Sheffield Resources Ltd and Another v Charles and Others on behalf of Mount Jowlaenga Polygon #2

[2017] NNTTA 25

NATIONAL NATIVE TITLE TRIBUNAL

Sheffield Resources Ltd and Another v Charles and Others on behalf of Mount Jowlaenga Polygon #2 [2017] NNTTA 25 (22 May 2017)

Application No: WF2016/0014

IN THE MATTER of the Native Title Act 1993 (Cth)

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IN THE MATTER of a inquiry into a future act determination application

Rona Charles and Others on behalf of Mount Jowlaenga Polygon #2 (WC2014/005)

(native title party)

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Sheffield Resources Ltd

(grantee party)

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State of Western Australia

(Government party)

DECISION ON WHETHER THE TRIBUNAL HAS POWER TO CONDUCT AN INQUIRY

Tribunal:	Mr JR McNamara, Member
Place:	Brisbane
Date:	22 May 2017

Catchwords: Native title – future act – s 35 application for a determination – mining lease application M04/459 – jurisdiction – power – whether grantee party has negotiated in good faith – grantee party has negotiated in good faith – Tribunal does have power to proceed with future act determination inquiry

Legislation: Native Title Act 1993 (Cth) ss 29,30, 30A, 31, 33, 35, 36, 51, 148, 151

Cases:

Angelina Cox & Ors on behalf of the Puutu Kunti Kurrama & Pinikura People/ Wintawari Guruma Aboriginal Corporation/Western Australia/FMG Pilbara Pty Ltd, [2008] NNTTA 90 (‘Cox v FMG’)

Holocene Pty Ltd/Western Australia/Western Desert Lands Aboriginal Corporation (Jamukurnu – Yapalikunu), NNTTA WF08/27, [2009] NNTTA 8 (‘Holocene v WDLAC’)

June Ashwin on behalf of the Wutha People/Western Australia/Contact Uranium Limited [2008] NNTTA 129 (‘Wutha v Contact’)

Pilbara Stone Pty Ltd/Angelina Cox and Ors on behalf of Puutu Kunti Kurrama & Pinikura 2/Western Australia, [2012] NNTTA 114 (‘Pilbara Stone v Cox’)

South Blackwater Coal Ltd/Queensland/Cliff Kina and Others on behalf of the Kangoulu People (Qc98/25) and Lindsay Kemp and Others on behalf of the Ghungalu People (Qc99/16) [2001] NNTTA 23 (‘South Blackwater Coal v Kina’)

Strickland v Minister for Lands for Western Australia [1998] FCA 868; (1998) 85 FCR 303 (‘Strickland v Minister for Lands’)

Walley v Western Australia [1999] FCA 3, (1999) 87 FCR 565

Western Australia/Arthur Dimer, Ollan Dimer, John Walter Graham, Sonny Graham, Katie Ray, Maureen Young, Georgina Schultz, Mabel Wilson, Jack Schultz, Betty Bullen, Graeme Pellew (Ngadju People, WC95/17); Cyril Barnes, Merle Forrest, Mercy O’Loughlin, Stevie Sinclair, Judy Slater, Elvis Stokes & Victor Willis (Central East Goldfields People, WC99/30)/Equs Limited, [2000] NNTTA 290 (‘Western Australia v Dimer’)

Western Australia/Western Australia Petroleum Pty Ltd & Anor/Hayes & Ors on behalf of the Thalanyji People [2001] NNTTA 18 (‘Western Australia v Thalanyji’)

Western Australia v Taylor [1996] NNTTA 34; (1996) 134 FLR 211

White Mining (NSW) Pty Ltd v Franks (2011) 257 FLR 205; [2011] NNTTA 72 (‘White Mining v Franks’)

Representative of the native title party:

Hayley Haas, Arma Legal (formerly KRED Legal Pty Ltd)

Chris Shanahan SC, Francis Burt Chambers

Representative of the grantee party: Christine Lovitt, Hewett & Lovitt

Representatives of the Government party:

Dennis Jacobs, Department of Mines and Petroleum

Domhnall McCloskey & Emily O’Keeffe, State Solicitors Office

REASONS FOR DECISION

Introduction

1. This decision considers whether the Tribunal has power to conduct an inquiry into a s 35 future act determination application lodged by Sheffield Resources Ltd (‘Sheffield’) for the grant of mining lease M04/459 (‘the proposed lease’). The application was lodged under s 35 of the Native Title Act 1993 (Cth) (‘the Act’) and I was appointed by the President of the Tribunal to conduct the inquiry.

2. The Mount Jowlaenga Polygon #2 claimants (‘Mount Jowlaenga’) are a negotiation party in this matter because: their registered native title claim overlapped the proposed lease four months after the notification day; and their native title claim is still registered (see ss 29(2)(b)(i), 30(2) and 30A of the Act).

3. Mount Jowlaenga contend that Sheffield did not negotiate in good faith as required by s 31(1)(b) of the Act. I must therefore consider whether or not Sheffield did so before I can proceed to make a determination on the application. If Mount Jowlaenga satisfies me that Sheffield did not negotiate in good faith, then I must not make a determination (s 36(2)).[1] The Tribunal will not be entitled to deal with the application and the application will be dismissed (s 148(a)).

   [1] s 36(2) of the Act prohibits the arbitral body from making a determination if any negotiation party satisfies it that any other negotiation party (other than a native title party) did not negotiate in good faith as required by s 31(1)(b). The arbitral body is not prevented from making its own enquiries (Ward v Western Australia (1996) 69 FCR 208, 215-217)

Proceedings and submissions

1. In early November 2016 I convened a preliminary conference at which Mount Jowlaenga alleged Sheffield did not negotiate in good faith. Mount Jowlaenga made no such allegation against the Government party. Accordingly, I set directions requiring good faith submissions to be lodged.

2. Directions are designed to assist in the just and speedy determination of the issues.  These directions required the parties to identify facts in dispute and outline how a finding on these issues would be critical to the decision, and required parties to show how they have attempted to clarify any facts in dispute.  The expectation was that in the course of compliance with directions the issues for consideration would be narrowed.  That did not occur in any significant way.  The Tribunal received 180 pages of contentions, more than 400 pages of affidavits, and over 3000 pages of annexures.  When parties provide contentions and affidavits to the Tribunal it is expected that source material, for example correspondence and draft documents, will be faithfully and accurately quoted.  That did not always occur in this matter.  Some examples are referred to in these reasons. This meant that special care needed to be taken to closely check the content and context of contentions and affidavits against the source material.  Given the volume of material this was extremely time consuming.  

3. The material that was provided to the Tribunal contains many comments regarding the behaviour and statements made by Mount Jowlaenga regarding Sheffield, and Sheffield regarding Mount Jowlaenga.  I note here that there are comments and statements made by both parties which have not been individually mentioned in this determination.  The fact that each of these comments and statements has not been specifically mentioned in the determination should not be assumed to mean that they were not considered or that they were not accepted.  It simply means that in considering all of the material their specific mention was not itself determinative of good faith.

4. The below documents, lodged on 23 December 2016, form the initial submissions made by Mount Jowlaenga:

   NTP Statement of Contentions;

   NTP Summary of Contentions;

   NTP List of Authorities;

   Affidavits of:

   oMs Hayley Haas, sworn 23 December 2016, with annexures HH1-55;

   oDr Victor Rudenno, sworn 21 December 2016;

   oMr Jerome Manado, sworn 7 December 2016;

   oMr Nathan Lenard, sworn 6 December 2016;

   oMr Preston Manado, sworn 7 December 2016;

   oMr Rob Houston, sworn 7 December 2016;

   oMs Rosemary Nunju, sworn 7 December 2016.

5. The following documents, lodged with the Tribunal on 12 January 2017, form the submissions of Sheffield:

   GP Statement of Contentions;

   Affidavits of:

   oMr Bruce McFadzean, sworn 19 December 2016, with annexures BMF1-70;

   oMr Bruce McQuitty, sworn 11 January 2017, with annexures BMQ1-25;

   oMs Christine Lovitt, sworn 10 January 2017, with annexures CML1-15;

   oMr David Boyd, sworn 10 January 2017, with annexures DMB1-52;

   oMr William Burbury, sworn 11 January 2017;

   oMs Kim Pervan, sworn 12 January 2017;

   oMr Marco Di Silvio, sworn 12 January 2017;

   oMr Wayne Groeneveld, sworn 12 January 2017.

6. On 24 January 2017, Mount Jowlaenga lodged the following documents in reply:

   NTP Reply;

   NTP Reply - Attachment C;

   Affidavits of:

   oMr Damien Parriman, sworn 23 January 2017;

   oMr Wayne Bergmann, sworn 23 January 2017;

   oMs Hayley Haas, sworn 23 January 2017, with annexures HH55-76 (‘Ms Haas’ further affidavit’)

7. At a listing hearing held in late January, I sought parties’ views on whether the good faith issue should be decided on the papers or whether an oral hearing should take place. After some discussion all parties supported the matter proceeding on the papers.

8. I have considered the material before me and I am satisfied the matter can be decided on the papers (per s 151(2) of the Act).

Background

1. In early February 2015, KRED Legal Pty Ltd (‘KRED’) was appointed to act for Mount Jowlaenga in negotiations with Sheffield over the Thunderbird Project[2]. The Thunderbird Project is located on the Dampier Peninsula, approximately halfway between Broome and Derby, with the purpose of extracting and processing heavy mineral sands from the proposed lease area. The proposed lease sits over a current exploration licence (E04/2083) which was granted to Sheffield in 2011 and is the subject of a Heritage Protection Agreement between Sheffield and the Kimberley Land Council. The proposed lease was notified on 13 August 2014 and parties commenced active negotiations around May 2015.

   [2] I note that from March 2017, KRED Legal Pty Ltd are now known as Arma Legal.

Issues for good faith

1. The issues I have addressed in considering whether or not Sheffield negotiated in good faith with Mount Jowlaenga are outlined below. I have also referenced my findings on each issue:

   1.   Was Sheffield’s negotiation on Traditional Owner Royalty reasonable? (findings at [45]-[49])

   2.   Did Sheffield induce Mount Jowlaenga to produce and provide the Agreement Survey report? (findings at [68]-[75])

   3.   Did Sheffield Misrepresent the basis upon which the Agreement Survey was provided? (findings at [81]-[82]; [95])

   4.   Did Sheffield seek to use the Agreement Survey report inappropriately? Findings at [108])

   5.   The 25 July meeting: Was Sheffield’s behaviour reasonable? (findings at [115]-[119])

   6.   Did Sheffield provide counter offers? (findings at [127]-[128])

   7.   Did Sheffield’s offers constitute an offer of ‘minimum guaranteed contracts’? (findings at [130])

   8.   Did Sheffield ignore Mount Jowlaenga’s request to not attend the Agreement Survey? (findings at [136])

   9.   Did Sheffield fail to meet, provide information and assist in drafting? (findings at [169]-[174])

   10.  Did Sheffield make ‘unfounded allegations of misconduct’? (findings at [183]-[184])

   11.  Did Sheffield make misrepresentations to the Tribunal during mediation? (findings at [185])

   12.  Did Sheffield engage directly with individual Named Applicants and Other TOs? (findings at [195]-[196])

   13.  Did Sheffield disclose confidential aspects of negotiations to non-negotiating parties? (findings at [202])

   14.  Did Sheffield refuse to pay amounts owing to Mount Jowlaenga? (findings at [206])

   15.  Did Mount Jowlaenga encourage activist intervention? (findings at [213])

   16.  Did Mount Jowlaenga engage in commentary damaging to Sheffield’s credibility? (findings at [218])

   17.  Did Mount Jowlaenga’s representative have a conflict of interest? (findings at [226])

   18.  Was the overall behaviour of the parties reasonable in the circumstances? (findings at [246])

1. Was Sheffield’s negotiation on Traditional Owner Royalty reasonable?

1. Mount Jowlaenga contends that the position taken by Sheffield in respect of the Traditional Owner Royalty (‘TO Royalty’) does not satisfy its obligation to negotiate in good faith. Mount Jowlaenga states that Sheffield has been unable to adequately explain its assertion that financiers would not agree to fund the project with royalty payments at the rate proposed by Mount Jowlaenga. Further, Mount Jowlaenga contends that Sheffield failed to engage or respond to the proposition put by Mount Jowlaenga’s financial expert that the TO Royalty being sought would only have a marginal effect on the Thunderbird Project’s after tax profitability.

