Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd

[2013] HCATrans 222

[2013] HCATrans 222

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth   No P19 of 2013

B e t w e e n -

HANCOCK PROSPECTING PTY LTD ACN 008 676 417

Applicant

and

WRIGHT PROSPECTING PTY LTD ACN 008 677 021

Respondent

Application for special leave to appeal

FRENCH CJ
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON THURSDAY, 12 SEPTEMBER 2013, AT 10.15 AM

Copyright in the High Court of Australia

MR N.C. HUTLEY, SC:   If your Honours please, I appear with my learned friend, MR C.N. BOVA, for the applicant.  (instructed by Corrs Chambers Westgarth)

MR A.J. MYERS, QC:   May it please the Court, I appear with MR R.J. BRENDER for the respondent.  (instructed by Clayton Utz Lawyers)

FRENCH CJ:   Yes, Mr Hutley.

MR HUTLEY:   Your Honour, there are five grounds upon which special leave is sought.  We propose to address orally grounds 4, 6 and 2, and in that order.  The grounds, your Honour, appear at application book 2, pages 295 and 296, and I will make a small reference to one aspect of ground 6. 

Turning to ground 4:  the parties, your Honours, conducted the proceedings on the basis that the prohibitions in condition 3 of the temporary reserve section 25.04 of what was called “the State Agreement” and section 11.01 of the joint venture agreement were valid and that any transaction entered into in breach of those prohibitions would be contractually ineffective.  That appears from the reasons of the President at application book 1, page 231, paragraph 95.

Now, the court concluded that the option was valid and the exercise of the option was of effect because the requirement of ministerial or other consent provided equitable assignment or the creation of an equitable interest associated with the Rhodes Ridge assets and, therefore, there was no contravention of the prohibitions contained in condition 3.  That appears, with respect, condition 3, at application book 1, 241, paragraphs 137 to 139, clause 25.04 at paragraph 155 on page 245 and 11.01 of the joint venture at page 164 at 247.

In reaching that conclusion, the Court of Appeal identified what the President described as two lines of High Court authority.  Your Honours, I will not go to them.  They are set out at paragraphs 166 to 175, the first being what is called involving classically the decisions in this Court in Stern v McArthur and Chan v Cresdon.  The second line was that which began with Justice Windeyer’s judgment in Brown v Heffer.

The Court of Appeal followed what was described by her Honour as the Brown v Heffer line because it concluded that line was approved by this Court in Zhu v Treasurer of New South Wales.  That is at paragraph 175 in her Honour’s judgment at pages 250 to 251.  Zhu is behind tab 5, your Honours, but the relevant paragraph is at 158 of her Honour’s judgment on pages 250 to 251, and I think it is sufficient to deal with that.

We submit that the reference by the court to the statement of Justice Windeyer in Brown v Heffer refers to the undoubtedly correct proposition that the protection of one’s contractual rights by injunction can occur without necessarily creating a property right.  Many injunctions, of course, are incapable of creating property rights, injunctions to support negative stipulations and the like.  We submit that reference was not a reference which is intended to, as it were, quell the controversy which is exposed between the Brown v Heffer line and Stern v McArthur.

We submit that had the court followed what we submit the principles in Stern v McArthur and Chan v Cresdon demonstrate, it would have concluded that the exercise of the option at least was invalid.  We submit that this case provides an appropriate vehicle to determine whether the extent of what is perceived to be an inconsistency between Stern v McArthur and Chan v Cresdon, which endorsed Sir Frederick Jordan’s famous footnote, and the single judgment of Justice Windeyer in Brown v Heffer and was perceived by her Honour the President to be contrary to the principles set out in Stern v McArthur.  So, in our respectful submission, this is an appropriate vehicle to deal with it because of its right.  It was common ground that the only thing that saved the exercise from being held invalid was that distinction.

FRENCH CJ:   This is all covered in your grounds 3 and 4?

MR HUTLEY:   Ground 3, your Honour, is an illegality ground.

FRENCH CJ:   This is the premise upon which the illegality operates?

