Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited & Anor; Wright Prospecting Pty Limited v Mount Bruce Mining & Anor

[2015] HCATrans 188

[2015] HCATrans 188

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S99 of 2015

B e t w e e n -

MOUNT BRUCE MINING PTY LIMITED

Appellant

and

WRIGHT PROSPECTING PTY LIMITED

First Respondent

HANCOCK PROSPECTING PTY LTD

Second Respondent

Office of the Registry
  Sydney  No S102 of 2015

B e t w e e n -

WRIGHT PROSPECTING PTY LIMITED

Appellant

and

MOUNT BRUCE MINING PTY LIMITED

First Respondent

HANCOCK PROSPECTING PTY LTD

Second Respondent

FRENCH CJ
KIEFEL J
BELL J
GAGELER J
KEANE J
NETTLE J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON WEDNESDAY, 12 AUGUST 2015, AT 10.17 AM

Copyright in the High Court of Australia

____________________

MR N.J. YOUNG, QC:   May it please the Court, I appear with my learned friends, MR M.J. DARKE, SC and MR M.A. IZZO, for the appellant in S99 and for the first respondent in S102.  (instructed by Allens)

MR A.J. MYERS, QC:   May it please the Court, I appear with MS K.A. STERN, SC and MR R.J. HARDCASTLE, in each of the appeals for Wright Prospecting Pty Limited.  (instructed by Clayton Utz Lawyers)

MR N.C. HUTLEY, SC:   If your Honours please, I appear with my learned friend, MR J.C. GILES, for Hancock Prospecting in each of the appeals.  (instructed by Horton Rhodes)

MR A.C. ARCHIBALD, QC:   May it please the Court, I appear with MR M.P. COSTELLO on behalf of Perron Iron Ore Pty Limited, seeking leave to intervene in the appeals.  (instructed by King & Wood Mallesons)

FRENCH CJ:   Thank you, Mr Archibald.  Perron will have leave to intervene in the appeals.  There was a question also whether HPPL should have special leave to cross‑appeal in S102.  Special leave will be granted for that purpose.  The third question was whether time should be enlarged to allow MBM to file its notice of contention in S102 and that time is enlarged.

MR ARCHIBALD:   Thank you.

FRENCH CJ:   Yes, Mr Young.  I understand there is an agreed order of address.

MR YOUNG:   There is, your Honours.  We have distributed an oral outline of our submissions that covers the issues in both of the appeals and it is agreed that I will proceed by addressing issues in both of the appeals but first by addressing the issues in MBM’s appeal.

FRENCH CJ:   Yes.

MR YOUNG:   The appeals arise from claims by the Wright and Hanwright interests in respect of allegedly unpaid royalties under a 1970 agreement.  The claim relates to two disputed areas.  May I identify those geographically?  If the Court goes to volume 1 of the appeal book, please – page 179 is a map of the Pilbara depicting the two areas in contest which are labelled “Eastern Range” and “Channar” and coloured so as to distinguish them. 

In the same volume, at page 187, there is a map which one of our witnesses tendered at trial.  It is the same map as page 2479 in volume 6 and it is the same map as page 31 of the annotated agreed facts which was filed subsequently.  The map shows the location of the two contested areas and it is mapped in such a way as to show the location, vis-à-vis the expired temporary reserves that expired in October 1974. 

The area of ML4SA, sections 236 and 237, is the area of Eastern Range.  The Channar area is faintly enclosed with a yellow line.  It is two parallelograms adjacent to each other and everything within that yellow line is the Channar lease, lease No ML265SA.  The blue shaded rectangles which are labelled ML252SA, with various section numbers running from 11 to 19, are the areas of the lease which MBM obtained in 1974 when it applied for a lease under the MBM state agreement.  On that occasion, by force of the State agreement, there was a required expiration of what had formerly been the temporary reserves which you see in the mauve colour – the violet colour depicted on this map. 

So, if one looks at the sections of 252SA depicted in blue, one can see that they are based on areas depicted in mauve that were the former temporary reserve areas and they were required to expire by force of the State agreement as the condition of the grant of the lease, 252SA.

KIEFEL J:   Is section 238 the Channar A area comprising what was TR4966H and 4965H?

MR YOUNG:   It is part of it.  It is the Channar A area.

KIEFEL J:   Put it this way ‑ ‑ ‑

MR YOUNG:   Section 238 ‑ ‑ ‑

KIEFEL J:   ‑ ‑ ‑ is section 238 that part of those temporary reserves which is later surrendered and becomes ML4SA?

MR YOUNG:   Well, it is not that part of the temporary reserves because the temporary reserves ceased to exist and it became unalienated Crown land in 1974.

KIEFEL J:   Formerly part of those ‑ ‑ ‑

MR YOUNG:   Yes.  ML4SA was surrendered by Hamersley on the occasion of the grant of the Channar lease.  So, your Honour is right.  Section 238SA – 238, part of ML4SA, is the Channar A area that derives from the Hamersley lease.

KIEFEL J:   Thank you.

MR YOUNG:   The 1970 agreement in its royalty provision throws up two elements.  I am referring to clause 3.1 of the 1970 royalty agreement.  The two elements necessary to trigger royalty are that the ore must be won from the MBM area and the second element is that it must be won by MBM.  Those two elements are respectively the subject of the two different appeals.  The MBM area issue is the focus of our appeal.  The question whether the ore was won by MBM depends upon the incorporated provision concerned with deriving title through or under MBM.  So, they are the two issues and they correspond with the two elements for royalty under clause 3.1 of the 1970 agreement.

Although, MBM failed in relation to the MBM area point, both in respect of Eastern Range, where it was decisive against us and in respect of Channar A, where it was not decisive, the reason why it was not decisive in respect of Channar A was that the ore was found by the Court of Appeal not to be ore that was being won by MBM.  There was no scope on the facts of the application of the deriving title provision to produce the result but it was deemed to be won by MBM.  So that is how the two issues arise.

The Court will have seen that the Court of Appeal construed the words “from the MBM area” as referring to ore won from the physical areas of land that had been the subject of the temporary reserves that expired in October 1974.  Our contention, in our appeal, is that that fails to give effect to the plain language of the 1970 agreement in the way in which it defines MBM area.  Our contention is that the words “ore won from the MBM area” mean ore won from the present and future rights that MBM acquired from Hancock, or Hanwright, under clause 2.2.  That is the short issue in the MBM appeal. 

