Suzanne Hunt & Tony Johnstone v Kendall Jones - [2008] SAWC 4

Wardens Court of South Australia
(District Court Administrative and Disciplinary Division)
SUZANNE HUNT & TONY JOHNSTONE v KENDALL JONES
[2008] SAWC 4
Judgment of Senior Warden Cannon
16 September 2008
MINING LAW
Extractive Mineral Lease, landowner rights under S.75 Mining Act 1971, contrast to exempt land rights, Breach of Deed by assignment without consent, MARP, landfill, concurrent obligations under the Mining Act 1971 and Development Act 1993.

SUZANNE HUNT & TONY JOHNSTONE v KENDALL JONES
[2008] SAWC 4
The facts

Decisions of fact in this judgment are made on the balance of probabilities with the plaintors bearing the onus of proof. There is not much factual dispute here. Dr Suzanne Hunt and Mr Tony Johnson purchased the freehold ownership of the land on which Mining Lease 5222, which is for extractive minerals, is situated and the freehold was transferred to their names on 28 November 2003. EML 5222 had been in place since 2 July 1984. I note the extract from the mining register, in exhibit P12 which says that the lease was transferred to Kendall Michael James on 6 July 1992 and I take that to be a typographical error and in fact it referred to Mr Jones the respondent. The EML has been renewed most recently on 9 November 2005. Since 19 May 1992 there has been a deed in place between the mining operator and the landowner. The benefit to the landowners accrues in its terms to their successors and assigns and accordingly it accrued to Mr Johnson and Dr Hunt when they became the landowners. The conduct of all relevant parties has been in accordance with that legal conclusion.
In June 2005, Mr Jones and Mr Johnson had a discussion in which the possibility of closing down the mine was canvassed. On 7 June 2005 the landowners gave notice of termination (Exhibit P4) based upon the failure by the miner to meet the quota required under clause 4.3 of the Deed. Mr Jones spoke to Mr Johnson and asked that the notice be waived and it was on the basis that he would be rehabilitating the mine. There was then a dispute as to the rehabilitation that would be required. Mr Johnston wanted a buffer of native vegetation whereas Mr Jones was just proposing pasture grasses. Mr Johnston then fell ill and no further action was taken. Some mining continued on the EML. I conclude that any rights in favour of the landowner arising from the first notice of termination were waived.
By January 2008 Mr Johnson had recovered. Dr Hunt was annoyed that the lease had been renewed without consultation and she asked for a copy of the mining and rehabilitation program (MARP). Clause 6 (4) of the EML obligates the miner to mine the land:
… In a fair, orderly, skilful and workmanlike manner in accordance with the first schedule hereto and bona fides exclusively for the purpose for which it is demised …
By a memorandum of variation dated 21 August 2001, the first schedule was amended to provide:
Operations for the recovery of sand may be conducted over the area of the lease in accordance with a development plan approved by the Chief Inspector of Mines.
In the practice of supervision of mining leases the MARP is the development plan referred to in the first schedule. Dr Hunt had difficulty obtaining the MARP. This surprises me. I expect that a landowner would be entitled to see the MARP for a lease situated on their freehold land. Be that as it may, I was successful in obtaining a copy of the MARP and I thank the Department for supplying it so promptly upon my request. It is exhibit P12. It is noted that the MARP goes back to 1995 and " it is no longer adequate."
Mr Smoker is an agent for Middleton Sand Supplies Pty Ltd, which I permitted to intervene as a party in these proceedings. In March this year he had a meeting with Mr Johnson and discussed the possibility of obtaining an interest in the mine. He stated that the greater value in the site lay in using it for fill rather than in mining. There was a further discussion on an occasion in April when Mr Johnson was installing a satellite dish at Mr Smoker's home. $20,000 per annum was offered to allow Mr Smoker access to the mining site. Mr Johnson refused the offer. On 1 May 2008 (Exhibit P5) Mr Smoker on behalf of himself and Michael O'Connell wrote to inform Mr Johnson and Dr Hunt that they had concluded negotiations with Mr Jones to:
… Continue the operations of the lease via a management agreement.
From our discussions we note your clear intention to seek the closure of the mine and the extinguishment of the lease, which is your prerogative. We have no intention to interfere with this process.
However mining and rehabilitation activities will continue until the site closes via whatever method to be determined in the future. It is our clear intention to invite your comments and input and be sensitive to your occupation, adjacent to the site whilst we manage the mine.
