Pilbara Iron Ore Pty Ltd v Ammon
[2020] WASCA 92
•11 JUNE 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: PILBARA IRON ORE PTY LTD -v- AMMON [2020] WASCA 92
CORAM: BUSS P
MURPHY JA
VAUGHAN JA
HEARD: 22 OCTOBER 2019 & WRITTEN SUBMISSIONS 15 & 22 MAY 2020
DELIVERED : 11 JUNE 2020
FILE NO/S: CACV 92 of 2018
BETWEEN: PILBARA IRON ORE PTY LTD
Appellant
AND
DEREK NOEL AMMON
First Respondent
DIRECTOR GENERAL OF MINES
Second Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: FIANNACA J
Citation: PILBARA IRON ORE PTY LTD -v- AMMON [2018] WASC 258
File Number : GDA 12 of 2014
Catchwords:
Contract - Joint Venture Agreement between appellant and first respondent - Mining - Feasibility study - Where Joint Venture Agreement provided that appellant would earn an 80% interest in the Joint Venture upon completion of feasibility study - Whether feasibility study completed in accordance with the Joint Venture Agreement - Alleged implied terms in fact to give business efficacy - Where primary court and Mining Warden had not properly construed express terms of Joint Venture Agreement before finding alleged implied terms - Where the question of whether appellant had completed a feasibility study in accordance with Joint Venture Agreement on proper construction of its express terms had not been litigated or determined by primary court or in proceedings in Warden's Court - Remitter to Warden's Court to consider any application by first respondent for leave to plead proper construction of Joint Venture Agreement
Legislation:
Nil
Result:
Appeal allowed in part
Category: B
Representation:
Counsel:
| Appellant | : | Mr B W Walker QC & Mr J J Hutton |
| First Respondent | : | Mr C P Shanahan SC & Mr A P Hershowitz |
| Second Respondent | : | No appearance |
Solicitors:
| Appellant | : | Allen & Overy |
| First Respondent | : | JDK Legal Services |
| Second Respondent | : | State Solicitor's Office |
Case(s) referred to in decision(s):
Ammon v Pilbara Iron Ore Pty Ltd & DG DMP [2014] WAMW 18
Ammon v Pilbara Iron Ore Pty Ltd [2012] WAMW 14
Australian Communication Exchange Ltd v Deputy Commissioner of Taxation [2003] HCA 55; (2003) 201 ALR 271
Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334
Bell v Lever Brothers Ltd [1932] AC 161
Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
Carlton & United Breweries Ltd v Tooth & Co Ltd (1985) 6 IPR 319
Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337
Collector of Customs v Agfa‑Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389
Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169
Coplin v Al Maha Pty Ltd [2019] NSWCA 159
Dan v Barclays Australia Ltd (1983) 57 ALJR 442
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544
Electricity Generation Corp v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue [2011] WASCA 228; (2011) 43 WAR 186
Fitzpatrick v Job t/as Jobs Engineering [2007] WASCA 63
George 218 Pty Ltd v Bank of Queensland Limited [No 2] [2016] WASCA 182; (2016) 313 FLR 287
Hancock Prospecting Pty Ltd v BHP Minerals Pty Ltd [2003] WASCA 259
Harrington v Browne [1917] HCA 36; (1917) 23 CLR 297
Heimann v The Commonwealth (1938) 38 SR (NSW) 691
Helicopter Sales Pty Ltd v Rotor Work Pty Ltd (1974) 132 CLR 1
Hill End Gold Ltd v First Tiffany Resource Corporation [2010] NSWSC 375
Hill End Gold Ltd v First Tiffany Resource Corporation [2011] NSWCA 276
Homestake Australia Ltd v Metana Minerals NL (1991) 11 WAR 435
Khoury v Government Insurance Office of NSW [1984] HCA 55; (1984) 165 CLR 622
Life Insurance Co of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
Marcus Clark (Victoria) Ltd v Brown [1928] HCA 12; (1928) 40 CLR 540
Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] 4 All ER 441
Max Cooper & Sons Pty Ltd v Sydney City Council (1980) 29 ALJR 234
Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; (2018) 264 CLR 541
Moore v Stockland South Beach Pty Ltd [2011] WASC 337
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
Pilbara Iron Ore Pty Ltd v Ammon [2018] WASC 258
Pringle v Everingham (2006) 46 MVR 58
Rizhao Steel Holding Group Co Pty Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91
Servcorp WA Pty Ltd v Perron Investments Pty Ltd [2016] WASCA 79; (2016) 50 WAR 226
Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80
Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418
Teoh v Minister for Immigration and Ethnic Affairs (1994) 49 FCR 409
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
University of New South Wales v Moorhouse [1975] HCA 26; (1975) 133 CLR 1
Vickery v Waitaki International Ltd [1992] 2 NZLR 58
Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 328 ALR 564
Waterways Authority v Fitzgibbon [2005] HCA 57; (2005) 79 ALJR 1816
Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598
Wilson v Anderson [2002] HCA 29; (2002) 213 CLR 401
Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40
Table of contents
The proceedings before the Warden
The appeal to the primary judge
The Joint Venture Agreement
Definitions
Recitals and Commencement Date
Joint Venture and Joint Venture Interests
Joint Venture Expenditure
Joint Venture Property and Mining Information
The 'Commencement Date' and the 'Free Carry Period'
The Grant Date - The commencement of the Joint Venture and the parties' respective interests
Payments to Ammon prior to and within 14 days of the Grant Date
The Earning Period from the Grant Date
Pilbara's obligations and financial contributions to Joint Venture Expenditure in the Earning Period
Feasibility study - consequences for Pilbara
Feasibility study - election by Ammon
The Finance Raising Period if Ammon elects to contribute to Joint Venture Expenditure
Cash calls
Joint Venture Operations whilst Pilbara is the sole contributor to Joint Venture Expenditure
The Operating Committee: Joint Venture Operations after the Earning Period
Confidential information
Warranties
Relationship of participants
Formal agreement
Further assurances
The appeal to this court
Grounds of appeal
The parties' submissions on the proper construction of the JVA and the implied terms
Pilbara's submissions
Ammon's submissions
The proper construction of the JVA
Principles
The express terms of the JVA
The implied terms
Ammon's application in the appeal and the proposed Notice of Contention
Ammon's application
Ammon's submissions
Pilbara's submissions
Materials on the application
The history of the litigation - overview
2008
5 December 2011
The Further Amended Plaint
6 - 7 December 2011
The trial of the preliminary issues and sequelae
Pilbara's applications of 14 February 2013
The trial of the substantive issues - March 2013
The Substantive Decision - 16 December 2014
Ammon's expert evidence
Disposition
Conclusion
JUDGMENT OF THE COURT:
This is an appeal from the decision of Fiannaca J in Pilbara Iron Ore Pty Ltd v Ammon[1] (primary decision). The primary decision concerned an appeal from decisions of the Mining Warden in relation to the proper construction and application of a Joint Venture Agreement dated 3 September 2002 (JVA) between the appellant (Pilbara) and the first respondent (Ammon). The Warden had granted declarations, sought by Ammon, to the effect that Pilbara was deemed to have withdrawn from the joint venture, and that a transfer lodged by Pilbara transferring an 80% interest in the joint venture to itself was invalid and unenforceable. The primary judge dismissed Pilbara's appeal and Pilbara now appeals against that decision.
[1] PilbaraIron Ore Pty Ltd v Ammon [2018] WASC 258 (primary decision).
The proceedings before the Warden
Ammon was an applicant for, and subsequently the holder of, an Exploration Licence granted in 2003. In general terms, the JVA provided that Pilbara was to indemnify Ammon for his past expenditure associated with the Exploration Licence, and carry the cost of certain future exploration expenditure for a period, and that if it completed a feasibility study by a specified time, it would earn an 80% interest in the joint venture. Ammon could thereupon elect whether to contribute to the financing of the joint venture and remain in the joint venture with respect to his 20% interest, or withdraw from the joint venture. If Pilbara did not complete a feasibility study by the specified time, it would be deemed to have withdrawn from the joint venture.
The Warden dealt with the proceedings by (1) determining, as a preliminary issue, the proper construction of the JVA involving the implication of certain terms advanced by Ammon, and then (2) determining the factual issues in light of his findings on the proper construction of the JVA, and in particular its implied terms. The Warden found that the JVA contained the implied terms pleaded by Ammon. The factual issues were, in effect, whether the study prepared by SRK Consulting dated 24 January 2008 (SRK Report) and relied on by Pilbara as the feasibility study for the purposes of the JVA, conformed with the implied terms in the JVA as found by the Warden.
The primary judge described the first decision by the Warden as the 'Preliminary Issues Decision'[2] and the second decision as the 'Substantive Decision'.[3] These reasons will also adopt that nomenclature.
[2] Ammon v Pilbara Iron Ore Pty Ltd [2012] WAMW 14 (Preliminary Issues Decision).
[3] Ammon v Pilbara Iron Ore Pty Ltd & DG DMP [2014] WAMW 18 (Substantive Decision).
In the Preliminary Issues Decision, the Warden accepted[4] that the JVA contained implied terms pleaded by Ammon in par 12 of his Further Amended Plaint, amended on 6 December 2011, to the following effect:[5]
12.It was an implied term of the [JVA] that to be a 'completed feasibility study' for the purposes of the [JVA], including those [pleaded] at paragraph 11, any such feasibility study must:
(i)be accurate enough to enable the Plaintiff to seek to raise project finance pursuant to clause 4.7 of the [JVA];
(ii)be independent, in that any information provided by, or on behalf of, a Participant in the joint venture ('Participant') for the purposes of producing such a feasibility study be independently verified;
(iii)be reliable, in that any information or data provided a Participant for the purposes of producing such a feasibility study not be inaccurate or incomplete; and
(iv)include any reserve statement required to enable the Plaintiff to seek to raise project finance pursuant to clause 4.7 of the [JVA].
[4] Primary decision [139].
[5] Primary decision [132], [133.12].
In this context Ammon had pleaded (in par 11 of his Further Amended Plaint) what he said was the purpose of the feasibility study:[6]
11.On a proper construction of the [JVA], [Ammon] says that the purpose of the 'feasibility study' to be completed by [Pilbara] under clause 4.5 of the [JVA] was to inform [Ammon's] Election, which required that any such feasibility study be delivered to [Ammon], to allow [Ammon] to decide either to:
(i)Withdraw and first offer to transfer his interest to [Pilbara] pursuant to cl 4.6 of the [JVA], for the then net present value of that interest calculated by reference to the 'feasibility study'; or
(ii)Contribute to Joint Venture Expenditure and seek to raise project finance pursuant to cl 4.7 of the [JVA].
[6] Primary decision [132], [133.11].
Although Ammon compendiously described the four terms referred to in [5] above as an 'Implied Term', it is convenient, and does no injustice to Ammon's case, to treat them as separate, albeit related, implied terms. In what follows, the terms referred to in subpars (i) - (iv) of [5] above will be referred to respectively as the 'First Implied Term (Accuracy)', the 'Second Implied Term (Independence)', the 'Third Implied Term (Reliability)' and the 'Fourth Implied Term (JORC Code Ore Reserve Statement)'.[7]
[7] Ammon's claim involved reliance on 'the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves' known as the 'JORC Code': Substantive Decision [83], [171], [181], [341].
