Macarthur Coal Limited v MCG Coal Pty Ltd
[2011] QLC 55
•30 August 2011
LAND COURT OF QUEENSLAND
CITATION: Macarthur Coal Limited v MCG Coal Pty Ltd [2011] QLC 0055 PARTIES: Macarthur Coal Limited
(applicant)v. MCG Coal Pty Ltd
(respondent)FILES NO: MRA220-11 DIVISION: Land Court of Queensland PROCEEDING: Application for extension of caveat. DELIVERED ON: 30 August 2011 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER: His Honour: PA Smith ORDER: [1] Pursuant to s.201(2)(c) of the Mineral Resources Act 1989 (Qld), the caveat lodged by Macarthur Coal Ltd over MDL 162 on 6 April 2011 (dealing number 1025072) remain in force until 30 days after the finalisation of Supreme Court proceedings number S4388 of 2011 including any appeals from any decisions in those proceedings or until further order of the Land Court.
[2] No order as to costs.
CATCHWORDS: Caveats – Mineral Resources Act 1989, ss.199 and 201 – whether sufficient evidence to demonstrate “a right or interest in or in respect of a mineral development licence” – how long caveat should remain in force. APPEARANCES: Mr PH Morrison QC and Mr McQuade of counsel, instructed by Corrs Chambers Westgarth Lawyers for the applicant
Mr MD Martin of counsel instructed by ClarkeKann Lawyers for the respondent
Background
On 8 June 2011 Macarthur Coal Pty Ltd (Macarthur) filed an originating application in the Land Court seeking the following orders:
1.Pursuant to s.201(2)(c) of the Mineral Resources Act 1989 (Qld), the caveat lodged by Macarthur Coal Ltd over MDL 162 on 6 April 2011 (dealing number 1025072) remain in force until 30 days after the finalisation of Supreme Court proceedings number S4388 of 2011 including any appeals from any decisions in those proceedings or until further order of the Land Court.
2.No order as to costs.
Subsequently, on 15 June 2011, the Land Court ordered that the application be heard on 8 August 2011, and that the caveat lodged by Macarthur over MDL 162 on 6 April 2011 (dealing number 1025072) remain in force until determination of this application or earlier order of the Court.
The hearing of the application was conducted on 8 August 2011 and all evidence was by way of affidavit. That affidavit evidence was very sizeable. No witnesses were required for cross-examination. At the hearing of the application, Macarthur was represented by Mr Morrison QC and Mr McQuade of counsel, while the respondent MCG Coal Pty Ltd (Coal) was represented by Mr Martin of counsel.
Counsel for both Macarthur and Coal have greatly assisted the Court by providing useful summaries and diagrams to represent the factual context which gives rise to Macarthur’s application.
Having read the relevant affidavit evidence and considered extensively the written and oral submissions of counsel, in my view the facts (so far as they relate to my determination of the application) become relatively clear.
On 1 September 2010 Macarthur, MCG Coal Holdings Pty Ltd (MCG Holdings), Coal, MCG Resources Pty Ltd (in liquidation) (Resources) and Fortrus Resources Pty Ltd (Fortrus) entered into a written Loan Facility Agreement whereby Macarthur agreed to fund the acquisition by Coal, a wholly owned subsidiary of MCG Holdings, of a substantial coal resource contained within the area which is the subject of Mineral Development Licence 162 (MDL 162) in exchange for an entitlement to subscribe for 90% of the share capital in MCG Holdings.
Pursuant to the Loan Facility Agreement, Macarthur agreed to advance $360,000,000 to MCG Holdings for the specific purpose of financing the acquisition by Coal, a subsidiary of MCG Holdings, of MDL 162.[1] On receiving Foreign Investment Review Board (FIRB) approval, Macarthur (or its nominee) was, on or before the business day which was 30 days after the date it received FIRB approval (Implementation Deadline), entitled to subscribe for 90% of the shares in MCG Holdings (Subscription Shares) by delivering a Subscription Notice to MCG Holdings.[2]
[1] See clauses 1.1, 2 and 4 of the Loan Facility Agreement.
[2] See clauses 1.1, 17.1 and 17.2 of the Loan Facility Agreement.
