Lee & Anor v His Honour Warden Calder SM & Anor

[2008] HCATrans 156

[2008] HCATrans 156

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth   No P34 of 2007

B e t w e e n -

GEORGE FRANCIS LEE AND WARWICK JOHN FLINT

Applicants

and

HIS HONOUR WARDEN CALDER SM

First Respondent

HORSESHOE GOLD MINE PTY LTD

Second Respondent

Application for special leave to appeal

KIRBY J
HAYNE J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 18 APRIL 2008, AT 11.25 AM

Copyright in the High Court of Australia

MR S.J. GAGELER, SC:   If the Court pleases, I appear with MR N.P. GENTILLI for the applicant.  (instructed by Jackson McDonald)

MR C.L. ZELESTIS, QC:   If the Court pleases, I appear with MR M.F. GERUS for the second respondent.  (instructed by Blakiston & Crabb)

KIRBY J:   The Court has a submitting appearance for the first respondent.  Yes, Mr Gageler.

MR GAGELER:   Your Honours, I do not propose to bother you with the questions of fact and procedure which occupy much of the written submissions.

KIRBY J:   I do wish you had told us that before, Mr Gageler.  We struggled and struggled trying to see what you were getting at.  To this moment I was unclear about it.  Anyway, we can concentrate on the construction of the Act, which did seem your better argument.

MR GAGELER:   Your Honours can focus on what we see is a quite good, quite discrete and quite important question of construction that arises quite squarely ‑ ‑ ‑

KIRBY J:   Construction of the regulation, rather.  Regulation 31.

MR GAGELER:   The regulation within the scheme of the Act.

KIRBY J:   Yes.

MR GAGELER:   In that respect ‑ ‑ ‑

HAYNE J:   Just before you come to that, is this advanced as some species of error on the face of the record and the base proceedings are certiorari?

MR GAGELER:   And mandamus.

HAYNE J:   But mandamus runs if, but only if, certiorari quashes, surely?

MR GAGELER:   We can do it in two ways, your Honour.  Let me say it was common ground that if there was an error of law, then we would be entitled to some form of relief.  We can say it is either an error of law on the face of the record or, probably sufficiently for our purposes, if there was an error of law in the manner in which the warden applied regulation 31, then there was a constructive failure to exercise jurisdiction and mandamus would run independently of certiorari.  Your Honour might think they are interesting questions and they could well and truly be debated on appeal.

HAYNE J:   No.  I just want to understand the field of discourse because that comes to identifying the precise error of which you complain.

MR GAGELER:   Yes, and it is a very precise error of law, your Honour.  Can I go to page 80 of the application book where the special leave question, as we now confine it, appears fairly starkly in paragraph 45 of the judgment of Justice McLure in the second sentence.  Your Honours, paraphrasing that sentence only slightly, the special leave question is whether:

following the cessation of mining operations –

here a full decade before the period in question –

and in the absence of any intention to conduct future mining, expenditure [that is simply] for the purpose of complying with conditions of the mining lease is capable of being “in connection with mining”.

Her Honour’s conclusion, two sentences further on, that there is nothing or “no basis in the language or purpose of the Act and Regulations” that leads to a reading‑down of the expression “in connection with” to exclude expenditure of that kind is, in our submission, one, wrong on a proper understanding of the Act and regulations but, two, and in any event, inconsistent with previous Full Court authority which her Honour in this judgment does not grapple with, indeed, does not even acknowledge, your Honours, to make that ‑ ‑ ‑

KIEFEL J:   Her Honour does not deal at any other point in her judgment with the notion of the purpose of the Act.

MR GAGELER:   Her Honour touches upon the purpose of the Act in paragraphs 38 and 39 at the bottom of page 78 and at the top of page 79.  Her Honour in that context failed to refer to the earlier case of Nova Resources, which I want to come to in just a moment, and stated a policy at the top of page 79 which, in our submission, is wrong.  It is not the policy of the Act and it is certainly not the policy of the Act as explained in Nova Resources.  Where I want to go and I do need to go, I am afraid, just in a little detail but within 20 minutes, is to the Act, the regulations and Nova Resources, but where is want to get to, your Honours, is this. 