Can I start by giving an overview of the 1970 agreement?  The 1970 agreement is in volume 3, at 1274.  I want to commence with an overview so that the Court understands the structure of the 1970 agreement.  By that agreement Hanwright transferred all of its present and future rights in relation to temporary reserves, 4937H to 4946H and 4963H to 4967H to MBM.  In many ways, that is the principal purpose of the agreement.  That transfer is affected by clause 2.2.  The coming into effect of the transfer is conditional on governmental approval and governmental implementation under clause 10.  The implementation aspect comes from the handwritten addition but may be difficult to decipher. 

Under the 1970 agreement, the parties contemplated that the transfer would require MBM to step into the shoes of Hanwright under the 1967 and 1968 Hanwright State agreement and to acquire all of the rights and assume all of the obligations of Hanwright under those two – or under the State agreement as enacted in 1967 and as amended in 1968. 

That appears from a number of things but, inter alia, clause 2.3 where the anticipated lease under the State agreement is to be shared in certain proportions between the contracting parties and also from clause 4 where it is contemplated that the transfer will necessitate variations to the Hanwright State agreement, including a special agreement that MBM would take over all of the secondary processing obligations that arose under the State agreement.  That is not confined to the secondary processing obligations relating to the rights that MBM acquired but embraces secondary processing obligations in respect of the rights that were restored to Hanwright under the first limb of clause 2.2.

Now, the consideration for the transfer of those rights in relation to the specified temporary reserves was at least threefold under this agreement.  First, there was a relinquishment of an option – a contractual option – that was granted to Hamersley under the January 1968 agreement.  That is the effect of clause 2.1 and that contractual option was identified in clause 1.2.  I should add – and I will come to this – as well as the contractual option there was an option resting in MBM under the State agreement which is referred to in clause 1.1 and also in clause 12 which is the entire agreement clause and as well in clause 4.

So the first element of consideration was the relinquishment by Hamersley of its contractual option.  The second element of consideration for the transfer of the rights was MBM’s agreement to pay a base royalty of two and a half per cent as specified in clause 3.1.  The third element of the consideration was the payment of a further royalty by MBM – triggered by the same two elements in clause 3.2.  That further royalty was a specified monetary sum of $5 million. 

In addition, there are two other related features of the agreement that could also be characterised as consideration and I have mentioned them.  MBM agreed to assume Hanwright’s secondary processing obligations going forward in respect of the reserves restored to Hanwright and in connection with that assumption of processing obligations, Hanwright was given an option to sell its iron ore – or any iron ore it produced from what was restored to it – to Hamersley on the terms and conditions set out in clause 6.  That is an overview of the structure of the 1970 agreement.

There were a number of prior transactions between the parties that I will need to refer to.  I will not go through them immediately.  I will go to the text of the 1970 agreement first, in most respects.  But the prior transactions and the background are these.  First, there was a 1959 agreement – found at appeal book volume 2, page 668 – I will not go to it right now.  By that agreement, the Hanwright interest granted an option to Rio Tinto to purchase specified mining titles in exchange for a royalty. 

The 1959 agreement led to the 1962 agreement because the 1962 agreement exercised that option just before it expired.  So the 1962 agreement provided that the Hanwright interest would transfer specified mining titles to the Hamersley interests in exchange, again, for a two and a half per cent royalty.  The 1959 and 1962 agreements relate to different areas than we are concerned with and the royalties are expressed in different language.  They are part of the remote background, as it were.  There is also a short provision from the 1962 agreement that is relevantly incorporated into clause 3 as a condition of payment and I will need to come to and explain that.  It is part of clause 24(iii) from the 1962 agreement.

FRENCH CJ:   That is the through or under ‑ ‑ ‑

MR YOUNG:   That is the deriving title through or under clause.  The next stage in the history is that the Hanwright interests acquired a new set of rights in relation to occupancy for iron ore prospecting purposes that were the subject of the 1967 Hanwright state agreement.  That new set of rights was then the subject of a transaction between these parties recorded in the 1968 agreement. 

I should have given the appeal book references to these documents as I went.  The 1962 agreement is in volume 2 at page 708.  The Hanwright State agreement is in volume 2 at page 902.  The 1968 agreement between the parties is in volume 2 at page 968.  The 1968 agreement was replaced by the 1970 agreement.  So it is the immediate context for the 1970 agreement.  So I will need to go to its provisions. 

It provided for the grant of an option to Hamersley that would result in the transfer of all of the relevant rights in respect of temporary reserves to MBM which was to be a newly formed joint venture company for the Hamersley and Hanwright interests.  The provisions of that agreement also dealt separately with one particular block which led to the Paraburdoo mine.  The 1968 agreement provided for royalties in consideration of the grant of that option that might result in transfers of rights.

Then, in the sequence, there is a 1968 supplementary agreement at volume 3, page 1019.  It does not figure much in the parties’ submissions.  The 1968 supplementary agreement separated out of the 1968 agreement and provided for the immediate transfer of that single Paraburdoo block – block 4053H.  So that was transferred out and we are not concerned with that block.  That was an implementation earlier than otherwise required of Part 1 of the 1968 agreement. 

Then finally in this sequence, shortly before the 1970 agreement, there was a 1968 Hanwright State agreement.  It amended the 1967 Hanwright State agreement to provide for the implementation of the joint venture option.  Under the 1968 State agreement, MBM was given an option to take the place of Hanwright in respect of all areas – in respect of all rights under the Hanwright State agreement of 1967.  That is the option referred to in clause 1.1 of the 1970 agreement.

Before I come to the text of the 1970 agreement, I need to explain the nature of the rights that were subject of the transactions in the 1970 agreement.  It is our contention that it is necessary to fully understand the nature of the rights being transacted to appropriately construe the 1970 agreement.  The 1970 agreement contains various references that provide indications as to the special nature of the rights that are being transacted. 

Those references include the reference to holding temporary reserves in respect of areas and the various references to the rights under the Hanwright State agreements.  It also includes clause 1.4 which gives a special and expanded meaning to all references to reserves wherever they appear in the 1970 agreement.

