Empire Resources Limited and Another v Raymond William Ashwin (dec) and Others on behalf of Wutha
[2018] NNTTA 27
•24 April 2018
NATIONAL NATIVE TITLE TRIBUNAL
Empire Resources Limited and Another v Raymond William Ashwin (dec) and Others on behalf of Wutha [2018] NNTTA 27 (24 April 2018)
Application No: | WF2017/0019 |
IN THE MATTER of the Native Title Act 1993 (Cth)
- and -
IN THE MATTER of an inquiry into a future act determination application
Raymond William Ashwin (dec) and Others on behalf of Wutha (WC1999/010)
(native title party)
- and -
Empire Resources Limited
(grantee party)
- and -
State of Western Australia
(Government party)
DECISION ON WHETHER THE TRIBUNAL HAS POWER TO CONDUCT AN INQUIRY
Tribunal: | Mr JR McNamara, Member |
Place: | Brisbane |
Date: | 24 April 2018 |
Catchwords: | Native title – future act – s 35 application for a determination – mining lease application M57/636 – jurisdiction – power – whether government party has negotiated in good faith – government party has negotiated in good faith – whether grantee party has negotiated in good faith – grantee party has negotiated in good faith – Tribunal does have power to proceed with future act determination inquiry |
Legislation: | Native Title Act 1993 (Cth) |
Cases: | Brownley v Western Australia [1999] FCA 1139 Drake Coal Pty Ltd, Byerwen Coal Pty Ltd /Grace Smallwood & Ors (Birri People)/Queensland [2012] NNTTA 9 (‘Drake Coal v Birri People’) Muccan Minerals Pty Ltd and Another v Taylor and Others on behalf of Njamal [2014] NNTTA 74 (‘Muccan v Njamal #1’) Muccan Minerals Pty Ltd and Another v Taylor and Others on behalf of Njamal [2016] NNTTA 28 (‘Muccan v Njamal #2’) Muccan Minerals Pty Ltd and Another v Allen and Others on behalf of Njamal [2018] NNTTA 24(‘Muccan v Njamal #3’) Placer (Granny Smith) Pty Ltd v Western Australia (1999) 163 FLR 87; [1999] NNTTA 361 Raymond Dann & Ors (Amangu People)/Western Australia/Empire Oil Company (WA) Limited [2006] NNTTA 153 (‘Amangu v Empire Oil’) Ward v Western Australia (1996) 69 FCR 208 Western Australia v Taylor (1996) 134 FLR 211 |
| Representative of the native title party: | Ron Harrington-Smith |
| Representative of the grantee party: | Tim Kavenagh, Kavenagh Legal |
| Representatives of the Government party: | Domnhall McCloskey, State Solicitor’s Office Faye Mitchell, Department of Mines, Industry Regulation and Safety |
REASONS FOR DETERMINATION
Introduction
This decision considers whether the Tribunal has power to conduct an inquiry into a future act determination application lodged by Empire Resources Limited (‘Empire’) for the grant of mining lease M57/636 (‘the proposed lease’). Empire lodged the application under s 35 of the Native Title Act 1993 (Cth)[1] and the President of the Tribunal appointed me to conduct the inquiry.
[1] Unless specified otherwise, all legislative references are to the Native Title Act 1993 (Cth) (‘the Act’).
The Wutha People (‘Wutha’) are a negotiation party in this matter because at all relevant times the proposed lease was and remains over land and waters the subject of their registered native title claim (see ss 29(2)(b)(i), 30(2) and 30A).
Wutha contend Empire and the State did not negotiate in good faith as required by s 31(1)(b). I must therefore consider whether Empire and the State did so negotiate before I can proceed to make a determination on the application. If I am not satisfied that Empire and/or the State negotiated in good faith with Wutha, then I must not make a determination (s 36(2)).[2] The Tribunal will not be entitled to deal with the application and the application will be dismissed (s 148(a)). If I am satisfied that both Empire and the State negotiated in good faith, then I must proceed to make a determination about the application (s 38).
[2] s 36(2) prohibits the arbitral body from making a determination if any negotiation party satisfies it that any other negotiation party (other than a native title party) did not negotiate in good faith as required by s 31(1)(b). The Act does not prevent the arbitral body from making its own enquiries (Ward v Western Australia 215–217).
Proceedings and submissions
On 21 December 2017, I convened a preliminary conference and Wutha alleged both Empire and the State failed to negotiate in good faith. Accordingly, I set directions requiring parties to lodge good faith submissions.
In accordance with my directions, Wutha provided a statement of contentions and supporting documents on 25 January 2018 (‘NTP contentions’ ‘NTP1–3’). Empire provided a statement of contentions on 1 February 2018 (‘GP contentions’), accompanied by the affidavit of David Ian Ross sworn 1 February 2018 with annexures (‘DIR affidavit’ ‘DIR1–31’). In his affidavit, Mr Ross states he is an Exploration Manager employed by Empire and is authorised to make the affidavit on Empire’s behalf. I accept Mr Ross has authority to give evidence on behalf of Empire in this matter. The State provided a statement of contentions with supporting documents on 2 February 2018 (which they subsequently amended on 1 March 2018) (‘GVP contentions’ ‘GVP1–4’). On 9 February 2018, Wutha provided a statement in reply (‘NTP reply’).
