Tribune Resources Ltd v EKJV Management Pty Ltd [No 2] - [2022] WASC 463

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   TRIBUNE RESOURCES LTD -v- EKJV MANAGEMENT PTY LTD [No 2] [2022] WASC 463
CORAM:   CURTHOYS J
HEARD:   12 - 14 OCTOBER 2020
DELIVERED          :   23 DECEMBER 2022
FILE NO/S:   CIV 3171 of 2019
BETWEEN:   TRIBUNE RESOURCES LTD
First Plaintiff
RAND MINING LTD
Second Plaintiff
RAND EXPLORATION NL
Third Plaintiff
AND
EKJV MANAGEMENT PTY LTD
First Defendant
NORTHERN STAR (KANOWNA) PTY LTD
Second Defendant
GILT-EDGED MINING PTY LTD
Third Defendant
EKJV MANAGEMENT PTY LTD
NORTHERN STAR (KANOWNA) PTY LTD
GILT-EDGED MINING PTY LTD
Plaintiff by counterclaim
TRIBUNE RESOURCES LTD
RAND MINING LTD
RAND EXPLORATION NL
Defendant by counterclaim

Catchwords:

Contract - Contractual construction - Joint venture agreements - Joint venture operation - 'Minerals' - Ore - Division of ore - Processing of Ore

Legislation:

Nil

Result:

Claim dismissed
Counterclaim granted

Category: B

Representation:

Counsel:

First Plaintiff	:	P Crutchfield SC, M Feutrill SC & S Russell
Second Plaintiff	:	P Crutchfield SC, M Feutrill SC & S Russell
Third Plaintiff	:	P Crutchfield SC, M Feutrill SC & S Russell
First Defendant	:	S Penglis SC & P Congdon
Second Defendant	:	S Penglis SC & P Congdon
Third Defendant	:	S Penglis SC & P Congdon
Plaintiff by counterclaim	:	S Penglis SC & P Congdon
Defendant by counterclaim	:	P Crutchfield SC, M Feutrill SC & S Russell

Solicitors:

First Plaintiff	:	Grondal Bruining
Second Plaintiff	:	Grondal Bruining
Third Plaintiff	:	Grondal Bruining
First Defendant	:	Ashurst Australia
Second Defendant	:	Ashurst Australia
Third Defendant	:	Ashurst Australia
Plaintiff by counterclaim	:	Ashurst Australia
Defendant by counterclaim	:	Grondal Bruining

Cases referred to in decision:

Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 347
County Security Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23
Fitzgerald v FJ Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215
Franklins Pty Ltd v Metcash Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603
George 218 Pty Ltd v Bank of Queensland Ltd (No 2) [2016] WASCA 182
Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45; (1993) 177 CLR 635
Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 410
Pilbara Iron Ore Pty Ltd v Ammon [2020] WASCA 92
Process Minerals International Pty Ltd v Consolidated Minerals Pty Ltd [2011] WASCA 219
Secured Income Real Estate (Aust) Ltd v St Martin's Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596
Simic v New South Wales Housing Corp [2016] HCA 47; (2016) 260 CLR 85
Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222; (2010) 41 WAR 318
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Tribune Resources Ltd v EKJV Management Pty Ltd [2020] WASC 47
White v Australian and New Zealand Theatres Ltd [1943] HCA 6; (1943) 67 CLR 266
Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522

TABLE OF CONTENTS

Introduction

Procedural history

Factual background

The dispute

R&T Group's claim against Northern Star Group

Pleaded breaches of the ProJVA

The claim against EKJVM

The claim against GEM

Pleaded breaches of the OTA

Northern Star Group's counterclaim

The respective cases

The ProJVA

The OTA

The issues

Principles of contractual interpretation

The agreements

Background

The ProJVA

Recitals

Formation of joint venture

Manager of joint venture

Powers and duties of Manager

Operating Committee

Programmes, budgets and contributions

Accounts and audit

Trust as to beneficial interest

Further assurances

Entire agreement

Partition

Relationship of parties

The OTA

Recitals

Ownership of EKJV Ore

Suspension of ore division agreements

Mill Schedule

Terms of agreement and treatment arrangements

Warranties

Whole agreement

The evidence

Rodney Johns

Dr Geoffrey Lyman

The relevance of the Mining Act and regulations

Taking Minerals Issue

The context of the ProJVA

What are the 'Minerals'?

The relevant definitions

The parties' competing constructions

Definition of 'minerals' in the Mining Act

'Minerals' as an 'obtainable' substance

'Minerals' versus 'concentrate' and 'ore'

'As and when produced by the Joint Venture Operations'

The entitlement and obligation to take in kind

Other parts of the ProJVA relied upon by the parties

The perspective of a reasonable business person

Conclusion

Is EKVJM entitled to divide ore without any further agreement of R&T Group and GEM?

How are Minerals to be divided?

Is the division of Minerals for ore stockpiling a 'Joint Venture Operation'?

Is the ODP in accordance with good mining practice?

Conclusion

Ore Processing Issue

Context, purpose and object of the OTA

The title of the ProJVA

Recitals

All EKJV Ore?

Clause 4.1, cl 4.2 and cl 5.7

Clause 5.7 - Batch Campaign

Is cl 5.11 consistent with Kanowna's obligation to process all EKJV Ore?

Conclusion

Outcome

CURTHOYS J:

Introduction

The plaintiffs, Tribune Resources Ltd (Tribune), Rand Mining Ltd (Rand Mining) and Rand Exploration NL (Rand Exploration) (collectively, R&T Group), seek damages, declaratory relief and other associated relief against the defendants, EKJV Management Pty Ltd (EKJVM), Northern Star (Kanowna) Pty Ltd (Kanowna) and Gilt-Edged Mining Pty Ltd (GEM) (collectively, Northern Star Group).
Northern Star Group counterclaims against R&T Group.
The action centres around two agreements governing the operations of a mining joint venture near Kalgoorlie, namely:
(1) the East Kundana Production Joint Venture Agreement dated 21 February 2002 (as amended) (ProJVA);[1] and
(2)the Ore Treatment Agreement dated 21 January 2013 (OTA).[2]
[1] Exhibit 7, 431 - 526.
[2] Exhibit 7, 722 - 769.
The dispute between R&T Group and Northern Star Group concerns the proper construction of various provisions of the ProJVA and the OTA.
For the reasons that follow, I have concluded that R & T Group's claim should be dismissed and Northern Star Group's counterclaim allowed. I thank the parties for their detailed submissions.

Procedural history

This action was commenced by writ filed on 20 December 2019.
On 23 January 2020, Northern Star Group filed a defence and counterclaim seeking declarations.
On 31 March 2020, R&T Group filed an amended writ and substituted statement of claim.
On 23 June 2020, CIV 3171 of 2019 was consolidated with CIV 1385 of 2020 and orders were made for consolidated pleadings.
A substituted statement of claim was filed by R&T Group on 23 June 2020 (Statement of Claim).
A substituted defence and amended counterclaim was filed by Northern Star Group on 26 June 2020 (Defence and Counterclaim).
A reply to substituted defence and defence to amended counterclaim was filed by R&T Group on 13 July 2020.
On 21 August 2020, orders were made deleting certain paragraphs of the statement of claim and the prayer for relief.
On 11 September 2020, the court made orders for a liability-only trial and made provision for separate trials as to quantum and damages. These reasons relate to the liability-only trial.

