Mineralogy Pty Ltd v Sino Iron Pty Ltd - [2022] WASCA 162

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT :   THE COURT OF APPEAL (WA)
CITATION:   MINERALOGY PTY LTD -v- SINO IRON PTY LTD [2022] WASCA 162
CORAM:   BUSS P
BEECH JA
VAUGHAN JA

HEARD:   16 MAY 2022
DELIVERED          :   9 DECEMBER 2022
FILE NO/S:   CACV 42 of 2021
BETWEEN:   MINERALOGY PTY LTD
Appellant
AND
SINO IRON PTY LTD
First Respondent
KOREAN STEEL PTY LTD
Second Respondent
CITIC LIMITED
Third Respondent

ON APPEAL FROM:
Jurisdiction              :   SUPREME COURT OF WESTERN AUSTRALIA
Coram:   KENNETH MARTIN J
Citation: MINERALOGY PTY LTD -v- SINO IRON PTY LTD [2021] WASC 45
File Number            :   CIV 2840 of 2018

Catchwords:

Contract - Construction of contracts - Where parties enter long‑term mining agreements imposing remediation obligations upon the first and second respondents - Where contract provided for a Site Remediation Fund to secure performance of those obligations - Where contract provided for the appellant to determine the annual charge to be paid by the first and second respondents into the Site Remediation Fund having regard to certain stipulated matters - Where contract provided that Site Remediation Fund was to be an account 'designated as a trust account' - Whether appellant's demand to the first and second respondents for payment of annual charge was in accordance with the contractual clauses, properly construed - Whether appellant had constituted the Site Remediation Fund by an account that was 'designated as a trust account'

Legislation:

Nil

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

Appellant	:	P Dunning KC, K S Byrne & J Kennedy
First Respondent	:	S K Dharmananda SC, J H Kirkwood & L N Firios
Second Respondent	:	S K Dharmananda SC, J H Kirkwood & L N Firios
Third Respondent	:	S K Dharmananda SC, J H Kirkwood & L N Firios

Solicitors:

Appellant	:	Daniel Jacobson
First Respondent	:	Allens
Second Respondent	:	Allens
Third Respondent	:	Allens

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

Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219
Electricity Generation and Retail Corporation trading as Synergy v EIT Kwinana Partner Pty Ltd [2022] WASCA 3
JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2] [2020] WASCA 112
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2021] WASC 45
Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80; (2019) 55 WAR 89

JUDGMENT OF THE COURT:

Introduction

This appeal concerns another of the very numerous disputes between the parties to this appeal arising from and concerning two iron ore mining agreements made between them.
The appellant, Mineralogy Pty Ltd (Mineralogy), is the registered holder of certain mining leases containing deposits of magnetite ore. Each of the first and second respondents (to which we will refer respectively as Sino and Korean) is a party to an agreement with Mineralogy, termed a Mining Right and Site Lease Agreement (MRSLA), in relevantly identical terms. The third respondent, CITIC Limited (CITIC), is the holding company of Sino and Korean and, according to Mineralogy, is guarantor for Sino's and Korean's obligations under the MRSLAs.
For ease of exposition, we will refer to the MRSLA concerning Sino in the course of these reasons.
The MRSLA establishes a long‑term relationship between Mineralogy and Sino by which, in broad summary, (1) Mineralogy grants Sino the right to take ore from the areas of the mining leases; (2) Sino agrees to produce certain iron ore products from the ore for sale or export; and (3) Sino agrees to pay Mineralogy a royalty comprising two separate components. Relevantly to this appeal, the agreement makes elaborate provision for the carrying out by Sino of site remediation work, including at mine closure, and for security for Sino's site remediation obligations in the manner provided by cl 20.5 and cl 20.6 of the MRSLA.
Clause 20.6 of the MRSLA is the subject matter of this appeal. It provides for Mineralogy to constitute a Site Remediation Fund,[1] to be maintained in a separate interest‑bearing trust account which is to be designated as a trust account, to be used solely for the purpose of paying Site Remediation Costs as they become payable. It also provides for Mineralogy to determine an annual charge on account of future Site Remediation Costs to be determined by Mineralogy, having regard to Mineralogy's best estimate of the amount of future Site Remediation Costs and the amount already contributed by Sino into the Site Remediation Fund, and having regard to the number of years remaining until Mine Closure.
[1] This and other capitalised terms used in this introduction are defined terms in the MRSLA; see [12] below.
The primary proceedings concerned demands made by Mineralogy in 2018 that the respondents pay approximately $530 million into what Mineralogy asserted was the Site Remediation Fund. Mineralogy said that that amount corresponded to an estimate by a relevant expert of the then present‑day cost to remediate the then existing disturbance of the Mine Sites.
The primary judge rejected Mineralogy's claim.[2] In broad summary, his Honour did so on three bases. First, his Honour considered that cl 20.6 of the MRSLA required Mineralogy to divide its estimated costs of future remediation by the estimated number of years until Mine Closure, which Mineralogy had failed to do. Secondly, Mineralogy had failed to establish a 'designated trust account'. Thirdly, Mineralogy's demands to each of the respondents did not constitute valid notices for the purposes of the MRSLA.
[2] Mineralogy Pty Ltd v Sino Iron Pty Ltd [2021] WASC 45 (primary reasons).
Mineralogy challenges all three of these conclusions, advancing 12 grounds of appeal. Grounds 1 ‑ 5 challenge the judge's construction of cl 20.6; grounds 6 ‑ 8 challenge his Honour's finding that Mineralogy had not established a designated trust account; and grounds 9 ‑ 11 challenge the primary judge's finding that Mineralogy's demands were not valid notices. Ground 12 is conclusionary, asserting that, because of the errors in grounds 1 ‑ 11, the judge should have upheld Mineralogy's claim in the primary proceedings.
For the reasons that follow, in our opinion, none of Mineralogy's challenges to the primary judge's conclusions has been made out. We would dismiss the appeal.
It is convenient to begin by outlining the relevant provisions of the MRSLA.