On 2 May 2008 (Exhibit P6) Mr Smoker wrote to Tony Johnson complaining about some allegations that Mr Johnson may have made to the Mines Department. On 7 May 2008, Mr Johnson responded (Exhibit D2) in robust terms, demanding that Mr Smoker stay off the lease which he wanted rehabilitated. Shortly after this, Mr Johnson had a conversation with the leaseholder Kendall Jones, who assured him that they were not taking over the lease and that he had submitted a rehabilitation plan. Mr Johnson had discussions with a Paul Minnard about proposed rehabilitation and was reassured. Hence it came as a shock to Mr Johnson to receive a letter from Mr Jones dated 16 May 2008 (Exhibit P7) advising:
I write to advise that I have sold my interest in the lease and have signed and sent the transfer notification to the Department of Mines today.
The new owners are Middleton Sand Supply Pty Ltd c/o Post Office 2090 Middleton 5213.
It is my intention to reconcile my accounts and remit a royalty payment equivalent to the extraction of 5000 tonnes per annum in accordance with the land management agreement.
I believe this will discharge my obligations to you.
Wishing you well in the future.
Mr Smoker on a letterhead representing all of Middleton Sand Supplies Pty Ltd, Michael O’Connell and himself, on 19 May 2008 (Exhibit P8) wrote a letter confirming that:
The contract and lease transfer documents have been signed and we are currently lodging it with PIRSA.
Exhibit P12 notes this transfer was lodged with PIRSA on 21 May 2008.
At some stage Mr Johnson and Dr Hunt accessed the mine site and made their own measurements and took some samples. They did not have permission to do so, but nothing hangs on that.
On 19 May 2008 (Exhibit D4) Mr Johnson and Dr Hunt rescinded the Deed, relying upon the failure under clause 4.3 to mine and sell 5000 tonnes of sand for each of the last four years. The notice also complained of the unauthorised transfer of the lease and warned that if this breach was not remedied within a month that was a further ground to terminate the deed. On 27 May 2008, Mr Jones wrote giving notice that he had sold the lease and requesting consent to the transfer of the lease (Exhibit D3). On 29 May 2008, Mr Johnson and Dr Hunt refused to consent to the transfer of the lease and advised they had taken action to have the matter heard in the Wardens Court. The plaint was filed in this court on 23 May 2008.
On 6 June 2008, Mr Jones sent a cheque for $4,495.20 with a reconciliation asserting this was the shortfall between 5000 tonnes per annum and the tonnage for which he had already paid royalty for all relevant years. No one has successfully reconciled Mr Jones calculation but no one takes issue with the fact that in broad terms he has paid sufficient royalty to comply with a notional obligation to pay the royalty for a minimum of 5000 tonnes extracted each year.
I have heard evidence about the usefulness of the material. It is sand with significant clay content. It is useful for fill. It compacts well. It is clear from the last several years that there has not been a big demand for this product. Mr O'Connell gave evidence that there could be a big market for this product. I note the evidence from Mr Simon Grenfell, the operations manager at the Alexandrina Council that there are other sources of adequate fill for this area. I note that the increase in diesel cost will benefit this sandpit to satisfy demand in the Middleton area over competitors that are more distant. I make no definite conclusion as to the value of the sand resource remaining in the sandpit.
Mr Smoker and Mr O'Connell both gave evidence that although they have no direct mining experience, they have the resources and Mr O'Connell has earthmoving experience which in combination would be sufficient to successfully mine this pit. Mining this pit is a simple operation and I accept that this is true.
We had a view. It was obvious from the view that material has been dumped on the mining lease. There is concrete, bricks, metal and even a small piece of what appeared to be asbestos sheeting mixed with dirt, all of which have clearly been brought on to the lease from elsewhere. Mr Jones denied that he did this. I do not have to resolve who did that. It is a background fact to give cause for the concerns of the landowners that the pit will be used as a place to take fill from elsewhere. They are totally opposed to this.
Future intentions
Dr Hunt is involved in the mining industry and the landowners assert that they are content to allow the mining to continue. It is clear from their conduct that their strong preference is to have the EML rehabilitated and closed. I have noted that in June 2005 they purported to terminate the deed. The evidence is that Mr Johnson made it quite clear orally that he wanted the EML rehabilitated as part of the process of bringing it to an end. He said as much in his e-mail of 7May 2008 (exhibit D2):
I told you we don't want you on the lease. I want the sand mine rehabilitated ASAP and that is all I have to say to you on the matter.