Relevant facts on TO Royalty

1. Sheffield first met with the Mount Jowlaenga Named Applicant and KRED in Broome on 24 June 2015. At this meeting Sheffield gave a Power Point presentation which provided an introduction and overview of the company and the Thunderbird project.

2. In July 2015, KRED engaged Dr Victor Rudenno as an advisor to the Mount Jowlaenga Traditional Owners (‘TOs’). Dr Rudenno’s affidavit states that he is a resource project valuer and that he was engaged to provide advice to Mount Jowlaenga in relation to commercial terms of agreements, including the terms of the agreement being negotiated over the Thunderbird Project.

3. On 23 July 2015, Sheffield received a document from KRED entitled ‘Preliminary Request for Commercial Information’ which outlined information requested by Dr Rudenno to assist him in providing his commercial advice to Mount Jowlaenga. Sheffield provided the requested information to KRED on 10 August 2015. There was some further back and forth between parties, with Dr Rudenno requesting, and Sheffield providing, some additional information including a prefeasibility study update (‘PFS Update’).

4. Sheffield met with KRED in Perth on 3-4 November 2015, with Dr Rudenno in attendance on the second day of the meeting. At this meeting KRED provided Sheffield with a document titled ‘Co-Existence Agreement – Commercial Benefits’ which set out the proposed commercial benefits sought by Mount Jowlaenga. Specifically, this proposal outlined a stepped royalty on gross revenue, starting at 1.8% for the first three years and then increasing over time up to 2.2% at the ninth anniversary; three milestone payments of $1,000,000 each; 5% equity in the company; and minimum annual payments for the life of the mine. At this meeting Dr Rudenno presented his financial model to Sheffield. In his affidavit, Bruce McFadzean (Managing Director of Sheffield) states (at 9) that Dr Rudenno told Sheffield at the meeting ‘in his view the Project was marginal but viable at current spot pricing[3], and difficult but not impossible to fund.’ Dr Rudenno states in his affidavit (at 15) ‘[t]he model in my opinion showed that allowing for the proposed royalty the project was viable and that ratios applicable to the project financing were not unreasonable.’

   [3] A spot price is the current price in the market place at which a given asset such as security, commodity or currency can be bought or sold for immediate delivery.

5. On 20 November 2015, Bruce McQuitty, non-executive Director at Sheffield, emailed Dr Rudenno outlining what he concluded would be the total Native Title Agreement costs (‘NTA costs’) of the Agreement based on Sheffield’s PFS Update financial model. Mr McQuitty explained the exchange rate and spot prices he was working from, and that he was including the additional costs put forward in the draft Agreement (i.e. royalty at $178.5 million for the life of the mine (‘LOM’), lump sum payments at $3.5 million LOM, and trust administration, committee meetings, and additional personnel costs at $39.7 LOM). Mr McQuitty stated that he had calculated the NTA costs to be 22.9% of Net Profit After Tax (‘NPAT’), with the royalty alone being 18.5%. Mr McQuitty stated in his email ‘[t]his is a heavy impost and would have operational consequences.’ He queried if Dr Rudenno derived a similar result using his model before stating that Sheffield had begun thinking about ‘a royalty based on a % of NPAT, instead of a % of gross revenues. This would help the business get through times of low pricing while offering upside in better times.’

6. Dr Rudenno replied to Mr McQuitty’s email on 27 November 2015 asking for more detail about how he had determined a total of $39.7 million for ‘other costs’. On 30 November 2015, Mr McQuitty provided that breakdown.

7. In his affidavit, Mr McQuitty attests Sheffield worked with Ray Cary, an independent advisor, on building a Net Profits Interest (‘NPI’) royalty into the PFS Update financial model between 1 and 4 December 2015, in the lead up to a teleconference with KRED on 4 December 2015. Mr McQuitty states (at 42) ‘[t]he motivating force behind this work was the strong adverse impact which the royalty proposed by KRED would have on NPAT at spot prices and the resultant impact this would have on Sheffield’s ability to finance the Project.’ He then states ‘Ray Cary’s advice was that an NPI royalty is hard to administer in practice’, although I note Mr McQuitty has not referenced this advice. In an email back to Mr Cary on 4 December 2015, Mr McQuitty advised that Sheffield had decided to proceed with a simpler Ad Valorem royalty at a lower percentage rate. I note here that Mr McQuitty does not provide any details regarding how, when or why this decision was reached by Sheffield other than to say it was ‘simpler’.

8. According to Mr McFadzean, Sheffield put forward its first counter offer in relation to the commercial benefits at a teleconference held on 4 December 2015 with KRED. The offer proposed a lower royalty rate (than that proposed by Mount Jowlaenga), increased milestone payments and increased employment targets. David Boyd, Exploration Manager at Sheffield, was also present at the meeting. In his affidavit he states there was a discussion about the project financial models prepared by Dr Rudenno and Sheffield. It was noted that whilst the models were not materially different, the derivation of the NPAT number was different.

9. On 7 December 2015, Ms Haas emailed Mr McQuitty noting the different impacts the proposed royalty payments would have if assessed on net profit on a post-tax versus a pre-tax basis. She states;

   As discussed in our teleconference last Friday, we note that the reference to the impact of the Traditional Owner benefits on the project is based on a comparison a [sic] pre-tax figure (the Traditional Owner costs) with a post-tax net profit figure. Our assessment of the impact is approximately 12.2% and 4.4% on an after tax basis compared with 18.5% and 5.7% as per your…presentation.’

10. Ms Haas also noted that, in assessing the impact of the TO Royalty on the project, Sheffield used spot pricing whilst the project is marginal. She stated that, as discussed at the 4 December teleconference, KRED considered a more appropriate measure for this assessment would be bankable feasibility study figures using commodity prices relevant to a viable project.

11. Mr McQuitty’s affidavit states that, following receipt of Ms Haas’ email, he sought comment from Mr Cary. He further states (at 45) that Mr Cary ‘calculated the impact of the KRED proposed royalty as 13.8% of NPAT on an after tax basis at spot prices versus Victor Rudenno’s number of 12.2%’ but also puts forward the opinion that ‘even 12.2% is still a very large slice of profit.’

12. In his affidavit, Dr Rudenno offers his view on this, stating (at 20) ‘in my opinion at the very low commodity price assumptions [relied on by Sheffield] it was unlikely that project financing would be achievable even at Sheffield’s proposed royalty rate.’ He goes on to state (at 21) ‘it was my opinion that from the bank’s perspective once the royalty rate was set, the project’s viability would ultimately depend on expectations of higher commodity prices and hence the royalty would be supportable – at “spot” prices the project was unlikely to get off the ground even if the royalty was 0%.’

13. On 11 December 2015, Sheffield attended a full day meeting with KRED and members of the Mount Jowlaenga negotiating committee in Broome. At this meeting Sheffield presented its commercial benefits counter offer to the Mount Jowlaenga negotiating committee (Sheffield’s ‘first counter offer’)[4]. In his affidavit, Mr McFadzean states (at 17) that at this meeting he ‘explained the reason why it was not economically viable for Sheffield to pay a royalty of the magnitude that the Mount Jowlaenga People had proposed as it would limit the ability of Sheffield to obtain finance for the Project.’ He goes on to state that the royalty structure proposed by Sheffield ‘provides for a rise in royalty payments to Traditional Owners as the price of commodities rises.’

    [4] References throughout this determination to ‘counter offers’ is an adoption of Sheffield’s description of events.

1. In my view, Mr McFadzean’s comments appear to offer more of a justification for Sheffield’s position than a detailed reason for why Mount Jowlaenga’s proposed royalty was not economically viable. Mount Jowlaenga’s contention on this point is not focussed on Sheffield’s counter offer being unreasonable. Rather, it argues that Sheffield was unreasonable to dismiss Mount Jowlaenga’s proposed royalty rate without adequately explaining why it was uneconomical, particularly given Dr Rudenno’s advice that it was. Dr Rudenno has asserted that this was communicated to Sheffield on a number of occasions, however no further specifics regarding this communication has been provided.

2. On 29 January 2016, Sheffield met with KRED and Dr Rudenno in Broome. At that meeting Sheffield put forward a revised counter offer (Sheffield’s ‘second counter offer’) ‘which now contained minimum guaranteed Aboriginal contract value of $2 million per annum for the life of the mine’ (McFadzean Affidavit at 19). Mr McFadzean goes on to state the revised terms and reasoning for Sheffield’s second counter offer was set out in an 11 page Power Point presentation he presented at the meeting. Slide seven is titled ‘Royalty rate must be bankable’, contains a table setting out the royalty rates being proposed by each party, and then notes the follow dot points:

   ·Must be based on current pricing – low prices are reality

   ·Higher royalty will prevent project financing

   I note, as outlined above, it is these two assumptions that Dr Rudenno’s affidavit argues are incorrect. There is nothing in the material before me that suggests Mr McFadzean explained Sheffield’s position on these points in any detail at this meeting.

3. On 2 February 2016, Mr Wayne Bergmann, CEO of KRED, wrote to Mr McFadzean stating that, as explained at the meeting the week prior, the compensation proposal put forward by the TOs was in line with Kimberley standards. He went on to state ‘[i]t is the view of some senior Traditional Owners that if compensation is not in line with other Kimberley Agreements, then the Thunderbird Project should not proceed until the economic climate is one in which these well-established standards can be met or exceeded.’ In his affidavit, Mr McFadzean states (at 21) that this suggests to him a non-negotiable stance in relation to the commercial benefits which the Mount Jowlaenga People had first proposed. I presume that Mr McFadzean is suggesting at this point that Sheffield cannot be accused of failing to negotiate in good faith if Mount Jowlaenga adopted a non-negotiable stance in relation to commercial benefits. However, I note that the following sentence in Mr Bergmann’s letter does not indicate a non-negotiable stance. Mr Bergmann states ‘[w]ith that said, we look forward to your revised commercial proposal and how the royalty might be re-modeled [sic] to address the disparity between parties’ positions.’

4. Mr McFadzean responded to Mr Bergmann’s letter on 3 February 2016, pointing out that the Thunderbird Project is not a ‘high-margin, short life’ project like other ‘benchmark’ Kimberley projects, and the TO Royalty should reflect this. He goes on to state ‘Thunderbird’s strengths lie in its long life and the benefits this brings… Short life operations, with high margins, may well be able to carry a ‘Kimberley royalty’ if developed during highs in the price cycle.’

5. I note that the tone of Mr McFadzean’s letter is quite conciliatory and he has attempted to explain Sheffield’s position, although there is no specific reference to the two dot point assumptions noted at [29] above.

6. Another meeting between Sheffield, KRED and Dr Rudenno was held on 11 February 2016. At that meeting Mr McFadzean presented a further revised counter offer (Sheffield’s ‘second counter offer’) in which Sheffield proposed royalty payments at an initial rate of 0.5% then increasing to 0.75% of revenue from production year 3. In his affidavit, Mr McFadzean’s states (at 25) the ‘minimum guaranteed dollar amount for Aboriginal contracting was also increased so that it was now a guaranteed minimum amount of $2 million for the first 3 years of production and a $3 million guaranteed minimum amount from production year 4 onwards.’ The Power Point slides Mr McFadzean presented at this meeting are annexed to his affidavit and outline Sheffield’s third counter offer. Slide 10 of this presentation is titled ‘Royalty Calculations’ and includes a note that ‘Traditional Owner proposed royalty is not possible on either PFS or Spot. I believe this suggests Sheffield was continuing to negotiate and look for ways to make their proposal more attractive to Mount Jowlaenga.