The relevant provisions of the MRSLA

For present purposes, it is only necessary to set out the following definitions and provisions of the (Sino) MRSLA.
Relevant definitions in cl 1.1 include the following:[3]
[3] GAB 1503 - 1507.
Environmental Approval means any Government Approval obtained under the EP Act or otherwise relating to environmental obligations.
…
Good Industry Practices means, in respect of any work:
(a)the exercise of that degree of skill, diligence, prudence and foresight that reasonably would be expected from a reputable and prudent contractor in performing work similar to that work and under conditions comparable to those applicable to that work; and
(b)compliance with those standards, codes and practices which would ordinarily be applied by reputable companies and contractors in the iron ore industry in Australia.
…
Legal Requirements means present or future obligations arising under:
(a)legislation regulations by-laws;
(b) the orders and requirements of any Government Authority, including notices requiring the carrying out of any repairs alterations or works;
(c)the terms and conditions of the proposals, as submitted to and approved by the Minister under the State Agreement, in respect of Sino's Project; and
(d)the terms and conditions of the Mining Leases, and of all Government Approvals relating to Sino's Project, Sino's Project Facilities, and Sino's Activities.
…
Mine means the open-cut mine to be developed within the Mine Area by Sino and/or other Mine Participants for the mining and extraction of Magnetite Ore.
Mine Area means the area, within the Mining Leases, within which Mining Operations are to be conducted, as described in Clause 3.1, and as may be amended from time to time under this Agreement.
Mine Closure means the permanent cessation of operations at the Mine.
Mine Facilities means facilities established within the Mine Area for the purpose of Sino exploiting its Mining Rights in accordance with this Agreement.
…
Mining Operations means all activities in connection with:
(a)development of one or more Mines within the Mine Area in accordance with the Mine Plan;
(b)mining of Magnetite Ore from the Mine and delivery of the Magnetite Ore to the Processing Facilities;
(c)establishment and operation of Mine Facilities as necessary to support Mining Operations;
(d) creation and operation of all necessary stockpiles and waste dumps;
(e) applying for and obtaining necessary Government Approvals associated with Mining Operations;
(f) acquiring power, water and other services and utilities as required for Mining Operations; and
(g) all activities incidental to the foregoing.
…
Operating Year means each period of 12 months commencing 1 July. The first Operating Year will be the period commencing on the date of this Agreement and ending on the next 30 June.
…
Remediation Work means all rehabilitation or remediation work necessary to meet Legal Requirements and Good Industry Practices. Without limitation, Remediation Work includes as appropriate severing and removing structures and facilities, making good damage to the land, re-contouring the land, spreading top-soil, re-establishing vegetation and removing contaminated soil.
…
Site Remediation Costs means costs and liabilities incurred in respect of Site Remediation Work.
Site Remediation Fund is defined in clause 20.6.
Site Remediation Work means all work required in connection with the decommissioning of the Mine, shut-down and cessation of Mining Operations, and rehabilitation or remediation of areas affected by Mining Operations as necessary to meet Legal Requirements and good industry practices. Without limitation, Site Remediation Work may include as appropriate severing and removing structures and facilities, making good damage to the land, re-contouring the land, spreading top-soil, re-establishing vegetation and removing contaminated soil.
Clause 19, 'Cessation of Mining Operations', provides that:
19.1 Mine Closure
Following Mine Closure, Sino will carry out all necessary Site Remediation Work. Sino will comply, and will continue to comply, with any ongoing Legal Requirements relating to Site Remediation Work on areas affected by Mining Operations. All Site Remediation Costs will be Sino's expense.
19.2 Obligations upon winding-up
Following Mine Closure and the completion of all Site Remediation Work in accordance with Legal Requirements, Sino will wind-up all Mining Operations, will dispose of all property remaining at the Mine at that time and will finalise all outstanding obligations in connection with Mining Operations.
19.3 Mine Facilities
(a)Following Mine Closure, Sino will notify Mineralogy of its intention to dispose of the Mine Facilities within the Mine Area at that time, and identifying each of the Mine Facilities. Within 60 days from the date of such notification, Mineralogy may elect by notice to Sino to acquire all of [sic] any of the Mine Facilities.
(b) If Mineralogy elects to acquire all or any of the Mine Facilities, then those Mine Facilities which Mineralogy has elected to acquire will be left at the Mine Site, and Sino will be under no further obligation in relation to the removal of such Mine Facilities or any Remediation Work consequential upon such removal.
(c) All Mine Facilities other than those which Mineralogy has elected to acquire will be removed from the Mine Area and disposed of in accordance with Legal Requirements. All of the costs associated with such removal and disposal will be Sino's expense.
19.4 Continuing obligations
Following the winding-up of the Mining Operations, all rights and obligations of the parties will cease except for the following:
(a) Sino will remain liable for their respective obligations and liabilities in relation to Site Remediation Work and Site Remediation Costs;
(b) the parties will continue to be bound by the confidentiality provisions of this Agreement; and
(c) Sino will remain liable to contribute to any liabilities which may arise after the winding-up of the Mining Operations, to the extent that such liabilities are attributable to any act, omission, event or circumstance occurring prior to the winding-up of the Mining Operations.
Clause 20, 'Environmental Obligations', provides that:[4]
[4] GAB 1530 - 1534.
20.1 Environmental Approvals
(a) Unless otherwise determined by Mineralogy, Sino is responsible for obtaining all necessary Environmental Approvals in relation to Sino's Project and Sino's Activities.
(b) Mineralogy may elect to obtain (or may have obtained) Environmental Approvals in respect of Sino's Project as a proponent. In that event, and if Mineralogy wishes to transfer a part or the whole of any Environmental Approval to Sino:
(i) Sino must sign any document or instrument, pay any bond, security or other financial provision and otherwise do anything reasonably necessary to effect the transfer.
(ii) Sino will indemnify Mineralogy for any costs and expenses, including any fines or penalties that Mineralogy incurs or has incurred by virtue of Mineralogy having been the proponent and/or continuing to be a co-proponent for Sino's Project and its associated activities.
Clause 20.2 Legal Requirements
(a) In relation to the Site Lease Area and otherwise in relation to all of Sino's Activities, Sino will comply strictly with all Legal Requirements relating to protection of the environment and Site Remediation Work.
(b) Sino acknowledges that Legal Requirements will include:
(i) the conditions of all present or future Environmental Approvals in relation to Sino's Project;
(ii) the undertakings made by Sino or by Mineralogy in relation to Sino's Project as part of Sino's Project Proposals made under the State Agreement in relation to Sino's project.
Clause 20.3 Bonds
As between Mineralogy and Sino, Sino will be solely responsible for the provision of all bonds required by Government Authorities in respect of Sino's Activities.
Clause 20.4 Site Remediation Work
(a) As and when required by Legal Requirements, Sino will carry out all Site Remediation Work that may be required as a result of Sino's Activities. All Site Remediation Work must meet Legal Requirements.
(b) Following Mine Closure, Sino will remove and dispose of all Sino's Project Facilities in accordance with Legal Requirements, and will carry out all necessary Site Remediation Work. Sino will comply, and will continue to comply, with any ongoing Legal Requirements relating to Site Remediation Work on areas affected by Sino's Activities.
Clause 20.5 Mineralogy may require security
Mineralogy may from time to time require Sino to provide reasonable security for the performance of its obligations under this Clause 20. Such security will be provided in the form of a Site Remediation Fund.
Clause 20.6 Site Remediation Fund
(a) In order to make provision and to provide security for payment of future Site Remediation Costs as they become payable, Mineralogy will establish a Site Remediation Fund, and Sino will make payments into the Site Remediation Fund in the manner set out in this clause.
(b) The Site Remediation Fund is intended to provide security and certainty for the benefit of Sino, and for Mineralogy as the holder of the Mining Lease, that sufficient funds will be available at Mine Closure to meet Site Remediation Costs.
(c) The Site Remediation Fund will be maintained in a separate interest-bearing trust account controlled by Mineralogy as trustee, and which will be designated as a trust account. The interest earned on funds in the Site Remediation Fund will be retained in the Site Remediation Fund.
(d) The Site Remediation Fund may be used solely for the purpose of paying Site Remediation Costs as they become payable. The Site Remediation Fund may not be used or accessed for any other purpose.
(e) For each Operating Year, Mineralogy will determine an annual charge on account of future Site Remediation Costs to be made by Sino in that Operating Year. The amount of the annual charge is to be determined by Mineralogy, having regard to:
(i) Mineralogy's best prevailing estimate of the amount of future Site Remediation Costs, and the amount (if any) already contributed by Sino into the Site Remediation Fund; and
(ii) the number of years remaining until Mine Closure.
(f) At least 30 days prior to the commencement of each Operating Year, Mineralogy will notify Sino of its annual charge in respect of the forthcoming Operating Year.
Clause 20.7 Environmental Management Plan
(a) As a condition to Mineralogy's approval of Sino's Development Plan, Sino will prepare for the approval of Mineralogy an environmental management plan setting out the obligations of Sino with regard to environmental management. Sino may from time to time submit changes to the environmental management plan.
(b) The environmental management plan must at a minimum:
(i) be sufficient to ensure compliance by Sino with its obligations under all applicable Legal Requirements, and to meet the requirements of all relevant Government Authorities;
(ii) comply with good and accepted environmental management practices adopted by the mining industry in Australia;
(iii) set out the strategies and management processes that will achieve compliance with these requirements;
(iv) set out the obligations of Sino with regard to, among other things, the reporting of environmental incidents; and
(v) set out obligations of Sino with regard to periodic review of its environmental management performance.
(c) The environmental management plan submitted by Sino shall be subject to the approval of Mineralogy, approval not to be unreasonably withheld.
(d) Mineralogy may from time to time require Sino to modify or add to the environmental management plan if Mineralogy can demonstrate that the amendment is necessary to meet the standards required under paragraph (b).
(e) Sino will at all times comply with the approved environmental management plan, and will ensure that Sino's employees and contractors comply with the approved environmental management plan.
(f) Sino will on an annual basis following commencement of development review its environmental management performance against the environmental management plan and will provide a report to Mineralogy on the effectiveness of the plan in achieving compliance, the reasons for non-compliance and the changes required to the plan to achieve compliance.
(g) If Mineralogy has approved an environmental management plan under a Project Agreement which contains the same content as the environment management plan to be approved by Mineralogy under this Agreement, Mineralogy will be deemed to have approved the environmental management plan.
(h) If Mineralogy approves the environmental management plan and Mineralogy's approval is also required under a Project Agreement for an environmental management plan which contains the same content as the environmental management plan, Mineralogy will be deemed to have approved that environmental management plan. Sino and Mineralogy hereby agree to vary the terms of such Project Agreement to the extent required to give effect to this paragraph (h).
Clause 20.8 Claims in respect of Environmental incidents
Sino will indemnify Mineralogy against all Claims in respect of:
(a) any Site Remediation Work required as a result of Sino's Activities;
(b) any contamination of land resulting from Sino's Activities;
(c) pollution (which includes all discharges and emissions in excess of or in contravention of relevant Legal Requirements) resulting from Sino's Activities;
(d) dangerous, hazardous or toxic substances brought onto the Mining Leases by Sino.