MR HUTLEY:   Yes, but the illegality ground also is premised – and I concede that - that one would need to be given leave to address a construction question of the provisions because her Honour found that an option could not constitute an infringement of the provisions because the provisions did not preclude a creation of an equitable interest such as there is by an option, only one which she described as, in effect, being an exercise of “completing the sale transaction”, or words to that - in substance to that.

We have challenged that.  We accept that that is a visitation question in relation to the construction of the clauses.  We would submit that if your Honours are minded to take up the other point, the Chan v Cresdon point, your Honours would also take up that construction question because, with respect to her Honour, her Honour concluded that the creation of an equity by an option did not constitute, in effect, a relevant assignment of an interest for the purposes of those clauses. 

That is a construction question, but I accept it.  But it is not affected by the question on exercise, because her Honour was of the view that but for the Chan v Cresdon/Brown v Heffer point, if one followed Chan v Cresdon there would be a breach and therefore the exercise would have been bad.

That then leads to the next question, could there be another exercise, and that is the ground 6 point. That depends – if the illegality arises one does not need that. Ground 6 is concerned with section 110 of the Property Law Act 1969 (WA). Your Honours will find that behind tab 3 in the materials at page 13, and the relevant provision is 110(1)(b):

an option to acquire an interest in land –

does not apply, and then (2) –

An option to which subsection (1)(b) refers, and which according to its terms is, or may be, exercisable at a date more than 21 years from the date of its grant, becomes void, on the expiry –

et cetera.

FRENCH CJ:   That then brings in the Interpretation Act definition of “land”.

MR HUTLEY:   That brings two points, we say.  Firstly, the common law character of whether – because the section refers to “an interest in land” and the definition of “land” is expanded to be not just land, but also an interest in land.  So there is firstly the question, is this an interest, and I will come to the relevant interests in a moment, and secondly, if they are not per se an interest, are they made interests by the extended definitions which appear in section 7, which your Honours will find on the preceding page in the materials.

Now, her Honour dealt with the question of whether temporary reserves were interests at law at paragraph 51 in application book 223, and her Honour said:

The Temporary Reserves are not land or an estate or interest in land under the 1904 Mining Act or at common law.

Her Honour then cited a series of cases, in our respectful submission, none of which conclude that issue.  In Gander v Murray, which we have put behind tab 10, your Honours, the statement of significance in that judgment is from the judgment of Justice Isaacs at page 589, if your Honours please, at about point 5, there was dealing with a particular authority under an Act which gave a very limited right of entry.  One of the critical facts relied upon to, in effect, conclude it was not property at all was that:

the rights, like the obligations, are purely personal, and no provision exists to transfer any of them. 

Similarly – we have not given it to your Honours – but Justice Windeyer in Wade v New South Wales referred to that matter at page 188, and 190 point 7 referred to that very same point.

Now, the other cases commence with the decision of this Court in Adamson v Hayes, which concerned the 1904 Mining Act so far as it concerned mining tenements within the meaning of section 273 of the Act.  This Court had reason to look at 273 in the context of TEC Desert.  Section 273, your Honours will find behind tab 1.  That was a provision which rendered certain mining tenements, chattels – and that was held to be chattels personal.

As this Court observed in TEC Desert – and I will come to that in a little while if I might, which is behind tab 8 – the precursor to section 273 was section 18 of the Mining Act 1874 (NSW), which was considered in Williams v Robinson, which your Honours will find behind tab 7, if I could take your Honours there just shortly.  There, the Chief Justice of New South Wales observed at pages 39 to 40 that the whole point of a provision such as section 18 was to alter the character of these mining tenements from what would otherwise be a property interest to being a personal interest.

Now, that statement was referred to in Adamson itself by Justice Gibbs, as the former Chief Justice then was, if your Honours go to tab 9 and look at pages 300 to 301.  What his Honour there said, in effect, referred to that matter and said, in effect, but for these provisions, one would be dealing with property interests. 