Factual background

The parties are involved in gold extraction at a mine located at a mine located east of Kundana, approximately 25 km northwest from Kalgoorlie. The mine comprises four interconnected operational underground gold mines (East Kundana Mine).
R&T Group is involved in the business of exploring for, and mining, minerals. Tribune, Rand Mining and Rand Exploration have common directors and are all related body corporates for the purposes of the Corporations Act 2001 (Cth).
EKJVM, GEM and Kanowna also have common directors and are all related body corporates for the purposes of the Corporations Act.
R&T Group and GEM are Participants' (as defined in cl 1.1 of the ProJVA) in a joint venture (Joint Venture) project known as the East Kundana Production Joint Venture, under which the parties mine for ore (EKJV). The Joint Venture is governed by the operation of the ProJVA. The ProJVA governs the mining operations undertaken at the East Kundana Mine.
R&T Group, GEM and EKJVM are parties to the ProJVA. In accordance with the ProJVA, the R&T Group holds a 49% participating interest in the Joint Venture and GEM holds a 51% participating interest. EKJVM is the manager of the ProJVA.
On 21 January 2013, R&T Group and Northern Star Group entered into the OTA for the processing of EK Ore.
Kanowna is the owner of a gold ore processing facility, the Kanowna Belle Mill (KB Mill), approximately 20 km north of Kalgoorlie. The KB Mill is used to process gold bearing ore into a material known as doré. Doré is a material that can be refined into gold bullion.
EK Ore has to be transported to the KB Mill for processing to doré since there is not a mill on the East Kundana Mine. Until the parties fell out, EK Ore was transported from the East Kundana Mine to the KB Mill for processing to doré.

The dispute

In around March 2018, EKJV Ore began to be stockpiled at the East Kundana Mine (2018 stockpiled ore).
At the time, EKJVM proposed to GEM and R&T Group arrangements for the joint processing of the 2018 stockpiled ore. The stockpiled ore was described as a run of mine (ROM) pad.
By letters dated 6 April 2018, R&T Group informed EKJVM, in effect, that they did not agree or consent to EKJVM's proposal and, in the absence of an ore sharing agreement or agreed procedures for allocating gold from stockpiles between GEM and R&T Group, no ore could be moved from the ROM pad or processed without agreement of all parties.[3]
[3] Exhibit 7, 2075 – 2076; 4, 2227 - 2228.
Between April and June 2018, EKJVM delivered to GEM, and GEM removed, some of the 2018 stockpiled ore which was then milled at the Greenfields Mill and the Jubilee Mill owned by HBJ Minerals Pty Ltd (HBJ) in South Kalgoorlie.
Between around December 2018 and April 2020, R&T Group removed some of the 2018 stockpiled ore which was then milled at the Greenfields Mill and the Lakewood Mill. R&T Group submitted that its removal of the stockpiled ore was done to mitigate its potential losses arising from the purported breaches of the ProJVA.
From January 2020, Kanowna significantly reduced the amount of EK Ore it was willing to process through the KB Mill.
From January 2019 until July 2019, Kanowna generally estimated it could process at least 250,000 dry tonnes of EKJV ore in each upcoming quarter and in the following three quarters.[4]
[4] Exhibit 7, 26, 783, 785, 787.
On 31 July 2019, Kanowna issued a mill schedule for the following 12 months estimating the amount of EKJV Ore that could be processed in that period. It estimated the amount of EKJV Ore that could be processed in the first quarter of 2020 at roughly 260,000 dry tonnes, the second quarter at 303,808 dry tonnes and the third quarter at 249,315 dry tonnes.[5]
[5] Exhibit 7, 787.
On 29 October 2019, Kanowna issued another mill schedule for the first to fourth quarters of 2020 that revised down the previous estimates provided in the July mill schedule to 35,000 dry tonnes per quarter.[6]
[6] Exhibit 7, 797.
The subsequent mill schedules issued by Kanowna in January 2020 and April 2020 also estimated the amount of EKJV Ore that could be processed at the KB Mill at 35,000 dry tonnes per quarter.[7]
[7] Exhibit 7, 799, 801.
In January 2020, EVJVM began applying a procedure described as the Ore Division Procedure dated 21 April 2018 (ODP), for the division of EKJV Ore not scheduled to be processed under the OTA or otherwise jointly processed at any other third-party mill. At EKJVM's direction, some of the EKJV Ore began being stockpiled and divided in accordance with the procedures provided for in the ODP (2020 stockpiled ore).
Since around 11 January 2020, EKJVM has delivered to GEM, and GEM has removed, some ore that had been notionally allocated to it from the 2020 stockpiled ore. GEM processed this ore through the KB Mill and other mills in the Kalgoorlie area.
R&T Group says that it did not have in place ore treatment agreements with other mills. As a result, the amount of stockpiled ore notionally allocated to it became significant.[8]
[8] Plaintiffs' and defendants by counterclaim's consolidated opening and closing submissions filed 15 October 2020 [227] (Plaintiffs' Consolidated Submissions).
Since around 24 April 2020, EKJVM delivered to R&T Group, and R&T Group has removed, some ore from the 2020 stockpiled ore. R&T Group again submitted that these measures were taken to mitigate its losses arising from Northern Star Group's conduct.[9]
[9] Plaintiff's Consolidated Submissions [228].
R&T Group contended that it entered agreements with a number of ore processing mills on a piecemeal basis through which it has been able to commence processing ore. Notwithstanding these arrangements, R&T Group does not expect that it will be able to process all the EKJV Ore projected to be produced and notionally allocated to them under the ODP.
In the period from about 11 January 2020 to 30 April 2020, almost 110,000 wet tonnes of divided EKJV Ore allocated to GEM under the ODP was hauled to the KB Mill for separate processing by GEM.[10]
[10] Substituted defence and amended counterclaim filed 26 June 2020 [43(g)(i)], [52(d)(i)] (Defence and Counterclaim).
In the period from about 11 January 2020 to 30 April 2020, Kanowna processed at least 79,924.08 dry tonnes of EKJV Ore at the KB Mill for GEM. That quantity of EKJV Ore was processed at the KB Mill for GEM between 3 and 25 March 2020.[11]
[11] Defence and Counterclaim [52(d)].
The parties agree that in preparing the mill schedules of October 2019, January 2020 and April 2020 (EKJV Mill Schedules), Kanowna took into account and allocated capacity for the projected processing requirements for ore produced from sources other than the KB Mine and other tenements within the Kanowna Belle Project for each of the quarters the subject of each of the EKJV Mill Schedules (Relevant Quarters).
It is also common ground that at the respective times that Kanowna prepared each of the EKJV Mill Schedules - after taking into account the amount of ore Kanowna estimated to be produced from the KB Mine or other tenements within the Kanowna Belle Project and the forecasted capacity of the KB Mill for each of the Relevant Quarters - the KB Mill had capacity to process more than 35,000 dry tonnes of EKJV Ore in each of the Relevant Quarters.
R&T Group submitted that it did not agree to the division of the EKJV Ore using the ODP.[12] In its view, all EKJV Ore remains jointly owned and has not been taken in kind by GEM in accordance with the terms of the ProJVA.[13]
[12] Plaintiffs' Consolidated Submissions [11].
[13] Plaintiffs' Consolidated Submissions [11].
R&T further submitted that the conduct of Northern Star Group involves a significant departure from the agreed manner in which the Joint Venture has been managed in previous years.[14] The conduct was asserted to involve clear breaches of the ProJVA regarding the parties' entitlement and obligation to take in kind and separately dispose of the gold contained in jointly owned ore. Northern Star Group's conduct also involves clear breaches of the OTA that have the effect of preventing and (or) hindering the R&T Group from receiving the full benefit of the ProJVA and the OTA.[15]
[14] Plaintiffs' Consolidated Submissions [13].
[15] Plaintiffs' Consolidated Submissions [14].
Northern Star Group submitted that it has:[16]
have not shied away from the fact that the KB Mill had capacity to process more than 35,000 tonnes of EKJV Ore in each calendar quarter the subject of this dispute. Despite that, the plaintiffs have chosen to lead evidence for the purposes of the liability only trial regarding the processing arrangements they have made for their ore. Although the defendants do not accept the relevance of this evidence for the purposes of the liability only trial, the defendants simply point out that the evidence serves to illustrate that the plaintiffs' ore is anything but 'stranded' at the EKJV Mine, contrary to the suggestion made by the plaintiffs on more than one occasion in opening.
[16] Outline of closing submissions of the defendants/plaintiffs by counterclaim filed 14 October 2020 [132] (Defendant's Closing Submissions)..