On the second business day after MCG Holdings received the Subscription Notice, or such other date as agreed, completion of the subscription of shares in favour of Macarthur was required to take place.[3] At Subscription Completion (amongst other obligations), MCG Holdings and Coal were required to deliver to Macarthur counterparts of the Shareholders Agreement and Marketing Agreement (annexures A and B to the Loan Facility Agreement) executed by MCG Holdings, Coal, Fortrus and Resources,[4] and MCG Holdings was required to issue the Subscription Shares to Macarthur or its nominee.[5]
[3] See clauses 1.1 and 17.3 of the Loan Facility Agreement.
[4] See clauses 1.1 and 17.5 of the Loan Facility Agreement.
[5] See clauses 1.1, 17.6 and 17.7 of the Loan Facility Agreement.
Pursuant to clause 16.1(a) of the Loan Facility Agreement and clauses 3 and 4.1 of the Shareholders Agreement, upon Subscription Completion, MDL 162 was to be developed and operated for the shareholders of MCG Holdings, namely:
(a) Macarthur or its nominee as to 90%;
(b) Resources as to 6%; and
(c) Fortrus as to 4%.In accordance with clauses 9.5(a) and (c) of the Loan Facility Agreement, Coal was obliged not to encumber or dispose of MDL 162 or any interest therein without the consent of Macarthur.
On 1 September 2010, Macarthur advanced $360,000,000 to MCG Holdings for the specific purpose of its subsidiary, Coal, acquiring MDL 162 in accordance with the Loan Facility Agreement. That same day, Coal acquired MDL 162.
On 20 October 2010, Macarthur received FIRB approval.
The Implementation Deadline was extended on a number of occasions by variation of the Loan Facility Agreement by the parties, the last of which extended the Implementation Deadline to 1 March 2011.
On 28 February 2011, pursuant to clause 17.7 of the Loan Facility Agreement, Macarthur gave notice of its nomination of Macarthur Berrigurra Pty Ltd (Macarthur Berrigurra), a wholly owned subsidiary of Macarthur, to subscribe for the Subscription Shares in its place, and Macarthur Berrigurra gave notice of its election to subscribe for the Subscription Shares.
On 1 March 2011 liquidators were appointed to Resources.
Macarthur and Macarthur Berrigurra commenced proceedings on 25 May 2011 in the Supreme Court of Queensland seeking specific performance of the Loan Facility Agreement. The Supreme Court proceedings have been placed on the Commercial List by order of his Honour Justice P McMurdo made on 7 June 2011 and directions have been given for the future conduct of that proceeding.
Coal contends that the Loan Facility Agreement with Macarthur has come to an end.[6] As indicated, Macarthur seeks specific performance of the Loan Facility Agreement. That dispute will be resolved in the Supreme Court proceedings between Macarthur and Coal.
[6] See Transcript 8 August 2011 p. 17 Lines 49-50.
Statutory Provisions
Macarthur lodged its caveat on 6 April 2011 pursuant to s.199 of the Mineral Resources Act 1989 (MRA). Section 199 relevantly provides as follows:
“199 Lodgement of caveat
(1)Subject to subsection (2), a person who claims a right or interest in or in respect of a mineral development licence may by a caveat in the approved form forbid the approval of any assignment or mortgage in respect of the mineral development licence (save any assignment or mortgage the approval of which is excepted in the caveat) either absolutely or until after notice of intention to approve such an assignment or mortgage is served on the caveator.
(2)…”
Subsection 2 is not relevant in the current proceedings.
Depending upon the circumstances, once a caveat has been registered a number of things can occur. Pursuant to s.201(2)(d) of the MRA a caveat expires 3 months from the date of lodgement of the caveat. However, provided an application is brought in the Land Court prior to the expiration of the caveat, the Land Court has power, pursuant to s.201(2)(c) of the MRA to extend the caveat for whatever period it considers appropriate. Pursuant to s.203(2) of the MRA, a person who has a right or interest in an MDL affected by a caveat may bring an application in the Land Court seeking that the caveator be summonsed to attend the Land Court to show why the caveat should not be removed. It is of note that at no time subsequent to the registration of the caveat on 6 April 2011 has Coal sought to have the caveat removed on the basis that Macarthur does not hold a right or interest in respect of MDL 162 or, indeed, on any other ground.