What his Honour there said was not the subject of disagreement by the other Justices.  Justice Menzies did not comment on the question, and your Honours will see that from 291 to 292.  Justice Walsh did not determine the question, and your Honours will see that at 295 to 296.  He accepted the possibility that there were not property interests by reason of certain other provisions, which I will come to in a moment.  Justice Stephen said there was not an interest, and this is at 312, a passage which, your Honours, this Court had reference to in TEC, where his Honour said at about point 9:

It is apparent from this short description of the rights conferred on a miner who holds a claim over Crown land that no interest in land is involved in any ordinary sense –

Those provisions included a provision which provided that a mining tenement over Crown land gave no right of occupation as against the Crown.  That was the very thing that Justice Menzies adverted to in his judgment, that that might have removed the character from being a property interest, setting aside 273.

Now, our point is that it does not follow from the fact that the temporary reserves were issued under the 1904 Act that the rights conferred on them were not interests in property.  Section 273 does not apply to a temporary reserve.  Temporary reserves are issued under 276, and also affected here by the State Act.

The rights under this are assignable, and that is because of the State Act.  Their duration was one year with an election on the part of my client and its partner to extend for up to five years, and that is from the judgment, paragraph 16, in the Court of Appeal, page 210.  They include rights to prospect, drill and take samples, and that is apparent from application book 341 to 342.

FRENCH CJ:   So they fall back, you say, into the default characterisation of “interest in land”.

MR HUTLEY:   Quite, “interest in land”.  We submit that those rights are sufficient.  So much, we say, was said by this Court in Stow v Mineral Holdings, which is the case behind tab 6, by Justice Aickin.  If your Honours would go to page 311 – your Honours will find the type of rights which he was dealing with at 306 which deals with the interest – but if your Honours go to about point 4, it says:

A person holding a prospector’s or exploration licence or a miner’s right would however have an “estate or interest” in the land since he has at least some rights to occupy and to take minerals from the land -

That is 15A, B and C, and your Honours will find those at page 306.  That proposition was agreed in by Justice Stephen and Sir Anthony Mason at page 301.

Now, that would be the position at common law, so we say the court was wrong, with respect.  The expanded definition, in our submission, makes it clear, having regard to the breadth of section 7 – I am conscious of the time, your Honours, I do not want to go through it – and we say a fortiori the position with exploration licences under the Act, and that has not been dealt with by TEC.

FRENCH CJ:   What implication does this have for the 1978 Act?

MR HUTLEY:   Your Honour, we say it has implications for that.  TEC dealt with section 114 and was not squarely called upon to consider whether these could give rise to an interest in land.  It did not strictly arise in TEC.  Section 114 dealt with the fixtures problem.  So we do not say it has been determined by the court.  Her Honour thought it had been, and in our respectful submission, her Honour is wrong in that regard.

Could I now go to ground 2, your Honour, in the time?  Your Honour, the Court of Appeal held that the 1989 agreement was not relevantly ambiguous, and that is at 257, paragraph 203.  The court found that the entire operation of that Act was limited to a period of years and a formula which was only able to ‑ ‑ ‑

FRENCH CJ:   This involved management by a particular person who had a particular association with Mr Hancock?

MR HUTLEY:   Only referred to a period in one clause, clause 1, so unlike most commercial agreements which have a term covering the whole of it, will often say “this is for a term of X”.  So the first point is that the agreement only referred to a term in one clause.  Secondly, her Honour seems to have found that it was unambiguous, at 207, on the basis – if your Honours go to paragraphs 204 to 206 – which was the whole process of construction which her Honour undertook.

So one of the issues which is arising, and we submit this is a perfect case to deal with it, is when do you determine under the Codelfa principle, if it is to remain, there is ambiguity?  If one reads 203 through 207, her Honour found no ambiguity after her Honour had concluded the construction of the contract.  Her Honour then in 203 referred back to the facts which we are advancing and said they would not have mattered, but since her Honour had found that they were clear to demonstrate what the contract meant, that reference cannot, with all due respect to her Honour, take the matter further.