When you understand the scheme of the Act and the regulations and particularly when you understand the definition of “expenditure conditions” in section 8 of the Act, what you will see is that there is a distinction that is drawn between expenditure that is in connection with a lease and expenditure that is in connection with mining on a lease.  An expenditure in the former category, and the findings of the mining warden simply place this expenditure in the former category, does not thereby become expenditure in the latter category.

KIRBY J:   Is the argument of construction that you urge on us that, having regard to its language and purpose, the object is to get people with licences to actually extract?

MR GAGELER:   That is the whole idea, yes.  When you understand where the regulation fits within the statutory scheme, what you find is that a person who has a mining tenement, except in a very special case of a retention licence, which is meant to park the resource for later exploitation, has to use that mining tenement to promote or advance mining.  If the person is not expending money for the promotion or advancement or furtherance of mining now or at some time in the future, then the person can, at the application of anybody else, lose the mining tenement.  It is a use it or lose it scenario.  If you are not going to use it, then you lose it.  You move over and you make way for someone who is going to use it.  That is the basic scheme of the Act, your Honours.  Can I go to the Act.

KIRBY J:   That point would be quite an important point, one would think, for the administration of the Act.

MR GAGELER:   It goes to the heart of the scheme of the Act, your Honour, yes.

KIRBY J:   It is either right or wrong.  I mean, there are arguments against your construction in the actual language and the definition of “mining” and of “mining operations”.  There are arguments against it but going for you is the fact that it is a sort of threshold question of the obligation of those who get these licences.

MR GAGELER:   Yes, your Honours, within the scheme of the Act and I really just need to go to three tabs within this large bundle of authorities that your Honours have.  Behind tab 1 is the Act and, as your Honours are aware, the Act creates a number of forms of mining tenement.  I have mentioned the exception, which is the retention licence.  The rule is, the other forms of tenement, a prospecting licence, an exploration licence and a mining lease, each of which is automatically subject to prescribed expenditure conditions.  There is no need, your Honours, to turn precisely to these sections.  But a prospecting licence by virtue of section 46 is deemed to be granted subject to the condition that the holder of the licence will prospect and under section 50 carries an obligation to comply with the prescribed expenditure conditions.

One sees the same thing in relation to an exploration licence; section 63.  It is deemed to be granted subject to the condition that the holder will explore and under section 62 carries the obligation to comply with prescribed expenditure conditions.  And then more relevantly for present purposes, section 82, which deals with mining leases, says in subsection (1) that every mining lease is deemed to be granted subject to conditions; relevantly (b), that the holder will use the land only for mining purposes, and (c) will comply with prescribed expenditure conditions.

In respect of prescribed expenditure conditions, section 102 makes provision for the tenement holder in each case to seek and obtain an exemption from those conditions for a period of up to five years for one of the reasons set out in subsection (2), and your Honours will see they are relevantly narrowly drafted reasons, or ‑ ‑ ‑

KIRBY J:   That was not in fact done in this case.

MR GAGELER:   No, it was not.

KIRBY J:   But you draw on the fact that there is this entitlement to seek it but that it is limited.

MR GAGELER:   This is the way to do it.  You either seek an exemption under section 102 if you want to do nothing on the lease, nothing directed towards mining, or you seek a retention licence which is designed for that very purpose.  But absent one of those two options being taken, then the expenditure conditions apply.  The scheme of the Act then is in sections 96 in the case of a prospecting licence or section 98 in the case of an exploration licence or a mining lease.  Section 98 is at page 140 of the print, your Honours.  What you see there is that:

Where the requirements of this Act are not being complied with in respect of the expenditure conditions applicable to an exploration licence or a mining lease, [then] any person may apply –

for forfeiture, the application gets heard by a mining warden under subsection (3) and the mining warden can make the recommendation that is referred to in subsection (4)(a), leading to forfeiture in the discretion of the Minister under section 99(1)(a).  Significantly – and this is really an important part of the statutory scheme – under section 100 the person who successfully made that application for forfeiture under section 98 gets priority in applying for a new tenement to take over the exploration or mining on site.  Your Honours, if you then look back to section 8 at page 5 of the print, what you see ‑ ‑ ‑

KIRBY J:   This may be where you start to run into a few problems with artificial definitions of “mining” and “mining development”.