R&T Group's claim against Northern Star Group

Pleaded breaches of the ProJVA

The claim for breach of the ProJVA is made against EKJVM and GEM. R&T Group pleads that the alleged breaches occurred in respect of the 2018 stockpiled ore and the 2020 stockpiled ore.[17]
[17] Substituted statement of claim filed 23 June 2020 [33(b)], [39], [41], [43] (Statement of Claim).
The essence of the claim is that in breach of the ProJVA:
(a)EKJVM divided EKJV Ore or allowed or facilitated the removal of EK Ore by GEM to take and separately process when there was no agreement in place between R & T Group and GEM for the division of EKJV Ore; and
(b)GEM took and separately processed EKJV Ore and appropriated to itself 'Minerals' (as defined in cl 1.1 of the PROJVA) contained in the EKJV Ore, without R&T Group's agreement and without accounting to R&T Group.[18]

The claim against EKJVM

[18] Plaintiffs' Consolidated Submissions [211].

R&T Group pleads that EKJVM has, in breach of cl 2.4, cl 17.1 and cl 25.1 of the ProJVA:
(1)between April and June 2018, allowed and/or facilitated the division, partition and delivery to or removal of 199,265 tonnes of EKJV Ore by, or on behalf of, GEM from the stockpiles, to take and separately mill at the Greenfields Mill and the Jubilee Mill, which GEM did, without the agreement of the R&T Group; and
(2)from on or about 1 January 2020:
(a) has applied, and has required that any other persons involved in stockpiling EKJVOre apply; and
(b) continues to apply and to require that any other persons involved in stockpiling EKJV Ore apply, the ODP (as updated in May 2018) for the division of EKJV Ore, without the agreement of R&T Group.[19]
[19] Statement of Claim [41], [43].
R&T Group pleads that by reason of the above matters,[20] EKJVM has, in breach of the terms of the ProJVA:
[20] As pleaded at [33(b)], [39] - [41], [43], [44] - [46] and [52(d)] of the Statement of Claim.
(1)failed, and continues to fail, to take all available and necessary or desirable steps to ensure that:
(a)R & T Group and GEM can each receive and dispose of their joint venture interest in the Minerals produced by the 'Joint Venture Operations' in proportion to their 'Joint Venture Interest'; (each as defined in cl 1.1 of the ProJVA) and
(b) arrangements are in place for the treatment of the EKJV Ore so as to:
(i)process the EKJV Ore and refine the Minerals contained in the EKJV Ore so as to accurately determine the amount of Minerals to be taken in kind by each of R&T Group and GEM in proportion to their Joint Venture Interest; and
(ii)ensure that each of the R&T Group and GEM receives the benefit of the ProJVA, including cl 2.4;
(2)allowed or facilitated the division of EKJV Ore or the removal of EKJV Ore by, or on behalf of, GEM to take and separately process when there is no agreement in place between the R&T Group and GEM for the division of the EKJV Ore; and
(3)acted so as to hinder or frustrate the operation of cl 2.4 of the ProJVA or so as to hinder or prevent the R&T Group and GEM from receiving the benefit they are entitled to under cl 2.4 of taking in kind Minerals in proportion to their Joint Venture Interest.[21]
[21] Statement of Claim [61(a)].

Further and in the alternative to the above, R&T Group pleads that in breach of the terms of the ProJVA, EKJVM continues to:
(1)allow or facilitate the division of EKJV Ore;
(2)allow or facilitate the removal and separate processing of EKJV Ore and further refinement of Minerals by, or on behalf of GEM, without R&T Group's agreement; and
(3)act so as to hinder or prevent R&T Group and GEM from taking in kind minerals in proportion to their Joint Venture Interest in accordance with cl 2.4 of the ProJVA.[22]

The claim against GEM

[22] Statement of Claim [61(b)].

R&T Group pleads that GEM has, in breach of cl 2.4, cl 17.1, cl 25.1 and cl 27.4 of the ProJVA, as well as certain implied terms,[23] breached its obligations:
[23] Statement of Claim [17].
(1)to be just and faithful in its dealings with R&T Group in all matters arising out of or connected in any way with the ProJVA;
(2)to cooperate and do all things reasonably necessary to ensure performance of the ProJVA and to enable R&T Group to:
(a)take in kind Minerals produced by the joint venture operations in proportion to their Joint Venture Interests; and
(b)ensure that each of R&T Group and GEM receives the benefit of the ProJVA, including cl 2.4;
(3)has taken and separately processed EKJV Ore and appropriated to itself minerals contained in the EKJV Ore, without R&T Group's agreement and without accounting to R&T Group; and
(4)acted so as to hinder or frustrate the operation of cl 2.4 of the ProJVA or so as to hinder or prevent R&T Group from receiving the benefit it is entitled to under cl 2.4 of taking in kind Minerals in proportion to its Joint Venture Interest.[24]

Pleaded breaches of the OTA

[24] Statement of Claim [61(c)].

The claim for breach of the OTA is made against Kanowna in respect of its management of processing at the KB Mill.
The parties agree that in preparing the mill schedules of October 2019, January 2020 and April 2020 (Mill Schedules), Kanowna took into account and allocated capacity for the projected processing requirements for ore produced from sources other than the Kanowna Belle Mine and other tenements within the Kanowna Belle Project for each of the quarters the subject of each of the Mill Schedules.
It is also common ground that at the respective times that Kanowna prepared each of the Mill Schedules - after taking into account the amount of ore Kanowna estimated to be produced from the Kanowna Belle Mine or other tenements within the Kanowna Belle Project and the forecasted capacity of the KB Mill for each of the Relevant Quarters - the KB Mill had capacity to process more than 35,000 dry tonnes of EKJV Ore in each of the Relevant Quarters.
R&T Group pleads that in breach of cl 4.2 and cl 5.2 of the OTA, as well as certain implied terms,[25] Kanowna:
[25] Statement of Claim [35].
(a)failed to properly identify and state in the milling schedules of October 2019, January 2020 and April 2020, details of the estimated EKJV Ore tonnes and ore source that can be physically processed by the KB Mill in:
(i)the next calendar quarter; and
(ii)in the following three calendar quarters;
(iii)after taking into account only the projected processing requirements for ore produced from the Kanowna Belle Mine or other tenements within the Kanowna Belle Project;
(b)calculated and estimated the EKJV Ore tonnes and ore source that can be physically processed by the KB Mill by wrongfully taking into account the projected processing requirements for ore produced from sources other than the Kanowna Belle Mine or other tenements within the Kanowna Belle Project; and
(c)failed and refused to process EKJV Ore that can be physically processed by the KB Mill after taking into account only the projected processing requirements for ore produced from the Kanowna Belle Mine or other tenements within the Kanowna Belle Project.[26]

Relief sought

[26] Statement of Claim [63].