Reference should also be made to cl 37.4. This provides:
Mineralogy and each Mine Participant [which included Sino] will act in good faith towards one another in relation to the performance of this Agreement.

Background facts

The parties entered into the MRSLAs in 2006.[5]
[5] Primary reasons [1], [42].
On 16 April 2018, Mineralogy, by Mr Clive Palmer, sent a letter to CITIC Pacific Mining Management Pty Ltd, agent for CITIC. The letter demanded that an amount of $529,378,207 be paid by Sino and Korean into the Site Remediation Fund, asserting that those companies were already in breach of their obligations to make contributions to the Site Remediation Fund.[6]
[6] Primary reasons [49]; GAB 3777.
Sino, Korean and CITIC rejected Mineralogy's demand, asserting that the purported notice of 16 April 2018 was invalid.[7]
[7] Primary reasons [51].
On 21 May 2018, Mineralogy issued a separate notice to each of Sino and Korean requiring each of them to pay 50% of the sum referred to in [17] above within 14 days.[8]
[8] Primary reasons [52]; GAB 3861, 3865.
Following the respondents' failure to meet these demands, Mineralogy commenced the primary proceedings during October 2018.[9]
[9] Primary reasons [52].

The primary judge's approach

The nature of the issues on appeal means that it is not necessary to recount or summarise the primary judge's very detailed reasons. The critical issue in the appeal is the proper construction of cl 20.6. As has been observed many times in this court, including in an earlier appeal between the parties to this appeal,[10] there is only one true construction of a legal instrument, and the task of this court on appeal concerning the construction of an instrument is to determine for itself the proper construction of the instrument.
[10] Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80; (2019) 55 WAR 89 [172].
Consequently, we will do no more than outline his Honour's central conclusions.
The primary judge accepted that progressive remediation - in other words, remediation prior to Mine Closure - was contemplated by, and the subject matter of, cl 20.6(a) and was encompassed by the broad definitions of 'Site Remediation Work' and 'Site Remediation Costs'.[11] The judge accepted that some funds would be needed to be held in the Site Remediation Fund for the forthcoming Operating Year to enable progressive remediation work to be carried out and paid for in the course of that Operating Year.[12]
[11] Primary reasons [266], [270], [273].
[12] Primary reasons [271].
The primary judge observed, by reference to cl 20.6(b), that cl 20.6 was directed to ensuring that sufficient funds be available at Mine Closure to meet Site Remediation Costs. His Honour considered that this reflected and indicated that the clause's predominant object was to ensure sufficient funds at the point of Mine Closure.[13] His Honour observed, in this regard, that there was 'some element of tension' between cl 20.6(a) and (b).[14]
[13] Primary reasons [278].
[14] Primary reasons [279].
The judge pointed to the definition of 'Mine Closure', namely the permanent cessation of operations at the Mine, as counting against Mineralogy's contention that the Site Remediation Fund must always hold sufficient funds in the event of an unforeseen early closure or shutdown.[15]
[15] Primary reasons [283] - [284].
The judge agreed with the respondents' contention that Mineralogy's failure to overtly designate their National Australia Bank (NAB) account as a 'trust account' was legally fatal to the validity of Mineralogy's debt claims.[16]
[16] Primary reasons [288].
The judge found that cl 20.6(c) explicitly required Mineralogy to establish a designated trust account. Given the potentially huge sums of money to be held in the account, his Honour did not accept that some internal designation by Mineralogy, or communication to NAB, would be sufficient to establish a designated trust account.[17] The requisite level of protection necessitated an express designation by the financial institution itself.[18] To avoid future confusion or misunderstandings, his Honour considered that the trust status needed to be overt.[19]
[17] Primary reasons [497].
[18] Primary reasons [498].
[19] Primary reasons [498].
The judge said that, in practice, Mineralogy would need to notify each of Sino and Korean individually at no later than 31 May of a particular calendar year in respect of the annual charge for an ensuing Operating Year.[20]
[20] Primary reasons [295].
The judge noted that nothing in the MRSLA expressly identified when the obligation to render payment arises after a cl 20.6(f) notification.[21] The judge held that, 'essentially by implication', payment should be met within a reasonable time of a notification. The judge held that a reasonable time for payment would be no later than six months into the ensuing Operating Year.[22] This conclusion is not challenged on appeal.
[21] Primary reasons [296].
[22] Primary reasons [297].
The judge said that cl 20.6(e)(i) and (ii) 'deliver key criteria that must be given proper attention by Mineralogy in any determination decisions'.[23] The judge said that Mineralogy would not meet the required degree of good faith (imposed by cl 37.4) were it to ignore or avoid the controlling criteria in cl 20.6(e)(i) and (ii).[24]
[23] Primary reasons [304].
[24] Primary reasons [311].
The judge observed that Mineralogy's determination is to be made by reference to future Site Remediation Costs, not incurred costs or liabilities.[25] His Honour found that the phrase 'to be made' in cl 20.6(e) is a reference to the annual charge levied for a forthcoming Operating Year, rather than a more limiting reference to an assessment of the future Site Remediation Costs assessed only by reference to the projected remediation work to be carried out by Sino or Korean in an ensuing Operating Year.[26] While already-planned works would be relevant to an assessment of the cost, the scope of the assessment would be greater than already-planned works.[27]
[25] Primary reasons [305].
[26] Primary reasons [306].
[27] Primary reasons [307] - [308].
The judge found that Mineralogy's assessed numerical figure constituting its best prevailing estimate of future Site Operating Costs to be made within the next Operating Year, by reason of its character as a 'best prevailing estimate', was not a reviewable assessment, provided it was the honest best prevailing estimate. However, the numerical figure constituting the money already in the Site Remediation Fund was reviewable, by virtue of it being a fixed sum rather than an estimate.[28]
[28] Primary reasons [393] - [395].
The judge expressed his conclusion on the critical question of construction in the following manner:[29]
As a matter of ascertaining the overall true meaning of MRSLA cl 20.6(e), my end view is that there must be found a methodological requirement upon Mineralogy whilst determining the annual charge (if any) for an Operating Year - to engage properly with the chosen contractual criteria, as has been specified in MRSLA cl 20.6(e). This will require Mineralogy to have regard as well to, and so, to ascertain the input C and then, for Mineralogy to divide the numerator money sum of the cl 20.6(e)(i) fraction ($A - $B) by those years. Only a fractional approach by dividing the $A - $B numerical amount so derived by the remaining number of years (ie, C) in my assessment will afford the proper level of force and effect to the deployed text of cl 20.6(e)(ii). That construction is also a more commercial one for a long term (potentially) project. No surrounding circumstance sufficiently intrudes to detract from that greater textual direction. Part of the present problems arise, I fear, because the annual charge task is only approached rather late - ie, in 2018, after the project then has been on foot for some years. Had earlier incremental annual charges been rendered and paid earlier, then by now a monetarily significant fund should already have been held in the Site Remediation Fund. Of course that feature does not affect the true construction of the 2006 MRSLAs which is focused at the time of their 2006 perfections, not later on, as problems of implementation emerge. Mineralogy's counter arguments about the true meaning of the words in cl 20.6(e)(ii) as canvassed earlier are ultimately, just not persuasive. The division by C years is the only viable true meaning that is acceptable in my end view.
[29] Primary reasons [397].
What his Honour meant by '$A', '$B' and 'C' appears in an earlier part of the primary reasons where the judge characterised the respondents' preferred construction in the following terms:[30]
The CITIC defendants contend that the true work done by the controlling (e)(ii) criteria, is straightforward. In effect, they say (e)(ii) provides the denominator in a fractional division calculation that must be followed in determining an enforceable annual charge. Hence, the figure as assessed as Mineralogy's best prevailing estimate (call this amount '$A') after the subtraction of any $ amount(s) already contributed to the Site Remediation Fund (amount '$B') under (e)(i), at the end is to be divided by the number of years that is assessed as remaining until Mine Closure (amount of years 'C').
[30] Primary reasons [320].
The judge considered that the determination of the number of years until Mine Closure was not a matter on which Mineralogy had a significant range of discretion. Rather, it was a matter to be assessed honestly based on the most up‑to‑date information.[31]
[31] Primary reasons [398].
The primary judge concluded that the purported notice issued by Mineralogy on 16 April 2018 was ineffectual for each of several reasons. First, no Site Remediation Fund had been constituted because the bank account with NAB opened in Mineralogy's name and asserted by Mineralogy to be the Site Remediation Fund was not 'designated as a trust account' as required by cl 20.6(c).[32]
[32] Primary reasons [287], [455], [492] - [508].
Secondly, the letter of 16 April 2018 demanded payment of an aggregate sum for Sino and Korean globally. In his Honour's view, the letter of 16 April 2018 did not, by inference, make a demand for payment by each individual company of the amount that was said to be payable by that company.[33]
[33] Primary reasons [450], [455].
Further, the notice was ineffectual because Mineralogy's determination of the annual charge did not conform with the requirements of cl 20.6(e), as construed by his Honour.
The judge further found that Mineralogy's notices of 21 May 2018 to each of Sino and Korean were also invalid, suffering all but the second of the flaws of the first notice.[34]
[34] Primary reasons [488] - [492].
Further, the primary judge found that the 14 days provided by the 21 May 2018 notices for payment of the amount demanded was insufficient to constitute a reasonable time for payment.[35] This conclusion is not challenged on appeal.
[35] Primary reasons [485] - [486].