My directions required that by 22 February 2018, the parties were to lodge a statement of agreed issues and facts, including whether they agreed that I could decide the good faith issue on the papers or whether a hearing should take place. The following day, Empire and the State advised they had prepared a statement, but Wutha did not agree to it. They requested a listing hearing, which I convened on 1 March 2018.
At the listing hearing on 1 March 2018, I heard all parties’ submissions on whether I should hold a good faith hearing and/or allow further written submissions. After doing so, I gave Empire and the State leave until 15 March 2018 to respond to paragraphs 3, 5, 6, 8, 9 and 11 of Wutha’s statement in reply. I directed Wutha to provide further good faith contentions and supporting evidence limited to compensation issues by 15 March 2018, and I directed Empire and the State to reply by 29 March 2018.
On 1 March 2018, the parties lodged an agreed statement of facts. On 2 March 2018, Empire lodged their response to Wutha’s reply (‘GP 2 March reply’) and on 14 March 2018, the State lodged theirs (‘GVP 14 March reply’). On 14 March 2018, Wutha lodged their further contentions and supporting documents (‘NTP further contentions’ ‘NTPA–C’). On 20 March 2018 Empire lodged their reply (‘GP 20 March reply’) and on 26 March 2018 the State lodged theirs (‘GVP 26 March reply’).
Empire’s and the State’s objections to some material
Empire contend the report from Economic Consulting Services that Wutha attached to their further contentions is irrelevant. Further, both the State and Empire submit I should not consider particular information contained in Wutha’s further contentions regarding statements made during Tribunal s31(3) mediation because the information is privileged and that mediation is conducted on a confidential and without prejudice basis.
The economic report
At the listing hearing on 1 March 2018, it became apparent that, in their contentions, Wutha had not clearly expressed an allegation of bad faith relating to their economic advice; the parties understanding of that advice; and the role the advice played in negotiations (that Empire ‘knew all about’ particular circumstances relating to the negotiations). Accordingly, I made further directions for the allegation to be expanded upon and requested any contention, particularly where it concerned the state of mind of the grantee party or the government party to be to be supported by sworn evidence.
The economic report is attachment C to Wutha’s further contentions (filed in accordance with my further directions made at the listing hearing). It states that Economics Consulting Services prepared it for Wutha in September 2017. The fact that Wutha obtained an economic report is already noted in the parties’ correspondence. Wutha amended the draft agreements ‘payments’ and the ‘royalty’ and provided it to Empire (DIR26). However, there is no evidence that Wutha provided the report to Empire.
The report assesses Empire’s 6 July 2017 compensation offer (DIR16) against other West Australian agreements, and recommends Wutha seek a particular benefits package from Empire.
Empire submit that because Wutha did not provide any affidavit that attaches the economic report ‘there is no evidence of the state of mind … or the specialist’s advice’ (at [4]). They submit ‘where the Tribunal makes it clear that any evidence should be in affidavit form, any documents produced (for example, attached to contentions) should be disregarded or, alternatively, given no weight’ (at [6]).When Wutha lodged their further submissions, they did not make the allegation alluded to in the listing hearing (‘NTP further contentions’). Accordingly, there is no ‘state of mind’ allegation made out. It is however open to me under s 109 to consider the economic report, to the extent it is otherwise relevant.
Tribunal mediation outcomes
Tribunal records show Member Helen Shurven provided parties with s 31(3) mediation assistance and convened four mediation meetings between June and October 2017. As part of standard process, the Tribunal asks all parties in all s 31(3) mediations to agree to a mediation protocol. It outlines the Tribunal’s process, the expectations of the parties and notes that Tribunal staff will circulate a brief synopsis and agreed outcomes after each meeting (‘mediation outcomes’).
In their material, Wutha refer to the Tribunal’s ‘various mediation outcomes’ and in particular those of 29 June and 12 October 2017 (NTP reply at [3]; NTP further contentions at [8]). Empire and the State submit that I cannot consider the mediation outcomes because the mediation protocol (that Wutha, Empire and the State agreed to) provides that mediation is ‘conducted on a confidential and “without prejudice” basis’ (GP 2 March reply at [1]–[3]; GVP 14 March reply at [3]; GP 20 March reply at [10]).
I do not accept Empire and the State’s submission. The mediation protocol draws the parties attention to s 31(4)). S 31(4) prohibits the Tribunal from using or disclosing information that it has access to only because it provided s 31(3) mediation assistance, without the prior consent of the person who provided the information. However, it allows the Tribunal to do so for two purposes: (a) for providing the assistance; or (b) for establishing whether a negotiation party negotiated in good faith. Therefore, to the extent I consider them relevant, I will consider the ‘synopsis and outcomes’ document of mediation meetings prepared by the Tribunal.
