Siberia Mining Corporation Pty Ltd v Wilson
[2015] WASC 322
•1 SEPTEMBER 2015
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: SIBERIA MINING CORPORATION PTY LTD -v- WILSON [2015] WASC 322
CORAM: ALLANSON J
HEARD: 13 & 14 OCTOBER 2014
DELIVERED : 1 SEPTEMBER 2015
FILE NO/S: CIV 1931 of 2014
BETWEEN: SIBERIA MINING CORPORATION PTY LTD
Applicant
AND
WARDEN STEVEN WILSON
First RespondentMICHAEL ALLAN THOMPSON
Second Respondent
Catchwords:
Judicial review - Application for exemption from expenditure conditions - Whether warden failed to properly consider evidence - Error of law
Judicial review - Application for exemption from expenditure conditions - Whether warden made adverse credit findings which should have been disclosed - Breach of natural justice - Jurisdictional error
Legislation:
Corporations Act 2001 (Cth), s 436A, ch 5
Mining Act 1978 (WA), s 8(1), s 82(1), s 82(1)(c), s 98, s 101(2)(c), s 102, s 102(2), s 102(2)(b), s 102(2)(f), s 102(3), s 102(5), s 102(6), s 102(7), s 160(c)
Mining Regulations 1981 (WA), reg 31, reg 54
Result:
Application granted on grounds 1 and 3
Report and recommendation of the warden quashed
Category: B
Representation:
Counsel:
Applicant: Ms E C Hensler & Ms L A Shave
First Respondent : No appearance
Second Respondent : Ms C McKenzie
Solicitors:
Applicant: Gilbert + Tobin
First Respondent : No appearance
Second Respondent : McKenzie & McKenzie
Case(s) referred to in judgment(s):
Arian v Nguyen [2001] NSWCA 5; (2001) 33 MVR 37
Assistant Commissioner Condon v Pompano Pty Ltd [2013] HCA 7; (2013) 252 CLR 38
Attorney-General (NSW) v Quin [1990] HCA 21; (1990) 170 CLR 1
Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd [1994] FCA 1074; (1994) 49 FCR 576
Craig v South Australia [1995] HCA 58; (1995) 184 CLR 163
Ex parte Savage [1989] WAR 46
Haoma Mining Nl v Tunza Holdings Pty Ltd [2001] WASCA 123
Hot Holdings Pty Ltd v Creasy (1996) 185 CLR 149
Minister for Aboriginal Affairs v Peko‑Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24
Minister for Immigration and Citizenship v Li [2013] HCA 18; (2013) 249 CLR 332
Nova Resources NL v French (1995) 12 WAR 50
R v Martin (No 4) [2000] SASC 436; (2000) 78 SASR 140
Re Minister for Immigration and Multicultural Affairs; Ex parte Lam [2003] HCA 6; (2003) 214 CLR 1
Re Minister for Resources; ex parte Cazaly Iron Pty Ltd [2007] WASCA 175; (2007) 34 WAR 403
Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82
Saeed v Minister for Immigration and Citizenship [2010] HCA 23; (2010) 241 CLR 252
Seiffert v The Prisoners Review Board [2011] WASCA 148
SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63; (2006) 228 CLR 152
Water Conservation & Irrigation Commission (NSW) v Browning [1947] HCA 21; (1947) 74 CLR 492
ALLANSON J: Siberia Mining Corporation Pty Ltd (Siberia) applied for an exemption from the expenditure conditions applicable to three mining leases it holds near Kalgoorlie. The warden reported to the Minister, recommending that the exemption be refused. Siberia now applies for judicial review of the recommendation of the warden, seeking orders that the report and recommendation be quashed, and an order that the warden is to determine the application according to law.
For the reasons which follow I allow the application.
In these reasons, unless otherwise stated, all references to legislation are to the Mining Act 1978 (WA) and the Mining Regulations 1981 (WA).
The parties
Swan Gold Mining Limited (Swan) is the parent company of Siberia. At August 2012, Swan and its subsidiaries held approximately 135 contiguous mining tenements near Kalgoorlie, including the three mining leases held by Siberia that are the subject of this application: Mining Leases 16/262, 16/263, and 16/264.
Between 10 July 2008 and 26 February 2010, Swan (then known as Monarch Gold Mining Company Ltd) was in administration. It came out of administration following a re-capitalisation in February 2010.
On 10 May 2011, Siberia applied for an exemption from the expenditure conditions applicable to three mining leases for the expenditure year ending 11 March 2011. The second respondent, Michael Allan Thomson, objected to the application. The application was heard before the Warden over four days in August 2012.
The evidence
In the proceedings before the warden, Siberia tendered the statements of nine witnesses, and each of them gave oral evidence. Siberia also tendered five volumes of mining statements and documents. Mr Thomson was represented at the hearing. He called one witness, Geoffrey Warren Greenhill.
The evidence before the warden, including the witness statements and documents, and the transcript of the proceedings, are before the court as exhibits to the affidavit of Andrew Edward Czerw, sworn 3 July 2014. Mr Czerw is the Chief Operating Officer of Swan.