Grounds of appeal

Mineralogy advances 12 grounds of appeal. Grounds 1 ‑ 5, which concern the proper construction of cl 20.6, are expressed in the following terms:
1. The primary judge erred in law by construing sub-clause 20.6(e) of the MRSLA as requiring the appellant, in making its determination of an annual charge, to divide the matters in paragraph (i) of that sub-clause by the matter in paragraph (ii): J[397].
2. The primary judge erred in law by construing the matters in paragraphs (i) and (ii) of sub-clause 20.6(e) of the MRSLA as 'controlling criteria' and determinative (J[310] ‑ [311] and [397]), when the primary judge ought to have found that those paragraphs only provided matters which the appellant was to consider in making its determination of an annual charge.
3. The primary judge erred in law by failing to:
(a)construe sub-clause 20.6(e) of the MRSLA in a manner that entitled the appellant, in making its determination of an annual charge, to require the respondents to pay an amount into the Site Remediation Fund covering the costs and liabilities for remediating the then-present disturbance caused by the respondents' mining activities; and
(b)consider the appellant's construction to the effect of paragraph (a) above, including by reason of misconstruing the appellant's construction as advocating for a lump sum payment up-front of all future costs and liabilities that may be incurred with respect to future mining activities: J[283], [306]-[307], [324].
4.The primary judge erred in both fact and law by finding that a construction of cl 20.6(e) of the MRSLA that led to a divisional exercise resulted in a more 'commercial' outcome, when that conclusion was not supported on the evidence below and was contrary to the objective purpose of cl 20.6 of the MRSLA: J[283], [397]-[398].
5. The primary judge erred in both fact and law by finding that the appellant's determination of the amount to be paid into the Site Remediation Fund failed to have regard to the number of years remaining until Mine Closure in accordance with cl 20.6(e) of the MRSLA and was invalid: J[488]-[491].
While, in this way, Mineralogy's grounds of appeal challenge discrete aspects of the primary judge's reasoning process in coming to his Honour's ultimate construction, this is not how Mineralogy's written or oral submissions proceed. Rather, consistently with the orthodox position that there is but one true construction of a legal instrument, Mineralogy seeks to demonstrate that the primary judge's construction was in error and that the true construction was in the terms contended for by Mineralogy. It is appropriate to evaluate grounds 1 - 5 conformably with the way in which they were argued - ie by determining the proper construction of cl 20.6. In doing so it is unnecessary to address each of grounds 1 - 5 separately.
Grounds 6 - 8 concern whether Mineralogy's NAB bank account was a designated trust account:
6. The primary judge erred in law by finding that the bank account established by the appellant failed to meet the requirements of cl 20.6(c) of the MRSLA, properly construed, and ought to have found that the bank account was controlled by the appellant as trustee and complied in substance with that subclause: J[497] ‑ [500] and [557] ‑ [559].
7. The primary judge erred in law by finding that a failure to constitute a bank account in accordance with cl 20.6(c) of the MRSLA rendered ineffective any determinations made by the appellant under cl 20.6(e) of the MRSLA: J[507].
8. The primary judge erred in both fact and law by finding that the respondents were excused from performing any obligations to make payment into the Site Remediation Fund under cl 20.6 of the MRSLA in the absence of a bank account being established by the appellant that met the requirements of cl 20.6(c) of the MRSLA: J[504] ‑ [507].
Grounds 9 - 11, which concern whether the April and May 2018 notices were valid, are as follows:
9.The primary judge erred in law by finding that the appellant was required, in notifying the respondents of its determination under cl 20.6(e) of the MRSLA, to identify separate amounts for each of the first and second respondents and the manner in which the appellant had regard to the matters in paragraphs (i) and (ii) of the sub-clause, when no such requirements were imposed for any notice under cl 20.6 of the MRSLA: J[455]-[456].
10. The primary judge erred in both fact and law by finding that the appellant's notice of 16 April 2018 did not constitute a valid notice of the appellant's determination under cl 20.6(e) of the MRLSA and was therefore ineffective: J[457].
11. The primary judge erred in both fact and law by finding that the appellant's notices of 21 May 2018 were ineffective at law, because of the matters identified in grounds 1 to 9 above: J[487]-[491] and [507].
Ground 12 is a conclusionary ground that raises no additional issues:
12. Because of the matters described in grounds 1 to 11 above, the primary judge ought to have found that the appellant's notice of 16 April 2018, alternatively its notices of 21 May 2018, were valid and binding determinations under cl 20.6(e) of the MRSLA and the respondents were obliged to pay the sum of $529,378,207 into the Site Remediation Fund.

Grounds 1 - 5: proper construction of cl 20.6

Mineralogy's propounded construction

Mineralogy submits that, contrary to the primary judge's construction, cl 20.6(e) does not 'require a divisional exercise', and that the factors in subparagraphs (i) and (ii) of cl 20.6(e) are not controlling criteria.[36] Rather, on a proper construction, Mineralogy must consider, take into account or 'think about' the matters in subparagraphs (i) and (ii).
[36] Appellant's submissions [22] - [25].
Mineralogy submits that, on the proper construction of cl 20.6(e), the setting of the annual charge requires attention to the disturbance that has already occurred as at the date of the determination, the disturbance that is expected to be incurred during the next Operating Year and the extent to which any progressive remediation will take place in that Operating Year. The annual charge must be based on the best prevailing estimate of the costs of remediating all disturbance likely to exist by the end of the forthcoming Operating Year and any progressive remediation anticipated for that year, adjusted according to the extent to which the number of years remaining until Mine Closure may affect the assessment of those costs and the extent to which existing money in the Site Remediation Fund covers those costs.[37]

Mineralogy's submissions

Textual considerations

[37] Appellant's submissions [35] - [36], [67]; appeal ts 17 - 18.

Senior counsel for Mineralogy accepted that the concept of 'current disturbance' was critical to Mineralogy's preferred construction. Asked to identify the textual foothold for the focus on current disturbance inherent in the construction propounded by Mineralogy, senior counsel pointed to the definition of 'Site Remediation Costs'.[38]
[38] Appeal ts 8.
Mineralogy submits that, because the words 'on account of future Site Remediation Costs' are read by inserting the definition of 'Site Remediation Costs', the reference to 'on account of future Site Remediation Costs' in cl 20.6(e) means a charge on account of both the costs of remediation to be incurred in the future, as well as the liability for remediation that arises in the future. Mineralogy submits that, unlike costs which are not incurred until remediation work is done, liabilities are incurred whenever mining operations cause disturbance.[39] Thus, to determine what liabilities for remediation might be incurred in the following financial year, one need only look to what further disturbance is projected in that financial year and estimate the costs that would then be incurred in remediating that disturbance in the future.[40]
[39] Appellant's submissions [26]. See also appeal ts 11 - 12, 13 - 14.
[40] Appellant's submissions [29].
When Site Remediation Costs are understood in this way, Mineralogy submits that it does not make sense for the estimated Site Remediation Costs to be divided by the number of years until Mine Closure.[41]
[41] Appellant's submissions [27].
Further, when Site Remediation Costs are so understood, it can be seen, Mineralogy submits, that what the annual charge is to be 'on account of' are the 'Site Remediation Costs' that are 'to be made' in that Operating Year. As a matter of ordinary language, costs are incurred or paid, rather than 'made'. The phrase 'to be made', as used in cl 20.6(e), is a recognition that the Fund captures not just the actual costs of remediation that are to be paid, but the liabilities arising from disturbance made during that year.[42]
[42] Appellant's submissions [30].
Secondly, Mineralogy emphasises that the ordinary meaning of the words 'having regard to' is nothing more than to consider or take into account. Mineralogy submits that, whereas the clause says that Mineralogy must take into account the matters in subparagraphs (i) and (ii), the primary judge's construction is radically different in requiring Mineralogy to divide the result of the matters in (i) by the matter in (ii).[43]
[43] Appellant's submissions [23] - [25]; appeal ts 38.