7. In his affidavit, Dr Rudenno’s states (at 22) ‘it still appeared that Sheffield were not taking into account fully the tax shield from the payment of royalty when comparing with the NPAT.’ He goes on to state (at 23) ‘I had put to the company on a number of occasions that for the purposes of determining the impact of any royalty, the financial model should be based on commodity prices that would result in a financial outcome acceptable to lenders and not use spot prices that in my opinion were too low to allow the project to proceed.’

8. On 16 February 2016, Mr Bergmann emailed Mr McFadzean stating that Sheffield’s latest royalty offer was still significantly lower than other Kimberley agreements and the other participation benefits were not significant enough to make up for this gap in the royalty offer.

9. On 17 February 2016, Mr McFadzean responded, emailing KRED and Dr Rudenno a pie graph titled ‘Background to Revised Offer’. Mr McFadzean stated that this graph ‘is to illustrate the total package provided to the Traditional Owners is significant and it illustrates that there is very little margin in this project to provide further cash royalties.’ I note that the correspondence from both Mr McFadzean and Mr Bergmann during this time was civil and the relationship between parties appeared positive.

10. Mr McFadzean wrote to Mr Bergmann on 22 February 2016 (in response to a 9 February 2016 letter from Mr Bergmann), confirming dates for the next meeting and again ‘providing further justification for the proposed royalty amount offered by Sheffield and re-iterating the significance of the long term employment and contracting opportunities’ (McFadzean affidavit at 32). Mr McFadzean stressed that as a long mine life project, Thunderbird cannot sustain the higher royalty levels applied to short mine life operations in the Kimberley. He also stated that most Kimberley mines are short mine life projects and therefore have robust economics to allow funding payback, higher royalties and higher shareholder return over shorter periods, therefore applying the same approach to long life mines is not a reasonable methodology. Mr McFadzean addressed a stepped royalty concept that had been previously suggested by Dr Rudenno, where the royalty rate was variable based on the movement of commodity prices. Mr McFadzean stated ‘as explained in our meeting the other week, seeking an equitable solution over a 47 year mine life whilst allowing for inflation, escalation, varying commodity prices, varying production output and other considerations, it was considered too difficult to apply a simple and measurable formula over this time period.’

11. Meetings were held in Broome from 9 to 11 March 2016 involving KRED, Sheffield and the Mount Jowlaenga Named Applicant. On the third day of the meetings, attended by Sheffield, KRED and two members of the Named Applicant, Mr McFadzean gave a Power Point presentation outlining Sheffield’s counter offer 3. In her affidavit, Ms Haas recounts Mr Bergmann addressing Sheffield’s position on the TO Royalty. She quotes (at 88) Mr Bergmann as stating ‘[o]n the figures we have put, we’re advised the Project can go ahead. To consider lowering the TO Royalty we’ve got to build the capacity for Mount Jowlaenga to participate in contracting. If this is a long term project, we want to build Traditional Owner capacity.’ Parties discussed Mount Jowlaenga partnering with the Indigenous Construction Resource Group Pty Ltd (‘ICRG’) and BGC Contracting Pty Ltd (‘BGC’) to help build the capacity of the Mount Jowlaenga to participate in business and contracting[5]. Ms Haas states (at 91) ‘Wayne Bergmann agreed to follow up by arranging the meeting between Mount Jowlaenga’s representatives, ICRG and Sheffield in Perth. Wayne explained that the outcome of that meeting would inform the final drafting of the contracting clause of the Agreement, and the subsequent TO Royalty position that the Named Applicant could consider recommending to the Native Title Claim group.’

    [5] Mount Jowlaenga have made specific contentions regarding Sheffield failing to meet with ICRG, BGC and Mount Jowlaenga representatives, which is dealt with specifically and in detail below.

12. It appears that over the ensuing months the issue of the TO Royalty was set to one side as parties sought to resolve issues around business and contracting, and a heritage survey and report (both being issues described in further detail later in this decision). By May 2016, the matter had been referred to the National Native Title Tribunal (‘Tribunal’) for mediation assistance under s 31 of the Act, and it is clear from the material before me that the relationship between parties had deteriorated considerably.

13. On 15 May 2016, Mr Bergmann emailed Mr McFadzean, following a meeting that was held between the two of them the day before. In his affidavit, Mr McFadzean (at 65) points to a statement from Mr Bergmann in his email that ‘the royalty is what it is – you can afford the royalty’. Mr McFadzean argues that this ‘demonstrated a complete unwillingness on the part of KRED and the Mount Jowlaenga People to negotiate the quantum of the royalty which had first been provided by KRED at the meeting with Sheffield on 4 November 2015, and despite three subsequent counter-offers by Sheffield.’

14. Mr McFadzean has annexed a copy of the email to his affidavit and on inspection I note that Mr Bergmann has written ‘[t]he royalty is what it is you can afford the royalty. If the value of the product drops lower then you won’t start up the mining operation. I believe the ore is fair.’ I have considered the broader context of Mr Bergmann’s statement, specifically that the general tone of his email is polite, and also that there are a number of typographical errors. Given this broader context, I am not satisfied that Mr McFadzean’s characterisation of this statement is correct. The statement could be interpreted to mean ‘the royalty is what you can afford’ and that he believed the offer is fair. This aligns with KRED’s negotiating position up to this point and the statement regarding the price dropping and its impact on the project is possibly true based on the advice provided by Dr Rudenno.

15. In early July 2016 KRED provided an amended draft agreement to Sheffield, dated 6 July 2016. The proposed royalty in this draft was 1.4% until the fourth year of production then increasing to 2.1%. On 23 July 2016, Sheffield responded to KRED with a further marked up version of the draft agreement in which it ‘amended the Agreement to reflect the terms of the Sheffield Counter Offer 3’ (McFadzean affidavit at 82) (i.e. a royalty rate of 0.5% moving up to 0.75% at the fourth year of production was reinserted).

16. I believe the final piece of relevant information on this issue is a letter sent from KRED to the Tribunal and copied to other parties on 12 October 2016. In this letter it states:

    Regarding the Grantee’s view that Mount Jowlaenga’s most recent royalty position is not “commercially viable as it constitutes too great a percentage of the company’s net profit after tax (NPAT)”, respectfully this position is lacking in reason. It is contradictory to suggest the Project is not commercially viable if it is generating NPAT net of the royalty. As Dr Rudenno has explained to the Grantee on several occasions, the commercial viability of the Project is primarily dependant on the prices received for its products, not the Mount Jowlaenga royalty that (at the currently proposed rate over the life of the Project) represents 2.1% of total costs at current market prices or 2.6% of total costs at base case prices. Further reasoning or rationale behind the Grantee’s position on this term will need to be provided to the Mount Jowlaenga People at the proposed meeting.

17. The proposed meeting was to occur on 1 November 2016, however was cancelled once this s 35 application was lodged.

Findings on TO Royalty

1. The Act makes it clear that parties are able to negotiate about profit or royalty type payments as a result of activities over the land and waters concerned (see s 33(1)), however, this is not a mandatory provision. There is no requirement for a grantee party to negotiate about payments of this kind and failure to reach agreement on such payments, in and of itself, does not indicate a lack of good faith negotiations. What the Tribunal has deemed a requirement is for the grantee party to ‘receive and consider fairly, dispassionately and proportionately any proposal from a native title party for a payment of the type outlined in s 33(1) but without an obligation to ‘capitulate in order to reach agreement’.’ (Cox v FMG at [38] citing Western Australia v Thalanyji). This fits within the understanding that honest and reasonable behaviour forms the overarching principles of good faith negotiations, as established by Member Lane in Western Australia v Dimer.

2. In Cox v FMG Deputy President Sosso at [40] states:

   There is no obligation on a grantee party to strike a deal involving payments of the type outlined in section 33. The refusal of a grantee party to make such payments may or may not, in the circumstances, be unreasonable. The fact that the mining activities of a grantee party will be very profitable is a factor that should be given proper weight. For example, a small miner with a marginally profitable enterprise is in a far more precarious position and its capacity to participate in negotiations, let alone make significant concessions or payments, is very limited. What is a reasonable offer from such a grantee party would be different to that of a large miner with greater resources and capacity. But even allowing for this, just because commodity prices are high, the relevant grantee party is financially secure and the proposed exploration and mining activity will be profitable does not mean that a grantee party is required to submit to demands for payments based on a nominated proportion of profits made, income derived, or things produced. Evaluating the reasonableness of negotiating conduct by reference solely or significantly to movements in commodity prices and the Share market is incorrect and inserts into the evaluation of negotiating conduct potentially irrelevant and distorting considerations.

3. In this matter Mount Jowlaenga contend that Sheffield failed to adequately explain its assertion that Mount Jowlaenga’s proposed TO Royalty payments would prevent the project from obtaining finance; and that Sheffield failed to engage or respond to the advice from Dr Rudenno that Mount Jowlaenga’s proposed TO Royalty would not significantly affect the project’s profitability.

4. I do not find either contention particularly compelling. I accept that KRED and its financial advisor held a different view to Sheffield regarding the financial impost of the TO Royalty on the project but I do not believe Sheffield’s behaviour in the face of this difference was unreasonable or lacking. Sheffield did not agree to the TO Royalty proposed by Mount Jowlaenga and provided reasons for that position, namely that in Sheffield’s view a royalty at this rate would prevent it from obtaining financing, and a longer mine life is not able to sustain the royalty rates applied to short life mines. I believe this position was explained to KRED and Mount Jowlaenga on a number of occasions. It should be noted that even if Sheffield agreed with Dr Rudenno that it was economically viable for the project to operate under Mount Jowlaenga’s proposed TO Royalty, there is no obligation for Sheffield to therefore agree to that proposal.

5. Sheffield made a counter offer which, on being deemed not acceptable to Mount Jowlaenga, was subsequently increased. Sheffield also sought to ‘offset’ this royalty offer (which was still less than Mount Jowlaenga were proposing) through business and contracting opportunities[6]. In this regard I believe that Sheffield adequately engaged with the issue and responded to Mount Jowlaenga’s concerns.

   [6] Mount Jowlaenga have also argued that Sheffield’s behaviour in relation to business and contracting did not meet the requirements of good faith negotiations and this is dealt with in further detail later in this decision.

2. Did Sheffield induce Mount Jowlaenga to produce and provide the Agreement Survey report?

1. Mount Jowlaenga contends that Sheffield breached its obligation to negotiate in good faith by inducing it to conduct a heritage survey and then to provide the heritage survey report to Sheffield. Mount Jowlaenga states that it agreed to conduct the survey and to produce and provide the heritage survey report to Sheffield on the basis of what it describes as ‘Sheffield’s Agreed Negotiation Position’. Mount Jowlaenga contends that, in reliance on Sheffield’s position, it altered its position to its detriment (in conducting the heritage survey, and producing and providing the survey report) only to have Sheffield abandon fundamental agreed terms of its Agreed Negotiation Position without explanation, and refuse to pay amounts owing to Mount Jowlaenga under the Negotiation Protocol after 25 July 2016. In order to understand what Mount Jowlaenga sees as Sheffield’s Agreed Negotiation Position, some further information on the history of negotiations is required.

Relevant Facts on inducement

1. The initial draft agreement provided to Sheffield by Mount Jowlaenga in early September 2015 did not include Schedule 1, being the Cultural Heritage Management Protocol (‘Heritage Protocol’). Schedule 1 of the draft agreement included a drafting note from KRED that it was to be determined. A draft Heritage Protocol in a separate Word document was later provided to Sheffield on 30 September 2015 for consideration.

2. In his affidavit, Mr McFadzean states (at 10) that, at a meeting between KRED and Sheffield on 4 November 2015, concerns were raised by Sheffield regarding the cultural heritage provisions within the draft agreement. Specifically, Sheffield had concerns regarding what parties termed the ‘No Means No’ provision. This provision stated that Sheffield must not lodge a notice under s 18 of the Aboriginal Heritage Act1972 (WA)[7] without the consent of Mount Jowlaenga. The provision also stated that Mount Jowlaenga ‘will be deemed not to oppose a Section 18 Notice to the extent that the Work Program the subject of the Section 18 Notice has been Cleared’. Mr McFadzean (at 10) explains that this was of concern to Sheffield as ‘it exposed Sheffield to the risk that the mine could be seriously economically impaired or be prevented from development if a heritage site or object was identified and consent was not given by Mount Jowlaenga’ for a s 18 notice to be lodged. Mr McFadzean says it was equally concerning that Sheffield would not be able to provide project certainty to investors without mitigating this risk in some way.