The statutory scheme
Section 82(1) provides that every mining lease shall be deemed to be granted subject to conditions set out in that section. The conditions include that the holder must 'comply with the prescribed expenditure conditions applicable to such land unless partial or total exemption therefrom is granted in such manner as is prescribed': s 82(1)(c). Failure to comply with the expenditure condition may result in forfeiture of the lease on an application for forfeiture made under s 98.
The expression 'expenditure conditions' is defined in s 8(1):
expenditure conditions in relation to a mining tenement means the prescribed conditions applicable to a mining tenement that require the expenditure of money on or in connection with the mining tenement or the mining operations carried out thereon or proposed to be so carried out.
The expenditure for a mining lease is prescribed in reg 31.
The conditions reflect the object of the Act as explained in Nova Resources NL v French (1995) 12 WAR 50, 57:
[To] ensure as far as practicable that land which has either known potential for mining or is worthy of exploration will be made available for mining or exploration. It is made available subject to reasonably stringent conditions and if these, including expenditure conditions, show that the purposes of the grant are not being advanced, then the Act and regulations make provision for others who have an interest in those purposes on that land to apply for forfeiture so they may exploit the area.
The Act also recognizes competing considerations. In Re Minister for Resources; ex parte Cazaly Iron Pty Ltd [2007] WASCA 175; (2007) 34 WAR 403, Pullin JA said:
Title to a mining tenement is not as secure as title to real property. This relative lack of security sits uneasily with the fact that very large amounts of capital may be expended on mining infrastructure. Miners desire as much security of title as possible if they are to make such investment. The State also has an interest in ensuring reasonable security of title so that investment will be encouraged. If this happens, the chance that greater royalties may be earned for the benefit of the State is enhanced [24].
Exemption from expenditure conditions is dealt with in pt IV, div 7. Under s 102 of the Act, the holder of a mining tenement may be granted a certificate of exemption totally or partially exempting the mining tenement from the prescribed expenditure conditions. In respect of a mining lease, the exemption can be for a period of up to five years.
Section 102(2) provides:
(2) A certificate of exemption may be granted for any of the following reasons ‑
(a)that the title to the mining tenement is in dispute; or
(b)that time is required to evaluate work done on the mining tenement, to plan future exploration or mining or raise capital therefor; or
(c)that time is required to purchase and erect plant and machinery;
(d)that the ground the subject of the mining tenement is for any sufficient reason unworkable; or
(e)that the ground the subject of the mining tenement contains a mineral deposit which is uneconomic but which may reasonably be expected to become economic in the future or that at the relevant time economic or marketing problems are such as not to make the mining operations viable; or
(f)that the ground the subject of the mining tenement contains mineral ore which is required to sustain the future operations of an existing or proposed mining operation; or
(g)that political, environmental or other difficulties in obtaining requisite approvals prevent mining or restrict it in a manner that is, or subject to conditions that are, for the time being impracticable …
By s 102(3):
Notwithstanding that the reasons given for the application for exemption are not amongst those set out in subsection (2), a certificate of exemption may also be granted for any other reason which may be prescribed or which in the opinion of the Minister is sufficient to justify such exemption.
An applicant for a certificate of exemption is required to lodge a prescribed form, and 'reasons in the form of a statutory declaration supporting the application for the certificate of exemption': reg 54.
Where an objection is lodged to an application for exemption, the application must be heard by the warden: s 102(5). By s 102(6):
The warden shall as soon as practicable after the hearing of the application transmit to the Minister for his consideration the notes of evidence and any maps or other documents referred to therein and his report recommending the granting or refusal of the application and setting out his reasons for that recommendation.
The Minister may grant a certificate of exemption whether or not the warden recommends that it be granted: s 102(7).
There is no appeal from a decision of a warden on an application for exemption from expenditure or other conditions: s 160C.
The powers exercised by the warden under pt IV are administrative in character. Although the warden's function under s 102 is to report and recommend, that decision has a discernible legal effect upon the Minister's exercise of discretion and is amenable to judicial review, including the remedy of certiorari: see Haoma Mining Nl v Tunza Holdings Pty Ltd [2001] WASCA 123 [58] ‑ [59]; Hot Holdings Pty Ltd v Creasy (1996) 185 CLR 149, 174.
It was not in dispute before me that the remedy sought by Siberia is available for jurisdictional error or error of law on the face of the record.
The Transaction
Because of its importance to the applicant's grounds, it is necessary to briefly describe the arrangement to recapitalise the Swan Gold Group (as it is now known) and to enable it to emerge from administration. The applicant refers to this as the Transaction, and I will follow that usage. The evidence regarding the Transaction, and later attempts to fund Swan and companies in the group, was primarily given by Keith John Vuleta, a director of Swan. Documents describing the Transaction, including an explanatory memorandum prepared for a general meeting of shareholders to be held on 10 September 2009, were attached to Mr Vuleta's witness statement.
