LRL (AUST) Pty Ltd v Drem Pty Limited

[2025] NSWCA 204

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

LRL (AUST) Pty Ltd v Drem Pty Limited [2025] NSWCA 204

Hearing dates:

27 May 2025

Date of orders:

04 September 2025

Decision date:

04 September 2025

Before:

Bell CJ at [1];
Stern JA at [80]; and
McHugh JA at [81].

Decision:

Appeal dismissed with costs.

Catchwords:

CONTRACTS – Construction – Deeds – Scope of appellant’s assumption of third party’s royalty obligation under separate deed entered between unrelated parties – Whether “proportionate share or interest” could refer to a 100% interest.

Legislation Cited:

Mining Act 1978 (WA)

Cases Cited:

Cirrus Real Time Processing Systems Pty Ltd v Jet Aviation Australia Pty Ltd (2023) 113 NSWLR 80; [2023] NSWCA 280

QBT Pty Ltd v Wilson [2024] NSWCA 114

Westpac Banking Corporation v Tanzone (2023) 113 NSWLR 73; [2000] NSWCA 25

Texts Cited:

N/A

Category:

Principal judgment

Parties:

LRL (AUST) Pty Ltd (Appellant)
Drem Pty Limited (Respondent)

Representation:

Counsel:
G Rich SC, O Jones (Appellant)
J Ireland KC (Respondent)

Solicitors:
Allens (Appellant)
McGirr Lawyers Pty Limited (Respondent)

File Number(s):

2024/448809

Publication restriction:

N/A

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity – Commercial List

Citation:

[2024] NSWSC 1422

Date of Decision:

08 November 2024

Before:

Hmelnitsky J

File Number(s):

2023/458566

HEADNOTE

[This headnote is not to be read as part of the judgment]

This appeal concerned a dispute as to whether an agreed royalty of 2% was payable by LRL (AUST) Pty Ltd (the Appellant) to Drem Pty Limited (the Respondent) on the gross proceeds of production from only 87.15% of the Appellant’s interest in certain mining tenements (as the Appellant contended) or from the Appellant’s current 100% interest in those tenements (as the primary judge held).

The parties had entered into contractual relations in 2020 by a “Deed of Acknowledgment – Drem Royalty” (the 2020 Deed). The royalty obligations originated from an earlier deed executed in 1994 between different parties (the 1994 Royalty Deed). There had previously been a joint venture between the two parties to the 1994 Royalty Deed in respect of the exploitation of some, but not all, of the relevant tenements, but that joint venture was terminated in 2014, and at the time the 2020 Deed was entered into, ownership of the tenements had been unified in the Appellant.

At first instance, Hmelnitsky J (the primary judge) determined that the Respondent was entitled to a 2% royalty on 100% of the Appellant’s interest in the Kathleen Valley mining tenements. The sole issue on appeal was his Honour’s construction based on the 2020 Deed and 1994 Royalty Deed.

The Court (Bell CJ, Stern JA agreeing; McHugh JA dissenting), dismissing the appeal, held that the primary judge was correct to interpret the relevant transactional documents as he did. Central to this conclusion was the view that a “proportionate share or interest” could refer to a 100% share or interest: [60]-[65].

JUDGMENT

1. BELL CJ: Lithium is a precious metal. Spodumene is an ore used in the production of lithium.

2. This appeal concerns the extent of the appellant’s (LRL (AUST) Pty Ltd or LRL) obligation to pay a royalty to the respondent (Drem Pty Ltd or Drem) in respect of the production and sale of spodumene in connection with tenements in the Kathleen Valley.

3. It is not in dispute that LRL is under an obligation to pay Drem royalties; the precise and only dispute is whether the LRL’s obligation is to pay a 2% royalty on the production from LRL’s 100% interest in certain mining tenements or a lesser amount, namely 2% of 87.15% of gross production. The primary judge resolved this dispute in favour of Drem: Drem Pty Ltd v LRL (AUST) Pty Ltd [2024] NSWSC 1422. LRL now appeals.

4. The dispute turns on the proper construction of two Deeds: first, a “Deed of Acknowledgment – Drem Royalty” (the 2020 Deed) entered into between LRL and Drem on 18 November 2020; and, second, a “Deed for Bullion Royalty and Non-bullion Royalty” (the 1994 Royalty Deed) entered into by unrelated parties on 28 March 1994 but which related to the same Kathleen Valley tenements which were owned by LRL but which, as at 1994, were the subject of an unincorporated joint venture between Giralia Resources NL (Giralia) (which was the original registered holder of the tenements) and Hunter Resources Limited (Hunter) which held its interest in the joint venture through a latter agreement which contemplated an “earn-in” to obtain an “ownership interest” in the underlying tenements by meeting certain expenditure obligations in respect of exploration and development during an “earning phase”. Giralia and Hunter were free to assign their respective interests under the joint venture, subject to a 30 day right of refusal by the other party.

5. By a “Deed of Assignment and Assumption” dated 28 March 1994, but the effective date of which was 26 March 1993, Hunter agreed to assign its interest in the Kathleen Valley joint venture to Sir Samuel Mines NL (SSM) in return for SSM covenanting to execute the 1994 Royalty Deed in order to grant Hunter a gross production royalty of “2%... upon the interest of SSM from time to time in the Project”: cl 3.2 of the Deed of Assignment and Assumption. The “Project” was defined in both the Deed of Assignment and Assumption and the 1994 Royalty Deed to mean “exploitation of the Tenements” which were defined and listed in a Schedule to the Deed as the Kathleen Valley tenements, Mount Harris Tenements and PL36/1142 at Violet Range: PJ [22]. It is the Kathleen Valley tenements that are of relevance in the present case.

Background

6. On 5 December 1990 and 23 September 1991, Hunter and Giralia entered the Mount Harris and Kathleen Valley joint ventures respectively, the terms of which were outlined in separate “Heads of Agreement”: PJ [12]. In both cases, Giralia was the registered holder of the tenements to which the joint ventures related: PJ [11]. Both agreements contained “farm-in” provisions whereby Hunter could increase its share or interest in the relevant tenements over time vis-à-vis its joint venture partner, Giralia. For instance, under the Kathleen Valley joint venture agreement:

1. Hunter could, through an earn-in right, obtain 51% followed by an additional 19% ownership interest if it met certain expenditure obligations and other conditions: cl 2(a)-(c); and

2. Hunter or Giralia’s interests could be diluted according to a formula expressed in cl 3, which was based upon expenditure.

7. By letter dated 26 March 1993, Hunter agreed to assign to SSM its interest in certain mining tenements in what was described in the letter as the “Joint Venture Area”, which was defined as including tenements arising under the Mount Harris and Kathleen Valley joint ventures, as well as Violet Range PL 36/1142 (the 1993 Transfer Agreement). The 1993 Transfer Agreement provided that the consideration for Hunter assigning its rights and obligations under its joint venture agreements included the granting of a royalty by SSM to Hunter, expressed as follows (PJ [19]):

“The granting by SSM to Hunter of a 2.0% Gross Production Royalty ('GPR') on SSM's interest from time to time in the Project, provided that if SSM bona fide withdraws from the Project (as distinct from its assigning its interest) it shall have no further liability to pay the GPR. Any assignee of SSM's interest in the Project must covenant, as a condition of the assignment, to pay Hunter the GPR. The GPR is to be calculated as 2.0% of gross proceeds on the sale of all minerals from the project, calculated by reference to the Perth Mint's spot buying price for gold and silver, without any deduction or allowance of any kind and shall be payable to Hunter quarterly in arrears from commencement of production.”

8. The “Project” was defined in the 1993 Transfer Agreement as “the Kathleen Valley – Mt Harris Project”. The Agreement also contemplated the transfer of PL 36/1142 (the Violet Range Tenement), which was legally and beneficially owned by Hunter and did not form part of the Kathleen Valley or Mount Harris joint ventures but was listed in Schedule 1 under a heading “Mining Tenements” in the Kathleen Valley Area: PJ [18]. The 1993 Transfer Agreement contemplated the drafting of a Deed of Assignment for SSM to assume the rights and obligations of Hunter, and a “separate deed defining the GPR”.

9. By a Notice of Assignment issued by Hunter to SSM, it was stated:

“TAKE NOTICE that by Deed of Assignment made effective 15 December, 1993, Hunter Resources Limited (A.C.N. 010 267 428) of Level 2, 21-23 Grosvenor Street, Neutral Bay, New South Wales. 2089 (‘Hunter’) has assigned all its rights and obligations in respect of the interest described in Schedule ‘A’ below· (‘the Interest’) to Technomin Australia N.L. (A.C.N. 010 216 332) of Level 2, 21-23 Grosvenor Street. Neutral Bay, New South Wales. 2089 (‘Technomin’). All further notices in respect of the Interest should be directed to Technomin.

SCHEDULE ‘A’

2% Gross Production Royalty over the interest of Sir Samuel Mines N.L. (wholly owned subsidiary of Jubilee Gold Mines N.L.) in Kathleen Valley, Mount Harris and Violet Range project tenements (Western Australia) pursuant to letter agreement dated 26 March, 1993 and all the rights of Hunter under the said letter agreement.”

Deed of Assignment and Assumption

10. On 28 March 1994, Giralia, Hunter, SSM and SSM’s parent company, Jubilee Gold Mines NL (Jubilee), entered into a Deed of Assignment and Assumption which assigned Hunter’s interests in the Kathleen Valley and Mount Harris joint ventures to SSM. The cover page to the Deed of Assignment and Assumption described the deed as: (i) a “Deed of Assignment and Assumption” in relation to the Kathleen Valley and Mount Harris joint ventures; and (ii) a “Deed of Assignment” in relation to the Violet Range Project:

11. Recitals I, J, K and L to the Deed provided:

“I.   Hunter has agreed to assign the benefit of all of its rights in the Mount Harris Joint Venture and in the Kathleen Valley Joint Venture to SSM and SSM has agreed to assume all of Hunter's rights and obligations under the Joint Venture Agreements upon certain terms and conditions.

J.   Giralia has waived its first right of refusal under clause 6 of the Kathleen Valley Joint Venture and under clause 6 of the Mount Harris Joint Venture in respect of the assignment to SSM and Giralia now wishes to record its agreement to the assignment by Hunter and the assumption by SSM.

K.   Hunter has also agreed to assign to SSM PL36 / 1142 at Violet Range upon certain terms and conditions.

L.   SSM is a subsidiary of the Parent [Jubilee] which joins in this deed to secure to Hunter performance of the GPR Deed.”

12. Clause 3.1 of the Deed of Assignment and Assumption provided that:

“Hunter now assigns to SSM and SSM now assumes with effect from the Effective Date all Hunter's rights and obligations under the Joint Venture Agreements.”

The Effective Date was 26 March 1993, being the date of the 1993 Transfer Agreement: see [7] above. The “Joint Venture Agreements” were defined as the Mount Harris and Kathleen Valley joint venture agreements.

13. Clause 3.2(b) provided that, in consideration for the assignment, SSM:

“covenants to execute upon the signing hereof the GPR Deed in order to grant to Hunter a gross production royalty of 2% (being a bullion royalty applying to gold and silver and a non-bullion royalty applying to other minerals) upon the interest of SSM from time to time in the Project.”