Mineralogy submits, therefore, that the requirement to have regard to the number of years remaining until Mine Closure should not be read as requiring that the years remaining be the denominator in a 'divisional exercise'. Rather, a more natural reading of that part of the clause is that Mineralogy is to consider the extent to which the number of years remaining until Mine Closure affects whether the amount to be paid into the Fund adequately accounts for and secures Site Remediation Costs as defined.[44] One way that the number of years until Mine Closure can affect the extent to which the Fund adequately provides for Site Remediation Costs is that, the further out one is from Mine Closure, the greater the uncertainty as to how much it will actually cost to undertake remediation. One has regard to that uncertainty by making allowance for an appropriate contingency. As one approaches Mine Closure, the amount of that contingency would be expected to reduce.[45]
[44] Appellant's submissions [41]; appeal ts 28 - 29.
[45] Appellant's submissions [42]; appeal ts 29.
Further, regard may be had to the number of years remaining until Mine Closure by allowing appropriately for the effect of inflation, balanced against the interest that will accrue on money already paid into the Fund.[46]

Contextual considerations

[46] Appellant's submissions [43]; appeal ts 33.

Mineralogy points to Sino's obligations to undertake progressive remediation and to the provision in cl 20.6(a), suggesting that one of the purposes of the Site Remediation Fund is to secure performance of remediation obligations that arise before Mine Closure. It submits that the judge's construction, which involves a simple divisional exercise, fails to meet this function because it leads to the full amount required being secured only at the time of Mine Closure. By contrast, the purpose of the Site Remediation Fund is to ensure that there is available at all times sufficient funds to meet costs or liabilities of Site Remediation Work, whether before or at Mine Closure.[47]

Commercial considerations

[47] Appellant's submissions [47] - [50].

Mineralogy submits that the definition of 'Mine Closure', namely, 'permanent cessation of Mining Operations', is properly to be understood as permanent cessation of Mining Operations undertaken by Sino. This would encompass Mine Closure occurring unexpectedly early, such as in the event of an insolvency. In support of this construction, Mineralogy contends that it would be unfair to Sino if it were otherwise, since in that case Sino would be obliged to remediate disturbance caused by others, after the cessation of Sino's operations.
Adopting this construction of 'Mine Closure', Mineralogy submits that the judge's construction of cl 20.6(e) is liable to result in an insufficient amount of money being in the Site Remediation Fund.[48] The Fund would have sufficient funds if, as is the case under Mineralogy's propounded construction, the annual charge reflected the full amount of existing liabilities rather than, as on the judge's construction, an amount to be paid incrementally on an assumption of a Mine Closure date based on everything going to plan.[49] Thus, the judge's construction does not advance the purpose of cl 20.6 because it does not provide security for an unplanned and early Mine Closure.[50]
[48] Appellant's submissions [56]; appeal ts 9.
[49] Appellant's submissions [59].
[50] Appellant's submissions [60].
Mineralogy further points to apparent difficulties that would be encountered by Mineralogy in assessing, in the context of a long‑term project, the likely future development of the Mine and consequent remediation obligations, as well as the likely date of Mine Closure.[51]

Construction of contracts: general principles

[51] Appellant's submissions [52] - [54]; appeal ts 20 - 21.

The principles applicable to the construction of written contracts have been established by decisions of the High Court. Those principles have been outlined in many cases in this court. See, for example, Black Box Control Pty Ltd v Terravision Pty Ltd;[52] JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2][53] and Electricity Generation and Retail Corporation trading as Synergy v EIT Kwinana Partner Pty Ltd.[54] By way of summary:
[52] Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219 [42].
[53] JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2] [2020] WASCA 112 [67] - [72].
[54] Electricity Generation and Retail Corporation trading as Synergy v EIT Kwinana Partner Pty Ltd [2022] WASCA 3 [230] ‑ [234].
(1)The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose. The starting point for the proper construction of a clause is the language used in the clause. In particular, one starts by identifying the possible meanings that the words chosen by the parties can bear.
(2)Ascertaining the meaning of terms in an instrument requires a determination of what a reasonable person would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract.
(3)The instrument must be read as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed to have some operation.
(4)The general principle applicable to the construction of commercial contracts is that they should be given a businesslike interpretation. Absent a contrary intention, the court approaches such contracts on the basis that the parties intended to produce a result which makes commercial sense. This requires that the construction placed on the term or terms in question is consistent with the commercial object of the agreement. However, it must also be borne in mind that business common sense may be a topic on which minds may differ.
(5)Definitions do not have substantive effect. A definition is not to be construed in isolation from the operative provision(s) in which the defined term is used. Rather, the operative provision is ordinarily to be read by inserting the definition into it.