The Further Amended Plaint also contained a plea at par 14, albeit in terms unrelated to par 12 and not expressed as a matter of construction or implication, that '[i]n order to seek to raise project finance pursuant to cl 4.7 of the [JVA], [Ammon] required a completed feasibility study that:[8] (1) was accurate to at least ±10 ‑ 15%, and (2) included a reserve statement'. The Further Amended Plaint also contained a 'breach' plea in par 19. The 'breach' plea in par 19 was confined to a breach of the four implied terms alleged in par 12 of the Further Amended Plaint. Paragraph 19 of the Further Amended Plaint alleged that 'in breach of the [four implied terms in par 12 of the Further Amended Plaint] the SRK Report was not accurate, independent, reliable or complete as required by the [four alleged implied terms]'.[9]
[8] BB 371.
[9] BB 372.
After the 'Preliminary Issues Decision' was delivered, the factual contest in the Warden's Court, as noted earlier, was whether the SRK Report complied with the four implied terms as found by the Warden. In that regard, the Warden in the Substantive Decision treated the factual contest as requiring a determination of Ammon's 'breach' plea in par 19 of the Further Amended Plaint.[10] Ammon relied on the expert evidence of Mr Lawrence, a geologist and a fellow of the Australasian Institute of Mining and Metallurgy, and Mr Amos, a consultant holding a science degree with honours in geology and a fellow of the Australasian Institute of Mining and Metallurgy and of the Financial Services Institute of Australia, who also taught project finance and corporate finance for various institutions.[11]
[10] Substantive Decision [12].
[11] Substantive Decision [61], [78].
It will be necessary to consider in more detail later the expert evidence led by Ammon in the Wardens Court. At this stage it is sufficient to note that Ammon's instructions to the experts, Mr Lawrence and Mr Amos, preceded his Further Amended Plaint of 6 December 2011 and, consequently, the expert reports did not advert to the four implied terms in par 12 of the Further Amended Plaint.[12]
[12] Mr Lawrence was instructed on 26 June 2011, and his report was dated 4 July 2011. Mr Amos was instructed on 3 November 2011, and his report was dated 11 November 2011. See GB 61, 64, 69, 139 - 140 (Mr Lawrence), and GB 143, 195 ‑ 196 (Mr Amos).
The Warden referred to or summarised key aspects of Ammon's expert evidence as follows:
1.There are three types of 'techno-financial' studies known in the mining industry:
(a)Scoping study - which asks what could the mineral project be and constitutes a preliminary initial review, including conceptual designs and an order of magnitude of costings, such that it is expected to have inputs accurate to ±40% ‑ ±50%.
(b)Pre-feasibility study - which asks what should the mineral project be and outlines the optimum way forward, having identified, examined and reviewed all available options and alternatives. The inputs are expected to be accurate to ±20% - ±25%, and it is a precursor to the feasibility study.
(c)The feasibility study - which demonstrates what the mineral project will be. It provides a reliable estimate of project value upon which an investment decision and allocation of funds can be made, and is expected to have study inputs accurate to ±10% ‑ ±15%. It is often referred to as a 'Definitive', 'Bankable' or 'Final' feasibility study.[13]
[13] Substantive Decision [82]. In each case, the emphasis is in the original.
2.The JVA required a report the 'ultimate objective [of which was] to produce a document that does (or does not) support the internal or external allocation of the funds to develop the deposit into a mine'. A document of that nature was a 'Bankable/Definite/Final Feasibility Study'.[14]
3.A Bankable, Definite or Final Feasibility Study is required to have inputs accurate to ±10% ‑ ±15%.[15]
4.A financier, whether it be a bank or some other source of finance, would require a feasibility study conducted to a level of ±10% ‑ ±15% accuracy.[16]
5.In such a 'Feasibility Study':
(a)it is 'imperative … to produce … an objectively accurate result … [and] that is why the inputs to [such] a Feasibility Study must come from independent sources about which there can be no reasonable apprehension of bias';[17] and
(b)it is necessary to have an independently prepared and verified JORC Code-compliant Ore Reserve Statement.[18]
6.The SRK Report did not meet the criteria of a Definitive/Bankable/Final Feasibility Study because its levels of accuracy were not ±10% ‑ ±15%, its information was not independently verified, and it did not contain an Ore Reserve Statement in compliance with the JORC Code.[19] Rather, it contained information more apposite to a Scoping study or a Pre‑feasibility study.[20]
[14] Substantive Decision [81].
[15] Substantive Decision [81] - [82], [91], [118]; see also [62], [67].
[16] Substantive Decision [118].
[17] Substantive Decision [160]. See also, Mr Lawrence's evidence at GB 107.
[18] Substantive Decision [83], [171].
[19] Substantive Decision [62], [77], [81] - [94], [147] - [149], [160], [171].
[20] Substantive Decision [314].
In the Substantive Decision, the Warden effectively accepted that Ammon's expert evidence proved that the SRK Report did not meet or was in 'breach' of the requirements under each of the four implied terms in par 12 of the Further Amended Plaint (even though Ammon's expert reports, which preceded the plea of the four implied terms, were not drawn by reference to those alleged implied terms).[21]
[21] Substantive Decision [296] - [348].
The Warden made declarations on 19 September 2014, relevantly to the effect that (1) Pilbara is deemed to have withdrawn from the Joint Venture effective 30 January 2008, (2) a power of attorney, No 10265H, lodged by Pilbara with the Department of Industry and Resources on or about 21 February 2008 is invalid and unenforceable,[22] and (3) the Transfer lodged by Pilbara with the Department of Industry and Resources on 11 March 2008 to transfer 80% of the Exploration Licence to itself is invalid and unenforceable. The Warden also discharged an interim injunction granted on 10 April 2008.[23] He also ordered Pilbara to pay Ammon's costs of the proceedings, including reserved costs and the costs of expert witnesses, such costs to be taxed if not agreed without reference to the limits in the relevant Legal Profession (Magistrates Court) (Civil) Determination.[24]
[22] As to which, see [135] below.
[23] See also [135] below.
[24] BB 253 - 254.
The appeal to the primary judge
Pilbara lodged a notice of appeal against the Warden's orders on 7 October 2014. There were 12 grounds of appeal. Ground 12 stated that by reason of errors alleged in grounds 10 and 11, 'the trial miscarried and the learned Warden's judgment is to be set aside'.[25]
[25] BB 237 - 251.
There was no dispute in the appeal to this court, that the appeal to the primary judge was pursuant to s 147 of the Mining Act 1978 (WA) (Mining Act), and that it was an appeal in the strict sense as the criteria for an appeal by way of rehearing under s 148(1) of the Mining Act had not been enlivened.[26]
[26] Appeal ts 49 - 50, 54 - 55.
The primary judge upheld (save in one respect referred to next) the Warden's decisions, both as to the implication of the terms in the JVA and the SRK Report's disconformity with the implied terms. The only material difference was that the primary judge concluded that the Warden had erred in finding the Fourth Implied Term (JORC Code Ore Reserve Statement).[27] The judge dismissed the appeal and 'confirmed' the Warden's orders of 19 September 2014.[28] In outlining the legal principles, the judge referred to the observations of the High Court in Byrne v Australian Airlines Ltd[29] as applicable to the implication of terms in the JVA.[30]
[27] Primary decision [443] - [445].
[28] BB 1.
[29] Byrne v Australian Airlines Ltd (1995) 185 CLR 410.
[30] Primary decision [170], [172].
The judge's reasons included the following observations:[31]
'Feasibility study' was not defined. It is not in dispute that, in context, 'feasibility study' meant a study of the technical and economic feasibility of developing and mining the tenement, although what was required in terms of detail is in dispute. Importantly, the terms of the [JVA] did not expressly provide any criteria by which it could be determined that [Pilbara] had 'completed a feasibility study'. However, the completion of a feasibility study was the event that would mark the end of the Earning Period, if that occurred before the expiration of five years from the Grant Date. (emphasis added)
[31] Primary decision [45].
The judge also said:[32]
[32] Primary decision [369] - [377].
In essence, for a feasibility study to be capable of informing Ammon's election under cl 4.6, having regard to the commercial context of the [JVA], there had to be minimum requirements it must satisfy in terms of its nature, content and quality.
Although cl 4.6 provided that [Pilbara] notify Ammon that it had earned its Joint Venture Interest (upon that occurring), that requirement cannot be construed as conferring on [Pilbara] an unconstrained right to determine, for the purposes of the [JVA], whether it had completed a feasibility study. If that were so, it could decide to stop the feasibility study at any time and declare it had completed the study. I have rejected that proposition. It is not what a reasonable businessperson would have understood from the language of the [JVA], having regard to the purpose and object of the [JVA] and the surrounding circumstances known to the parties, including the fact that Ammon was ceding an 80% interest in the tenement on completion of a feasibility study. In particular, such a construction would not be consistent with the purpose of informing Ammon's election under cl 4.6.
[Pilbara] acknowledged that, under the [JVA], Ammon, who had the tenement and could not afford to undertake a feasibility study to determine whether it had commercial worth, agreed to transfer part of his interest to [Pilbara], which had funds, if it completed a feasibility study. That was the whole point of the Joint Venture. Of course, the part he agreed to transfer was the vast majority of his interest. It was not consistent with the bargain struck with [Pilbara] that Ammon should have to undertake further work to determine the commercial worth of the tenement if the information in the feasibility study was deficient for the purposes of informing his election.
... The question of whether a feasibility study undertaken by [Pilbara] was adequate to inform those considerations had to be determined objectively. That required the identification of objective criteria, constituting minimum requirements. The [JVA] could not work effectively, in a commercial sense, without the identification of such criteria.
On a proper construction of the [JVA], and in the absence of a definition of 'feasibility study', it is not obvious that the parties made provision for the minimum requirements that had to be met before it could be said that [Pilbara] had completed a feasibility study on the tenement. Nor is it obvious that the terms of the [JVA] represented the totality of what the parties were willing to agree on the subject.
[Pilbara] referred to the provisions of cl 6.5(d) (concerning the manner in which the Manager was to perform its functions) and to cl 19.2 (concerning the parties' obligation to do all that was reasonably necessary to give effect to the terms of the [JVA]) as provisions from which inferences could be drawn about what was required of a feasibility study. … Each of those clauses supports the need to identify objective criteria by which it could be determined whether [Pilbara] had completed a feasibility study that would serve the purposes of such a study under the [JVA]. However, I do not accept that the objective criteria necessary to give effect to the terms of the [JVA] can be inferred from the wording of those clauses, without more.
[Pilbara's] obligation under cl 19.2 to do all such things as may be reasonably necessary to give effect to the terms of the [JVA] underpinned the need for any feasibility study completed by it to enable Ammon to make his election and seek to raise finance in accordance with the terms of clauses 4.6 and 4.7. In that way, cl 19.2 is part of the factual matrix that informs (a) the need to imply a term as to what was necessary for a feasibility study to serve that purpose and (b) the contents of any such term, by reference to the need to give effect to the terms of the [JVA]. However, the terms of cl 19.2 did not identify what was necessary from a feasibility study to give effect to the terms of the [JVA].
This is not a case where an express term of the contract, formulated in different terms to the asserted implied term, covers the same field or subject matter as the asserted implied term. The express terms of the [JVA] dealt with the requirement that [Pilbara] complete a feasibility study in order to earn a Joint Venture Interest; they did not deal with how it was to be determined whether that eventuality had occurred.
