Sickerdick v B & M Property Enterprises Pty Ltd (in Liq) No. Scciv-01-1549

SICKERDICK v B & M PROPERTY ENTERPRISES PTY LTD (IN LIQ)
[2003] SASC 131
Full Court: Perry, Williams and Gray JJ

PERRY J I agree that the appeal should be dismissed for the reasons given by Williams J.
WILLIAMS J. This is an appeal under the Mining Act 1971 from a decision of the Environment Resources and Development Court.
By application dated 24 March 1999 the present appellant Mr Sickerdick took proceedings in the Warden’s Court seeking an order that Mineral Lease No 5776 is liable to forfeiture. He relied upon the Mining Act 1971 (SA) s 70 which reads:
“(1)The Warden’s Court may, upon application by any interested person, adjudge that a lease under this Act is liable to forfeiture, and recommend to the Minister that the lease be forfeited.
(2)A recommendation shall not be made under subsection (1) unless the Court is satisfied that the requirements of this Act in relation to the lease have not been complied with in a material particular and that the matter is of sufficient gravity to justify the forfeiture of the lease.”
As now relevant, the appellant by his plaint alleges a breach of the working conditions applicable to the lease. However, during the course of the proceedings two further matters of complaint were raised namely an allegation of illegal mining of moss rocks and an allegation that the mineral lease had been made the subject of a dealing by the lessee without the consent of the Minister.
Mineral Lease No 5776 was transferred to the respondent B & M Property Enterprises Pty Ltd on 20 March 1996; that company went into liquidation when this Court by an order dated 9 March 1999 ordered that the company be wound up and appointed Mr CF Perkins as liquidator. The lease was for a term of 7 years commencing on 9 December 1991 and on 12 November 1998 was renewed for a further term of 7 years from 9 December 1998 to 8 December 2005.
The appellant relies upon alleged breaches of the Mining Act or non-compliance with the regulations since 20 March 1996 but in view of the renewal of the lease it seems arguable that the court should not entertain a complaint with respect to anything which occurred before the commencement of the renewed term. This point was not addressed at trial. However, Sickerdick’s case is that (without Ministerial consent) dealings with the tenement occurred in May, July and August 1996 in terms of three documents each entitled “Acknowledgement of Trust” signed by one Pettingill in favour of Euston Holdings Pty Ltd in respect of shares in the beneficial interests in the mineral lease. The evidence of Mr Sickerdick as to illegal mining is indeterminate as regards date [see Transcript at 252]. Insofar as compliance with labour conditions is relevant, it is not in dispute that the present leaseholder has never undertaken any operation which would constitute “mining” or “mining operation” as defined in the Mining Act but had undertaken feasibility studies.
The mining lease relates to 46 hectares or thereabouts of land at Kanmantoo where a copper mine has existed since the early days of the colonisation of South Australia. The lease (cl 2(1)) grants to the lessee the rights during the continuance of the lease:
“(1)to conduct mining operations and obtain for the lessees own use and benefit the minerals as specified in the first schedule in the manner described in the first schedule hereto.
(2)for or incidental to the purposes aforesaid:
(a) to cut and construct races, drains, dams, reservoirs, roads and tramways; and
(b) to erect offices, buildings, works and machinery in the manner described in the First Schedule hereto.”
The lessee’s covenants include the following:
“(4)to mine the land in a fair, orderly, skilful and workmanlike manner in accordance with the First Schedule hereto and bona fide exclusively for the purpose for which it is demised so as to effect maximum recovery of the mineral resources consistent with economic practicability and shall ensure that all waste materials containing minerals are so placed that they are reasonably accessible for retreatment:
….
(8)to furnish all returns prescribed by the Act and Regulations:
….
(11)not to assign, transfer, sublet the land, or make the land the subject of any trust or other dealing, whether directly or indirectly, for the whole or any part of the term without first obtaining the written consent of the Minister:
….
(13)to perform and comply with all of the conditions set out in the Second Schedule annexed hereto:”
The Schedules to the lease read as follows:
“FIRST SCHEDULE
1Operations for the recovery of copper oxides, sulphides and associated minerals from the existing ore stockpiles only may be undertaken on the lease.