Inquiry ‘on the papers’
I have considered whether the good faith issue can be adequately determined ‘on the papers’ without a hearing, using the material before me (s 151(2)(b)). I am satisfied it can be.
Issues for good faith
I will address the following issues in considering whether Empire negotiated in good faith with Wutha:
(a)Did Empire provide Wutha with sufficient information about the proposed lease? If not, did it hinder Wutha’s capacity to negotiate?
(b)Did Empire conduct itself with the genuine aim of reaching agreement with Wutha?
(c)Does Empire’s overall conduct meet the threshold for good faith?
I will address the following issues in considering whether the State negotiated in good faith with Wutha:
(a)What do Wutha allege?
(b)Does the State’s overall conduct meet the threshold for good faith?
Did Empire negotiate in good faith?
(a) Did Empire provide Wutha with sufficient information about the proposed lease? If not, did it hinder Wutha’s capacity to negotiate?
Failure to provide sufficient information about proposed activities can indicate a lack of good faith if it hampers the native title party’s ability to properly consider the effect of the future act on their registered native title rights and interests and hinders their capacity to negotiate (Brownley v Western Australia at [24]–[25] ‘Brownley Principle’). However, a grantee party can mitigate the effects of insufficient information if they attempt to address the native title party’s concerns in a draft agreement (Muccan v Njamal #1 at [51] and Muccan v Njamal #2 at [12] ‘Muccan Principle’).
Wutha contend that because ‘information on the works program and matters in relation to the activities on the proposed tenement were not provided in any detail’, Wutha could not make ‘an informed decision’ about the negotiations (NTP contentions at [15]). Citing various indicia from Western Australia v Taylor, Wutha contend Empire:
(a)failed to make representations or submissions about the proposed lease to the negotiation parties after receiving the State’s letter inviting submissions under s 31(1)(a) (at [40]);
(b)failed to inform the negotiation parties ‘of the impact of the work proposed on the Tenement’ (at [41]);
(c)failed to respond to Wutha’s request for information about Empire’s intended activities and the ‘financial structure of those activities’ (at [42]).
Referring to indicium from Western Australia v Taylor, Empire assert that a party has an obligation to make inquiry of another party if there is insufficient information to proceed in negotiations. Empire argue Wutha proceeded in the negotiations, did not make any such inquiry and the purpose of the indicium is to prevent what Wutha now contend (GP contentions at [7] and [12]).
Under s 31(1)(a) the ‘Government party must give all native title parties an opportunity to make submissions to it’ regarding each proposed future act. On 16 September 2016, the State requested Empire provide certain information ‘[to] enable the native title parties to make these [s 31(1)(a)] submissions’(GVP1). They list the information as: an outline of the proposed work programme (if available); copies of the company’s last annual report (if available); advice about whether Aboriginal heritage surveys are completed or proposed; company policies that might be relevant to native title parties; and a suitable map of the project area (if applicable). On 4 October 2016, Empire’s representative responded to the State’s letter via email and copied in Wutha’s representative Mr Ron Harrington-Smith:
Ron knows this area well and has a long relationship with Empire Resources so I personally think we are well beyond the Section 31 requirements of providing work programs, annual reports and heritage survey information. I have included Ron into this email. Could you please advise if the information is still required [NTP2]
In my view the State should have considered this response inadequate. Instead, their representative replied ‘I do not think it necessary to provide the submissions that we requested’ (NTP2). The native title party in the negotiations is Raymond William Ashwin (dec) and Others on behalf of Wutha. Despite any personal relationship between Empire’s representatives and Mr Harrington-Smith, their roles are as either employees or advocates for their respective parties. The presumed knowledge of the individual is irrelevant.
In their contentions, Empire assert they had no mining proposals to provide and they informed Wutha that it would be some time before they could submit a mining proposal to the State. They assert they advised Wutha that mining on the proposed lease would not be economically viable unless they could undertake mining in conjunction with deposits on other land and that Wutha made no complaint about the lack of information while negotiating (GP contentions at [12]). They also assert that sufficient information was available to Wutha; Empire’s annual reports are publically available on their website, as is ‘information about the land’, and they provided copies of the two heritage survey reports they commissioned over the underlying exploration licence which involved Wutha people (GP contentions at [10]). They support their assertions by evidence (DIR Affidavit at [5], [32], [35] and [36]).