MR GAGELER:   This helps me, your Honour.  This bit really helps me.

KIRBY J:   Always look on the bright side of things, Mr Gageler.

MR GAGELER:   If your Honours look at page 5, what you see is a definition of “expenditure conditions” and what it says is:

“expenditure conditions” in relation to a mining tenement means the prescribed conditions applicable to a mining tenement that require the expenditure of money on or in connection with –

then your Honours can insert (1) –

the mining tenement –

or (2) –

the mining operations carried out thereon or proposed to be so carried out [thereon] –

So there is a latitude given in the definition for the regulations, if those making mining policy in Western Australia so chose, to make expenditure conditions applicable simply to the mining tenement, but that has not occurred.

HAYNE J:   The other possible construction of that is that it is simply cast in those terms to account for its necessarily distributive operation to the variety of mining tenements to which it must be applied.

MR GAGELER:   That would be a difficult construction, your Honours.  If you go to the way in which the regulations have been formulated, which are behind tab 2, you will see in relation to regulation 15, which deals with the prospecting licence, a form of words, it requires expenditure “in connection with mining on the licence”, not in connection with the licence itself.  You see the same structure in regulation 21, expenditure “in mining on or in connection with mining on the licence”, and you see the same structure, relevantly for present purposes, in regulation 31, the expenditure is “in mining on or in connection with mining on the lease”.

KIRBY J:   “Mining” is not actually defined in section 8, is it?

MR GAGELER:   Yes, it is, your Honour.

KIRBY J:   It has an extension, but it does not seek to define the word.

MR GAGELER:   Sufficiently, it includes – this is at page 7 – prospecting, clearly the subject matter of a prospecting licence; exploring for minerals, the subject matter of an exploration licence; or mining operations and then “mining operations” is defined.  It is mining operations which had here ceased 10 years before the year in question.  If your Honours then go to Nova Resources, which is the third of the tabs I wanted to take you to.  It is behind tab 4.

HAYNE J:   I am sorry.  Just pause a moment at “mining” and “mining operations”, would you?  “Mining” includes mining operations; “mining operations” includes “the doing of all lawful acts incident or conducive to” such operations.

MR GAGELER:   Yes.

HAYNE J:   Are they necessarily prospective?  Do they include matters retrospective?

MR GAGELER:   Your Honour, I would not want to be too strict about the temporal element of the expenditure.  One can see that in some circumstances there will be expenses that are so closely related to activities that have occurred that they can be seen as really part of the activities; yes.

HAYNE J:   Just so.  The criterion to be applied cannot be a temporal one, can it?

MR GAGELER:   Certainly not a strict temporal one.  But, your Honour, here the finding was – and this is at page 32, paragraph 97 of the warden’s reasons – that:

the tenement holder simply has no plans at all concerning the mine other than to hold on to the tenement.  That has been its intention and purpose from the time extractive and processing operations ceased in 1994.

KIRBY J:   But would it not be open to inference that expending these not insubstantial annual sums that either the respondent was seeking to maintain its chances of returning to actual extraction or to maintain the value of its capital asset?

MR GAGELER:   Maintaining the value of capital asset is simply not something that the holder of a tenement can do under the scheme of this Act.  That is really what regulation 31 put with section 98 put with section 100 ‑ ‑ ‑

KIRBY J:   The respondent rather suggests in its submissions that one of the problems of mining in Australia is leaving unattended large areas of unmaintained ex‑mines, or possibly ex‑mines, and that that is a very narrow construction of the Act that you are urging.  The problem is the Court of Appeal really did not grapple with this issue at all.

MR GAGELER:   It did not grapple with this.  Can I take you then to the case that really squared in point that was raised in argument before the Court of Appeal.

KIRBY J:   You might win or you might lose, but one would think it is a significant issue.