… [T]he parties appear to have failed to direct their minds to the identification of criteria for that purpose and failed to make provision for it. Had they directed their minds to it, one can presume they would have agreed that a term identifying objective criteria, constituting minimum requirements, should be included in the [JVA], as the completion of a feasibility study was pivotal to the determination of the rights of both [Pilbara] and Ammon under the [JVA]. As discussed … their commercial interests were not necessarily congruous. That underscores the need to identify criteria by which it could be determined that [Pilbara] had met the condition for earning its Joint Venture Interest.
The Joint Venture Agreement[33]
[33] GB 205 - 228.
The most relevant provisions of the JVA for present purposes are outlined below. The headings are points of reference designed for ease of reading only.
The JVA concerned an exploration licence under the Mining Act. By s 61(1) of that Act, an exploration licence remains in force for a period of five years from the date it was granted, but may be extended on prescribed grounds in specified circumstances.[34]
Definitions
[34] See s 61(2) of the Mining Act, and reg 23AB and reg 23A of the Mining Regulations 1981 (WA).
Clause 1 of the JVA contains a number of defined terms, which are conveniently addressed in the context of the clauses in which they appear. The terms 'feasibility study' and 'project finance' (referred to below) are not defined terms.
Recitals and Commencement Date
Recital A provides that Ammon is the applicant for Exploration Licence 47/1140 (EL 47).
Recital B provides:
Ammon has agreed with [Pilbara] that, subject to the Retained Interest, [Pilbara] may earn an interest in [EL 47] and the parties shall enter into a joint venture for the purposes of exploring, and if warranted, mining of Minerals on the Tenements.
The defined term 'Retained Interest' read with cl 5.1, means, in effect, a bedded hematite resource located in specified blocks in the southern part of the Tenements, over which Ammon retained full ownership. The term 'Retained Interest' is irrelevant for the purposes of this appeal. The term 'Tenements' is defined to mean, relevantly, EL 47 and any other mining tenements acquired by the Joint Venturer.
Joint Venture and Joint Venture Interests
Clause 2.1 provides that the parties 'hereby associate in an unincorporated joint venture for the purpose of exploring and, if warranted, developing and mining the Tenements'. That is the 'Joint Venture' defined in cl 1.1.
'Joint Venture Interest' is, in effect, defined in cl 1.1 to mean in relation to each Participant:
1.the obligation to contribute to Joint Venture Expenditure;
2.the ownership of and right and benefit as a tenant in common to receive in kind and to dispose of for its own account Minerals produced by the Joint Venture; and
3.the beneficial ownership as a tenant in common of an undivided share in all Joint Venture Property,
in accordance with its percentage interest.
In broad terms, cl 14 permits a Joint Venture Participant to assign its 'Joint Venture Interest' to a Related Body Corporate, but not otherwise unless the other Participant is given a first right of refusal. For this purpose, Pilbara's Joint Venture Interest includes its right to 'earn' a Joint Venture Interest.[35]
Joint Venture Expenditure
[35] Clause 14.8 read with the definition of 'Farmin Interest'.
Joint Venture Expenditure means all costs, expenses and liabilities incurred in connection with the 'exploration, development and mining of the Tenements'. It includes 'Outgoings' (relevantly, in effect, rents, charges and expenses under the Mining Act), an administrative overhead charge (on top of direct expenditure) not exceeding 10% of direct expenditure and native title costs.
Joint Venture Property and Mining Information
Joint Venture Property includes the Tenements and Mining Information together with Minerals, concentrate and ore prior to their being taken in kind by the Participants.
The term 'Mining Information' is defined in cl 1.1 to mean 'all technical information including (without limitation) geological, geochemical and geophysical reports, surveys, mosaics, aerial photographs, samples, drill core, drill logs, drill pulp, assay results, maps and plans relating to the Tenements or to the Joint Venture Operations, whether in physical, written or electronic form'.
The 'Commencement Date' and the 'Free Carry Period'
The 'Commencement Date' is the date of the execution of the JVA - 3 September 2002.
The 'Commencement Date' is the start of the 'Free Carry Period' for Ammon. The definition of 'Free Carry Period', read with cl 2.5, cl 3.1, cl 3.2, cl 4.1, cl 4.2, cl 8.1, cl 8.2 and cl 9.1 (as explained more fully below), indicates that the 'Free Carry Period' is the period in which (1) Ammon is not liable to Pilbara or to any third party and is to be indemnified by Pilbara in respect of any such liability, (2) Ammon is to recoup his past expenditure from Pilbara in the sum of $250,000, (3) Ammon is to receive $5,000 each 30 days up to the date that EL 47 is granted, and (4) Ammon is not required, after the grant of EL 47, to contribute to 'Joint Venture Expenditure' or to maintain the title to EL 47.
Under cl 4.6, the 'Free Carry Period' ends on the date upon which Ammon elects 'to contribute to Joint Venture Expenditure in accordance with his Joint Venture Interest'.
The Grant Date - The commencement of the Joint Venture and the parties' respective interests
Clause 2.2 provides that the 'Joint Venture' (ie, the joint venture formed for the purpose of exploring and, if warranted, developing and mining the Tenements)[36] commences on the 'Grant Date', being, in effect, the date EL 47 is granted to Ammon. At that date, Ammon's 'Joint Venture Interest' is 100% and Pilbara's is nil.
Payments to Ammon prior to and within 14 days of the Grant Date
[36] Clause 2.1.
By cl 3.1, Pilbara is to pay, in advance, $5,000 to Ammon for every 30 day period from the Commencement Date to the Grant Date. As noted above, the Grant Date is the commencement of the Joint Venture.
By cl 3.2, within 14 days from the Grant Date, Pilbara is to pay Ammon $250,000 for reimbursement of Ammon's past expenditure in relation to the Tenements.
The Earning Period from the Grant Date
The Earning Period is the period commencing on the Grant Date and ending in accordance with cl 4.2.
By cl 4.2, the Earning Period ends when Pilbara 'has completed a feasibility study on the Tenements', or within five years from the Grant Date, whichever occurs earlier (subject to any extensions under cl 4.3).
In general terms, cl 4.3 permits an extension of time if Pilbara has been denied access to EL 47, in which case the extension equates to the period during which access has been denied.
Pilbara's obligations and financial contributions to Joint Venture Expenditure in the Earning Period
By cl 4.1 and cl 4.2, Pilbara must contribute not less than $1 million to 'Joint Venture Expenditure' during the first 30 months of the Earning Period (ie, effectively the first two and a half years of the five‑year period from the Grant Date within which to complete a feasibility study).
By cl 8.1, Pilbara must also maintain the Tenements in good standing during the Earning Period, including paying all Outgoings.
Feasibility study - consequences for Pilbara
By cl 4.4, if Pilbara 'fails to complete a feasibility study' during the Earning Period (ie, effectively within five years of the Grant Date subject to any extensions under cl 4.3) then 'it shall be deemed to have withdrawn from the Joint Venture pursuant to cl 15.1'. Clause 15.1 provides for withdrawal by a Participant on written notice. The effects of such withdrawal are provided for in cl 15.2 and include the Participant 'absolutely forfeiting' and assigning to the other Participants all its Joint Venture Interest and being released from all future obligations. The term 'feasibility study' is not defined.
If, however, Pilbara 'completes a feasibility study' during the Earning Period then, by cl 4.5:
[Pilbara] shall be deemed to have acquired from Ammon an 80% Joint Venture Interest, so that at the expiration of the Earning Period the Joint Venture Interests of the Participants shall be as follows:
[Pilbara] 80%
[Ammon] 20%
Feasibility study - election by Ammon
Clause 4.6 provides in effect that, upon Pilbara earning its 80% Joint Venture Interest, it shall notify Ammon in writing. Ammon then has 90 days to elect by written notice whether he wishes to (1) 'contribute to Joint Venture Expenditure in accordance with his 20% Joint Venture Interest' or (2) withdraw from the JVA and the Joint Venture.
By cl 4.7, if Ammon elects 'to contribute in accordance with cl 4.6', he then has 12 months to raise 'project finance', starting from the date that Pilbara notified him that it had earned its 80% interest. This period is described as the 'Finance Raising Period'.
If Ammon, upon receiving notice that Pilbara has earned its 80% interest, elects to withdraw from the JVA and the Joint Venture, then cl 4.6 effectively provides that:
1.Ammon must offer to transfer his 20% Joint Venture Interest to Pilbara for its net present value, to be 'calculated by reference to the feasibility study', and on terms to be agreed between Ammon and Pilbara.
2.Pilbara and Ammon have three months from the date of the offer to agree upon the terms of sale. Once agreed, Pilbara has three months to make payment (upon which interest will accrue if the payment is not made on time).
3.If Pilbara does not accept Ammon's offer, or if terms cannot be agreed, then Ammon may sell his 20% Joint Venture Interest to a third party.
The Finance Raising Period if Ammon elects to contribute to Joint Venture Expenditure
By cl 4.7(b), during the Finance Raising Period, Pilbara is to fund Ammon's share of Joint Venture Expenditure until such time as 'Ammon succeeds in obtaining project finance'. Upon obtaining 'project finance' Ammon must repay to Pilbara his share of Joint Venture Expenditure that was funded by Pilbara during the Finance Raising Period. The term 'project finance' is not defined.
By cl 4.7(c), if Ammon is successful in obtaining 'project finance', Ammon becomes 'responsible for contributing to Joint Venture Expenditure' in accordance with his percentage Joint Venture Interest, including being liable for cash calls under cl 9.
If, during the Finance Raising Period, Ammon is unsuccessful in obtaining 'project finance', or if, during the Finance Raising Period, Ammon so elects, then (1) Ammon's Joint Venture Interest will convert to a production royalty of 2.5% (FOB) in respect of all iron ore produced by Pilbara from EL 47, and (2) Ammon shall be deemed to have withdrawn from the Joint Venture and shall transfer his interest in EL 47 to Pilbara at no cost.
Cash calls
By cl 9.1, after the Free Carry Period, the 'Manager' (as defined in cl 1.1) must, within 30 days after the end of each month, issue to each Participant a cash call 'for its share of Joint Venture Expenditure' paid or incurred during the preceding month. Further, all Participants are liable to contribute to Joint Venture Expenditure (in proportion to their Joint Venture Interests) from time to time.
Clause 9.4 effectively provides a mechanism whereby, if a Participant is in default of a cash call for more than 14 days, the other (non‑defaulting) Participant may elect to dilute the Joint Venture Interest of the defaulting Participant.
By cl 10.3, if Ammon's Joint Venture Interest is diluted to 5% or less, then he must offer to sell his Joint Venture Interest to Pilbara for 'the then net present value'.
Joint Venture Operations whilst Pilbara is the sole contributor to Joint Venture Expenditure
By cl 6.1, Pilbara is the Manager of the Joint Venture whilst it is the sole contributor to Joint Venture Expenditure, and is entitled to remain so whilst it holds a Joint Venture Interest. Clause 6.9 provides in effect that each Participant appoints the Manager and each of its directors from time to time (severally) as its lawful attorney to sign all forms and documents and do everything necessary to maintain the Tenements in good standing and in full force, and to comply with the provisions of the Mining Act.