On 10 July 2008, the Board of Swan (then known as Monarch Gold Mining Company Ltd) advised that voluntary administrators had been appointed under s 436A of the Corporations Act 2001 (Cth) to Monarch and each of its subsidiaries. Swan and its subsidiaries remained in administration from 10 July 2008 to 26 February 2010.
In June 2009, Stirling Resources Ltd proposed a recapitalisation plan to the administrators of Monarch. The proposed recapitalisation involved injecting funds into Monarch to settle the outstanding creditors' claims and to recommence operations, focusing on Davyhurst and Mount Ida. On 23 June 2009, Swan entered into a Recapitalisation Deed with Stirling Resources, Stirling Gold Pty Ltd, MGMC Pty Ltd, Crawley Investments Pty Ltd and the deed administrator. The funds available under this proposal were to be used to recommence operations at the Davyhurst and Mount Ida gold projects and to make payments to creditors. The recapitalisation was approved by creditors on 30 June 2009, subject to shareholder approval by 10 September.
The proposal also included the creation of three creditors' trusts created for the benefit of the creditors of companies within the Monarch Group, including Siberia, Carnegie Gold Pty Ltd and Mount Ida Gold Pty Ltd:
a.the Group Trust comprising creditors of the companies in the Monarch Group, other than Mount Ida Gold Pty Ltd and Mount Ida Gold Operations Pty Ltd (together Mount Ida);
b.the Mount Ida Trust comprising creditors of Mount Ida; and
c.the Territory Trust comprising Territory Resources Ltd.
These creditors were owed approximately $33 million: $9.6 million to those in the Group Trust, $1 million to those in the Mount Ida Trust, and $22 million to Territory Resources Ltd. The Swan Group companies would be released from the creditor's claims, as at the commencement of administration, and the creditors in return would have reciprocal claims against the three creditors' trusts.
Monarch would issue 300 million shares and 100 million free attaching options to Stirling Gold Pty Ltd for a total consideration of $15 million; 35 million shares to Crawley Investments in satisfaction of a debt; and 208,832,344 shares to the trustee of the Group Trust and the Mount Ida Trust, the trustee to sell the shares over a 12 month period and pay the net proceeds to creditors.
Monarch would also make payments at completion to creditors' trusts for specified creditors:
a.the Group Trust would be paid $6,630,392;
b.the Mount Ida Trust would be paid $1,201,838; and
c.the Territory Trust would be paid $2,961,000.
Each of the trusts would receive further payments following completion, including the proceeds of shares issued to the Trusts and sold over a 12 month period. (The figures given by Mr Vuleta for the amount paid to the Mount Ida Trust and, as a result, the total paid, differ slightly from those in the explanatory memorandum. The discrepancy is not material to these reasons or the result.)
The recapitalisation contemplated that Swan may seek to sell its interest in some of its subsidiaries, including Siberia, with the proceeds payable to the Territory Trust.
On 26 February 2010, the eventual date of completion, MGMC Pty Ltd became the trustee of three trusts. As trustee of the creditors' trusts, MGMC held securities in the form of first ranking charges over all of the assets of Siberia, Carnegie Gold, and Mount Ida Gold, and over all of the shares held by Monarch in each of those companies. MGMC's role was to act in the interest of the beneficiaries of the three creditors' trusts that were created.
Accordingly, upon completion, $10,793,230 of the $15 million capital raised would be paid to existing creditors. Stirling Resources would have a relevant interest in 300 million shares (approximately 40%), and the trustee would have a relevant interest in approximately 209 million shares (28%).
The recapitalisation was approved by the shareholders at a general meeting.
By 26 February 2010, Stirling Resources invested $15 million in Swan, and the administration ceased. It was on that day that Swan assumed its present name.
It had been initially intended that completion of the refinancing would be on 11 September 2009. Stirling Resources was unable immediately to raise the $15 million required, and completion did not occur until 26 February 2010. A result of the delay was that further, unanticipated, administration and operational costs of approximately $3 million were incurred. The result was that Swan had only approximately $1.2 million for working capital as at February 2010.
Events after the Transaction
The board of Swan began exploring opportunities for further funding. Initially funding was expected from Stirling Resources' major shareholder, DCM DECOmetal GmbH (DCM), but Swan experienced difficulties in obtaining the funding that had been promised.
After DCM failed to provide the funding, Swan pursued alternatives. Mr Vuleta said that he was involved 'in numerous meetings and discussions and planning with potential investors and the Stirling board/management and DCM trying to achieve funding for Swan Gold' [69]. Options considered included a further restructure, or the outright sale or divestment of Swan's assets.
Around November 2010, MGMC requested that Swan's assets be placed on care and maintenance. On 17 December 2010, the cash available to Swan was only $233,000.
Subsequently, Swan was provided with sufficient funds to meet its ongoing care and maintenance and corporate costs, but only those costs.
In January 2011, Swan announced that, at the direction of MGMC, it had undertaken a public marketing of secured assets. Mr Vuleta said that a number of opportunities for the sale of the Carnegie Project were pursued unsuccessfully.
On 14 March 2011, a 'Preferred Bidder' for the purchase of the Carnegie Project advised that it could not be satisfied that the tenements were, and would remain, in good standing. On 16 March 2011, Swan announced that negotiations with the Preferred Bidder had ceased.
