Paxton Enterprises Pty Ltd v Brancote Australia Nl - [2000] WASC 273

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: PAXTON ENTERPRISES PTY LTD -v- BRANCOTE AUSTRALIA NL [2000] WASC 273

CORAM: ANDERSON J

HEARD: 26 OCTOBER 2000

DELIVERED : 21 NOVEMBER 2000

FILE NO/S: ARB 13 of 2000

BETWEEN: PAXTON ENTERPRISES PTY LTD (ACN 070 134 557)
Plaintiff
AND
BRANCOTE AUSTRALIA NL (ACN 050 219 924)
Defendant

Catchwords:

Contract - Agreement containing novation clause - Construction - Rights and obligations of one party assumed by another party on happening of certain events - Effect - No point of principle

Legislation:

Commercial Arbitration Act 1985

Result:

Application refused

Representation:

Counsel:

Plaintiff: Mr A Atkinson
Defendant: Mr A P Hershowitz

Solicitors:

Plaintiff: Solomon Bros
Defendant: Pullinger Readhead Stewart

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

Nil

Case(s) also cited:

Martin & Anor v Taylor & Anor (1999) 17 ACLC 1563
Re Gordon Grant and Grant Pty Ltd (1989) 1 ACLC 196

ANDERSON J: This is an application by originating summons under the Commercial Arbitration Act 1985 in an arbitration between the plaintiff and the defendant. The relief which is sought is:
"1.A declaration that no arbitration agreement subsists between the parties with respect to the Tailings Agreement dated 11 August 1995.
2.A declaration that the arbitration proceedings purportedly commenced by the defendant against the plaintiff by notice dated 29 June 2000 have been invalidly commenced.
3.A declaration that Ian W Steele does not have jurisdiction to hear and determination the arbitration proceedings purportedly commenced by the defendant against the plaintiff by notice dated 29 June 2000.
4.The defendant do pay the plaintiff the costs of and incidental to this application and the costs of and incidental to the arbitration proceedings purportedly commenced by the defendant against the plaintiff by notice dated 29 June 2000."
The arbitration proceedings referred to have been stayed by order of a Judge of this Court pending the hearing of this originating summons.
The background circumstances are not in dispute and can be briefly stated.
In July 1992, Accolade Mining Management Pty Ltd lodged an application for an exploration licence in the Phillips River mineral field near Ravensthorpe. Twenty‑one blocks were applied for. The application was given the identification number EL74/154. Before the exploration licence was granted, two brothers, Mark and Gregory Williams, applied for several mining leases, two of which were within the boundaries of the exploration licence. These applications were numbered ML74/95 and ML74/97 and covered a tailings dump, or tailings dumps. It was the right to mine or treat those dumps which the Williams brothers would secure by the grant to them of the two mining leases in question.
Having applied for the mining leases, the Williams brothers lodged objections against the grant of the exploration licence. This led to negotiations between Accolade Mining Management Pty Ltd and the Williams brothers. The dispute was settled by an agreement dated 11 August 1995 and called "Tailings Agreement". The parties to this agreement were Accolade Mining Management Pty Ltd, the Williams brothers and a third entity, Brancote Australia NL. The latter entity is a party because there was an existing agreement between it and Accolade for the sale of the exploration licence to it upon the grant of the exploration licence.
This is expressly acknowledged in the recitals to the Tailings Agreement. Recital B is in terms that "by a sale agreement dated 26 August 1993 between Accolade and Brancote, Accolade agreed to sell [the exploration licence] if granted to Brancote on the terms and conditions therein set out".
The Tailings Agreement provided, in effect, that the Williams brothers would withdraw their objections to the grant of the exploration licence and Accolade would excise from the application for the exploration licence certain ground covered by the Williams brothers' applications for the two mining leases. The ground to be excised was a designated area of 40 hectares and it was expressly agreed that the excise would be to a depth of "15 metres below the natural surface of the land".
For their part, the Williams brothers agreed to excise from their applications all ground, except for the designated 40 hectares, to a depth of 15 metres.
In the result, the Williams brothers would obtain the right to mine or treat the tailings dumps and Accolade would obtain the right to explore for minerals in all of the rest of the ground outside the 40‑hectare area.
Various other covenants were contained in the Tailings Agreement relating to rights to mine, rights of access and so on.
By cl 11 of the Tailings Agreement, it was provided that:
