPCs. Each of the grants of the EPCs included a programme for desktop reviews and drilling programmes over a five year period from the date of the grant.
Mr Goode gave evidence that NSL met all expenditure obligations for the EPCs, either before the issue of the writ as a result of the ability to aggregate expenditure over a three year period, by extension arrangements with the Department and then by deferral due to the issue of the writ. Mr Goode said:
Has NSL met the minimum expenditure requirements on these tenements?---So the minimum expenditure - so, interestingly
- so EPC 2198 was granted before a change in legislation. So Eden Hodson from UTM - I think she was a witness of yours - she applied for us to have the special exemption, as she recommended to us all people were doing at that point in time to be able to aggregate your first three
years of expenditure, so that you didn't have to spend that amount on year 1. That amount on year 2. That amount on year 3. You could actually aggregate all of that at any point in time in year 3. And then - so we applied for 2198 on that basis. The other three tenements were granted.
Sorry. You made an application. Was that approved?---Yes.
There was documentary evidence comprising correspondence with the Department that was consistent with Mr Goode's evidence. For example, there was a request made by Ms Hodson on behalf of NSL for a deferral of rental payments. The Department took some six months to respond (and its internal communications suggested payment extension requests from EPC grantees were not uncommon at that time) permitting extensions until the end of February 2015, by which time these proceedings had been instituted.[93]
[93] TB 64; TB 101; TB 102.
Coal Hub has not satisfied me to the requisite standard of proof that NSL had failed to protect its interest in the Tenements or in some manner failed to comply with conditions of the grant. It is artificial to consider the original terms of the grants when clearly indulgences and variations were agreed as between NSL and the Department. To the extent it was alleged that NSL had also failed to comply with environmental approvals, it was not established that at the time of the writ there was any subsisting default. Mr Goode asserted the environmental approvals were in good standing at that time. There is no credible evidence to the contrary.
In general Coal Hub attacked the financial standing of NSL and questioned its ability to meet its financial commitments. There is no doubt that NSL negotiated extended payment plans for certain obligations, including the fourth tranche and rental relating to the EPCs. The evidence suggests it was under financial pressure in late 2013 and 2014, although it was considering a range of options.[94] It was an area where Mr Goode's evidence was at some levels troubling. For example, his assertion that it was good business sense to renegotiate debts rather than pay them in accordance with agreed terms would be concerning (and properly so) to all parties who enter into contracts with NSL in good faith, who enter into them on the understanding that NSL intends to comply with its commitments and who plan their own businesses accordingly. A contract should not be treated simply as a starting point from which one party intends to negotiate a different position. However, in the end such evidence did not affect my determination: Mr Goode's evidence was that NSL was in a position to pay its debts at the time of the alleged termination taking into account options open to it and Coal Hub did not establish otherwise.[95]
Proceedings issued
[94] See Minutes of Board meetings as tendered.
[95] For example TB 104A; TB 104B: resolution that reasonable basis for the company to continue as going concern.
Birmanie did not issue any default notice to NSL under cl 14 of the Agreement.
It commenced these proceedings by writ issued 13 February 2015 and, if not by the writ then at least by the statement of claim dated 23 March 2015 asserted that NSL breached and repudiated the Agreement. Birmanie pleaded that it accepted the repudiation and it sued for damages.
Coal Hub was substituted as plaintiff in the proceedings on 2 October 2015. There was no determination or concession as to the role of Coal Hub or any interest it may have at the time of its joinder under O 18 r 7(2) of the Rules of the Supreme Court 1971 (WA).
According to the solicitors for Coal Hub, each of Mr Osborne, Mr Warrick and Subiaco Capital gave an undertaking at the time of the substitution to be jointly and severally liable in respect of costs orders made against Coal Hub.
Deed of assignment of debt: 21 August 2015
On about 21 August 2015, Birmanie, Subiaco Capital and Coal Hub executed a deed of assignment of debt, with an effective date of 3 July 2105 (Deed of Assignment).[96]
[96] TB 109.
Relevantly, the Deed of Assignment contains the following by way of Recitals:
Background
A.Birmanie is owed the Debt by NSL Consolidated.
B.Birmanie has commenced the Proceedings against NSL Consolidated to recover the Debt.