The Case for Macarthur
Mr Morrison QC contends that the factual circumstances set out at the beginning of this decision clearly show that Macarthur has a right or interest in respect of MDL 162 capable of being protected by way of a caveat. Mr Morrison QC referred me to a number of authorities in support of his contention.
In Re: Arkaroola Resources Pty Ltd v. Niugini Mining (Australia) Pty Ltd[7] Deputy President Kingham of the Land and Resources Tribunal (as her Honour then was) made the following observations:[8]
[7] [2001] QLRT 12.
[8] Ibid 10-15.
“[10]Counsel for neither party was able to refer me to authorities dealing with caveats in analogous circumstances. Whilst there is a dearth of authority dealing with caveats over mining leases, there has been considerable judicial consideration of this issue in relation to freehold land. Most significantly, the Queensland Court of Appeal considered a similar argument in relation to a contract for the sale of land, subject to a statutory requirement for approval by a local authority of the subdivision.
[11]In that case, the vendor sought to remove the purchaser’s caveat on a number of grounds, including that the purchaser could not have a caveatable interest until the local authority approved the sub-division. On appeal from the chamber Judge’s dismissal of the application to remove the caveat, it was revealed that the statutory provision relied upon by the vendor had since been repealed. The comments of the Court of Appeal are, therefore, obiter.
[12]The Court was referred to a line of Queensland decisions to the effect that an interest in a conditional contract of this nature could not support a caveat. The majority (Macrossan CJ and Demack J) stated:
‘There is now weighty opinion in the High Court suggesting that an equitable interest in land can exist when a claimant is entitled to something less than a full decree of specific performance ordering conveyance, that is it can exist provided that a claimant is entitled to equitable relief by way of injunction or other remedy to maintain and protect his interest……With an expanded view of what can constitute an equitable interest in land, a correspondingly wider view of a caveatable interest under s. 98 of the Real Property Act can apply.’
Davies J was in the minority but agreed with the majority on this point:
‘…before fulfilment of that condition, the purchaser has an interest capable of protection in equity against forfeiture. The difference between that interest and that of a purchaser who has paid the purchase price under an unconditional contract is one only of degree…..The words of s. 98 are wide enough to encompass the interest of a purchaser under such a conditional contract and, in my view, should be so construed.’
[13]It is worth noting that, some time after that decision, the Land Title Act 1994 was enacted. Section 121 uses the word interest rather than the phrase “estate or interest in land” used in s. 98 of the now repealed Real Property Act 1861. Similarly, s. 301 of the Act uses the phrase “right or interest” rather than “estate or interest”.
[14]Davies J cited with approval decisions by a single judge of the Supreme Court of NSW and the Full Court of the Supreme Court of WA. The majority also referred to the NSW decision. In both cases, purchasers under contracts, which were conditional upon local authority approvals, were able to maintain their caveats.
[15]There is no relevant distinction between those cases and the circumstances of this case. I find that the interest asserted by the Applicant is sufficient to support a caveat over the mining leases.”
The next case to which Mr Morrison QC referred was that of Shenhuo International Group Pty Ltd v Shinelia Resources Limited.[9] That case involved an application for the removal of a caveat. In considering the matter, President Koppenol (as his Honour then was) stated as follows:[10]
[9] [2007] QLRT 31.
[10] Ibid 7 and 8.
“[7]Subsequently, the respondent advanced certain funds (in excess of $700,000) to Mr Hou’s company (for various works on the EPC) and (8 days after the Supreme Court order) a formal loan agreement and deed of charge were executed. The respondent’s case was that these documents were designed to document or restate what had previously been agreed.
[8]Many issues were canvassed at the hearing but in my view, the matter can be decided on the following summary basis:
·Mr Hoe’s company, as the registered holder of the EPC, had the capacity in April 2006 to encumber any of its assets including the EPC.
·The preliminary loan agreement arguably constitutes (in the first of the Masters v Cameron classes) a valid agreement between those parties for the respondent to take a charge over Mr Hou’s company assets—which included the EPC.
·The agreement to create a charge arguably takes effect as an equitable charge.
·Whilst that equitable charge would be sufficient to support the caveat, it also establishes that there is a serious question to be tried as to whether the EPC is subject to the charge.