I will only talk to Kendal and the Department of Mines regarding the lease, the two parties I need to speak to in order to get the mine rehabilitated and get everybody off my land.
Please just leave us alone.
I accept that the landowners had a genuine concern about the failure of the miner to comply with the obligation in clause 4.3 to mine and sell at least 5000 tonnes of sand in any 12-month period. However, they were more interested in this occurring so that the resource would be exhausted and the EML could be ended rather than being concerned to receive the royalty and for mining to continue.
There is a dispute about the future intentions of Middleton Sand Supplies Pty Ltd. The evidence of Mr O’Connell is that the Company intends to use sand from the pit extensively and he believes that he can use 10,000 tonnes a year. His evidence was that this would entail extensive deepening of the pit, which is a change in the nature of the operation conceived in the existing MARP. The company says its primary intention now is mining rather than using the pit for landfill. I do not accept this. In Mr Smoker's early conversations with Mr Johnson, he made it clear that the main value of the pit was to use it for fill. The letter of 1 May 2008, quoted above, seems to accept that the mine will be closed and that they are still interested in managing the rehabilitation. The reason for that becomes clear in the draft MARP (exhibit D8) submitted to the Department by Middleton Sand Supplies Pty Ltd. It states (p.1):
Description of the operation
The current scope of operation is to be maintained. A 20 foot shipping container for storage, attached site office and toilet amenity are to be installed as soon as convenient. Excavation by way of the excavator and loader to continue in the existing format. Access track to be upgraded to suitable all-weather conditions. This is an Excavation Style Recovery mine.
It is estimated that approx 50,000 tonnes of via (sic) material can still be recovered by excavation method. At current sales levels, 10-year reserves remain. The market remains for builders to use clay and sand for compacted fill at building sites. (My emphasis)
Later it states:
Justification for acceptance of residual risk
The closure and rehabilitation strategy is to reinstate the site back to natural topography and pre-mining land use with no residual risks identified. No pollutant materials will be left at the site. (My emphasis)
And again:
MINE CLOSURE AND COMPLETION PLAN
The entire site has had the surface disturbed by previous mining and extractive procedures conducted during the lifetime of the lease. An estimated 50,000 tonnes remains recoverable within current financial constraints. More than 50% of the site can now be turned over to rehabilitation activities.
Rehabilitation will consist of returning the contours to pre-mining levels, spreading of topsoil consistent with the surrounding land and returning the site to grazing activities. The land is to be returned to its stable productive self-sustaining condition. This pre-mining status will achieve a successful outcome of the highest standard.
The community will not be left with any future residual liability for site rehabilitation and maintenance. No ongoing financial impact to the community is envisaged. Provision to return to the site for future extraction is considered low priority it was other comparable material being available from alternative local sites. (My emphasis)
This is inconsistent with the existing MARP, which leaves the pit in place with appropriately battered edges and revegetation. There is no approval in that to return the land to the original contour, which would require the bringing of large quantities of fill into the pit.
In the introduction/executive summary of the draft MARP it states that:
… There is no proposal to change existing operations.
This draft MARP is dated 28 May 2008. It has attached to it a letter from the Environment Protection Authority of 23 May 2008. This discusses a proposal (which I do not have) to rehabilitate the mine. In that context the writer observes:
However, at such time as waste of fill material is to be received and deposited on the site as detailed in your proposal to rehabilitate the mine, the activity will need to be considered by the EPA to ensure that potential harm to the environment is managed appropriately.
I conclude from this that Mr O'Connell's assertion that he would mine up to 10,000 tonnes per year and take the level down for another seven or more metres is a recent invention to bolster the case that this is a mining operation to ensure that the EML is successfully transferred to Middleton Sand Supplies Pty Ltd. In fact, as the early discussions, the correspondence and the draft MARP all imply the primary interest of Middleton Sand Supplies Pty Ltd in the EML is to use it as a place to receive fill from building sites. When questioned about this, Mr Smoker and Mr O'Connell did not deny that they may have an interest in finding sites to take fill. Mr O’Connell stated that it would be clean fill excavated for example, from new septic tank installations and as such little different in nature and quality from the existing soil in the area surrounding the EML.