14. “GPR Deed” was defined in cl 1.1 to mean a “Gross Production Royalty Deed in the form of annexure ‘A’ providing for the grant by SSM to Hunter of a 2% gross production royalty (being a bullion royalty applying to gold and silver and a non-bullion royalty applying to other minerals) on SSM's interest from time to time in the Project”. The GPR Deed was the 1994 Royalty Deed, referred to below at [18]-[22].

15. Clause 3.5 of the Deed of Assignment and Assumption stated that:

“SSM and Giralia agree that SSM replaces Hunter as a party to the Joint Venture Agreements with effect from the Effective Date and that SSM and Giralia will be bound by each of the Joint Venture Agreements and have the benefit of each of the Joint Venture Agreements as if SSM and Giralia were the parties to those agreements and had been the parties to those agreements from the Effective Date.”

16. Clause 4.1 of the deed effected the transfer of the Violet Range Tenement for the “same consideration”.

17. In turn, following the Deed of Assignment and Assumption, the Kathleen Valley and Mount Harris joints ventures were operated by Giralia and SSM (which later became Xstrata Nickel Australasia Operations Pty Limited (XNAO)).

The 1994 Royalty Deed

18. Also on 28 March 1994, SSM, Jubilee and Hunter entered the 1994 Royalty Deed. The recitals provided that:

“B.    The Holder [Hunter] has assigned to the Payer [SSM] its interest under the Joint Venture Agreements and in PL 36/1142 at Violet Range in consideration of the Payer [SSM] agreeing to enter into this deed for payment of a 2% gross royalty on production from the Payer's [SSM’s] proportionate share or interest (as varied from time to time) in the Tenements (in the form of a Bullion Royalty applying to gold or silver and a Non-Bullion Royalty applying to all other Minerals.)

C.    Giralia is or is entitled to be the registered holder of the Kathleen Valley Tenements and the Mt. Harris Tenements.”

19. The key provision was cl 6.1, which provided:

“6.1   Non-Bullion Royalty Grant

With effect from the Effective Date, the Payer [SSM] shall pay to the Holder [Hunter] a royalty (the ‘Non-Bullion Royalty’) equal to the Royalty Percentage of Gross Proceeds of Saleable Product without any deduction or allowance of any kind, whether for costs of sales, production, exploration, evaluation, development, restoration, depreciation of plant, amortisation or anything else whatever.” (emphasis added)

20. Clause 1.1 defined the Effective Date as 26 March 1994, and the Royalty Percentage as 2%.

21. The meaning of “Royalty Percentage of Gross Proceeds of Saleable Product” is the product of no less than four separate defined terms which are identified and considered further below.

22. Clause 9.3 of the 1994 Royalty Deed provided that the “Holder [Hunter] may assign its interest under this Deed in whole or in part”. The parties proceeded on the basis, and it was undisputed, that there was a valid and effective assignment of Hunter’s rights under the 1994 Royalty Deed to Technomin Australia Pty Limited (Technomin), as reflected by recital 2 to the 2020 Deed, to which LRL and Drem were parties: PJ [31].

Termination of Kathleen Valley Joint Venture

23. In 2014, Giralia and XNAO (formerly SSM) terminated the Kathleen Valley and Mount Harris joints ventures by executing a “Deed of Termination – JV Agreements”. Although the Deed of Termination in evidence was undated, it is to be inferred (and this was not controversial as between the parties) that it was entered into prior to 9 June 2014 which was the date of a sale and purchase agreement. The term “Sale Agreement” in the Deed of Termination referred to this as an agreement “to be entered into”.

24. On 9 June 2014, XNAO and Giralia entered a Sale and Purchase Agreement (2014 SPA) with Ramelius Resources Pty Limited (Ramelius) concerning certain tenements, including the “Relevant Tenements” under the Kathleen Valley and Mount Harris joint ventures: PJ [33].

25. Under the 2014 SPA, Ramelius acquired XNAO and Giralia’s interests in the Relevant Tenements: PJ [56]. This gave Ramelius a 100% interest in the Kathleen Valley Tenements. At that time, XNAO’s Kathleen Valley joint venture interest was 87.15%, and this was referred to in cl 2.4 of the 2014 SPA. Clause 4.2(a) of the 2014 SPA provided that Ramelius must “assume, pay and discharge all Assumed Liabilities”. “Assumed Liabilities” was defined to include “any Contractual Liabilities” which included liabilities under the 1994 Royalty Deed.

26. Clause 9.1 of the 2014 SPA provided:

“9.1   Transfer of Contracts

XNAO and the Buyer [Ramelius] will from the Execution Date until 4 months after the Completion Date use their best endeavours to:

(a)   transfer the benefit of the Contracts to the Buyer [Ramelius]; and

(b)   have the Buyer [Ramelius] assume the obligations of XNAO under the Contracts,

to the extent that they relate to the Tenements with effect from the Completion Date by way of a Novation Deed or in a form otherwise acceptable to XNAO and the Buyer.”

Clause 9.6 provided that, for the purposes of interpreting cl 9, the “parties acknowledge that Giralia is not a party to any Contract listed in Schedule 5”, which included the 1994 Royalty Deed.

27. On 25 August 2014, Ramelius, XNAO and XNAO’s parent company (known as XNA) entered a Deed Poll in favour of Technomin, whereby Ramelius assumed XNAO’s obligations under the 1994 Royalty Deed to the extent that it related to the Tenements: Recital C and definition of Contract Interest.

28. Clause 3 of the 2014 Deed Poll contained a covenant by Ramelius in favour of Technomin as follows:

“3.   Covenant

On and from the Effective Date, the Covenantor undertakes and agrees, in favour of the Continuing Party [Technomin]:

(a)   to observe, be bound by and perform the obligations imposed on the Retiring Parties [XNAO and XNA] under the Contract Interest, whether arising before, on or after the Effective Date; and

(b)   that it will be liable for any breach of the Contract Interest committed by it or by the Retiring Parties as its predecessor, whether committed before, on or after the Effective Date.”

29. “Effective Date” was defined as meaning the later of the date of Completion or the date of execution of the Deed Poll. On either view, that was after termination of the joint ventures. “Contract Interest” was defined as the 1994 Royalty Deed as amended or varied by assignments from, relevantly, Hunter to XNAO to the extent that the Royalty Deed related to the Tenements.

30. On 22 September 2014, Technomin gave notice of its assignment to Drem of its interest in the 1994 Royalty Deed: PJ [39].

31. On 12 September 2016, Ramelius sold its interests in the Relevant Tenements (as acquired under the 2014 SPA) to LRL under a Tenement Sale Agreement (the 2016 TSA). These tenements included the Kathleen Valley tenements: PJ [40].

32. On 7 December 2016, by tripartite Deed Poll, LRL assumed Ramelius’ obligations to Technomin in respect of the 1994 Royalty Deed: PJ [41]. In point of fact, Technomin’s interests in respect of the 1994 Royalty Deed had been assigned to Drem more than two years earlier: see [30] above. Nothing appears to turn on this curiosity.

The 2020 Deed

33. On 18 November 2020, Drem (as Royalty Holder) and LRL (as Tenement Holder) entered the 2020 Deed, whereby LRL covenanted with Drem to assume and be bound to the extent of the Assigned Interest all liabilities and obligations of the Tenement Holder under the 1994 Royalty Deed that accrued after 7 December 2016 (the Effective Date): PJ [42].

34. Clause 2 of the 2020 Deed provided:

“2.   Acknowledgement Tenement transfer and Assigned Interest

(a)   The Tenement Holder [LRL] and the Royalty Holder [Drem] each acknowledges and agrees that the Tenements, and the corresponding obligation to pay the royalty under the Royalty Deed in respect of the Tenements, were assigned to the Tenement Holder [LRL] with effect on and from the Effective Date.

(b)   With effect on and from the Effective Date:

(i)   the Tenement Holder [LRL] covenants in favour of the Royalty Holder [Drem] to assume and be bound, to the extent of the Assigned Interest, by the liabilities and obligations under the Royalty Deed that accrue or are incurred after the Effective Date; and

(ii)   the Royalty Holder [Drem] covenants in favour of the Tenement Holder [LRL] to observe the terms and conditions of the Royalty Deed which are on its part required to be observed.”

35. “Assigned Interest” was defined by cl 1.1 as “all of the rights, interest, obligations and liabilities in and under the Royalty Deed, to the extent that they relate to the Tenements”. “Royalty Deed” referred to the 1994 Royalty Deed. “Tenements” referred to “Western Australian mining leases M36/264, M36/265, M36/459 and M36/460”. These had all formed part of the Kathleen Valley Joint Tenements.

36. It was uncontroversial that LRL has a 100% ownership interest in the Kathleen Valley tenements: PJ [9]. LRL’s 100% interest was acquired through:

1. Ramelius, under the 2014 SPA, obtaining a 100% ownership interest in the Kathleen Valley tenements, comprising XNAO’s (87.15%) and Giralia’s (12.85%) respective interests; and

2. LRL, under the 2016 TSA, obtaining Ramelius’ 100% interest: [31].

37. From this survey of complicated transactional history, it may be seen that, as recognized by cl 2 of the 2020 Deed, LRL assumed a royalty obligation originally owed by SSM (and then XNAO) to Hunter and then owed by Ramelius to Technomin under cl 6.1 of the 1994 Royalty Deed. The benefit of Technomin’s interest (originally derived from Hunter) had been assigned to Drem. This is how the two parties to this appeal came to be in dispute.

38. Against this somewhat complex background, attention is now turned to the primary judgment and the narrow question of construction in respect of cl 6.1 of the 1994 Royalty Deed which it resolved.

Primary judgment

39. The terms of cl 6.1 of the 1994 Royalty Deed have been set out at [19] above.

40. The Royalty Percentage under cl 6.1 of the 1994 Royalty Deed is defined as 2% of the “Gross Proceeds of Saleable Product”. The meaning of that phrase is in turn supplied by a number of defined terms in the 1994 Royalty Deed.

41. “Gross Proceeds” is defined as:

“(a)   if Saleable Product is sold for cash by or on behalf of the Payer at arm’s length on normal commercial terms - the gross proceeds receivable by the Payer from the sale without any deduction or allowance of any kind; and

(b)   for any other utilisation or disposal of Saleable Product by or on behalf of the Payer - the gross proceeds without any deduction or allowance of any kind which would have been receivable if the Saleable Product had been sold for cash at arm's length on normal commercial terms in due course on the open market;”

42. “Saleable Product” is defined as meaning a “Product which has been treated or processed and rendered into a substance or state for which there is a commercially significant market, either within or outside Australia, of arm’s length sales or purchases between unrelated parties”. “Product”, in turn, is defined as “any Minerals (except gold or silver in the form of ore or bullion) from the Project attributable to the Payer's proportionate share or interest (as varied from time to time) in any Tenement or in the Project”.

43. “Project” meant “exploitation of Tenements”, and “Tenements” is defined as:

“the Kathleen Valley Tenements and the Mount Harris Tenements and PL36/1142 at Violet Range and any extension or variation or addition or replacement or substitution of any of them (whether or not also affecting other tenements or land outside the Area).”