Negotiations commenced on 2 September 2016 when Mr Harrington-Smith took the initiative and forwarded Wutha’s draft agreement to Mr Ross (DIR1). The draft agreement was entitled ‘Deferred Productive Mining Agreement’, which (as the title suggests) provided for the possibility (but not certainty) of mining operations on the proposed lease. It included clauses for a signing payment, an Aboriginal heritage protection agreement, liaison and information, and a general clause about ‘future negotiations’ which would occur after lodgement of a mining proposal. Further email exchanges discussed ‘main points’ which addressed the signing payment clause and the ‘future negotiations’ clause. The ‘main points’ contemplated what would happen ‘should mining operations commence’: a signing payment, an advanced ‘royalty’ payment on mining commencement, ongoing mining ‘royalty’, and Indigenous employment, training and enterprise opportunities in the mining operations. Between September 2016 and 11 July 2017, Mr Harrington-Smith and Mr Ross exchanged offers and counter offers on these ‘main points’ (DIR3, DIR6, DIR10, DIR16, DIR17). At that point, they had not reached agreement.
Conclusion
Applying the Brownley principle, there is no evidence to show that the lack of information about Empire’s proposed mining activities hampered Wutha’s capacity to negotiate. Applying the Muccan principle, at all relevant times, parties’ centred the negotiations on Wutha’s own deferred production agreement. It was a starting point for providing certainty in the event that mining activities should occur on the proposed lease. By using an agreement that Wutha proposed, I cannot conclude that Empire failed to mitigate the possible effects of insufficient information.
(b) Did Empire conduct itself with the genuine aim of reaching agreement with Wutha?
Empire’s intent to lodge s 35 application
Wutha contend Empire did not conduct itself with the genuine aim of obtaining Wutha’s agreement about the grant of the proposed lease as required by s 31. Rather, they submit that at ‘at all material times’ Empire negotiated with a view to making a s 35 application to the Tribunal and believed that obtaining a determination was in their ‘best interests’. Wutha assert this is demonstrated by Empire’s intention to lodge a s 35 application at the same time as continuing Tribunal mediation (NTP contentions [36]–[37], [30]).
In reply, Empire argue they negotiated in good faith because they undertook negotiations prior to Tribunal mediation assistance, the negotiations occurred over a period of 14 months, relations were cordial, both parties forwarded proposals and counter proposals, and both exchanged draft agreements (GP contentions [9]). The evidence supports Empire’s argument (DIR affidavit, DIR1–31 and Tribunal records). Negotiations commenced in September 2016. The State did not refer the matter to Tribunal mediation until April 2017 (NTP3, GVP4). Member Shurven conducted three mediations on 29 June 2017, 17 August 2017 and 12 October 2017 and Tribunal staff produced mediation outcomes documents for each. At the fourth mediation on 26 October 2017, Empire advised that they would lodged a s 35 application and so the member terminated the mediation (and Tribunal staff did not produce a mediation outcomes document). On 16 November 2017, Empire lodged the application.
Conclusion on Empire’s intent to lodge s 35 application
I have outlined above the evidence of negotiations. I conclude it does not support Wutha’s contention that at ‘at all material times’ Empire negotiated with a view to making a s 35 application to the Tribunal and believed that obtaining a determination was in their ‘best interests’ (NTP contentions [36]–[37], [30]).
Rigid position over negotiations generally
In relation to the negotiations generally, Wutha contends Empire maintained a ‘rigid predetermined position’ (NTP contentions at [17]).
It was clear from the outset that Empire sought an agreement that ensured ‘Empire is allowed to continue unhindered with exploration and any mine development as necessary’ – a position they repeated throughout the negotiations (DIR3, DIR6, DIR16). It included a total heritage clearance with no opportunity for further heritage surveys. In August 2017, Wutha emailed Empire further amendments to the draft agreement and attached a copy of their Aboriginal Heritage Protection Agreement per schedule 1 (DIR22). Empire replied ‘we have deleted reference to the Aboriginal Heritage Protection Agreement’ and stated that the ‘land (which is) the subject of the mining lease application was cleared by the Wutha People in 2009’ (DIR23). This is consistent with Mr Harrington-Smith’s oral submissions at the listing hearing. He stated ‘we did the right and honourable thing for David Ross … We cleared it and we sacrificed the dreaming tracks to that area on the proviso that he … give us a fair deal’ when Empire later applied for the proposed lease.
As noted above, negotiations commenced in September 2016, when Wutha forwarded their draft agreement. They sought a $150,000 signing payment to cover various negotiation costs including legal advice (DIR1). They left the ‘royalty’ provision blank. In October 2016, Empire made a counter offer of a $10,000 signing payment, $3,000 towards Wutha’s legal expenses, $50,000 advanced ‘royalty’ upon mining commencement (increased to $100,000 in December 2016 – see [37] below), and an ongoing ‘royalty’ of five cents per tonne of ore processed (DIR3). In November 2016, Wutha made a further counter offer with a $125,000 signing payment (DIR4). Wutha did not make a counter offer on the ‘royalty’: later correspondence states that they were not in a position to make a counter offer without economic advice (DIR10, DIR17). In July 2017, Empire did not increase its upfront payment, but offered $115,000 on commencement of a full bankable feasibility study (DIR16). Wutha asked Empire to consider increasing the upfront payment and legal expenses (DIR17). Empire replied ‘Empire cannot increase the upfront payment of $10,000 ... Empire is also unfunded and as such cannot increase the amount paid for your legal expenses’ (NTPB).