Disposition

The proper construction of cl 20.6 generally

The primary question of construction on appeal concerns cl 20.6(e), which governs Mineralogy's determination of an annual charge on account of future Site Remediation Costs for an Operating Year, giving rise to an obligation for Sino to make payment of that sum into the Site Remediation Fund. In order to resolve that question, it is necessary to understand cl 20.6(e) in the context of cl 20 as a whole.
Clause 20.6 recognises and reflects that both Mineralogy and Sino have obligations in respect of remediation of the site on which Mining Operations under the MRSLA are conducted.
As the tenement holder of the relevant mineral leases, Mineralogy has obligations as to site remediation arising under the Mining Act 1978 (WA).
As between Mineralogy and Sino, under the MRSLA, Sino is obliged to undertake all Site Remediation Work: cl 19, cl 20.2 and cl 20.4.
The MRSLA contemplates, and imposes, obligations on Sino in respect of two kinds of site remediation. First, at Mine Closure (that is, permanent cessation of operations at the Mine), Sino is obliged to carry out all necessary Site Remediation Work: cl 19.1 and cl 20.4(b). 'Site Remediation Work' is defined to mean 'all work required in connection with the decommissioning of the Mine, shutdown and cessation of Mining Operations, and rehabilitation or remediation of areas affected by Mining Operations as necessary to meet Legal Requirements and good industry practices'. The definitions of 'Mining Operations' and ‘Legal Requirements’ are set out in [12] above.
Secondly, Sino is obliged, as and when required by Legal Requirements, to carry out all Site Remediation Work that may be required as a result of Sino's activities: cl 20.4(a). The primary judge and the parties have referred to this kind of remediation, which occurs before Mine Closure, by the shorthand 'progressive remediation'. At times, we will do the same.
As well as the distinct substantive obligations in cl 20.4(a) (as and when required) and cl 20.4(b) (following Mine Closure), these two aspects of Sino's obligations in respect of Site Remediation Work are reflected in the two limbs of the definition of 'Site Remediation Work'. That definition is set out at [64] above. The two limbs of the definition are reflected by reading the definition in the following manner:
[1] all work required in connection with the decommissioning of the Mine, shutdown and cessation of Mining Operations, and [2] rehabilitation or remediation of areas affected by Mining Operations as necessary to meet Legal Requirements and good industry practices.
Clause 20.5 entitles Mineralogy to require Sino to provide reasonable security for the performance of Sino's obligations under cl 20, in the form of the Site Remediation Fund provided by cl 20.6. That purpose - providing security for Sino's obligations under cl 20 - encompasses Sino's remediation obligations in respect of Site Remediation Work at Mine Closure (cl 20.6(b)) and those in respect of progressive remediation (cl 20.6(a)).
By cl 20.6(b), the Site Remediation Fund is intended to provide reasonable security and certainty that sufficient funds will be available at Mine Closure (that is, the permanent cessation of operations at the Mine) to meet costs and liabilities incurred in respect of all work required in connection with the decommissioning of the Mine, shutdown and cessation of Mining Operations and rehabilitation or remediation of areas affected by Mining Operations as necessary to meet Legal Requirements and good industry practices.
By cl 20.6(a), the Site Remediation Fund is also intended to provide reasonable security for payments, as they become payable, of other future costs or liabilities incurred in respect of work required from time to time before Mine Closure to rehabilitate or remediate areas affected by Mining Operations as necessary to meet Legal Requirements and good industry practices.
So, the dual purposes stated in cl 20.6(a) and cl 20.6(b) encompass and reflect the two limbs of Sino's obligations concerning Site Remediation Work provided for in cl 20.4(a) and cl 20.4(b). These two purposes are complementary and are not in conflict or tension.
The Site Remediation Fund is to be constituted by a separate interest‑bearing trust account controlled by Mineralogy as trustee, which account must be 'designated as a trust account': cl 20.6(c).
Interest earned on the funds in the Site Remediation Fund will accrue and accumulate within it, thereby increasing the amount of the Site Remediation Fund: cl 20.6(c).
The Site Remediation Fund is expressly for the benefit of both Sino and Mineralogy. Clause 20.6(b) provides that the Site Remediation Fund is intended to provide security and certainty for the benefit of Sino, and for Mineralogy as the holder of the mining lease, that sufficient funds will be available at Mine Closure to meet Site Remediation Costs.
Mineralogy must only use the Site Remediation Fund for the purpose of paying Site Remediation Costs - namely, costs and liabilities incurred in respect of Site Remediation Work - as they become payable: cl 20.6(d). Inserting the definition of 'Site Remediation Work', the Site Remediation Fund may be used solely for the purpose of paying costs and liabilities incurred in respect of (i) all work required in connection with the decommissioning of the Mine, shutdown and cessation of Mining Operations and (ii) rehabilitation or remediation of areas affected by Mining Operations as necessary to meet Legal Requirements and good industry practices. In other words, the Site Remediation Fund may be used, and may only be used, to pay costs and discharge liabilities for either of the two aspects of Sino's obligations concerning Site Remediation Work referred to in [64] and [65] above.
Each Operating Year (namely, each period of 12 months commencing 1 July), following a notice from Mineralogy, Sino must make a payment into the Site Remediation Fund in accordance with an annual charge as determined by Mineralogy: cl 20.6(a) and cl 20.6(e). Clause 20.6 does not make express provision for the time for payment of the annual charge by Sino. In the circumstances, the MRSLA is to be read and construed as requiring that Sino pay the annual charge within a reasonable time after receiving Mineralogy's notification of the annual charge.
For each Operating Year, Mineralogy determines an annual charge to be paid by Sino into the Site Remediation Fund: cl 20.6(e). The annual charge is on account of - that is, in anticipation of, and as a contribution to - future costs and liabilities to be incurred in respect of Site Remediation Work, namely the costs and liabilities of work of the kinds mentioned in [64] and [65] above: cl 20.6(e).
Mineralogy must notify Sino of the annual charge to be paid into the Site Remediation Fund for the next Operating Year by no later than the 31 May preceding the commencement of that Operating Year: cl 20.6(f).

Our preferred construction of cl 20.6(e)

Clause 20.6(e) stipulates that the amount of the annual charge is to be determined by Mineralogy having regard to three identified matters. The first is Mineralogy's 'best prevailing estimate of the amount of future Site Remediation Costs'. The second is the amount (if any) already contributed by Sino into the Site Remediation Fund. The third is the number of years remaining until Mine Closure.
In our view, both the text and purpose of this clause suggest that these three matters are mandatory and exhaustive. The imperative language of cl 20.6(e) - 'is to be determined by Mineralogy, having regard to …' - is apt to prescribe the process by which Mineralogy is to determine the annual charge. In so dictating the process, the text conveys that the stipulated matters are mandatory and exhaustive. So reading cl 20.6(e) fits comfortably with cl 20.6's purpose of constituting a fund for the benefit of both parties to the MRSLA. Moreover, no other apparently relevant consideration was identified by any party.
In construing cl 20.6(e) in this manner, we note that interest accrues on the Site Remediation Fund. In our view, such interest, which is retained in the Fund under cl 20.6(c), falls within the ambit of the second stipulated matter, namely the amount already contributed by Sino, and thus is a matter to be taken into account.
In determining an annual charge, including in making its best estimate of the amount of future Site Remediation Costs, Mineralogy must act in good faith towards Sino: cl 37.4. That requires Mineralogy to act honestly and not arbitrarily or capriciously.
The subject of Mineralogy's best estimate is the amount of 'future Site Remediation Costs': cl 20.6(e)(i). That requires Mineralogy to make an assessment of Site Remediation Costs that have not yet been incurred, but which are expected to be incurred.
As explained in [66] above, the definition of 'Site Remediation Costs' encompasses costs and liabilities in respect of the two forms of Site Remediation Work the subject of cl 20.4(a) and cl 20.4(b). Thus, inserting the definition of 'Site Remediation Costs' into cl 20.6(e)(i), the subject of Mineralogy's estimate is the costs and liabilities in respect of future Site Remediation Work of both kinds - progressive remediation and remediation at Mine Closure. That reflects the dual purposes of cl 20.6 as expressed in cl 20.6(a) and cl 20.6(b). Keeping these dual purposes in mind seems to us to be central to understanding the proper construction of cl 20.6(e).
In order to effect its overarching purpose of providing reasonable security for Sino's obligations under cl 20 - expressed in cl 20.5 - and having regard to the dual purposes expressed in cl 20.6(a) and cl 20.6(b), the Site Remediation Fund must contain sufficient money to meet two objectives. First, it must have sufficient funds to enable the payment of costs and discharge of liabilities in respect of Site Remediation Work - as required by cl 20.4(a) - anticipated to be undertaken in the forthcoming Operating Year. Secondly, by the time of Mine Closure, there must be sufficient funds to enable the discharge of Sino's obligations - as provided for by cl 20.4(b) - at, and following, Mine Closure.
Consequently, having regard to cl 20.6(e)'s text and context within cl 19 and cl 20, in our view, on a proper construction of cl 20.6(e), Mineralogy is to determine the amount of the annual charge in the following manner. Mineralogy must make an assessment of the work by way of Mining Operations (as defined) done to date and the work likely to be done in the future, up to Mine Closure. It must then assess what rehabilitation or remediation, either (i) by way of progressive remediation in the forthcoming Operating Year, or (ii) by way of remediation at and following Mine Closure, is likely to be required, arising from those Mining Operations, in order to meet Legal Requirements and good industry practices. Mineralogy must then estimate the costs of such rehabilitation or remediation. Undertaking these steps will produce two estimates: (i) the expected cost of progressive remediation in the forthcoming Operating Year; and (ii) the expected cost of remediation at and following Mine Closure. By definition, the latter sum will not be required until the passage of the number of years remaining until anticipated Mine Closure.
Bearing in mind the two objectives identified in [84] above, the annual charge should be the sum which:
(a)enables payment of the estimated costs of remediation anticipated to be undertaken in the forthcoming Operating Year; and
(b)is sufficient to ensure that, after the payment referred to in (a), by the time of anticipated Mine Closure there will be sufficient money to pay for the Site Remediation Work required at and following that time.
In other words, the annual charge is to be the amount which, after taking into account the amount already in the Fund, provides for the payment of Site Remediation Work anticipated to be undertaken in the forthcoming Operating Year and then, allowing for a uniform annual payment over the number of years remaining until the permanent cessation of operations at the Mine, will result in there being sufficient funds in the Site Remediation Fund to meet Site Remediation Costs at and following Mine Closure.
Our preferred construction may be illustrated by reference to a worked hypothetical example in which the following assumptions are made: the balance of the Site Remediation Fund is $20 million, the cost of anticipated progressive remediation in the forthcoming Operating Year is $5 million, the estimated cost of all necessary remediation at and following Mine Closure is $200 million, and Mine Closure is expected to be 20 years away. On these assumptions, Mineralogy would act in accordance with cl 20.6 if it fixed the annual charge as $14 million, being the sum of:
(a)$5 million to pay for the progressive remediation for the forthcoming Operating Year; and
(b)$9 million, being the amount which, by uniform payment over the 20 years remaining until Mine Closure, would result in there being sufficient funds to meet the costs of remediation at that time. $9 million is reached by subtracting $20 million (the amount already in the Fund) from $200 million and dividing the result of that subtraction by 20 (the number of years expected until Mine Closure).