C.Subiaco Capital and Birmanie entered into the Litigation Funding Agreement pursuant to which they agreed to share the Legal Costs of the Proceedings in the Agreed Proportion.
D.Birmanie has not paid its Agreed Proportion of the Legal Costs of the Proceedings in accordance with the Litigation Funding Agreement and has accrued the Legal Costs Debt to Subiaco Capital.
D.[sic]Under the Consulting Agreement Birmanie owes Subiaco Capital the Consulting Fee, which it has not paid, thereby accruing the Consulting Fee Debt.
E.In satisfaction of the Legal Costs Debt and the Consulting Fee Debt Birmanie has agreed to assign all its legal and beneficial right, title and interest in the Debt to Coal Hub in accordance with this Deed, and Subiaco Capital has agreed to accept that assignment.
Relevant terms are:
Consulting
Agreement
means the agreement between Birmanie and Subiaco Capital pursuant to which Subiaco Capital agreed to provide consulting, corporate, administration and other services to Birmanie in relation to the transactions contemplated in the Tenement Acquisition Fee, in exchange for the Consulting Fee.
Consulting Fee
means the consulting fee payable under the Consulting Agreement, being 50% of the consideration payable to Birmanie by NSL Consolidated under the Tenement Acquisition Agreement.
Debt
means all indebtedness (present or future, actual or contingent) of NSL Consolidated to Birmanie (or, after the Assignment Date, to Coal Hub) under the Tenement Acquisition Agreement or as a result of the determination of, or any costs order made in favour of Birmanie under, the Proceedings.
...
Litigation
Funding
Agreement
Means the agreement made between Subiaco Capital and Birmanie on 3 July 2015.
2.1Agreement to Assign
(a)Birmanie assigns all its right, title and interest in the Debt and the Tenement Acquisition Agreement to Coal Hub with effect from the Assignment Date including, without limitation, the right to exercise the full benefit and advantage of all rights, powers, authorities and discretions conferred upon or vested in Birmanie in relation to the Debt or under the Tenement Acquisition Agreement or any other document, agreement or arrangement giving rise to the Debt.
(b)Subiaco Capital acknowledges that the assignment of the Debt and the other rights pursuant to this Deed satisfies:
(i)the Legal Costs Debt; and
(ii)the Consulting Fee Debt.
(c)Coal Hub agrees to accept the assignment of the Debt.
Mr Goode says that NSL did not receive any notice of the assignment prior to 22 September 2015.[97]
[97] Exhibit 48 [76].
Veronica Jumeaux was the lawyer who drafted the Deed of Assignment and notice of assignment (Notice). She says that on about 28 August 2016, she posted the Notice to NSL at three addresses that were registered with ASIC for NSL at the time. The third address was also NSL's address for the purpose of giving notices under cl 17.2 of the Agreement. Ms Jumeaux says that on about 8 September 2015 the letters that she had sent to the first and second addresses were returned to her by Australia Post marked 'RTS'. The letter that she sent to the third address was not returned to her.[98]
[98] Exhibit 2 [14].
Nothing turns on the date of receipt of the Notice. I accept Ms Jumeaux's evidence that the Notice was sent in accordance with the terms of the Agreement on 28 August 2016.
The role of Subiaco Capital is best gleaned from the Recitals. Neither the Consulting Agreement nor Litigation Funding Agreement referred to in the Recitals were in evidence. The Consulting Agreement perhaps explains why Mr Warrick and Mr Osborne were parties to some of the correspondence with Mr Goode referred to above. Some of that correspondence also indicates Subiaco Capital may have offered to play some role in capital raisings on behalf of NSL. Neither Mr Osborne nor Mr Warrick gave evidence. Mr Triplett said when pressed under cross‑examination that they were his business partners.[99]
[99] ts 258.
There is no evidence of the role of Coal Hub save as assignee. A company search dated 2 June 2016 indicates that Mr Warrick and Mr Osborne are its directors.[100] The company search also indicates that two of its shareholders are BBD Custodians Pty Ltd and Red Marlin Pty Ltd. There is no evidence about those companies, save that each was nominated by Birmanie to receive certain 'consideration securities' from NSL as part of the consideration under the Deed of Settlement (for the fourth tranche). That is, NSL was directed to issue certain securities in accordance with Birmanie's nomination. There is no evidence that those shareholders have any connection with the subject matter of the proceedings. There is no evidence of any agreement to which it is a party apart from the Deed of Assignment itself.