Empire’s offer of $115,000 on commencement of a full bankable feasibility study signifies a concession by them. It represented an increased advance payment to Wutha - but only when Empire’s project (and therefore Empire’s financial circumstances in relation to the project) would be certain. In October 2017, following receipt of the economic report, Wutha made a counter offer with a $50,000 signing payment and accepted the $115,000 bank feasibility payment (DIR26).
The evidence does not support a conclusion that Empire held a rigid position over the negotiations. Their offer of $10,000 signing payment, $115,000 bank feasibility payment and $3,000 in legal fees, together with a $100,000 ‘advance’ royalty payment discussed further below, is a position more advanced than when they commenced negotiations. Empire’s position was seemingly responsive to Wutha’s proposals for payments prior to mining commencement.
Rigid position over ‘royalty’ specifically
Wutha submit Empire maintained a ‘rigid predetermined position’ particularly in relation to their ‘production royalty offer’ which they ‘refused to change or increase’ after Wutha’s counter offers. They contend there was ‘little or no meaningful negotiations by the Grantee Party in advancing its initial royalty offer’. (NTP contentions at [17], [38]–[39]; NTP further contentions at [8]).
In October 2016, Empire offered an ongoing ‘royalty’ of 5 cents per tonne of ore processed (with $50,000 advanced upon mining commencement) (DIR3). In December 2016, Empire increased the ‘royalty’ advance to $100,000 (DIR6). In February 2017, Wutha advised Empire that Wutha were unfunded and were not in a position to respond to the ‘royalty’ offer without professional advice. Wutha requested $30,000 ‘to engage an appropriate professional to analyse the proposed mining data and determine what is a fair royalty to be paid. Otherwise we are just guessing’ (DIR10, DIR12). Empire declined Wutha’s request stating ‘you have entered into previous land use agreements. If they include a royalty, we do not understand why you don’t know what a fair royalty would be.’ They asked Wutha to reconsider Empire’s offer of $100,000 advance ‘royalty’ payment and 5 cents ongoing ‘royalty’ (DIR14).
In July 2017, Wutha provided their first royalty counter offer, asking Empire to consider a 25 cent ‘royalty’ in circumstances where Wutha were ‘without being able to obtain economic advice’ (DIR17). Empire declined the counter offer stating ‘[w]ithout knowing the economic ramifications of an increased royalty on any future operation because operating costs are unknown at present, Empire is not willing to increase the royalty payment’ (NTPB).
On 3 October 2017, Wutha provided their second ‘royalty’ counter offer. They advised they had ‘sought economic advice from an independent consulting service to assist with determining compensation’ and asked for $135,000 advance ‘royalty’ payment and an ongoing ‘royalty’ of 0.75% of the value of any minerals recovered as assessed by the State’s Mining Regulations (DIR26).
Two days later Empire’s lawyer replied:
The changes proposed by your clients are not acceptable to my client. We think the best way forward is to ask for the mediation to be relisted so that one last attempt can be made to negotiate an outcome acceptable to both parties. [DIR27]
Member Shurven conducted a mediation on 12 October 2017. The Tribunal outcomes note Empire’s lawyer ‘said that what Wutha is asking for is too high, and hoped they may come back with another counter offer’ (Mediation outcomes document for 12 October 2018).
Five days later on 17 October 2017, Empire’s lawyer emailed Wutha’s lawyer stating ‘I confirm that the amendments sought by your client are largely not acceptable to my client. I attach a further draft of the deed and ask whether the changes I have made can be agreed’ (DIR28). The email does not invite a counter offer from Wutha. I compared the financial offer in the attached draft to that offered by Mr Ross on 6 July 2017 (DIR16). The ‘changes’ proposed by Empire’s lawyer did not go to the substance of the offer, only to procedural and other aspects. Empire did not alter its financial offer. A month later, they lodged their s 35 application with the Tribunal.
Although Empire did increase their ‘royalty’ advance payment from $50,000 to $100,000, they did not make any alternative offer in relation to the ongoing ‘royalty’ of 5 cents per tonne of ore processed. Wutha made two ‘royalty’ counter offers, one prior to receiving economic advice and the other following it. The difference between Wutha’s two ‘royalty’ offers is complicated by the fact that different measurements are used. The first was a cent/tonne processed, the second was a percentage of the value of minerals recovered. However, there does not appear to be a significant difference between Wutha’s two ‘royalty’ counter offers.
