St Barbara Ltd v Hockley (No 2) - [2013] WASC 358

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: ST BARBARA LTD -v- HOCKLEY [No 2] [2013] WASC 358

CORAM: BEECH J

HEARD: 10 & 11 SEPTEMBER 2013

DELIVERED : 27 SEPTEMBER 2013

FILE NO/S: CIV 1685 of 2013

BETWEEN: ST BARBARA LTD
Plaintiff
AND
DESMOND JAMES HOCKLEY
Defendant

Catchwords:

Contract - Agreement to sell tenement - Seller retains interest in gold in part of tenement - Provision permitting assignment provided other party consents - Consent not to be unreasonably withheld - Whether consent to assignment unreasonably withheld

Legislation:

Nil

Result:

Plaintiff's claim upheld
Declaration that defendant's withholding of consent to assignment was unreasonable

Category: B

Representation:

Counsel:

Plaintiff: Mr S K Dharmananda SC
Defendant: Mr J A Thomson SC

Solicitors:

Plaintiff: Gilbert & Tobin Lawyers
Defendant: Mizen & Mizen

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

Australian Zircon NL v Austpac Resources NL (No 2) [2011] WASC 186
Boss v Hamilton Island Enterprises Ltd [2009] QCA 229; [2010] 2 Qd R 115
Cathedral Place Pty Ltd v Hyatt of Australia Ltd [2003] VSC 385
Daventry Holdings Pty Ltd v Bacalakis Hotels Pty Ltd [1986] 1 Qd R 406
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23
Fulham Partners LLC v National Australia Bank Ltd [2013] NSWCA 296
Harvey v Walker (1945) 46 SR (NSW) 180
JA McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd [1992] 2 Qd R 121
Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85
Louis Vuitton New Zealand Ltd v Princes Wharf Property Fund Ltd [2005] ANZ ConvR 245
Noranda Australia v Lachlan Resources NL (1988) 14 NSWLR 1
Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11
Olsson v Dyson (1969) 120 CLR 365
Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40; (2006) 149 FCR 395
Re Idoport Pty Ltd [2012] NSWSC 524
Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359
St Barbara Ltd v Hockley [2013] WASC 283
St Hilliers (Developments) Pty Ltd v Radmanovich [2002] NSWSC 524
Tolhurst v Associated Portland Cement Manufacturers [1902] 2 KB 660
Yedway Pty Ltd v Owners Corporation of Strata Plan 62871 [2009] NSWSC 8
BEECH J:

Introduction

The issue in this trial is whether the defendant unreasonably withheld his consent to an assignment of a mining tenement by the plaintiff. It arises in the following way.
The plaintiff (St Barbara Ltd) is the registered holder of a mining lease. In 1992, the defendant (Mr Hockley) sold the mining lease. He sold it under an agreement which gave him a continuing interest in gold extracted from a specified part of the mining lease.
The sale agreement provided that the mining lease, and rights…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] WASC 358
Decision Date: 27 SEPTEMBER 2013

CaseChat Overview and Summary

In St Barbara Ltd v Hockley (No 2), St Barbara sought to assign the mining lease to another party, with Mr Hockley's consent. Mr Hockley refused to consent, and St Barbara brought proceedings seeking a declaration that Mr Hockley's refusal to consent was unreasonable. The case was heard by the Supreme Court of Western Australia, which found that Mr Hockley's refusal to consent was unreasonable.

The primary legal issue before the court was whether Mr Hockley's refusal to consent to the assignment was unreasonable. The court had to consider the provisions of the Sale Agreement, which provided for the sale of the mining lease, and the circumstances surrounding Mr Hockley's refusal to consent to the assignment. The court also had to consider whether the reasons provided by Mr Hockley for withholding consent were reasonable or whether he acted in a manner that was unreasonable.

The court found that none of the reasons provided by Mr Hockley for withholding consent were reasonable. The court held that the refusal to consent was unreasonable because Mr Hockley's actions were not in accordance with the proper construction of the Sale Agreement, which provided that consent should not be unreasonably withheld. The court also found that Mr Hockley's refusal to consent was influenced by his desire to achieve a collateral advantage, which was not a reasonable basis for withholding consent. The court noted that the Sale Agreement provided that consent should not be unreasonably withheld and that Mr Hockley's refusal to consent was unreasonable because he did not act in accordance with the terms of the Sale Agreement.

The court made a declaration that Mr Hockley's refusal to consent to the assignment was unreasonable and ordered him to do all things necessary to enable the transfer of the mining lease. The court also ordered that Mr Hockley pay St Barbara's costs of the proceedings.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

