Jabiru Metals Ltd v Lynch - [2009] WASC 238

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: JABIRU METALS LTD -v- LYNCH [2009] WASC 238

CORAM: HASLUCK J

HEARD: 24 AUGUST 2009

DELIVERED : 2 SEPTEMBER 2009

FILE NO/S: CIV 1541 of 2009

BETWEEN: JABIRU METALS LTD (ACN 060 620 751)
Plaintiff
AND
AUBREY LYNCH
CYRIL BARNES
DIMPLE SULLIVAN
ELVIS STOKES
LEO THOMAS
LES TUCKER
MURRAY STUBBS
PEARLIE WELLS
RON HARRINGTON-SMITH
SADIE CANNING
THELMA O'LOUGHLIN
TOMASHISHA PASSMORE on behalf of the Wongatha People
First Defendants
RAYMOND WILLIAM ASHWIN
JUNE ROSE HARRINGTON-SMITH
GEOFFREY ALFRED ASHWIN
RALPH EDWARD ASHWIN on behalf of the Wutha People
Second Defendants
RICHARD GUY EVANS
DAWN EVANS
BRETT ANDREW LEWIS
GERALDINE HOGARTH
JOAN TUCKER on behalf of the Koara People
Third Defendants

Catchwords:

Contracts - Discharge - Legal principles concerning frustration - Whether the situation that has arisen is fundamentally different from the situation contemplated by the contracts - Facts and matters bearing upon discretionary power to grant declaratory relief - Payments due to native title claimants under a mining agreement - Native title claims dismissed - Grant of declaratory relief directed to confirming the termination of the agreements due to frustration - Payments to be made voluntarily in respect of any accrued rights

Legislation:

Native Title Act 1993 (Cth), s 29, s 253
Property Law Act 1969 (WA), s 11(2)
Rules of the Supreme Court 1971 (WA), O 18 r 16
Supreme Court Act 1935 (WA), s 25(6)

Result:

Declaratory relief granted

Category: B

Representation:

Counsel:

Plaintiff:    Ms M Watts
First-named First Defendant     :    Mr M W Hutchings
Second-named First Defendant   :    Mr M W Hutchings
Third-named First Defendant     :    Mr M W Hutchings
Fourth-named First Defendant    :    Mr M W Hutchings
Fifth-named First Defendant     :    Mr M W Hutchings
Sixth-named First Defendant     :    Mr M W Hutchings
Seventh-named First Defendant :    Mr M W Hutchings
Eighth-named First Defendant     :    Mr M W Hutchings
Ninth-named First Defendant :     Mr M W Hutchings
Tenth-named First Defendant     :    No appearance
Eleventh-named First Defendant :    Mr M W Hutchings
Twelfth-named First Defendant   :    Mr M W Hutchings
Second Defendants          :    Mr P N Tolcon
First-named Third Defendant     :    No appearance
Second-named Third Defendant :    Mr M W Hutchings
Third-named Third Defendant     :    Mr M W Hutchings
Fourth-named Third Defendant   :    Mr M W Hutchings
Fifth-named Third Defendant     :    Mr M W Hutchings

Solicitors:

Plaintiff:    Hunt & Humphry
First-named First Defendant     :    Murray Hutchings
Second-named First Defendant   :    Murray Hutchings
Third-named First Defendant     :    Murray Hutchings
Fourth-named First Defendant    :    Murray Hutchings
Fifth-named First Defendant     :    Murray Hutchings
Sixth-named First Defendant     :    Murray Hutchings
Seventh-named First Defendant :    Murray Hutchings
Eighth-named First Defendant     :    Murray Hutchings
Ninth-named First Defendant :     Murray Hutchings
Tenth-named First Defendant     :    No appearance
Eleventh-named First Defendant :    Murray Hutchings
Twelfth-named First Defendant   :    Murray Hutchings
Second Defendants          :    Mony de Kerloy
First-named Third Defendant     :    No appearance
Second-named Third Defendant :    Murray Hutchings
Third-named Third Defendant     :    Murray Hutchings
Fourth-named Third Defendant   :    Murray Hutchings
Fifth-named Third Defendant     :    Murray Hutchings