R&T Group seeks that the court make the declarations to the effect of pars A - F, K and N of the prayer for relief in the Statement of Claim:
AND THE FIRST, SECOND AND THIRD PLAINTIFFS CLAIM AGAINST THE FIRST AND THIRD DEFENDANTS:
A.Declarations that:
(a)The term Minerals for the purposes of the [ProJVA] Agreement means the gold, silver and any other minerals contained in the EKJV Ore.
(b)Until Minerals are taken in kind by [R&T Group and GEM] under clause 2.4 of the [ProJVA]:
(i)all Minerals and the EKJV Ore are held [R&T Group and GEM] as tenants in common in undivided shares in accordance with their respective Joint Venture Interests; and
(ii)no [party to the ProJVA], nor any person claiming through them, or EKJVM may divide the Minerals or the EKJV Ore without the agreement of each of the other [parties to the ProJVA]..
(c)The entitlement and obligation of each [of R&T Group and GEM] referred to in clause 2.4 of the [ProJVA] is to take and separately dispose of, in proportion to its Joint Venture Interest, all Minerals (being the gold, silver and any other minerals) contained in the EKJV Ore.
(d)To accurately determine the amount of the Minerals contained in the EKJV Ore, and which each [of R&T Group and GEM] is to take in kind under clause 2.4 of the [ProJVA], the undivided EKJV Ore must be processed without blending with ore from other sources, refined to produce gold bullion and metallurgical reconciliation be completed.
(e)The entitlement and obligation of each (of R&T Group and GEM] referred to in (c) above arises as and when the quantity of Minerals (gold, silver and any other minerals) contained in the EKJV Ore has been determined by metallurgical reconciliation following the treatment of undivided EKJV Ore and the refining of the Minerals into bullion
(f)Further to the declarations sought in (c) and (e) above, the entitlement and obligation of each [of R&T Group and GEM] referred to in clause 2.4 of the [ProJVA] to take in kind and separately dispose of, in proportion to its Joint Venture Interest:
(i)the quantity of Minerals (gold, silver and any other minerals) contained in the EKJV Ore as and when determined by metallurgical reconciliation following the treatment of the undivided EKJV Ore and refining of the Minerals, if [R & T Group and GEM] Parties have in place an agreement or agreements for the treatment of the undivided EKJV Ore and refining of the Minerals contained in the EKJV Ore (Milling Agreement or Agreements); EKJV
(ii)EKJV Ore containing the Minerals, if (but only if):
(A)the [R&T Group and GEM] do not have in place a Milling Agreement or Agreements with respect to the undivided EKJV Ore; and
(B)the [R&T Group and GEM] have in place an agreement between them for the division of the EKJV Ore which ensures that the Minerals (gold, silver and any other minerals) contained in the unprocessed EKJV Ore reflects, as closely as can be achieved without metallurgical reconciliation, their respective Joint Venture Interests in the Minerals contained in the EKJV Ore
B.Declarations that EKVM is required under the [ProJVA]:
(a)to take all available and necessary or desirable steps to ensure that:
(i)[R&T Group and GEM] can each receive and dispose of their Joint Venture Interest in the Minerals produced by the Joint Venture Operations in proportion to its Joint Venture Interest as provided in clause 2.4 of the [ProJVA];
(ii)to ensure that each of the [parties to the ProJVA] receives the benefit of the [ProJVA], including clause 2.4;
(iii)arrangements are in place for the treatment of EKJV Ore so as to:
(A)process the EKJV Ore and refine the Minerals (gold, silver and any other minerals) contained in the EKJV Ore so as to accurately determine the amount of Minerals to be taken in kind by each of [R&T Group and GEM] in proportion to its Joint Venture Interest; and
(B)ensure that each of [R&T Group and GEM] receives the benefit of the [ProJVA], including clause 2.4;
(b)not do anything to allow or facilitate the division of the EKJV Ore unless there is an agreement in place between [R&T Group and GEM] for the division of the EKJV Ore, which ensures that the EKJV Ore is divided between the [R&T Group and GEM] Parties in proportions representing, as closely as can be achieved without metallurgical reconciliation, their respective Joint Venture Interests in the Minerals contained in the EKJV Ore; and
(c)not act so as to hinder or frustrate the operation of clause 2.4 of the [ProJVA] or so as to hinder or prevent any of the [parties to the ProJVA] from receiving the benefit it is entitled to under clause 2.4 of taking in kind Minerals in proportion to their Joint Venture Interest.
C.Declarations that GEM is required under the [ProJVA]:
(a)to be just and faithful in its dealings with the R&T Group in all matters arising out of or connected in any way with the [ProJVA];
(b)to co-operate and do all things reasonably necessary to ensure performance of the [ProJVA] and to enable the R&T Group to:
(iv)take in kind Minerals produced by the Joint Venture Operations in proportion to its Joint Venture Interest; and
(v)ensure that the R&T Group receives the benefit of the [ProJVA], including clause 2.4;
(c)not to take and separately process EKJV Ore and appropriate to itself Minerals contained in the EKJV Ore, without the R&T Group's agreement and without accounting to the R&T Group; and
(d)not to act so as to hinder or frustrate the operation of clause 2.4 of the [ProJVA] or so as to hinder or prevent the R&T Group from receiving the benefit it is entitled to under clause 2.4 of taking in kind Minerals in proportion to its Joint Venture Interest.
D.Declarations that EKJVM is in breach of its obligations under the [ProJVA] as pleaded in paragraphs 61(a) and 61(b) of the statement of claim.
E.Declarations that GEM is in breach of its obligations under the [ProJVA] as pleaded in paragraph 61(c) of the statement of claim.
F.Injunctive relief to give effect to the declarations in A - E above.
AND THE FIRST, SECOND AND THIRD PLAINTIFFS CLAIM AGAINST THE SECOND DEFENDANT:
K.Declarations that Kanowna:
(a)Is required, by clause 4.2 of the OTA, to provide the R&T Group with … Mill Schedule which states details of the estimated EKJV Ore tonnes and ore source that can be physically processed by the KB Mill:
(i)in the next calendar quarter; and
(ii)in the following three calendar quarters;
after taking into account only the projected processing requirements for ore produced from the KB Mine or other tenements within the Kanowna Belle Project.
(b)In calculating and estimating the EKJV Ore tonnes and ore source that can be physically processed by the KB Mill for the purposes of clause 4.2 of the OTA, is not permitted to take into account the projected processing requirements for ore produced from any source other than from the KB Mine or other tenements within the Kanowna Belle Project.
(c)Must process EKJV Ore in accordance with…Milling Schedules prepared and issued in accordance with (a) and (b) above until the [Joint Venture] has completed the mining of the EKJV Ore and all stockpiled EKJV Ore has been processed by Kanowna, unless one of the circumstances in clause 5.2 of the OTA applies.

Northern Star Group's counterclaim

By its counterclaim, Northern Star Group plead that on the proper construction of the ProJVA:
(1)each of GEM and R&T Group is entitled and obliged to take in kind and separately dispose of, in proportion to its Joint Venture Interest, all Minerals as and when produced by the Joint Venture Operations;
(2)each of GEM and R&T Group's entitlement and obligation arises as and when Minerals are delivered by EKJVM to an ore stockpile at the Joint Venture Area in accordance with the Joint Venture Interests of GEM on the one hand and the R&T Group on the other hand;
(3)the division of Minerals for ore stockpiling in accordance with the Joint Venture Interests of GEM on the one hand and R&T Group on the other hand is a Joint Venture Operation; and
(4)EKJVM is entitled to adopt and implement operating procedures and practices to conduct Joint Venture Operations, including for the division of Minerals for ore stockpiling in accordance with the Joint Venture Interests of GEM on the one hand and R&T Group on the other hand without any further agreement of the GEM and the R&T Group.[27]
[27] Defence and Counterclaim [73].
Northern Star Group further plead that on the proper construction of the OTA:
(1)Kanowna is not required to provide R&T Group with Mill Schedule for any quarter which details the estimated EKJV Ore tonnes and ore source that can be processed in the upcoming calendar quarter in an amount in excess of 35,000 tonnes per quarter; and
(2)Kanowna is not required to provide R&T Group with Mill Schedule which states the total amount of EKJV Ore the KB Mill can physically process after taking into account only the projected processing requirements for ore produced from the Kanowna Belle Mine or other tenements within the Kanowna Belle Project process ore at the KB Mill and is not required to process EKJV Ore on that basis.[28]
[28] Defence and Counterclaim [74].
Northern Star Group seek that the court make the declarations in pars A ‑ G of the prayer for relief in the Defence and Counterclaim:
AND THE FIRST PLAINTIFF BY COUNTERCLAIM AND THE THIRD PLAINTIFF BY COUNTERCLAIM CLAIM AGAINST THE FIRST, SECOND AND THIRD DEFENDANTS BY COUNTERCLAIM:
A.A declaration that each [of R&T Group and GEM] is entitled and obliged to take in kind and separately dispose of, in proportion to its Joint Venture Interest, all Minerals as and when produced by the Joint Venture Operations.
B.A declaration that each [of R&T Group and GEM's] said entitlement and obligation arises as and when Minerals are delivered by EKJVM to an ore stockpile at the Joint Venture Area in accordance with the Joint Venture Interests of GEM on the one hand and the R&T Group on the other hand.
C.A declaration that the division of Minerals for ore stockpiling in accordance with the Joint Venture Interests of GEM on the one hand and the R&T Group on the other hand is a Joint Venture Operation.
D.A declaration that EKJVM is entitled to adopt and implement operating procedures and practices to conduct Joint Venture Operations, including for the division of Minerals for ore stockpiling in accordance with the Joint Venture Interests of GEM on the one hand and the R&T Group on the other hand without any further agreement of the [parties to the ProJVA].
E.A declaration that the ODP is an operating procedure of EKJVM to conduct Joint Venture Operations for the purposes of clause 5.15 of the [ProJVA] which is in accordance with good mining industry practice as required by clause 5.17 of the [ProJVA].
AND THE PLAINTIFFS BY COUNTERCLAIM CLAIM AGAINST THE FIRST, SECOND AND THIRD DEFENDANTS BY COUNTERCLAIM:
F.A declaration that Kanowna is not required to provide the R&T Group with [a] Mill Schedule for any quarter which details the estimated EKJV Ore tonnes and ore source that can be processed in the upcoming calendar quarter in an amount in excess of 35,000 tonnes per quarter.
G.A declaration that Kanowna is not required to provide the R&T Group with [a] Mill Schedule which states the total amount of EKJV Ore the KB Mill can physically process after taking into account only the projected processing requirements for ore produced from the Kanowna Belle Mine or other tenements within the 'Kanowna Belle Project' and is not required to process EKJV Ore on that basis.