Essentially, the rights being transacted under the 1970 agreement were all of the rights conferred upon Hanwright – or the Hanwright interests – by the State agreement as expanded in meaning by the special definition in 1.4.  What I want to do is pause and to take the Court to the Hanwright State agreement of 1967 and then 1968 to explain the nature of the bundle of the rights that were being transacted by the 1970 agreement.  Can I just defer that for one moment, just to say something about the nature of temporary reserves?  The opening words of clause 1.1 are that:

Hanwright hold Temporary Reserves in respect of areas –

Then clause 1.1 goes on to say that those temporary reserves, also called blocks –

are subject to the exercise of an option –

Now, the concept of holding temporary reserves in respect of areas and the notion that the temporary reserves are the subject of an option conveys quite clearly that they are a bundle of rights, not a purely physical or geographical area that has been spoken about.

What is temporary reserve? A temporary reserve has its origin in section 276 of the Mining Act 1904. That simply provided that the Minister may reserve any Crown land from occupation. So it is simply Crown land that is set aside as a reserve. But the section goes on to say that, subject to 277, the Minister may authorise any person to temporarily occupy the reserve on such conditions as the Minister thinks fit.

So the notion of a temporary reserve is that it is simply reserve Crown land and the Minister has authorised occupation by a person for a particular period but the effect of the provisions in the 1904 Act is that the reservation is of limited duration – 12 months – and so, too, is the right of occupation.  Quite clearly, those rights are simply personal choses in action.  So, if someone is granted a right of occupation, it is simply a personal right and we have referred in our authorities to various cases that establish that fact quite clearly.

FRENCH CJ:   The term “temporary reserves” only appears, I think, in the marginal note, does it not? 

MR YOUNG:   In the section, yes.

FRENCH CJ:   Yes.

MR YOUNG:   Yes, your Honour.

FRENCH CJ:   One then construes it as an authority to a person to temporarily occupy a reserve on terms and conditions.

MR YOUNG:   That is not the reserve.  The reserve is simply the land that is set aside.  The grant of authority is the next step.

FRENCH CJ:   Well, it is something that the Minister does.  The reserve is used as a verb, I think.

MR YOUNG:   Yes, but I think that ‑ ‑ ‑

FRENCH CJ:   It was a mysterious document – the Mining Act 1904.

MR YOUNG:   Yes.  This is perhaps an aside, your Honour, but the State agreements in Western Australia across their range supplanted the Mining Act which was quite unsophisticated in its provisions – the 1904 Mining Act – with a special regime ‑ ‑ ‑

FRENCH CJ:   Yes.

MR YOUNG:   ‑ ‑ ‑ of a much more sophisticated sort under which much more extensive obligations and rights were imposed on the counterparty to the State agreement.  The temporary reserve has simply been used as one element in the State agreement to erect that set of rights - if I can call it that - set of rights and obligations.  The temporary reserves that we are concerned with under the 1970 agreement are reserves that were special in the sense that they were granted under and for the purposes of the Hanwright State agreement of 1967.  They were not freestanding.  That is borne out by the grant documents for the Hanwright TRs.

If the Court looks – I will not go through them all – I will give the references – but if the Court looks at volume 2 and, I think the last page, page 980, this is the first in a sequence of documents relating to the occupancy rights granted to Hanwright in 1968 that became the subject of the 1970 agreements.  This is simply a letter from the Under Secretary of Mines but it refers to the Minister having approved of the creation of the relevant temporary reserves – it is page 980, your Honours – with occupancy rights for the purposes of the agreement.  As I said, that is the first in the sequence. 

There are documents relating to the renewal of those rights.  The documents in the sequence are in volume 3 – and I will just give the page numbers – 1125, 1129, 1257 and the register for one of the TRs is volume 3 at page 1162 to 1163.  All those documents indicate, as the provisions of the State agreement make clear, that these were temporary reserves granted under and for the purposes of the State agreement.

Can I then turn to the Hanwright 1967 State agreement which is in volume 2 at page 894?  Page 894 is the Act approving and giving effect to the agreement.  The agreement itself is in the schedule commencing at 897.  What I will do is draw attention to particular clauses without reading them at any length.  Clause 2(a) deals with the obligation of the State to cause certain rights of occupancy to be granted.  It is at page 902 of the appeal book.

The first step under the 1967 agreement was that the joint venturers were to surrender such existing rights of occupancy as they had, and the State shall then cause to be granted to the joint venturers the rights of occupancy for the purposes of the agreement under section 276. When one reads on, we see that special rights attach to these rights of occupancy an entitlement to successive renewals, each of 12 months, which is a right over and above that conferred by the ordinary provisions of section 276, the last of which shall expire (1) on the date of application for a mineral lease, (2) at the expiration of one month from the commencement date, and (3) on the determination of this agreement pursuant to its terms, whichever shall first happen.

The rights of occupancy had a limited life; they were defeasible.  The commencement date was the date of approval of detailed mining proposals under clause 4 and following.  The lease would follow approval of proposals, but the rights of occupancy would expire on the date of application for a mineral lease.  Aside from the fact that the rights of occupation started a particular pathway under the State agreement, they were a very limited set of personal rights giving no right to extract ore.  In fact, it would only arise under a mineral lease granted in pursuance of these provisions.

The detailed proposals that were required covered an extensive set of obligations relating to the development of the mine, a railway, a port and processing facilities – that is clause 5 and following.  Those proposals had to be submitted within set timeframes and approved within a set period.  The final date, unless extended, is specified in clause 7(2) at the top of page 910, at about point 2 on the page, 30 November 1968 or such extended date to which the joint venturers may become entitled.  That was the specified “drop dead” date, if I could call it that, for the development.

The commencement date is identified in the next subclause.  It is effectively the date of approval or determination.  Determination refers to the fact that if the State refused to approve the detailed proposals after discussions, the joint venturers had a right to arbitrate that refusal of approval.  That appears at page 909 in subclause (2) of clause 6, just before line 40. 

Now, that pathway, if one got to approval, could lead to a mineral lease.  Clause 8(1)(a) is the relevant provision, towards the bottom of 910.  The State’s obligation related to an application for a mineral lease not exceeding in total area 300 square miles in a rectangular shape.  That was a much lesser area than the subject of the rights of occupancy, and the State’s obligation was ‑ ‑ ‑

FRENCH CJ:   That is a point that is relied upon?

