Red Hill Iron Ltd v API Management Pty Ltd

Link copied
Case Copied 69 min read

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   RED HILL IRON LTD -v- API MANAGEMENT PTY LTD [2012] WASC 323

CORAM:   BEECH J

HEARD:   23­26 & 30 JULY 2012

DELIVERED          :   12 SEPTEMBER 2012

FILE NO/S:   CIV 2508 of 2011

BETWEEN:   RED HILL IRON LTD

Plaintiff

AND

API MANAGEMENT PTY LTD
Defendant

Catchwords:

Contract - Farm­in agreement for exploration of mining tenements - Joint venture agreement - Proper construction - Background facts - Turns on own facts

Equity - Fiduciary relationships - Fiduciary duties - Joint venture - Whether fiduciary duty owed by manager to joint venturers - Whether fiduciary duty owed by one participant to others - Relevance of terms of contract - Scope of any duty - Turns on own facts

Legislation:

Nil

Result:

Action dismissed

Category:    B

Representation:

Counsel:

Plaintiff:     Mr P D Crutchfield SC & Mr S B Rosewarne

Defendant:     Mr C L Zelestis QC & Mr M N Solomon

Solicitors:

Plaintiff:     Tottle Partners

Defendant:     DLA Piper Australia

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

Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd [1999] WASC 218; (1999) 21 WAR 425

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Australian Securities and Investments Commission v Citigroup Global Markets Australia (No 4) [2007] FCA 963; (2007) 160 FCR 35

Birtchnell v The Equity Trustees Executors & Agency Company Ltd [1929] HCA 24; (1929) 42 CLR 384

Breen v Williams [1996] HCA 57; (1996) 186 CLR 71

Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253

Canberra Residential Developments Pty Ltd v Brendas [2010] FCAFC 125; (2010) 188 FCR 140

Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178

Chemeq Ltd v Shepherd Investments International Ltd [2007] WASCA 117

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337

Disctronics Ltd v Edmonds [2002] VSC 454

Elovalis v Elovalis [2008] WASCA 141

Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue [2011] WASCA 228

Euphoric Pty Ltd v Ryledar Pty Ltd [2006] NSWSC 2

Fazio v Fazio [2012] WASCA 72

Goldsmith v Sandilands [2002] HCA 31

Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296

Hallmark Consolidated Ltd v Centaur Mining & Exploration Ltd [2001] WASC 190

Henderson v Merrett Syndicates Ltd [1995] 2 AC 145

HML v The Queen [2008] HCA 16; (2008) 235 CLR 334

Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41

Idemitsu Queensland Pty Ltd v Agipcoal Australia Pty Ltd [1996] 1 QR 26

International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151

John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1

Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216

Maggbury Pty Ltd v Hafele Australia Pty…

CaseChat AU logo

Keep reading for free

Create a free CaseChat account to read Red Hill Iron Ltd v API Management Pty Ltd and more:

  • Read every judgment in full
  • Ask AI and get answers linked to paragraphs
  • See how each paragraph was cited in later cases
  • Download judgments as PDF or Word
Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details
Case
[2012] WASC 323
Decision Date

CaseChat Overview and Summary

Red Hill Iron Ltd v API Management Pty Ltd involved a dispute between the two companies regarding the interpretation of a farm-in agreement for the exploration of mining tenements, as well as the existence of any fiduciary duties between the parties. The case was heard by the Supreme Court of Western Australia. The primary legal issue was whether API owed fiduciary duties to Red Hill under the farm-in agreement, specifically during the sole funding period of the joint venture. The court also considered the relevance of the background facts and terms of the contract in determining the existence and scope of any fiduciary duty.

The court found that the terms of the farm-in agreement, specifically clauses 10.9 and 10.10, expressly excluded the imposition of fiduciary duties on API during the sole funding period. The court emphasised that the parties had deliberately chosen to exclude fiduciary duties from the agreement, and that the background facts did not alter the clear wording of the contract. The court held that the existence and scope of any fiduciary duty would turn on the specific facts of each case, and that the terms of the contract and the intention of the parties were paramount in determining the issue.

