RUSSELL-TAYLOR v The State of South Australia - [2011] SASC 115

Supreme Court of South Australia
(Civil: Application)
RUSSELL-TAYLOR v THE STATE OF SOUTH AUSTRALIA & ORS
[2011] SASC 115
Judgment of The Honourable Justice Kourakis (ex tempore)
16 June 2011
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PARTIES - JOINDER OF PARTIES
ENERGY AND RESOURCES - MINERALS - MINING FOR MINERALS - TITLES: RIGHTS, PERMITS, LICENCES AND LEASES ETC - EXPLORATION TITLES - NATURE AND EXTENT OF INTEREST
Application to join parties to action - whether applicants should be joined - application to discharge stay order - whether applicants prejudiced by continuation of stay order - whether stay order should be discharged.
Held: applicants should have been joined as defendants when it became known that exploration licenses had been offered to them - applicants should have been joined because they would not have been bound by outcome of proceedings - balance of convenience lies with applicants - stay order discharged.

ENERGY AND RESOURCES - MINERALS - MINING FOR MINERALS - DEALINGS IN TITLES - SALE, TRANSFER AND ASSIGNMENT
Mining Act 1971 - section 83 of the Mining Act 1971 requires the consent of Minister for any dealing under that section - whether joint venture agreement contravenes section 83.
Held: joint venture agreement with precondition of Ministerial consent does not contravene section 83.
Mining Act 1971 (SA) s 28(1), s 28(5), s 31, s 83 and s 92(a); Mining Regulations 1998 (SA) sub-reg 55(3), referred to.

RUSSELL-TAYLOR v THE STATE OF SOUTH AUSTRALIA & ORS
[2011] SASC 115
Civil: Application

KOURAKIS J (ex tempore): This is an interlocutory application by Mintech Resources Pty Ltd (Mintech) and Mawson Gold NL (Mawson) to be joined as defendants in the primary action and for an order discharging a stay order in that action. The stay order enjoined the State of South Australia issuing licenses to Mintech and Mawson pursuant to the Mining Act 1971 (the Act). Before turning to the merits of the interlocutory application it is necessary to explain briefly the primary action.
In late 2004 the plaintiff applied for mining exploration licenses over an area in the north east of the State. The extent to which the plaintiff’s application complied with the applicable procedural requirements is in dispute in the primary action.
Prior to December 2004 Mintech and Mawson had held exploration licenses over the area for which the plaintiff had applied for an exploration licence. Their exploration licenses had been cancelled shortly before the plaintiff made his application.
The power to grant licenses is conferred on the Minister. The responsible Minister is the Minister for Mineral Resources and Development. The Minister may delegate his functions under the Act. The Department of Primary Industries and Resources (PIRSA) is an administrative unit of the Public Service of South Australia and its employees are responsible to the Minister for the administration of the Act. The Act creates the office of Mining Registrar and other subordinate offices and allows the assignment of a subordinate mining registrar to act in the Mining Registrars’s place. The functions of the Mining Registrar include the maintenance of a register with mining tenements.
In late December 2004, PIRSA wrote to the plaintiff informing him that other persons had expressed an interest in the exploration licenses over the same area and that further applications from other interested persons would be accepted until 18 January 2005.
On 20 July 2007, the plaintiff was informed that competing applications which had been made would be assessed by a technical panel of PIRSA (the panel).
The plaintiff’s substantial complaint in the primary proceedings is that the decision to refer the competing applications to a panel was a departure from a long established practice of the Minister and PIRSA to grant an exploration licence over a particular area to the person who first applied for a licence over that area (the ‘first come, first served processing’ policy). The State of South Australia denies that an exploration licence was issued as a matter of course to the first applicant who sought it. It contends that a licence was only granted if the applicant satisfied prescribed statutory and administrative requirements for the grant.
The State of South Australia contends that in any event it was free to depart from that policy. It pleads that the decision to depart from the policy was properly made by the Mining Registrar who had decided it would be equitable to depart from the ‘first come, first served processing’ policy in view of the interest that had already been expressed over the same area by a number of entities. It appears that Mintech and Mawson were amongst the other persons who had expressed an interest.
The State of South Australia pleads in its defence that the Director of Mineral Resources in PIRSA (the Director), was delegated the functions of the Minister for the purposes of making decisions on the competing applications. The Director convened a panel for that purpose. The State of South Australia pleads that the panel made recommendations to the Director and that exploration licenses were offered in accordance with those recommendations.
On 24 January 2008 the Mining Registrar wrote to Mintech and Mawson informing them that the Minister’s delegate had considered their applications and was willing to grant an exploration licence in terms of their applications.
On 11 February 2008 Mintech and Mawson accepted the offers and paid the fees required by s 31 of the Act.