MR YOUNG:   Yes, we rely upon that.  The State’s obligation was to cause that to be granted, and looking at the top of page 911, the grant was subject to certain conditions; subject to:

the performance and observance by the Joint Venturers of their obligations under the mineral lease or mineral leases and otherwise under this Agreement shall be for a period of twenty‑one years –

The lease is granted subject to the performance of obligations both under the lease and under the State agreement for a term of 21 years with successive rights of renewal.

FRENCH CJ:   Just so I understand the legal framework of the agreement, you spoke of the State Act as having approved and given effect to the agreement, but the way in which the agreement was given effect to was that the approval designated as ratification in the agreement was a condition of, effectively, its coming into operation.

MR YOUNG:   More than that, your Honour.  The arrangements in the 1970 agreement could not be given effect to without formal amendments to the State agreement, which would then have to be ratified.  We will see that.

FRENCH CJ:   But in terms of the rights which were being granted, they were being granted within the framework of the existing mining legislation?

MR YOUNG:   No, primarily within the framework of the existing State agreement obligations, because most of the relevant obligations concerned with ‑ ‑ ‑

FRENCH CJ:   I am talking about the statutory – to the extent that there were statutory rights, they came from the Mining Act as distinct from the agreement, because the agreement is not a statute.  It is simply approved by the Act.

MR YOUNG:   No, but, your Honour, the Act which approves the agreement has the consequence that certain contractual rights attach ‑ ‑ ‑

FRENCH CJ:   Come into existence; yes, I understand.

MR YOUNG:   More than come into existence - attach to the holding of the rights of occupancy.  To take successive rights of renewal, your Honour, there was no successive right of renewal in respect of a right of occupancy under 276, but there was an associated contractual right of renewal under the State agreement in respect of those rights of occupancy.

FRENCH CJ:   Well, that means the Minister on behalf of the State had an obligation in relation to the renewal of those temporary reserves.

MR YOUNG:   Yes.

FRENCH CJ:   In other words, he had to exercise his discretion under the Mining Act in accordance with contractual obligation?

MR YOUNG:   Yes, and that process was approved and, moreover, the legislation said that the provisions of the State agreement shall take effect.  It does not give them legislative force and I am not contending that ‑ ‑ ‑

FRENCH CJ:   No, it certainly does not.

MR YOUNG:   It is within the concepts explained by the Western Australia Court of Appeal in Re Michael dealing with various categories of State agreement.  Our point is that the bundle of rights that were the subject of the 1970 agreement is not confined to the bare statutory right.  It embraces all of the associated State agreement rights, and in many ways, they are the most important rights because they provided the pathway to a lease as of a right, in the sense there is a contingent right to a lease if you satisfy certain conditions, then the lease carries with it a whole set of rights and obligations that I am about to come to.

KEANE J:   Was the opportunity to apply for the mining lease assured exclusively to Hanwright?

MR YOUNG:   Yes, by force of these provisions under clause 8(1), and other provisions that I will come to.

KEANE J:   That is to say, that the State obliged itself not to entertain an application from anyone else?

MR YOUNG:   That is so.

KEANE J:   In respect of that land.

MR YOUNG:   Whilst these rights existed the State had a power to determine the State agreement if the counterparty to the State agreement was not performing its rights and obligations.  Likewise, it had a right to bring the State agreement to an end if the detailed proposals were either not lodged as required, did not address what was required, or the Minister refused approval.  That is why those rights of occupancy were determinable in the various circumstances described in clause 2(a)(i) to (iv).  So they are a limited set of rights; they were all defeasible; they would expire necessarily within a relatively short timeframe, but they provided a pathway under which there were sole and contingent opportunities to acquire the lease as defined in the State agreement.

Going to your Honour’s question still, Justice Keane, the rights of occupancy are described in clause 2(a) as conferring the sole right to search and prospect for iron ore.  They were granted under and for the purposes of this agreement.  Then it was only the holder of those rights – only the Hanwright interests, whilst they held those rights – that could make the application and have the benefit of a promise to cause to be granted the mineral lease over the reduced area that clause 8(1)(a) refers to.  But the price of all that was that the balance of the area, the subject of the rights of occupancy, all rights would expire and the balance would fall back into the category of unalienated Crown land, open to anyone.  In further answer to your Honour Justice Keane, I was about to come to ‑ ‑ ‑

GORDON J:   Clause 8(4)(a) might help.

MR YOUNG:   That is what I was about to come to, your Honour, yes.  Clause 8(4)(a) provides there is to be no interference with the joint venturers’ rights; at least, that is the caption.  It is a covenant by the State not during the currency of the agreement to register any claim or grant any lease or other mining tenement by which another person will obtain any rights.  There was a special position conferred on the counterparty.

The rights were not limited to a mineral lease.  Under clause 8(1)(b) and (c), other leases were promised by the State to facilitate the performance of the later development obligations, we will see, leases of lands for railway, processing plants, for access to a port, and so forth.  The power of the State to determine the agreement if the joint venturers did not perform is contained in clause 10(l), which appears at page 932 of the appeal book.  The power of determination appears at about point 7 of the page:

the State may by notice to the Joint Venturers determine this Agreement and the rights of the Joint Venturers hereunder and under any lease license easement or right granted hereunder –

The secondary processing obligations appear in clause 11 and following.  There is a right subject to approval to vary the State agreement in clause 15 – perhaps in sequence, before I get to that, there is an ability to assign or to dispose of any of these interests under clause 14(1)(a).  The joint venturers may assign – and I abbreviate, dispose of:

the whole or any part of the rights of the Joint Venturers hereunder (including their rights to or as the holder of any lease license easement grant or other title) and of the obligations of the Joint Venturers hereunder –

The clause goes on to require a deed of covenant to be procured from the assignee, and the joint venturers remain liable under clause 14(2), the due performance of the obligations that are assigned.  The Court will have seen some discussion to the effect that the bundle of rights was not transferable.  Whatever mechanism was adopted administratively, the rights, in our submission, were transferable.  There is a provision dealing with variation of the State agreement in clause 15, and the Minister has a general power to extend time periods in clause 18 at page 941.