2Operations authorised in clause 1 above, and rehabilitation of the site must be in accordance with a developmental plan approved in writing by the Chief Inspector of Mines.
SECOND SCHEDULE
1Rehabilitation of the site should be progressive, where practical, and must be to the satisfaction of the Chief Inspector of Mines.
2Storage of reagents required for the approved operations must be at a location, and in the manner approved in writing by the Chief Inspector of Mines.
3Appropriating bunding must be constructed to ensure internal drainage and must be to the satisfaction of the Inspector of Mines.
4Access to the tenement must be restricted to satisfaction of the Inspector of Mines.”
The working conditions required in respect of a mineral lease are as set out in the Mining Regulations 1998 (or its predecessor). Regulation 50 includes the following:
“(3)Unless otherwise determined by the Warden’s Court, a mining lease must, immediately after the Minister gives notice that the lease has been approved, be diligently worked-
(a)    by at least one person on the basis of at least 100 hours of work per calendar month; or
(b)    as specified in the lease; or
(c)    as approved by the Minister from time to time.
(4)The following will be taken to be within the concept of diligently working a claim or lease-
(a)    the performance of mining operations on the claim or lease; and
(b)    work associated with the extraction of, or making merchantable, minerals located within, or recovered from, the claim or lease where that work is carried out on site; and
(c)    the preparation, erection or maintenance of machinery or equipment used in connection with mining operations where the work is carried out on site.”
The complaint as to illegal mining is based upon the Mining Act s 74(1) which reads as follows:
“A person who-
(a) mines; or
(b) sells, or disposes of, minerals recovered by him in the course of mining operations, or utilises any such minerals for a commercial or industrial purpose,
without being duly authorised by or under this Act shall be guilty of an offence.”
(The definition of “minerals” in s 6 includes “stone” and Mr Sickerdick therefore argues that the unauthorised excavation and sale of rocks for ornamental purposes is in breach of s 74. There was some evidence of a proposal to cultivate moss on these rocks in the course of commercial exploitation).
The complaint as to unauthorised dealings with the mineral lease is based upon the Mining Act s 83 which includes the following:
“(1)Subject to subsection (2), a lease or licence, or an interest in a lease or licence, under this Act shall not be assigned, transferred, sublet, or made the subject of any trust or other dealing, whether directly or indirectly, without the consent in writing of the Minister, and any such transaction entered into without that consent shall be void.
(2)A lease or licence, or an interest in a lease or licence, may be charged without the consent of the Minister, but any assignment or transfer of the licence or interest for the purpose of enforcing the charge shall not be made except with the consent of the Minister and, if made without that consent, shall be void.”
The warden conducted a trial upon oral evidence and delivered reasons for his decision on 9 March 2001. In the warden’s view the requirements of the Mining Act had not been complied with in a material particular and he recommended to the Minister that the lease be forfeited. In reaching his decision the warden held that Mr Sickerdick had proved a breach of the working conditions, illegal mining and dealings with the lease without ministerial consent.
B & M Property Enterprises by its liquidator appealed to the ERD Court against the decision. In terms of written reasons delivered on 4 October 2001 (Judgment No [2001] SAERDC 82) the ERD Court Judge allowed Mr Perkins’ appeal and applied the reasoning of this Court in Wells v Simnovec (1998) 71 SASR 286 for the purpose of determining that the lessee was not in breach of the working conditions required by the Mining regulations.