[100] TB 3.
Issue 1
Before addressing whether terms are to be implied, it is necessary to consider how the express terms of the Agreement operate.
Express terms
There are two significant issues with the Agreement. The first is that it does not expressly oblige NSL to undertake drilling. It does not expressly oblige it to seek to establish or take steps to establish a JORC Inferred or Indicated Resource of coal.
The second issue is that the Agreement does not prescribe any time period in which either Birmanie or NSL were to secure the grants of the EPCs. Nor does it prescribe any time period by which unfettered access was to be obtained. There is no identifiable completion date.
The Agreement provides that once there is unfettered access, NSL must spend a minimum of $500,000 on a drilling programme within 12 months (cl 4.3). That is, once unfettered access is obtained there is a stipulated time period for performance. Therefore it can be accepted that time is of the essence as to that 12 months obligation.
The Agreement also contains an express further assurance clause that provides that each party shall sign, execute and do all deeds, acts, documents and things as may reasonably be required by the other party to effectively carry out and give effect to the terms and intentions of this Agreement (cl 18).
It also provides that time shall be of the essence in all respects (cl 24).
The best efforts obligation (cl 2.3) relates only to the conditions precedent.
Implied terms
Against that backdrop, one can understand why Coal Hub argues that terms that impose obligations on NSL are to be implied.
In my view, it is apparent on an objective reading of the Agreement that Birmanie had an interest in the drilling being undertaken because the drilling enhanced the prospect of JORC Inferred or Indicated Resources being established. Birmanie's potential to be paid the fifth and sixth tranches was therefore enhanced by a drilling programme. Otherwise, inclusion of the drilling obligation makes no sense as Birmanie would have no interest in the outcome.
However, it is necessary to carefully consider the terms Coal Hub asserts are to be implied. They are:
NSL was obliged to use its reasonable endeavours to:
(a)negotiate and obtain all relevant native title, cultural heritage and land access approvals in a timely manner;
(b)comply with statutory requirements or administrative directives in respect of the Tenements in a timely manner;
(c)commence and continue a drilling program in a timely manner following the grant of the Tenements and obtaining native title, cultural heritage and land access approvals;
(d)spend a minimum of $500,000 on drilling over the 12 months immediately following the date NSL obtained unfettered access to commence drilling on all Tenements;
(e)take reasonable and necessary steps to achieve the commercial objectives of the agreement in a timely manner;
(f)progress and secure the grant of the EPCAs in a timely manner from the date of the Agreement.
The principles for implication of terms are well known and set out in particular in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council.[101] For a term to be implied, the following conditions (which may overlap) must be satisfied: it must be reasonable and equitable; it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; it must be so obvious that 'it goes without saying'; it must be capable of clear expression; it must not contradict any express term of the contract.[102]
[101] BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266.
[102] BP Refinery (282 ‑ 283); Secured Income Real Estate (Australia) Ltd v St Martins Investment Pty Ltd[1979] HCA 51; (1979) 144 CLR 596, 605 ‑ 606; Director General, Department of Education v United Voice WA [2013] WASCA 287 [89].
A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proved Ore Reserve or under certain circumstances to a Probable Ore Reserve.
Mineralisation may be classified as a Measured Mineral Resource when the nature, quality, amount and distribution of data are such as to leave no reasonable doubt, in the opinion of the Competent Person determining the Mineral Resource, that the tonnage and grade of the mineralisation can be estimated to within close limits, and that any variation from the estimate would be unlikely to significantly affect potential economic viability.
This category requires a high level of confidence in, and understanding of, the geological properties and controls of the mineral deposit.
Confidence in the estimate is sufficient to allow application of Modifying Factors within a technical and economic study as defined in Clauses 37 to 40.
Depending upon the level of confidence in the various Modifying Factors it may be converted to a Proved Ore Reserve (high confidence in Modifying Factors), Probable Ore Reserve (some uncertainty in Modifying Factors) or may not be converted at all (low or no confidence in some of the Modifying Factors; or no plan to mine, eg pillars in an underground mine or outside economic pit limits).
24.The choice of the appropriate category of Mineral Resource depends upon the quantity, distribution and quality of data available and the level of confidence that attaches to those data. The appropriate Mineral Resource category must be determined by a Competent Person.