That general scheme is evident in the 1963 Hamersley Range State agreement, which is in the appeal book at page 787 of volume 2.  The same general scheme appears in all of the other State agreements on the Western Australian statute book immediately prior to the 1970 agreement, and there were eight of them relating to iron ore in the Pilbara.  We have a list which I will make available at the break to your Honours’ associates – it is simply a list of the other State agreements concerning iron ore and the general scheme of those State agreements is similar to that which I have just been through.

Modifications were made to the Hanwright State agreement in 1968.  Consequent upon the 1968 agreement between the parties, that is to say, the Hamersley interests, the Wright and the Hancock interests – that is at volume 3, page 1064.  The approving Act commences at 1059.  The agreement itself is in the schedule commencing at 1061. 

There are relatively few provisions I need to identify for the assistance of the Court in this agreement.  Clause 4 has the effect of excising what I call the “Paraburdoo block”, block 4053H, from the Hanwright State agreement.  That was because under the 1968 agreement and the 1968 supplementary agreement, that was to be immediately transferred to Hamersley, and we are not thereafter concerned with that block.

Clause 5(1) is the central provision.  It gives effect to the option that the 1968 contract between the parties gave whereby a joint venture company, MBM, would completely take the place of Hanwright in respect of all of the rights and obligations.  Hence, it provides the company – that is, the contemplated joint venture company:

may by notice . . . inform the State and the Joint Venturers that the Company desires to take the place of the Joint Venturers under the Principal Agreement . . . covenants and agrees with the State to perform and observe all of the Joint Venturers’ covenants and obligations –

under the State agreement.  Upon the giving of that notice, the joint venture company would succeed to the former rights of the joint venturers to move, subject to various conditions, to a lease.  Clause 2 provides that the joint venturers shall surrender their rights of occupancy:

simultaneously therewith the State shall cause to be granted to the Company and to the Company alone rights of occupancy –

similarly expressed –

for the purposes of this Agreement (including the sole right to search and prospect for iron ore) –

with successive rights of renewal, and then an expiry date.  The circumstances that would result in expiry were expressed differently in the 1968 agreement - (a) is on the “grant of a mineral lease under clause 8(1)”; (b) is “on the expiration of five (5) years”, so these rights fall away if there is no mineral lease granted within five years.

FRENCH CJ:   So these are all characterised as contractual rights, having regard to what you said earlier in your response to my question ‑ ‑ ‑

MR YOUNG:   Yes, but contractual rights that define ‑ ‑ ‑

FRENCH CJ:   ‑ ‑ ‑ as against the State, which are then being dealt with by the parties.

MR YOUNG:   Yes, but nonetheless, your Honour, they are contractual rights that we say define what is meant in the agreement when the agreement refers to the parties holding temporary reserves, which are the subject of an option.  These contractual rights are embraced within that which is held, and that which is being dealt with by the 1970 agreement.  They are the most important component of what is held.

FRENCH CJ:   Is there any difference between the parties as to the characterisation of the rights as contractual?

MR YOUNG:   Yes, there seems to be, your Honour.  At least, the Hancock interests, your Honour, say that the only rights in question under the 1970 agreement were the bare statutory rights of occupancy, as we understand it, of a very limited 12‑month duration.

FRENCH CJ:   But you are characterising the obligations of the State as correlative with rights conferred upon you pursuant to contract with the State, or conferred upon the parties with the State agreement.

MR YOUNG:   What we are saying is that the subject matter of the rights, the subject of the various transactions in the 1970 agreement, are rights that are to be defined in the way I have been endeavouring to explain – that is, there is a statutory element, but much more importantly, there are a bundle of contractual rights under the State agreement associated with the contractual element that provide the pathway to a lease, and the pathway to development and extraction of iron ore.  Other than that, the statutory right gives you virtually nothing.

FRENCH CJ:   Some of these agreements – I do not think it is a matter which is raised – were made at a time when there may have been a particular understanding of the effect of approval and ratification which was perhaps altered by Sankey v Whitlam, and then we saw the sequelae of that in the Government Agreements Act 1979.

MR YOUNG:   Well, that is possible, your Honour.

FRENCH CJ:   Anyway, you are not worried about that territory.

MR YOUNG:   No, I do not think I can ask the Court to construe the document by reference to misapprehensions that may have prevailed at that point in time.  Beyond that, the 1970 agreement went on to make various changes to the secondary processing obligations, but I do not need to go through the detail of that.  It is the combination of the 1967 and 1968 agreements that essentially define the valuable aspects of the rights that were the subject of the transactions in the 1970 agreement.

In our submission, a proper appreciation of the nature of the rights being transacted assists in the construction of the agreement, and we do submit that a misapprehension by the Court of Appeal contributed to its erroneous construction of the 1970 agreement.  Why I say that is that in various places, Justices Macfarlan and Meagher described the rights in question under the 1970 agreement as being confined to rights of occupancy; for instance, Justice Macfarlan at paragraphs 42 and 46, and Justice Meagher at paragraph 88. 

It is that narrow and mistaken identification of the rights that are being transacted which contributed to the conclusion that the parties were only describing physical areas rather than the complex set of rights that were the subject of the agreement with respect to those areas.

BELL J:   Why does the fact that the bundle of rights may have been greater than members of the Court of Appeal apprehended, if that be the case, why does that affect the reasoning of Justice Macfarlan, who saw the expansion in clause 1.4 of the 1970 agreement to rights - an expansion of the expression to include rights – in a sense, it does not matter quite what rights his Honour had in mind.  The point that he was making was that that did not dictate a conclusion that the earlier reference to area was not to a physical area.  It is just the logic of his Honour’s reasoning at paragraphs 42 to 44 does not seem to turn on the question of the extent of the rights.

MR YOUNG:   Your Honour’s question requires a very long answer, because that attracts most of the limbs of our argument.  Can I give your Honour a very short answer, and I will develop it in an orderly fashion, if I may.  Firstly, clause 1.4 is, in a sense, the starting point because it requires that all references to reserves be read in the specially expanded sense of present and future rights in relation to those reserves, including extensions of ore bodies, et cetera.  That definition applies just as much to clause 1.1 as it does to clause 2.2 and other provisions.