Section 28(1) of the Act empowers the Minister to grant an exploration licence. Sub-regulation 55(3) of the Mining Regulations 1998 (the Regulations) is made pursuant to s 92(a) of the Act and regulates the issue of exploration licenses. It provides that the Minister will approve of an application for an exploration licence on the acceptance of an offer to grant such a licence. The combined effect of s 28(1) of the Act and sub-regulation 55(3) of the Regulations appears to be that an irrevocable decision to grant an exploration licence is made on the acceptance of the Minister’s offer.
Section 28(5) of the Act requires the Minister to publish a proposal to grant an exploration licence in the Government Gazette and State-wide and local newspapers 28 days before the licence is issued.
Part 9 of the Act requires holders of exploration licenses to comply with prescribed procedures before entering land for the purposes of exploration. Part 9B prescribes a procedure for undertaking exploration on Native Title land. Both Parts require notification to interested parties.
According to the affidavit of a solicitor experienced in the procedures mandated by the Act, it is unlikely that exploration could commence earlier than nine months after discharging the stay order.
The plaintiff brought his proceedings on 28 June 2007, a hearing for the trial of the primary action has been fixed for 5 September 2011. Mintech and Mawson are not currently parties to the action and have not taken any part in direction hearings and the management of the matter before the trial.
In my view, Mintech and Mawson should have been joined as defendants when it became known that exploration licenses had been offered to them. At that time they were prima facie entitled to the exploration licenses. They now claim an entitlement to the exploration licenses for which they have paid in accordance with the Act and regulations. Subject to the objections raised by the plaintiff in the primary proceedings, they are entitled, as against the Minister, to declarations to that effect. If a decision were made in the primary action between the plaintiff and the State of South Australia that the offer to Mintech and Mawson was invalid, it would not bind Mintech and Mawson. They would be entitled to bring proceedings against the State of South Australia for a declaration as to their entitlement. For these reasons Mintech and Mawson were, in my view, a necessary party to ensure a complete and final resolution of the controversy over the issue of the exploration licenses.
The plaintiff complains that the joinder of Mintech and Mawson may delay the trial. Mintech and Mawson must accept their late application to be joined necessarily entails a curtailment of their procedural rights with respect to that trial. In my view, appropriate case management will minimise the risk that the hearing and determination of the primary action will be delayed. I propose to give some initial directions to guard against that possibility.
The plaintiff also complains that the joinder will expose him to a greater cost penalty if he is unsuccessful. However, the plaintiff would have been similarly exposed if Mintech and Mawson had been joined as they ought to have been soon after the action was instituted. Indeed, the plaintiff’s cost exposure has probably been reduced by the late joinder. Again, case management will ensure that there is no unnecessary duplication as between the defendants.
I therefore order that Mintech and Mawson be joined as defendants.
I turn to the stay order. On 13 February 2008 an order prohibiting the taking of any further steps on the issue of the licenses was made in the primary proceedings. Notice of the application for the stay order was given to Mintech and Mawson; they chose not to intervene.
The order made by a Master of this Court was:
By consent there will be an order that the second defendant, acting personally or by delegate as the relevant Minister of the Crown, be stayed from proceeding to publish, grant or otherwise deal with applications for exploration licenses to PepinNini Minerals Limited, Mintech Resources Pty Ltd or Mawson Gold NL until further order.
It is that stay order that Mintech and Mawson now ask this Court to discharge.
Mintech and Mawson submit that their attitude to the stay has changed because of an agreement entered into by Mintech on 18 April 2011.
Mintech and Mawson have common shareholdings and directorships as between themselves and with another mining company, Goldus Pty Ltd. Goldus holds mining leases in the area of Mintech’s explorations licenses. Mintech and Goldus have entered into agreements with other corporate entities (the joint venturers) to explore for, and exploit, the mineral resources within their mining tenements.
The purpose of the agreement is to secure finance through a joint venture arrangement. A joint venturer has committed a very substantial amount of capital to fund an exploration program. Depending on the results of that exploration program, the joint venturers have agreed to provide equity finance through a yet to be formed corporation to commence exploitation of the mineral resources within the mining tenements. The agreement with the joined venturers is expressly conditioned on ‘any consents or approvals required in respect of the transfer of any interest in the “mining tenements” pursuant to the combined operation of the joint venture agreements’.
Section 83 of the Act provides, and I set out the section:
83—Dealing with licenses
(1)     Subject to subsection (2), a lease or licence, or an interest in a lease or licence, under this Act shall not be assigned, transferred, sublet, or made the subject of any trust or other dealing, whether directly or indirectly, without the consent in writing of the Minister, and any such transaction entered into without that consent shall be void.
(2)     A lease or licence, or an interest in a lease or licence, may be charged without the consent of the Minister, but any assignment or transfer of the licence or interest for the purpose of enforcing the charge shall not be made except with the consent of the Minister and, if made without that consent, shall be void.
(3)     The Minister may, before consenting to a transaction subject to the provisions of this section, require the parties to furnish him with such information in relation to the transaction as he may require.