MR GAGELER:   Yes.  Your Honour, I probably should stop talking at that point.  Behind tab 4 is the case of Nova Resources, not referred to by the Court of Appeal in the present case.  At the bottom of page 57 your Honours see a paragraph that begins, “Before dealing in detail”.  It is the entirety of that paragraph, except the last sentence, that expresses the policy of the Act as we would urge it, as it was urged to the Court of Appeal in the present case and which, if accepted, would strongly support the construction for which we contend.  If your Honours please, those are our submissions

KIRBY J:   Thank you, Mr Gageler.  What do you say, Mr Zelestis?

MR ZELESTIS:   May it please your Honours.  There are two significant aspects of the construction question which need to be understood.  The first is that, as I apprehend the argument which my learned friend seeks to make, is that it is not suggested that on the proper construction of the regulation an intention to mine is imported into it as an element with respect to activities which precede extractive mining.  One only has to contemplate for a moment how destructive of the intention of the regulation such a construction would be.

We accept, of course, that the concept of mining that is employed here includes exploration, fossicking and doing a lot of practical things short of extractive mining.  It also, of course, includes extractive mining.  But one needs to understand the nature of the process of mining.  It will usually involve beginning with a degree of exploration.  That may progress to drilling.  There will then usually be a period of assessment of results in which nothing happens in the field but a lot happens in offices where people apply intellectual skills and computer programs and analyse the results of the drilling.

KIRBY J:   Not indefinitely, one would think.  Not indefinitely.  I mean, the reference in that definition to five years indicates that Parliament has a sort of time meter going here.  Mr Gageler was ultimately driven by Justice Hayne’s question to a point where I thought he said, “Well, we are not introducing a strict time element, but you get to a point where, if you are just doing nothing but maintaining your resource or your capital asset, that is destructive of the scheme and purpose of the Act and that that is something the Court of Appeal did not address”.

MR ZELESTIS:   The question is whether that finds expression as a construction which imports the notion of intention.  What I am seeking to elucidate is the proposition that there is a very important distinction in this context not brought out by our opponents, indeed, criticised when they respond to our submissions, between intention and purpose.  A miner at the point of studying data, thinking about how one might design a mining process, seeking to raise capital and thinking about how one might raise capital may be doing things in a sense for the purpose of mining without having anything that qualifies as an intention to mine.  That concept is very different.

Here in this case there is an element of perversity within the case which the applicants seek to put against us because, as your Honour Justice Kirby has pointed out, the very purpose of the not inconsiderable expenditure which Grange was carrying out on this tenement – or Horseshoe, its subsidiary, was carrying out – was for the purpose of keeping open the possibility of mining.  That was the purpose.  There was no intention to mine in the sense that there was a specific plan that mining in the extractive and processing sense was to occur, but, as a matter of purpose ‑ ‑ ‑

KIRBY J:   Did you seek before Warden Calder to demonstrate that you were analysing rock samples and doing things anterior to taking the matter further?

MR ZELESTIS:   No.  What we sought to demonstrate was that rehabilitation ‑ ‑ ‑

KIRBY J:   You were maintaining.

MR ZELESTIS:   ‑ ‑ ‑ of the entire lease was being postponed in the final sense so that the resource which comprised partly material at the bottom of the pit and partly material which had been mined but was of low grade was not put beyond the reach of future mining.  That meant that there was a tailings dam which contained deleterious material which required a degree of monitoring.  There were bores around the tailings dam which required an annual report to the department but in the meantime there had to be monitoring on a regular basis in order to get the data to put to the department.

So there are the consequences of the previous mining which had not been finally disposed of.  Final disposition may, for example, involve putting a lot of material that is now above the surface into the pit.  If you do that, of course, then you will never access the material beneath the pit.  It was clear, in our submission, on the findings – and the warden found that this was a reasonable approach to take; that is the expression, reasonable, that he used – was that, instead of bringing about final rehabilitation and effectively putting future mining both of the in situ material and the low grade mine material out of reach, a lot of money was being spent to keep the possibility of mining alive.  That is why I say there is an element of perversity, because our learned friends seek to exploit in truth a narrow distinction between intention and purpose.

KIRBY J:   That is a fair point and it is a point Justice McLure latched onto, really, and she painted you as a very environmentally‑friendly sort of person and that is how you paint yourself.