Why Mineralogy's construction should not be preferred

In our view, the following three related textual considerations individually and collectively count decisively against adopting Mineralogy's propounded construction.

First, Mineralogy's construction gives attention to the expected remediation costs only in relation to all disturbance that has previously occurred and that is anticipated to occur up to the end of the forthcoming Operating Year. This is inconsistent with the text, which requires Mineralogy to estimate all future Site Remediation Costs. There is no justification in the text for confining the inquiry to costs arising only from previous disturbance and anticipated disturbance in the forthcoming Operating Year. The generality of the word 'future' directs attention to all costs not yet paid and liabilities not yet incurred, but which are expected to be paid or incurred at a later time. It is not restricted in the manner contended for by Mineralogy.
But for the presence of cl 20.6(e)(ii) - which requires regard to the number of years remaining until Mine Closure - commercial considerations might have militated against reading the clause as permitting Mineralogy to determine an annual charge for an Operating Year that requires a payment in respect of all anticipated future costs and liabilities for the entire life of the Mine. But cl 20.6(e)(ii) means that cl 20.6(e) is not to be so read. Rather, as explained in [93] below, cl 20.6(e)(ii) ensures that payments of annual charges directed to remediation costs to be incurred at or following Mine Closure are staged so that, by Mine Closure, sufficient funds are available to meet those costs.
Secondly, the text of cl 20.6 does not support reading the clause as employing disturbance that has previously occurred and that is anticipated to occur up to the end of the forthcoming Operating Year as the criterion for staging payments on account of anticipated Site Remediation Costs. We do not accept Mineralogy's submission that, for the purpose of cl 20.6, a presently existing liability to remediate the site is incurred whenever, and to the extent that, mining operations cause disturbance. A presently existing liability to do something by way of remediation arises only when and if either a Legal Requirement or good industry practice requires that thing to be done now. To so conclude is not to deny that, as a matter of fact, in some - perhaps many - instances, the disturbance to the ground may play a central role in evaluating the likely future remediation obligations. The point is that disturbance is not the contractual criterion selected by the parties in cl 20.6. Thus, we do not accept Mineralogy's submissions summarised in [49] ‑ [51] above.
Thirdly, in our view, Mineralogy's construction seeks to relegate the requirement in cl 20.6(e)(ii) that Mineralogy have regard to the number of years remaining until Mine Closure to a matter of very little significance, in circumstances where the number of years remaining until Mine Closure is one of three explicitly identified mandatory considerations. Mineralogy's attempts to give some effect to this integer, as summarised in [53] ‑ [54] above, seem to us artificial and unconvincing. The central significance given in cl 20.6(e) to the number of years remaining until Mine Closure is, in our view, readily understood in the framework of the reference in cl 20.6(e)(i) to all future Site Remediation Costs, as explained in [89] above.
In our view, the purpose and effect of the stipulation that Mineralogy is to have regard to the number of years remaining until Mine Closure is to enable and ensure the staging of uniform annual payments of the part of the annual charge that relates to remediation at and following Mine Closure so that, by the time of Mine Closure, sufficient funds are available to enable payment of the costs and discharge of the liabilities of Site Remediation Work necessary thereafter.
In short, in our view, while it would have been open to the parties to choose to adopt the approach articulated in Mineralogy's construction, the text of cl 20.6 reveals that they did not do so. To our minds, to adopt Mineralogy's construction would be to rewrite cl 20.6(e).
As already noted, Mineralogy emphasises that the parties could have expressly stipulated, but did not expressly stipulate, that the amount required for future rehabilitation work was to be divided by the number of years remaining until Mine Closure. There would have been more force in this point if Sino's rehabilitation obligations had been limited to obligations arising at Mine Closure. In our view, the force of the point is removed once it is recognised that the purpose of the Site Remediation Fund is to secure performance of Sino's progressive remediation obligations, as well as its remediation obligations arising at Mine Closure. Stipulation of a process of division of the amount required for future remediation by the number of years remaining until Mine Closure would not have been apt to ensure that both purposes were achieved.
In their submissions to this court, the parties joined issue on whether the primary judge's construction accommodated Sino's obligations of progressive remediation. Mineralogy contended that it did not, pointing to the absolute terms in which the primary judge's ultimate conclusion on the construction question, in the passage set out at [33] above, was expressed. Against this, the respondents pointed to earlier parts of his Honour's reasons, referred to in [23] above, in which Sino's progressive remediation obligations were recognised by his Honour.
It is neither necessary nor fruitful to resolve this issue. As already observed, the task of this court is to identify for itself the correct construction. In order to succeed on appeal, Mineralogy must establish the construction it propounds. For the reasons already given, we do not accept that construction.
Nor do we accept Mineralogy's contention that the definition of 'Mine Closure', namely permanent cessation of Mining Operations, is properly to be understood as permanent cessation of such operations on particular parts of the Mine Area as are undertaken by Sino.
This contention requires that words are read into the definition of 'Mine Closure' in the MRSLA. In our view, there is no sufficient justification for doing so.
The MRSLA contemplates that Sino will undertake Mining Operations until Mine Closure. Clause 28 governs early termination. Clause 28.1 provides that Sino's Mining Right under cl 3 and Site Lease under cl 4 continue until they expire or are terminated in accordance with the MRSLA. Clause 28.2 provides that Sino may not surrender the Mining Right and Site Lease after the commencement of development activities. Clause 28.6 provides that upon the happening of any of the events stipulated in cl 28.6(a), which include the appointment of a receiver or an order for winding up of Sino, Mineralogy may - not must - terminate the MRSLA by giving written notice of termination. Clause 31 prohibits Sino from assigning its interests under the MRSLA except with the prior written consent of Mineralogy. Clause 31.2 provides that Sino will not assign any part of its interests under the MRSLA, and that no such assignment will be effective unless and until the intended assignee has entered into an assumption deed in the form annexed to the MRSLA or other agreed form.
Having regard to the terms of the MRSLA as a whole, including the terms to which we have referred, we would not read the additional words into the definition of 'Mine Closure' in accordance with Mineralogy's submissions.
In any event, the manner in which cl 20.6 operates in the event of an early Mine Closure carries little weight in the construction of cl 20.6. Early Mine Closure is evidently not the primary scenario contemplated by the parties. More significantly, any commercial disadvantage of Mineralogy (or Sino) in the manner in which cl 20.6 operates in the event of an early Mine Closure falls well short of overcoming the textual considerations to which we have referred in [88] - [94] above.
Thus, Mineralogy's submissions at [56] ‑ [57] above cannot be accepted.

Conclusion on grounds 1 - 5

For all these reasons, grounds 1 - 5 fail.
This conclusion is fatal to Mineralogy's appeal. Nevertheless, we will proceed to explain why we reject Mineralogy's other grounds.

Grounds 6 - 8: was Mineralogy's account 'designated as a trust account' and does it matter?

Grounds 6 - 8, which are set out at [43] above, challenge the primary judge's conclusion that Mineralogy's claim failed, independently of the construction of cl 20.6(e), on the basis that Mineralogy had not constituted the Site Remediation Fund because there was no account that was designated as a trust account.[55]

Mineralogy's submissions

[55] Primary reasons [287], [455], [492] - [508].

Mineralogy submits that a trust may be created without the use of the word 'trust' and that no special words are necessary to constitute a trust.[56] It submits that the name of its NAB account, 'Mineralogy Pty Ltd Remediation Account', identified the purpose for which the account was created, thereby satisfying the element of designation.[57] It submits that the bank account was therefore 'designated in a way that adequately gave notice of its status', complying with cl 20.6, and that to find otherwise was to prefer form over substance.[58]
[56] Appellant's submissions [71].
[57] Appellant's submissions [73]; appeal ts 40, 42.
[58] Appellant's submissions [74].
Further, Mineralogy submits that, even if it had not established an account in accordance with cl 20.6(c), there was no basis to conclude that this affected the validity of its determination of the annual charge and it did not relieve the respondents of their obligation to make a payment into the Site Remediation Fund.[59]

Disposition

[59] Appellant's submissions [75] - [78].