The Operating Committee: Joint Venture Operations after the Earning Period
Under cl 7.1, an 'Operating Committee' is to be formed by the Participants (namely, Pilbara and Ammon) 'as soon as practicable' after the completion of the Earning Period (relevantly, after the completion of the feasibility study).
After Pilbara ceases to be the sole contributor to Joint Venture Expenditure, it must (as Manager) prepare programs and budgets for the Operating Committee: cl 6.4.
By cl 7.3, the Operating Committee may review and give directions to the Manager as to 'Joint Venture Operations', and must consider and approve (including with modifications) programs and budgets prepared by the Manager. The term 'Joint Venture Operations' is defined in cl 1.1 to mean all activities as are necessary or desirable to implement and give effect to the JVA.
By cl 7.6, all matters for decision by the Operating Committee are to be determined by majority vote, save that the following circumstances require the unanimous vote of all Participants:
(a)the undertaking of a development and mining operation; and
(b)decisions regarding the scope of any such development and mining operation.
Confidential information
Clause 12.1 provides, in effect, that unless otherwise agreed or required by law, all information obtained in relation to the Joint Venture that is not generally known or generally available is to be kept confidential and is not to be disclosed by the Participants.
Warranties
Clause 13 of the JVA contains a number of warranties by Ammon, including warranties to the effect that (1) he was the sole applicant for EL 47 and had good right and title to assign an unencumbered interest in it, (2) there was no litigation concerning EL 47, (3) EL 47 had been duly and properly applied for, and all outgoings as at the Commencement Date had been paid, (4) he did not hold EL 47 on trust, and (5) to the best of his knowledge and belief, all matters relating to EL 47 which would reasonably be regarded as material and proper for disclosure to an intending purchaser had been disclosed to Pilbara.
Relationship of participants
Clause 2.3 provides, in effect, that the JVA is not to be construed so as to make a Participant a partner, agent or representative of any other Participant, or to create any partnerships or trusts for any purpose, except to the extent to which the manager is the agent of the Participants. No Participant is under any fiduciary duty to the other which would prevent it from engaging in, or enjoying the benefits of, any competing endeavours (subject to the express provisions of the JVA).
Formal agreement
By cl 23, if requested by any Participant, a 'formal joint venture agreement' setting out the arrangements and commitments contained in the JVA, together with such provisions as are normally found in joint venture agreements and which are not inconsistent with the JVA, will be negotiated in good faith between the parties. In the meantime, the parties are bound by the provisions of the JVA.
Further assurances
Clause 19.1 provides that the JVA shall be registered against the Tenements pursuant to the Mining Act. Clause 19.2 provides that the Participants 'shall sign all such further documents, forms and notices and do all such things as may be reasonably necessary to give effect to the terms of' the JVA.
The appeal to this court
The appeal to this court is pursuant to s 58(1)(b) of the Supreme Court Act 1935 (WA). The JVA has only one true construction, and the task of this court in an appeal concerning the construction of an instrument is to determine for itself the proper construction of the instrument.[37]
[37] Life Insurance Co of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60, 78; Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; (2018) 264 CLR 541 [154]; Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80 [172].
Pilbara's grounds of appeal are referred to below. After the oral hearing in the appeal, the court invited the parties to make submissions on whether, on the proper construction of the express terms of the JVA (as opposed to the implication of terms) the phrase 'complete a feasibility study' (and cognate expressions) requires a feasibility study for the Joint Venture which in its nature, scope and analysis would meet the minimum criteria that financiers to the mining industry would ordinarily require before considering a proposal to finance the development and mining of EL 47. Both parties filed submissions in that regard on 15 May 2020 and 22 May 2020. Also, on 14 May 2020, Ammon filed an application in the appeal for leave to file a Minute of Notice of Contention (proposed Notice of Contention) effectively seeking to uphold the primary judge's orders on the basis that the JVA has the construction referred to above.
Grounds of appeal
There are 10 grounds of appeal. It is unnecessary to set them out in full. Ground 1 is a generalised assertion that the judge erred in dismissing the appeal from the Warden. It rises no higher than the other grounds. Grounds 2 - 7 involve different ways of advancing the contention that the implied terms found by the judge (and the Warden) did not meet the criteria for the implication of terms as set out in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council.[38] Grounds 8, 9 and 10 effectively allege, in the alternative, that if the JVA contained the first three implied terms, the SRK Report conformed with those implied terms, and the judge erred in not so finding.
[38] BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266.
The parties' submissions on the proper construction of the JVA and the implied terms
Pilbara's submissions
Pilbara emphasised the italicised portion of the primary decision at [45] (referred to in [17] above), and made the following submissions on the express terms of the JVA, on its proper construction:
1.The term 'feasibility study' is not defined, and there is no reference in the JVA to it being a 'bankable' or 'definitive' feasibility study. Further, Pilbara did not expressly warrant (although the JVA contained warranties by Ammon) that the feasibility study would have any particular quality. That is in the context of the JVA being a formal and detailed written agreement, evidently drafted with the benefit of legal advice.[39]
[39] Appellant's written submissions, pars 11 - 13.
2.The JVA did not specify a minimum expenditure for, or the requisite time to be spent in, preparing the feasibility study.[40]
[40] Appellant's written submissions, par 14.
3.By virtue of cl 12.1 of the JVA, Ammon could not provide the feasibility study to a potential financier without Pilbara's agreement.[41]
[41] Appellant's written submissions, par 16.
4.There is no definition of 'project finance' in the JVA.[42]
[42] Appellant's written submissions, par 17.
5.Clause 7 of the JVA deals with the 'undertaking of a development and mining operation on any part of the Tenements', and '[t]hus the quantum of any "project finance" would not be known until … after' (1) the convening of the Operating Committee, and (2) the unanimous agreement of the Participants on the Operating Committee for the undertaking of a development and mining operation.[43]
[43] Appellant's written submissions, par 17, emphasis added.
6.The JVA imposed a relatively short time after the completion of the feasibility study for Ammon to make his election as to whether or not to continue to participate. Further, the JVA required the rapid formation of an Operating Committee after the conclusion of the Earning Period. The JVA did not 'contemplate the operations of the joint venture being held up whilst the detail of the feasibility study was picked apart by experts with ensuing litigation, as has occurred in the present case as a result of arguments over the existence of implied terms and whether or not the feasibility study complied with those implied terms'.[44]
7.In addition to the cost of the feasibility study, Pilbara was required to pay $250,000 by way of an indemnity for Ammon's past expenditure, $5,000 per month up to the Grant Date, a minimum of $1 million expenditure in the first 30 months after the Grant Date and to provide indemnities to Ammon in the Free Carry Period.[45]
8.Clause 23 of the JVA provided for the prospect of a 'formal joint venture agreement' to be negotiated in good faith, and the presence of this provision suggests that any concerns over the nature and scope of the feasibility study and questions of project finance were matters that lent themselves to further negotiations.[46]
9.There was no evidence or findings to the effect that the words 'feasibility study' had an industry usage in the mining industry that was different from their ordinary English meaning, or that the term should be regarded as a term of art.[47]
10.Having regard to the finding at [45] of the primary decision (see [17] above), the JVA accordingly contemplated and required 'no more and no less than a study into the feasibility of mining the tenement', and this meaning was conveyed by the language of the JVA. Nothing further was required to be implied.[48] In that regard, Pilbara submitted that it was to carry the 'lion's share of the investment and … had the option of pulling out [and] therefore [Pilbara] had an obvious interest in ensuring that the study was thorough and meaningful'.[49]
11.A feasibility study in its ordinary meaning could indicate that the mining of a deposit on EL 47 was not technically or economically feasible. Accordingly, Pilbara could earn an 80% Joint Venture Interest by providing a feasibility study which revealed no commercially minable reserves.[50]
12.In oral submissions, the content and criteria of 'a feasibility study' within the meaning of cl 4.2, cl 4.4 and cl 4.5 was explained by senior counsel for Pilbara as follows:[51]
A feasibility study - and I do stress the indefinite article: a feasibility study. No epithet. No specialised term. Just a feasibility study is one that has, as its essence, considering normally for the purposes of investment - certainly, in this case, for the purpose of investment - the nature of risks and uncertainties because it is all risk and uncertainty - whether it be the price you're going to get for any resource won; whether it's going to be the cost of your winning it; whether it's going to be the regulatory regime in which you will be permitted to win it; etcetera, etcetera, etcetera.
And so … by definition, a feasibility study does not produce what might be called a predetermined objectively demonstrable red light, green light. (emphasis added)
[44] Appellant's written submissions, par 18, emphasis added.
[45] Appellant's written submissions, par 19.
[46] Appeal ts 4.
[47] Appellant's written submissions, par 24.
[48] Appellant's written submissions, par 21.
[49] Appellant's written submissions, par 22, emphasis added.
[50] Appeal ts 16, 36 - 37.
[51] Appeal ts 16.
Having contended, in effect, that the words 'feasibility study' carry no more and no less than their ordinary meaning, namely a study into the feasibility of mining EL 47, and have no technical or industry meaning, Pilbara summarised its position in its written submissions as follows:[52]
This should have been the beginning and end of the case: there was no necessity to imply any terms to make the JVA work or to give content to the phrase 'feasibility study'. The parties' deliberate use of the indefinite article - 'a feasibility study' - in each of clause 4.2, 4.4 and 4.5 strongly reinforces that conclusion. This gave what should be taken to have been an intended measure of flexibility to [Pilbara] as to how definitive or comprehensive the feasibility study it undertook was to be before bringing the Earning Period to an end and allowing the work of the Operating Committee to commence.
As a matter of contractual interpretation arising from clause 4.6, it may be accepted that the feasibility study contemplated by the JVA had to include sufficient information to assist in the determination of a net present value of Ammon's Joint Venture Interest … But beyond that, the JVA was not prescriptive as to the length or level of detail of the feasibility study or the amount of expenditure required to be incurred or a minimum amount of time to be spent in completing the feasibility study, and there is no reason to think that this was other than a deliberate decision by the parties in drafting the JVA which was otherwise a detailed document. (emphasis added)
[52] Appellant's written submissions, pars 25 - 26.
Pilbara also contended in supplementary submissions that a construction of the JVA along the lines referred to in [64] above has no merit, in that:
1.The term 'feasibility study' in the JVA has an ordinary English meaning which ought not be confined, and that the contractual context, for the reasons advanced by Pilbara in its original submissions, favours a wider rather than a narrower meaning of that term.[53]
2.It suffers from the same vagueness and disputability as the implied terms. Each of the elements of such a construction is contestable and it would introduce 'nebulous standards that no reasonable commercial parties could have intended'.[54]
3.There are no 'minimum criteria' of the type posited that are generally applicable - each case would depend on the lender's risk at the time, the nature of the resource identified, the security offered, the economic conditions at the time, the nature of the commercial opportunity and other matters dependent on the state of affairs at the time when the financing falls for consideration.[55]
4.It is inconsistent with the terms of the JVA, in that any specific project would require determination by the Operating Committee, which is only formed after the Earning Period has ended, and thus after the feasibility study has been completed. This means that if such a construction were correct, 'whether or not a document constituted a "feasibility study" could not be known at the time the document was created because the extent of "project finance" required for development and mining of the tenement would not at that stage be known. The earn-in provisions would thus completely misfire'.[56]
5.Such a construction 'would raise a troubling doctrinal question' in that, Pilbara asked, 'how is it that terms can be "read in" to a contract by a purported process of construction, rather than implication in fact, to achieve a result that implication in fact fails to achieve?' Pilbara again referred to the BP Refinery criteria, and also to the principles referred to in [88] below.[57]
[53] Appellant's supplementary submissions, 15 May 2020, par 29.