What we say is that this contract is so clearly ambiguous that the principle had to be engaged.  If I could take your Honours shortly to it, and if your Honours could have 204 to 206 open beside - the contract your Honours will find in volume 2 commencing at page 336 - her Honour considered that the presence of the reference to management in the recital very important.  But your Honours note that the word “management”, its cognates appear at various parts of the clause.  The word “manage” appears in clause 1 in the first line.  It appears in clause 3(a) on page 337 as the second word, together with a whole lot of other words.

So whatever “management” meant in that recital, it was not just managing.  What we say is management can extend to control.  This was the party’s desire to record their – concerning the control of certain interests.  Of course, “management” in the Macquarie Dictionary extends to control, as one would know, and control would extend to ‑ ‑ ‑

KEANE J:   Even though control is referred to separately in 3(a).

MR HUTLEY:   Quite.  Control at a very broad level.  Control in the sense of control the fate.  It is concerning the control of certain of the interests of the partners.  Control also refers to the interests of the partners; ownership, interest, beneficial interest and, your Honour, her Honour also considered, your Honours will see, that the reference to interests of the partners was significant because there was not being referred to as partnership interest. 

The important point we would bring is if the premise of the case is that, in effect, in 84, the “beneficial interests” were broadly split, it is passing strange that one would have a clause which defines HPPL as it does in recital A as the partners and then say the parties hereto desire to record their intentions concerning the management of certain of the interests of the partners, that is, of their joint interests.

FRENCH CJ:   Well, the interests were split but they were kept in the same bucket for tax reasons, were they not?

MR HUTLEY:   If one is dealing solely with the question of technical legal position, correct, but her Honour draws significance from the fact that they have moved from partnership interest to the interest of the partners but does not have regard to the fact that they seem to be treating it as a joint interest.  Her Honour also considered that clauses 4 and 5, which dealt with, in effect, the benefit, were to be explained as the remuneration for the services provided under clause 1 and following by Mr Hancock and Mr Dalby.

FRENCH CJ:   You are really here disputing the correctness of her construction and her approach to construction.

MR HUTLEY:   Yes, your Honour, and we say - I am sorry, your Honour, I should – and we say it is a good vehicle to deal with this question which, in our respectful submission, is rising in just - if one goes through first instance commercial cases, the difficulties produced by Codelfa are just turning up in every case.  What is to be the position?  How does one approach the question of ambiguity?  Do you approach it at the beginning? 

Do you go through the whole construction exercise, what is it?  Or is the proper approach that the court should take an iterative approach, that is as the English have, that is, bring known surrounding circumstance to the process of construction throughout.  This is a good example of the difficulty that is being produced.  The court, in effect, has to find ambiguity before it determines the answer.

FRENCH CJ:   I think we have your point on that, Mr Hutley.  Your time is up.  Thank you very much.

MR HUTLEY:   Your Honour understands.

FRENCH CJ:   Yes, Mr Myers.

MR MYERS:   Thank you, your Honours.  Your Honours have seen a substantial recasting of the application for special leave.  Could your Honours go to volume 2 of the book, just to identify what is left?  First of all, on page 295, the first page of the book, there is the point that my learned friend was last addressing.  Then your Honour the Chief Justice referred to “illegality”.  Well, that is in ground 3, so that is apparently not pressed any more.  It is only ground 4 that is relied upon.  The Court of Appeal failed to conclude that the purported exercise of the option under clause 4 was contractually ineffective.

I should just refer to the balance of that ground on page 3. My learned friend only addressed temporary reserve condition 3 and section 25.04 of the State agreement, so apparently (c) is abandoned. Then my learned friend referred to ground 6. Now, ground 6 relates to this question whether an interest under a temporary reserve is land within the meaning of section 110 of the Property Law Act (WA). Could I now ask your Honours to go to volume 1 of the Court book, and I hope I deal with this in an organised way. Page 255, paragraph 197:

The appellant conceded in its written submissions that these grounds only arise if the court finds that it is a condition precedent to the exercise of the cl 4 option that consent be obtained under condition 3, s 25.04 and s 11.01.  I have concluded that there is no such condition precedent.  I have also concluded that the Temporary Reserves are not land for the purposes of the PLA.  In the circumstances it is unnecessary to determine –

et cetera.  So the land question only arises if the construction adopted by the court of the clause 4 option is found to be incorrect.  Now, my learned friend, as I heard him, did not address that point below according to the observations of the President it was conceded.  In any event, what my friend has put does raise questions of construction of temporary reserve condition 3 and section 25.04 of the State agreement and, concerning those, I invite your Honours to go ‑ ‑ ‑

FRENCH CJ:   Incidentally, just going back for a moment to 6, I think at 38 of the submissions, that is conditioned upon success on any of 4, 5(a) or 5(b).

MR MYERS:   Correct, and that is, with respect, a reference to the same matter that the President referred to apparently.  Then could I ask your Honours to go to paragraphs 135 and 136 of the judgment first of all?  This is the conclusion of the court in relation to condition 3:

Moreover, even if (contrary to my view) condition 3 is not confined to arrangements that effect an actual legal or equitable assignment –

So that question of construction has to be determined –

the 1984 Agreement cannot be characterised as a contract (arrangement) ‘to transfer’ any interest in the Temporary Reserves.  It is a contract permitting a party to exercise an option to call for a transfer, which is outside the scope of the natural and ordinary meaning of the text of condition 3.

That is a matter my learned friend has not dealt with.

So too is a contract containing an option to call for a transfer, which transfer is subject to and conditional upon obtaining third party consents.

For all these reasons, there is no merit in the appellant’s claim that ministerial consent is a condition precedent to the existence of the 1984 Agreement.

If one goes back to paragraph 109, I think, of the reasons, one sees where it is that the analysis of condition 3, construction and effect, commences, and in the course of that, if your Honours go to page 237, turn the page, you will see that the court deals with the construction of the meaning and effect of section 25.04, or clause 25.04 of the State agreement.

FRENCH CJ:   So the thrust of your submission is that this all collapses into a sequence of constructional questions in relation to both the agreement and the condition?

MR MYERS:   Correct, your Honour.  It does.  They are questions of construction of documents that affect the rights only of the parties to those documents, if we are dealing with 25.04 and 11.01, I can put that aside, whether they are properly called private agreements is another matter, but they are agreements of limited application and they are sui generis to the circumstances of the parties in the particular case. 

As regards condition 3, temporary reserves were something sui generis to Western Australia, issued under the 1904 Act, which was repealed by the 1978 Act which came into force in 1982.  So it is more than 30 years since, even in this State, a temporary reserve has been created.  So for that reason also this is not a matter for which special leave should be given.

Furthermore, if one gets to the last issue, that is, the meaning and effect of section 110 of the Property Law Act, we say, with respect, that the court below was correct.  If I could ask your Honours to look at paragraph 49, I think it is, of the decision of the President, that is where the nature of temporary reserve begins to be considered, and then over the page, paragraph 61, the nub of the reasoning is set out:

Section 276 and s 277 of the 1904 Mining Act constitute a code for temporary reserves, with the consequences that the holder of a right of occupancy could occupy the reserve for prospecting without anyone being entitled to acquire claims over the reserve during the continuance of the right . . . It follows that the provisions of the 1904 Mining Act relating to miner’s rights, and thus claims and mining tenements, have no application to temporary reserves.  The holders of the Temporary Reserves do not have a right to work and get minerals or substances.

That reasoning is perfectly sound and it contradicts what my learned friend put orally to your Honours this morning.  In fact the decision of the President that temporary reserves are property but not land is in accordance with the terms of the legislation which she had to construe. 