MR ZELESTIS:   No, not at all; not environmentally friendly, just ‑ ‑ ‑

KIRBY J:   But the important point, at least arguably, is that the purpose of the statute and of giving parties rights such as the applicant has exercised is to actually get things out of the land.

MR ZELESTIS:   With respect, no, your Honour, for two reasons.

KIRBY J:   Not a point; not a purpose; not relevant?

MR ZELESTIS:   No.  There is a purpose of encouraging the exploitation of the State’s resources.

KIRBY J:   Yes; quite.

MR ZELESTIS:   But there is no purpose of encouraging it to be done when it is uneconomic.  It is very important to understand – my learned friend said something about use it or lose it.  A person such as the applicant here who plaints a tenement does not itself have to establish that it intends to mine, that it has the capacity, the intention, the resources, to mine.  The other thing to bear in mind is, as Justice McLure pointed out, a mining lease itself does not impose an obligation to mine in the extractive or exploration sense.  All that is imposed is an obligation to expend money in mining or in connection with mining on the ground.

One can see that, insofar as the object is to encourage the exploitation of the resources, we say implicitly to do so responsibly Parliament would not expect it to be done uneconomically.  This was the very purpose which was being employed here.  The purpose was to keep the mining operation a possibility.  In effect, what the applicants are saying is, well, because you did not intend to mine, expenditure which was directed to ensuring that the ground and the low‑grade material which had been mined was available did not qualify.  That is why we say there is an element of perversity.

The other thing to appreciate, with respect, as regards this being an for application for special leave is that there was only some $97,000 of expenditure required, some $34,000 was conceded and the difference of some $60,000‑odd out of total expenditure of $240,000 is not a great amount to find when one realises that, as regards the conditions of the lease, there were works which had to be done to monitor the deleterious material in the tailings dam.  As one of the witnesses said in the evidence, when it rains the bunds which protect this tailings dam need to be inspected because the bunds wash away.  They need to be pushed back up.  The caretakers can do that to some extent themselves.  If it requires more work, they get a contractor in.

The response to that by the applicants was you did not need to be there full time, but one cannot tell when weather conditions, wind and rain, are going to intervene and require this kind of maintenance to occur.  So for the applicants to succeed in the end, they have to establish, in effect, that the way in which the company went about looking after the deleterious material was unreasonable and, in the face of the findings by the warden, it was not.  So in the end there are some nitty gritty factual issues which, in our submission, make this an unsuitable vehicle.

KIRBY J:   You will recall at the very beginning of argument Justice Hayne asked a question of Mr Gageler about the process that is before us.  One has to be a little careful here, but the process was an application for a writ of certiorari and mandamus directed to the warden, was it not?

MR ZELESTIS:   Yes.

KIRBY J:   That normally brings in the baggage, unless there is something in Western Australian procedural law, the Supreme Court Act or something like that, that you have to establish the ingredients that are laid down for those prerogative writs.  You do not appear to have raised any issue about this at all.  Can we put that out of our minds?

MR ZELESTIS:   In our submission, yes, because, as it has emerged, what is really being said, which was really what was being said in the Court of Appeal, albeit after some struggle to get there, with respect, was that at the foot of the problem was an error of construction of the regulation.  If that is found, that is an error of law and we accept that that emerges.

KIRBY J:   That emerges on the face of the record by the reasons of the warden or the judge.  Is that how it happens?

MR ZELESTIS:   Yes, of necessity it emerges, in our submission.

KIRBY J:   When I was in the Court of Appeal 25 years ago there used to be very big arguments as to whether those reasons constituted a part of the record for the purpose of – but we can put that out of our minds, can we?  You accept that, if there was a misconstruction of the regulation, that will found certiorari and mandamus?

MR ZELESTIS:   There are local decisions of the Full Court some years ago bringing these reasons in as part of the record, with respect.

KIRBY J:   Yes.  I tried to do that in the Court of Appeal but I am not sure that everyone agreed.  I am glad to hear that things have progressed in a sensible fashion.