At this time, Swan was still being funded by DCM, through Stirling Resources. Its securities were still not trading. Mr Vuleta said that, despite exhaustive attempts to ensure that its subsidiaries would have sufficient capital, no capital was available. Swan was only able to obtain basic care and maintenance funding.
Mr Vuleta also gave evidence about further funding developments. On 1 June 2011, Swan Gold announced that it had received a conditional offer from DCM for the acquisition of Swan's subsidiaries, including Siberia. Since October 2011, Swan has been funded directly by DCM.
The application to the warden
The application by Siberia contained six grounds, but only three were relied upon when the matter was heard by the warden:
1.time is required to evaluate work done on the Leases, to plan future exploration or mining or raise capital: s 102(2)(b),
2.the ground the subject of the Leases contains mineral ore which is required to sustain the future operations of an existing or proposed mining operation: s 102(2)(f), and
3.any other sufficient reason under s 102(3) of the Act. The particulars relied upon by Siberia pursuant to 102(3) were:
a.the exhaustive efforts of the board of Swan to obtain funding prior to and during the 2011 years;
b.the economic conditions which prevailed during the 2011 year and the resultant low investor confidence, including by reason of the global financial crisis and the proposed introduction of the Federal mining tax;
c.significant past development and expenditure on the project including the leases; and
d.the impending injection of funds by Investment and significant planned development and expenditure on the Carnegie project, including the Leases.
The warden found, and it is not in dispute, that the minimum expenditure required by the Act and Regulations for the 2011 year is as follows:
16/262:$99,000
16/263:$100,000
16/264:$99,100
Siberia reported expenditure of $48,306, $48,643, and $63,248.
The objector raised many grounds of objection to the grant of an exemption certificate, including that:
(1)Siberia has been grossly non-compliant with meeting prescribed minimum expenditure on the Leases since it has been the holder of them;
(2) since Siberia acquired the Leases in 2005, they have not been either adequately explored or mined;
(3)Siberia has held the Leases since 2005 and has had adequate time to evaluate work done, to plan future exploration or mining or to raise capital;
(4)Swan has not been able to comply with prescribed minimum expenditure on the Leases since they were acquired;
(5) funding difficulties by Swan are not matters that should be taken into account in relation to the exemptions, as it is incumbent upon the holder of the Leases to have sufficient means to comply with the expenditure conditions imposed by the Act;
(6) inadequate corporate governance and/or the acquisition of a large number of mining tenements where there is no inherent capacity to comply with the obligations under the Act to hold those mining tenements is not a valid ground for the grant of the exemptions;
(7) Siberia did not require further time to evaluate work done on the Leases or plan further exploration or mining or to raise capital for the Leases during the 2011 year, as there were no plans for future exploration or mining, and no plans to mine or explore the Leases during the 2011 Year; any planning that was done was in respect of other mining tenements held by Siberia or Swan and took priority over the Leases; and
(8)the focus of Siberia and Swan during the 2011 year was to divest itself of the Leases and in those circumstances Siberia did not require time to evaluate work done on the Leases, plan future exploration or to raise capital.
The decision of the warden
The warden described his function 'in hearing the evidence is to act as a "filter" to ensure the matters are appropriately brought to the attention of the Hon Minister' [22]. He referred to the policy of the Act, as outlined in Nova Resources (the relevant passage is quoted earlier in these reasons).
Time to evaluate work done on the Leases, to plan future exploration or mining or to raise capital: s 102(2)(b)
The warden did not accept that Siberia required further time to raise capital in respect of the Leases after emerging from administration [33].
His critical finding, to which his reasons repeatedly return, is that Swan, as the parent company of Siberia, had access to some $15 million only one month before the commencement of the 2011 year. For a period of several months after Swan came out of administration funds were available to it. However, because of the arrangements Swan entered into with MGMC, DCM and Stirling Resources, by offering shares and security over its assets, effective control of Swan was lost: [43] ‑ [45]. The warden held:
[46]In my opinion the evidence of Mr Vuleta demonstrates Swan, in entering into various commercial arrangements, made decisions as to the manner in which the funds it had raised were to be expended and that decision clearly left insufficient funds to meet the minimum prescribed expenditure conditions on all of the mining tenements held by its subsidiaries, including the Leases held by Siberia. Notwithstanding that, the evidence of Mr Vuleta demonstrates other parties were interested and prepared to make funds available to Swan during the 2011 year but because of its complicated arrangements with MGMC, DCM and Stirling agreement could not be reached.
[47]I find the evidence of Mr Vuleta does not demonstrate Swan requiring more time to raise capital rather it demonstrates capital raised by Swan was diverted by deliberate commercial decisions to other uses on the part of Swan to the detriment of its capacity to meet the prescribed minimum expenditure conditions on the Leases. (emphasis added)
The warden compared the present application to other cases where applicants for exemption had prioritised expenditure on some mining tenements but not others, and thereby 'created their own predicament'. He referred to a principle that, where sufficient funding or capital is available to meet prescribed expenditure conditions, and deliberate commercial decisions are made to divert or use the money in some other way, a recommendation for exemption should not be made unless some other ground for exemption exists: [47] - [48].