[54] Appellant's supplementary submissions, 15 May 2020, pars 2, 31.
[55] Appellant's supplementary submissions, 15 May 2020, par 32.
[56] Appellant's supplementary submissions, 15 May 2020, par 30.
[57] Appellant's supplementary submissions, 15 May 2020, par 33.
With particular reference to the three implied terms accepted by the judge, Pilbara submitted, in effect:
1.The judge (and the Warden) erred in that the implied terms were said to be justified by effectuating the purpose of the JVA as pleaded by Ammon (see [6] above), whereas the BP Refinery criteria apply a more stringent test than a mere inquiry as to whether the implied terms would effectuate a purpose of the JVA.[58]
2.Ammon was protected (1) against misleading or deceptive conduct by the relevant provisions of the Trade Practices Act 1974 (Cth), and (2) more generally by the common law of Australia which implied a duty of good faith in the law of contract.[59]
3.This was a case where there was no one obvious term or provision to deal with a matter for which there had been no provision in the JVA, and that this was 'in and of itself, fatal to … the [three] Implied Terms'.[60]
4.The three implied terms were not reasonable or equitable because they (1) imposed unwritten and stringent criteria the effect of which was to expose Pilbara to significant loss in its inability to acquire an 80% Joint Venture Interest, and (2) were of an imprecise nature which would likely involve contention and litigation.[61]
5.On its face, the First Implied Term (Accuracy), with its references to 'accurate enough', is imprecise, incapable of clear expression, not 'obvious' and not reasonable or equitable.[62]
6.The Second Implied Term (Independence) also (1) has a range of potential meanings and is not obvious or capable of clear expression, and (2) is inconsistent with the express term that Pilbara should complete the feasibility study and is unnecessary as the feasibility study is, on the proper construction of the JVA, principally for Pilbara's benefit.[63]
7.The Third Implied Term (Reliance) (1) suffers from the same defects as the Second Implied Term (Independence), (2) has no one obvious meaning, and its reference to the feasibility study not being 'incomplete' is 'an entirely unsatisfactory and inapposite criterion and of uncertain ambit', (3) is unreasonable and inequitable, and (4) is also inconsistent with the express terms of the JVA.[64]
[58] Appellant's written submissions, par 7.
[59] Appellant's written submissions, par 23.
[60] Appellant's written submissions, par 29.
[61] Appellant's written submissions, pars 30 - 33.
[62] Appellant's written submissions, pars 34 - 41.
[63] Appellant's written submissions, pars 42 - 46.
[64] Appellant's written submissions, pars 47 - 51.
There were echoes in Pilbara's written submissions that Pilbara was not obliged to provide the feasibility study to Ammon.[65] However, senior counsel for Pilbara made it clear in oral submissions that, whilst that had originally been Pilbara's position, it was not contended for now.[66]
Ammon's submissions
[65] Appellant's written submissions, par 15.
[66] Appeal ts 8, 19, 31.
Ammon contended, with evident reference to [45] of the primary decision (see [17] above), that:[67]
There was no dispute as to the general nature of the feasibility study. It was a question of what the feasibility study had to do in the context of the [JVA].
[67] Appeal ts 63, 66. See also appeal ts 68, 74 - 75.
Ammon effectively contended, by way of an overarching submission, that the three implied terms accepted by the judge flowed from the purposes of the JVA as pleaded by Ammon and accepted by the Warden and primary judge (see [6] above). Ammon referred to this as the 'Construction Issue' and distinguished it from the implication of the terms, to which it referred as the 'Implied Term Issue'. Ammon contended that, while Pilbara attacked the 'Construction Issue' in the appeal before the primary judge, it has not done so in this appeal. Ammon submitted that, as a consequence, the footings for the implied terms remain undisturbed and the appeal must fail.[68]
[68] First respondent's written submissions, pars 1 - 8, 38, 45 - 46.
In this connection, Ammon also submitted that Pilbara, having taken a different approach before the Warden, had accepted before the primary judge that one of the purposes of any feasibility study was to assist Ammon to make an election under cl 4.6. Ammon submitted that Pilbara should be confined to the case it ran on appeal below.[69]
[69] First respondent's written submissions, pars 8.
Ammon further submitted that, prior to considering the question of any implied terms, the court must first construe the express terms.[70] Reference was made to Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd.[71]
[70] First respondent's written submissions, pars 32 - 34.
[71] Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] 4 All ER 441 [21].
Ammon submitted that, for present purposes, attention should not be confined to the meaning of 'feasibility study', but rather the meaning of 'completed a feasibility study' in cl 4.5 and related provisions.[72]
[72] First respondent's written submissions, pars 16 - 19.
Ammon submitted that it was necessarily in the interests of both parties that each be able to use such a study as the basis for making commercial decisions regarding their respective positions, and to identify when Pilbara had earned an 80% interest.[73]
[73] First respondent's written submissions, par 20.
Ammon submitted, in effect, that on the proper construction of the JVA, the provisions concerning the completion of a feasibility study arise in a context where the parties evidently contemplated that (1) the exploration phase of the Joint Venture had been completed, and (2) the development and mining of the tenement was under consideration. Ammon submitted that the nature and quality of the 'feasibility study' referred to in cl 4.5 and related provisions of the JVA was to be understood in that context.[74]
[74] Appeal ts 80 ‑ 81, 83, 85.
In this context, Ammon emphasised that Pilbara always had the option of ceasing work on a feasibility study and surrendering its right to earn an 80% interest.[75]
[75] First respondent's written submissions, pars 9, 36 - 43.
Ammon submitted that the provisions of the JVA concerning the completion of a feasibility study were also to be understood in the context of cl 4.7 and the opportunity given to Ammon to obtain 'project finance'. Ammon submitted, in effect, that it was implicit in cl 4.7 (read in the context of the JVA as a whole) that the parties objectively contemplated that financiers to a mining operation would have particular standards as to the information required for financing purposes.[76]
[76] Appeal ts 86 - 87.
Ammon effectively submitted that, absent the objective criteria supplied by the implied terms, Pilbara would be in a position to own an 80% interest 'irrespective of accuracy, reliability, independence or completeness', and in that regard, referred to the primary judge's observations at [370] of the primary decision (see [18] above).[77]
[77] First respondent's written submissions, par 20.
Ammon submitted, in effect, that the judge correctly stated and applied the relevant legal principles.[78] In particular, Ammon submitted that '[a]t the heart of the decisions [by the judge and the Warden] was the proposition adopted by the High Court in Byrne …, ie, implying the term must be necessary for the "reasonable or effective operation of [the contract] in the circumstances of the case"'.[79]
[78] First respondent's written submissions, pars 26 - 30.
[79] First respondent's written submissions, par 30 - with reference to Byrne (422).
Ammon also submitted, with reference to the evidence, that:
1.The unchallenged evidence of Mr Lawrence and Mr Amos 'established the parameters required to "raise project finance" [for the purposes of] cl 4.7(a)'.[80]
2.It was in the interests of both parties to have a completed feasibility study containing the implied terms. The expert evidence identified the levels of accuracy, reliability and independence suitable for that purpose.[81]
3.It was unchallenged that Ammon could not afford to produce a feasibility study, and that a feasibility study lay at the heart of the bargain under which Pilbara could earn an 80% interest in the tenement. It was for Ammon to raise project finance and the nature of such project finance must necessarily have been a matter for Ammon informed by the completed feasibility study. Given that the nature of a completed feasibility study was unknown when the JVA was entered into, Ammon's ability to raise project finance pursuant to cl 4.7 was 'necessarily predicated on the content of a completed feasibility study. The ... unchallenged expert evidence established the levels of accuracy required to do so'.[82]
[80] First respondent's written submissions, pars 48 - 49, 56.
[81] First respondent's written submissions, par 49.
[82] First respondent's written submissions, par 56.
More generally, Ammon contended that the primary judge's conclusions were correct for the reasons he gave, including those set out in [18] above.[83]
[83] First respondent's written submissions, pars 16, 19 - 20, 37, 53 - 57, 59, 62, 67, 69.
With respect to the possible construction of the JVA referred to in [64] above, Ammon in his supplementary submissions in substance contended that the same arguments raised in the appeal in relation to the implication of terms were relevant to and supported such a construction of the JVA.[84]
[84] First respondent's supplementary submissions, 15 May 2020, pars 4 - 43.
The proper construction of the JVA
Principles
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. 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. The instrument must be read as a whole.[85]
[85] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46] ‑ [51], [59]; Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 328 ALR 564 [51]; Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219 [42].
The general principle applicable to the construction of commercial contracts is that they should be given a businesslike interpretation.[86] 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.[87] However, it must also be borne in mind that business commonsense may be a topic on which minds may differ.[88]
[86] Electricity Generation Corp v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35]; Hancock Prospecting Pty Ltd v BHP Minerals Pty Ltd [2003] WASCA 259 [72].
[87] Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544 [17]; Woodside [35]; Black Box [42(9)].
[88] Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [43]; Black Box [42(9)].
At one time, the terms 'construction' and 'interpretation' were held to signify different things. The word 'interpretation' was said to concern the meaning of words, whereas 'construction' concerned the legal effect of the words used. That distinction has not been maintained, on the basis that notions of meaning and construction are interdependent.[89] A term may be deduced by implication or interpretation from the express terms of the contract.[90]
[89] Collector of Customs v Agfa‑Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389, 396 - 397; Wilson v Anderson [2002] HCA 29; (2002) 213 CLR 401 [8].
[90] Marcus Clark (Victoria) Ltd v Brown [1928] HCA 12; (1928) 40 CLR 540, 553 ‑ 554; Vickery v Waitaki International Ltd [1992] 2 NZLR 58, 64; Carlton & United Breweries Ltd v Tooth & Co Ltd (1985) 6 IPR 319, 320; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 [28]; Servcorp WA Pty Ltd v Perron Investments Pty Ltd [2016] WASCA 79; (2016) 50 WAR 226 [66].
The task of determining whether a contract contains terms implied by law or in fact (to give business efficacy to the contract) is undertaken in order to ascertain the meaning and effect of the contract as a whole and is thereby an exercise in construction.[91] Nevertheless, the process of implication is not one of 'interpretation' in the narrow sense, in that it does not involve assigning a meaning to a particular express provision in the contract.[92] Rather, an implied term in fact (to give business efficacy to the contract) is a term that the parties have not actually agreed upon, but which, it is presumed, the parties would have agreed upon had they turned their minds to it. For reasons which include not rewriting the contract for the parties, the courts are slow to imply a term.[93] The party alleging that a term should be implied bears the onus of proof.[94] The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to turn their minds to address the question in issue.[95]
[91] Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337, 345 ‑ 346; Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169 [22]; Sino Iron [299].
[92] Codelfa (345).
[93] Codelfa (346).
[94] Heimann v The Commonwealth (1938) 38 SR (NSW) 691, 695.
[95] Codelfa (346).
As part of the overall process of construing a contract to determine its meaning and effect, the implication of terms is governed by the objective theory of contract law.[96]
[96] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]; Codelfa (352).