The ERD Court Judge also upheld the liquidator’s complaint that Sickerdick had been allowed to introduce two issues which were not pleaded namely the allegation of illegal mining and the allegation of unauthorised dealing with the lease. Although the basis of the Judge’s decision on this point is not entirely clear to me it must be implicit in her reasoning that the failure to plead these allegations resulted in a breach of the rules of natural justice in that the liquidator was not afforded a proper opportunity to deal with the allegations. Her Honour observes that a party was “entitled to know the case which it had to meet” and referred in this context to the comprehensive particulars which had been supplied upon the court’s order. However, the fact that the evidence has gone beyond the pleadings is not in itself a ground for complaint upon appeal in the absence of demonstration of some prejudice to a party. In the present case there was no affidavit to explain how Mr Perkins might have been unfairly disadvantaged; when the liquidator’s counsel was invited by us to identify the prejudice he was unable to point to anything specific to support his contention. In my opinion the ERD Court Judge was wrong in allowing an appeal based upon a procedural miscarriage at trial. However, as I am otherwise in agreement with the conclusions of the ERD Court Judge as to the merits of Sickerdick’s claims, the procedural point does not lead me to differ from Her Honour in my ultimate conclusion.
Despite her criticisms of the procedure at trial the ERD Court Judge disposed of the two unpleaded issues upon their merits. She held that the warden had made an error of fact in concluding that there was evidence of illegal mining within the area of the mineral lease. It is apparent upon an examination of the evidence that the warden was not entitled to find that illegal mining of rock had occurred upon land within the lease. The area in which rock mining occurred appears to be upon land lying to the west of the northwest corner of the mineral lease and outside its boundary. The lease has a distinctive system of roads which as now relevant enables the area of the lease and the position of the rock workings to be identified by inspection of an aerial photograph in conjunction with the plan attached to the lease (both of which are reproduced upon the same scale in the exhibits). In my opinion the ERD Court Judge was entitled to correct the obvious factual error which is apparent when Mr Sickerdick’s evidence is read in light of the two documents to which I have referred. (see Fox v Percy [2003] HCA 22 per Gleeson CJ, Gummow and Kirby JJ at pars 24-29 restating the principles as to the correction of factual error upon appeal.)
As regards the allegation of illegal dealing in 1996 the evidence was far from satisfactory. Three documents were produced which upon their face showed a dealing by Mr Pettingill as abovementioned. Mr Pettingill’s authority was not proved and there was argument before us as to the status which should be accorded these documents as business records. The ERD Court Judge treated the documents as suggesting that a breach of s 83 of the Mining Act had occurred. Her Honour decided that the section carried its own penalty and that in terms of s 83 the documents were void ab initio. Her Honour decided that the evidence was insufficient to justify the application of s 70. In my opinion this decision was correct.
There remains a question as to the way in which the ERD Court Judge dealt with the issue raised upon the pleadings namely a default in the manner of working of the lease since 20 March 1996. The statement of claim alleges:
“10.1The Leaseholder has failed to mine the land in a fair or skilful and workmanlike manner pursuant to Clause 4 of the Lease.
10.2The Leaseholder has failed to mine exclusively for the purpose for which it is demised so as to effect maximum recovery of the mineral resources pursuant to Clause 4 of the Lease.
10.3The Leaseholder has failed to keep and preserve the mine and premises in good order repair and condition pursuant to Clause [6 7] of the Lease.
….
10.6The Leaseholder has failed to mine in accordance with the First Schedule of the Lease.
10.7The Leaseholder has not been willing or able to mine the Lease.”
In his defence the liquidator alleges:
“7As to paragraph 10 of the Statement of Claim, the Defendant claims that the alleged failure to honour conditions contained within the Lease and the Schedules thereto is not relevant to this action. Further, the Defendant denies the allegations contained in paragraph 10 of the Statement of Claim and each sub-paragraph thereof.
8The Defendant admits that it has not lodged a Development Plan with the Department of Primary Industries and Resources or the Mining Registrar, but denies that it is obliged to do so.
….
12By virtue of Sections 474, 477, 478(1), 545(1) and 553 of the Corporations Law, the liquidator of the Defendant has at all material times had a duty to realise the assets of the Defendant, for the benefit of creditors and possibly members of the Defendant.
13The liquidator of the Defendant is thereby under a duty to realise the mining lease for a price which will be of the greatest possible benefit to the creditors and possibly the members of the Defendant.
14For the purpose of satisfying that duty, the liquidator of the Defendant has negotiated with various parties for the sale of Mining Lease No 5776.
….