The warden returned repeatedly to this finding that Swan had created the situation by a deliberate commercial decision to divert or use available capital for purposes other than to meet the prescribed expenditure: see at [48], [49], [50], [66], [70], [103], [111], and [112].
In his conclusions, at [111] - [112], the warden stated:
I find at the commencement of the 2011 Year, both Swan and Siberia had access to substantial sums of capital and cash with which they could employ the necessary staff for the purposes of exploiting the potential wealth within the Leases and thus be able to expend sufficient money to meet the minimum expenditure conditions on each of the Leases … However, Swan made deliberate decisions to expend the substantial capital and money it had at the commencement of the 2011 year in a manner that left it with insufficient capital to ensure its subsidiary Siberia was able to meet its minimum expenditure conditions on the Leases. As a consequence of the manner in which the capital and money was utilised by Swan its subsidiary Siberia seeks the Exemptions
The policy of the Act, to exploit the mineral wealth that may lie in or under a mining tenement, is not advanced by the granting of Exemptions in circumstances where Siberia being dependent upon its parent company, Swan, for capital is starved of such capital by deliberate decisions made by Swan to expend that capital in a manner that ensured Siberia was unable to meet its minimum expenditure conditions on the Leases.
The second critical finding, at [65] ‑ [68], is significantly dependent upon the first. The warden found that, rather than continuing the evaluation of work done and the planning of future exploration on the leases and other mining tenements within the Carnegie Project, Swan began to shed the staff it needed to achieve those goals. That conduct was 'inextricably linked' to the decision by Swan to use the funds it raised on its emergence from administration in the manner it did. It demonstrated that Swan 'had no real commitment to its stated intentions' [67], and '[h]ad Swan intended to carry out those intentions it would have ensured it had available to give to Siberia … sufficient funds to meet expenditure obligations when it raised the significant sums of money and capital on emergence from Administration' [68]. The warden said that it would be contrary to the underlying policy of the Act to recommend the grant of exemption when Swan made deliberate decisions that resulted in Siberia being unable to use the time available to it to evaluate work done on the Leases and to plan future exploration: [70].
Mineral ore required to sustain the future operation of an existing or proposed mining operation: s102(2)(f)
The third finding, relating directly to the first limb of s 101(2)(f), was that there was no existing mining operation being conducted by either Swan or Siberia in respect of the Leases, or 'any other mining tenements within the Carnegie Project, any of the mining tenements held by Swan or any of its subsidiaries in the area of the Davyhurst Plant': [74]. The warden found that Swan could not argue a case that ore was required to sustain the future operations of an existing operation.
The warden then considered the future operation of a proposed mining operation, stating that a:
proposed mining operation means 'more than a mere hope or intention or expectation'. It means at least an identified or planned or recognisable operation that includes activities such as exploration on the ground, desk studies, feasibilities and adequate identification of resources in order that reserves classification may be achieved and necessary capital raising activity [72].
He found, in effect, that the evidence of the witnesses called on behalf of Siberia did not satisfy him that the Leases met the description of a proposed mining operation. He referred to Swan's focus on other 'start up pits', a significant distance from the Leases; the lack of proven reserves on the Leases; and issues regarding haulage due to distance from a route to the Davyhurst Plant: [78] - [81].
In making those findings, the warden referred to the evidence of four witnesses called by Swan: Mr Bampton, Mr Delaney, Mr Guy and Mr Vuleta. He described Mr Bampton as giving the 'only relevant evidence', and made the observation that the evidence of three of the witnesses relied upon by Siberia, Mr Delaney, Mr Guy and Mr Vuleta, was coloured by their desire to remain positive about Swan's expectations or hope or intentions with the Leases and the Carnegie project 'so as not to be seen to cause concern with potential investors' [85]. He also found, however, that the evidence of those witnesses did not suggest that the evidence of Mr Bampton was wrong, or that mining operations existed to which feed of ore from the Leases was integral:
The evidence of each of these witnesses did no more than to again confirm it was their hope or expectation that the Davyhurst Plant could be restarted. Whether the Davyhurst Plant could be restarted was dependent upon more capital being found and all of the technical matters Mr Bampton raised in his evidence. No specific date for the re-start of the Davyhurst Plant was given by any of the witnesses for Siberia [84].
Any other reason is sufficient in the opinion of the Hon Minister to justify the grant of exemptions: s 102(3)
Having regard to the grounds in this application, it is unnecessary to consider in detail the warden's grounds for not recommending that the Minister give the exemption under s 102(3). There are, however, two matters to record: first, the warden repeated his previous finding that Siberia lacked funds due to the deliberate corporate decisions as to how funds available, when Swan emerged from administration, were spent [103]; second, little weight was given to the evidence of Mr Hughes (the administrator), Mr Delaney, Mr Guy and Mr Valiukas in respect to plans for future development of the Carnegie Project, the Leases and the Davyhurst Plant. In particular, he found the evidence showed no more than a hope or expectation regarding that development and proposed capital raising: [105], [109].