Further, a contract can only have one correct meaning. Thus, its construction cannot alter depending on the events which happen, but the operation of the contract on its proper construction can.[97]
[97] Harrington v Browne [1917] HCA 36; (1917) 23 CLR 297, 307; Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418, 442; Sino Iron [172].
The cumulative (but related) criteria for the implication of terms in fact (to give business efficacy to the contract) in a wholly written contract such as the JVA were set out by the Privy Council in BP Refinery.[98] The implied term must be:
1.Reasonable and equitable.
2.Necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it.
3.So obvious that it 'goes without saying'.
4.Capable of clear expression.
5.Consistent with, and not contradict, any express term of the contract.
[98] BP Refinery (283); see also Codelfa (347); Khoury v Government Insurance Office of NSW [1984] HCA 55; (1984) 165 CLR 622, 636; Servcorp [72]; Sino Iron [254].
On the other hand, the BP Refinery criteria are not rigidly applied in informal contracts, ie, where the parties have never attempted to reduce their contract to complete written form.[99] It has been said that, in relation to informal contracts, the true question is whether the implication of the particular term is necessary for the reasonable or effective operation of the contract in the circumstances of the case.[100]
The express terms of the JVA
[99] Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41, 121; Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539, 572 ‑ 573; Byrne (422), (441 ‑ 442).
[100] Byrne (422), (442); Hawkins (573).
The term 'feasibility study' is not defined in the JVA. Nor did Ammon plead that the term was a term of art or had a technical or industry‑usage meaning.[101] Its meaning within the operative provisions of the JVA is to be understood from a consideration of the JVA as a whole. Consistently with the manner in which the Preliminary Issues Decision fell to be determined (see [127], [137] - [142] below), the parties did not refer to any extrinsic evidence of mutually‑known circumstances.[102]
[101] cf, for example, Max Cooper & Sons Pty Ltd v Sydney City Council (1980) 29 ALJR 234; Homestake Australia Ltd v Metana Minerals NL (1991) 11 WAR 435, 446 ‑ 448. Also compare Hill End Gold Ltd v First Tiffany Resource Corporation [2010] NSWSC 375 [42], [44] (concerning the meaning of 'feasibility study' in the mining industry) and [60] (concerning the meaning of a defined term 'economic feasibility study'), and on appeal Hill End Gold Ltd v First Tiffany Resource Corporation [2011] NSWCA 276 [2] ‑ [3], [64].
[102] cf Codelfa (352); Mount Bruce Mining [48] - [49].
A number of observations may be made at the outset about the operative provisions in which the term 'feasibility study' appears. First, the word 'on' in the phrase 'completed a feasibility study on [EL 47]' in cl 4.2 means, in this context, 'on the topic of developing and mining [EL 47]'. Secondly, it is evident from cl 4.6 that the feasibility study is to provide an opinion as to the net present value of the project examined in the study. Thirdly, the word 'completed' in the phrase 'completed a feasibility study on the Tenements' is used, in the context of cl 4.2, to refer to when the 'Earning Period will end'. The ordinary meaning of the word 'completed' is 'finished, ended or concluded'.[103] The word 'complete' in cl 4.4 and 'completes' in cl 4.5 have cognate meanings. In other words, the phrase 'completed a feasibility study on [EL 47]' in cl 4.2, and the analogous expressions in cl 4.4 and cl 4.5, refer to a feasibility study on the topic of developing and mining EL 47 which must be completed (ie, finished, ended or concluded) within five years of the Grant Date (unless an extension is granted under cl 4.3).
[103] Macquarie Online Dictionary.
Further, it may be inferred from the general purpose expressed in cl 2.1, and the definition of 'Mining Information' in cl 1.1, that the parties contemplated an iterative process in which information is gathered, analysed and made the subject of reports of increasing detail and exactitude, before being in a position to conclude whether the development and mining of EL 47 is warranted.
The term 'feasibility study' in the operative provisions of the JVA is also to be understood in the context of the overall scheme and structure of the JVA. The overall scheme of the JVA is to the following effect:
1.Ammon's past expenditure in relation to EL 47 is reimbursed and Pilbara is to pay $5,000 every 30 days up to the grant of EL 47.
2.In the first two and a half years of the five‑year term of EL 47, Pilbara must spend at least $1 million in Joint Venture Expenditure. The work on EL 47 the subject of this expenditure will precede, and inform, any feasibility study prepared by Pilbara.[104]
3.If and when Pilbara completes a feasibility study on EL 47, it earns an immediate 80% Joint Venture Interest, and Ammon's Joint Venture Interest is correspondingly reduced to 20%.
4.After being notified by Pilbara of that change in interests, Ammon has 90 days within which to elect under cl 4.6 to 'contribute to Joint Venture Expenditure' or withdraw from the Joint Venture. If he elects to withdraw, Ammon must offer to transfer his 20% joint venture interest to Pilbara (who, in effect, has first opportunity of purchase) by reference to the net present value calculated by reference to the feasibility study, or (absent agreement between Ammon and Pilbara) to a third party.
5.If Ammon elects under cl 4.6 to contribute to Joint Venture Expenditure and consequently to remain in the Joint Venture, his options are twofold. One is that he remains as a participant in the decision‑making and funding of the Joint Venture and he has 12 months within which to obtain 'project finance' in that regard. Alternatively, in the same 12‑month period, he may choose to withdraw from the Joint Venture and take a production royalty instead.
[104] A point which, in general terms, was accepted by Pilbara: appeal ts 12 - 13.
The election under cl 4.6 is to 'contribute to Joint Venture Expenditure'. The expression reflects the change from the Free Carry Period which is brought about by the election. The term 'Joint Venture Expenditure' is very broadly defined to include all costs associated with the exploration, development and mining of EL 47, and is given colour by the context in which it is used in the operative provisions of the JVA. In the context of Pilbara's contribution to Joint Venture Expenditure in cl 4.1 and cl 8.1 and the definition of 'Outgoings' in cl 1.1, the term includes exploration and related costs. In cl 4.6, the term is used to refer to Joint Venture Expenditure applicable to the phase of the Joint Venture which follows the completion of the feasibility study.
Turning to the scheme of the JVA in more detail, the effect of cl 4.2, cl 4.4 and cl 4.5 is that Pilbara has no obligation to produce a feasibility study, but cannot earn any interest in the Joint Venture unless it does so. Upon completion of a feasibility study, which must be produced to Ammon,[105] Pilbara immediately earns an 80% Joint Venture Interest, and Ammon's interest is immediately reduced to 20%. The feasibility study both alters the parties' respective interests in the Joint Venture and, it may be inferred, provides the information relevant for the election to be made under cl 4.6 in consequence of the alteration of the parties' interests.
[105] As noted earlier, Pilbara had originally contended before the Warden that it was not obliged to provide the feasibility study to Ammon under the JVA. Pilbara no longer maintained that contention.
If Ammon elects to withdraw from the Joint Venture under cl 4.6, there is a procedure for the transfer of Ammon's 20% interest to Pilbara (which is given, in effect, the first right to purchase the interest) or to a third party (if the interest is not acquired by Pilbara). In the former case, the purchase price will be the result of an agreement arising from an offer by Ammon based on the net present value of his interest calculated by reference to the feasibility study.
If Ammon elects to contribute to Joint Venture Expenditure under cl 4.6, he retains his 20% interest and has 12 months, from the date he was notified that Pilbara had earned its 80% interest, to raise 'project finance'. If Ammon is unsuccessful in obtaining project finance during the 12‑month period or at Ammon's election at any time during that 12‑month period, Ammon's 20% interest will be converted to a production royalty, and Ammon will be deemed to have withdrawn from the Joint Venture and Ammon shall transfer his interest in the Tenements to Pilbara at no cost.
The words 'project finance' are not defined, and Ammon did not plead that they had a technical meaning, or one supplied by industry usage. Accordingly, they are to be given their ordinary meaning in the context of the JVA read as a whole. On their ordinary meaning they signify 'finance' for a 'project'. The word 'project' in this context prima facie means a project for the development and mining of a mineral deposit on EL 47. Accordingly, 'project finance' prima facie means finance for the development and mining of a mineral deposit on EL 47. That is the natural meaning of the words 'project finance' in the context of the JVA read as a whole.
Moreover, the effect of cl 4.7(b) and (c) is that Ammon's election to contribute to Joint Venture Expenditure under cl 4.6 is conditional in the sense that despite the election, he may, within the 12‑month period, elect to take a production royalty. In other words, Ammon's economic options in the 12‑month period from the date he is notified that his Joint Venture Interest has been reduced to 20%, are to (1) participate as a Joint Venturer in the risks, rewards and decision‑making of undertaking the development and mining of EL 47 (assuming the Operating Committee approves it),[106] or (2) remove himself from the Joint Venture and passively earn an income stream from any production undertaken by Pilbara.
[106] As to which, see [110.4] below.
It may be inferred that the parties understood that EL 47 may not contain a commercially mineable deposit. It may also be inferred that a study by Pilbara, in the course of the iterative process referred to in [95] above, may be sufficient to demonstrate that the mining of EL 47 is not viable or is only of doubtful or marginal viability, and that further exploration and investigation is only likely to confirm those negative assessments. Whilst such a study (together with any earlier iterations of it or parts of it) would assist the furtherance of the cl 2.1 purpose, it would, self‑evidently, be of no use to Ammon in obtaining project finance or in deciding whether to take a production royalty. Such a study could, however, indicate to Pilbara that any further work in refining the exactitude and analysis of the study was not justified. Absent a positive contractual obligation to produce a more advanced study, Pilbara could 'cut its losses' as it were, without the additional expenditure associated with further work and a more advanced study.
In this context, Pilbara's obligation to contribute $1 million in Joint Venture Expenditure in the first two and half years of the term of EL 47 is significant. Providing Pilbara spends the $1 million (and maintains the indemnities required of it under cl 2.5 during the Free Carry Period) it has no obligation to go any further if, for example, it concludes, at the end of that expenditure, that the development and mining of EL 47 is unlikely to be technically or economically feasible. However, Pilbara must, at its cost, do all work necessary for completing, and complete, 'a feasibility study' in order to earn an 80% Joint Venture Interest. In doing so, it runs the risk that the work it carries out and the money it expends may demonstrate that, ultimately, mining is not technically or economically feasible.
The considerations above indicate that, objectively, the parties contemplated that upon the acquisition by Pilbara of an 80% interest and the corresponding dilution of Ammon's interest to 20%, there would be a feasibility study for the Joint Venture which in its nature, scope and analysis would meet the minimum criteria that financiers to the mining industry would ordinarily require before considering a proposal to finance the development and mining of EL 47. Of course, a feasibility study meeting those criteria may demonstrate that mining is technically and economically feasible, or it may demonstrate that it is not. However, such a study would not only be in furtherance of the general purpose in cl 2.1, but would also underpin what is evidently intended to be the harmonious operation of cl 4.5, cl 4.6 and cl 4.7 within the operation of the JVA as a whole. That conclusion tends to be confirmed by the considerations referred to in the next two paragraphs.
The 'breach' plea in par 19 did not allege a breach of the matters pleaded in par 14 of the Further Amended Plaint.