44. As outlined at the outset of these reasons, the dispute between the parties is as to whether the royalties should be calculated by reference to LRL’s current 100% interest in the tenements on the basis that, under the 2020 Deed, LRL assumed the obligations under the 1994 Royalty Deed “that accrue or are incurred after the Effective Date”, namely 7 December 2016. The obligations under the 1994 Royalty Deed were calculated by reference to its proportionate share in the Tenements. Ramelius, from whom LRL had acquired its interests in December 2016, had held a 100% share of the Tenements since June 2014, following termination of the joint venture earlier that year by XNAO and Giralia: see [23] above. Thus, LRL’s share in the Tenements as at the Effective Date under the 2020 Deed, namely 7 December 2016, was 100%, and it was on that interest that Drem contended the 2% royalty should be calculated.

45. Alternatively, on LRL’s construction, the royalty should be calculated by reference to an 87.15 % interest which was XNAO’s (as the “Payer”) interest in the Kathleen Valley tenements at the time the joint venture was terminated in 2014. The thrust of LRL’s argument was that the 1994 Royalty Deed was entered into at a time when a joint venture was on foot, and Hunter’s royalties were expressed to be referable to a percentage of the share in the joint venture held by SSM (as the original Payer), noting that percentage interest in the joint venture could vary from time to time. The highest percentage interest in the tenement held by SSM or its assignees as a partner in the joint venture was 87.15%. The unification of the previous joint venturers’ interests resulting in a 100% interest in the Kathleen Valley tenement was only achieved by Ramelius following termination of the joint venture in 2014: see [23]-[24] above. LRL in turn acquired its 100% interest on 12 September 2016 from Ramelius, with a tripartite deed poll executed on 7 December 2016: see [31]-[32] above.

46. The primary judge preferred Drem’s construction, holding that:

“the obligation assumed by LRL under the 2020 Deed requires it to pay a royalty under the terms of the 1994 Royalty Deed on the footing that it has a 100% proportionate share or interest in the Kathleen Valley tenements. Its obligation is not, as LRL contended, limited to paying a royalty attributable only to a percentage interest in the Kathleen Valley tenements equal to the percentage held by XNAO at the time the joint venture was terminated in 2014…”

47. His Honour advanced eight reasons for this conclusion.

48. First, the primary judge observed that the language of the 1994 Royalty Deed was “as wide as can be in identifying the relationship between Product, by reference to which royalty is paid, and the relevant tenements”: PJ [60]. His Honour observed that the royalty was payable to the extent that Product was “attributable to the Payer’s proportionate share or interest (as varied from time to time) in any Tenement or in the Project”, and that Project was widely cast as “the exploitation of the Tenements”: PJ [60].

49. Secondly, his Honour observed that the tenements subject to the 1994 Royalty Deed included PL 36/1142 – which was an interest held by Hunter acquired outside the Kathleen Valley or Mount Harris joint ventures: PJ [61]. Having noted this fact, his Honour held that the language “proportionate share or interest…in” in cl 6.1 of the 1994 Royalty Deed was wide enough to encompass “both joint venture and non-joint venture interests”: PJ [62]. Given the 1994 Royalty Deed contemplated interests outside the relevant joint ventures, his Honour found it “difficult to accept the proposition that the reference to a ‘proportionate share or interest’ in a tenement necessarily connotes only a joint venture interest in a tenement”: PJ [62].

50. Thirdly, the primary judge rejected LRL’s submission that the language of “varied from time to time” in the definition of “Product” was referable to the nature of the Kathleen Valley joint venture: PJ [54], [63]. LRL argued that “varied from time to time” reflected the Kathleen Valley joint venture because, under the 1991 agreement (see [6] above), Giralia and SSM’s interests could “vary” depending on how the parties exercised their rights: PJ [54]. His Honour rejected this submission because, while the 1991 agreement facilitated variation in the joint venture interests, the 1994 Royalty Deed also contemplated that “non-joint venture interests” could vary from time to time: PJ [63].

51. Fourthly, the primary judge held that the Deed of Assignment and Assumption, for which the 1994 Royalty Deed was consideration, defined the “Project” as including the Violet Range, which was associated with the exploitation of PL 36/1142: PJ [64]. In turn, the meaning of Project under the Deed of Assignment and Assumption, which was closely connected with the 1994 Royalty Deed (temporally and commercially), was “wider than just the project constituted by the two joint ventures”: PJ [64].

52. Fifthly, the primary judge held that the meaning of “proportionate” share could refer to a sole owner because, according to its ordinary meaning, a proportionate interest holder could move from having a 50% interest to having a 100% interest: PJ [65].

53. Sixthly, the primary judge did not accept that his construction involved a “windfall” because, in 1994, Hunter bargained for a royalty which “was not strictly tied to the fortunes of the joint venture interests which it sold”: PJ [66].

54. Seventhly, his Honour rejected LRL’s contention that the 2020 Deed’s reference in recital 5 and cl 2(a) to a “corresponding obligation” to pay the royalty referred to an assumption of XNAO’s obligation as it stood immediately prior to the termination of the joint venture in 2014: PJ [71]-[72]. Recital 5 and cl 2(a) provided that:

“5   XNA, XNAO and Ramelius executed a Deed Poll in favour of Technomin dated 25 August 2014 in respect of the corresponding obligations under the Royalty Deed.

…

2.     Acknowledgement Tenement transfer and Assigned Interest

(a)   The Tenement Holder and the Royalty Holder each acknowledges and agrees that the Tenements, and the corresponding obligation to pay the royalty under the Royalty Deed in respect of the Tenements, were assigned to the Tenement Holder with effect on and from the Effective Date.”

His Honour held that reference to “corresponding obligations” did not assist because on either Drem or LRL’s proposed construction, there would be a “royalty obligation that ‘corresponds’ to an interest in the Kathleen Valley tenements”: PJ [72]. That is, the term “corresponding obligation”, without more, merely stated the issue to be resolved: PJ [72]. His Honour similarly observed that the phrase “to the extent of the Assigned Interest” in cl 2(b)(i) of the 2020 Deed failed to shed light on the meaning of “proportionate share or interest”: PJ [73].

55. Eighthly, the primary judge relied upon the “commercial context” of the 2020 Deed to suggest that reasonable persons in the position of LRL and Drem would not have intended the 2020 Deed to involve only a limited assumption by LRL of the royalty obligation in the 1994 Royalty Deed: PJ [74]. The relevant context was that, at the time of the execution of the 2020 Deed, LRL was the 100% holder of the Kathleen Valley tenements, and Drem was the assignee of the rights under the 1994 Royalty Deed: PJ [74]. His Honour continued:

“The parties by that point may well have had very different understandings of what it meant for the holder of 100% of those tenements to covenant to comply with the earlier deed. LRL's actual intention may well have been to assume the obligation only to the extent of XNAO's terminating joint venture interest, but that intention is not one that I can discern from the terms of the 2020 Deed understood in the light of the commercial context that existed in 2020.”

56. In turn, the primary judge concluded that the obligation acknowledged by LRL in the 2020 Deed was to pay a 2% royalty on the Gross Proceeds of the Saleable Product attributable to its 100% share or interest in the Kathleen Valley tenements: PJ [75].

Grounds of appeal

57. By Notice of Appeal filed on 6 February 2025, the Appellant raised the following grounds of appeal:

“1   The primary judge erred in finding that, on a proper construction of the 1994 Royalty Deed (as defined at J[2]) and the 2020 Deed (as defined at J[2]), the appellant was obliged to pay to the respondent a royalty to be calculated as a 2% gross royalty on production from the appellant's 100% interest in mining tenements M36/460, M36/459, M36/264 and M36/265 (the Relevant Tenements): J[59], [75].

2   The primary judge erred in finding that the reference in the 1994 Royalty Deed to the Payer's ‘proportionate share or interest (as varied from time to time)’ in any Tenement or in the Project, properly construed, encompasses both joint venture and non-joint venture interests, and variations to such interests whether or not within the joint venture.

3   The primary judge erred in not finding that, on the proper construction of the 1994 Royalty Deed and the 2020 Deed, the reference to ‘proportionate share or interest (as varied from time to time) in any Tenement or in the Project’ is, in relation to the Relevant Tenements, to the proportionate share or interest arising from and during the Kathleen Valley Joint Venture (as defined in J[4]), namely 87.15%.

4   The primary judge erred in making order 1 in circumstances where there was no dispute that the appellant held 100% of the Relevant Tenements.”

Consideration

58. Grounds 1-3 are all concerned with the central question of construction addressed by the primary judge. To a large extent and unsurprisingly, the arguments on appeal closely mirrored those that were mounted at first instance.

59. For the reasons that follow, and although the matter is finely balanced, I favour the construction reached by the primary judge.

60. At the forefront of LRL’s argument was the expression “proportionate share or interest” in the definition of “Product” in the 1994 Royalty Deed. It is important, of course, not to consider that phrase in isolation. That it was immediately followed by the parenthetical “(as varied from time to time)” signalled that the relevant share or interest was not fixed.

61. Critically in my view, and apparently critical for the primary judge, the “proportionate share or interest” was one “in any Tenement or in the Project”. “Project” meant the “exploitation of the Tenements” and “Tenements” was defined in the 1994 Royalty Deed not only as the Kathleen Valley Tenements and the Harris Valley Tenements but also “PL36/1142 at Violet Range” (the Violet Range Tenement).

62. Recital B to the 1994 Royalty Deed has been set out at [18] above. It introduced the expression “proportionate share” that one also finds in the definition of “Product” which in turn feeds into cl 6.1. In both this definition and Recital B, the expression “proportionate share or interest” was “in any Tenement” or “in the Tenements”. They included the Violet Range Tenement.

63. If one were called on to construe the 1994 Royalty Deed as at the date of its execution and indeed thereafter, Hunter’s “proportionate share or interest” in the Violet Range Tenement was 100%. The 1994 Royalty Deed therefore contemplated that the expression “proportionate share or interest” could extend to a 100% share or interest and need not necessarily be something less than this. This is also consistent with the underlying Kathleen Valley joint venture agreement, whereby Giralia initially held a 100% interest, but that proportion could change and dilute based on the parties’ expenditure throughout the project: see [6] above.

64. Obviously enough, where a tenement was being exploited by joint venture partners, Hunter’s proportionate share would not, as at the date of execution of the Royalty Deed, be 100% but the interest was not fixed in time as the parenthetical “(as varied from time to time)” made plain. Nor was there any certainty that to the extent that any given tenement was being exploited by a joint venture, that that would continue to be the case. LRL submitted that “the parties evidently crafted [the royalty obligation] contemplating a change in the respective “proportionate share or interest” of each joint venture party”. That is so. There is no good or apparent reason, however, to confine that contemplated change to one in which the interest of either party could not be 100%.

65. What was a party’s proportionate share at a particular point in time could rise to a 100% share or interest if the joint venture were terminated. The continuing joint venturer could then be said to have a 100% share or interest in the project. 100% ownership is a proportionate share or interest: the relevant proportion or interest is 100%, and even though, as LRL submitted, “proportionate” ordinarily connotes two persons having relative proportions, the question of construction needs to be resolved in the context of the 1994 Royalty Deed where, as has been observed, the expression “proportionate share or interest” must have been capable of being applied to Hunter’s 100% share or interest in the Violet Range Tenement when the 1994 Royalty Deed was executed.