"11.1This Agreement contemplates that Accolade will transfer the Exploration Licence to Brancote and therefore Williams and Brancote shall as and from the date the instrument of transfer of the Exploration Licence from Accolade to Brancote is registered, release and discharge Accolade from all obligations and liabilities under this Agreement and agree to be bound by this Agreement from such date as if Brancote was named herein in place of Accolade."
That was an agreement for novation upon the transfer of the exploration licence from Accolade to Brancote. It is clear that all three parties intended that once Accolade transferred the exploration licence to Brancote, Accolade would drop out of the agreement, so to speak. Brancote would assume all of Accolade's rights and obligations thereunder.
In due course, the exploration licence was granted to Accolade and on or about 1 March 1996 Accolade transferred the exploration licence to Brancote. The effect of cl 11 of the Tailings Agreement was that Accolade was thereupon released from all of its obligations and liabilities under the agreement and the Williams brothers and Brancote were bound by the agreement "as if Brancote was named herein in place of Accolade".
By par 9 of the Tailings Agreement, it was provided:
"9.1Assignment of Rights
Subject to clause 11, any party may assign the whole or any part of its rights under this Agreement to a third party provided that they and the assignee first comply with clause 9.2.
9.2Terms of Assignment
No assignment in whole or in part to a third person pursuant to clause 9.1 shall be effective unless and until:
(1)the assignee agrees with the remaining party to this Agreement (in form and terms satisfactory to the remaining party) to assume and perform the duties, liabilities, terms and conditions by this Agreement; and
(2)… "
The phrase "subject to clause 11" in cl 9.1 simply means that the right to assign cannot be exercised so as to defeat the arrangement set out in cl 11. No point about that arises in this case.
It is common ground that by deed dated 24 June 1996, the Williams brothers assigned their rights under the Tailings Agreement to the plaintiff, Paxton Enterprises Pty Ltd.
On a date in 1999 which does not clearly appear from the papers, Brancote entered into negotiations with Galaxy Resources NL with respect to Brancote's rights and obligations under the Tailings Agreement. I gather that, in effect, Brancote wished to exercise the right of assignment conferred by cl 9 of the Tailings Agreement and wished to exercise that right in favour of Galaxy. On grounds which do not concern this Court, Paxton Enterprises Pty Ltd disputes Brancote's entitlement to exercise the rights conferred by cl 9.
On 29 June 2000, Brancote purported to give a notice of dispute pursuant to cl 6 of the Tailings Agreement, nominating a chartered engineer, Mr Ian W Steele, as arbitrator. Clause 6 provides:
"6. Dispute
6.1In the event that there is a dispute which cannot be resolved by agreement then either Accolade or Williams may give to the other party written notice.
6.2If a dispute which is the subject of a notice under clause 6.1 is not settled within twenty one (21) days of service of the notice, the dispute must be referred to arbitration. The arbitration must be an arbitrator agreed upon by the parties or, failing agreement, nominated by the President of the Australasian Institute of Mining and Metallurgy at the request of the parties. The arbitrator must be appointed by the parties or the President of the Australasian Institute of Mining and Metallurgy within fourteen (14) days of the expiration of twenty‑one (21) day period referred to in this clause and must be conducted in accordance with the Commercial Arbitration Act 1985 (WA)."
Paxton contends that Brancote has no right to require the dispute to go to arbitration on the ground that there was no basis on which Brancote can claim to have the benefit of the arbitration clause in the Tailings Agreement. It is to make good that contention that these proceedings are brought.
In my opinion, as from the date of the transfer of the exploration licence from Accolade to Brancote, Brancote obtained all of the rights of Accolade and assumed all of the liabilities of Accolade under the Tailings Agreement. In accordance with cl 11, the Williams brothers (and hence by assignment or novation, Paxton) agreed "to be bound by [the Tailings Agreement] from such date as if Brancote was named [t]herein in place of Accolade". The agreement to be bound by the Tailings Agreement "as if Brancote was named" therein is an enforceable obligation. The result is that the Williams brothers' successor, Paxton, cannot be heard to say that Brancote does not have the benefit of the arbitration clause. Clause 6.1 is to be read as if it said:
"In the event that there is a dispute which cannot be resolved by agreement then either Brancote or Williams (or their assigns) may give to the other party written notice."
For these reasons, I decline to grant the relief sought in the originating summons.