His Honour’s starting point that 1.1 is referring only to areas involves a disregarding of the fact that clause 1.4 defines references to reserves.  Secondly, in clause 1.1, you need to read the whole of the provision.  When it refers to holding temporary reserves in respect of areas that is not saying that the temporary reserves are mere physical geographic areas.  It is referring to a holding in respect of areas, which holding is then the subject of an exercise of an option.  Such a holding can only consist of rights because the bare geographic area cannot be the subject of an option.  It is the rights in respect of it which might be.

There are many other reasons, but when one takes into account the definition, the all‑embracing definition in 1.4, it feeds into 2.2.  It defines what is meant by “temporary reserves” that immediately precedes the parenthetical definition “MBM area”.  You cannot ignore the rights aspect of the definition, as his Honour does, and pick and choose the area aspect of the definition.  It is all present in future rights with respect to areas, and as Chief Justice Dixon once said, that is an error of logic to drop part of the defined expression, and to pick and choose will only make use of the area component of the definition. 

Now, there is a very long answer I am going to have to give, your Honour, but the answer is found in the text of the agreement, read and understood in the proper context of the nature of the rights that are being transacted, is the short answer.

FRENCH CJ:   If one goes back to 276 of the Mining Act, which gives you the bare statutory right designated as a temporary reserve in the marginal note, as we noted earlier, it is really understood in terms of an authority in relation to a reserved area.

MR YOUNG:   Yes.  “Temporary reserve” in the Mining Act is not an area.  It is an authority to occupy an area for ‑ ‑ ‑

FRENCH CJ:   It is not defined, but that would appear to be the usage, if you have reference to the marginal note.

MR YOUNG:   Yes.  But these parties’ usage is wider, because they use “temporary reserves” to include all of the associated contractual rights under the mining agreements.

FRENCH CJ:   I understand.

MR YOUNG:   I have dealt with context, so far as the nature of the rights is concerned.  Can I deal with the immediate context provided by the 1968 agreement, which was being replaced by the 1970 agreement next?

FRENCH CJ:   Now, is this under the rubric of a general approach to construction of the contract?

MR YOUNG:   No, your Honour.  I thought, in sequence, I can deal with the 1968 agreement after the text or after ‑ ‑ ‑

FRENCH CJ:   No, I am just talking about the principle of construction that you are applying.

MR YOUNG:   It is narrower than the principle that one can have regard to, surrounding circumstances.  The reason I am going to the 1968 agreement is that it is specifically adjusted by the 1970 agreement and the 1970 agreement refers to the option under the 1968 agreement and it refers to the fact that those adjustments are going to necessitate amendments to the State agreement.  One cannot really understand those references within the 1970 agreement without seeing the interconnection with the agreement that it is replacing.  So it is a much narrower matter that I am addressing than the surrounding circumstances.

FRENCH CJ:   Well, it is context, is it not?

MR YOUNG:   It is context.  It is, as I said, the immediate context for the 1970 agreement and in particular provisions of the 1970 agreement that need to be understood to construe it properly.

FRENCH CJ:   Ultimately, when you are dealing with the term “MBM area” you may be dealing with a term which offers constructional choices.  There is obviously a debate about the appropriate construction here.

MR YOUNG:   Yes, I understand that is the way it is put by our opponents ‑ ‑ ‑

FRENCH CJ:   I am avoiding the use of the term “ambiguity” because ‑ ‑ ‑

MR YOUNG:   No, no, what I was going to say, your Honour, is we say that there is no ambiguity at all about the defined terms.

FRENCH CJ:   Plain meaning, is it?

MR YOUNG:   Well, it is a question of applying the text and ‑ ‑ ‑

KIEFEL J:   There is no ambiguity but each of you had a totally different view of what it means.

MR YOUNG:   We have a totally different take, but the differences are about the content of the definition and the content of the definition is specified by the text of the agreement is the point I am trying to make.  At all events I will be brief about the 1968 agreement but I thought it makes no sense to go to it before I go the text but I am not in any way attempting to substitute its language for the text of the 1970 agreement. 

The 1968 agreement is at volume 2 at page 968.  The 1968 uses language that is very similar to some of the language of the 1970 agreement in parts.  Under the heading “Preamble” it starts with a representation from Hanwright that it holds temporary reserves.  They are set out.  There is then a representation:

that they have the right to these reserves as provided by their Government Agreement. 

So, apropos of the point I was making earlier, the parties make it very plain that they are transacting prospective rights to the reserves.  At the top of the next page, there is a definitional provision, unnumbered, that corresponds in language to clause 1.4 of the 1970 agreement.  There are two parts to the agreement.  Part I deals with the Paraburdoo block.  Part II deals with the remaining blocks.  They are captioned there “Mount Bruce Reserves”. 

In Part I, there is an agreement by Hanwright to transfer block 4053H to Hamersley after Hamersley gives a “notice of intention to proceed”.  The next clause refers to aspects of the government agreement affecting the rights being transacted, referring to timing obligations under the government agreement, expressing the sentiment or the feeling that the:

Government would be unlikely to rights under the Mount Bruce Temporary Reserves because . . . the Timing conditions were not –

being met.  Now, that is clearly a reference to the State agreement and so when it refers to the rights under the Mount Bruce temporary reserves, they are referring to the bundle of associated contractual rights relating to development and how you move to a lease and so on.  Then, in paragraph 3, if there is a transfer of block 4053H, there is a royalty provision. 

Now, that is not the blocks we are immediately concerned with but a similar structure relates in Part II to the remaining blocks, described as the Mount Bruce reserves.  If I can go to Part D of Part II at page 6 of the document, 973 of the appeal book: 

implementation . . . are conditional upon the necessary approvals being granted by the Western Australian Government.

2.Hamersley may give Hanwright written notice of its intention to proceed -

Under 4, there is a reference:

rights in relation to the Mount Bruce Reserves may be extended by the Western Australian Government. 