In light of the findings, the court dismissed Red Hill's claims for breach of fiduciary duty and affirmed that API was not subject to any fiduciary duties in favour of Red Hill during the sole funding period of the joint venture. The court also considered API's application for special costs orders, and determined that the limits provided by the Scale in the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 should not be removed in respect of the costs sought. The court found that the matter was not of unusual difficulty, complexity or importance to warrant an order for costs above those fixed by the determination.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Construction of the instruments: background facts; findings and rulings Both Red Hill and API relied on background facts known to both parties in support of their respective constructions of the instruments. In its written outline of opening submissions, Red Hill correctly submits that it is common ground that the following matters were known to both parties at the time the instruments were entered:(a)the commercial exploitation of iron ore from the Tenements would only be possible if iron ore mined from the Tenements could be transported to the port and loaded onto ships;(b)neither API nor Red Hill had any rights of access to transport infrastructure by which any iron ore mined from the Tenements could be transported to port and loaded onto ships;(c)whether or not the proposed project would be commercially viable was highly dependent upon not only exploration success, but also on the issue of transportation and the costs of any necessary transport infrastructure. It is also common ground that the following further facts were known to both parties:(a)the Tenements were around 100 km from the coastline, and the capital cost of transport infrastructure was likely to be far greater than the capital cost of extracting iron ore from the Tenements (defence pars 4, 5(i); reply pars 2, 7);(b)the extent of iron ore deposits in the Tenements was not known (reply par 6; API's closing written submissions par 4). API objects on the grounds of relevance to exhibit D1 [92], [96], [99], [100], [109], [110], which relate to communications between API and Red Hill in August 2012 and thereafter. It is not necessary to rule on this objection. If admitted, the evidence is not probative of any issue and does not influence my reasoning in any respect. On 12 September 2012, I delivered my reasons for judgment after the trial of this action: Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323. I ordered that the proceedings be dismissed, and that Red Hill pay API's costs of the proceedings, including reserved costs, to be taxed if not agreed. I also made an order providing that any application for special orders in relation to costs be made by 26 September 2012, supported by affidavit and submissions. By consent, the date for any such application was extended. API has made an application for special costs orders. It seeks an order that the limits provided by the scale (the Scale) in the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 be removed in respect of preparing the defence, requesting and giving particulars, giving discovery, getting up for trial, and counsels' fees. It also seeks an order in relation to the costs of a private mediation, and an order that there be an allowance for the attendance of both a senior practitioner and a junior practitioner at the trial. Section 280(2) of the Legal Profession Act 2008 (WA) provides:[I]f a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -(a)order the payment of costs above those fixed by the determination;(b)fix higher limits of costs than those fixed in the determination;(c)remove limits on costs fixed in the determination;(d)make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Clause 10.4 is in the following terms:10.4Exploration and indemnity(a)Each Relevant Owner, severally in respect of each Tenement in which it holds any registered interest, grants to:(i)API, prior to the Formation Date, at API's sole cost and risk;(ii)on and from the Formation Date and until the expiry of the Sole Funding Period, the Manager, in accordance with the Joint Venture Agreement, at API's sole cost and risk; and(iii)on and from the expiry of the Sole Funding Period, the Manager, in accordance with the Joint Venture Agreement, at the Participants' sole cost and risk, the sole and exclusive right to carry out:(iv)Exploration for Iron Ore on the Tenements; and(v)if so decided by the Management Committee pursuant to the provisions of clause 15 of the Joint Venture Agreement, Development and Mining of Iron Ore on the IO Tenements.(b)Each Relevant Owner acknowledges and agrees that subject to this agreement and the Joint Venture Agreement, the nature, timing and conduct of all:(i)Exploration on or of the Tenements during the Sole Funding Period will be at the sole discretion of API; and(ii)Development and Mining on or of the IO Tenements will be at the sole discretion of the Participants in accordance with the Joint Venture Agreement,provided that such Exploration, Development and Mining must be carried out in accordance with good mining practice and in compliance with all laws and conditions applicable to the Tenements.(c)API irrevocably and unconditionally undertakes and agrees to indemnify each Relevant Owner and their respective directors, officers and employees against any Liability (including legal fees) that they may suffer, incur or sustain as a result of any breach:(i)by API of its obligations under this agreement during the Sole Funding Period; and(ii)by the Manager of its obligations under the Joint Venture Agreement between the Formation Date and the expiry of the Sole Funding Period, except to the extent that the Liability was caused by any act, default or omission, (including negligence, breach of contract, or breach of statute) of the Relevant Owner or its officers, directors, employees, agents or contractors. API particularly emphasises that by cl 10.4(b)(i), the nature, timing and conduct of all Exploration (as defined) on or of the Tenements during the Sole Funding Period will be at the sole discretion of API. Further, by cl 10.4(a), as Manager, API has the sole and exclusive right, at its sole cost and risk, to carry out all exploration and evaluation on or of the Tenements. API also relies heavily on cl 10.9 and cl 10.10. Those clauses are in the following terms:10.9Activities outside the Tenements(a)Without limiting the rights of the OMR Holder within the Tenement Area, but subject to clause 10.9(b), each party will have an unrestricted right to engage in and receive full benefit of activities outside the Tenement Area (whether or not such activities may be in competition with the Joint Venture or any other party) without consulting the other parties or being obliged to offer the other parties the opportunity to participate in such activities. For the avoidance of doubt, in conducting such activities each party may use Mining Information.(b)If API, Red Hill, Giralia or Guardian of any of their respective Related Bodies Corporate acquires an interest in any mining tenement (other than a Tenement) within the Tenement Boundaries (the Project Area Interest), that party must offer, or must ensure that its Related Body Corporate offers, the Project Area Interest to the Principal Parties to be held subject to the terms of this agreement and the Joint Venture Agreement, such that:(i)with effect on and from the Formation Date, API and Red Hill hold:(A)registered interests in the Project Area Interest; and(B)interests in any Iron Ore Rights (but not in relation to Other Mineral Rights) in relation to the Project Area Interest,in proportion to their respective Participating Interests from time to time; and(ii)subject to entering into an agreement with API and Red Hill pursuant to which it agrees to comply with the obligations of the OMR Holder under this agreement, the relevant party, or its Related Body Corporate, retains all rights under the Project Area Interest in respect of Other Minerals.10.10Exclusion of Fiduciary DutiesNotwithstanding anything to the contrary in this agreement or the Joint Venture Agreement, during the Sole Funding Period, in exercising its rights under this agreement, including:(a)the determination of the location and manner of Exploration;(b)the amount of Expenditure or Joint Venture Costs to be incurred; and(c)the exercise of any discretion as to whether to withdraw from this agreement, exclude any Tenement, cease to sole fund activities or to earn any further interest,API may exercise those rights in its absolute discretion and in its own interests (unless this agreement expressly provides otherwise), and API will not be subject to fiduciary duties in favour of Red Hill in respect of the exercise of those rights.