The facts The facts are not in dispute. The parties relied on affidavits on which there was no cross‑examination. The plaintiff, St Barbara, is the registered holder of mining lease 77/525 located at Marvel Loch (Tenement). The defendant, Mr Desmond Hockley, became the registered owner of the Tenement on 2 August 1991. The boundaries of the Tenement are defined by reference to distances along a surveyed boundary from a single datum peg.[1][1] Affidavit of Ross James Kennedy sworn 12 July 2013 (First Kennedy affidavit), RK 1 (pages 17 ‑ 18). A gold resource known as the 'Undaunted Lode' runs into the eastern area of the Tenement. The part of the Undaunted Lode which runs into the Tenement is known as the Clough Lode.[2][2] Affidavit of Desmond James Hockley sworn 28 August 2013 (Hockley affidavit), [7]. In 1992, Mr Hockley sold the Tenement to Cambrian Resources NL (Cambrian), under an agreement (the Sale Agreement) dated 5 June 1992.[3] As its proper construction is at the heart of this case, it is necessary to give detailed attention to the provisions of that instrument By cl 3, Mr Hockley sold and Cambrian purchased the Tenement. As part of the sale process, Mr Hockley became the major shareholder of Cambrian.[4][4] Hockley affidavit [5]. Clauses 4 and 5 provided for settlement of the sale and purchase in three stages. By cl 6 and 7, Cambrian was to have the sole and exclusive right to possession and working of the Tenement from the date of the execution of the Agreement. The Clough lode was defined to mean any gold comprised in that part of the geological unit known as the Clough Lode as within the area hatched on the plan annexed to the deed. The plan annexed to the Sale Agreement identified an area described as the area of Clough Lode (the Clough Lode Area). That area is within the area of the Tenement. The plan annexed to the Sale Agreement also identified the neighbouring tenement, then belonging to Reynolds Metals, which was mining lease 77/10.[5][5] Hockley affidavit [8]. Clause 9 provided that the Clough lode would belong to Mr Hockley as to 25% and Cambrian as to 75%. Subject to that, all gold from the Tenement would belong to Cambrian. Cambrian was obliged to deliver to Mr Hockley 25% of any Clough lode mined by Cambrian, subject to Cambrian selling and retaining the proceeds of so much of Hockley's share of the Clough lode as will pay to Cambrian 25% of the mining costs incurred in respect of the Clough lode.[6][6] Clause 9.2. Cambrian agreed to pay all rents, rates and taxes and other outgoings in respect of the lease from 1 July 1992.[7][7] Clause 10. Mr Hockley made various covenants.[8][8] Clause 11. Cambrian covenanted:[9](1)to pay all rents, rates and taxes and not to permit any act or expenditures which would render the Tenement liable to forfeiture; and(2)to indemnify Mr Hockley from all claims, damages, fines and costs arising from any breach of Cambrian's covenants under the Agreement, or from any accident or injury happening under the Tenement.[9] Clause 12.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Conclusion For the reasons I have given, I am satisfied that none of the pleaded reasons for Mr Hockley's refusal to consent to the assignment, individually or taken together, sustains a reasonable withholding of the consent. I find that Mr Hockley's withholding of consent was unreasonable. I would make a declaration to that effect, and in accordance with the parties' agreement, consequential orders requiring Mr Hockley to do all things necessary to enable the transfer of the Tenement. I will hear from the parties as to the precise form of orders and as to costs.

Ratio Decidendi

Legal Principle Established

I accept the two propositions on which the parties agreed. The first is supported by what was said in JA McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd.[134] The second is established by Secured Income.[135][134] JA McBeath (129 ‑ 130); see also Boss v Hamilton Island Enterprises Ltd [2009] QCA 229; [2010] 2 Qd R 115 [135].[135] Secured Income (610 ‑ 611). It appears that an approach differing from the first proposition was taken by Martin CJ in EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd.[136] That approach was mentioned without any apparent criticism in the Court of Appeal.[137] In any case, nothing turns on this point because I accept that all of the pleaded reasons influenced Mr Hockley's decision to withhold consent at the time of refusal.[136] EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 [204].[137] EDWF [120] ‑ [121]. It seems that the cases provide only limited assistance in relation to the point in dispute between the parties. In Secured Income, Mason J said that he was inclined to the view that the landlord was entitled to rely on a ground not taken at, or about, the time of refusal. His explanation of why that was so makes it clear that he considered the landlord could take into account a circumstance not known to him at the time.[138] Mason J referred to the general rule in contract that a party can justify his termination of a contract by reference to grounds not taken at the relevant time.[139] His Honour applied that view to matters which had not been known to the decision‑maker at the time of the refusal to the case before him. He held that the trial judge was wrong to exclude from consideration matters relied on at trial by the person refusing consent as sustaining the reasonableness of the refusal.[140][138] Secured Income (611).[139] Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359.[140] Secured Income (614). In Re Idoport, Ball J stated that the question whether refusal of consent was unreasonable is to be determined objectively having regard to all the circumstances of the case. He referred to what Mason J had said, in the passage I have summarised.[141][141] Idoport [51]. Ball J stated that, in determining the question of whether the refusal of consent was unreasonable, the court can look at what was said and not said at the time to infer the real reasons for the refusal. If the court infers that the operative reason was in order to achieve a collateral advantage then it would follow that consent was unreasonably withheld. That would be true even if there existed reasons that could reasonably have been relied on.[142][142] Idoport [52] ‑ [53]. Ball J rejected the analogy with Shepherd v Felt & Textiles. He concluded that the conduct of the party refusing consent must be considered in the course of determining the question of reasonableness. That party's actual reasons, and the reasons that he gave or did not give at the time, are part of the objective facts against which the question of reasonableness must be answered. Nevertheless, his Honour said facts not known to that party are relevant in answering the objective question.[143][143] Idoport [54].