6 - 7 December 2011
On 6 December 2011, Ammon's application to amend in terms of the Further Amended Plaint was granted. Ammon agreed to the proposal for a trial of preliminary issues in relation to the construction question raised by the Further Amended Plaint. The Warden made orders for a trial of preliminary issues and certain programming orders. The preliminary issues ordered for determination were, in effect:[139]
1.Whether the JVA should be construed as pleaded by Ammon at par 11 of the Further Amended Plaint.
2.Whether the implied terms pleaded by Ammon at par 12 of the Further Amended Plaint are to be implied into the JVA.
[139] Primary decision [133] - [134].
The statement of preliminary issues did not include a reference to the plea at par 14 of the Further Amended Plaint (as to which, see [8] above).
The orders on 6 December 2011, were made on the basis that if the preliminary legal issues were determined against Ammon, that determination would conclude the case, because Ammon would then lead no evidence, and Pilbara would be entitled to succeed on the action. On the other hand, if the preliminary issues were determined in Ammon's favour, there would be a trial to determine whether the SRK Report complied with the requirements of the implied terms pleaded in par 12 of the Further Amended Plaint. This understanding was confirmed by counsel for both parties on 7 December 2011, when the Warden reconvened the proceedings to query the appropriateness of a trial of a preliminary issue in light of certain authorities, including Moore v Stockland South Beach Pty Ltd.[140]
The trial of the preliminary issues and sequelae
[140] Moore v Stockland South Beach Pty Ltd [2011] WASC 337; primary decision [136].
Despite this further query by the Warden, the proceedings went to trial on the two preliminary issues referred to in [140] above. The hearing took place on 13 December 2011. Pilbara had not, at this point, amended its response to Ammon's Further Amended Plaint.[141]
[141] Primary decision [137].
On 24 July 2012, the Warden, by the Preliminary Issues Decision, determined the preliminary issues in favour of Ammon, answering each of the two questions in the affirmative. A determination of the correctness of the plea in par 14 of the Further Amended Plaint was neither sought in connection with, nor made in, the Preliminary Issues Decision.[142]
[142] Primary decision [139].
On 10 August 2012, Pilbara filed a notice of appeal against the Preliminary Issues Decision, but that appeal was withdrawn on or about 27 September 2012.[143]
[143] Primary decision [140].
The trial of the substantive issues, namely whether Pilbara had failed to complete a feasibility study in accordance with the implied terms in par 12 of the Further Amended Plaint as alleged by Ammon, was listed to commence on 18 March 2013.[144]
Pilbara's applications of 14 February 2013
[144] Primary decision [141].
On or about 14 February 2013, Pilbara applied to the Warden (1) to reconsider and vary the Preliminary Issues Decision, (2) for leave to amend Pilbara's response in light of the Further Amended Plaint, and (3) for leave to rely, at the resumption of the trial on 18 March 2013, on the expert evidence in a report it had obtained from Graham George Walker dated 15 January 2013. That report also contained material from another expert, Mr Davies, and the Warden dealt with the application 'as one' for leave to rely on the report of Mr Walker and Mr Davies.[145]
[145] Primary decision [142]. See also, Mr Walker's statement dated 15 January 2013, section 'C' in exhibit 2 of Ammon's application.
Pilbara's applications were heard on 26 February 2013. On 1 March 2013, the Warden refused the applications, save insofar as he granted Pilbara leave to amend its response, providing the amendments were consistent with the Preliminary Issues Decision, did not raise new issues, and that the pleading was responsive to the Further Amended Plaint. As to Pilbara's application to rely on expert evidence, the Warden considered that the application came too late and would unfairly prejudice Ammon, in light of the procedure that had been agreed to in December 2011.[146]
[146] Primary decision [142] - [146].
Prior to commencement of the trial of the substantive issues, Pilbara filed a second further amended response to the amended plaint.[147] This contained a counterclaim. Pilbara alleged that in compliance with the JVA it had prepared a feasibility study to earn an 80% Joint Venture Interest and earned such an interest on 25 January 2008.[148] Among other things Pilbara sought relief by way of (1) a declaration that it had earned an 80% Joint Venture Interest in terms of the JVA, and (2) an order requiring Ammon to execute and provide a registrable transfer as to an 80% interest in EL 47.[149]
The trial of the substantive issues - March 2013
[147] Appellant's second further amended response to the amended plaint dated 13 March 2011.
[148] Appellant's second further amended response to the amended plaint dated 13 March 2011 pars 11(a) - (c), 19 - 20, 23.
[149] Appellant's second further amended response to the amended plaint dated 13 March 2011 prayers for relief pars A and B,
The trial of the substantive issues occurred over five days from 18 ‑ 22 March 2013. Closing submissions were made on 8 May 2013. The trial was conducted on the basis that all questions of construction were resolved by the Preliminary Issues Decision, and that the parties were confined to their pleaded cases on the trial of the substantive issues.[150]
The Substantive Decision - 16 December 2014
[150] Primary decision [147].
On 16 December 2014, the Warden gave the Substantive Decision, in which he found that the SRK Report was not a feasibility study meeting the requirements of the implied terms pleaded in par 12 of the Further Amended Plaint, and that Ammon was entitled to the relief he sought.[151]
Ammon's expert evidence
[151] Primary decision [147] - [151].
It is convenient to return now to the topic of expert evidence led by Ammon at the hearing of the substantive issues.
In the letter of instructions from his solicitors dated 26 June 2011, Ammon instructed Mr Lawrence that there would be an application on 8 July 2011 to amend the plaint in the Warden's Court in terms of an enclosed Minute of Proposed Amended Plaint (a predecessor to the Further Amended Plaint ultimately relied on by Ammon in the trial of the preliminary issues and the substantive issues). The letter sought Mr Lawrence's opinion on the basis that the proposed amendment would be allowed. The letter also set out a number of specific questions in anticipation that the Warden would allow the amendment.[152]
[152] GB 138 - 142.
The letter also set out for Mr Lawrence the terms of par 12 of the then Minute of Proposed Amended Plaint, as follows:
12.It was an implied term of the [JVA] that the completed 'feasibility study' would provide an accurate independent estimate of the then net present value of the Tenement - calculated pursuant to an independent, reliable and accurate assessment of the technical and economic feasibility of the development and mining of the Tenement pursuant to the [JVA] (that is a feasibility report accurate to at least +/-10 ‑ 15% as required by a definitive or bankable feasibility study and which included a reserve statement) - so as to:
(1)Enable [Ammon] to make [his] Election;
(2)If [Ammon] elected to contribute to the Joint Venture Expenditure, to provide a 'feasibility study' that was suitable, and adequate, for the purpose of raising project finance to fund such contributions; or
(3)If [Ammon] elected to withdraw from the Joint Venture, to provide a 'feasibility study' that made an accurate independent assessment of the then net present value of his interest so that [Ammon] could offer his Joint Venture Interest to [Pilbara] for sale pursuant to clause 4.6 of the [JVA][.] (underlined emphasis added)
Ammon's other expert, Mr Amos, was instructed by letter from Ammon's solicitors dated 3 November 2011. The letter indicated that, by this time, the plaint had been amended by the Warden on 11 July 2011 (apparently in the terms referred to in the preceding paragraph). A copy of the amended plaint was forwarded to Mr Amos, together with instructions to prepare a report which 'evaluated and responded to' a witness statement of a Dr Ruddeno, which had been served on behalf of Pilbara.[153]
[153] GB 195 - 196.
Mr Lawrence's report was dated 4 July 2011,[154] and Mr Amos' report was dated 11 November 2011.[155] Although prepared at a time earlier than the pleadings as they stood at the time of the trial of the substantive issues commencing 18 March 2013, and thereby prior to the pleading of the implied terms in par 12 of the Further Amended Plaint, both reports were evidently tendered to prove the 'breach' plea in par 19 of the Further Amended Plaint. Each report was tendered at trial on 21 March 2013.[156]
Disposition
[154] GB 61.
[155] GB 143.
[156] GB 3, 49.
The Warden's reference to, or summary of, key aspects of the expert evidence has been set out in [11] above. The Warden's findings are summarised at [12] above. At least from this distance, it is not clear, with respect, to what extent Ammon's expert evidence purported to restate and reflect the instructions given as to the implied term [see [154] above) in the Minute of Proposed Amended Plaint (as allowed on 11 July 2011), or even purported to state the experts' own views of the meaning of 'feasibility study' in the JVA.
It is nevertheless plain that by the hearing of the substantive issues in March 2013 (1) Ammon's case of 'breach' of contract centred upon the four implied terms in par 12 of the Further Amended Plaint as found in the Preliminary Issues Decision, (2) there was no plea of an implied (or express) term to the effect that the phrase 'completed a feasibility study' in the JVA required the provision of a 'bankable' feasibility study with a degree of accuracy of ±10% ‑ ±15%,[157] and (3) moreover, there was no plea that the JVA had the construction referred to in the proposed Notice of Contention.
[157] As noted earlier, Ammon's plea in par 14 (1) was not said to arise on the express or implied terms of the JVA, and (2) was not the subject of any determination in the Preliminary Issues Decision.
The only material construction issues dealt with by the primary judge in the appeal below were those litigated in the Warden's Court - the existence or otherwise of the four implied terms alleged in par 12 of the Further Amended Plaint. The plea in par 11 of the Further Amended Plaint was no more than a contextual plea, said to support the four implied terms pleaded in par 12. There was not alleged to be, nor could there be, a 'breach' of the matters pleaded in par 11 of the Further Amended Plaint.
The primary judge was not asked to uphold the Warden's orders on the bases that (1) the express terms of the JVA, on their proper construction, had the meaning referred to in the proposed Notice of Contention, and (2) on that construction, the SRK Report was not a feasibility study within the meaning of the JVA. Nor could his Honour have done so when such a case was not run at trial, and there was no notice of contention in the appeal to the primary judge to the effect that the Warden's orders could be supported on any alternative basis.
An appellate court has power to allow an amendment to a pleading if the case sought to be made on appeal by the party applying to amend is not materially different from the case that was litigated at the trial. See Bell v Lever Brothers Ltd;[158] Teoh v Minister for Immigration and Ethnic Affairs;[159] Pringle v Everingham;[160] Fitzpatrick v Job t/as Jobs Engineering.[161]
[158] Bell v Lever Brothers Ltd [1932] AC 161, 216.
[159] Teoh v Minister for Immigration and Ethnic Affairs (1994) 49 FCR 409, 416.
[160] Pringle v Everingham (2006) 46 MVR 58 [48] ‑ [49].
[161] Fitzpatrick v Job t/as Jobs Engineering [2007] WASCA 63 [194].
The proper construction of the JVA was always an integral part of Pilbara's case on appeal, and any consideration of the alleged implied terms should necessarily have been undertaken by the primary judge and has necessarily been undertaken by this court with regard to the true construction of the JVA's express terms. Although the construction of the JVA favoured by this court was not advanced by the Pilbara in its appellant's case or by Ammon in his respondent's answer, this court was entitled to reach its own conclusion as to the true construction of the JVA, subject to the requirements of procedural fairness.[162] Any suggestion that evidence might have been led that was relevant to the construction question ought not be accepted: before the Mining Warden then senior counsel for Pilbara expressly proposed that the constructional questions be determined as a preliminary issue on the terms of the JVA and without the necessity for any evidence to be adduced (see [137] above). Nevertheless, in order for Ammon positively to contend that the appeal should be dismissed, and that the judge's (and the Warden's) orders should not be disturbed, on the basis of the construction advanced in the proposed Notice of Contention, Ammon would need to show that (1) had he run such a case at trial, it could not possibly have been met by evidence from Pilbara, (2) even then, that it would in the interests of justice for Ammon to raise the point now by way of the proposed Notice of Contention and (3) this court should exercise its power to allow an amendment to the Further Amended Plaint.[163]
[162] Australian Communication Exchange Ltd v Deputy Commissioner of Taxation [2003] HCA 55; (2003) 201 ALR 271 [7], [51], [101]. In this case, the parties were invited to address the point of construction by supplementary submissions.