The law
The Mining Act 1971 provides:
S.75 (1) no claim or lease may be pegged out or granted in respect of extractive minerals on land granted in fee simple or land in respect of which native title conferring a right to exclusive possession of land exists except with the written consent of the owner of the land.
(2) The owner of land does not require a mining tenement under this Act for the recovery of extractive minerals from that land for his own personal use.
The Act treats extractive minerals differently from other minerals. In particular this section enhances the rights of landowners in relation to extractive minerals. Whereas this court has a jurisdiction to resolve disputes between landowners and miners in relation to notices of entry and exempt land for other minerals, there is no such jurisdiction in this court in relation to section 75. The mining operator’s right to mine is limited by the terms of the deed and absent the deed the landowner could refuse permission for mining to occur.
The landowner has purported to terminate the deed due to non-compliance with clause 4.3. That non-compliance gives the landowner an absolute right to ‘give notice to the operator terminating the deed whereupon the Operator shall forthwith surrender the said Mining Lease and vacate the Subject Land.’ This was the second notice of termination given for this reason. I have found that the first notice was waived. This is mentioned as having been a warning. It is not clear from the deed if the harm guarded against by this clause is lack of mining activity or lack of royalty. This is important because the lack of royalty was later remedied by payment and the payment was accepted. Clause 4.1 gives the landowner the right to terminate if the EMML was not worked for any continuous period of six months. I conclude that the primary purpose of clause 4.3 is to assure a minimum royalty to the landowner.
The position of the landowners is that they have terminated due failure to remove the minimum tonnage, whilst accepting payment as if mining had occurred. They may now be willing to refund the money accepted but my finding is that by accepting the payment as if mining had occurred in accordance with clause 4.3 was a waiver of the breach and cannot be undone after the event.
The notice of termination and the plaint note also complain of the assignment of the mining lease without the previous written consent of the owner. Clause 4.2 of the deed provides that:
Should the operator … commit any breach of the terms of this deed of which notice in writing shall have been given and which shall not have been remedied within one calendar month of the date of such notice being served upon the operator by the owner …
THEN IN ANY SUCH EVENT the owner may give notice to the operator terminating this deed whereupon the operator shall forthwith surrender the said mining lease and vacate the subject land.
Clause 13 of the deed provides that it is agreed between the parties:
… Not to assign part with or otherwise deal with the said mining lease without the previous written consent of the owner (which consent shall not be unreasonably or capriciously withheld).
The lease was transferred without prior consent to Middleton Sand Supplies Pty Ltd. This was confirmed by Kendall Jones, by the company, and by correspondence to the Department. Once an application for consent was received consent was not given. I find that the refusal to give consent was not unreasonable nor capricious. This is because the landowner had reasonable concerns that the nature of the operation would change from the existing mining operation to primarily a landfill operation.
Landfill is not a mining operation, although it is conceivable that it could be an incident of rehabilitation of a mining operation. I note the provisions of s.75 and 75A of the Development Act 1993. I do not need to decide potentially difficult issues arising from the interface of mining and land filling operations in this case. However, I suggest that where an incident of a mining operation can properly be characterised as an operation controlled under separate legislation, it might be necessary for the mining operator to comply with both legislative requirements and for the MARP to address the issue.

Under the terms of the deed the mining operator cannot insist that the owner must consent to the transfer of the lease in the circumstance where the transferee intends to operate the lease in an entirely different fashion. What the deed requires is to first obtain the consent of the owners to the proposition before the transfer occurs. The consent was not applied for at that time. The owners gave notice on 19 May 2008 complaining of the breach of clause 1.3. They were clearly entitled to give notice requiring remedy of the breach by a transfer without consent. The remedy would have been to bring the transfer to an end. That has not occurred. On the contrary the mining operator and the transferees have maintained that the transfer is valid and the withholding of consent was unreasonable, which I have found it was not. Because the breach has continued for more than a month the landowners are entitled to the orders sought in the plaint note in accordance with clause 4.2.
On the occasion when I formally deliver this judgment, I shall order that the deed is terminated and that Mr Jones must surrender the mining lease and vacate the subject land. In the circumstances, I will find that Mr Jones’s progressive rehabilitation of the lease so far, is sufficient compliance with his obligation to rehabilitate in accordance with the deed. What obligations he may have to the Department, is a matter for others. I shall publish this to the parties and fix 16 September 2008 at 9.15am as the date for its formal delivery. I shall hear from them as to orders to permit the orderly removal of equipment, costs and other consequential matters.