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

Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Connell v Reynolds SM (1993) 9 WAR 27
Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421
Harrington‑Smith on behalf of the Wongatha People v State of Western Australia (No 9) [2007] FCA 31; (2007) 238 ALR 1
Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286

HASLUCK J:

Introduction

The plaintiff, Jabiru Metals Ltd, commenced proceedings by way of an originating summons dated 19 March 2009. Declarations were sought that certain agreements between the plaintiff and each of the defendants were terminated as at and from 5 February 2007.
The application for declaratory relief was supported principally by an affidavit sworn by the Managing Director of the plaintiff company, Gary Ernest Comb, on 19 March 2009.
The plaintiff relied also upon an affidavit sworn by a solicitor in the employ of the plaintiff's solicitors on 6 August 2009, shortly before the hearing of the application. As a consequence of matters touched upon in that affidavit leave was granted for the originating summons to be amended in terms of an application for leave to amend dated 7 August 2009.
The defendants were represented by counsel at the hearing. Upon the basis reflected in certain documents exhibited to the Comb affidavit the defendants did not oppose the declaratory relief sought by the plaintiff. However, for reasons that will become apparent, it is necessary to set out the background to the plaintiff's application before proceeding to the question of whether the relief sought should be granted.

Background

The plaintiff is a mining company formerly known as Pilbara Mines Ltd. In 2004 the plaintiff company entered into agreements in largely identical terms with each of the first, second and third defendants dated 26 March 2004, 26 March 2004 and 10 November 2004 respectively. A copy of each of the subject agreements was exhibited to the Comb affidavit.
The first defendants are the persons whose names appeared at the time of the execution of the agreement between the plaintiff and the first defendants in the entry on the Register of Native Title Claims as the applicants in relation to application for determination of Native Title, Federal Court application No WAD 6005/98 (as provided in s 253 of the Native Title Act 1993 (Cth)) commonly known as the Wongatha native title claim.
The second defendants are the persons whose names appeared at the time of the execution of the relevant agreement in the entry on the Register of Native Title Claims as the applicants in relation to application No WAD 6064/98 commonly known as the Wutha native title claim.
The third defendants are the persons whose names appeared at the time of the execution of the relevant agreement in the entry on the Register of Native Title Claims as the applicants in relation to application No WAD 6008/98 commonly known as the Koara native title claim.
In each case the relevant agreement was described as a mining project agreement and the object of the agreement was set out in the recital.
For example, in the case of the Wongatha agreement it was said that the Wongatha applicants, on behalf of the Wongatha claim group, had made the Wongatha claim which was yet to be determined. The mining company had lodged applications for the grant of certain mining tenements within the land and waters the subject of the Wongatha claim, yet to be granted.
It was said further that the State of Western Australia had given notice in accordance with s 29 of the Native Title Act of its intention to grant each mining tenement. On the terms set out in the mining project agreement the Wongatha applicants had agreed to consent to the grant of each mining tenement. In the body of the agreement provision is made for the payment of compensation by the mining company.

Other matters

At the time the subject agreements were executed, each of the Wongatha, Wutha and Koara native title claims applied over land including the land comprising but not limited to the mining area as that term was defined in the agreements. The Wongatha and Wutha native title claims were registered native title claims under the Native Title Act at the time they were entered into and at all times subsequent to that up until 4 February 2005. The Koara native title claim lost its registration status in or around 2003 and was not a registered native title claim at the time the agreement between the plaintiff and the third defendants was entered into.
Pursuant to cl 4.2 of each of the agreements, the plaintiff was required to make various payments in relation to milestones in its mining project known as the Jaguar Development (as defined in the subject agreements). More particularly, cl 4.2(1)(a) of each of the agreements provided that if there has not been a final determination of native title in respect to the mining area, the payments referred to in cl 4.2 should be paid into the trust accounts established by any registered native title claim group in equal proportions of the total amount.
Pursuant to cl 7.2 of the Wongatha agreement and cl 6.3 of the Wutha and Koara agreements, the plaintiff is required to make annual payments of $10,000 payable upon commencement and subsequent anniversaries of the processing of ore from the Jaguar Development and while commercial mining operations continue on the mining area to an educational trust fund nominated in writing by the 'native title parties' established for the benefit of the Wongi People who are said to be Aboriginal persons from the Eastern Goldfields region generally. The term 'native title parties' is not defined in any of the agreements.
It was said at par 12 of the Comb affidavit that the plaintiff company has not received written notification of the details of any education trust fund for the purpose of paying moneys pursuant to the provisions in the agreements concerning educational funds in relation to any of the subject agreements.