MR ZELESTIS:   Another refinement of our argument, of course, which needs to be noticed is that if there are conditions of the mining lease itself, which is the very tenure that one has, which require works to be done – and there were conditions here regarding the monitoring of the tailings dam and matters of that kind – then, in our submission, expenditure on them, directly related to them, is necessarily expenditure incidental to mining when ‑ ‑ ‑

KIRBY J:   I think you are scraping the bottom of the tailings now, Mr Zelestis.

MR ZELESTIS:   It is dealing with the consequences of mining.  The consequences of mining are just as important as those things which precede mining, in our submission.  Those are our submissions.

KIRBY J:   Thank you, Mr Zelestis.  Yes, Mr Gageler?

MR GAGELER:   Your Honour, Mr Zelestis’s client wants to sit on what is potentially a very valuable resource.

KIRBY J:   Well, he is not actually sitting on it.  He is spending money and that is surely a good thing for people who own tenements to do.

MR GAGELER:   What he is doing is he is complying with his environmental obligations.  That is the only relevant finding of the mining warden at page 30, paragraph ‑ ‑ ‑

HAYNE J:   I would take a deal of persuasion, Mr Gageler, to accept the proposition that both parties to this litigation were motivated other than by the steeliest‑eyed commercial consideration.  For your side to suggest that the other side is somehow ignoring economics is an unusual submission.

MR GAGELER:   That was preamble, your Honour, to getting to the finding of fact.  I am no white knight, your Honour.

HAYNE J:   You are not commercially stupid either, I assume.

MR GAGELER:   No, but what I am doing is exercising a right given to me by section 98 in combination with section 102 which furthers the purposes of the Act.  The critical finding of fact is at paragraph 93, second sentence, that the duties these caretakers were performing “related to obligations that arose out of conditions attached to the tenement”.  That is a bit scrappy but there you have it.  The only relevant finding is that the expenditure was in compliance with conditions of the lease.  There are no messy factual questions, unless that is enough to bring the expenditure within regulation 31, then we win.

HAYNE J:   What exactly is the construction of 31 that you say should have been adopted but was not?

MR GAGELER:   Can I say it in two parts?

HAYNE J:   Please.

MR GAGELER:   Positive and negative.  We say that expenditure that is simply for the purpose of complying with conditions of a mining lease, which is the only relevant finding of fact, is not expenditure that is thereby in connection with mining on the lease.  That is point one.  Point two is putting a proposition more positively on a proper view of the legislative purpose of regulation 31.  Read in the context of section 98 and sections 100 and 102, for expenditure to be in connection with mining on a lease it must be expenditure which promotes, furthers or advances mining on the lease.  That is the construction.  If the Court pleases.

KIRBY J:   That means promotes extraction?

MR GAGELER:   Extraction, or things that are described within the definition of “mining operations”, your Honour, all of which are of or incidental to the process of extraction.

KIRBY J:   Yes.  We will take a short time to consider this matter.

AT 11.58 AM SHORT ADJOURNMENT

UPON RESUMING AT 12.01 PM:

KIRBY J:   The applicants applied to have a mining lease granted to the second respondent forfeited on the ground of the failure of that respondent to comply with the expenditure conditions prescribed by regulation 31 of the Mining Regulations made under the Mining Act 1978 (WA). The application was refused by a Mining Warden and the applicants sought writs of certiorari and mandamus from the Supreme Court of Western Australia.

The Court of Appeal of the Supreme Court discharged the orders of certiorari and mandamus.  The principal reasons for that court were given by Justice McLure.  Her Honour acknowledged that regulation 31 required the holder of a mining licence to expend a specified amount per hectare each year “in mining and in connection with mining”.  However, she pointed out that “mining” was defined to include “mining operations” which, in turn, included all lawful acts incidental and conducive to mining.

The evidence showed that the second respondent had expended the requisite amount on costs of caretakers and maintenance so that appropriate extractive operations might resume.  This was held to be a sufficient compliance with the regulation.

Although there are arguments that a purposive interpretation of the relevant law might suggest expenditure on actual extractive activities, we are not in the end convinced that the argument would succeed were special leave granted.  Nor do the other complaints of the applicants warrant a grant of special leave by this Court.  Special leave is therefore refused.  The applicants must pay the respondents’ costs.

AT 12.03 PM THE MATTER WAS CONCLUDED