   [7] A notice under s 18 of the Aboriginal Heritage Act is lodged in instances where the grantee party seeks Ministerial consent to disturb an Aboriginal heritage site.

3. On 11 November 2015, Sheffield provided KRED with a marked up version of the draft agreement (‘November draft agreement’). The TO Royalty and provisions relating to business and contracting were still to be agreed upon in this draft. A teleconference was held on 13 November 2015 between Sheffield and KRED, whereby parties went through the agreement and marked up proposed amendments and also formulated a list of ‘Parked Issues’, being issues that parties required further instruction on. Mount Jowlaenga contend that, at the conclusion of the teleconference, Sheffield indicated that aside from the commercial terms, the Parked Issues list and the areas marked up, they (Sheffield) were in agreement with the November draft agreement. In her affidavit, Ms Haas (at 25) quotes Rob Houston (then Practice Manager and Director at KRED) as stating ‘[w]e note your mark-ups – a few issues. Do we assume you generally agree the remaining terms?’ to which Mr Groeneveld (Sustainability Manager at Sheffield) responded ‘we generally went through the Agreement and marked up what needed. Stuff unmarked except for the commercial terms we are pretty much in agreement.’ Ms Lovitt (Sheffield’s legal representative) later stated ‘we’re confident we’ve marked up any changes we have, aside from commercial terms.’

1. At a meeting between KRED, Sheffield and the Named Applicant on 11 December 2015, Mr Groeneveld stated that Sheffield had an issue with the ‘No Means No’ provision as Sheffield needs to know what it can and cannot do. Ms Haas’ affidavit (at 37) quotes Mr Bergmann at this point saying “if that’s the case you’d have to do a final survey and we would lay out the heritage concerns the best we know. That way you get your heritage consent upfront in a report that forms an attachment to the Agreement as a ‘clearance as at the commencement date’”. It appears there was general consensus to this proposal and parties continued discussions in the following weeks to settle the terms and process for conducting the survey and producing a report. At the conclusion of these discussions it appears to me that each party had a different understanding of the terms and processes that would be followed, and were unaware of this disparity. I believe these differences in interpretation had a significant impact on negotiations (this is considered in greater depth later in this decision).

2. Parties agreed that the heritage survey (‘Agreement Survey’) would be conducted to deal specifically with project operations as set out in a Heritage Impact Assessment Notice (‘HIA Notice’) provided by Sheffield to Mount Jowlaenga on 15 February 2016. On 31 March 2016, KRED and Sheffield executed a letter of variation to the previously executed Thunderbird Project Negotiation Protocol (‘Negotiation Protocol Letter of Variation’). This Letter of Variation acknowledged that Mount Jowlaenga agreed to undertake a heritage survey over the proposed mining lease in regard to the proposed Thunderbird Project operations. Mount Jowlaenga’s contentions state that this was in order to reduce the risk that the terms of the Heritage Protection Agreement might have on Sheffield’s ability to raise finance. The Letter of Variation also stated that, in relation to the heritage survey report produced, ‘Sheffield must not, without the prior written consent of KRED acting on behalf of the Mount Jowlaenga Claimants, disclose to any third party, other than its legal and other advisors, information contained in the Report that is marked confidential.’

3. A heritage survey based on the HIA Notice was conducted between 31 March and 8 April 2016. Mount Jowlaenga also conducted a concurrent survey of Sheffield’s bank feasibility studies activities (‘BF Survey’). The BF Survey was conducted under the terms of a heritage protection agreement executed in 2011 by the Kimberley Land Council and Sheffield relating to the underlying exploration licence held by Sheffield.

4. The BF Survey report was provided to Sheffield on 7 May 2016. Mount Jowlaenga’s contentions state that the Agreement Survey report was not provided to Sheffield at this time due to the fact that Sheffield had not paid invoices issued pursuant to the Negotiation Protocol for two months, and Sheffield had not made any effort to progress the outstanding terms of the draft agreement.

5. The matter was then referred to the Tribunal for mediation assistance, with four joint mediation sessions and two single party sessions being held between June and August 2016. According to Ms Haas’ affidavit, a meeting between KRED and Sheffield was held on 15 June 2016 at which issues regarding the outstanding invoices appear to have been resolved and on 6 July 2016 the Agreement Survey report was provided to Sheffield.

6. A two-day negotiation meeting in Broome between KRED and Sheffield was scheduled for 25-26 July 2016. On 23 July 2016, Sheffield provided a revised draft agreement to KRED (‘July draft agreement’).

7. Mount Jowlaenga contends that the terms proposed by Sheffield in the July draft agreement demonstrate that at this point Sheffield withdrew from previously agreed terms. A primary source of contention in the July draft agreement was Sheffield’s amendments to the heritage provisions, in particular the replacement of any reference to the Heritage Protocol with the term Heritage Survey Report (except, I note, in the definitions section where ‘Heritage Protocol’ remained as a defined term).

8. Mount Jowlaenga’s contentions state that the meeting on 25 July 2016 went ahead, but was cut short by Sheffield after three hours. It contends Sheffield have refused to meet costs invoiced under the Negotiation Protocol since that date.

9. A further revised draft agreement was provided to Mount Jowlaenga by Sheffield on 23 September 2016 (‘September draft agreement’). Ms Haas’ affidavit (at 231) states this draft maintained Sheffield’s withdrawal from key agreed terms, although I note that the September draft agreement now included some references to the Heritage Protocol.

10. Mount Jowlaenga’s contentions state that, prior to receiving the July draft agreement, they were led to believe the only substantive matters left to be agreed upon were the TO Royalty and the business and contracting terms. It acknowledges the outstanding matters on the Parked Issues list, but argues these were not substantive issues. Mount Jowlaenga defines Sheffield’s Agreed Negotiation Position as acceptance of:

    (a)All the terms in the November draft agreement but for the terms marked up by Sheffield at that date, including the applicable TO Royalty and business and contracting provisions;

    (b)The Heritage Terms at clause 13 of the draft agreement and the Schedule 1 Heritage Protocol to the draft agreement (in particular the ‘No Means No’ provisions); and

    (c)Any Agreement Survey report findings becoming a ‘Clearance at the Commencement Date’ under clause 2 of the Schedule 1 Heritage Protocol to the draft agreement.

11. Mr McFadzean, in his affidavit at 82, states the basis for Sheffield’s proposed changes in the July draft agreement were that:

    ·Many of the Parked Issues had not been addressed;

    ·None of the commercial issues had been agreed;

    ·The draft agreement needed to reflect the fact that the Agreement Survey had taken place; and

    ·Sheffield had an increasing concern regarding a lack of transparency in the process.

12. In her affidavit, Ms Lovitt (at 19) states the replacement of ‘heritage protocol’ with ‘heritage report’ in the July draft agreement was an inadvertent result caused by a ‘global change’. She states that the September draft agreement ‘reinstated the Heritage Protocol as an Annexure’ and it had never been intended that the heritage protocol would cease to apply.

13. Mount Jowlaenga’s contentions in reply argue that the evidence clearly shows point made at [63] (a) above to be true. It argues that those commercial terms were to be negotiated in parallel to the Agreement Survey being conducted and that a heritage survey of this nature was an unprecedented and major concession by Mount Jowlaenga. Mount Jowlaenga argues that the July draft agreement is evidence of Sheffield’s abandonment of fundamental agreed terms, and it disputes Sheffield’s justifications for the proposed amendments. Mount Jowlaenga argues that its readiness to complete the Agreement Survey ‘was firmly based on the application of the ‘No Means No’ provisions’ and the ‘attempts by Sheffield to use the completion of the heritage survey to justify amending the draft Coexistence Agreement and to exclude reference to the Heritage Protocol (which contained the ‘No Means No’ provisions) ignored the agreed process on which the Agreement Survey was based.’ Mount Jowlaenga rejects Sheffield’s suggestion that the draft agreement required amending to reflect the fact that a heritage survey had taken place. It argues that clause 2 of the draft Heritage Protocol was expressly for the purpose of recognising prior clearances and provided for heritage reports to be annexed to the agreement for that purpose. I note that clause 2 of the draft Heritage Protocol (as provided to Sheffield on 30 September 2015) states:

    CLEARANCES AT COMMENCEMENT DATE

    The parties acknowledge that, before the Commencement Date, certain activities have been Cleared in specific locations as outlined in the report annexed hereto at [X] (Existing Reports). For the avoidance of doubt, Sheffield Resources is not required to comply with the heritage processes in items 4 to 5 in respect of the particular activities Cleared in particular locations as identified in the Existing Reports.

14. Mount Jowlaenga’s contentions list various pieces of correspondence to Sheffield in which it is explained that the Agreement Survey report will become a ‘clearance at commencement’.

Findings on inducement

1. This decision will later examine in greater detail the operation of the Agreement Survey report and its relation to the draft agreement and Heritage Protocol, but for the purposes of this issue, I will simply consider whether Sheffield breached its good faith obligations by inducing Mount Jowlaenga to produce and provide the Agreement Survey report.

2. As a general comment, Mount Jowlaenga’s contentions fail to particularise why Sheffield’s specific behaviours around this issue amount to a lack of good faith.  Although not explicitly stated, the allegations appear to imply that Sheffield’s behaviour was dishonest, unreasonable and disclosed an intention to deceive. This would, of course, be antithetical to the requirement of open and honest conduct as a key element of good faith negotiations.

3. Mount Jowlaenga’s contentions on this point focus on establishing that Sheffield clearly indicated its agreement to the majority of the terms of the November draft agreement. The contentions detail occasions where Sheffield indicated it agreed to the balance of the terms of the agreement (excluding TO Royalty and business and contracting). It points out instances in which Sheffield described the draft agreement as close to finalisation, presumably an indication that only a few issues remained to be resolved. I am satisfied that, at the time of the November draft agreement both parties felt they were within sight of reaching agreement.

4. However, in my view Mount Jowlaenga’s contentions fail to establish Sheffield’s conduct around this issue as dishonest, deceitful or unreasonable. I do not believe the evidence supports a finding that Sheffield was disingenuous in its request for the Agreement Survey report. It was proposed as a way in which to mitigate any risk posed by the ‘No Means No’ provisions, and there is nothing before me to suggest any ulterior motive.

5. I am also not satisfied there was a clear understanding between parties that the Agreement Survey report was being provided as a trade for Sheffield’s Agreed Negotiation Position. Had this been an explicit agreement between parties, or an undertaking made by Sheffield, a subsequent change in position would generally be unreasonable conduct. In the circumstances of this matter, no agreement or undertaking was made by Sheffield.

6. Mount Jowlaenga contends that once Sheffield received the ‘benefit’ of the Agreement Survey report it changed its position to the ‘detriment’ of Mount Jowlaenga. Sheffield’s contentions argue that the changes it proposed were not to the detriment of Mount Jowlaenga and I agree that Mount Jowlaenga have not clearly articulated any impairment they have suffered as a result. I cannot assume that any change in position on Sheffield’s part is necessarily to the detriment of Mount Jowlaenga. Further, I cannot assume that any change in position that is to the detriment of Mount Jowlaenga is necessarily not in good faith.

7. Western Australia v Taylor identifies shifting position just as agreement seems in sight as indicia of failing to negotiate in good faith. As with all good faith indicia, its application is contextual and I must consider parties’ motives and intent. A shift in position would likely be seen as unreasonable if it was maliciously timed to disrupt or dismantle negotiations, or the change in position was for trivial reasons and unduly prolonged negotiations. In this matter I do not believe Sheffield’s behaviour betrayed ill intent. Negotiations were ongoing with a number of issues still to be resolved and Sheffield was at liberty to put forward its position in a proposed draft agreement. Sheffield’s proposed changes to the draft agreement might have been unsatisfactory to Mount Jowlaenga but I do not believe it was unreasonable or done with deceit or dishonesty.