66. On appeal, LRL was critical of the extent to which the primary judge made reference to the Violet Range tenement and the influence it had on his Honour’s analysis. Indeed, it was described in LRL’s submissions as allowing the “tail to wag the dog”. I disagree. That the Violet Range tenement (a non-joint venture tenement) was intended to be included in the royalty regime, and thus its existence was relevant to the understanding of the Gross Production Royalty may be seen in the fact that it was expressly referred to in the Notice of Assignment (see [9] above) as well, of course, as in the 1994 Royalty Deed itself and definition of the Tenements. LRL’s written submissions, in stating by reference to Recital B of the 1994 Royalty Deed, that the royalty obligation was given “as consideration for the assignment by Hunter of its interest in the joint venture agreements to SSM” omitted reference to the fact that the assignment of the Violet Range tenement was also identified in Recital B as part of the quid pro quo for the royalty payment. There is no textual basis to support LRL’s submission that the transfer of the Violet Range Tenement was “subordinate” to what it styled the “core” aspect of the transaction, namely the transfer of the joint venture tenements. Each formed part of the one transaction which included the royalty obligation which was expressed to apply not only to the latter tenements but also the Violet Range tenement.

67. It is also relevant that the definition of “Project” in the 1994 Royalty Deed was expressed in terms of “exploitation of the Tenements” rather than “pursuit of the Joint Venture Agreements” or words to similar effect. These included the Violet Range tenement. True it is that the parties’ current dispute has nothing to do with that tenement but its inclusion in the royalty arrangements was highly germane to understanding the meaning to be given to them and, in particular, one of the central questions, namely whether the expression “proportionate share or interest” was only intended to apply to an interest in a joint venture less than 100%.

68. The “proportionate share or interest” in any of the Tenements was ambulatory as the parenthetical expression “(as varied from time to time)” made clear and as was at least in part accepted by LRL, a share or interest could be varied up to 100% or down to 0% if a joint venture partner wished to exit the venture. There is nothing commercially surprising by such a possibility.

69. LRL’s submissions, moreover, assumed that the word “proportionate” governs not only the word “share” but also the word “interest”. That is not self evident, and giving the word “proportionate” a distributive application arguably introduces a degree of redundancy as it is difficult to discern, on that hypothesis, how the term “interest” differs from “share”. If the word “proportionate” does not apply distributively to qualify “interest”, what was a proportionate share in a joint venture could become a 100% interest in a tenement that was formerly being exploited by the joint venture parties.

70. LRL also submitted that, on the primary judge’s construction, the word “proportionate”, as read into cl 6.1 of the 1994 Royalty Deed, through the definition of “Product”, was redundant as it could have been said that the royalty was payable “in relation to any share or interest in the Tenements”. That submission should be rejected. There will often be different ways available to the drafter to express the parties’ bargain. At the time the 1994 Royalty Deed was executed, it was entirely proper to use the expression “proportionate share” as the shares in the two joint ventures were held by two parties. The definition of “Product” recognised, however, that these could vary from time to time. One possible variation could be that one of the joint venturers acquired a 100% interest in one or more of the tenements previously the subject of a joint venture.

58. LRL sought to rely on the definition of the word “Project” in the 1993 Transfer Agreement which was expressed by reference to the Kathleen Valley and Mount Harris joint ventures as part of the surrounding contractual context. Such reliance is misplaced, in my view, in circumstances where the 1994 Royalty Deed uses the word “Project” and expressly defines it in different terms, namely “exploitation of the tenements” which included the Violet Range tenement. The parties acknowledged in the 2020 Deed that the 1994 Royalty Deed “replaced the royalty provisions” in the 1993 Transfer Agreement. LRL’s submissions also do not take into account and are inconsistent with the terms of the Notice of Assignment, the terms of which were noted at [9] above.

59. Further, given that what is ultimately being construed in this appeal is the 2020 Deed albeit by reference to the 1994 Royalty Deed, it is relevant that, as at the time the 2020 Deed was entered, the exploitation of the Kathleen Valley Tenements by a joint venture had ceased more than 6 years earlier and Ramelius, from which LRL had acquired its 100% interest in the Kathleen Valley Tenements, had unified the interests of the former joint venturers after the termination of the Joint Venture in 2014.

60. The 1994 Royalty Deed contained no provision to the effect that, in the event that either joint venture was terminated, the Payer’s obligation to the Holder in respect of the royalties would be frozen at the proportionate share or interest in the Tenements as at termination, which was the construction contended for by LRL. As submitted by Mr Ireland KC on behalf of Drem, the 2020 Deed “says nothing about restricting the payment obligation by reference to tenements in any terminated joint venture”.

61. LRL repeated a submission it had made before the primary judge to the effect that the construction he favoured would involve a windfall to Drem and for that reason, should not be favoured, citing QBT Pty Ltd v Wilson [2024] NSWCA 114 at [72] (QBT). His Honour rejected this submission, as would I. The circumstances in QBT were very different to those in the present case. Unlike that case, it was not suggested that the construction the primary judge favoured would lead to a “commercially absurd” result. As Leeming JA said at [72], “[c]ourts should be cautious in accepting submissions that a construction is absurd; one reason is that courts are far from being well placed to assess what is or is not commercially sensible.” See also Cirrus Real Time Processing Systems Pty Ltd v Jet Aviation Australia Pty Ltd (2023) 113 NSWLR 80; [2023] NSWCA 280 at [87]-[88]; Westpac Banking Corporation v Tanzone (2023) 113 NSWLR 73; [2000] NSWCA 25 at [22]. As the primary judge observed at PJ [66]:

“It is true that Ramelius acquired an interest in the Kathleen Valley tenements that was greater than any interest held by XNAO and any “interest” in the tenements that had originally been held by Hunter. However, in 1994 Hunter bargained for a royalty that, in my view, was not strictly tied to the fortunes of the joint venture interests which it sold. Whether the resulting royalty is a windfall to Drem depends very much on one’s view of the nature of the bargain which Hunter struck with SSM in 1994.”

75. Further, had Giralia increased its share in the joint venture, thus diluting SSM’s interest, and had Giralia not disposed of its interest to Ramelius, which could also have happened, Drem would have had a lower royalty entitlement than it now enjoys. That would have been a consequence of the drafting of the 1994 Royalty Deed.

76. Additionally, under cl 2 of the 2020 Deed, LRL covenanted to Drem to assume and be bound by the obligations under the 1994 Royalty Deed “to the extent of the Assigned Interest”. Thus, having regard to the definition of “Assigned Interest” in the 2020 Deed as including the obligations in and under the Royalty Deed, under the 2020 Deed LRL assumed the obligations of payer under the Royalty Deed. In this regard, it is notable that the definition of the Assigned Interest in the 2020 Deed was limited to the liabilities under the 1994 Royalty Deed to the extent that they related to the Tenement, not the liabilities of SSM/XNAO. That obligation was to pay the 2% royalty percentage on any, relevantly Lithium from the exploitation of tenements attributable to LRL’s proportionate share or interest, being 100%.

77. For these reasons, grounds 1-3 which compendiously challenge the primary judge’s construction, should be dismissed.

78. Ground 4 of LRL’s appeal was to the effect that the declaration that the primary judge made by his first order, namely that, in relation to LRL’s 100% shareholding in the relevant tenements, was unnecessary because there was no dispute about that. I see no need to disturb the making of that declaration in the circumstances.

Conclusion

79. Although, as indicated in the reasons, the matter is finely balanced, in my view the construction of the 2020 Deed and the 1994 Royalty Deed posited by the primary judge was correct. It follows that the appeal should be dismissed with costs.

80. STERN JA: I agree with the Chief Justice.

81. McHUGH JA: I have had the benefit of reading in draft the Chief Justice’s reasons for judgment, with which Stern JA agrees. I agree that the matter is finely balanced. However, I have the misfortune of reaching a different conclusion as to the scope of the obligation in favour of Drem that LRL covenanted to assume and be bound by in 2020. In the following reasons, I adopt the defined terms used by his Honour.

82. As the Chief Justice says, what is ultimately being construed in this appeal is the 2020 Deed, by reference to the 1994 Royalty Deed. At cl 2(a), the 2020 Deed acknowledges the assignment of “the Tenements, and the corresponding obligation to pay the royalty under the Royalty Deed in respect of the Tenements”, to LRL. The acknowledgement that the “obligation to pay the royalty” was “assigned” to LRL is loose language: one cannot assign an obligation. Clause 2(b)(i) then refers to “the liabilities and obligations under the Royalty Deed”, which words are qualified by the words, “to the extent of the Assigned Interest”. The Assigned Interest was defined as “all of the rights, interest, obligations and liabilities in and under the Royalty Deed, to the extent that they relate to the Tenements”.

83. The 2020 Deed thus operated by reference to something that supposedly already existed: an obligation to pay the royalty under the 1994 Royalty Deed. The 2020 Deed does not further expressly identify whose obligation that was, or what was its scope. Both questions are largely answered by the language and purpose of the 1994 Royalty Deed, construed in the context of the two joint venture agreements, the 1993 Transfer Agreement and the 1994 Deed of Assignment and Assumption.

The Joint Venture Agreements

84. Although the focus for present purposes is Drem’s right to be paid a royalty, the context in which the 1994 Royalty Deed came into existence is important. Subject to minor third-party interests that are not presently relevant, in both the 5 December 1990 Mount Harris Joint Venture Agreement and the 23 September 1991 Kathleen Valley Joint Venture Agreement (the Joint Venture Agreements) Giralia warranted that it would have unencumbered legal title to, and 100% beneficial ownership of, the tenements the subject of the two Joint Venture Agreements. In each Agreement, the tenements were defined by registration numbers and said to include “successor or substitute titles”. Each of the Joint Venture Agreements went on to refer to Hunter’s ability to obtain, and then to increase, an “ownership interest in the Tenements”.

85. Clause 2 of each Joint Venture Agreement conferred a “right” on Hunter to “earn a 51% ownership interest in the tenements” (or “Tenements”) by expending certain sums on exploration and development. Hunter then had “the right to earn a further 19% ownership interest (Hunter 70%)” by expending further sums. Other provisions of the Joint Venture Agreements could result in further variations to Hunter’s “ownership interest” in the tenements. These included Hunter’s rights to obtain an increased ownership interest, and its liability to suffer a decrease in its ownership interest, in accordance with the formula for dilution in cl 3 of each Agreement. Clause 3 operated where either party gave notice electing to cease expenditure, and was again expressed in percentages (that is, as a proportion of the whole ownership of the tenements). Clause 6 of each Agreement also acknowledged that each party could assign its “interest in the Joint Venture” to third parties, subject to the other party’s having a right of first refusal. (No distinction was drawn between these words and the notion of an “ownership interest” in the tenements).

86. Clause 2 of each Joint Venture Agreement thus contained a conditional promise to convey to Hunter a proportionate “ownership interest in the Tenements” (or “tenements”) by reference to specified percentages (the condition being that Hunter expended the identified sums). Each Agreement also contemplated the further variation of Hunter’s “ownership interest in the Tenements” pursuant to the terms of the Agreements (in particular, by dilution through cl 3). As to the nature of Hunter’s ownership interest, each Joint Venture Agreement operated by reference to the registration numbers of identified tenements. In that context, it is most natural to read the words “ownership interest in the Tenements” as ownership to be recorded, in the proportions required by the Joint Venture Agreements, in the Mining Tenements Register of Western Australia. That is, legal title. (As will be seen, the proportionate ownership of the tenements of Hunter’s successor, SSM, later renamed XNAO, was at least partially recorded in the Register.)