…”
I was also referred by Mr Morrison QC to my decision in JH Fryar v IP Lewis.[11]Unfortunately, although the respondent in that matter had actively resisted the application in the lead up to the hearing, when the matter came on for hearing there was no appearance by the respondent and I subsequently gave an Ex tempore decision. In those circumstances, the utility of the decision is somewhat limited. Notwithstanding, the following statement from the decision is of importance:[12]
“[5]… The facts of this matter can be briefly stated. Ms Fryar claims to have a debt owing to her from Mr Lewis in the sum of $320,000 plus interest. Ms Fryar by her sworn testimony has linked the repayment of the loan by Mr Lewis to herself to the interest held by Mr Lewis in various mining tenements across Australia including mining lease 6782. In my view Ms Fryar, by her evidence, has established a sufficient interest in mining lease 6782 of a financial nature in financing Mr Lewis to enable the caveat to be granted.”
[11] [2007] QLC 0134.
[12] Ibid 5.
Mr Morrison QC also drew the Court’s attention to the important High Court decision of Moneywood Pty Ltd v Salamon Nominees Pty Ltd.[13]Although dealing with quite different legislation (Auctioneers and Agents Act 1971 (Q)), the Court was required to consider the statutory meaning of the words “in respect of”. As already indicated, the words “in respect of” are found in s.199(1) of the MRA. Relevantly, Justice Gummow had this to say:[14]
“The term is coupled with the phrase ‘in respect of’, which has ‘the widest possible meaning of any expression intended to convey some connection or relation between the two subject matters to which the words refer’. This catches a good number of transactions that may be entered into by real estate agents, something obviously considered desirable by the legislature to fulfil the policy of the Act. It also means that one should not strain unduly to narrow the content of the transaction for which the agent’s appointment is required to be in writing.”
[13] [2001] 202 CLR 351.
[14] At paragraph 96.
Reference was also made to the Court of Appeal case of D'Aguilar Gold Ltd v Gympie Eldorado Mining P/L.[15] Although that case was primarily concerned with issues of priority with respect to EPM’s, it is noteworthy because the Court of Appeal made observations with respect to the effect of caveats under the MRA. In particular, Williams JA observed as follows:[16]
“[30]Senior counsel for the appellant submitted, by referring to the position under the Torrens system of land title, that a caveat was primarily concerned with the protection of rights pending registration. Whilst that might generally be so under the Torrens system, it does not mean that the caveat regime under this Act is so limited. The wording of the sections dealing with caveats in this Act clearly indicate that wider protection is afforded than mere protection until registration under s 158.”
[15] [2007] QCA 158.
[16] Ibid 30.
Coal’s Response
Mr Martin of counsel strongly contends that the provisions of s.199 of the MRA do not give Macarthur any right or interest in respect of MDL 162. Mr Martin referred to the NSW Supreme Court case of Redglove Projects v Ngunnawal Local Aboriginal Council.[17] In Redglove, Justice White determined that a near negative covenant not to encumber or dispose of land does not create or constitute an estate or interest in land. Specifically, His Honour had this to say:[18]
“The fact that equity will enforce the negative promise by injunction does not transmute a purely personal claim into a proprietary interest. Equity does ‘nothing more than give the sanction of the process of the Court to that which is already in the contract between the parties’ (Doherty v Allman (1878) 3 App Cas 709 at 720).
An injunction operates in personam. The grant of an injunction does not create an equitable interest which does not otherwise exist (Craftsman Colour Newcastle Pty Ltd v Scotman McLelland CJ in Eq, 6 September 1993, unreported, p 2). If the right created by contract is merely personal, the fact that a breach may be restrained by injunction and does not sound only in damages cannot convert a personal right into a proprietary interest.”
[17] [2004] NSW SC 880.
[18] At paragraphs 26-27.
Mr Martin of counsel also contended that it is unchallengeable that a shareholder in a company has no proprietary interest in the property of the company. As Justice McPherson stated in ANZ Executors & Trustee Company Limited v Qintex Australia Ltd:[19]
“[A] shareholder’s freedom to exercise his vote as he pleases does not mean that in law he can accomplish everything that takes his fancy. The right to vote is, it is true, a species of property that can be exercised at will, and it may confer control over the affairs and the property of the company; but it does not follow that the holder may always do whatever he pleases with the corporate assets. For they are the property of the company and not the shareholder, who has no legal or equitable interest in them: Macaura v Northern Assurance Co Ltd [1925] AC 619, [Lord Buckmaster] at 626. That is the inescapable consequence of treating the company in law as an entity distinct from its members.”