The respective cases

The ProJVA

The dispute between the parties under the ProJVA primarily centres around the nature of the parties' entitlements to take and divide the ore processed at the KB Mill.
R&T Group's case is that, on the proper construction of the ProJVA, there is no entitlement or obligation to take Minerals in kind unless and until Minerals are produced in a form that permits the Participants in the Joint Venture to take in kind and separately dispose of those Minerals in proportion to each Participant's Joint Venture Interest. In short, in the context of cl 2.4, Minerals means gold not ROM ore.
R&T Group submits that even if it were found that Minerals can mean ROM ore as Northern Star Group contends, cl 2.4 does not permit a Participant such as GEM to take in kind and separately dispose of such ore as and when produced unless that Participant takes its proportion of the gold contained in that ore. Clause 2.4 does not provide for a fair and equitable division of ore or gold. It provides for division exactly in accordance with each Participant's Joint Venture Interest.
R&T further submits that division and taking of ROM ore in accordance with the ODP is a breach of the ProJVA because it is not a procedure that will result in GEM or R&T Group taking in kind the gold contained in the ROM ore divided in proportion to each Participants' Joint Venture Interest, as and when, that ore is divided and taken.
Northern Star Group's case is that on its proper construction, the ProJVA deals with the mining (extraction) of gold bearing ore from the 'Tenements' referred to in cl 1.1 of the ProJVA. Once that gold bearing ore is in a form that a Participant can physically 'receive in kind' or 'take in kind', and 'separately dispose of', then absent any agreement between the parties to the contrary, that is what is to occur and it arises as and when gold bearing ore is obtained through the process of mining.

The OTA

The dispute under the OTA relates to the Kanowna's obligations in processing EK Ore at the KB Mill and providing notice of its capacity to do so under cl 4 and cl 5 of the OTA.
R&T Group's case is that:[29]
the effect of clauses 4 and 5 of the [OTA] is that, subject to certain limited and express exceptions, Kanowna must do all things reasonably necessary to process all EKJV Ore to the KB Mill each quarter in accordance with a notice given under clause 4.1 of that agreement. In taking into account what is reasonably necessary to process EKJV Ore in any given quarter, Kanowna is entitled to process Kanowna Ore (ore produced from the Kanowna Belle Project) in preference to EKJV Ore, but not ore from other sources.
Consistently with the above processing obligation, Kanowna is obliged to provide R&T Group with [a] Milling Schedule providing details of the estimated amount of EKJV Ore that it will process in the upcoming quarter and an estimate of the amount of EKJV Ore that can be processed in that quarter and the following three quarters.
There was evidence to the effect that Kanowna has processed ore from outside the Kanowna Belle Project in preference to EKJV Ore. Further, that Kanowna has not processed EKJV Ore that was capable of being processed at the KB Mill during the first and second quarters of 2020. Further, that Kanowna's estimates of the amount of EKJV Ore that 'can be processed' in Milling Schedules provided to the R&T Group from October 2019 were not reasonable. That is, the…Milling Schedules were not validly prepared in accordance with clause 4.2.
[29] Plaintiffs' Consolidated Submissions [23] - [25].
Northern Star Group's case is that the proper construction of the OTA is that, subject to cl 5.8 and cl 5.9:
(a)Kanowna's obligation to process EKJV Ore under the OTA is to undertake 'a minimum of one Batch Campaign in each calendar quarter' with a 'minimum batch size' of 35,000 tonnes; and
(b)in determining what, if any, amount over and above 35,000 tonnes can be processed in any upcoming calendar quarter, Kanowna may have regard to ore available to it to process from sources other than EKJV Ore and its own mine (or the 'Kanowna Belle Project' referred to by R&T Group).[30]
[30] Outline of opening submissions of the defendants/plaintiffs by counterclaim filed 8 October 2020 [45] (Defendants' Opening Submissions).

Northern Star Group contends that nothing in the OTA supports the R&T Group's contention that Kanowna must process 'all' EKJV Ore in preference to ore from sources other than the Kanowna Belle Project, which it says is a phrase not used or defined in the OTA.

The issues

In practical terms, the issue under the ProJVA is whether GEM can separately divide and take ore mined on behalf of the Joint Venture from the East Kundana Mine under cl 2.4 of the ProJVA.
It appears from the parties' submissions that the relevant issues of construction I must determine are as follows:
(1)On a proper construction of cl 2.4 of the ProJVA, what are the Minerals that R&T Group and GEM are entitled and obliged to take in kind and, relatedly, when does the right and obligation of the R&T Group and GEM to take in kind their respective shares of Minerals arise?
(2)Issues as to the division of Minerals, being:
(a) Is EKJVM entitled to adopt and implement operating procedures and practices to conduct Joint Venture Operations, including for the division of Minerals for ore stockpiling in accordance with the Joint Venture Interest of GEM on the one hand and R&T Group on the other hand, without any further agreement of the R&T Group and GEM.
(b)Is the ODP an operating procedure of EKJVM to conduct Joint Venture Operations for the purposes of cl 5.15 of the ProJVA which is in accordance with good mining industry practice as required by cl 5.17 of the ProJVA?
(3) Have either EKJVM or GEM breached the ProJVA?
For convenience, I will hereafter refer to the above issues collectively as the 'Taking Minerals Issue'.
The issue for determination that arises in relation to the OTA is, on the proper construction of cl 4.2 and cl 5.7 of the OTA, whether Kanowna is obliged to process EKJV Ore as defined in the OTA through the KB Mill and, if so, the extent of that obligation in any calendar quarter. I will hereafter refer to this issue as the 'Ore Processing Issue'.