87. To the extent that Hunter (or a successor) had “earned” or was otherwise entitled to an “ownership interest in the Tenements” under the Joint Venture Agreements, but the ownership interest had not yet been entered on the Register, the better view is that equity would recognise Hunter’s (or the successor’s) beneficial ownership to the extent that the Joint Venture Agreements were specifically enforceable. That the Joint Venture Agreements were intended to confer a beneficial proprietary interest was implicitly acknowledged in cl 9 of the Mount Harris Joint Venture Agreement, which expressly provided that Hunter was entitled to enter caveats against the tenements to protect its interests.

88. It may not be necessary to express a concluded view as to the nature of the “ownership interest[s]”. The language the parties chose in the Joint Venture Agreements demonstrated that, as between themselves, they were agreeing to proceed on the footing that Hunter (or any successor) would have a beneficial “ownership interest in the Tenements” upon reaching certain expenditure thresholds. The parties then agreed that that ownership interest could be varied in accordance with the terms of the Agreements. Subsequent agreements involving third parties adopted similar language. The 1994 Royalty Deed referred to the Joint Venture Agreements and then to the royalty payer’s “proportionate share or interest … in any Tenement”. The 2014 SPA operated by reference to “the Sellers’ interests in the Kathleen Valley JV Tenements”. Given that all these agreements were referring to the same thing, the precise identification of the nature of the interests may not matter.

89. In addition to conferring the right to earn (and vary) proportionate ownership of the tenements, each Joint Venture Agreement conferred important contractual rights on Hunter in relation to the operation of the joint ventures. For example, by cl 5(a) of each Agreement, “Hunter shall be the Manager during the Earning Phase”, which was defined as the period in which Hunter was expending money on exploration and development in the course of earning up to a 70% ownership interest. Thereafter, by cl 5(b) of each Agreement, on completion of the Earning Phase, a management committee was to be established “with voting rights in proportion to ownership interests”. That would again favour Hunter as the majority owner.

90. It is convenient to note that, as will be seen, it appears from Sch 1 of the 26 March 1993 Transfer Agreement that when Hunter entered that agreement with SSM, Hunter’s expenditure on each joint venture had not yet reached the level at which it was entitled to an “ownership interest” in any of the tenements.

The 1993 Transfer Agreement

91. Under the 26 March 1993 Transfer Agreement, SSM acquired all Hunter’s rights in the Joint Venture Agreements, including Hunter’s rights to earn a proportionate ownership interest in the joint venture tenements.

92. The 1993 Transfer Agreement provided for Hunter to “assign its rights and obligations under its joint venture agreements with [Giralia] to SSM on the following terms”. Under the heading “Joint Venture Area”, cl 1 referred to “[a]ll of the land covered by the tenements listed in Schedule 1 and successor or substitute titles (the ‘Tenements’).” Schedule 1 listed the Mount Harris joint venture tenements; the Kathleen Valley joint venture tenements (identifying the registered holder of each as Giralia and, in one case, immaterial third-party owners as to 10%); and the Violet Range Tenement PL36/1142 (identifying the registered holder as Hunter, and describing the tenement as “not part of either J/V”).

93. Clause 2 then went on: “Hunter shall assign to SSM and SSM shall assume Hunter’s rights and obligations under the agreements with Giralia …”

94. The effect was to assign to SSM:

1. Hunter’s right to “earn” proportionate ownership interests in the two joint ventures. This was a conditional right to have conveyed to it a proportionate "ownership interest in the Tenements”. For the reasons given above, the better view is that that was a right to be registered on the title, and which equity would recognise. But on any view the parties treated this as a right to obtain beneficial ownership of the tenements;

2. Hunter’s rights relating to variation of those ownership interests;

3. Hunter’s contractual rights in relation to the operation of the joint ventures; and

4. Hunter’s legal and beneficial ownership of the Violet Range Tenement, which was not part of any joint venture, and was accordingly not subject to variation.

95. The 1993 Transfer Agreement identified, as part of the consideration given by SSM for the assignment, the grant of a “2.0% Gross Production Royalty (‘GPR’)” in favour of Hunter: cl 2(2), which is set out at [7] above. The royalty was expressed to be “on SSM’s interest from time to time in the Project”. “Project” was defined in the opening words of the agreement as “the Kathleen Valley – Mt Harris Project”. Although not further defined, that plainly included the Kathleen Valley joint venture. As will be seen, the term “Project” was used loosely at different points and had different meanings in different agreements.

96. As noted above, one of the incidents of Hunter’s rights under the Kathleen Valley Joint Venture Agreement (including its conditional right to obtain proportionate ownership of the tenements) was that Hunter’s ownership of the tenements could be varied in accordance with the terms of the Joint Venture Agreement. What Hunter was selling SSM was the conditional right to obtain proportionate (and potentially variable) ownership of the tenements. Indeed, Sch 1 to the 1993 Transfer Agreement included a column headed “Joint Venture Details”. In relation to the Kathleen Valley joint venture, this recorded: “Hunter has the right to earn 51% by sole expending $500,000 and … a further 19% by spending an additional $800,000. Expenditure to date is approximately $65,000.”

97. In other words, at the time of the 1993 Transfer Agreement, Hunter had not yet obtained any ownership interest in the tenements that it could sell to SSM. Instead, what SSM was buying was the potential for a very substantial upside as to ownership of the tenements, which could be varied in accordance with the Joint Venture Agreements. If SSM expended the contracted sums, it would obtain the corresponding proportionate ownership of the joint venture tenements (51% or 70%): cl 2. There would then be further potential upside pursuant to the Joint Venture Agreements: SSM’s proportionate ownership could further increase, either through dilution of Giralia (cl 3), or by the exercise of SSM’s right of first refusal if Giralia wished to sell (cl 6).

98. SSM’s obligation under the 1993 Transfer Agreement to pay royalty “on SSM’s interest from time to time in the Project” was part of the quid pro quo which SSM gave for receiving that significant and potentially variable upside as to ownership of the tenements. The words “from time to time” ensured that, as SSM’s ownership interest was earned and then grew in accordance with the terms of the Joint Venture Agreements, Hunter’s royalty would grow with it. That being so, the words “on SSM’s interest from time to time” should be understood as referring to SSM’s proportionate ownership interests in the two joint ventures and, in particular, in the joint venture tenements, as earned and then varied “from time to time” pursuant to the Joint Venture Agreements.

99. As noted above, cl 6 of each Joint Venture Agreement permitted either party to “assign its interest in the Joint Venture” to unrelated third parties, subject to a right of first refusal in the other joint-venture party. As to later assignees from SSM of its “interest in the Joint Venture[s]”, an incident of the interest taken by the assignee would again be that the interest could be varied in accordance with the terms of the Joint Venture Agreements. It follows that where cl 2(2) of the 1993 Transfer Agreement provided that “[a]ny assignee of SSM’s interest in the Project” was required to covenant, as a condition of the assignment, to pay Hunter “the GPR”, the assignee’s obligation would include royalty on the assignee’s proportionate ownership interest in the joint ventures and in the joint venture tenements, as initially assigned to it by SSM, and also as varied “from time to time” pursuant to the Joint Venture Agreements.

100. There would, of course, be no reason for SSM, or for any assignee from SSM, to pay royalty to Hunter in respect of Giralia’s continuing ownership interest in the Project (i.e., its ownership interests in the two joint ventures and in the joint venture tenements). The royalty was consideration for the assignment of Hunter’s rights and interests; it had nothing to do with Giralia’s interests.

101. That that was the scope of SSM’s royalty obligation, and the obligation of any assignee from SSM, is confirmed by the Deed of Assignment and Assumption and the 1994 Royalty Deed, each of which was contemplated by the 1993 Transfer Agreement.

The Deed of Assignment and Assumption

102. The parties to the Deed of Assignment and Assumption, entered on 28 March 1994, were Giralia, Hunter, SSM and its parent Jubilee.

103. Recital E relevantly recorded that “[s]ubject to the Kathleen Valley Joint Venture, Giralia is the absolute legal and beneficial owner of the Kathleen Valley Tenements” (save for immaterial third-party interests). As noted above, Hunter had not yet obtained an “ownership interest” in the Kathleen Valley tenements. Clause 3.4(a) recorded that up to the Effective Date (i.e., 26 March 1993, the date of the 1993 Transfer Agreement), Hunter had spent $83,824 under the Kathleen Valley joint venture. That figure was below the expenditure threshold in the Kathleen Vally Joint Venture Agreement to earn a proportionate ownership of the tenements.

104. Instead, Hunter had contractual rights under the Joint Venture Agreements as discussed above. Recital I thus recorded that “Hunter has agreed to assign the benefit of all of its rights in the Mount Harris Joint Venture and in the Kathleen Valley Joint Venture to SSM …”

102. Recital K separately recorded that “Hunter has also agreed to assign to SSM PL36/1142 at Violet Range upon certain terms and conditions.” As noted above, the Violet Range Tenement was outside the joint ventures and Hunter held it in its own right.

103. Clause 3.1 of the Deed of Assignment and Assumption provided: “Hunter now assigns to SSM and SSM now assumes with effect from the Effective Date all Hunter’s rights and obligations under the Joint Venture Agreements”, being those “constituting the Mount Harris Joint Venture and the Kathleen Valley Joint Venture”. That assignment included (a) Hunter’s conditional rights to have conveyed to it proportionate "ownership interest[s] in the Tenements” of 51% and then 70%, upon meeting the expenditure thresholds in the Joint Venture Agreements (cl 2); (b) Hunter’s contractual rights relating to variation of those ownership interests (cll 3 and 6); and (c) Hunter’s contractual rights in relation to the operation of the joint ventures (cl 5).

104. Clause 3.2, to which I will shortly return, addressed the consideration for the assignment.

105. Separately, by cl 4.1, the Deed of Assignment and Assumption provided that, for the same consideration, Hunter assigned PL36/1142 at Violet Range to SSM. Hunter also agreed to execute a transfer of that tenement to SSM under the Mining Act 1978 (WA). Hunter warranted that it was the legal and beneficial owner of that tenement and that it was free of all encumbrances.

106. Clause 3.2(b) provided that, in consideration of the assignment, SSM (among other things):

“covenants to execute upon the signing hereof the GPR Deed in order to grant to Hunter a gross production royalty of 2% (being a bullion royalty applying to gold and silver and a non-bullion royalty applying to other minerals) upon the interest of SSM from time to time in the Project.”

110. The defined term the “GPR Deed” was in substantially similar terms to the description of its purpose in cl 3.2(b), referring to “a 2% gross production royalty … on SSM’s interest from time to time in the Project”. Clause 1.1 provided: “‘Project’ means exploitation of the Tenements.” The “Tenements” were defined to mean “the Kathleen Valley Tenements and the Mount Harris Tenements and PL36/1142 at Violet Range …” The effect of those definitions was that the royalty contemplated by cl 3.2 was a royalty upon the interest of SSM from time to time in the exploitation of those tenements.

111. SSM’s interest in the exploitation of those tenements took two distinct forms.

112. The first was through SSM's absolute, direct and immediate legal ownership of the Violet Range Tenement. This tenement was outside the two joint ventures. Since SSM was taking an outright assignment of ownership of the Violet Range Tenement, the words “from time to time” might not be expected to have work to do in relation to SSM’s interest in that tenement.