Subsequent events

On 5 February 2007, the Federal Court handed down a decision in relation to the Wongatha native title claim and those parts of the Koara and Wutha native title claims that overlapped with the Wongatha native title claim: Harrington‑Smith on behalf of the Wongatha People v State of Western Australia (No 9) [2007] FCA 31; (2007) 238 ALR 1.
The Federal Court dismissed the Wongatha native title claim and each of the Wutha and Koara native title claims to the extent that those claims overlapped with the Wongatha native title claim. The court did not make a final determination as to whether native title existed or did not exist. I note in passing that the dismissal of each of the Wongatha, Wutha and Koara native title claims is not, and has never been, the subject of any appeal.
It emerges from the Comb affidavit that as a result of the dismissal of the Wongatha native title claim and each of the Wutha and Koara native title claims to the extent that those claims overlapped with the Wongatha native title claim, there are presently no registered native title claims affecting the mining area as defined in the subject agreements. This is verified by a search exhibited to the affidavit in question.
It is said that the Wongatha native title claim has been dismissed in its entirety. Those parts of the Wutha native title claim that did not overlap with the Wongatha native title claim is still pending determination. Those parts of the Koara native title claim that did not overlap with the Wongatha native title claim was still pending determination until 13 October 2008 at which time the balance of that claim was dismissed. The remaining parts of the Wutha and Koara native title claims, however, do not affect the mining area.