Principles of contractual interpretation

The parties generally agreed on the legal principles to be applied in this case.
The general principles of contractual interpretation were succinctly summarised by the Court of Appeal in Pilbara Iron Ore Pty Ltd v Ammon:[31]
The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose. Ascertaining the meaning of terms in an instrument requires a determination of what a reasonable person would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract. The instrument must be read as a whole.
The general principle applicable to the construction of commercial contracts is that they should be given a businesslike interpretation. Absent a contrary intention, the court approaches such contracts on the basis that the parties intended to produce a result which makes commercial sense. This requires that the construction placed on the term or terms in question is consistent with the commercial object of the agreement. However, it must also be borne in mind that business commonsense may be a topic on which minds may differ. (footnotes omitted)
[31] Pilbara Iron Ore Pty Ltd v Ammon [2020] WASCA 92 [85] - [86].
Where a contract contains defined terms, the court will give effect to them. A definition is not to be construed in isolation from the operative provision or provisions in which the defined term is used.[32]
[32] George 218 Pty Ltd v Bank of Queensland Ltd (No 2) [2016] WASCA 182 [82].
Where a commercial transaction is implemented by several contracts or documents, all of the contracts or documents may be read together for the purpose of ascertaining their proper construction and legal effect, at least where the contracts or documents are executed contemporaneously or within a short period.[33]
[33] EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23 52-53 [104].
Further, each of the contracts has to be construed in context, considering its terms as a whole, giving consistent meaning to all of its terms, and avoiding any apparent inconsistency.[34] Preference is to be given to a construction that gives 'a congruent operation to the various components of the whole'.[35]
[34] Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J).
[35] Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 [16].
It is not permissible to consider extrinsic evidence to subtract from, add to, vary or contradict the language of a written contract.[36] However, resort to extrinsic circumstances and things external to the contract may be necessary to identify its purpose and in determining the proper construction where there is a constructional choice.[37] In Black Box Control Pty Ltd v TerraVision Pty Ltd,[38] the Court of Appeal set out the principles that must be applied in respect of extrinsic evidence:[39]
(1) If an expression in a contract is unambiguous and susceptible of only one meaning, evidence of surrounding circumstances cannot be adduced to contradict its plain meaning.
(2) To the extent that a contract, document or statutory provision is referred to, expressly or impliedly, in an instrument, that contract, document or statutory provision can be considered in construing the instrument, without any need for ambiguity or uncertainty of meaning.
(3) There are important limits on the extent to which evidence of surrounding circumstances (when admissible) can influence the proper construction of an instrument. Reliance on surrounding circumstances must be tempered by loyalty to the text of the instrument. Reference to background facts is not a licence to ignore or rewrite the text. The search is for the meaning of what the parties said in the instrument, not what the parties meant to say.
(4) There are also limits on the kind of evidence which is admissible as background to the construction of a contract, and the purposes for which it is admissible. Insofar as such evidence establishes objective background facts known to the parties or the genesis, purpose or objective of the relevant transaction, it is admissible. Insofar as it consists of statements and actions of the parties reflecting their actual intentions and expectations it is inadmissible. Such statements reveal the terms of the contract which the parties intended or hoped to make, and which are superseded by, or merged into, the contract.
[36] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 347, 348, 352; see also Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [35] ‑ [36].
[37] Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219 [42(4)]; Simic v New South Wales Housing Corp [2016] HCA 47; (2016) 260 CLR 85 [18].
[38] Black Box [42].
[39] Black Box [42].
In Agricultural & Rural Finance Pty Ltd v Gardiner,[40] Gummow, Hayne and Kiefel JJ clearly expressed the view that the conduct of the parties subsequent to contract cannot, as a general rule, be used as an aid to construction of the terms of a contract.[41] This principle accords with the objective theory of contract.[42]
[40] Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 [35].
[41] Gardiner [35].
[42] Franklins Pty Ltd v Metcash Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 [327].
The statement of the majority in Gardiner was not disputed by the parties. However, R&T Group submitted that subsequent conduct may be used to identify the subject matter of an ambiguous term.[43] In support of this submission, it referred to the cases of County Security Pty Ltd v Challenger Group Holdings Pty Ltd[44] and White v Australian and New Zealand Theatres Ltd.[45] Northern Star Group submitted that these cases precede the decision of the High Court in Gardiner. As Allsop P said in Franklins Pty Ltd v Metcash Ltd,[46] the expressed approach of the majority in Gardiner evidences a departure from statements in earlier authorities to the contrary. While subsequent conduct may be examined in certain recognised circumstances, none of these apply in this case. The cases relied on by R&T Group precede Gardiner.
[43] Plaintiffs' Consolidated Submissions [47].
[44] County Security Pty Ltd v Challenger Group Holdings Pty Ltd[2008] NSWCA 193 [21], [24].
[45] White v Australian and New Zealand Theatres Ltd [1943] HCA 6; (1943) 67 CLR 266, 270 - 271 (Latham CJ), 280 - 281 (Williams J).
[46] Franklins Pty Ltd v Metcash Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 [11].
In any event, it is clear from the passage cited in County Security that subsequent conduct has no role in 'deciding the meaning of words'.[47] See also Process Minerals International Pty Ltd v Consolidated Minerals Pty Ltd.[48]
[47] County Security [21].
[48] Process Minerals International Pty Ltd v Consolidated Minerals Pty Ltd [2011] WASCA 219 [98] ‑ [99].
As part of its claim, R&T Group pleads that there were implied terms to cooperate and not to hinder or frustrate the performance of the ProJVA. It is uncontroversial that a contract imposes an implied obligation on each party to cooperate with the other by doing all that is necessary to secure performance of the contract.[49] There is also an implied obligation not to hinder or prevent the fulfillment or purpose of the promises made in the contract.[50] The precise ambit and content of the duty to cooperate will depend on the express terms and any other implied terms of the contract.[51]
[49] Secured Income Real Estate (Aust) Ltd v St Martin's Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 607 (Mason J); Butt v M'Donald(1896) QLJ 68, 70 - 71 (Griffiths CJ).
[50] Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 410 [36].
[51] See Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45; (1993) 177 CLR 635, 659 - 660; Fitzgerald v FJ Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215, 219, 226.

The agreements

Background

Prior to entering into the ProJVA, R&T Group and GEM entered into an exploration joint venture agreement (ExJVA). The ExJVA comprises:
(a)the East Kundana Tenements Farm-in and Joint Venture Agreement dated 4 July 1997;
(b) the East Kundana Joint Venture Supplemental Deed 1 dated 25 October 2001; and
(c) the East Kundana Joint Venture Agreement Supplemental Deed 2 dated 21 February 2002.[52]
[52] Exhibit 7, 1 - 92.
On the same date as the East Kundana Joint Venture Supplemental Deed 1 (25 October 2001), R&T Group and GEM made an ore treatment agreement with Kundana Gold Pty Ltd (Kundana OTA).[53]
[53] Exhibit 7, 527 - 567.
R&T Group, GEM and EKJVM entered the ProJVA on 21 February 2002. As set out further below, the ProJVA comprises a substantive agreement and three supplemental deeds.[54]
[54] See [92].
During the term of the ProJVA, R&T Group, GEM and EKJVM have been party to various agreements for the treatment and division of EK Ore.
Until 2004, the Kundana OTA governed the treatment of EKJV Ore.
On 27 July 2004, R&T Group, GEM and EKVM and Paddington Gold Pty Ltd (a related body corporate of GEM and EKJVM), entered a new ore treatment agreement to process EKJV Ore mined from the Joint Venture's Raleigh underground mine at a mill owned by Paddington Gold Pty Ltd (Paddington OTA).[55] The R&T Group and GEM did not treat ore from the Raleigh underground mine under the Paddington OTA and the agreement was terminated in 2005.
[55] Exhibit 7, 568 - 587.
Due to difficulties in processing EKJV Ore, the participants made an agreement by which EKJV Ore was divided rather than refined after processing at a mill. On 2 December 2005, R&T Group, GEM, EKJVM and Placer Dome Australia Ltd (then the parent entity of GEM) made an ore division agreement concerning the ore mined from the Raleigh underground mine (Raleigh ODA).[56]
[56] Exhibit 7, 606 - 623.
Subsequently, on 12 November 2010, R&T Group, GEM EKJVM and Barrick (PD) Australia Limited (then a related entity of GEM) made an ore division agreement concerning ore mined from the Rubicon - Hornet - Pegasus mine (Rubicon ODA).[57]
[57] Exhibit 7, 634 - 653.
R&T Group, EKJVM and Kanowna executed the OTA on 21 January 2013. The OTA has effect from 31 December 2012.

The ProJVA

The ProJVA comprises the following documents:
(a)East Kundana Production Joint Venture Agreement dated 21 February 2002 between R&T Group, GEM and EKJVM;[58]
(b)East Kundana Production Joint Venture Agreement Supplemental Deed 1 dated 4 August 2004 between R&T Group, GEM and EKJVM (ProJVA S1 Deed);[59]
(c)East Kundana Production Joint Venture Agreement Supplemental Deed 2 dated 2 December 2005 between R&T Group, GEM and EKJVM (ProJVA S2 Deed);[60] and
(d)East Kundana Production Joint Venture Agreement Supplemental Deed 3 dated 3 September 2013 between R&T Group, GEM and EKJVM (ProJVA S3 Deed).[61]
[58] Exhibit 7, 93 - 198.
[59] Exhibit 7, 386 - 402.
[60] Exhibit 7, 403 - 410.
[61] Exhibit 7, 421 - 430.
ProJVA S1 Deed was made shortly after the parties made the Paddington OTA on about 27 July 2004.
ProJVA S2 Deed was made on the same date as the Raleigh ODA to amend the text of the ProJVA to make specific reference to the Raleigh ODA: cl 13.1.
ProJVA S3 Deed was made after the execution of the OTA on 21 January 2013 to further amend the text of the ProJVA to make specific reference to the OTA.
The ProJVA is an agreement contemplated under cl 15.4 of the ExJVA.
The most relevant provisions of the ProJVA for present purposes are outlined below.