113. The second was through SSM’s future ownership, if any, of the joint venture tenements, pursuant to what were now SSM’s contractual rights under the Joint Venture Agreements. Clause 3.5 of the Deed of Assignment and Assumption provided that SSM replaced Hunter as a party to the two Joint Venture Agreements with effect from the Effective Date, and that SSM was bound by and had the benefit of those agreements as if SSM and Giralia were the parties to them. The Joint Venture Agreements thus gave SSM the rights discussed above: the right to “earn” proportionate ownership of the joint venture tenements through expenditure on exploration and development; the right to increase its proportionate ownership of the tenements through dilution of Giralia’s ownership; and the rights of first refusal in relation to Giralia’s ownership of the tenements. Until SSM exercised its earn-in rights, it would have no ownership interest in the joint venture tenements to exploit. And if SSM exercised those rights, the proportionate ownership of the joint venture tenements that it would obtain would be variable in accordance with the terms of the Joint Venture Agreements.

114. That being so, again, the words “upon the interest of SSM from time to time in the Project” in cl 3.2(b) should be understood as referring to SSM’s proportionate ownership interests in the two joint ventures and, in particular, in the joint venture tenements, as earned and then varied “from time to time” pursuant to the Joint Venture Agreements.

115. And, again, there would be no reason for SSM, or for any assignee from SSM, to pay royalty to Hunter in respect of Giralia’s continuing ownership interest in the Project.

The 1994 Royalty Deed

116. The 1994 Royalty Deed was entered on 28 March 1994, the same day as the Deed of Assignment and Assumption. The “Tenements” were defined in the 1994 Royalty Deed to mean “the Kathleen Valley Tenements and the Mount Harris Tenements and PL36/1142 at Violet Range and any extension or variation or addition or replacement or substitution of any of them …” The Kathleen Valley Tenements and the Mount Harris Tenements were defined by reference to registration numbers, and acknowledging as to some tenements that they had previously had different registration numbers.

117. The 1994 Royalty Deed recited at B and C:

“B.   The Holder [i.e., Hunter] has assigned to the Payer [i.e., SSM] its interest under the Joint Venture Agreements and in PL36/1142 at Violet Range in consideration of the Payer agreeing to enter into this deed for payment of a 2% gross royalty on production from the Payer’s proportionate share or interest (as varied from time to time) in the Tenements (in the form of a Bullion Royalty applying to gold or silver and a Non-Bullion Royalty applying to all other Minerals).

C.    Giralia is or is entitled to be the registered holder of the Kathleen Valley Tenements and the Mt. Harris Tenements.”

118. Recital B refers to the fact that SSM has taken an assignment of Hunter’s “interest under the Joint Venture Agreements”, which is distinguished from Hunter’s interest in the Violet Range Tenement. That is consistent with the position described above: it appears that at the time of entry into the 1994 Royalty Deed (28 March 1994), neither SSM nor its assignor Hunter had yet earned an ownership interest in any of the joint venture tenements. Hunter’s interest under the Joint Venture Agreements consisted of the contractual rights referred to above.

119. Recital B then describes the royalty by reference to SSM’s “proportionate share or interest (as varied from time to time) in the Tenements”. The focus on the tenements is also consistent with the position described above. SSM owned the Violet Range Tenement outright, which was accordingly subject to royalty. However, so far as the joint venture tenements were concerned, the royalty was the quid pro quo for SSM’s right to obtain, and then to expand, an ownership interest in the joint ventures (and in particular ownership of the joint venture tenements) pursuant to the Joint Venture Agreements.

120. The provision in the 1994 Royalty Deed granting the royalty was cl 6.1:

“With effect from the Effective Date, the Payer [i.e., SSM] shall pay to the Holder [i.e., Hunter] [1] a royalty (the ‘Non-Bullion Royalty’) equal to the Royalty Percentage of Gross Proceeds of Saleable Product without any deduction or allowance of any kind, whether for costs of sales, production, exploration, evaluation, development, restoration, depreciation of plant, amortisation or anything else whatever.”

1. The word “Holder” was defined to mean Hunter, notwithstanding a notice of assignment dated 15 December 1993 given by Hunter to SSM in respect of Hunter’s rights in the royalty conferred under the 1993 Transfer Agreement, which is referred to below. Nothing turns on this given that by cl 1.2(h) a reference to a party to the 1994 Royalty Deed included the party’s successors and permitted assigns.

121. The Royalty Percentage was 2%. The meaning of “Gross Proceeds” was not controversial and does not bear on the present question. The meaning of “Saleable Product” was similarly uncontroversial. The key word is “Product”, defined as:

“any Minerals (except gold or silver in the form of dore or bullion) from the Project attributable to the Payer’s [i.e., SSM’s] proportionate share or interest (as varied from time to time) in any Tenement or in the Project”.

122. “Project” was defined to mean “exploitation of the Tenements”. The 2% royalty was payable on the Gross Proceeds of the sale of minerals, but only those “attributable” to SSM’s proportionate share or interest “in any Tenement or in the Project”.

123. The reference to both “any Tenement” and “the Project” does not necessarily convey mutual exclusivity, as opposed to a belts and braces approach in circumstances where, as noted above, SSM had not yet earned an ownership interest in any of the joint venture tenements.

124. The position was relatively simple as to the Violet Range Tenement: the effect of the Deed of Assignment and Assumption left no room for argument. SSM’s “proportionate share or interest” was 100% of the legal and beneficial ownership of the tenement. Any minerals won from the Violet Range Tenement would be 100% “attributable” to SSM’s interest. SSM was unsurprisingly promising to pay Hunter royalty on that basis in return for Hunter’s having transferred that interest to SSM.

125. By contrast, the legal relationship between SSM and the tenements the subject of the two joint ventures was far from straightforward, and it was contemplated to evolve over time. Hunter had not transferred the legal (or indeed beneficial) ownership of those tenements to SSM; Recital C made clear that the legal owner of those tenements remained Giralia. Instead, what Hunter had assigned to SSM were contractual rights to “earn” ownership interests in the two joint ventures and, in particular, proportionate ownership of the joint venture tenements. SSM’s proportion of ownership of the tenements would then be capable of being varied in accordance with the terms of the Joint Venture Agreements. SSM’s conditional contractual right to earn such ownership of the joint venture tenements might arguably be described as an “interest … in [a] Tenement”, but there would be good reasons for rejecting that interpretation. SSM’s other contractual rights under the Joint Venture Agreements, such as management rights, would be still further removed from the description, “interest … in [a] Tenement”.

126. The context in which words “share or interest … in the Project” are to be construed remains that, as Recital B recognised, what Hunter had assigned to SSM at that point was its “interest under the Joint Venture Agreements”. That “interest” consisted of contractual rights, which included conditional rights to obtain ownership of the tenements. The royalty was part of the quid pro quo for that interest. The broader language in the definition of “Project” of “Minerals … attributable to … [a] share or interest … in the Project” (i.e., in the exploitation of the joint venture tenements) was not confined to legal ownership registered on the title of a “Tenement”. Instead, that language was apt to capture the economic share in the proceeds of sale of minerals that SSM obtained as assignee of Hunter’s “interest” — its rights under the Joint Venture Agreements — falling short of legal title. That language would capture, for example, any notional “ownership interest” that SSM had “earned” under the Joint Venture Agreements but which had not been registered on the title, or which might not be recognised in equity. SSM was thus promising to pay Hunter royalty on so much of the minerals won from the joint venture tenements as was “attributable” to the “interest” that Hunter had assigned to SSM (the contractual rights under the Joint Venture Agreements and the fruits of their exercise) — but not more.

127. As noted above, SSM’s share or interest in each joint venture, and its ownership of the joint venture tenements, were potentially subject to change. However, the definition of “Product” does not merely refer to SSM’s “share or interest from time to time” in a Tenement, or in the Project, obtained by whatever means. Instead, the definition refers to SSM’s “proportionate share or interest (as varied from time to time)”. The words “proportionate” and particularly “varied” are significant. The two Joint Venture Agreements provided for variation of the parties’ ownership interests, and did so by reference to percentages. Part of what Hunter had assigned to SSM was a right to earn proportionate ownership of the tenements, which proportion would be variable in accordance with the terms of the two Joint Venture Agreements. The royalty was part of the quid pro quo for that assignment, such that the obligation to pay royalty is properly seen as referable to SSM’s ownership interest as varied from time to time in accordance with the Joint Venture Agreements.

128. In those circumstances, so far as concerns minerals won from the tenements the subject of the joint ventures, the royalty is readily seen as payable by reference to SSM’s proportionate ownership of the tenements, or (if it makes any difference) its proportionate share in the joint ventures, in either case as obtained in its capacity as assignee from Hunter, and as “varied” in accordance with the terms of the Joint Venture Agreements. Viewed from the opposite perspective, the rationale of the royalty — that for which it was the quid pro quo — did not extend to any interest in the joint venture tenements which was not obtained by SSM (or by any successor) qua assignee from Hunter. That is how I read the definition of “Product”.

129. Clause 1.2(h) of the 1994 Royalty Deed provides that “a reference to any party to this deed … includes that party’s … successors and permitted assigns”. Clause 9.1 then provides:

“(a)   The Payer [i.e., SSM] must not assign the whole or any part of its interest in the Tenements without the prior written consent of the Holder [i.e., Hunter].

(b)   The Holder will not withhold consent if at the time of assignment:

(i)   the assignee enters into a deed with the Holder securing to the Holder performance by the assignee of the obligations of the Payer under this deed;

…”

130. Like Recital B, cl 9.1(a) refers to SSM’s “interest in the Tenements” rather than to a share or interest in the Project. I do not consider that anything turns on this. The parties to the Joint Venture Agreements (Giralia and, at this point, SSM) agreed that SSM had the right to earn proportionate ownership of the joint venture tenements. Clause 9.1(a) prohibited SSM from assigning any interest SSM had in the joint venture tenements without Hunter’s consent. That effectively secured to Hunter the protection in cl 9.1(b)(i), which in turn caught the whole of SSM’s obligation to pay royalty under cl 6.1.

The position immediately before the 2014 Ramelius transactions

131. In the view that I take, the crucial point in time is the termination of the joint ventures and Ramelius’s simultaneous acquisition of SSM’s (then renamed XNAO) and Giralia’s ownership interests in the tenements in 2014.

132. It was not in dispute that Hunter’s right to be paid royalty under the 1993 Transfer Agreement was assigned to Technomin by deed of assignment made effective on 15 December 1993. Hunter gave notice to SSM of that assignment on the same day. The parties appear to have proceeded on the footing that that assignment was effective to assign Hunter’s interest under the later 1994 Royalty Deed (which was entered on 28 March 1994) to Technomin.

133. As to SSM’s registration on the title of the joint venture tenements, the four tenements which were the subject of the 2020 Deed were “Western Australian mining leases M36/264, M36/265, M36/459 and M36/460 each as registered under the Mining Act 1978 (WA).” Searches of the Mining Tenement Register for those tenements were in evidence. Taking M36/264 as an example, the Register records:

1. On 7 December 1995, Giralia, which then held 100%, transferred 51% to SSM.

2. On 7 July 1999, Giralia, which then held 49%, transferred 19% to SSM. At that point, SSM was the registered holder of 70% of the tenement (as contemplated by cl 2 of the Kathleen Valley Joint Venture Agreement), and Giralia was the registered holder of the remaining 30%.

3. On 4 December 2014, SSM (then renamed XNAO) transferred its 70% to Ramelius, and Giralia transferred its 30% to Ramelius.