We would say that is a reference again to the bundle of rights arising under the State agreement and then 5:

On the giving by Hamersley of the notice of its intention to proceed, the blocks mentioned in the Preamble above, with the exception of [the Paraburdoo block] will be transferred -

So the notable features of the 1968 agreement is that it has been replaced by the 1970 agreement in most respects - I say in most respects for a particular reason I will come to, but it has the same concept of holding temporary reserves, meaning quite clearly when you look at the whole context within the agreement the bundle of rights under the State agreement with respect to those reserves, and it provides for a definition of blocks - all references to blocks or reserves include all present and future rights.

So, if I look at D5, when the provision says that the blocks will be transferred, what of course is transferred is not a geographical area because there is no right to a geographical area as such.  What is transferred is the bundle of rights with respect to the Mount Bruce reserves. 

KIEFEL J:   Are you referring to the 1968 agreement to show that the parties have historically spoken in terms of rights and that this colours the – or effects - one should approach the 1978 agreement by reference to ‑ ‑ ‑

MR YOUNG:   No, primarily to show that parties’ conception of the rights was when they spoke of reserves being transferred and reserves being the subject of a royalty, their conception of rights was the bundle of rights under the State agreement.

KIEFEL J:   Well, conception of rights is one thing, but you are also, as I apprehend it, relying upon the language of rights being the language in which the parties are speaking.

MR YOUNG:   Yes, yes, your Honour.  I will make it very clear.  I am not substituting this language, which is different for the language of the 1970 agreement.

KIEFEL J:   No, but if you are historically saying it is going to carrying us into the 1970 agreement ‑ ‑ ‑

MR YOUNG:   Yes, yes, I am, your Honour.

KIEFEL J:   ‑ ‑ ‑ then you are really talking about the background to the 1970 agreement by reference to what the parties have previously agreed.  That is almost to bring in a negotiation context to the 1970 agreement.

MR YOUNG:   Yes, that is the context.  Now, I have gone to the transfer provision, D5.  There is a royalty provision expressed in a similar way, which is in A5, page 4 and that says:

Ore won by M.B.M. from the Mount Bruce Reserves -

Now, the same language is used in respect of both the transfer and the royalty provisions, the Mount Bruce reserves, but the dictionary of the parties and their understanding is plain from this agreement that they mean in both B5 and A5 the bundle of rights with respect to the Mount Bruce reserves.  The same point can be made if you look at Part I, clauses 1 and 3.  They speak of transferring this temporary reserve, block 4053H in clause 1 of Part I and then in the royalty provision, clause 3:

Ore won by Hamersley from Block 4053H -

So both as a matter of their usage and as a matter of the definitional provision they are conceiving of a reserve or the block or the bundle of reserves and blocks as being a bundle of rights that are the subject of both the transfer and the subject matter of the royalty.  So that is the immediate context in the 1968 agreement.

KEANE J:   Why would one read it in that way?  Why would one not read the references, particularly in clause 1.4 of the 1970 agreement, to future rights, all existing or future rights, as indicating that the parties are utterly indifferent as to the source or content of the rights to exploit and win ore?  The agreements are simply concerned to assure that as between them one party gets to exploit, by whatever rights it can obtain, the tenements and whatever tenements it can obtain.  What else does one make of the reference to future rights? 

It seems to be that it is trying to say, comprehensively, or it is trying to make a provision as comprehensively as possible, to ensure that as between the parties to the agreement, whatever rights each party can obtain from the government to explore and exploit the blocks, they are exclusively assured to that party and in return for that they agree to pay royalties. 

MR YOUNG:   But, your Honour, that overlooks the fact that the term “MBM area” is defined explicitly by reference to those rights.  One needs to adhere to the text of what the parties agreed and I am about to go through the text of the 1970 agreement.

KEANE J:   But why?  What do you make then of the reference to future rights?

MR YOUNG:   Well, future rights is readily explicable by reason of the fact that as at 5 May 1970, Hanwright had the benefit of a set of unfolding contingent rights to move to a lease of a lesser area on condition that they would lose all of their rights to the balance of the area and that lease then gave them certain rights to renewals, to associated land for ports, railways and processing plants.  All of those rights fall within the description of “future rights” because they are not vested rights, they are not current rights.  They are rights that may unfold contingently, if you satisfy the various conditions laid down by the State agreement. 

So it is that very bundle of rights that led to the parties, and I am speaking objectively, choosing a specially defined expression, definition, to govern the concept of reserves.  They wanted to ensure that what was transferred and what was restored was the full pathway of contingent future rights that may arise under the State agreements that would allow them to extract ore but recognising that they would only get the right to extract ore from limited areas.  That was the price they paid for that bundle of rights and when rights expired, it was then thrown open to all comers.  They had no priority or privilege in respect of areas that had become unalienated Crown land on the expiry of occupancy rights. 

So it is the recognition of that circumstance that led the parties to adopt a specially expanded definition and then that definition feeds into two things:  what was the subject of the transfer and restoration of rights and what was the definition of MBM area that would be the basis for the royalty.  Now, I will explain that more slowly, if I may, your Honour, and try and put all the pieces together but that is the nub of our answer.

KIEFEL J:   When one does get to the 1970 agreement and clause 3.1, regardless of the bundle of rights that is transferred under the agreement, is not the royalty provision - and this may be too simplistic - but is not the royalty provision directed only to the material which is physically extracted from the land and that is it?

MR YOUNG:   No, your Honour.  Royalties are only payable on the value of the ore that you extract and sell but the circumstance that triggers a royalty consists of the two elements of winning it from the MBM area and winning it  by MBM but ‑ ‑ ‑

KIEFEL J:   But winning from is a process of extraction, is it not?

MR YOUNG:   Winning is ‑ ‑ ‑

KIEFEL J:   It is a physical process ‑ ‑ ‑

MR YOUNG:   ‑ ‑ ‑ is a process of extraction

KIEFEL J:   ‑ ‑ ‑ by which material is derived.

MR YOUNG:   Yes.

KIEFEL J:   That is what it is concerned with.  That gives certainty in terms of the royalties to what it is that the royalty attaches to.

MR YOUNG:   But that is entirely neutral in terms of the matter of construction we are concerned with, which is whether “MBM area” is defined earlier by the combination of clauses 1.4 and 2.2 in terms of the present and future rights acquired in respect of the areas.  If it is so defined, then “MBM area” becomes winning the ore from the present and future rights relating to a more confined area, being the area the subject of the lease, because the rest is gone and it is necessarily gone long before you get to extraction.