Mineral Resource classification is a matter for skilled judgement and a Competent Person should take into account those items in Table 1 that relate to confidence in Mineral Resource estimation.
In deciding between Measured Mineral Resources and Indicated Mineral Resources, Competent Persons may find it useful to consider, in addition to the phrases in the two definitions relating to geological and grade continuity in Clauses 22 and 23, the phrase in the guideline to the definition for Measured Mineral Resources: '... any variation from the estimate would be unlikely to significantly affect potential economic viability'.
In deciding between Indicated Mineral Resources and Inferred Mineral Resources, Competent Persons may wish to take into account, in addition to the phrases in the two definitions in Clauses 21 and 22 relating to geological and grade continuity, that part of the definition for Indicated Mineral Resources: 'sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit', which contrasts with the guideline to the definition for Inferred Mineral Resources: 'Confidence in the estimate of Inferred Mineral Resources is not sufficient to allow the results of the application of technical and economic parameters to be used for detailed planning in Pre-Feasibility (Clause 39) or Feasibility (Clause 40) Studies' and 'Caution should be exercised if Inferred Mineral Resources are used to support technical and economic studies such as Scoping Studies (refer to Clause 38)'.
The Competent Person should take into consideration issues of the style of mineralisation and cut-off grade when assessing geological and grade continuity for the purposes of classifying the resource.
Cut-off grades chosen for the estimation should be realistic in relation to the style of mineralisation and the anticipated mining and processing development options.
25.Mineral Resource estimates are not precise calculations, being dependent on the interpretation of limited information on the location, shape and continuity of the occurrence and on the available sampling results. Reporting of tonnage and grade figures should reflect the relative uncertainty of the estimate by rounding off to appropriately significant figures and, in the case of Inferred Mineral Resources, by qualification with terms such as 'approximately' and to emphasise the imprecise nature of a Mineral Resource, the final result should always be referred to as an estimate not a calculation.
In most situations, rounding to the second significant figure should be sufficient. For example 10,863,000 tonnes at 8.23 per cent should be stated as 11 million tonnes at 8.2 per cent. There will be occasions, however; where rounding to the first significant figure may be necessary in order to convey properly the uncertainties in estimation. This would usually be the case with Inferred Mineral Resources.
Competent Persons are encouraged, where appropriate, to discuss the relative accuracy and confidence level of the Mineral Resource estimates with consideration of at least sampling, analytical and estimation errors. The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnage. Where a statement of the relative accuracy and confidence level is not possible, a qualitative discussion of the uncertainties should be provided in its place (refer to Table 1).
26.Public Reports of Mineral Resources must specify one or more of the categories of 'Inferred', 'Indicated' and 'Measured'. Categories must not be reported in a combined form unless details for the individual categories are also provided. Mineral Resources must not be reported in terms of contained metal or mineral content unless corresponding tonnages and grades are also presented.
Mineral Resources must not be aggregated with Ore Reserves.
Public Reporting of tonnages and grades outside the categories covered by the Code is not permitted unless the situation is covered by Clause 17, and then only in strict accordance with the requirements of that Clause.
Estimates of tonnage and grade outside of the categories covered by the Code may be useful for a company in its internal calculations and evaluation processes, but their inclusion in Public Reports is not permitted.
27.In a Public Report of a Mineral Resource for a significant project for the first time, or when those estimates have materially changed from when they were last reported, a brief summary of the information in relevant sections of Table 1 must be provided or, if a particular criterion is not relevant or material, a disclosure that it is not relevant or material and a brief explanation of why this is the case must be provided.
For a significant project, when Mineral Resource estimates are first Publicly Reported or when a material change occurs (including classification changes), there is an increased need for transparent discussion of the basis for the new Mineral Resource estimate in order that investors are appropriately informed of the basis for the changes. As noted in Clauses 4 and 5 the benchmark of Materiality is that which an investor or their advisers would reasonably expect to see explicit comment on from the Competent Person, thus the reporting of all relevant criteria in Table 1 on an 'if not, why not' basis is required.
The Code specifies reporting against relevant sections of Table 1 in this Clause. This may be satisfied by reporting against section 3 on the presumption that matters related to sections 1 and 2 will already have been included in a still current Public Report and this Report can be referenced. If this is not the case then these sections are also relevant and should be included in the Public Report.