4. On 17 February 2017, LRL became the registered holder of 100% upon transfer from Ramelius.

134. The Register records identical transactions with respect to M36/265. Both M36/459 and M36/460, which appear to have been successor tenements to earlier Kathleen Valley tenements, commenced on 4 May 1999. The dealings in each were as follows:

1. on 16 June 1999, Giralia, which then held 49%, transferred 19% to SSM, which became registered as the holder of 70%.

2. On 4 December 2014, XNAO transferred its 70% to Ramelius, and Giralia transferred its 30% to Ramelius.

3. On 17 February 2017, LRL became the registered holder of 100% upon transfer from Ramelius.

135. Consistently with the Register, Sch 3 of the 2014 SPA records that the “Registered Holder” of each of the four tenements in issue was XNAO as to 70% and Giralia as to 30%. That was the position as to legal title in 2014.

136. However, as the primary judge found at PJ [7], immediately prior to the termination of the Kathleen Valley joint venture in 2014, XNAO’s joint venture interest stood at 87.15%. That must be understood as an 87.15% “ownership interest” in the joint venture assets, including the four tenements the subject of this appeal. The figure of 87.15% was the “Seller Percentage” attributed to XNAO with respect to the “Kathleen Valley JV Assets” in cl 2.4 of the 2014 SPA. “Seller Percentage” was defined as “the percentage held by each Seller in the Assets as set out in clause 2.4”. “Assets” was defined as including “the Kathleen Valley JV Assets”, which were defined to include “the Sellers’ interests in the Kathleen Valley JV Tenements”, which in turn were defined to mean the tenements in Pt 2 of Sch 3, which identified the four tenements in issue. As the primary judge relevantly found at PJ [33], what each of XNAO and Giralia sold to Ramelius by the 2014 SPA was their “Seller Percentages” of the assets that had been subject to the Kathleen Valley joint venture, which included the four tenements at issue.

137. Thus, although Sch 3 of the 2014 SPA identified the “Registered Holder[s]” (and hence the legal owners) of the four relevant tenements as XNAO and Giralia in the proportions 70:30, to the extent that the 87.15% figure exceeded XNAO’s registered 70% legal title, it should be understood as referring to beneficial ownership. It was not suggested that XNAO had come to hold that beneficial ownership other than in accordance with the joint venture agreement, or that XNAO held that beneficial ownership other than qua assignee of Hunter. The respondent appeared to accept that 87.15% was “the percentage interest that [XNAO] had earned … pursuant to the joint venture agreement”.

138. Giralia held the balance of the beneficial “ownership interest” in the Kathleen Valley joint venture tenements. Its “Seller Percentage” with respect to the “Kathleen Valley JV Assets” was accordingly identified at cl 2.4 of the 2014 SPA as 12.85%.

139. It does not appear to be in dispute that at the time the Kathleen Valley joint venture terminated, XNAO’s liability to pay royalty to Technomin was confined to royalty with respect to XNAO’s 87.15% beneficial ownership interest. XNAO had no obligation to pay royalty to Technomin with respect to Giralia’s 12.85% interest.

140. If instead of terminating, the Kathleen Valley joint venture had continued, and XNAO had retained its 87.15% beneficial ownership interest in the four tenements, and Giralia had wished to sell its 12.85% beneficial ownership interest to Ramelius, Technomin would not have had any right to require XNAO to obtain the benefit of a covenant from Ramelius that Ramelius pay royalty with respect to what had formerly been Giralia’s 12.85% interest in the four tenements. That is because Ramelius would not have held that 12.85% as successor to Hunter, but rather as assignee directly from Giralia. Clause 9.1 of the 1994 Royalty Deed is concerned with assignments by XNAO or its successors, not assignments by Giralia.

135. Conversely, if the joint venture had continued, and Giralia had retained its 12.85% beneficial ownership interest in the four tenements, and XNAO had wished to sell its 87.15% beneficial ownership interest to Ramelius, the practical effect of cl 9.1 of the 1994 Royalty Deed would have been that Ramelius would have been obliged to assume the obligation to pay royalty under that Deed as assignee from XNAO. That would have been an obligation to pay royalty to Technomin with respect to what had been XNAO’s, and what had become Ramelius’s, 87.15% beneficial ownership interest. I do not understand it to be suggested otherwise. Technomin would not have had any right to require XNAO to obtain for Technomin the benefit of a covenant from Ramelius that Ramelius pay royalty with respect to Giralia’s continuing beneficial ownership interest in the tenements.

136. There is no reason to think that the effect of the agreements entered into in and following 2014 changed that position.

The Deed of Termination

143. Clause 2.1 of the Deed of Termination provided that the parties (XNAO and Giralia) waived any pre-emptive rights available under the Joint Venture Agreements in respect of the sale to Ramelius.

144. Clause 2.2 then terminated each Joint Venture Agreement and provided that none of the parties would have any further rights or obligations under or in connection with either of the Joint Venture Agreements. But the termination only took effect “from the date on which completion of the sale and purchase of the Assets” (as defined in the 2014 SPA) took place.

The 2014 SPA

145. The “Sellers” under the 2014 SPA were XNAO and Giralia. The Assets as defined included, as explained above, the Sellers’ ownership interests in the four tenements the subject of the 2020 Deed; “the benefit of the Sellers’ interests in the Contracts (so far as they relate to the Kathleen Valley JV Tenements)”; the benefit of certain “Authorisations”; and certain “Records”. The “Contracts” included the 1994 Royalty Deed, but did not include either of the Joint Venture Agreements (which were simultaneously terminated on the day of completion of the sale).

146. By cl 4.1, on completion, “the Sellers must sell the Assets (to the extent of their respective interests) and the Buyer must buy the Assets …” Between them, the Sellers’ “interests” included the whole legal and beneficial title to the four relevant tenements. XNAO and Giralia were the registered holders in the proportions 70:30. They also held the beneficial interest, as explained above, in the proportions 87.15:12.85 (being the “Seller Percentages” in cl 2.4). However, by cl 2.1(a)(ii), the obligations of the Sellers under the agreement “shall be several (and not joint and several) and shall be in the proportions of their Seller Percentages.”

147. The effect of the 2014 SPA was thus that, on completion, Ramelius held the undivided legal and beneficial title to the four relevant tenements. But that came to Ramelius by two distinct assignments. XNAO assigned its 70% legal and its 87.15% beneficial ownership interest. Simultaneously, but separately, Giralia assigned its 30% legal and its 12.85% beneficial ownership interest. Since both joint ventures terminated at the time of completion of the sale, neither party assigned a joint venture interest as such to Ramelius. What they assigned, as the 2014 SPA made clear, were legal and beneficial interests in the four relevant tenements themselves.

148. However, since XNAO was assigning its legal and beneficial “interest in the Tenements” within the meaning of cl 9.1(a) of the 1994 Royalty Deed, Technomin’s consent was required. That made it necessary for Ramelius to enter into a deed with Technomin “securing to [Technomin] performance by [Ramelius] of the obligations of the Payer under” the 1994 Royalty Deed, in order to satisfy cl 9.1(b)(i). As noted above, the “Payer” was originally defined as SSM (i.e., XNAO). But by cl 1.2(h), a reference to a party to the 1994 Royalty Deed included that party’s “successors and permitted assigns”. Ramelius was XNAO’s successor to an 87.15% interest in the four tenements.

149. The words, “a deed … securing to the Holder performance by the assignee of the obligations of the Payer under this deed,” could have two different legal meanings (which, as will be seen, makes no practical difference on the facts of this case).

1. Those words could refer to the performance of the particular obligations that XNAO itself had as at the time of the assignment. As explained above, XNAO’s obligation at that time was, relevantly, to pay royalty by reference to its 87.15% ownership interest in the four tenements.

2. Alternatively, which I consider the better view, those words could be read as “securing to the Holder performance by the assignee of its obligations as the Payer under this deed”. In other words, cl 9.1(b)(i) contemplates a deed between Technomin and Ramelius recognising an obligation to pay royalty on the basis that the word “Payer” in the 1994 Royalty Deed is read as “Ramelius, as permitted assign from XNAO”.

150. The latter construction better reflects four significant matters. The first is the extension of “a reference to any party to this deed” to include the party’s “successors and permitted assigns” by cl 1.2(h). Clause 9.1 “permitted” assignment if the conditions in par (b) were met. The second is that unless the word “Payer” in cl 9.1 included XNAO’s successors, it would have a one-time only operation, and would not protect Hunter (and its permitted assigns) in relation to later assignments. The third is that, on the hypothesis that engages cl 9.1(b), Ramelius would hold its own “interest in the Tenements”. The royalty obligation could operate directly by reference to that interest. The fourth is the nature of the quid pro quo on which the 1994 Royalty Deed was based, namely, that XNAO’s ownership interest in the joint venture tenements was inherently variable in accordance with the Joint Venture Agreements, and that the obligation to pay royalty was referable to that ownership interest as varied from time to time in accordance with the Agreements.

151. The reason why both constructions lead to the same result on the facts of this case is that on either construction, the royalty would be payable on 87.15% of Ramelius’s ownership of the four tenements. On the second construction, the obligation of the “Payer” (i.e., Ramelius as successor) under the 1994 Royalty Deed would be to pay royalty by reference to the definition of “Product”, namely, “any Minerals … attributable to [Ramelius’s] proportionate share or interest (as varied from time to time) in any Tenement or in the Project”. For the same reasons as given above, the words “as varied from time to time” would refer to Ramelius’s proportionate ownership of the tenements, or its proportionate share in the joint ventures, in either case as obtained in its capacity as successor to Hunter, and as “varied” from time to time in accordance with the terms of the Joint Venture Agreements. Ramelius’s proportionate ownership of the tenements held in its capacity as successor to Hunter (via XNAO) was 87.15%. Since the Kathleen Valley joint venture no longer existed, Ramelius had no interest in the joint venture, and its ownership of the four tenements could no longer be varied in accordance with the now-terminated Joint Venture Agreement. On the second construction, Ramelius’s obligation as “Payer” would therefore be to pay royalty on the 87.15% of the four tenements that it held as successor to Hunter.

152. When Ramelius acquired Giralia’s 12.85% “ownership interest” in the Kathleen Valley tenements, it did not do so as successor to Hunter. It took that interest directly from Giralia. Nor was that interest a joint venture interest; the joint venture terminated at the time of completion of the sale. On the second construction, that part of Ramelius’s ownership of the four tenements would therefore not be subject to royalty.

153. The fact that Ramelius held 100% of the four tenements is beside the point. Ramelius’s 100% interest cannot be characterised as what was formerly XNAO’s 87.15% interest, varied in accordance with the terms of the Kathleen Valley Joint Venture Agreement. Ramelius’s acquisition of Giralia’s 12.85% had nothing to do with any earn-in rights under cl 2 of the Kathleen Valley Joint Venture Agreement, any rights arising upon dilution of the other party’s ownership interest pursuant to cl 3, or the exercise of any rights of first refusal pursuant to cl 6. Ramelius had no such rights. At the point at which Ramelius acquired its interests in the four tenements, the Kathleen Valley Joint Venture Agreement no longer existed.

154. On either construction, the practical effect of cl 9.1 was thus relevantly to require XNAO to procure that Ramelius enter a deed with Technomin to pay royalty on 87.15% of the four tenements, not 100%.

155. Of course, it was possible for subsequent agreements to make some different provision. But to the extent that subsequent agreements and instruments operated by reference to the obligation to pay royalty under the 1994 Royalty Deed, the obligation was limited in the way explained above.