I am now about to go to the text of the 1970 agreement.  I did want to refer to two matters of principle before I embark upon the text.  The task, in our submission, is to construe the agreement as a whole so that all of its provisions are harmonious with each other and that includes ensuring that you give effect to each of the provisions, rather than reading them out, effectively, of the agreement and that is a well‑known principle from the ABC v APRA Case and Wilkie v Gordian Runoff.

Now, here there is a particular aspect of that that is in question, and again I am about to mention a couple of cases very briefly.  First, it is not likely to be supposed that the same word or term has a different meaning in one provision compared to another provision.  That is the effect of the respondent’s construction.  Our construction gives the same word the same meaning in every provision where it appears. 

Now, that is necessarily so because that is the consequence of the express definitional provision in clause 1.4 which lays it down that all references, all references to particular word or words, in this case, “reserves” is the critical word, has a singular fixed meaning.  When we are dealing with a definitional provision, a further matter of principle I wanted to refer to is this. 

The proper course is to read the words of the definition into the substantive provision and that may involve modifying the language if necessary, if the definition is a lengthy one or cumbersome in the context of a particular clause.  There are a lot of cases to that effect.  But where the contracting parties have chosen to define a term with a special expanded meaning, in our submission that choice is to be respected and applied.  The only exception to that might be if it led to absurdity or repugnancy to some other provision.

Now, there are a number of cases that make that point very clear.  The two that we would identify as benchmark authorities, as it were, are decisions of this Court.  One is Halford v Price, the other is Southern Cross Assurance.  Could I take a moment just to point to the passages in those two cases?  Halford v Price 105 CLR is tab 6 in the bundle that I think our side has provided to the Court.  Halford v Price concerned an insurance contract, contained a definition of the word “firm”.  It was a policy of insurance effected by solicitors. 

The effect of the definition and its reference to any other person was that if you read it as the text said, a solicitor would have the benefit of the insurance before he joined the firm.  The countervailing argument was that it must have been intended that it should only operate in respect of permutations in the membership of the firm from the date the firm commenced.  The High Court rejected that assertion that should be read contrary to the text.  Chief Justice Dixon adopted the established approach of reading the whole of the definition in to the policy.  He did that at page 27, at about 27, point 7.  His Honour stated the issue and his Honour said:

But it is not a question that is answered, as I see it, by any words which would exclude –

the language of the definition.  At the top of page 28, his Honour read the whole of the definition in.  Page 29 his Honour stated the proposition:

Is there then any sufficient reason for implying a restriction on the indemnity -

to which he gave the answer no, and he dealt with this kind of argument that we confront here about what the parties must be taken to have been trying to do by saying it is all speculation, in the middle of the page.  That passage continues and his Honour identifies the proposition of logic that the Court of Appeal analysis falls foul of, that concerned with the undistributed middle.

Here, let me take, in answer to something Justice Bell asked me about the Court of Appeal, Justice Macfarlan’s approach.  His Honour accepted that the effect of clause 1.4 was to include rights in the concept of “MBM area” but his Honour then eliminated that by saying that does not matter.  I am only going to give effect to one component of the definition.  It is rights in respect of area - his Honour said I will give effect to the area component of the definition. 

That is the very error that his Honour, Chief Justice Dixon, criticised.  You cannot refuse to apply part of the definition because you think the parties might have intended something else.  That is not what the language says and you do not get to pick and choose between the components of the defined term.  So his Honour’s approach, in our submission, in Halford is correct.  Justice Windeyer was very clear that the text has primacy, at the bottom of page 40.

There is another earlier decision that is likewise very helpful in terms of principle.  It is the Southern Cross Assurance decision that we added to our list of authorities – tab 22.  The salient passage is at page 636, at about point 2 on the page.  Again, the text has primacy unless you find counter‑indications within the text.  Their Honours go on to say:

Preconceptions as to what the transaction involves of its own nature, or what the parties are likely to have intended ought not to be allowed to deprive the language in which the reinsurance is expressed of its natural meaning and effect.

That is the principle we seek to apply when these passages are read in their context.  Where the parties have agreed on a special expanded definition, it is not likely to be disregarded, in our submission.  So let me turn to the text – clause of the 1970 agreement.  The course I propose to take is to address the text and our construction and then turn to the Court of Appeal and make such criticisms as we do of the reasoning in those passages. 

I have explained the structure of the 1970 agreement.  The appropriate starting point, in our submission, is clause 1.4 because it is an all‑embracing special definition of the critical word “reserves”.  It provides that:

All references to blocks or reserves include all present and future rights of Hanwright in relation to the above blocks and reserves including any extensions of the ore bodies located therein or any adjustments of the present indicated boundaries –

I will address aspects of it a little bit later – that is the ore bodies extension passage, but that is, on any view of things, a special and expanded definition of what would be conveyed by the word “reserves” if read in isolation.

KIEFEL J:   It finds expression in clause 2.2 when the parties are talking about what is divided by ‑ ‑ ‑

MR YOUNG:   Yes.

KIEFEL J:   When it refers to the entire rights.

MR YOUNG:   Yes. 

KIEFEL J:   So one could at least discern that it governs the provisions made for the division of rights.

MR YOUNG:   More than that, your Honour.  Its purpose and function – its main purpose and function is to feed into the central operative provision which is clause 2.2.  By feeding into clause 2.2, it does two things.  It controls the definition of “MBM area” and, secondly, it defines – in the same breath, as it were – the rights that are being transferred to MBM and, for that matter, the rights that are being restored to Hanwright.

KIEFEL J:   But it does not control just what “MBM area” means.  It controls the rights which are the subject of both the MBM and the Hanwright area because it is talking about what is the subject of the division.

MR YOUNG:   Well, it is talking about two things.  Can I tackle it in this fashion, your Honour?  Within 2.2, the first reference that would attract the special definition is the phrase “its Mount Bruce Temporary Reserves”.  Notice the preposition.  It is not referring to areas in the abstract.  It is referring to something that is held – “its Mount Bruce Temporary Reserves”.  That harmonises with the opening words “Hanwright hold Temporary Reserves in respect of areas”.  Then it goes on to label them as “Mount Bruce Temporary Reserves”.