Could I now go back to the first ground that is advanced?  That is the ground concerning the construction of the 1989 agreement.  The 1989 agreement follows from the 1984 agreement, and if your Honours would look at volume 2 of the application book at page 325, there is the 1984 agreement, and your Honours will see at a glance who are the parties, clause 1(b):

WPPL shall assume sole control over and responsibility for the administration, development and disposal of the assets and interests of the Partnership set out in Schedule 2 –

That replicates, in the case of WPPL what is stated in relation to HPPL in the preceding paragraph.  Then clause 4 says - that is over the page:

EACH PARTNER SHALL HAVE the option exercisable at any time during the continuation of the Partnership to require the transfer of the HPPL interests to HPPL and the transfer of the WPPL interests to WPPL.

Now, the President examined what that meant in the context of a partnership, with respect, correctly.  Your Honours will see Schedule 1 and Schedule 2.  The Hancock interests got in quickly and they got all their Schedule 1 interest transferred to them and the only Schedule 2 interest, the Rhodes Ridge joint venture, my clients did not act quickly enough and so they did not get it until they exercised a right in 2001. 

Then, if your Honours would look at page 336 - this is the 1989 agreement - there are several things I draw attention to.  First of all, in contrast with the 1984 agreement, and all other preceding partnership agreements, one has as parties Mr Hancock and Mr Dalby, and they are parties because they are going to be involved in the management of certain interests of the partners, as recital B) says, and the period of management is for a term of 10 years.  That is the agreement.  It is unambiguous and it is clear.

The Court of Appeal accepted that that was the meaning, and it was unambiguously clear, as did the judge at first instance.  I will not give your Honours the references.  This is not a matter of general importance.  It is the construction of a private agreement.  The applicant wants to make this a vehicle to challenge the correctness of Codelfa and the rule also - and the rule that subsequent conduct can be used to construe a contract.  They are both involved in the application.

It is not a suitable vehicle for those purposes for several reasons.  First of all, there was no point about subsequent conduct taken below and the applicant ultimately submitted to the Court of Appeal that Codelfa was correct and the court was not permitted to have regard to surrounding circumstances.  That appears from the submissions in paragraphs 108 to 208 and 210 of the reply written submissions set out in the supplementary application book.  If your Honours would just glance at it – 208, 210 and 211.  So to allow a challenge on the basis of subsequent conduct in the performance of the contract and to Codelfa would be to allow the applicant to do something inconsistent with how the applicant conducted its case below. 

Next on this point, there was admitted in evidence at the trial an enormous body of testimony, oral testimony and documents.  The court book, I am instructed, consisted in the end of 50 volumes or thereabouts.  The submissions, the written submissions, ran to 4,000 pages.  The trial ‑ ‑ ‑

FRENCH CJ:   I think we have read the cri de coeur from Justice Murray in the opening pages of his judgment.

MR MYERS:   I should not repeat all that, but most of this evidence ‑ ‑ ‑

FRENCH CJ:   This is the in terrorem argument.

MR MYERS:   Well, it is not exactly in terrorem ‑ ‑ ‑

FRENCH CJ:   I have heard it before.

MR MYERS:   ‑ ‑ ‑ your Honour, because one is getting a stew of evidence.  It is not allocated to ‑ ‑ ‑

FRENCH CJ:   Their Honours are going to have to trawl endlessly through very boring documents if special leave is granted.

MR MYERS:   There will be a very great many of them, your Honour.

KEANE J:   But it also does give the best reason for preserving the Codelfa rule, does it not?

MR MYERS:   Of course it is, with respect, your Honour.  It is one of the very good reasons.  The other very good reason is that the parties chose to express their agreement in a document.  The problem with it is that a great deal of the documents were admitted for purposes other than construction on any view.  There was a claim for abandonment.  It was said that the WPPL interests had abandoned their rights under the 1984 agreement and there was an enormous body of evidence that came in for that purpose and winnowing that out - and it was not properly separated at the trial, I should say, with respect - but winnowing that out would be a very difficult thing.

There are other difficulties with this course.  The trial judge found that the extrinsic material did not support the applicant’s construction, and this appears at application book pages 9 and 10 at paragraphs 258 and 259.  The Court of Appeal agreed and that appears at paragraph 203 at page 257 of the appeal book, and they agreed also with respect to the 1984 agreement, if one has to construe that, at paragraph 82.  Thus, there are concurrent findings of fact which stand in the way of the applicant, even if it were to get past the Codelfa rule. 