The economic report and both parties’ offers
In Drake Coal v Birri People Deputy President Sosso summarised the Federal Court decisions which, as a general rule, make it impermissible for the Tribunal to determine good faith by evaluating the reasonableness of compensation offers (at [195]-[197]). He noted there two exceptions where the Tribunal might consider the fairness of an offer in relation to good faith. First, if the offer ‘is so manifestly and obviously unfair that any reasonable person would regard it as a “sham”’. Second, if ‘independent material … indicates that an offer is potentially unfair or unrealistic’ (at [201]).
The author of the economic report, Economics Consulting Services, are well known in native title agreement making: their website notes they ‘have worked for companies, Land Councils, PBC’s and government agencies … as negotiator, mediator, and financial advisor’ and they list some of their clients.[3] The report states ‘Economics Consulting Services has been involved in over 150 negotiations and is able to provide benchmark data’ (at 2.3). As such, the economic report, although prepared for Wutha, is material that I will assess against the offers in order to determine whether the second exception in Drake Coal v Birri People is triggered.
[3] >
The report provides some analysis of the range of payments of 60 ‘WA Right to Negotiate Agreements’ (excluding the top and bottom 5% of results). It also considers 17 ‘Gold agreements’ (removing the ‘outlier’) and identifies a ‘royalty’ rate range (noting that ‘there is generally some trade-off between cash payments and the royalty rate’ and that small gold projects have ‘a preference for making payments when sales revenue arrives’). The report makes a recommendation for payments including: an execution payment, a payment on commencement of a Bank Feasibility Study, a (no deduction from royalty) payment on commencement of mining, and a royalty of 0.75% ‘of the government determine Royalty Value under the Mining Regulations’.
On 3 April 2018, I advised parties I was considering the relevance and/or weight I would give to the economic report. I also conveyed my understanding of the economic report and gave each party the opportunity to confirm or correct my understanding within a week. Empire declined. The State and Economics Consulting Services (via Wutha) provided some corrections. Below is my summary of the report as it compares to Empire’s and Wutha’s offers.
Of the 60 WA agreements, the report notes ‘52 (86%) lying between 0.4% and 0.8%’ (at 2.4). Of the 17 gold specific agreements, the report notes these ‘ranged from 0.23% to 1%) (at 2.5). Overall however, as mentioned above, the report notes there ‘is generally some trade-off between cash payments and the royalty rate’ and that ‘payments with lower cash payments generally make higher royalty payments and vice-versa’ (at 2.5).
The report states Empire’s offer represents between 0.14% and 0.22% of the value of gold recovered. However, although Empire’s second ‘royalty’ offer did not alter the ongoing ‘royalty’ of 5 cents, it increased the advance ‘royalty’ payment to $100,000.
Wutha’s first ‘royalty’ counter offer was 25 cents per tonne of ore processed. Their second offer was $135,000 advance ‘royalty’ and ongoing ‘royalty’ of 0.75% of the value of all minerals recovered. The different methodologies for determining the ‘royalty’ value (that is, moving from an amount per tonne to a percentage of mineral recovered) makes a direct comparison between ‘offers’ more difficult. However, based on the report and simple calculations, the offers appear similar.
Whilst Empire’s offer would appear to be at the lower end of the benchmark data provided in the economic report, I cannot conclude that the ‘material indicates that [Empire’s] offer is potentially unfair or unrealistic’ as per Drake Coal v Birri People (at [201]). I also note that although Empire did not modify its offer in response to Wutha’s counter offers, it does not appear that Wutha did either.
(c) Does Empire’s overall conduct meet the threshold for good faith?
In this matter there was a deficit of factual information about Empire’s proposed activities because of the variables identified by Empire, that is, ‘it would be some time before a mining proposal would be submitted and the land the subject of the Application could only be economically mined in conjunction with deposits on other land’ (GP contentions at [12]). Despite the absence of information which challenged Wutha’s ability to negotiate in a fully informed way, it was Wutha who took the initiative and presented Empire with a draft deferred production agreement that compensated for the circumstances. As I stated at [27], because Empire adopted the agreement that Wutha proposed, I cannot conclude that Empire failed to mitigate the possible effects of insufficient information.
I concluded at [30] that the evidence of the negotiations does not support Wutha’s contention that at all material times Empire negotiated with a view to making a s35 application to the Tribunal. There was engagement, there was correspondence, offers were considered, counter offers were made and modified in some, but not necessarily all, aspects.
The parties were negotiating a ‘package’. The elements included a ‘signing’ or ‘up front’ payment, legal fees, ‘royalty’, and a bank feasibility study payment. It appears that Empire placed the bank feasibility study payment on the table as a proposal for Wutha to accept a lower ‘up front’ payment. During the negotiations, Wutha ultimately agreed to the bank feasibility study proposal ($115000). Empire put the first ‘royalty’ offer on the table and while their base offer (5c/t) did not increase, their advance royalty payment did increase following a counter proposal from Wutha.