The technical summary based against Table 1 criteria should be presented as an appendix to the Public Report.
Where there are as yet unresolved issues potentially impacting the reliability of, or confidence in, a statement of Mineral Resources (for example, poor sample recovery, poor repeatability of assay or laboratory results, limited information on bulk densities, etc) those unresolved issues should also be reported.
If there is doubt about what should be reported, it is better to err on the side of providing too much information rather than too little.
Uncertainties in any of the criteria listed in Table 1 that could lead to under- or over-statement of Mineral Resources should be disclosed.
Mineral Resource estimates are sometimes reported after adjustment from reconciliation with production data. Such adjustments should be clearly stated in a Public Report of Mineral Resources and the nature of the adjustment or modification described.
...
Reporting of Coal Resources and Reserves
42.Clauses 42 to 44 of the Code address matters that relate specifically to the Public Reporting of Coal Resources and Coal Reserves. Unless otherwise stated, Clauses 1 to 41 and Clause 51 of this Code (including Figure 1) apply. Table 1 should be considered when reporting on Coal Resources and Reserves.
For purposes of Public Reporting, the requirements for coal are those for other commodities with the replacement of terms such as 'mineral' by 'coal' and 'grade' by 'quality'.
For guidance on the estimation of Coal Resources and Reserves and on statutory reporting not primarily intended for providing information to the investing public, readers are referred to the 'Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves' or its successor document as published from time to time by the Coalfields Geology Council of New South Wales and the Queensland Resources Council. These guidelines do not override the provisions and intentions of the JORC Code for Public Reporting. Competent Persons should as always exercise their judgement in the application of these guidelines to ensure they are appropriate to the circumstances being reported. They may not be appropriate for use in all situations in Australia or overseas.
Because of its impact on planning and land use, governments may require estimates of inventory coal that are not constrained by short- to medium-term economic considerations. The JORC Code does not cover such estimates. Refer also to the guidelines to Clauses 6 and 20.
...
Table 1 Checklist of Assessment and Reporting Criteria
Table 1 is a checklist or reference for use by those preparing Public Reports on Exploration Results, Mineral Resources and Ore Reserves.
In the context of complying with the Principles of the Code, comment on the relevant sections of Table 1 should be provided on an 'if not, why not' basis within the Competent Person's documentation and must be provided where required according to the specific requirements of Clauses 19, 27 and 35 for significant projects in the Public Report. This is to ensure that it is clear to the investor whether items have been considered and deemed of low consequence or have yet to be addressed or resolved.
As always, relevance and Materiality are overriding principles that determine what information should be publicly reported and the Competent Person must provide sufficient comment on all matters that might materially affect a reader's understanding or interpretation of the results or estimates being reported. This is particularly important where inadequate or uncertain data affect the reliability of, or confidence in, a statement of Exploration Results or an estimate of Mineral Resources or Ore Reserves.
The order and grouping of criteria in Table 1 reflects the normal systematic approach to exploration and evaluation. Criteria in section 1 'Sampling Techniques and Data' apply to all succeeding sections. In the remainder of the table, criteria listed in preceding sections would often also apply and should be considered when estimating and reporting.
It is the responsibility of the Competent Person to consider all the criteria listed below and any additional criteria that should apply to the study of a particular project or operation. The relative importance of the criteria will vary with the particular project and the legal and economic conditions pertaining at the time of determination.
In some cases it will be appropriate for a Public Report to exclude some commercially sensitive information. A decision to exclude commercially sensitive information would be a decision for the company issuing the Public Report, and such a decision should be made in accordance with any relevant corporations regulations in that jurisdiction. For example, in Australia decisions to exclude commercially sensitive information need to be made in accordance with the Corporations Act 2001 and the ASX listing rules and guidance notes.
In cases where commercially sensitive information is excluded from a Public Report, the report should provide summary information (for example the methodology used to determine economic assumptions where the numerical value of those assumptions are commercially sensitive) and context for the purpose of informing investors or potential investors and their advisers.
...
TABLE 1
Section 3 Estimation and Reporting of Mineral Resources
(Criteria listed in section 1, and where relevant in section 2, also apply to this section.)