Furthermore, the applicant did not plead the extrinsic facts upon which it would now wish to rely and, indeed, it has never stated directly and clearly what those extrinsic facts are.  If we are going to get rid of the Codelfa rule we will have to have some sort of regime where the extrinsic facts are referred to either in pleadings or in some other document which informs the other party. 

It is not primarily a rule about evidence, although it is incidentally a rule about evidence.  It is a rule about extrinsic facts.  What are the extrinsic facts?  My learned friend addressed your Honours for half an hour and did not mention any extrinsic fact that he would want to rely upon.  None were pleaded and none were identified, either at first instance or on appeal.  The applicant also criticised the Court of Appeal for ‑ ‑ ‑

FRENCH CJ:   I think there is reference to surrounding circumstances, is there not, in paragraph 21 at page 308?

MR MYERS:   Page 308.

FRENCH CJ:   Yes, in the submissions, “surrounding circumstances” relevant to the 1984 agreement.  They are put.  Now, you say they were not argued below.

MR MYERS:   They were not.  Yes, I am sorry, they are identified now.   I ought to have expressed myself more clearly.  I agree with your Honour, with respect.  The applicant criticised the Court of Appeal for adopting an erroneous approach to the question of ambiguity.  This criticism is without merit.  We say the Court of Appeal was correct to say that a construction which is not reasonably open may not evidence ambiguity and my learned friends say to the contrary that even if a construction is not reasonably open it may be evidence of ambiguity.  The Court of Appeal in contradicting that certainly did not say anything which is apt for criticism.

There is one last matter which I wish to draw to the Court’s attention relating to the question whether any of these grounds would be suitable for special leave and the hearing of an appeal.  There was a cross‑appeal in the matter relating to unconscionability in the way in which the Hancock parties have conducted themselves and that is dealt with by the President at paragraphs 290 to 315 of the reasons.  In substance, what the President does is refer to the unconscionability claim and identify the principal elements of it - 292, first, second, right down to seventh on 298.  The trial judge dismissed the unconscionability claim.  Then there is discussion of the unconscionability claim.  At paragraph 308 the President says this:

The proven facts would give rise to an estoppel (promissory, equitable or by convention).  The real issue is what, if any, role equity can play when a statutory prohibition renders a contract illegal

and is imposed for the benefit of, inter alia, third parties who are not parties to the litigation.

Then 313, the President expresses the preliminary view in substance that the evidence that is otherwise available to the WPPL parties would be available giving effect to her view about unconscionability by reason of estoppel.  If the matter goes on appeal this question of unconscionability would have to be dealt with.  May it please the Court.

FRENCH CJ:   Thank you.  Yes, Mr Hutley.

MR HUTLEY:   Thank you, your Honours. May I take your Honours to paragraph 197 of the judgment? It was clearly not the case that her Honour was saying there that the precondition to the operation of section 110 was to win that construction question because if one goes back to paragraph 137 of the judgment, it was made clear by her Honour that if there was an equity, i.e., if we won on what might be called the Chan v Cresdon point, the notice would be bad, that is, the exercise would be bad. That immediately led into the question of section 110, and that is how it was argued. It is noteworthy that this point was not observed in our learned friend’s written submissions.

What her Honour was there dealing with the fact is she dealt with the equity, she found against the equity. Therefore, the only way for my client to win in those circumstances was to say that as a matter of construction of the clause – that is, the option – it was a precondition to exercising the option that you had ministerial consent because once we had lost the equity point the only way section 110 would arise is if there was a precondition to the exercise of the option that they had obtained ministerial consent before that.

If she was not in any way saying that if we won the equity point, which is the point I have agitated before your Honours, that section 110 would not ride because it flows as a matter of logic. That is the point I observed at the beginning. It was agreed by the parties if the exercise is bad, i.e., if there has been a breach of the conditions the exercise was bad. So a number of ways were put in which the exercises were bad: one, illegality; two, breach of the condition and creating an equity; three, that there was a condition precedent to the exercise of the option that you would obtain ministerial consent.