Termination of the agreements

The plaintiff commenced processing ore from its Jaguar Development on or about 27 May 2007. The effect of cl 4.2(2) of the agreements was to require the plaintiff to make payments of $90,000 under each agreement within 14 days of the commencement of the processing of ore. Further, as I indicated in earlier discussion, the plaintiff was required to make payments of $10,000 under each agreement upon the commencement and subsequent anniversaries of the processing of ore to an educational trust fund nominated in writing by the 'native title parties'. In fact, the term in question is not defined in any of the agreements.
These provisions created difficulties in the circumstances mentioned earlier because at the time of commencement of ore processing there had been a dismissal of the applications for native title in respect of the mining area. This meant that there was no final determination of native title in respect to the mining area and there were no 'registered native title claim groups' to whom payments could be directed. Moreover, the plaintiff had not received written notification of the details of any trust funds nominated by the 'native title parties'.
It was against this background that on or about 23 October 2007, the subject agreements were terminated by the plaintiff pursuant to cl 10.3(c) of the Wutha and Koara agreements and cl 10.3.3 of the Wongatha agreement, each of which provided that the plaintiff could by notice to the other party terminate the agreement if the relevant native title claim was withdrawn or ceased to affect the mining area.
For example, by letter dated 23 October 2007 the plaintiff wrote to Mr Thomas of the Wongatha People at an address in Kalgoorlie in these terms (omitting the inessential parts):
Jabiru Metals Ltd, trading as Pilbara Mines Ltd, entered into the mining project agreement (the agreement) with the Wongatha claimant group (the claimants) on 26 March 2004.
By order made 5 February 2007, Lindgren J dismissed the Wongatha native title claim.
This letter is notice to the claimants in accordance with clause 14 of the agreement that Jabiru Metals Ltd hereby terminates the agreement in accordance with clause 10.3.3 'the miner may by notice to the other party terminate this agreement if:
(i)The native title claim is withdrawn or ceases to affect the mining area.
If you have any queries in relation to the above please do not hesitate to contact me.
Letters to the same effect were written to Mr Ron Harrington‑Smith as spokesperson for the Wutha People at an address in Kalgoorlie and to Ms Geraldine Hogarth as spokesperson for the Koara People at an address in Leonora.
It is said in the Comb affidavit that the plaintiff has not made the payments contemplated in cl 4.2(2) of each agreement as there are no registered native title claimants whose native title claims affect the mining area to whom moneys can be paid. The plaintiff has also not made the payments contemplated by the educational fund provisions of each agreement as it has not been advised to whom the payments should be made and because it cannot be so advised in that the 'persons' to provide the advice no longer exist.
By letter dated 3 September 2008 the plaintiff's lawyers, Hunt & Humphry, wrote to the second defendants' lawyers, Mony de Kerloy, proposing to seek declarations as sought in the originating motion filed in these proceedings to the effect that as to each agreement the agreement was terminated for frustration as at and from 5 February 2007 as a result of the dismissal of all native title claims affecting the mining area. It was said that the plaintiff sought the support of the second defendants to that course of action. The letter contained a proposal described to ameliorate to the situation that had arisen.
It was said in the letter that the plaintiff was a listed company with the result that any payments aimed at resolving the situation that had arisen had to be made pursuant to an agreement or a court order. The proposal was that the plaintiff pay the sum of $100,000 to a trust account nominated by the Wutha People upon the court making orders for declaratory relief as sought in the originating summons before the court upon the basis that the relief mentioned in the summons would not be opposed. Letters to the same effect were sent to representatives of the other defendant parties.
The second defendants' lawyers confirmed the second defendants' support for the proposal by returning a countersigned copy of the letter written by the plaintiff's lawyers.
By letter dated 27 August 2008 the plaintiff wrote to the first defendants proposing declaratory relief as sought in the originating summons and seeking the support of the first defendants to that course of action. The first defendants (other than the person with the initials 'SC' who was deceased) confirmed the first defendants' support for the proposal by returning a countersigned copy of the letter dated 23 September 2008 to 17 December 2008.
By letter dated 27 August 2008 the plaintiff wrote to the third defendants' representative, Goldfields Land and Sea Council, proposing declaratory relief as sought in the originating summons and seeking the support of the third defendants to that course of action. The Goldfields Land and Sea Council confirmed the third defendants' support for the proposal by returning a countersigned copy of the plaintiff's letter under cover of a letter dated 5 September 2008.
The plaintiff company affirmed in its written submissions, and by further submissions at the hearing, that the plaintiff is prepared to undertake its accrued obligations (such as may exist) on a voluntary basis. Its commitment in that regard is verified by the letters sent to the interested parties and the acceptance of the proposal reflected in the countersigned letters. Underlying the plaintiff's stance is the recognition that the plaintiff is commercially unable to make voluntary payment if there is a risk of claims by persons asserting entitlement under s 11(2) of the Property Law Act 1969 (WA) whereby a contract that purports to confer a benefit upon a person is enforceable by that person irrespective of whether he or she is named as a party to the contract. The proposed payments, accompanied by declaratory relief, is a means of securing the plaintiff against any future claims.
In essence, the plaintiff submits that it is entitled to declaratory relief of the kind sought in the originating summons (as amended) because the subject agreements have been lawfully terminated pursuant to legal principles concerning frustration. Further, the discretion to provide declaratory relief in these circumstances should be exercised in the manner proposed by the plaintiff because payments are to be made to the defendants as persons with an interest under the agreements.
More particularly, the orders sought by the plaintiff company in these proceedings are as follows:
1.A declaration that the agreement between the Plaintiff and First Defendant dated 26 March 2004 is terminated by reason for frustration as at and from 5 February 2007 as a result of the dismissal of all native title claims affecting the Mining Area (as that term is defined in the agreement) pursuant to the Federal Court decision in Harrington‑Smith on behalf of the Wongatha People v Western Australia (No 9) [2007] FCA 31 (5 February 2007).
2.A declaration that [the agreement between] the plaintiff and Second Defendant dated 26 March 2004 is terminated by reason for frustration as at and from 5 February 2007 as a result of the dismissal of all native title claims affecting the Mining Area (as that term is defined in the agreement) pursuant to the Federal Court decision in Harrington‑Smith on behalf of the Wongatha People v Western Australia (No 9) [2007] FCA 31 (5 February 2007).
3.A declaration that the agreement between the plaintiff and Third Defendant dated 10 November 2004 is terminated by reason for frustration as at and from 5 February 2007 as a result of the dismissal of all native title claims affecting the Mining Area (as that term is defined in the agreement) pursuant to the Federal Court decision in Harrington‑Smith on behalf of the Wongatha People v Western Australia (No 9) [2007] FCA 31 (5 February 2007).
4.There be no orders as to costs.
It will now be useful to look briefly at the principles bearing upon termination of contract for frustration.