I cannot conclude that the element which appears to have prevented agreement, the ‘royalty’, means that Empire failed to negotiate in good faith. Nor can I conclude that Empire’s offer, and the position they took, was manifestly or obviously unfair per Drake Coal v Birri People (at [201]).
Consequently, having considered all the contentions and evidence, I cannot conclude that Empire failed to negotiate in good faith.
Did the State negotiate in good faith?
(a) What do Wutha allege?
Citing Western Australia v Taylor good faith indicium (vii), Wutha contend the State failed to take reasonable steps to facilitate and engage in discussions between the parties. They submit the State made ‘little to no contact’ with Wutha from the time they notified the proposed lease on 22 July 2016 until they referred the matter to mediation, almost a year later on 20 April 2017. Wutha assert ‘a unilateral decision by the State to place negotiation in abeyance for an extended period, provide little or no communication … and then have the matter referred to mediation’ meant the State failed to adhere to its own Negotiation Protocol (NTP contentions [43]–[45]).
Citing Western Australia v Taylor good faith indium (xvii), Wutha contend the State failed to do what a reasonable person would do in the circumstances. They submit a reasonable person with the statutory duty of the State to negotiate in good faith, ‘would have taken steps to institute regular negotiation meetings and follow up or assist other parties’ (NTP contentions [46]). They assert that instead, the State ‘chose to do nothing … other than refer the matter to mediation and then not actively participate’ (NTP contentions [51]). In support of this argument, Wutha say the State failed to:
·ascertain whether Empire satisfactorily answered the State’s request for submissions and information (NTP contentions [50]);
·‘express a view’ about Empire’s lack of submissions or description of how its proposed work programme would affect Wutha’s native title rights and interests (NTP contentions [49]); and
·give due consideration to or follow up on the concerns raised by Wutha at the mediations (NTP contentions [49], [51]).
(b) Does the State’s overall conduct meet the threshold for good faith?
Subsection 31(1) provides that unless a s 29 notice includes a statement that the Government party considers that the future act attracts the expedited procedure:
(a)the Government party must give all native title parties an opportunity to make submissions to it, in writing or orally, regarding the act; and
(b)the negotiation parties must negotiate in good faith with a view to obtaining the agreement of each of the native title parties to the doing of the act (with or without conditions to be complied with by any of the parties).
As discussed at [23] and [24] above, on 16 September 2016, the State requested Empire to provide certain information to assist Wutha in making its s31(1)(a) submission (GVP1). Empire’s response was:
Ron knows this area well and has a long relationship with Empire Resources so I personally think we are well beyond the Section 31 requirements of providing work programs, annual reports and heritage survey information. I have included Ron into this email. Could you please advise if the information is still required [NTP2]
In my view the State should have considered this response inadequate. Instead, on 18 October 2016 the State replied:
I refer to your email below. Seeing that the negotiations are at an advanced stage I do not think it necessary to provide the submissions that we requested in our s31 initial negotiation letter.
We would appreciate regular updates to keep this matter on track [NTP2].
On 16 September 2016 the State sent a letter to Wutha enclosing certain information including a copy of the tenement application, a topographical plan of the tenement, a copy of the search of the Register of Aboriginal Sites, and an extract of Section 39(1) of the NTA [GVP2]. The letter refers to s 31(1)(a) and says:
To enable the native title parties to make these submissions, EMPIRE RESOURCES LIMITED is requested to provide to all of the native title parties within 14 days of the date of this letter by REGISTERED MAIL
The letter goes on to list the material referred to earlier in this determination. Further, the letter includes:
An outline of the Government Party’s proposals …. being:
·a copy of the draft conditions and endorsements for this tenement/s in accordance with the Mining Registrar’s recommendations;
·a copy of four additional conditions for discussion;
·a copy of “Administration and Operation of Exploration Licences, Prospecting Licences, Mining Leases, General Purpose Leases and Miscellanous Licences in Western Australia”;
·“Fees and Charges: Information on Mining Tenements”; and
·A summary of approvals and responsibilitieis required by Government before activities can commence on the mining tenements.
The letter requested Wutha to make their submissions regarding the act, including their views on s 39 impacts, by no later than 4 November 2016, and to copy their submission to each other negotiation party. Finally, it says that:
Thereafter, all parties are at liberty to contact each other directly in in connection with any matter that will advance the negotiations. All parties are encouraged to actively pursue these negotiations. Meetings may take place without all of the parties being present if issues to be discussed concern only some of the parties. However, to ensure that all parties are kept informed of progress, it is suggested that all correspondence should be copied to each of the parties for their information – unless the communication is personal or confidential
The letter also enclosed additional information including a copy of the State’s Negotiation Protocol.
The State maintains they monitored the status of negotiations which they evidence in emails attached to their contentions. They note that Wutha had not identified any instance in which they made a request of the State to which the State refused or failed to respond. The State also note that they referred the matter to mediation.
Wutha’s contentions require that I give attention to the practical operation of the statutory obligation on the State to negotiate in good faith.