Her Honour was only referring to that because that was the one which was immediately alive, having regard to the rejection of the equity point.  That is all her Honour is saying, because one can see the logic.  You did not need to get to the condition precedent point.  If we were correct in relation to the equity, that is, the Chan v Cresdon point, so that point by my learned friend, with all due respect, is wrong.  It is not referred to in their

written submissions.  The way the case was conducted it was clear her Honour would have understood if we had won the option point, 110 was in action as a vehicle. 

Now, with all the rhetorical force of my learned friend, if one goes to the written submissions one was talking about, your Honours having looked at 50 documents to determine the construction question, your Honours now have to look at thousands of documents.  Your Honours, we have set out the facts that we say the surrounding circumstances.  We say they are ‑ ‑ ‑

FRENCH CJ:   Paragraph 21 that I referred to.

MR HUTLEY:   They are, in effect, found by her Honour.  What her Honour did was that her Honour, in effect, did not address the question of ambiguity or capable double meaning at the appropriate point.  So to then go to those facts when her Honour has already found that there is clear demonstration the other way is an exercise, with all due respect to her Honour, which is not the appropriate approach. 

Her Honour should have exposed the arguments of both sides.  Is that arguable?  Is that reasonably arguable?  Her Honour did not do that.  Her Honour, in effect, came to the conclusion her Honour did, therefore said it is not ambiguous, therefore I do not look.  Now, the other point is there is nothing inconsistent with what we have done.  Her Honour obviously in the judgment understood we were putting if it is ambiguous look at the surrounding circumstance because that is what she did in 203. 

So my learned friend’s suggestion that, in effect, we are departing from the case – we had alternate cases it was clear or if it was not clear our way it was ambiguous.  Look at the surrounding circumstances which informed you of this fact.  These parties had a real reason to go back to the status quo ante, that is, back to the point where there is shared interest because there was a real issue alive of illegality. 

People were asking questions and we say in that surrounding circumstance when one comes to this contract which in the critical clauses does not refer to any question of time, they are unlimited as to time.  They are, in effect, giving benefits to each other in the clauses which, if the construction of our learned friends is right, why were they giving benefits to WPPL?  WPPL had 100 per cent; the only person who could benefit was us.  Those are our submissions.  Therefore we say it is a perfect vehicle to deal with that fundamental question.

FRENCH CJ:   Thank you, Mr Hutley.  The Court will adjourn briefly to consider what course it should take.

AT 11.05 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.08 AM:

FRENCH CJ:   This application for special leave against the decision of the Court of Appeal of the Supreme Court of Western Australia turns largely upon contested constructions of provisions of agreements between the applicant and the respondent.  The primary focus of the parties was on cl 4 of an agreement made in 1984 which varied a partnership agreement made between the parties in 1983.  Clause 4 provided that each party should have the option, exercisable at any time during the continuation of the partnership, to require the transfer to itself of certain identified interests.  The litigation leading to the present application followed upon the purported exercise by the respondent in December 1997 of the cl 4 option to require the transfer to it of mining tenements, being temporary reserves in the Rhodes Ridge area which had been issued under s 276 of the Mining Act 1904 (WA).

The special leave issues said to arise relate to the principles to be applied by the court in the construction of commercial contracts, the circumstances in which and extent to which the court is entitled to look beyond the text of such contracts and the effect of the requirements of third party consent to a transfer of interest pursuant to the exercise of an option. Questions of illegality and its consequences attending upon asserted non‑compliance with statutory conditions relating to transfer were also raised, as was the character of temporary reserves as interests in land for the purposes of s 110 of the Property Law Act 1969 (WA).

In our opinion, the issues in this case are so closely connected with contested questions of construction of particular agreements with parties, the construction of particular statutory instruments and a statutory provision, for many years not in force, as to render it an inappropriate vehicle for the grant of special leave.  Special leave will be refused with costs.

AT 11.10 AM THE MATTER WAS CONCLUDED