The warden recommended that the application of exemptions would be refused.
The application to the court
The application contains five numbered grounds, two of which contain multiple sub-grounds and all but one of which is supported by particulars. The grounds run for five and a half pages in the application. In dealing with each of them, I will attempt to summarise the complaints made.
Ground 1
Ground 1 alleges the warden erred in law in his consideration of s 102(2)(b). It has four parts, supported by particulars, although in some cases the particulars are simply assertions of fact.
Ground 1(a) alleges the warden erred in law by asking the wrong question or misdirecting himself as to the relevant time period to be considered in deciding whether, in relation to the expenditure year ending 11 March 2011, Siberia required further time to raise capital. In particulars, the applicant alleges that the warden erroneously considered that the Transaction, which was completed prior to the expenditure year, had the effect that time was not required during the expenditure year to raise capital for future exploration or mining.
The ground, as formulated, does not identify an error.
First, the warden did not misdirect himself as to the relevant time period. He expressly considered whether, following its emergence from administration, Swan required further time to raise capital in respect of the Leases: [33]. He dealt with the evidence regarding the cash reserves available in months after the recapitalisation, the circumstances for investment between March and May 2010, the situation regarding funding between July 2010 and October 2011, and the decision in November 2010 to place Swan's assets on care and administration: [39] - [42].
Second, to establish an error of law in having regard to a particular factual matter, such as the Transaction and its effect on the applicant's capital and cash position, the applicant needs to show that the warden had regard to a matter which, on a proper construction of the Act, is so extraneous to the statutory scheme that taking it into consideration indicates a failure to decide in accordance with the statute: see Minister for Aboriginal Affairs v Peko‑Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24, 39 ‑ 40; Water Conservation & Irrigation Commission (NSW) v Browning [1947] HCA 21; (1947) 74 CLR 492, 505. Section 102(2)(b) calls for consideration of whether time is required to evaluate work done on a mining tenement, to plan future exploration or mining, or raise capital for that work. It is not so expressed as to exclude consideration of transactions entered into before the relevant expenditure year if those transactions are relevant to the question. The applicant did not identify anything else in the Act to make consideration of the Transaction irrelevant.
The heart of the applicant's complaint is found in ground 1(b) ‑ that the warden misunderstood and failed to properly consider the evidence regarding the Transaction and the investment in Swan by Stirling Resources pursuant to it, and consequently made findings that were erroneous and irrelevant and on which the warden relied. In particulars, the applicant refers to the findings, which I have set out above, that contends that the payments by Swan to the creditors trusts and to the former administrators were a diversion of capital arising from a decision by Swan following the Transaction.
The court must beware of turning this application for judicial review into a reconsideration of the merits of the warden's decision. The court is concerned only with legality. The merits of the decisions, to the extent they can be distinguished from legality, are for the warden alone: Attorney‑General (NSW) v Quin [1990] HCA 21; (1990) 170 CLR 1, 36; Minister for Immigration and Citizenship v Li [2013] HCA 18; (2013) 249 CLR 332 [66]. Where an administrative decision maker has made an erroneous finding or reached a mistaken conclusion, and its exercise or purported exercise of power is thereby affected, it exceeds its authority or powers: Craig v South Australia [1995] HCA 58; (1995) 184 CLR 163, 179. I am satisfied that the warden's characterisation of the Transaction as, in some way, a deliberate commercial decision to divert or use the money raised by recapitalisation, is wrong.
First, there is no basis in the evidence on which the warden's characterisation of the Transaction may be supported. The evidence about the Transaction, including the documents, must be considered in the context of the administration of Swan and the provisions of ch 5 of the Corporations Act. The end of administration depended on the decision of Swan's creditors. There is no question that the funds provided by Stirling Resources were ever available to Swan for any purpose other than the compromise of the creditors' claims.
The incorrect characterisation of the Transaction was not simply an error of fact because, based on his findings about the Transaction, the warden applied a principle which he regarded as determining the application. He stated that where sufficient funding or capital is available to meet prescribed expenditure conditions, and deliberate commercial decisions are made to divert or use the money in some other way, a recommendation for exemption under s 102(2)(b) should not be made: [47] ‑ [48]. That principle is not found in the Act. It may be an appropriate response to particular factual situations (I express no view about whether it is), but it was applied in this case on an incorrect appreciation of the nature of the Transaction, and so as to exclude proper consideration of the questions posed by the section.
The respondent's response to this ground is that the warden was not referring to the $15 million raised to emerge from administration but to other funding raised by or available to Swan after the administration ended. I do not accept that submission. The warden referred to substantial capital and cash available to Swan on its emergence from administration: see, for example, [50], [66], and, in particular, [68] where the warden said:
[It] beggars belief that Swan would [have] utilised the money and capital raised by it on its emergence from Administration in the manner it did. Swan, including its subsidiary Siberia, was left with access to patently inadequate sums of money and capital, some $1.5 million dollars, to meet the minimum expenditure conditions in the 2011 year.