156. In the view that I take, the practical consequence was that once the Joint Venture Agreements were terminated, the “proportionate share or interest” in the four tenements that was required to be subject to royalty under the 1994 Royalty Deed was fixed at 87.15%.

The effect of agreements other than the 1994 Royalty Deed

157. As to the provision made by the 2014 SPA itself in this regard, by cl 4.2, Ramelius promised upon completion to “assume, pay, perform and discharge all Assumed Liabilities”. These were defined to include “Contractual Liabilities”, which were in turn defined to include “any and all Liabilities that relate to Claims or Losses arising out of each Contract”. “Liability” was defined to mean “any liability, duty or obligation …” “Claim” was defined to mean “any claim, demand or cause of action however arising in relation to … the Assets or their sale; or … any other matter connected with the Assets.” As noted above, the 1994 Royalty Deed was one of the “Contracts”. But the only liability “arising out of” it was that of the “Payer”, as explained above.

158. Further, by cl 9.1 of the 2014 SPA, XNAO and Ramelius promised, until four months after the Completion Date, to use their best endeavours to “have [Ramelius] assume the obligations of the [sic] XNAO under the Contracts, to the extent that they relate to the Tenements with effect from the Completion Date by way of a Novation Deed or in a form otherwise acceptable to XNAO and [Ramelius].”

159. Clauses 4.2 and 9.1 of the 2014 SPA operated to require Ramelius to assume the obligations of either “the Payer” (cl 4.2) or XNAO (cl 9.1) under the 1994 Royalty Deed, as described above. In each case, that was an obligation to pay royalty by reference to an 87.15% interest in the Kathleen Valley tenements. Nothing in those clauses suggests that Ramelius was required to do anything more than that.

Ramelius’s 2014 Deed Poll in favour of Technomin

160. By cl 3(a) of the 25 August 2014 Deed Poll, Ramelius undertook in favour of Technomin “to observe, be bound by and perform the obligations imposed on the Retiring Parties under the Contract Interest”. The “Retiring Parties” were XNAO and its parent, but by cl 1.2(c)(ii) included their “successors and permitted assigns”. The “Contract Interest” meant the 1994 Royalty Deed, to the extent that it related to certain tenements including the four tenements the subject of this appeal. Nothing in that agreement expanded the scope of the royalty payable by Ramelius beyond the 87.15% discussed above.

Technomin’s 2014 Assignment Notice

161. Technomin’s 22 September 2014 Assignment Notice gave notice to XNAO of the assignment to Drem of, among other things, Technomin’s right, title and interest in the royalty under the 1994 Royalty Deed. Such a notice was not capable of expanding the scope of the royalty, and it did not purport to do so. It described the royalty as “over the Interest of [XNAO] in the Kathleen Valley, Mount Harris and Violet Range project tenements”.

The 12 September 2016 TSA with LRL

162. By the 2016 TSA, Ramelius sold the relevant tenements to LRL. The 1994 Royalty Deed was referred to as one of the Third Party Agreements. LRL promised to deliver upon completion original deeds of novation executed by each relevant third party counterparty: cl 6.2(d)(i). Alternatively, if the parties agreed to waive that obligation, cl 6.7 provided for completion on the basis that LRL enter into a deed poll in favour of the counterparty “to assume each of the Third Party Obligations”. Again, nothing in that agreement expanded the scope of the royalty payable by LRL (as successor to XNAO, via Ramelius) beyond the 87.15% discussed above.

The 2016 Deed Poll

163. On 7 December 2016, unaware that Technomin had assigned the royalty to Drem, Ramelius and LRL entered a deed poll in favour of Technomin (2016 Deed Poll). By cl 2(a)(ii), LRL covenanted in favour of Technomin “that it will assume and be bound by, to the extent of the Assigned Interest, the Obligations that accrue or have been incurred on or after the Effective Date.”

1. “Obligations” were defined as “all of the covenants, agreements, obligations and liabilities of [Ramelius] under the Royalty Agreement other than any obligations related to the Reserved Rights.” The “Royalty Agreement” was defined as the 1994 Royalty Deed, “as variously assigned”. The “Reserved Rights” are not presently relevant.

2. “Assigned Interest” was defined as “all of the rights, Interest and obligations in and under the Royalty Agreement, other than any obligations relating to the Reserved Rights.”

3. The Effective Date was 7 December 2016 (which was apparently the date of completion under the 2016 TSA and also the date of execution of the 2016 Deed Poll).

164. Clause 2(a)(ii) was thus a promise to assume the obligations of Ramelius to perform the obligations of the Payer under the 1994 Royalty Deed. Again, nothing in the 2016 Deed Poll expanded the scope of the royalty payable by LRL (as ultimate successor to XNAO) beyond the 87.15% discussed above.

The 2020 Deed

165. The 18 November 2020 Deed of Acknowledgement between LRL and Drem carefully recited the history of the 1994 Royalty Deed and the various assignments relating to it. Nothing in the way in which those matters are recited suggests an intention to expand the scope of the royalty payable by LRL beyond the 87.15% discussed above. Indeed, the last of the recitals, 12, records:

“The parties have agreed to enter into this deed to give effect to these transactions and record that the Royalty Holder [i.e., Drem] (and not Technomin) is the current holder of the Royalty and to set out additional terms and conditions to which they agree.”

166. The main object was thus “to give effect to” the transactions discussed above, not to change their effect by expanding the scope of the royalty. The “additional terms and conditions” included, for example, Drem’s consent to the transfer of certain tenements to LRL (cl 3(b)); its acknowledgement that no royalty was payable under the 1994 Royalty Deed prior to the Effective Date, being 7 December 2016 (cl 3(d)); and a limited release of the former registered holders of the relevant tenements (cl 3(e)). Those matters did not expand the scope of the royalty beyond the existing 87.15%.

167. The “Tenements” are defined as the four identified tenements: M36/264, M36/265, M36/459 and M36/460. The central provision is cl 2, which provides:

“2 Acknowledgement Tenement transfer and Assigned Interest

(a) [LRL] and [Drem] each acknowledges and agrees that the Tenements and the corresponding obligation to pay the royalty under the Royalty Deed in respect of the Tenements, were assigned to [LRL] with effect on and from the Effective Date.

(b) With effect on and from the Effective Date:

(i) [LRL] covenants in favour of [Drem] to assume and be bound, to the extent of the Assigned Interest, by the liabilities and obligations under the Royalty Deed that accrue or are incurred after the Effective Date; and

(ii) [Drem] covenants in favour of [LRL] to observe the terms and conditions of the Royalty Deed which are on its part required to be observed.”

168. Clause 2(a) refers to what has already happened. To the extent that par (a) refers to the assignment of “the Tenements, and the corresponding obligation to pay the royalty under the Royalty Deed in respect of the Tenements”, it should be read as an assumption of that obligation on and from the Effective Date, being the date of the 2016 Deed Poll in favour of Technomin. As noted above, the obligation assumed in favour of Technomin in the 2016 Deed Poll did not expand the scope of the royalty. Nor does the description of the obligation in par (a) as “the corresponding obligation … in respect of the Tenements” expand the scope of the royalty. Those words identify the four relevant tenements, but not the proportionate share or interest in them subject to royalty.

169. Clause 2(b)(i) is a fresh promise by LRL in favour of Drem “to assume and be bound, to the extent of the Assigned Interest, by the liabilities and obligations under the Royalty Deed that accrue or are incurred after the Effective Date”. The 2020 Deed was thus expressed to operate by reference to obligations that in some sense already existed under the 1994 Royalty Deed. The question is, what obligations?

170. Given their location in the syntax between the words “bound” and “by”, the words “to the extent of the Assigned Interest” qualify “the liabilities and obligations” which LRL assumed. “Assigned Interest” was defined to mean “all of the rights, interest, obligations and liabilities in and under the Royalty Deed, to the extent that they relate to the Tenements.” One way in which the reference to the “Assigned Interest” qualifies LRL’s obligation is that the four “Tenements” as defined are a subset of the tenements which LRL acquired from Ramelius. Another way in which the reference to the Assigned Interest qualifies LRL’s obligation is that the words “obligations … to the extent that they relate to the Tenements” are consistent with the language of the definition of Product in the 1994 Royalty Deed, which refers to a “proportionate share or interest” in a tenement. That is to say, the “obligations … under the Royalty Deed” might operate by reference to something less than the whole ownership interest in any of the tenements. For the reasons given above, once the Joint Venture Agreements were terminated, the “proportionate share or interest” in any Kathleen Valley tenement that was subject to royalty under the 1994 Royalty Deed was fixed at 87.15%.

171. Neither the words of cl 2(b)(i) itself nor the definition of “Assigned Interest” identifies whose “obligations” LRL is assuming, or the specific scope of the obligations. But the central obligation “under the Royalty Deed” in favour of Drem (as the successor “Royalty Holder”) is the obligation to pay royalty in cl 6.1 of the 1994 Royalty Deed. That obligation falls on “the Payer” — originally XNAO but, by force of cl 1.2(h), also its “successors and permitted assigns”. LRL is a successor to XNAO, via Ramelius, as to 87.15% of its ownership of the four relevant tenements. The covenant in cl 2(b)(i) is readily seen as the assumption by LRL of the obligation under the 1994 Royalty Deed of a successor to XNAO to pay royalty on so much of XNAO’s ownership as LRL succeeded to, namely, 87.15%. But, as to the 12.85% balance of LRL’s interest in the four relevant tenements, LRL is not a successor of XNAO. It is instead a successor to Giralia, via Ramelius.

172. If, alternatively, the covenant in cl 2(b)(i) is seen as the assumption by LRL of the obligation to which XNAO itself was formerly subject, that obligation was limited to 87.15%, for the reasons given above.

173. Moreover, the following matters indicate that the parties to the 2020 Deed should not be taken to have intended that the royalty obligation LRL was assuming in favour of Drem was any greater than the one LRL had purported to assume in favour of Technomin on 7 December 2016, which had been limited to 87.15%.

1. The limited purposes identified in Recital 12 (in particular, of giving effect to the earlier transactions, and recording that Drem rather than Technomin was entitled to the royalty).

2. The fact that the covenant in cl 2(b)(i) operated from the Effective Date (being the date of the 2016 Deed Poll in favour of Technomin).

3. The absence of any apparent legal or commercial reason, or anything manifesting an intention, for LRL to confer on Drem a royalty that was any broader in scope than that to which Ramelius had been subject with respect to the four tenements.

Conclusion

174. In the result, the obligation of LRL to pay royalty to Drem under the 1994 Royalty Deed with respect to the four tenements (defined as the “Tenements” in the 2020 Deed) is an obligation confined to the Royalty Percentage of Gross Proceeds of Saleable Product attributable to 87.15% of LRL’s ownership of those tenements.

175. I would uphold Ground 1 in the notice of appeal; Ground 2 to the extent that it asserts error in finding that the words “proportionate share or interest (as varied from time to time)” encompass variations other than in accordance with the terms of the joint venture agreements; and Ground 3, subject to the qualification, “and held as successor to XNAO”.

176. Accordingly, I would allow the appeal; set aside the orders of the primary judge and in lieu thereof dismiss the summons and order the plaintiff to pay the defendant’s costs of the proceedings at first instance; and order the respondent to pay the appellant’s costs of the appeal.

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Endnote

Decision last updated: 04 September 2025