Criteria
Explanation
Database integrity
• Measures taken to ensure that data has not been corrupted by, for example, transcription or keying errors, between its initial collection and its use for Mineral Resource estimation purposes.
• Data validation procedures used.
Site visits
• Comment on any site visits undertaken by the Competent Person and the outcome of those visits.
• If no site visits have been undertaken indicate why this is the case.
Geological interpretation
• Confidence in (or conversely, the uncertainty of) the geological interpretation of the mineral deposit.
• Nature of the data used and of any assumptions made.
• The effect, if any, of alternative interpretations on Mineral Resource estimation.
• The use of geology in guiding and controlling Mineral Resource estimation.
• The factors affecting continuity both of grade and geology.
Dimensions
• The extent and variability of the Mineral Resource expressed as length (along strike or otherwise), plan width, and depth below surface to the upper and lower limits of the Mineral Resource.
Criteria
Explanation
Estimation and modelling techniques
• The nature and appropriateness of the estimation technique(s) applied and key assumptions, including treatment of extreme grade values, domaining, interpolation parameters and maximum distance of extrapolation from data points. If a computer assisted estimation method was chosen include a description of computer software and parameters used.
• The availability of check estimates, previous estimates and/or mine production records and whether the Mineral Resource estimate takes appropriate account of such data.
• The assumptions made regarding recovery of by-products.
• Estimation of deleterious elements or other non-grade variables of economic significance (eg sulphur for acid mine drainage characterisation).
• In the case of block model interpolation, the block size in relation to the average sample spacing and the search employed.
• Any assumptions behind modelling of selective mining units.
• Any assumptions about correlation between variables.
• Description of how the geological interpretation was used to control the resource estimates.
• Discussion of basis for using or not using grade cutting or capping.
• The process of validation, the checking process used, the comparison of model data to drill hole data, and use of reconciliation data if available.
Moisture
• Whether the tonnages are estimated on a dry basis or with natural moisture, and the method of determination of the moisture content.
Cut-off parameters
• The basis of the adopted cut-off grade(s) or quality parameters applied.
Mining factors or assumptions
• Assumptions made regarding possible mining methods, minimum mining dimensions and internal (or, if applicable, external) mining dilution. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential mining methods, but the assumptions made regarding mining methods and parameters when estimating Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the mining assumptions made.
Criteria
Explanation
Metallurgical factors or assumptions
• The basis for assumptions or predictions regarding metallurgical amenability. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential metallurgical methods, but the assumptions regarding metallurgical treatment processes and parameters made when reporting Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the metallurgical assumptions made.
Environmental factors or assumptions
• Assumptions made regarding possible waste and process residue disposal options. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider the potential environmental impacts of the mining and processing operation. While at this stage the determination of potential environmental impacts, particularly for a greenfields project, may not always be well advanced, the status of early consideration of these potential environmental impacts should be reported. Where these aspects have not been considered this should be reported with an explanation of the environmental assumptions made.
Bulk density
• Whether assumed or determined. If assumed, the basis for the assumptions. If determined, the method used, whether wet or dry, the frequency of the measurements, the nature, size and representativeness of the samples.
• The bulk density for bulk material must have been measured by methods that adequately account for void spaces (vugs, porosity, etc), moisture and differences between rock and alteration zones within the deposit.
• Discuss assumptions for bulk density estimates used in the evaluation process of the different materials.
Classification
• The basis for the classification of the Mineral Resources into varying confidence categories.
• Whether appropriate account has been taken of all relevant factors (ie relative confidence in tonnage/grade estimations, reliability of input data, confidence in continuity of geology and metal values, quality, quantity and distribution of the data).
• Whether the result appropriately reflects the Competent Person's view of the deposit.
Criteria
Explanation
Audits or reviews
• The results of any audits or reviews of Mineral Resource estimates.
Discussion of relative accuracy/ confidence
• Where appropriate a statement of the relative accuracy and confidence level in the Mineral Resource estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the resource within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors that could affect the relative accuracy and confidence of the estimate.
• The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used.
• These statements of relative accuracy and confidence of the estimate should be compared with production data, where available.
Schedule 2
AP 154C (Exhibit 47, Tab 20, pages 320 ‑ 321)
Although some thick intersections of coal have been made in two drilling programs, all the samples analysed have shown to be of poor quality, very low rank coal, with high ash, low volatile and poor specific energy values.