Legal principles

It appears from Cheshire & Fifoot's Law of Contract (9th Aust ed) at par 19.1 that events may occur after a contract has been made that make a party's performance pointless, more difficult, or more costly, or even impossible. Such events can result in the termination of the contract by operation of law, on the basis that it has been frustrated.

The authors note that the courts are not easily persuaded that a contract has been terminated by supervening events affecting its performance, for all contracts involve the assumption by a party of an obligation to perform in the face of an uncertain future. Nevertheless, a doctrine has gradually evolved that allows for the automatic termination of a contract if events occur that result in a situation fundamentally or radically different from that in contemplation when the contract was made.
The leading modern case is Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337. In that case Codelfa agreed to excavate two tunnels for the authority, at a price based on work proceeding around the clock, seven days per week. The work generated considerable noise and vibration. Injunctions were granted to the local council and residents. Codelfa was forced to cease noisy work at night and on weekends. The High Court held that the contract had been frustrated. All members of the court agreed that there had been a fundamental or radical change of the situation. This satisfied the test of frustration, namely, as to whether the situation resulting from the grant of the injunction was fundamentally different from the situation contemplated by the contract.
It appears from Cheshire & Fifoot at par 19.26 and par 19.27 that at common law it is axiomatic that a frustrating event terminates the contract automatically. Termination is prospective from the time of frustration. In this respect termination by frustration is like termination for breach or non‑fulfilment of a contingent condition. It follows that rights accrued at the time of frustration are not affected, including the right to sue for damages for any breach that occurred prior to frustration, or to recover a payment fallen due under the contract. As the contract is not invalid ab initio, operational terms, such as dispute resolution clauses, are also not affected by frustration.
As to declaratory relief, s 25(6) of the Supreme Court Act 1935 (WA) gives the court power to make declarations of right without granting consequential relief. Order 18 rule 16 of the Rules of the Supreme Court 1971 (WA) provides more broadly that the court may do so whether or not any consequential relief is or could be claimed.
The decided cases underline that the courts have general declaratory power, whether or not other relief is or could be sought. However, the courts have exercised restraint in exercising the power and will generally not make a declaration on a theoretical question or one in which no dispute exists or which is hypothetical. To be within judicial power a judicial determination must involve a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy, resulting in the final determination of the rights of the parties: Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at 355. The existence of a right (which includes privileges, powers and immunities) is a matter going to the discretion rather than to the jurisdiction to grant declaratory relief: Connell v Reynolds SM (1993) 9 WAR 27 at 30.
In Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 the High Court made it clear that the power to provide declaratory relief is broad but is limited by the court's discretion.
These observations were made by Gibbs J at 438:
The question whether the court should make a declaration which would have the effect of deciding a question in issue in pending proceedings may often be of some difficulty. It is of course important that the proceedings in the present case were not pending in an ordinary court. However, there were some obvious reasons why a judge should hesitate before intervening when the matter was about to come before the Warden. It was, of course, possible that the Warden would give effect to the contention that Jododex held a valid exploration licence and would therefore refuse to grant any authority to enter to the appellant. The Warden might have declined to grant the appellant's applications for some other reason. Moreover, if it were ultimately held that Jododex's contention ought to fail, the proceedings before the Warden would have been delayed and the appellant would have been put to additional cost and inconvenience. On the other hand, to determine the existence of the right which Jododex sought to establish, it was necessary to ascertain the true meaning and effect of a statutory provision and of an instrument in statutory form. These were pure questions of construction such as would appropriately be decided in the Supreme Court. They were difficult questions, and apparently rights of considerable value depended on the answers to them. When all these conflicting considerations are weighed, it seems to me that it cannot be said that it was not a proper exercise of judicial discretion to proceed to make a declaration in all the circumstances of the case.
In Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 questions arose as to whether a contract had been terminated. Barwick CJ and Jacobs J made these observations at 307:
Unless the parties are agreed on the consequences which flow from a declaration that such a contract has or has not been validly rescinded it is generally undesirable that a court should so declare without any orders for consequential relief. If a party to such a contract claims that a contract has not been validly rescinded such a judicial declaration is proper if that party continues ready and willing at the conclusion of the litigation to perform the contract. A consequence of the declaration should be that the parties submit to the performance of the contract on his part and to an order for specific performance of the contract if that is appropriate. If such an order is not or cannot be made, nor an enquiry into damages ordered, then a declaration that on a certain day the contract had not been validly rescinded serves no purpose in the litigation.