8. A final comment I have on this contention is that Mount Jowlaenga did not articulate why it would be reasonable to assume that providing the Agreement Survey report to Sheffield was the basis for Sheffield then withdrawing from its Agreed Negotiation Position. In short, I am not satisfied that cause and effect between these two events (which is what has been implied by Mount Jowlaenga) has been demonstrated.

3. Did Sheffield Misrepresent the basis upon which the Agreement Survey was provided?

1. Mount Jowlaenga contends that Sheffield misrepresented the terms upon which Mount Jowlaenga provided the Agreement Survey report. Again, the specifics of this contention and how it amounts to a lack of good faith have not been clearly expressed by Mount Jowlaenga. It appears this contention relates to two ‘misrepresentations’, being: Sheffield’s comments around ‘certainty of funding’; and, Sheffield’s reasons for amending the heritage provisions in the July draft agreement.

Relevant Facts on Certainty of funding and heritage clearance

1. Mount Jowlaenga’s contentions (at 164) state the intention of the Agreement Survey ‘was to give Sheffield certainty on heritage clearances on Mining Operations as proposed under the HIA Notice…’ The contentions then go on to describe a number of statements made by Sheffield at the 11 August 2016 mediation conference regarding heritage clearance and how this affects project finance.

2. Mount Jowlaenga’s contentions point to statements made by Mr McFadzean at that mediation (as quoted in the affidavit of Ms Haas) which communicate that unless Sheffield knew what was cleared, it could not speak to shareholders and seek finance as the project could potentially be blocked under some heritage issues Sheffield was not aware of.  The contentions quote him as saying “the heritage survey was done to allow us to know whether there were any heritage issues that could block the project or part of the project which would change the whole economic outcome of the project and not allowed [sic] finance so in my view we set out to do the clearance for that reason and not for any other reason.”

3. Mount Jowlaenga’s contentions (quoting Ms Haas at 210) argue that at the mediation Sheffield characterised the provision of a heritage clearance as being linked to its ‘certainty of funding’, specifically obtaining offtake agreements. The contentions state that this was contradictory to the earlier position taken by Sheffield that certainty of funding issues were tied to finalising a native title agreement. Specifically, at a negotiation meeting on 29 January 2016, Ms Haas (in her affidavit at 52) recalls Mr McFadzean stating “the sooner we can do the native title agreement, the sooner we can get offtake funding parties and go to the bank for funding.” Ms Haas, at 210 of her affidavit, states that the mediation ‘was the first occasion at which I had heard Sheffield say its certainty of funding issue was only tied to the provision of the heritage clearance.’

4. I find this a tenuous argument that is not supported by the evidence before me. Mount Jowlaenga’s own contentions show that the 11 August mediation was not the first instance at which Sheffield had stated heritage clearance had an economic effect on the project. In his affidavit, Mr Houston states (at 24) that at a meeting with KRED and the Mount Jowlaenga Named Applicant on 11 December 2015 Mr McFadzean spoke about the challenges of raising finance in the current economic conditions and in particular how having the ‘No Means No’ provisions in the agreement would make it difficult to raise capital. Further, in an email from Mr McFadzean to Mr Bergmann (copied to Ms Haas and annexed to her affidavit at HH22) dated 30 March 2016, Mr McFadzean stated ‘[t]he sole reason why Sheffield has elected to conduct heritage clearance work…is in order to minimise the risk posed by the “no means no” provisions of the Agreement which would otherwise limit the ability of Sheffield to obtain finance, and to provide greater certainty going forward.’

Findings on certainty of funding and heritage clearance

1. I am not satisfied that there was a misrepresentation by Sheffield on this point. I accept Sheffield told Mount Jowlaenga its certainty of funding was tied to finalising a native title agreement. However, it is also clear that Sheffield’s concerns regarding the No Means No provisions, and the potential for flow on financial effects, were made known to Mount Jowlaenga early in the proceedings. Sheffield indicated on a number of occasions that the No Means No provision would affect its ability to raise finance so to later describe it as a certainty of funding issue is reasonable in my view.

2. Mount Jowlaenga assert the urgency expressed by Sheffield must not exist as Sheffield never made a request to disclose information contained within the report. Whether finance had in fact been sought, using the findings of the Agreement Survey report, is not relevant.

Relevant facts on heritage provisions amendments

1. Mount Jowlaenga draws attention to the statement by Sheffield that it amended the terms of the heritage provisions in the July draft agreement in order to reflect the completion of the Agreement Survey report. Mount Jowlaenga contends that this is a misrepresentation as the earlier draft agreement already provided for ‘clearances at commencement’, and that these clearances ‘were to be achieved by annexing relevant heritage surveys to the agreement’ including the Agreement Survey report (Mount Jowlaenga Contentions in Reply at 122). This accords with the wording of clause 2 of the Heritage Protocol as quoted at [66].

2. Mount Jowlaenga contend that Sheffield removed the Heritage Protocol from the draft agreement. From the evidence before me I can see that the Heritage Protocol was provided to Sheffield as a separate Word document on 30 September 2015. I have reviewed the various versions of the draft agreement exchanged by parties however I am unable to find a time at which the Heritage Protocol was inserted into the draft. Therefor the contention that Sheffield removed it does not follow. It is apparent that Sheffield removed reference to the Heritage Protocol in the draft agreement so I will frame this issue on that basis. Mount Jowlaenga contends that, by removing any reference to the Heritage Protocol in the July draft agreement, Sheffield withdrew from the application of the No Means No provisions (as they were contained within the Heritage Protocol). Mount Jowlaenga’s contentions in reply state it relied on the application of the No Means No provisions when it agreed to produce the Agreement Survey report therefore it would not have agreed to produce the report if Sheffield did not agree to the No Means No provisions.

3. Sheffield has sought to explain its removal of references to the Heritage Protocol in the July draft agreement as an ‘inadvertent result’ of a ‘global change’. Mr McFadzean, in his affidavit at 109, states that in the wake of this ‘drafting error’ Sheffield met with KRED and explained ‘what Sheffield’s true intentions were in relation to the heritage protocol’. Mr McFadzean does not elaborate on the explanation provided to KRED at that meeting. However, I note the affidavit of Ms Haas provides a reasonably detailed version of discussions held. Ms Haas’ affidavit (at 194-195) recounts Mr McFadzean stating that Sheffield’s amendments in the July draft agreement were “not material”. At this point Ms Haas challenged Mr McFadzean’s characterisation, querying how he could consider the amendments not material when “the entire Schedule 1 Heritage Protocol including ‘no means no’ had been removed from the Agreement.” Ms Haas recounts Ms Lovitt then stating “the changes to the heritage clauses are simply to reflect the fact that the Survey has been done.”

1. In his affidavit at 109, Mr McFadzean states the September draft agreement, which replaced the July draft agreement, ‘more accurately reflected Sheffield’s intentions, retained the reference to a heritage protocol and… provided additional comments explaining the reason for the other changes made by Sheffield.’ Mr McFadzean has annexed a copy of the September draft agreement to his affidavit which confirms that references to the Heritage Protocol were reinserted. However, Mount Jowlaenga have argued the wording proposed by Sheffield in this later draft would still significantly alter the way in which the Agreement Survey report operated under the Heritage Protocol and is not consistent with the terms Sheffield agreed to under the Negotiation Protocol Letter of Variation.

2. Ms Haas, in her affidavit at 232, states the September draft agreement provided by Sheffield now sought to limit the application of the Heritage Protocol to ‘Uncleared areas’ (being those areas not yet surveyed). Ms Haas argues Mount Jowlaenga undertook the survey on the understanding they were conducting an activity survey, as per the terms of the Negotiation Protocol Letter of Variation and the HIA Notice provided by Sheffield. She states that Sheffield’s September draft agreement sought to retrospectively redefine the basis on which the Agreement Survey was conducted so that it provided area clearance, rather than clearance of the activities specified in the HIA Notice. She also argued that this would render the Heritage Protocol ‘almost entirely redundant’ given the whole mining operations area of the proposed lease was under consideration in the Agreement Survey.

3. In considering this issue, I do not find Sheffield’s explanation of the ‘drafting errors’ particularly compelling. There are a number of drafting comments in the document to accompany the tracked changes, for instance at 13.2(a) of the July draft agreement, the reference to ‘Heritage Protocol’ has been replaced with ‘Heritage Survey Report’ and is annotated by a drafting comment that states ‘Reflects that a Heritage Survey Report is now in place.’ Later, at 13.2(d)(i) a similar change is annotated with the comment ‘Survey Report supersedes protocol.’ In my view this indicates the amendments were not inadvertent changes but intentionally made with reasoning provided.

4. Sheffield’s position that the draft agreement required amending to reflect the completion of the Agreement Survey, is not supported by the evidence and in my mind signals a misunderstanding by Sheffield. The Heritage Protocol acknowledged clearances at the commencement date and stated cleared activities from existing reports would be exempt from the heritage process. I agree with Mount Jowlaenga that the wording subsequently proposed by Sheffield in the September draft agreement fundamentally altered the way in which the Agreement Survey report and Heritage Protocol would operate.

5. This leads me to consider Sheffield’s motivation for these amendments and whether its actions would constitute a misrepresentation as alleged by Mount Jowlaenga, or a breach of its good faith obligations. Mount Jowlaenga’s contentions in reply state that Sheffield’s actions demonstrate an attempt to leverage its position following the provision of the Agreement Survey report. It states the only reason for amending the draft agreement after the completion of the Agreement Survey, or for removing reference to the Heritage Protocol ‘would be to either take advantage of the clearances in the heritage survey without authorisation by the Claim Group or to avoid the ‘No Means No’ provisions of the protocol’ (Contentions in reply at 155).

6. I do not believe there is a strong case to show that Sheffield acted in order to avoid the No Means No provisions. From the outset, the reason for Sheffield agreeing with the upfront survey was to ensure the inclusion of the No Means No provisions did not mean risking a situation where the project was blocked by a heritage concern held by Mount Jowlaenga at some point in the future. Annexed to Ms Lovitt’s affidavit is a table from the 11 December 2015 meeting between parties outlining ‘Traditional Owner Issues’ and ‘Sheffield Response’. Ms Lovitt’s notes record item 2 on the agenda to be ‘No Means No’ with Sheffield’s response being ‘a survey of the entire area where mining and construction of infrastructure on the mining lease is to be carried out before the Agreement is signed. This will de-risk the implications of the “no means no” rule.’ In my mind this wording suggests that Sheffield was acting on the basis that the No Means No provisions were to remain. If Sheffield’s intention was to avoid these provisions in their entirety I see no reason why it would have agreed to, and paid for, an upfront survey.

7. I have also considered Mount Jowlaenga’s suggestion that Sheffield was seeking to take advantage of the clearances in the Agreement Survey report without authorisation by the Claim Group. I fail to see, and Mount Jowlaenga has not articulated, what advantage Sheffield might gain in this situation. Sheffield required an upfront survey so that, when seeking funding, they could confidently tell financiers what risk, if any, the No Means No provisions posed to the project. If agreement was reached, and the No Means No provisions applied, any ‘risk’ they posed had arguably been managed. If agreement was not reached by parties, as has ultimately been the case in this matter, then the No Means No provisions would not apply[8] meaning there is no risk of a veto by Mount Jowlaenga at some point in the future and the clearances in the Agreement Survey report provide little ‘advantage’ to Sheffield. Although not contended by Mount Jowlaenga, there could be an argument that the Agreement Survey report may be used in support of any future s 18 applications made by Sheffield over the area. However, I believe in those circumstances Mount Jowlaenga would almost certainly object to such an application and it would be for the Minister or committee to determine what weight they give to an unauthorised report.

   [8] If my determination is that the act can be done, unless the determination is that the act can be done subject to a condition that the No Means No provisions apply, a condition which has not been proposed by any party.