What can be expected of each party can be influenced by the nature of the future act and the procedures followed in relation to that act. How and when a Government party will be involved in negotiations and what it will contribute to the substantive negotiations might vary depending on nature, scale and benefits derived from the future act. Further, the approach taken by one party is normally influenced by the approach taken by another party.
The State contends they complied with their obligation under s 31(1)(a) by writing to Wutha and inviting them to make submissions in relation to the proposed lease.
It is a well-worn phrase that negotiations do not occur in a vacuum - they must be about proposals. An opportunity is provided for a native title party to make submissions about the doing of the act (s 31(1)(a)) which is an opportunity for them to put forward proposals for negotiation. If a native title party makes no proposals on an issue to the Government or grantee parties, it is difficult to see how the other parties can be accused of not negotiating in good faith with them.
It appears from the evidence that Empire and Wutha negotiated directly with each other and only informed the State of negotiation meetings and outcomes by way of progress reports. It does not appear that the State were invited to negotiation meetings. In that regard, Empire and Wutha seemingly did not require or expect the involvement of the State in the initial or substantive negotiations. The State did, however, refer the matter to Tribunal mediation and participate in four Tribunal mediation meetings.
Because no agreement was reached between Empire and Wutha, no Section 31 Deed was signed by any party. Consequently, the State had a limited role in the negotiations before the commencement of these proceedings. Those circumstances conditioned the nature and extent of the State’s involvement in the negotiations and accordingly what might be expected of them in the discharge of their statutory obligation to negotiate in good faith.
It is not apparent from the evidence that Wutha responded to the State’s letter of 16 September 2016 (GVP2). Wutha’s failure to make a submission in response to the State’s invitation is a factor that I can take into account when determining whether the State negotiated in good faith.
I bear in mind the following observation made by Deputy President Sosso in Amangu v Empire Oil:
Assessing whether there have been good faith negotiations requires the Tribunal to look at all circumstances and the totality of the negotiations. This is particularly the case when the parties appearing before the Tribunal do not have the monetary and human resources of the Crown or large mining companies. … So it is very important to assess negotiations recognising that the Tribunal is considering the behaviour of real people, often working in very difficult circumstances, without many resources, sometimes with major financial constraints and often with both a less than perfect understanding of their obligations under the Act and of their respective aspirations and concerns. (at [72])
I am satisfied that Wutha was represented by someone well versed in future act negotiations and familiar with the State’s process and practices to the extent that they could have responded to the State’s letter dated 16 September 2016. Wutha’s representative could have contacted the nominated person for the State to inquire, or make arrangements, about the negotiations.
Negotiation involves ‘communicating, having discussions with or conferring with a view to reaching an agreement’ and the Tribunal must look at the Government party’s conduct as a whole, including whether it has done what a reasonable person would do in the circumstances (see Placer (Granny Smith) at [30]).
I am not satisfied that the State failed to negotiate in good faith, having regard to the State’s actions in contacting Wutha and providing certain information, their follow up correspondence and Wutha’s relative lack of engagement with them.
As a general comment, the State might reconsider the appropriateness of their standard procedures in particular negotiations. For example: they might consider following up where there is a lack of response to their standard letters to a native title party; they might require a more substantive response from a grantee party to a s31(1)(a) information request than Empire provided in this matter; and they might take further steps to facilitate and engage in discussions between parties rather than simply ‘check in’ or await an invitation to participate.
In deciding on the reasonableness or otherwise of the State’s actions in this matter, I need to take into account the fact that the good faith obligation is imposed on the Government party while much of the content of the negotiations and any agreement mainly involves the native title and grantee parties. Depending on the circumstances, it may be that the Government party has little to offer in resolution of a dispute. The practice developed in each State/Territory influences the content of the negotiations with the Government party.
On the evidence I find that:
(a)the State, on 16 September 2016, sought to inform Wutha about the grant of the proposed lease, of Wutha’s entitlement to make submissions to the State and about other aspects of the right to negotiate process;
(b)Wutha did not respond to that correspondence nor seek any assistance from the State;
(c)the State attempted to assist the progress of negotiations between Empire and Wutha by writing to Empire seeking information to assist Wutha in their submissions to the State;
(d)the State sought progress update reports from the parties;
(e)the State wrote to the Tribunal on 20 April 2017 requesting s 31(3) mediation and participated in four mediation meetings; and
(f)consistent with usual practice in Western Australia, the State would not usually have a more direct role in the negotiations until an agreement is reached and a s 31 Deed is prepared.
Accordingly, I conclude that the State acted reasonably. Wutha has not satisfied me that the State failed to negotiate in good faith.
Determination
I am satisfied Empire Resources Limited and the State of Western Australia negotiated in good faith as required by s 31(1) in relation to the grant of mining lease M57/636. The Tribunal has the power to make a determination on the application (s 38).
Mr JR McNamara
Member
24 April 2018
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