Quasar Resources Pty Ltd v APG Aus No 3 Pty Ltd

Quasar Resources Pty Ltd brought a claim against APG Aus No 3 Pty Ltd, seeking a declaration that a net smelter royalty payable under an agreement for the sale and purchase of mining tenements was to be calculated in a particular way. The crux of the dispute was the proper interpretation of the term "net smelter royalty" as it appeared in the agreement, and in particular whether certain costs, including the costs of "refining", could be deducted from gross revenue to arrive at the net revenue upon which the royalty was payable. The case was heard in the Federal Court of Australia.

The legal issues that the Court needed to decide were whether the judge had erred in considering evidence as to the understanding in the Australian mining industry at the time the agreement was entered into of the term "net smelter royalty" and the term "refining". In addition, the Court had to determine whether the judge had erred in fact in making findings as to the industry understanding, and whether those findings were relevant to the proper construction of the agreement.

The Court found that the judge had not erred in having regard to evidence as to the industry understanding of "net smelter royalty" and "refining". The Court held that it was appropriate for a court to take into account industry practice when interpreting a contract, and that the judge had not erred in making factual findings as to the industry understanding. The Court also held that the term "refining" in the agreement should be given its ordinary and natural meaning, and that it did not include costs associated with the processing of ore to produce a saleable product. The Court concluded that the judge's interpretation of the agreement was correct, and that Quasar was not entitled to deduct certain costs from gross revenue when calculating the net smelter royalty.

The Court dismissed Quasar's appeal and affirmed the orders of the primary judge. The final orders of the Court were that Quasar pay APG's costs of the appeal.