8. There remains a further reason as to why Sheffield would make the amendments it did, and that is there was a fundamental misunderstanding between parties regarding the terms of the Agreement Survey report and how it would operate within the agreement. I am satisfied it was outlined to Sheffield, in both verbal and written correspondence, that the Agreement Survey would provide clearances for activities (rather than areas) outlined in the HIA Notice. For example, the Negotiation Protocol Letter of Variation states that a heritage survey will be conducted for the ‘Project Operations’ the subject of the HIA Notice. However, there does appear to be some indication in the material before me that Sheffield did not fully appreciate this position. There are references within Sheffield’s contentions to the survey being conducted over the mining area (for example at 37, 121), and Sheffield has maintained its position that the draft agreement required amending to acknowledge the Agreement Survey. I also note a power point presentation given by Sheffield at a meeting with KRED and the Mount Jowlaenga Named Applicant on 9 March 2016, and then given to the Mount Jowlaenga survey team on 31 March 2016. At several points throughout this presentation it refers to heritage clearance being required for the ‘Operations Area’. Slide 32 of this presentation explicitly refers to cleared areas (rather than activities) stating:

   Results of the Heritage Clearance will be a part of the Agreement

   ·Exclusions Areas “No means no”

   ·Cleared Areas “Yes means yes”

   -Project Operations have heritage clearance to proceed

   -Operations cannot be prevented from continuing

9. At no point in its contentions has Sheffield directly addressed this discrepancy. Rather it has maintained the draft agreement required amending in order to reflect the Agreement Survey having taken place. Had Sheffield been an unrepresented or inexperienced party, it would be easier to conclude that an inadvertent misunderstanding occurred. However, Sheffield does not fall into either category. It had a number of experienced legal and mining professionals involved in the negotiations and had prior experience with activity clearance surveys through work done on the underlying exploration licence. The number of Sheffield representatives involved in the negotiations and drafting might in fact have been the cause of the problem.

Findings on heritage provisions amendments

1. Overall, I am not satisfied that Sheffield’s actions constitute an intentional misrepresentation and instead I believe it was a case of parties being at cross purposes. I do not believe Sheffield had anything to gain from being in receipt of the Agreement Survey report in the absence of an agreement with Mount Jowlaenga and I do not believe its intention was to obfuscate the issue. This is still a somewhat unsatisfactory conclusion as I believe Sheffield had sufficient experience and information to understand the terms of Agreement Survey put to it by Mount Jowlaenga. It is unfortunate that this misunderstanding was not identified early in negotiations, as I believe parties would likely have been able to rectify the issue and reach a mutually agreeable outcome. However, by the time it became apparent, the relationship between parties was already strained.

4. Did Sheffield seek to use the Agreement Survey report inappropriately?

1. The parties have differing views regarding the terms upon which the Agreement Survey report could be used. Mount Jowlaenga contend that the design of the heritage survey, being to provide clearances at the commencement date of the agreement, meant the heritage status of the proposed mining operations could only be ascertained by Sheffield and any of its financiers once the Coexistence Agreement was authorised by the Mount Jowlaenga Claim Group. In reply, Sheffield argue that it was advised by Mount Jowlaenga the proposed heritage clearance process would give Sheffield certainty of exclusion areas. Sheffield’s contentions state (at 135) that in order for it to approach potential financiers, this certainty ‘could not, and should not, be conditional upon the execution of the Agreement, the timing of which was unknown.’

Relevant facts on the use of the Agreement Survey Report

1. Sheffield contend the basis on which the Agreement Survey was to be undertaken was outlined in the Negotiation Protocol Letter of Variation, specifically at clause 9.3(f) which provided:

   For the avoidance of doubt, in the absence of native title consent to the Titles provided by way of properly authorised Agreement and deed agreed pursuant to section 31 of the Native Title Act, any decision of the Survey Team to Clear of Clear with Conditions the Project Operations must not be construed by Sheffield as constituting native title consent to the grant of the Titles or the Project Operations.

2. Sheffield states it was important that it be able to rely on the Agreement Survey report as soon as it was provided in order to commence discussions with financiers and at no time did it agree to the report being made conditional upon the execution of the Coexistence Agreement.

3. In reply, Mount Jowlaenga argues that Sheffield’s reliance on clause 9.3(f) to support its argument paints an incomplete picture. It points to an earlier proposal from Sheffield for the wording of this clause which stated:

   For the avoidance of doubt, no Project Operations which have been Cleared or Cleared with Conditions may commence until after authorisation of the Agreement.

4. Mount Jowlaenga contends this shows Sheffield always understood the Agreement Survey did not itself constitute clearance and this could only be provided after the Coexistence Agreement was authorised by the Mount Jowlaenga claimants.

5. I disagree with Mount Jowlaenga’s contention on this point. In my mind this proposed change to the draft Letter of Variation reinforces Sheffield’s contention that it always maintained it needed to be able to rely on the Agreement Survey report prior to finalising the Coexistence Agreement. There is nothing in this proposed wording, or in the wording that was eventually agreed to by parties, that suggests Sheffield is prohibited from using the report for other purposes (such as seeking finance)[9], rather it acknowledges that consent to the grant of the lease, in the form of an authorised agreement, is still required.

   [9] Subject to the condition regarding information marked ‘confidential’ referred to at [55]

6. An exchange of emails between Mr Bergmann and Mr McFadzean, which I believe to be of particular significance to this issue, occurred in the context of parties drafting the Negotiation Protocol Letter of Variation. Mr Bergmann emailed Mr McFadzean on 30 March 2016, stating:

   a.   It is proposed that the findings of the Survey Team be incorporated into the draft Thunderbird Project Coexistence Agreement (Agreement). If the Mount Jowlaenga #2 Named Applicant instructs KRED to call an authorisation meeting of the native title claim group to decide whether or not to authorise the Agreement as a whole, thereby giving native title consent to the grant of the lease. Therefore a ‘yes’ vote of the native title claim group at the point of authorisation will have the effect of ratifying the Survey Team’s findings (amongst other things).

   b.   I note that the survey in relation to M04/459 cannot proceed unless it is abundantly clear and agreed by all parties that in the absence of an authorised Agreement, the Survey Team’s findings alone are in no way to be construed as a replacement for, or the properly authorised consent of, the Mount Jowlaenga #2 claim group to the grant of the mining lease 04/459 under the Mining Act 1978 (WA) nor to the Project Operations.

7. Mr McFadzean responded to Mr Bergmann on the same day (30 March 2016) stating:

   a. Other than to acknowledge that the survey has taken place and for the purposes of making the definition of “Exclusion Areas” more meaningful, we see no need for the findings of the Survey Team to be incorporated into the Agreement, as the providing of consent to the grant of the future act under the Native Title Act is in no way dependant on heritage clearance having first been undertaken. The sole reason why Sheffield has elected to conduct heritage clearance work, at its considerable cost, at this stage is in order to minimise the risk posed by the “no means no” provisions of the agreement which would otherwise limit the ability of Sheffield to obtain project finance, and to provide greater certainty going forward.

   b.   Sheffield fully understands the difference between heritage clearance and native title consent and understands that the providing of heritage clearance under the Heritage Act does not constitute the consent of the Native Title Party to the grant of the Titles or the Project Operations. That said, Sheffield needs absolute certainty in relation to heritage clearance and needs to be able to rely on the Reports as conclusive evidence of the extent of Project Operations which have been Cleared, Cleared with Conditions or Not Cleared, as applicable. If there is any suggestion that the Report cannot be relied upon as conclusive until such time as the Agreement has been signed, or until the Report is ratified by a group other than the Survey Team, then this is not acceptable.

8. There does not appear to have been any further email communication on this issue. However, on the following day (31 March 2016) Sheffield met with KRED and the Heritage Survey Team in Broome. Ms Haas, in her affidavit at 104, recalls Mr Bergmann addressing Mr McFadzean’s email from the previous day at that meeting, stating:

   “To be clear – it isn’t open to the claim group to change the clearances of the Survey Team at the authorisation meeting on the Agreement. It’s just as we’ve discussed at the meeting that the Heritage clearance is subject to the Heritage Protocol, so it comes into effect only at the point of a claim group vote in favour of signing the Agreement as a ‘clearance at the commencement date.”

   Ms Haas quotes Mr Groeneveld responding “We understand that. We are on the same page…”

9. However, put simply, I do not believe parties were on the same page at this point. Based on the contentions, it appears that from this moment forward there was a significant disconnect between parties regarding how the Agreement Survey was going to be used, and this was not constructively identified and addressed at any point during subsequent negotiations.

10. Sheffield note the ‘condition’ that Mount Jowlaenga included as a header on each page of the Agreement Survey report it provided. Both in the affidavit of Mr McFadzean (at 79) and in Sheffield’s contentions the ‘condition’ is quoted as follows:

    The provision of this Report and the conclusions, recommendations and clearances contained within it are subject to execution of and compliance with an ancillary agreement (between Sheffield Resources Ltd and the Registered Native Title Claimants for the Native Title Claim) to the deed for the grant of mining lease 04/459 (Ancillary Agreement) and must be read and interpreted in conjunction with the Ancillary Agreement.

    Sheffield argues it never agreed to such a condition and in fact had indicated such a condition would be unacceptable to it.

11. Annexed to Mr McFadzean’s affidavit is the cover page of the Agreement Survey report which shows that the wording of the ‘condition’ is actually as follows (underlining in original):

    THIS DOCUMENT IS STRICLTY CONFIDENTIAL.

    THE INFORMATION IN THIS DOCUMENT PROVIDED BY THE MEMBERS OF THE MOUNT JOWLAENGA #2 NATIVE TITLE CLAIM WC2014/005; WAD331/2014 (‘THE NATIVE TITLE CLAIM’) REMAINS THEIR INTELLECTUAL PROPERTY. ALL HERITAGE CLEARANCES OR NON-OBJECTIONS CONTAINED IN THIS DOCUMENT ARE SUBJECT TO AND CONDITIONAL UPON THE EXECUTION OF AN ACILLLARY AGREEMENT (BETWEEN SHEFFIELD RESOURCES LTD AND THE REGISTERED NATIVE TITLE CLAIMANTS FOR THE NATIVE TITLE CLAIM) TO THE DEED FOR THE GRANT OF MINING LEASE 04/459 (‘ANCILLARY AGREEMENT’) AND MUST BE READ AND INTERPRETED IN CONJUCTION WITH THE ANCILLARY AGREEMENT.

Findings on the use of the Agreement Survey Report

1. Although I am not prepared to make any adverse finding against Sheffield for this, it does concern me that Sheffield’s contentions and the sworn affidavit of Mr McFadzean are inaccurate in this regard. That issue aside, I can see that Sheffield would find the inclusion of this statement provocative, given the 30 March 2016 email. On the other hand, I understand Mount Jowlaenga’s position that the Agreement Survey report was produced on the basis that there would be agreement, not that it was a separate contract for service.

Findings on the use of the Agreement Survey Report

1. Overall I believe the contentions and evidence around this issue are indicative of an overarching theme in these negotiations, being that there was disparity between parties regarding how the Agreement Survey report would function and how this should be reflected in the Coexistence Agreement and Heritage Protocol. I note Mr Bergmann’s comment, in his affidavit at 17, that an upfront survey of this kind was ‘unprecedented’ for Mount Jowlaenga which may support the conclusion that parties were exploring new territory and the rules were not as clear as they might be. I believe that, had parties taken more time at the early stages of negotiations to discuss their understandings of the terms more fully, much angst may have been avoided. As it stands I am of the view there is equal blame across parties for creating this situation. The knowledge and experience that was present on both sides of the negotiation table should have meant that more care was taken in communicating this issue and ensuring there was consensus between parties.