The evidence does not show any other 'substantial capital' raised. The references to capital and to the specific sum of $1.5 million can only be to the balance available to Swan on completion of recapitalisation and payment to the creditors' trusts.
Ground 1(c) alleges error by misconceiving the factual issue to be determined in considering whether further time to raise capital for exploration or mining was required. The applicant contends that the warden failed to consider whether further time was required because of an erroneous finding ([46]) that other parties were interested and prepared to make funds available to Swan.
The warden based his findings on two matters. I accept, as contended by the respondent, that the warden based his finding in part on the funds that Swan had managed to raise in the period February to March 2001, and the fact that Swan had been let down by DCM in not honouring its obligation to provide further funding. He also referred to opportunities to raise capital that were not taken advantage of: see [49]. I also accept that those findings were open on the evidence.
But the finding at [46] is linked to the further findings, in that paragraph and at [47], that funds were 'diverted', and includes the funds available as a result of the Transaction. The warden repeatedly refers to significant sums or substantial capital and cash raised on the emergence from administration. Essentially, this is part of the same error alleged in ground 1(b). I am satisfied that error has been established.
Ground 1(d) alleges error in that the warden considered irrelevant matters in deciding whether Siberia required further time to raise capital for exploration or mining under s 102(2)(b). There are four discrete particulars of this allegation, including (in particular (iii)) a repetition of matters dealt with in ground 1(b).
The other three particulars all refer to fact findings. The judicial review ground of 'irrelevant considerations' is not a general basis on which factual findings can be challenged. The ground will only be made out when it is established that the decision-maker took into account a matter that he or she was precluded from considering under the relevant Act, either expressly or by implication from the subject matter, scope and purpose of the Act: see Minister for Aboriginal Affairs v Peko-Wallsend Ltd (39), and as Martin CJ said in Seiffert v The Prisoners Review Board [2011] WASCA 148:
In some exceptional statutory contexts, an error of fact may be so fundamental as to cause the decision-maker to fail to take into account a mandatory relevant consideration (see Lu v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 340; (2004) 141 FCR 346), or to result in a misapprehension which is so gross as to amount to an improper exercise of the power (see Akers v Minister for Immigration Local Government and Ethic Affairs (1988) 20 FCR 363, 373; Sezdirmezoglu v Acting Minister for Immigration and Ethic Affairs (1983) 51 ALR 561, 573). However, those cases will be exceptional and the court should remain vigilant to ensure that cases in which the substantial complaint is that of error of fact are not masqueraded as cases seeking judicial review on the grounds of error of law: see Re Minister for Immigration and Multicultural Affairs; Ex parte Cohen [2001] HCA 10; (2001) 177 ALR 473 [35] - [36] (McHugh J) [195].
The matters complained of in this ground are not irrelevant in the required sense.
Ground 2
Ground 2 challenges the decision regarding s 102(2)(f). The ground alleges the warden made four errors, in that he:
(a)asked himself the wrong question by asking whether the mining leases themselves could be characterised as a proposed mining operation;
(b)failed to consider whether ore from the mining leases was required to sustain the future operations of a proposed mining operation;
(c)asked himself the wrong question in making findings about whether mining operations existed to which the feed of ore from the Leases was integral; and
(d)considered irrelevant matters in making those findings.
The difficulty for the applicant in establishing ground 2 is that the warden expressly addressed the case it presented. The applicant's case was that ore from the Leases was required to sustain a proposed mining operation, by providing mill feed to support the re-starting of the Carnegie Project. The warden considered that case. First, he asked whether there were existing mining operations being conducted in respect to the Leases, any other mining tenements within the Carnegie Project, and any mining tenements held in the area of the Davyhurst Plant: [74]. He found there were not, and that finding is not challenged. He then considered whether the Leases themselves fell into the category of a proposed mining operation and found they did not: [75].
Finally, he considered the evidence regarding Swan's hopes and expectations for all of its tenements, concluding that the evidence revealed nothing more than 'mere hope or expectation of what Swan considered it could achieve or wanted to achieve with its mining tenements, including the Leases held by Siberia'; and that 'there needed to be much more evaluation and exploration done by Swan and Siberia before any of the mining tenements, including the Leases, could be said to amount to a "proposed mining operation"': [83]. He concluded, at [86], that there was no existing or proposed mining operation to be sustained by ore from the Leases.
Siberia complains that the warden confined himself to finding that there was no mining operation to be sustained by ore from the Leases. That is not an accurate statement of the finding.
Ground 3
This ground alleges that the warden denied procedural fairness to Siberia by making adverse credit findings in relation to Mr Veluta, Mr Delaney and Mr Guy, based on matters that were not put to those witnesses, either in cross‑examination by counsel for the objectors or by the warden.
I have set out the comment above ‑ the warden described the evidence of those witnesses as coloured by their desire to remain positive about Swan's expectations or hope or intentions with the Leases and the Carnegie Project 'so as not to be seen to cause concern with potential investors': [85].