(4)     An application for the consent of the Minister under this section shall be accompanied by the prescribed fee.
Clause 2.3 of the joint venture agreement purports to allow the joint venturers to waive compliance with the condition precedent. The validity of that clause in the face of s 83(1) of the Act is doubtful.
In my view the language of s 83 of the Act is relatively clear. Those who hold a licence should not enter into an arrangement falling within s 83 without the prior consent of the Minister. The words ‘shall not be assigned ... without the consent in writing’ suggest that the consent is necessary before the dealing which has any of the prescribed effects on the mining tenement takes place. Moreover, s 83 of the Act provides that a transaction ‘entered into without that consent’ is void.
The impracticality of waiting for ministerial consent before reaching agreement on arrangements which implicate mining tenements and which are necessary to raise venture capital can be accepted. However, it seems to me that the practical difficulty is overcome by conditioning such agreements in terms similar to the condition in the joint venture agreement entered into by Mintech and Goldus. There is, therefore, no compelling reason to depart from the natural meaning of the terms of s 83 of the Act.
The words ‘or other dealings’ in s 83 take their meaning from the preceding words. What is prohibited is a dealing which alienates a proprietary interest in a mining lease or licence. Any such dealing entered into without prior consent is void. The joint venture agreement would have been such a dealing but for the condition precedent to which I have referred. The equitable remedies which would have been available to protect the interest of the joint venturers over the exploration licence but for the condition precedent, would have effectively alienated an interest of a proprietary nature in the exploration licence. However, these terms of the joint venture agreements entered into by Mintech and Mawson do not operate to alienate property in that way unless and until the Minster’s consent has been obtained. It follows that the joint venture agreements put before me do not contravene s 83 of the Act and are binding and effective.
True it is that the exploration licence covered by the agreement with the joint venturers has still not been issued. It is trite that s 83 of the Act could not be avoided by entering into an agreement which assigns, without Ministerial consent, a mining lease or licence as future property. Any such agreement would be equally void for the policy reason that it would undermine the restriction enacted by s 83(1) of the Act.
Nonetheless, the condition on which the joint venture agreement is predicated saves it from the invalidating effect of s 83 of the Act.
If the plaintiff succeeds in the primary action it will be because the administrative steps taken up to and including the offer of the exploration licenses to Mintech and Mawson so far taken are invalid and ineffective. If that is so, the grant of the exploration licenses will also necessarily be invalid.
I have considered whether the plaintiff’s pleaded case might also be that the Minister and his delegate were precluded by agreement, or in equity, from departing from the ‘first come, first served processing’ policy. Alternatively, the plaintiff’s case may even be understood as pleading an actionable misrepresentation. However, those causes are private law actions and could not result in orders enjoining the State of South Australia from complying with its public law obligations.
If follows that Mintech and Mawson will not acquire any rights independently of the validity of their exploration licence by undertaking exploratory activity pursuant to the provisions of the Act. Mintech and Mawson are unlikely to be in a position to extract mineral resources before the determination of the question of the validity of their licenses by this Court. I will ensure that the plaintiff is not prejudiced in that respect by requiring an undertaking from Mintech and Mawson that they will not peg any claim or apply for a mining lease without the leave of the Court.
It follows that the plaintiff’s interests will not be affected in any tangible way should I discharge the stay order. I accept that the plaintiff personally may find it psychologically disconcerting if the order were to be discharged but, in my view, that is not a relevant consideration. If, as I have found, and Mintech and Mawson, through their counsel accept, the validity of any exploration licence issued to them is subject to orders made in the primary proceedings, then the plaintiff’s unfounded fears to the contrary cannot be a relevant consideration.
On the other hand, there are strong prospects that Mintech and Mawson will suffer loss if the order is not discharged. I accept that many contingencies may ultimately affect whether Mintech profits from the joint venture agreement. But the commercial opportunity the agreement offers is, in itself, of value. No reason has been suggested for the withholding of Ministerial consent to the arrangement pursuant to s 83 of the Act.
In any event, the joint venturer may be prepared to expend money on exploration before that consent is obtained. A delay in embarking on the exploration program may mean that the capital which is now available will not be by the time the proceedings in the primary action are finalised. Investment in the mining industry is sensitive to variations in the global economic outlook which may occur rapidly and without warning.
Even though Mawson is not a party to the joint venture agreement, the nature of the mining industry to which I have just referred is such that prolonging the period which it is denied the exploration licence to which it is, prima facie and, subject to the objections raised in the primary proceedings, entitled is a substantial impingement on its economic interests. It has been denied the opportunity to exploit the commercial opportunities associated with an exploration licence for over three years.
The plaintiff has offered no undertaking with respect to damages which Mintech and Mawson might suffer if there is a delay.
In those circumstances, the balance of convenience strongly favours the discharge of the order and I so order.