Recitals

Recital B of the ProJVA notes that the ExJVA 'contemplates that the parties to it may conduct a mining operation under the terms of an agreement to be separately negotiated between them'.
Recital C provides that the Participants to the Joint Venture,[62] that is, R&T Group and GEM, 'have agreed to associate in a joint venture upon the terms and conditions set out in this Agreement for the purpose of the development, mining and further delineation of resources within the Joint Venture Area'.

Formation of joint venture

[62] 'Participants' means GEM, Rand Mining, Rand Exploration and Tribune: ProJVA cl 1.1.

Clause 2.1 provides that R&T Group and GEM:
confirm that they are associated in an unincorporated joint venture for the purpose of the commercial exploitation of Minerals from the Joint Venture Area including, but not limited to, the development, mining and, if required, further evaluation of the Joint Venture Area upon the terms and conditions set out in this Agreement.
'Joint Venture Area' is defined in the ProJVA as 'the Tenements or such other area as is agreed by the Participants from time to time.' Given there is no evidence of any such other agreement, the 'Joint Venture Area' means 'the Tenements'.[63]
[63] ProJVA cl 1.1.
Clause 2.4 of the ProJVA deals with R&T Group and Gem entitlements to the product the subject of commercial exploitation. It provides:
Entitlement to Minerals
Each Participant shall be entitled and obliged to take in kind and separately dispose of, in proportion to its Joint Venture Interest, all Minerals as and when produced by Joint Venture Operations. (emphasis added)

The effect of cl 2.4 is the principal question of construction concerning the alleged breaches of the ProJVA.
'Joint Venture Interest' is defined to mean:[64]
a Participant's undivided interest (expressed as a percentage) in:
…
(b) the ownership of and right and benefit as a tenant in common to receive in kind and dispose of for its own account Minerals produced by Joint Venture Operations;
(c)the beneficial ownership as a tenant in common of the Tenements and all other Joint Venture Property.
[64] ProJVA cl 1.1.
'Joint Venture Operations' is in turn defined as 'all activities as are necessary or desirable in order to implement and give full effect to the provisions and purposes of this Agreement, including Exploration Operations and Mining Operations'.[65]
[65] ProJVA cl 1.1.
'Joint Venture Property' is defined as:[66]
all property of whatsoever kind now held or hereafter acquired or created by or on behalf of the Participants for the purposes of the [Joint Venture] including, but not limited to:
(a)the Tenements;
(b)Mining Information;
(c)all fixtures, machinery, equipment, supplies and other property or facilities or rights, whether real or personal, established or acquired by or on behalf of the Participants for the purpose of and with the funds of the … Joint Venture;
(d)Minerals, concentrate and ore prior to their being taken in kind by the Participants;
[66] ProJVA cl 1.1.
'Minerals' means 'all naturally occurring substances obtained or obtainable by Joint Venture Operations carried out on or under the surface of the land the subject of the Tenements and includes, but is not limited to, gold'.[67]

Manager of joint venture

[67] ProJVA cl 1.1.

Clause 4 of the ProJVA concerns matters relating to the management of the joint venture. By cl 4.1, EKJVM is appointed 'Manager' of the Joint Venture. By cl 4.2(b), 'All Joint Venture Property held by EKJVM is held on trust for the Participants in accordance with their respective Joint Venture Interests.'
Clause 4.4 provides that the function of the Manager is, subject to cl 5.10, to 'manage, direct and control Joint Venture Operations on behalf of and as agent for the Participants and for this purpose shall have possession and control of all Joint Venture Property.'
The powers and duties of the Manager must be discharged in accordance with 'Approved Programmes and Budgets and decisions made by the Operating Committee'.[68] 'Approved Programme and Budget' means a programme and budget that has been approved through one of the methods provided for in cl 1.1.

Powers and duties of Manager

[68] ProJVA cl 4.5.

Clause 5 relates to the powers and duties of manager. The Manager must 'implement the decisions of the Operating Committee[69] and shall make all expenditures necessary to carry out all Approved Programmes and Budgets.'[70]
[69] 'Operating Committee' means the committee established pursuant to cl 7.
[70] ProJVA cl 5.1.
The Manager must keep R&T Group and Gem advised of all Joint Venture Operations by submitting to them certain information, including, amongst other things, a monthly report on all Joint Venture Operations carried out by the Manager during that month[71] and all information required to complete reports required to be submitted under the Mining Act1978 (WA).[72]
[71] ProJVA cl 5.11(a).
[72] ProJVA cl 5.11(e).
Clause 5.15 provides:
The Manager shall conduct all Joint Venture Operations, subject to the direction of the Operating Committee, in:
(a)a good, workmanlike and efficient manner;
(b)good faith;
(c)accordance with sound exploration and mining and other applicable industry standards and practices; and
(d) accordance with the terms and provisions of leases, licences, permits, contracts and other agreements pertaining to Joint Venture Property.
Clause 5.17 provides:
R&T Group may from time to time require the Manager to provide information on the standard operating procedures and practices used by the Manager in relation to a particular matter … The parties acknowledge that there may not be written standard operating procedures for all activities undertaken pursuant to the Joint Venture and in such circumstances will respond (in writing and in reasonable detail) by explaining the practice applied by the Manager in these circumstances. With respect to the standard operating procedures and practices, the Manager acknowledges that they must, at a minimum, be in accordance with good mining industry practice.

Operating Committee

Clause 7.1 provides that R&T Group and GEM must form an 'Operating Committee' which:
is empowered to make all decisions in relation to matters within the scope of the … Joint Venture other than matters expressly reserved by the ProJVA for the determination, decision, approval or consent of the Participants or any of them or matters which have been delegated pursuant to the agreement to a Participant or the Manager.

Programmes, budgets and contributions

By cl 8.1 and cl 8.2, the Manager is to prepare and submit to R&T Group and GEM for approval by the Operating Committee an annual programme and budget. The Operating Committee may approve a programme and budget with or without modification, which will then be an 'Approved Programme and Budget'.[73] An Approved Programme and Budget can be revised.[74]

Accounts and audit

[73] ProJVA cl 8.3 - cl 8.6.

[74] ProJVA cl 8.4.

By cl 14.1, the manager must maintain separate books and accounts in accordance with the Accounting Procedure and generally accepted accounting principles.[75] The 'Accounting Procedure' is set out in annexure A of the ProJVA. Amongst other things, the Accounting Procedure provides:[76]
Division in Kind
Division of material in kind, if made between Participants, shall be in proportion to their respective interests in such material. Each Participant will thereupon be charged individually with the value of the material received or receivable by each Participant, and corresponding credits will be made by the relevant Manager to the … Joint Venture.

Trust as to beneficial interest

[75] ProJVA cl 14.1.

[76] ProJVA annexure A, cl 5.2.

Clause 17.1 provides that the Joint Venture Property 'shall be held by the Manager or the Participant or Participants for the time being having legal title thereto upon trust for the Participants as tenants in common in undivided shares in accordance with their respective Joint Venture Interests.'
R&T Group and GEM may transfer their legal title in the Joint Venture Property pursuant to cl 17.2:
Any Participant having a beneficial interest in Joint Venture Property may at any time and at their expense call for a transfer from the other Participants, of the legal title to that beneficial interest (provided such transfer would not prejudice any application for a mining tenement which has been made or which is about to be made).

Further assurances

Clause 22.1 provides that 'Each party (which includes the Participants and EKJVM) agrees, at its own expense, on the request of another party to do everything reasonably necessary to give full effect to the ProJVA and the transactions contemplated by it, including, but not limited to, the execution of documents.'