1. It seems reasonable that Sheffield would have an interest in keeping residents at the Bidan Community informed on the Thunderbird Project, given their proximity to the site. It appears this was not an isolated occasion, rather, meetings had been held dating back several years. In considering the contentions and evidence on this issue I am mindful that the onus of establishing a failure to negotiate in good faith rests on the native title party. The accounts provided by Mr Groeneveld and Ms McMahon of the 25 August meeting differ somewhat in terms of the information disclosed. Namely, Mr Groeneveld claims that royalty negotiations were only ever discussed in broad and general terms, rather than disclosing specific rates, as stated by Ms McMahon. As such, I find Mount Jowlaenga has not sufficiently met its evidential burden for me to be satisfied Sheffield disclosed confidential aspects of the negotiations. However, I do not believe Sheffield are entirely faultless on this issue. In providing an example of a ‘typical royalty range’ Sheffield would no doubt be using figures that reflect their preferred approach, which could be seen as manipulative. The Negotiation Protocol expressly precludes parties disclosing confidential information without the consent of the other party. While I am not satisfied Sheffield did disclose confidential information, more attention could have been paid to the sensitive nature of their negotiations with Mount Jowlaenga.

14. Did Sheffield refuse to pay amounts owing to Mount Jowlaenga?

1. Mount Jowlaenga contend that Sheffield refused to pay amounts incurred by it after 25 July 2016. Mount Jowlaenga contend these amounts were to be paid by Sheffield under the terms of the Negotiation Protocol. Mount Jowlaenga’s contention and evidence imply that the date of 25 July 2016 is significant as it correlates with the offer made by Sheffield (whereby it ‘abandoned its agreed negotiation position’).

Relevant facts on refusal to pay

1. Mr Bergmann wrote to Mr McFadzean on 13 October 2016 stating ‘in the absence of any reasonable basis for the objections to meeting the costs of the attendances as outlined above, it would appear that Sheffield is intentionally exerting pressure on Mount Jowlaenga to provide native title consent to the Project…’. Were a party shown to be behaving in this manner, I would likely find this to be unreasonable and unconscionable behaviour, therefore not in good faith.

2. The affidavit of Mr Groeneveld states that invoices incurred after 25 July 2016 have not been paid as they primarily relate to matters not covered by the Negotiation Protocol. In an email he sent to KRED’s financial officer on 27 September 2016 he has outlined a number of costs (relating to before and after 25 July) in relation to which Sheffield were either disputing or requesting further information. Mr Groeneveld stated ‘we need more clarity around the costs post the 25/7/2016 meeting ($2,046.00). We haven’t been given any information or been provided with any detail as to what they relate to.’ Annexed to the affidavit of Ms Haas is the response sent to Mr Groeneveld on 5 October 2016. Mr Groeneveld makes no reference to this response in his affidavit (and in fact states that no response was received). As such, it is unclear if this information resolved the issue from Sheffield’s perspective. It does not appear to be disputed that these costs had not been paid at the time the s 35 application was lodged.

Findings on refusal to pay

1. Based on the evidence I am not satisfied that Sheffield failed to negotiate in good faith through not paying the costs invoiced by KRED following the 25 July meeting. Sheffield did raise concerns regarding the costs (as they had done on a number of occasions for earlier invoices) and I see no reason to doubt the validity of these concerns. I am not in a position to determine whether the outstanding invoices were valid and reasonable. I also consider it unlikely that Sheffield’s response was maliciously timed given negotiation costs was an ongoing issue between parties predating the 25 July meeting.

15. Did Mount Jowlaenga encourage activist intervention?

1. As already mentioned in this determination, the behaviour of the native title party is a relevant consideration in the context of a good faith inquiry. In situations where it can be shown that a native title party has failed to negotiate in good faith, this may lower the bar of behaviour required by the grantee party to satisfy its good faith obligation. Sheffield have made a number of contentions which allege Mount Jowlaenga failed to negotiate in good faith.

Relevant facts on encouraging intervention

1. The affidavit of Mr McFadzean refers to an email he was copied into, sent by Mr Bergmann to Ms Anne Poelina, a ‘local traditional owner and environmentalist’. The email is the last of a series initiated by Sheffield on 10 August 2016 regarding a ‘Derby Community Information Session Thunderbird Mineral Sands Project’ which had apparently been received by Ms Poelina. Ms Poelina forwarded the email to Mr Bergmann and Mr Parriman (amongst others) asking ‘will anyone be attending this?’ Mr Parriman said in reply that he had already attended a session and would find out if ‘there is anything additional that makes it worthwhile attending’. Mr Bergmann responded to the email group saying: ‘Anne it would be good to ask more questions about Sheffield about there (sic) cultural and environmental management plans. Bruce McFadzean is the CEO of Sheffield. … We are in the process of writing to the federal minister about this.  Has Sheffield respond (sic) to your email?’ 

2. Mr McFadzean provided a detailed email to Ms Poelina on 11 August 2016 and copied it to the others in the chain, describing the purpose of the presentation and some comments about Sheffield’s cultural and environmental plans. By email on the same day, Ms Poelina thanked Mr McFadzean for his response noting that ‘this is not development at all cost and so the environmental impacts as well as cultural and economic impacts need to be fully explored’.  Also on 11 August 2016 Mr Bergmann again emailed Ms Poelina and Mr McFadzean (and cc’d Ms Hass) stating:

   Hi Anne

   To be clear KRED is seeking instructions from the Named Applicant, because of the change in Sheffield position.
   We will need to start to inform the wider Traditional Owners of the current situation with Sheffield and the State.
   Sheffield has changed agreed terms, including deleting the “precautionary principle”. They have gone back on their word and I feed (sic) cannot be trusted.  I feel this is going to be a repeat of James Price Point dispute where the State and Sheffield will try to compulsory acquirer (sic) our interest without our consent. 
   In the draft Agreement, Sheffield has made changes to agreed terms, which has made the currents (sic) terms the worst agreement in the Kimberley. Even the James Price Point Agreement with the State gave traditional Owners greater say over what can and cannot happen on country. It takes us back to the 1970 (sic) when we had no say over develop (sic). As you are aware, our senior men have dreamtime stories about the significance of the Bibby (sic). The stories are fundamental to Nyikina identity and men’s cultural business.
   I disagree with Sheffield’s characterisation of the benefits of this agreement to traditional owners.
   I will catch up with you when we are both back in Broome.
   Regards

   Wayne

3. Mr McFadzean says at [90] that: ‘In my view this was totally unfounded and an attempt by Wayne Bergmann to encourage opposition to the Project on environmental grounds.’

4. On instructions, Ms Lovitt wrote to Mr Bergmann on 24 August 2016 characterising his behaviour as unprofessional conduct and acting in breach of the Negotiation Protocol.

5. Mr Bergmann responded to Ms Lovitt’s letter on 25 August 2016 by denying the ‘encouraging environmental opposition’ allegation, and asking Sheffield to advise the basis upon which the allegation is made.

Findings on encouraging intervention

1. In his affidavit, Mr Bergmann states that Ms Poelina is a director of WAC and one of the key affected native title holders in respect of the Thunderbird Project access licences (being miscellaneous licences L04/82 and L04/83). Mr Bergmann states that his 11 August 2016 response corrected the positions that Mr McFadzean had misrepresented. I do not believe this adequately summarises the correspondence, nor does it entirely justify it. There are a number of statements made by Mr Bergmann, such as the suggestion of compulsory acquisition, which could be seen as provocative. There is nothing in the material that suggests this was a possibility entertained by Sheffield, or even capable of execution. Given this, it is difficult to see these comments as being in the spirit of good faith. This behaviour is therefore marginally relevant to my consideration of Sheffield’s behaviour in relation to good faith.

16. Did Mount Jowlaenga engage in commentary damaging to Sheffield’s credibility?

Relevant facts on damaging commentary

1. Single party Tribunal mediation sessions were held on 23 August 2016.  In his affidavit, Mr McFadzean says that while Ms Hass was attending the single party session for Mount Jowlaenga, Mr Bergmann was ‘denigrating Sheffield to an ABC Kimberley radio journalist’. 

2. Ms Lovitt, on instructions, wrote to Mr Bergmann on 24 August 2016 saying ‘Sheffield is also extremely concerned at the conflict of interest which you have engaged in by communicating with the media in your capacity as Chairman of Walalakoo Aboriginal Corporation in relation to the status of the Thunderbird negotiations at a time when you are also acting as Chief Executive Officer of KRED who represents the Mount Jowlaenga #2 applicants.’

3. On 25 August 2016, ABC Kimberley Radio broadcast an interview with Mr Bergmann.  The interview had been conducted on 23 August 2016. In his affidavit Mr McFadzean says that Mr Bergmann referred to the Thunderbird Project ‘and stated, among other things, “there is no firm commitment for jobs and employment” and “the company has let us down on every step of the way”.  Annexed to Mr McFadzean’s affidavit is a document headed ‘Key Comments Extracted from Media Monitoring, August 2016’. It appears to be a transcript from a broadcast aired on Radio ABC Kimberly on 25 August 2016. The transcript states that TOs have pulled out of negotiations over a potential mining project; it refers to Sheffield and the Thunderbird Project and says that Wayne Bergmann who is representing the Walalakoo Traditional Owners group says that he is disappointed with how the company has conducted itself: “There are a number of unresolved issues with the impact on our land, we have high cultural values, there is no firm commitment for jobs and employment and so far to date the company has let us down every step of the way” –Wayne Bergmann’.

4. In his affidavit, Mr McFadzean says ‘this unilateral conduct by KRED was of great concern to me not only as KRED is in breach of the negotiation protocol … but it was also deliberately misleading and damaging … and part of a campaign to damage Sheffield’s credibility.

Findings on damaging commentary

1. I have considered Sheffield’s contention that KRED (or more specifically Mr Bergmann) engaged in commentary designed to damage Sheffield’s credibility. In circumstances where trust has evaporated (as I believe was the case at this point in time) the suggestion by Sheffield is understandable.  However, Mr Bergmann does not identify himself in the broadcast as CEO of KRED nor as representing Mount Jowlaenga.  His status appears to be as a representative of WAC.  Mr Bergmann is a Nyikina Mangala man.  If his comments are as a Traditional Owner and as a Nyikina Mangala representative, then it is arguably the WAC issue concerning access rather than the draft agreement with Mount Jowlaenga that he is talking about. On that analysis it might be open to conclude that Mr Bergmann was perhaps mischievous (and therefore not modelling ideal negotiating behaviour) rather than coordinating a structured campaign.

17. Did Mount Jowlaenga’s representative have a conflict of interest?

1. Sheffield highlight a number of behaviours and statements made by Mr Bergmann in his separate capacities as CEO of KRED and Chairman of WAC. Sheffield contend that Mr Bergmann improperly used his position of power as Chairman of WAC to influence the negotiations in this matter. Sheffield have also implied that the relationship between BGC and KRED (specifically, Mr Bergmann) was in some way improper. The overall subtext of Sheffield’s contentions is that Mr Bergmann’s behaviour was more personal than professional and constituted a conflict of interest.

Relevant facts on conflict of interest

1. Evidence to support this contention provided by Sheffield includes an email sent by Mr Bergmann to Sheffield on 24 August 2016. Mr Bergmann states ‘I am not going anywhere. This is my home and I will do what it takes to make companies like you treat us with respect’. 

2. Mr Bergmann defends this statement at 36 of his affidavit, saying ‘I confirm that it reflects Mount Jowlaenga and WAC’s joint position and instruction that they will not back down from fundamental principles underpinning their native title consent in the face of Sheffield’s conduct’. Mount Jowlaenga’s contentions in reply address the complaint of Sheffield that the tone of Mr Bergmann’s correspondence had been hostile, explaining that it must be read in the context of the negotiations at that time. It is clear that by August 2016 the relationship between parties was highly acrimonious. The majority of correspondence appears to be accusatory in nature and there was a high degree of mistrust.

3. On 22 August 2016, Mr Bergmann (on behalf of WAC) sent Sheffield a letter stating that Sheffield’s Night Train prospect sits within the Nyikina Mangala native title determination (the area WAC is responsible for). He states that ‘[o]ur members are also Native Title claimants of the Mt Jowlaenga claim’. He then states:

   This letter is to formally advise you that whilst there is no native title agreement in place with Sheffield and the relevant native title holders over its Thunderbird project, Walalakoo withdraws its consent and support for all Sheffield projects within the Nyikina Mangala native title determination area. If you attempt to access our traditional land without our consent we will be forced to protect our rights.