These grounds of appeal, and Mineralogy's submissions in support of them, are wholly without merit.
The account said by Mineralogy to constitute the Site Remediation Fund bore the name and style 'Mineralogy Pty Ltd Remediation Account'.[60]
[60] Primary reasons [500].
Clause 20.6(c) provides, relevantly, that '[t]he Site Remediation Fund will be maintained in a separate interest‑bearing trust account controlled by Mineralogy as trustee, and which will be designated as a trust account'. It is immediately apparent that this clause imposes two distinct requirements on the constitution of the Site Remediation Fund. First, the Fund must be a separate interest‑bearing trust account that is controlled by Mineralogy as trustee. Secondly, that account must be 'designated as a trust account'.
Consequently, Mineralogy's submissions entirely miss the mark. It is not to the point that the use of the word 'trust' or 'trustee' is not necessary in order to constitute a trust. Whether the account is a trust account relates to the first requirement in cl 20.6(c), whereas this ground impugns the judge's finding about the second requirement, namely designation as a trust account.
Moreover, to say, as Mineralogy does, that the purpose of the account was identified by the account name is, again, not to the point. An account holder may choose to identify, in the name of the account, the intended purpose of that account without conveying anything as to whether it is a trust account and whether there are any constraints on the account holder's freedom, as a matter of law, to use the funds in the account as it chooses.
What cl 20.6(c) requires is that the account be designated as a trust account, not merely that the purpose of the account be designated. 'Designated' means 'marked', 'named' or 'specified'. What must be marked, named or specified is the status of the account as a trust account. By definition, the holder of a trust account owes trust obligations to the beneficiary or beneficiaries of the trust, thereby constraining the trustee's liberty to deal as it pleases with the funds in the account. In order that an account be 'designated as a trust account' it must, in some manner, be named or marked in a way that conveys to third parties, including to the bank with whom the account is held, that the account holder is not free to do as it pleases with the money in the account.
Simply bearing the title 'Mineralogy Pty Ltd Remediation Account' fell manifestly short of designating the account as a trust account.
Consequently, ground 6 fails.
Grounds 7 and 8 fail for the following reasons.
Ground 7 asserts that the judge found that a failure to constitute the bank account in accordance with cl 20.6(c) rendered ineffective any determination made by Mineralogy under cl 20.6(e), and that the judge erred in so finding. The judge did not so find. Ground 7 asserts that the judge made the alleged finding in [507] of the primary reasons. However, in that paragraph, his Honour found that Mineralogy's demands were ineffective, not that its anterior determination under cl 20.6(e) was ineffective. The correctness of the judge's finding as to the inefficacy of the demands is the subject of ground 8.
As to ground 8, so far as relevant, the respondents' only obligation arising under cl 20.6 is its obligation in cl 20.6(a) to 'make payments into the Site Remediation Fund in the manner set out in [cl 20.6]'. By definition, that obligation does not arise, and cannot be performed, if there is no Site Remediation Fund in existence. Clause 1.1 states that 'Site Remediation Fund' is defined in cl 20.6. That imports the requirements stated in cl 20.6(c).
Mineralogy's submission that, notwithstanding the absence of a trust account designated as required by cl 20.6(c), the respondents were nevertheless obliged to pay the money to Mineralogy and could have sought directions from the court requiring Mineralogy to change the name of the account and 'achieve any proper designation'[61] is without any plausible basis and should not have been advanced. Nothing in cl 20.6 requires Sino to pay money on account of site remediation into an account in the name of Mineralogy that is not the Site Remediation Fund meeting the requirements stipulated in 20.6(c). In the absence of a Site Remediation Fund, the respondents had no obligation under cl 20.6.
[61] Appellant's submissions [78].
For these reasons, grounds 6 - 8 fail.

Grounds 9 - 11: validity of the April and May 2018 notices

In circumstances where Mineralogy's claims fail for the two independent reasons already canvassed - namely, because its purported determination of the annual charge was not in accordance with cl 20.6(e) and because the purported Site Remediation Fund was not designated as a trust account - we propose to deal with grounds 9 ‑ 11 in a somewhat summary fashion.
Mineralogy submits that there is no requirement in the MRSLA that Mineralogy separately identify the amounts to be paid by each of Sino and Korean in its determination. Mineralogy points to CITIC's obligations under the Fortescue Coordination Deed and to provisions of that deed by which Sino and Korean are made jointly and severally responsible for obligations of remediation imposed on any one of them.[62]
[62] Appellant's submissions [83].
We do not accept these submissions. Mineralogy's claim against each of Sino and Korean was said to arise pursuant to cl 20.6 of each of Sino and Korean's respective MRSLA. By cl 20.6(f), at least 30 days prior to the commencement of an Operating Year, Mineralogy must notify Sino (under the Sino MRSLA) of its annual charge in the forthcoming year. Correspondingly, under the Korean MRSLA, Mineralogy must notify Korean of its annual charge in the forthcoming year. Before doing so, according to the terms of each separate MRSLA, Mineralogy must have determined an annual charge to be made by the relevant company (Sino or Korean) in that Operating Year.
The primary judge correctly found that the letter of 16 April 2018 failed to notify each of Sino and Korean of its respective annual charge.
Mineralogy's reliance on the Fortescue Coordination Deed does not assist it. By that deed, Sino and Korean covenanted that their liabilities were joint and several and that each would be liable for the other's obligations. That covenant thus applies to the extent that either Sino or Korean has an obligation under its MRSLA. However, it does not purport to speak to, and so does not influence, whether any such obligation has come into existence. In the present context, without a valid notification to each company under cl 20.6(f) of their respective MRSLAs, no obligation came into existence. Consequently, the covenant in the Fortescue Coordination Deed was not engaged.
Ground 11 contends that the primary judge erred in finding that Mineralogy's notices of 21 May 2018 were ineffective, relying on grounds 1 ‑ 9 to establish the judge's error. Grounds 1 ‑ 9 having failed, ground 11 fails accordingly. In any event, as the respondents submitted, Mineralogy's reliance on the 28 May 2018 notices ignored the circumstance that on the primary judge's unchallenged findings the amounts notified would (assuming the notices were valid) only have fallen due for payment on 31 December 2018. This was after Mineralogy commenced its proceedings - meaning that Mineralogy had no cause of action when it commenced the proceedings.

Mineralogy's appeal: conclusion

For the above reasons, Mineralogy has not established any ground of appeal. The appeal must be dismissed.

The respondents' notice of contention

Following an application for leave to amend their ground in support of their notice of contention, which was not opposed and was granted,[63] the respondents' notice of contention is in the following terms:
The trial judge's decision can and should be upheld on the basis that, on the proper construction of cll 20.5 and 20.6 of the MRSLAs or pursuant to an implied term, Mineralogy's determination of an annual charge, including its best prevailing estimate of the amount of future Site Remediation Costs, and the assessment of the years remaining until mine closure must be made reasonably, and be reasonable, and not merely made honestly, and be honest, as found by the trial judge.
[63] Appeal ts 74 - 75.
Because Mineralogy's appeal fails, it is not necessary to resolve the respondents' notice of contention. Nor, in our opinion, is it appropriate to do so.
In part, that is because the respondents' notice of contention is procedurally inapt. By definition, a notice of contention propounds an additional or different ground on which the primary decision can be supported. But, in the present case, the respondents' contention is incapable of providing a ground for supporting the primary judge's decision to dismiss Mineralogy's claim. The respondents contend that, on a proper construction of cl 20.5 and cl 20.6, or as a matter of an implied term, Mineralogy is required to undertake any determination of the annual charge reasonably and any determination it makes must be reasonable. Acceptance of that contention would not sustain the primary judge's decision to dismiss Mineralogy's claim because the primary judge did not make any findings that Mineralogy acted unreasonably in making its determination, or that the determination itself was unreasonable.
The respondents accept that this is so, submitting that, should the merits of their notice of contention be accepted, this court should remit the matter to the General Division for a judge to determine the question of whether Mineralogy acted reasonably in making its determination and whether the determination was reasonable. An order for remitter is not an order to be made in response to a notice of contention.
This procedural defect in the notice of contention reflects a more fundamental obstacle to it. There are no, or at least insufficient, findings as to reasonableness to provide the factual context for resolution of the issues sought to be raised on the notice of contention.
For these reasons, we would dismiss the notice of contention.

Conclusion

For the above reasons, we would dismiss the appeal and the notice of contention.

We would hear from the parties as to the costs of the appeal.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AE
Associate to the Honourable Justice Beech
9 DECEMBER 2022