Conclusion

It emerges from a consideration of the decided cases that in the present case the critical issue is whether the situation that has arisen is fundamentally different from the situation contemplated by the contracts. In the end, I am of the view that such a finding can be made. In relation to each of the agreements, it is clear that the parties contemplated that at all times there would either be registered native title claims (before a hearing) or a final determination of native title (after a hearing and decision). I am persuaded that the parties did not contemplate a situation where there would be no native title claims affecting the mining area (as that term is defined in the agreements).
Further, in the circumstances that have arisen, performance by the plaintiff of its remaining obligations under the subject agreements (namely the making of the payments required pursuant to cl 4.2(2), cl 6.3 and cl 7.2) has become impossible because there are no longer any relevant persons to whom the payments are able to be made. It can be said also that it is not possible to identify with any precision any persons to whom the payments must be made to discharge the relevant obligations (bearing in mind that the payment to the wrong persons would not be a sufficient discharge of the relevant contractual obligations). A basis for providing declaratory relief of the kind sought has therefore been demonstrated.
However, it appears from the decided cases that the power to grant relief is discretionary with the result that factors bearing upon the exercise of a discretion in the circumstances of the present case must be considered. To my mind, the issues raised by the originating summons cannot be regarded as merely hypothetical or theoretical issues. The evidentiary materials point to an underlying reality that the processing of ore in the manner contemplated by the agreements has commenced and the mining company recognises that in the modern era negotiations with native title claimants are necessary, notwithstanding differences of opinion as to the merits of a particular plea.
There is also a recognition that the proposed payments bear upon the question of possible accrued entitlements prior to the termination of the agreements. Unlike the circumstances described by Barwick CJ and Jacobs J in Neeta, it appears from the materials before me that the parties in the present case are agreed on the consequences which will flow from declaratory orders of the kind sought by the plaintiff.
It emerges from the materials that such obligations as may have accrued prior to termination will be met voluntarily by the plaintiff (subject to the declarations being made) albeit that such obligations are arguably not enforceable by the reason of frustration. The qualification that declarations be made is necessary because the plaintiff is commercially unable to make voluntary payments if there is a risk of claims by persons asserting entitlement under the agreements pursuant to s 11(2) of the Property Law Act 1969 (WA). In this regard, the plaintiff requires legal certainty that it will be protected from any future claims.
I am of the view that the commitment by the plaintiff to fulfil its obligations, as evidenced by the countersigned letters mentioned earlier, is a factor which weighs strongly in favour of the court exercising its discretion to make the declarations sought. In other words, the intention is to ensure that the accrued obligations be discharged but without leaving the plaintiff open to a double jeopardy of potentially having to discharge obligations on more than one occasion.
It bears upon the exercise of the discretionary power also that no objection has been raised to what is proposed. I was informed by counsel for the defendants that they are not aware of any objections. The payments in question will be made to the trust accounts of the solicitors representing the defendant parties and will be dealt with accordingly.

Summary

In summary, then, I will make orders in terms of the orders sought by the originating summons (as amended), being the orders described in earlier discussion. In that regard, for the avoidance of doubt the second order is to include the words 'the agreement between' after the word 'that' in the first line.