The respondent submits that each of the witnesses was cross‑examined, and it was open to the warden to not accept or give little weight to their evidence. That, however, is not the point of Swan's complaint. A party would not normally address whether its witnesses have coloured their evidence for a purpose extraneous to the proceedings unless that possibility were, in some way, raised in cross‑examination, submissions, or questions by the tribunal.
The rules of procedural fairness do not have an immutably fixed content: Assistant Commissioner Condon v Pompano Pty Ltd [2013] HCA 7; (2013) 252 CLR 38 [156]. What will be both sufficient and necessary to ensure a fair hearing in any given case will depend on, and vary with, the context in which a decision-maker acts, including any statutory or regulatory requirements or considerations: SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63; (2006) 228 CLR 152 [26], [29]; Saeed v Minister for Immigration and Citizenship [2010] HCA 23; (2010) 241 CLR 252 [19] ‑ [20]. The content of procedural fairness in the circumstances of the particular case must be approached on the basis of what is reasonable and necessary to avoid 'practical injustice': Re Minister for Immigration and Multicultural Affairs; Ex parte Lam [2003] HCA 6; (2003) 214 CLR 1 [37] ‑ [38].
The warden was not necessarily required to disclose every piece of information that he might consider in arriving at his recommendation, or to disclose issues as to which the applicant was on notice. A decision maker may, however, be required to advise of any adverse conclusion which has been arrived at which would not obviously be open on the known material: Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd [1994] FCA 1074; (1994) 49 FCR 576, 592.
The requirements of natural justice may apply in credit findings: see, for example, Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82 [4], [76] ‑ [77], [211]. For example, it is established that a court may take into account its observations of the behaviour of witnesses in the well of the court, which could not have been seen by counsel, but only if they reveal what they have seen to the parties: see, for example, R v Martin (No 4) [2000] SASC 436; (2000) 78 SASR 140; Arian v Nguyen [2001] NSWCA 5; (2001) 33 MVR 37 [27].
In the present case, to the extent that the warden's findings on s 102(2)(f) were based on an assessment of the evidence, disregarding or giving little weight to the evidence of three of the applicant's witnesses, the factor which led to that discounting of their evidence, should have been disclosed. I accept, on reading the transcript of the hearing and the submissions lodged by both the applicant and the objector, that the issue of Siberia's witnesses 'colouring' their evidence due to concern about potential investors was neither disclosed nor a matter to which the applicant should have been alert from the way the hearing had proceeded.
The respondent also submits that, on the concessions made by the witnesses in cross examination, a new hearing would inevitably produce the same result. That is not a finding that I can make where the warden has discounted the evidence of three witnesses in this manner. In effect, following from his comment about their evidence being coloured, he discussed and dismissed that evidence in two paragraphs.
Ground 4
In this ground, Siberia complains that, due to the error identified in ground 2, and the adverse credit finding identified in ground 3, the warden failed to give any or any proper consideration to the evidence in support of an exemption under s 102(2)(f).
The ground adds nothing. First, I am not satisfied that the error alleged in ground 2 has been established. Second, the error in ground 3 is sufficient in itself to quash the report and recommendation. It is unnecessary to go into the extensive review of the evidence referred to in the particulars.
Ground 5
In this ground, Siberia claims that, consequentially upon the errors identified in grounds 1 ‑ 4 above, the warden erred in law in deciding to recommend refusal of the application under s 102(3).
Ground 5 is not an independent ground, but appears to stem from a desire to challenge the findings on each of the three separate statutory bases on which Siberia put its case for an exemption before the warden. For the reasons given earlier, the report and recommendation will be quashed. Any further consideration of an exemption under s 102(3) will need to have regard to the true effect of the Transaction.
Discretion
Finally, the respondent submits that the court may refuse the remedy in its discretion. In particular, he submits:
(1) certiorari may be refused where it would serve no useful purpose;
(2) there was undue delay in seeking relief.
The application was brought on 3 July 2014, the decision of the warden was delivered on 31 January 2014. The applicant was not required to explain delay as the applicant was brought within 6 months of the decision. While compliance with the six month limitation does not determine the issue, no basis has been put forward to support the respondent's claim that the delay was undue.
The respondent's submission is that, having expressed views on this matter, the warden would inevitably make the same decision again. In that submission, the respondent relies upon Ex parte Savage [1989] WAR 46, 53. In that case, however, the discretion was exercised where there had been a procedural breach. In this matter, I have found that the recommendation of the warden proceeded from failure to properly address the question posed by s 102(2)(b). It is not for this court to determine the strength of the applicant's case for an exemption. Ultimately that is a decision for the Minister. The respondent has not shown that, on the evidence, the only recommendation that could be made is that the Minister recommend refusal of the exemption sought. In any event, before the Minister can exercise that power, there must be a report and recommendation of the warden. The present report and recommendation, in my opinion, are invalid.
Conclusion
The applicant has established errors which in my opinion require that the report and recommendation of the warden be set aside. The error identified in ground 1 is, at least, an error of law on the face of the record. I believe it goes to jurisdiction. Breach of natural justice, as alleged in ground 3, is jurisdictional error.
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