16Prior to the plaint being issued by the Plaintor in this action, on or about 3 December 1999, the liquidator of the Defendant had reached an agreement in principle for the sale of Mining Lease No 5776 to Australian Mineral Developments Pty Ltd.
17By virtue of Section 70(4a) of the Mining Act 1971, the Mining Lease cannot be transferred until this action has been determined and actions concerning any other plaint of a similar nature have been determined.”
There was no dispute as to the facts as now relevant. The issue raised by the defence puts in issue the construction of the lease and the application of the Mining Regulations thereto. Although the facts of this case have a similarity to those which were before this Court in Wells v Simnovec (1998) 71 SASR 286, the terms of the lease in the present case are somewhat different from those which were before the Full Court in the previous case.
In the present case the terms of the First and Second Schedule are particularly restrictive and in terms of physical activity do not allow anything to be done until a developmental plan is approved. The only operations which are permitted are operations for the recovery of minerals from the existing stockpiles. However, these operations and the rehabilitation of the site (progressive where practical) can only be carried out when a developmental plan has been approved. The appellant contends that despite the ambit of the “operations” described in the first schedule, other work constituting “mining operations” within Regulation 50(3)(c) could be carried out (for example) with respect to “the preparation erection or maintenance of machinery or equipment” on site. I reject that argument. Upon the facts of the present case relevant machinery and equipment cannot be identified until a plan is approved by the Chief Inspector. The lessee cannot anticipate what manner of working or process may be approved.
Regulation 50(3)(b) requires that a mining lease must be “diligently worked as specified in the lease”. Upon my reading of the lease (and in particular the effect of the schedules) no operations of any sort can be undertaken until a developmental plan has been approved. Until this has occurred any work would be unauthorised and meaningless in relation to the requirements of the lease.
In Wells v Simnovec the leases limited the mining operations which could be undertaken until a programme of works had been approved by the Chief Inspector of Mines (see per Cox J at 295-296). According to the court, picks and shovels could still be used; upon the construction of the leases “the lessee was free to do a bit of construction work using hand tools”. The limited prohibition in that case upon work prevented “using mechanical or declared equipment until a development Plan and rehabilitation programme had been approved”: this is to be compared with the blanket prohibition for the time being upon all operations in the present case.
In Wells v Simnovec Cox J undertook a comprehensive review of the Mining Act and its regulations as now relevant. In circumstances such as the present the Full Court observed (at 294) that if the lessee were in breach of a term or condition of a lease, the Minister could move to suspend or cancel the lease under s 41 of the Act but compliance with the terms or conditions of a lease was not a “requirement” of the Act within the meaning of s 70; accordingly the forfeiture provisions of that section had no application to any such non-compliance. If the lessee were dilatory in discharging its implied obligation to prepare and submit a developmental plan the Minister has the power under s 41 to ensure that the objectives of the Act are not defeated by a lessee who chooses to ignore the contractual obligations. That is not the present case but it provides an answer to the appellant’s complaint that in the public interest the scheme of the Mining Act contemplates that the mine should be available to be worked. In fact the liquidator (as asserted in his defence) had no power to work the mine but he was actively engaged in attempting to realise the asset for the benefit of creditors.
In my opinion the ERD Court Judge was correct in her decision that by virtue of the covenants of the lease and the terms of the First Schedule there had been no breach of the working conditions as required by Regulation 50 and that there was no basis for recommending forfeiture in accordance with s 70 of the Mining Act.
The liquidator should not be criticised for the manner in which he conducted his administration. Mr Perkins properly discharged his responsibilities according to law. To the extent that the warden expressed a contrary view I disagree with him. While a company is being wound up the Corporations Act s 471B requires the leave of the Court to bring proceedings against the company in relation to its property or to enforce process in relation to such property. I consider that in the circumstances of this case (as the facts have emerged) leave to proceed was inappropriate insofar as the plaint was based upon grounds arising out of the liquidator’s administration.
I propose an order that the appeal be dismissed.
GRAY J I agree that this appeal should be dismissed. I have nothing to add to the reasons of Williams J.

[2003] SASC 131

6 May 2003