[163] Zerjavic [66] and the cases therein cited, including Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598 [51]; Rizhao Steel Holding Group Co Pty Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91 [53].
Whilst it is true that Ammon's expert evidence referred to the need for a 'bankable' feasibility study with a degree of accuracy of ±10% ‑ ±15%, as noted in [158] ‑ [159] above, that evidence was not led in the context of any pleaded case that there were implied (or express) terms of the JVA to that effect. Moreover, the evidence was not led for the purpose of addressing, and did not in terms address, the critical issue of fact in relation to breach raised by the construction advanced in the proposed Notice of Contention - the question of the minimum criteria that financiers to the mining industry would ordinarily require before considering a proposal to finance the development and mining of EL 47. Ammon's expert evidence was not directed to that question of fact because the issue had not been pleaded by Ammon. Pilbara led no expert evidence at all and, indeed (like Ammon), was precluded from calling any expert evidence other than in relation to the 'breach' of the implied terms pleaded in par 12 of the Further Amended Plaint as found in the Preliminary Issues Decision. Any connection between the expert evidence led by Ammon and the issue of fact in relation to breach raised by the construction advanced in the proposed Notice of Contention is effectively coincidental.
It is at least possible, and, indeed, likely, that Pilbara would have called evidence on that question of fact had it been raised in the proceedings before the Warden. The question of fact is more precise and narrower in compass and, objectively, capable of crisper resolution than the various questions of fact that might be seen to arise on the more diffuse, and uncertain, implied terms alleged in par 12 of the Further Amended Plaint.
Turning to the particular submissions of Ammon referred to in [124] above:
1.The short point is that the 'breach' of contract case contemplated by the proposed Notice of Contention raises an issue of fact not litigated below, is not open on the pleadings without an amendment, and is different to the implied term case pleaded below.
2.At this point in the analysis, Ammon would not be shut out from relying on the proposed Notice of Contention because of delay, but because it would be unjust to uphold the primary decision (and the Warden's decision) on a matter not litigated.
3.Whilst the point of the trial of the preliminary issues was that no evidence (including evidence by Pilbara) would be led on the question of 'breach' of the alleged implied terms if they were not found to exist, there is no reason to suppose that had Ammon run a case based on the proper construction of the JVA contemplated in the proposed Notice of Contention, Pilbara would not have adduced evidence in the event that such a construction were upheld.
4.It is to be inferred that the evidence Pilbara would likely lead would be as to the relatively confined question of fact raised by the proposed construction.
5.Pilbara was entitled to join issue with Ammon and to run its case at the trial (including to decide what evidence to call or not to call) on the basis of Ammon's pleading.
6.The proposed construction does not 'move' from the Warden's answer to the first of the preliminary questions. It arises from a consideration of the JVA as a whole.
7.The concession referred to by Ammon cannot be taken as an admission by Pilbara of the construction proposed in the proposed Notice of Contention.
8.The absence of challenge to Ammon's expert evidence when the case was fought on the alleged implied terms cannot be treated as an admission by Pilbara that if the case had been run by Ammon differently, it would have accepted the evidence without demur on that different case.
9.Grounds 10, 11 and 12 of Pilbara's appeal to the primary judge concerned, only, the rejection of its application to adduce evidence in the context of Ammon's implied term case. The applications were not made in the face of the construction sought to be advanced by Ammon in the proposed Notice of Contention, and the dismissal of those grounds of appeal is not relevant to the question presently under consideration.
In these circumstances, Ammon cannot rely on the proposed Notice of Contention to, in effect, retain a judgment inconsistent with the way in which he ran his case at trial. Further, in the circumstances, this court should not exercise its power to allow Ammon to amend his Further Amended Plaint. Ammon's application filed 14 May 2020 should be dismissed.
That leaves for resolution the question of final orders in this appeal. Pilbara's position is encapsulated in the submissions referred to in [130.4] above.
The orders sought by Pilbara in the appeal include orders to the effect that:[164]
[164] Amended WAB 41.
1.The primary judge's orders be set aside, and the Warden's orders of 19 September 2014 be set aside.
2.Judgment in the Warden's Court be entered in favour of Pilbara on terms including that:
(a)Ammon's claim in the Warden's Court is dismissed;
(b)this court declares that '[Pilbara] completed a feasibility study on 25 January 2008 and thereby acquired from [Ammon] an 80% Joint Venture Interest within the meaning of and pursuant to the terms of the [JVA] made between [Pilbara] and [Ammon] dated 3 September 2002';
(c)Ammon deliver to Pilbara, within seven days, an executed transfer in registrable form of an 80% legal interest in EL 47 from Ammon to Pilbara; and
(d)Ammon pay Pilbara's costs of the proceedings in the Warden's Court without regard to the scale limits.
3.Ammon pay Pilbara's costs of this appeal and the costs of the appeal to the primary judge.
Accordingly, the orders wanted included the relief that Pilbara had sought in its counterclaim before the Mining Warden (see [149] above). At the appeal hearing senior counsel for Pilbara retreated somewhat from that position. He said that an order that Ammon's claim in the Warden's Court be dismissed would dispose of all issues.[165] This was put on the basis that an issue estoppel would arise which would make the declaration unnecessary as this court would have concluded that (1) there were no implied terms as alleged by Ammon, and (2) a feasibility study was delivered.[166]
[165] Appeal ts 51.
[166] Appeal ts 52 - 53.
The question, ultimately, is how best the interests of justice are served in the context of the point now reached in this litigation - litigation which, it must be accepted, for a combination of reasons, reflects adversely on the efficient administration of justice.
The identification of the preliminary issues before the Warden was misconceived and the determination by the Warden that the JVA contained the alleged implied terms was erroneous. The Warden failed to recognise that any consideration of the alleged implied terms must necessarily be undertaken with regard to the true construction of the JVA's express terms, as a whole.
If the Warden had approached the issues raised by the Further Amended Plaint on that basis, it should have been apparent to the Warden, and the Warden should have held, that on the proper construction of the express terms of the JVA (as opposed to the implication of terms in fact to give business efficacy to the contract), the phrase 'complete a feasibility study' (and cognate expressions) requires a feasibility study for the Joint Venture which, in its nature, scope and analysis, would meet the minimum criteria that financiers to the mining industry would ordinarily require before considering a proposal to finance the development and mining of EL 47.
If the Warden had arrived at that conclusion he would have held that Ammon's case, based on the alleged implied terms, was flawed.
If the Warden had arrived at that conclusion and decided that Ammon's case, based on the alleged implied terms, was flawed, then, when the Warden delivered judgment and published his reasons, Ammon could have and no doubt would have sought to amend the Further Amended Plaint in the manner it has sought to do in its application to this court. In those circumstances, it would have been necessary for the Warden to consider whether it was in the interests of justice, no final orders having been made in the proceedings and given that property rights were involved, for Ammon to be released from the concession made by his senior counsel on 6 December 2011 before the Warden to the effect that if Ammon lost on the preliminary issue in relation to the existence of the implied terms, then that would be the end of Ammon's case. Pilbara would no doubt have opposed the proposed amendment.
The interests of justice favour this court endeavouring to restore the parties to the position they would have been in had the Warden approached the issues raised by the Further Amended Plaint on the correct basis (that is, on the basis that any consideration of the alleged implied terms must necessarily be undertaken with regard to the true construction of the JVA's express terms, as a whole) and arrived at the correct decision.
That conclusion is confirmed by the situation that will otherwise prevail should this court simply allow the appeal and follow Pilbara's invitation to make substitutive orders that see the dismissal of Ammon's claim in the Warden's Court. Contrary to Pilbara's expectation, no binding issue estoppel will arise that disposes of all issues in Pilbara's favour with a consequence that Pilbara will have established its entitlement to an 80% Joint Venture Interest within the meaning of and pursuant to the terms of the JVA. This court is not in a position to conclude, and has not concluded, that the SRK Report constituted a completed feasibility study within the meaning and for the purpose of cl 4.5 of the JVA as construed in these reasons. In the absence of a commercial resolution it is inevitable that Pilbara will need to press its counterclaim before the Mining Warden should it wish to establish the interest it claims. Recognising that this is so, it is in the interests of justice that all parties be restored to the position that would have ensued had the Warden approached the issues raised by the Further Amended Plaint on the correct basis and arrived at the correct decision.
The course of the litigation between these parties has been inordinately complicated and lengthy. Any retrial of this matter would be, more than is usually the case, 'a most deplorable result'.[167] It must be recognised, however, that the delays have, in large part, arisen systemically from the decision of both parties to seek and obtain a trial of preliminary issues, unnecessary skirmishes in this court,[168] and (regrettably) judicial delays at every level in the litigation. Further, the merits of the declaration sought by Pilbara have not been established by the proceedings in the Warden's Court, and have not been established by Pilbara's success in this appeal. A declaration is purely hypothetical if not made on facts as found or agreed.[169] Further, a declaration purporting to state the legal entitlements of a party must state the law correctly.[170] The statements made by senior counsel for Ammon referred to by Pilbara in [127] ‑ [128] above do not overcome this difficulty.
[167] Waterways Authority v Fitzgibbon [2005] HCA 57; (2005) 79 ALJR 1816 [36].
[168] See [134] and [145] above.
[169] Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 [49]; University of New South Wales v Moorhouse [1975] HCA 26; (1975) 133 CLR 1, 10 ‑ 11; Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2015) [19‑250].
[170] Meagher, Gummow & Lehane [19-245].
In the circumstances, the most appropriate course is to set aside the orders of the primary judge and the declaratory orders of the Warden dated 19 September 2014 (referred to in [13] above). Beyond that, the proceedings in the Warden's Court will need to be dealt with by another Mining Warden. If Ammon applies to amend the plaint as foreshadowed, no doubt the arguments now advanced by Pilbara might be brought to bear upon such an application. However, even if an amendment were disallowed, and Pilbara sought to have the proceedings dismissed, Pilbara would still need appropriate orders in terms of its counterclaim if it wished to obtain a declaration of its alleged entitlement and an order (presumably pursuant to cl 19.2 of the JVA)[171] for the delivery up of an executed transfer in registrable form.
[171] See [62] above.
Conclusion
For these reasons, the appeal should be allowed in part.
The parties should be heard on the form of the final orders in accordance with these reasons, and also on the costs of the appeal and the costs in the primary court and in the Warden's Court. We would also hear from the parties as to whether the court's orders should not take effect for a short period, say 14 days, so that - if so advised - Ammon may take steps to seek an interim injunction in substitution for that discharged by par 4 of the orders of the Mining Warden made 19 September 2014.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
NF
Research Associate to the Honourable Justice Murphy and the Honourable Justice Mazza12 JUNE 2020
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