Interpretation of the environment of deposition of the coal seam horizons indicates that the seams are discontinuous laterally and multi-split. Both these features preclude systematic mining on a large scale. The coal apparently occurs in relatively small discontinuous deposits.
Accurate estimation of coal reserves in the area is impossible without further detailed drilling, which, considering the quality of the coal and the remoteness of the locality with respect to marks, is not warranted at this stage.
It is recommended that the Authority be relinquished forthwith.
AP 165C (Exhibit 45, Tab 84, pages 1227 ‑ 1228)
Although some thick intersections of coal had been made in the two drilling programs, all the samples analysed have shown to be poor quality, very low rank coal, with high ash, low volatile and poor specific energy values.
Interpretation of the environment of deposition of the coal seam horizons indicates that the seams are discontinuous laterally and multi-split. Both these features preclude systematic mining on a large scale. The coal apparently occurs in relatively small discontinuous deposits.
Accurate estimation of coal reserves in the area is impossible without further detailed drilling, which, considering the quality of the coal and the remoteness of the locality with respect to markets, is not warranted at this stage.
It is recommended that the Authority be relinquished forthwith.
AP 166C (Exhibit 47, Tab 22, pages 439 ‑ 440)
Within AP166C, areas of economic seam thickness are not expected to be large (3 to 5 square kilometres). Away from areas of optimum thickness:
•the coal seam splits or disappears
•the thickness of the coal-bearing horizon increases
•individual coal seam splits become thinner and in some cases disappear.
In a coal mining feasibility study the lateral continuity of seam thickness is of prime importance. It is likely that coal in this Authority will occur in nuclear deposits a few square kilometres in area. Several such deposits located relatively close together and containing good quality coal would be required to make this prospect economically viable. These parameters and the fact that the area is remote from utilisation centres and export ports indicate that there could be only very long term economic potential in the area.
Indicated coal properties are tabulated [and include ash of 43.52%, fixed carbon of 22.1% and specific energy of 10.782 kj/kg].
ATP 298C (Exhibit 45, Tab 77, page 1082)
Very thin coal and carbonaceous spans intersected in several rotary holes appear to be of little economic value. The thicker coal intersections from CPE C8 and C5 have interbedded stone bands and have been affected by Tertiary weathering. With the very low rank of the coal (sub-bituminous to lignitic) and thin occurrence, the coal is considered to have negligible economic potential.
…
Exploratory drilling and geological mapping within A to P 298C have indicated that the area holds negligible potential for delineating an economically exploitable coal deposit.
ATP 367C (Exhibit 45, Tab 73, pages 932 ‑ 933)
The coal intersections encountered in the chip holes were all less than 1m in thickness and comprise dull cannelloid coal.
…
Examination of the coal from the cored sections confirm the chip hole findings in that the coal mainly comprised a dull cannelloid type. In parts it was lignitic and rich in plant remains. Rare thin fusain layers were also noted and semi-bright bands up to 2cm thick were common. Some of the coal graded into carbonaceous mudstone to the base of the ply. Cleat formation in the coal was rare. Inter-ply material consisted of grey mudstone, often with a high proportion of coal laminae.
…
Winton coal, because of its fluvial to lacustrine depositional environment tended to form in localised depo-centres which were subjected to periodic flooding with accompanying floodwater scouring and deposition. This has resulted in the coal formed being irregularly developed and multi‑split, with abrupt variations in thickness over short lateral distances.
It was anticipated that the drilling programme would locate one or more of these depo-centres in which the aggregate thickness of the coal plies was sufficiently great to give an economically viable tonnage. This the programme failed to achieve. The coal intersections encountered in the drilling were less than 1 m thick and only in 3 boreholes were plies sufficiently close together to render their aggregate thickness of possible interest.
…
Furthermore, the coal quality and Fischer Assay data indicates the coal is sub bituminous with a poor oil yield, factors which would preclude its use as conversion and/or steaming coal within the near future.
…
It is unlikely that an economic deposit of conversion or steaming coal is present within the Authority. No further work is warranted and it is recommended that this A. to P. be relinquished.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MV
ASSOCIATE TO THE HONOURABLE CHIEF JUSTICE MARTIN
18 MAY 2018
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