[19] [1991] 2 QdR 360 at 367.
As Mr Martin put it in his written submissions of 25 July 2011:[20]
“The applicant cannot claim to have any interest in MDL 162. It is an unsecured creditor of Holdings. A creditor has no interest or right in respect of the assets of a company. The applicant’s right is limited to a purported contractual entitlement for its subsidiary, Macarthur Berrigurra Pty Ltd (“Macarthur Berrigurra”), to be issued with 90% of his shares in Holdings in accordance with the Loan Facility Agreement (see exhibit JMH-6 to the affidavit of Jeremy Michael Horwood).”
[20] At paragraph 6.
Conclusions
Although Mr Martin’s submissions are not without some merit, I am not persuaded that the Loan Facility Agreement, coupled with the payment by Macarthur of the sum of $360,000,000 which, on the facts before me, was used by Coal to acquire MDL 162, do not give rise to Macarthur being able to claim a right or interest in respect of MDL 162. On the contrary, I am persuaded by all of the arguments put forward by Mr Morrison QC.
While Mr Martin has correctly stated the law with respect to caveats over Torrens System Land, such as freehold, it must be remembered that a tenure granted under the MRA does not, as set out in s.10, “create an estate or interest in land”.
As the cases of Arkaroola, Shenhuo International, Fryar, and Moneywood show for the reasons already discussed, a broad interpretation should be given to the term “a right or interest in or in respect of a mineral development licence” as set out in s.199(1) of the MRA. In my view, Macarthur clearly asserts rights greater than that of a mere shareholder. Macarthur entered into a significant contract with Coal and related companies. Macarthur paid a significant sum of money (some $360,000,000) to enable Coal to acquire MDL 162. If Macarthur’s assertions are proven correct, pursuant to the contract Macarthur, through its subsidiary, will have undeniable control over MDL 162 via its 90% holding in the company which holds, through its subsidiary Coal, MDL 162.
Balance of Convenience
Although there was some argument between the parties as to the balance of convenience in this matter, in my view where the balance of convenience falls is abundantly clear. Macarthur and its subsidiary are clearly at risk of losing the contractual rights that they claim with respect to MDL 162 should Coal dispose of MDL 162 prior to the conclusion of the Supreme Court proceedings.
The fact that Coal states that it has no current intention of disposing of MDL 162 does not assist it. Such statement is little more than a statement of a current intention and could easily change tomorrow.
Although it is no doubt true that Macarthur’s claim against Coal could be converted to a claim for damages, there has been no evidence placed before the Court by Coal to show what ability, if any, it has to meet any potential damages award. As Mr Morrison QC put it,[21] Macarthur has paid $460 million in order to obtain controlling corporate rights to MDL 162. The balance of convenience clearly requires that the status quo should be maintained until the Supreme Court proceedings are determined.
[21] See Transcript 8 August 2011 p.5.
Closing Remarks
Although nothing turns on this point, it is worthy of note that at no time has Coal availed itself of the provisions of s.203 of the MRA and sought to have the caveat removed. That would be the normal course that one would expect a person to take in circumstances where a caveat was registered over one of their MDL’s in circumstances where they strongly believed that the caveator had no right or interest in the MDL, as asserted here by Coal.
Determination
It is my primary function under s.201 of the MRA to consider whether or not the caveat lodged by Macarthur over MDL 162 should continue to be in force.
For the reasons set out above, in my view it is appropriate that the caveat lodged by Macarthur with respect to MDL 162 should continue in force until 30 days after the finalisation of Supreme Court proceedings number S4388 of 2011 including any appeals from any decisions in those proceedings or until further order of the Land Court.
I note that Macarthur by its originating application seeks an order that there be no order as to costs. Given that application, I do not propose to make any order as to costs in this matter.
Orders
Pursuant to s.201(2)(c) of the Mineral Resources Act 1989 (Qld), the caveat lodged by Macarthur Coal Ltd over MDL 162 on 6 April 2011 (dealing number 1025072) remain in force until 30 days after the finalisation of Supreme Court proceedings number S4388 of 2011 including any appeals from any decisions in those proceedings or until further order of the Land Court.
No order as to costs.
HIS HONOUR PA SMITH
MEMBER OF THE LAND COURT
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