4. Ms Lovitt on behalf of Sheffield wrote to Mr Bergmann on 24 August 2016 addressing the issue of confusion around WACs withdrawal of support. She stated it was without legal basis and a tactic which demonstrates a lack of good faith and a conflict of interest between Mr Bergmann’s role as Chairman of WAC and CEO of KRED representing Mount Jowlaenga.  It is clear this further eroded the already strained relationship between the negotiating parties. 

5. In a response to Sheffield, dated 25 August 2016, Mr Bergmann addresses Ms Lovitt’s letter of 24 August 2016, saying:

   ‘I have no conflict of interest in my capacity as CEO of KRED and Chairman of Walalakoo Aboriginal Corporation. Quite the contrary. Notwithstanding the fact that many Mount Jowlaenga and Nyikina Mangala Traditional Owners have shared cultural heritage over the native title lands affected by Sheffield’s tenure, the Mount Jowlaenga People and the Walalakoo Aboriginal Corporation have repeatedly shown their alignment and cooperation in respect of protecting their native title rights and interests in the face of resource developers who do not engage in a respectful or an open and transparent manner and they will continue to do so.’ 

6. In my view I do not believe this really explains away the perceived conflict. It comes across as an individual response rather than a representative response. I also note there is nothing in the material before me which suggests Mr Bergmann was acting on instructions. In the circumstances I believe this is somewhat problematic. Perhaps the question is whether some objectivity (on both sides) was lost by this point in negotiations, and the best interests of the parties was also lost in the process. A s35 application for many reasons is seemingly not in the best interests of either party.

Findings on conflict of interest

1. I do not believe there is any strong evidence to show a conflict in the ICRG-BGC-KRED relationship. I believe Sheffield raising the issue of ‘transparency’ with KRED, without simply stating its concerns about KRED’s business relationships, in some ways created a defensive dynamic between the two parties which was not conducive to good faith negotiations.

2. I find the perceived conflict in relation to Mr Bergmann’s roles without further explanation is marginally relevant to my consideration of the behaviour of Sheffield in relation to good faith.

18. Was the overall behaviour of the parties reasonable in the circumstances?

1. Member Lane noted in Western Australia v Dimer at p 26, all parties are required to adhere to the same standard of negotiating behaviour, but what they do to satisfy that obligation must be judged by reference to the interests that they seek to advance in the negotiation, the behaviour of the other negotiation parties, and the circumstances in which the negotiation takes place. Member Lane at [103] says that the final of the 18 ‘Njamal indicium’ outlined in Western Australia v Dimer (failure to do what a reasonable person would do in the circumstances) seems to express the overarching obligation imposed by s31(1)(b) to act honestly and reasonably with a view to reaching an agreement on whether or not the act should go ahead. In this context it is relevant to consider the conduct of the parties, viewed as a whole, and having regard to the individual circumstances of the parties.

Relevant facts on parties’ overall behaviour

1. It appears that Mr Bergmann first raised concerns about his relationship with Mr McFadzean in a phone conversation with Mr Burbury on 3 March 2016.  Mr Burbury’s file note of the conversation (annexed to his affidavit) records ‘Wayne started off by saying that he thought he was going to end up having a blue with Bruce McFadzean and so he wanted to have a chat with me’. At 15 Mr Burbury says that Mr Bergmann ‘seemed to think’ that when Mr McFadzean met with BGC at ICRGs offices, Mr McFadzean had questioned the capacity of ICRG/BGC to help Sheffield. Mr Bergmann told Mr Burbury he did not agree with this.  Mr Burbury says at 15 that Mr Bergmann said ‘he wanted to keep out of the discussions with Sheffield and ICRG in order to avoid conflict’, however he wanted Mr Burbury to meet with Jeffrey McGlinn of ICRG.

2. The direct relationship between Mr McFadzean and Mr Bergmann seemed to sour from 11 or 14 March.  Mr McFadzean reports a conversation he had with Dr Rudenno at the Broome airport on 11 March 2016, following a meeting with KRED earlier that day. Mr McFadzean recalls Dr Rudenno asking if he knew what the connection between KRED and ICRG or BGC was. In his affidavit at 38, Mr McFadzean recalls saying to Dr Rudenno ‘the only connection that I was aware of was that Clinton Wolf was, at that time, both the Chairman of ICRG and of a company called Aboriginal Maritime Pty Ltd of which Wayne Bergmann is Managing Director.’ This conversation was fed back to Mr Bergmann and precipitated a reaction of suspicion from him. This suspicion was reciprocated by Mr McFadzean who expressed the perception of a ‘veiled threat’ of environmental objection contained in comments from Mr Bergmann that non-guaranteed contracts does not allow the TO leadership group to counter opposition from some TOs.

3. Sheffield’s contentions (at 74) state: ‘Later that same morning, 11 May 2016, Wayne Bergmann replied by email to Bruce McFadzean. In Sheffield’s view the tone of that email was hostile and the statement that “I can’t help but feel your approach to the negotiations this year has soured what was previously a very positive relationship between Sheffield and the TOs” was without basis.’ 

1. I presume that Sheffield’s concern here is with the suggestion that the ‘souring’ is the fault of Sheffield. I also note that Mr Bergmann had spoken to Mr Burbury two months earlier on 3 March 2016 saying ‘he thought he was going to end up having a blue with Bruce McFadzean …’. Presumably Mr Bergmann saw this as the fault of Mr McFadzean and not mutual.

2. As mentioned above, Mr McFadzean (at 57) says that the tenor of Mr Bergmann’s response (to McFadzean’s email of 28 April 2016) on 29 April 2016 was abrupt ‘and seemed to suggest that I had not made myself available to meet …’.  The 28 April 2016 email from Mr McFadzean said that he would like to meet with Mr Bergmann as soon as possible to discuss additional issues which had become pressing.  The response from Mr Bergmann says ‘I note, your statement of being available to meet with me’ then noting that Mr McFadzean had been in the Kimberley and that McFadzean was unavailable when Bergmann had made time available. 

3. In my view by this time, both Mr McFadzean and Mr Bergmann seem sensitive and ready to assume negative intentions or inferences. 

4. Mr McFadzean (at 58) lists the occasions between early February 2016 and late March 2016 where he ‘attempted to meet in person or speak by telephone’ with Mr Bergmann.

5. I note that of those five occasions listed they did meet twice and one was the postponement of a meeting that did occur.  This leaves a 1 March 2016 arrangement which was cancelled by Mr Bergmann and a 28 March 2016 suggested meeting where Mr Bergmann did not respond.  This does not suggest to me a pattern of behaviour of avoidance.

6. Mr McFadzean and Mr Bergmann did eventually meet on (Saturday) 14 May 2016 in Broome.  Mr McFadzean (at 63) says that he met ‘to assure KRED and Mount Jowlaenga People of Sheffield’s desire to reach an agreed outcome and discuss a number of key issues …’. Mr McFadzean says they discussed outstanding invoices and the process of substantiation, and agreed ‘that it would be more productive if there were to be less exchanges of correspondence between the parties and more direct dialogue instead’. This appears to suggest a more positive engagement and the relationship potentially being ‘back on track’. Mr McFadzean says at that he was surprised to subsequently be invoiced for the 14 May 2016 meeting with Mr Bergmann.

7. Mr Bergmann and Mr McFadzean engaged in an email exchange (mid to late May) about their claims of availability and willingness, or not, to engage. The suggestion in this exchange and the commentary in the affidavits is that each was accusing the other of not appropriately engaging.

8. It appears to me that ‘the gloves were off’ by the end of July 2016.  As mentioned above, Mr Bergmann responded to the draft 21 July Agreement on 24 July 2016 claiming that Sheffield had withdrawn from fundamental terms of the Agreement, noting the obligation ‘at law to refrain from engaging in conduct that is either misleading or deceptive, and unconscionable’.

9. A meeting was held on 25 July 2016 and was scheduled to run for a day and a half. Mr McFadzean left the meeting at 11.50am on the first day.  Mr Groenveld made a statement in the meeting after Mr McFadzean had left that ‘We’ve negotiated as far as we can negotiate so we’re done’.  In subsequent correspondence between Mr McFadzean and Mr Bergmann, Mr Bergmann asked if Sheffield proposed to continue negotiations.  Mr McFadzean replied on 29 July 2016outlining concerns about the state of the agreement; noted that Mr Bergmann was to seek further instructions; and said ‘We are hopeful that an outcome can still be reached’.

10. Mr Burbury says that on 24 August 2016 a voicemail message was left on his mobile by Mr Bergmann.  He says that at this time the parties were in Tribunal mediation. In his view the message was ‘hostile and threatening, and completely unprofessional coming from the Chief Executive Officer of the organisation that was representing the Mount Jowlaenga people.’ He said that he did not respond – but annexed a transcript of the message.  The transcript is as follows:

    “Hi Will

    You got a letter I’ve cc’d you on as chair of Walalakoo, give me a call because things are going to get worse. Your staff have been undermining me personally all over Broome and the business community in Perth. The relationship between Sheffield and traditional owners are going to turn to a new level. Since you put Bruce McFadzean on board the relationship has gone from 10 to 0.

    Call me … bye”

11. An email from Mr Bergmann to Mr Burbury was received later the same afternoon which Mr Burbury says was also hostile and threatening. The email from Mr Bergmann was cc’d to Mr McFadzean, Mr Groenveld, Mr McQuitty, Mr David Archer, Mr Boyd, Mr Marco DiSilvio, Christine Lovitt, Damien Parriman and Hayley Hass. The text is as follows:

    Dear Will

    My ancestors walk this land for thousands of years.
    I will not let you or your directors take our land without our consent. This is stealing. You want to sue me and my people for protecting our rights. I have the support of my people to protect our interest.
    I am not going anywhere. This is my home and I will do what it takes to make companies like you treat us with respect.
    Regards

    Wayne

12. I can understand Mr Bergmann becoming agitated if he was hearing things were being said which questioned his integrity and authority. The phone message appears to be from Mr Bergmann in his capacity as Chairman WAC, where he is a TO. However, the email appears to be in his capacity as CEO KRED but it presents as a TOs perspective rather than as a representative. Nevertheless, it appears unprofessional. It is not clear what response either was intended to elicit. Inferences open could be that the native title party (although which one is unclear) was no longer willing to negotiate in order to reach agreement. The reference to ‘suing me and my people for protecting our rights’ could be in reference to a s35 application. The statement ‘I will do what it takes to make companies like you treat us with respect’ has uncertain meaning. Sheffield contentions that the use of such words is threatening and inappropriate.

13. On 25 August 2016 KRED responded to Sheffield by way of response to Ms Lovitt’s letter of 24 August 2016. In the penultimate paragraph it says:

    Whilst the Mount Jowlaenga People remain ready willing and able to meet and negotiate the Agreement on the basis of the terms agreed prior to Sheffield’s 23 July amendments, please be advised that the Mount Jowlaenga People will not welcome Bruce McFadzean nor Wayne Groeneveld to such a meeting in light of their conduct during the negotiations thus far.

14. Mr Burbury says that he considered this to be an attempt to undermine Sheffield’s negotiation team. 

Findings on parties’ overall behaviour

1. As noted on a number of occasions in my findings, the behaviour of both Sheffield and Mount Jowlaenga was at times not ideal and this affected the relationship between the parties. Accusations of conflict, of improper disclosure of information, and of breaches of the negotiation protocol were levelled at both sides. At some point the parties should have stepped back and discussed alternative approaches to the negotiation, including the possibility of changing negotiators and representatives on both sides to enable fresh perspectives to be brought to the issues which were identified so early in the negotiation.  The cost to both parties to be in this position is enormous

Conclusion

1. On the basis of my findings referenced at paragraph [13], I am not satisfied on the evidence before me that Sheffield’s conduct, viewed in the context of the history of negotiations, demonstrated a lack of good faith in its negotiations with Mount Jowlaenga.

Determination

1. I am satisfied that Sheffield negotiated in good faith as required by s 31(1) of the Native Title Act 1993 (Cth). The Tribunal has power to make a determination under s 38 of the Native Title Act 1993 (Cth).

Mr JR McNamara
Member

22 May 2017