Entire agreement

Clause 24.1 provides that the ProJVA, and subject to cl 2.5,[77] the ExJVA, constitute the full and complete understanding between R&T Group and GEM in relation to its subject matter and supersedes all prior negotiations, understandings and agreements with respect thereto.

Partition

[77] Clause 2.5 of the ProJVA essentially provides that in the event of any conflict between the ProJVA or the activities of the Joint Venture and the ExJVA and the activities of the Exploration Joint Venture, the former matters shall prevail.

Clause 25.1 prevents partition of Joint Venture Property:
[u]nless otherwise agreed between the Participants, no Participant and no person claiming through a Participant shall during the life of the East Kundana Production Joint Venture seek partition, whether by any Court or otherwise howsoever of any Joint Venture Property.

Relationship of parties

Clause 27.1 provides:
The relationship between the Participants shall be limited to the performance of the objects provided for in this Agreement. This Agreement shall be constructed as and shall constitute a joint venture only for carrying out such objects, and nothing contained in this Agreement shall be treated as creating a new entity or as constituting any Participant a general agent or representative of the other Participants, except to the extent to which the Manager is the agent of the Participants and in that case only to the extent specified in this Agreement. No Participant shall be under any fiduciary or other duty to the other which will prevent it from engaging in or enjoying the benefits of any competing endeavours subject to the express provisions of this Agreement. No Participant shall have the right to pledge the credit of the other Participants.
The rights and obligations of the Participants pursuant to this Agreement shall be several and neither joint nor joint and several.
By cl 27.4, 'Each Participant covenants with each other to be just and faithful in its dealings with each other in all matters arising out of, or connected in any way with' the ProJVA.

The OTA

The most relevant provisions of the OTA for present purposes are outlined below.

Recitals

Recital A of the OTA provides that Kanowna owns and operates the 'Mill'. The Mill means the KB Mill.[78]
[78] OTA cl 1.1.
Recital B provides that the parties agree that EKJV Ore will be treated through the KB Mill on the terms detailed in the agreement. EKJV Ore means ore that is produced pursuant to Joint Venture.[79]

Ownership of EKJV Ore

[79] OTA cl 1.1.

Clause 2 provides that the EKJV Ore delivered to the KB Mill is owned in the same proportions as the Joint Venture Interests which GEM and the R&T Group own in the East Kundana Joint Venture from time to time.

Suspension of ore division agreements

Clause 3 provides that the Raleigh ODA and the Rubicon ODA are suspended from 31 December 2012 and remain in suspense unless they recommence as provided for in the OTA.
The circumstances in which these two agreements may recommence are addressed in relation to cl 5 below.

Mill Schedule

Clause 4.1 provides for R&T Group and GEM to advise Kanowna on a rolling quarterly basis of the projected EKJV Ore that is expected to be available to be sent to the KB Mill for processing (tonnage and source of ore). The report is to provide these details for the upcoming quarter, as well as an estimate for the succeeding three quarters.
Clause 4.2 sets out Kanowna's obligation to provide a quarterly milling schedule:
During the term of this Agreement, Kanowna must provide to the R&T Group at least two months in advance of the start of each quarter a calendar quarterly milling schedule which is consistent with the requirements of clause 5.7 and which details the estimated EKJV Ore tonnes and ore source that can be processed in the upcoming calendar quarter and the timing of that processing, and the estimated EKJV Ore tonnes and ore source that can be processed in the following three calendar quarters.
The requirements of cl 5.7 are that there 'shall be a minimum of one Batch Campaign in each calendar quarter. The minimum batch size shall be 35,000 tonnes of EKJV Ore for a Batch Campaign (Batch Size'). The parties may, acting reasonably, agree to change this amount.

Terms of agreement and treatment arrangements

Clause 5.1 provides that subject to cl 5.2, the OTA commences on 31 December 2012 and remains in force until all obligations under it have been discharged, following the EKJV Joint Venture completing mining of EKJV Ore and the treatment of any stockpiled ore.
Clause 5.2 sets out Kanowna's obligation to process EKJV Ore. It provides that during the term of the OTA 'Kanowna will process EKJV Ore through the [KB Mill] (as advised by it in the … Mill Schedule)' unless one of the below circumstances in cl 5.2(a) - (g) occur:
(a)Kanowna notifies the [R&T Group and GEM] not less than 6 months in advance that it plans to cease operating the Mill (including by reason of sale, or proposed sale, of the Mill), or to suspend the operation of the Mill for not less than 6 months - in which event the obligation to treat EKJV Ore through the Mill will end at the end of the notice period or such other time as the parties agree; or
(b)Kanowna notifies the [R&T Group and GEM] not less than 6 months in advance that it plans to vary the Mill design in a way that it reasonably expects would lead to an increase in the treatment charge for processing EKJV Ore (compared with the treatment charge applying immediately before the changes contemplated by the change in the Mill design are effected) of at least 15%, and provides the [R&T Group and GEM] with an estimate of the increased treatment charge and, the R&T Group elects by notice in writing to Kanowna, given not later than 3 months after receipt of the notice from Kanowna, to cease having its share of the EKJV Ore treated through the Mill, in which event the obligation to treat the R&T Group's share of the EKJV Ore through the Mill will end at the end of the 6 month notice period referred to or such other time as the Parties agree (but, if a notice is not given by the R&T Group within the 3 month period then treatment of the EKJV Ore will continue after the change in Mill design has been implemented); or
(c)if Kanowna ceases to be (or will cease to be) a part of the Barrick Group and Kanowna provides not less than 6 months in advance that it wishes to cease treating the EKJV Ore; or
(d)an Insolvency Event occurs in relation to any of the [R&T Group and GEM], and Kanowna elects to terminate the Agreement by notice in writing to [R&T Group and GEM]; or
(e)an Insolvency Event occurs in relation to Kanowna and the R&T Group elects to terminate this Agreement by notice in writing to the other Parties; or
(f)there is a material breach of this Agreement by a Party that is not remedied within 30 days of a notice in writing by a Party that is not in breach advising of the breach and requesting that the breach be rectified (or, where the breach is not capable of being remedied, reasonable compensation has not been tendered by the breaching party within that 30 day period), and the Party that is not in breach elects by notice in writing to the other Parties to terminate the processing of EKJV Ore by the Mill; or
(g)if there is an unscheduled Mill shutdown that exceeds 3 months and a Party elects by notice in writing to the other Parties to terminate the processing of EKJV Ore by the Mill.
Where the amount of EKJV Ore available for processing exceeds the tonnes set out in the most recent notice under cl 4.1, Kanowna may elect to provide an 'Excess Treatment Notice' outlining the opportunity cost to process the EKJV Ore that is in addition to the amount set out cl 4.1 notice. This additional charge for processing additional EKJV Ore is referred to as an 'Opportunity Cost'. Kanowna is to calculate this Opportunity Cost according to the Technical Procedures. In substance, the Opportunity Cost is calculated on the basis of the 'Kanowna Ore' that is displaced by processing additional EKJV Ore.[80]
[80] OTA Opportunity Cost Technical Procedure cl 7.
Clause 5.4 provides that R&T Group and GEM may separately elect whether to accept or reject the offer to have the additional EKJV Ore owned by R&T Group or GEM treated pursuant to the Excess Treatment Notice.
Clause 5.5 provides that if:
(a)the R&T Group elect not to have additional EKJV Ore owned by R&T Group treated, and GEM wishes to have additional EKJV Ore owned by GEM treated; or
(b)if any of the circumstances in clause 5.2 occur (other than the circumstances in clause 5.2(a)) and EKJV Ore owned by R&T Group ceases (or will cease) to be treated through the Mill,
then:
(c)in the case of the additional EKJV Ore under clause 5.5(a); and
(d)in the case of the EKJV Ore owned by R&T Group under clause 5.5(b).
the Raleigh Ore Division Agreement and/or the Rubicon Ore Division Agreement (as the case may be) will recommence operating, and the Parties will negotiate in good faith any necessary amendments to those agreements in relation to the additional EKJV Ore or the EKJV Ore, as the case may be. The timing of the recommencement of the Raleigh Ore Division Agreement and/or the Rubicon Ore Division Agreement (as the case may be) will be such as to avoid any disruption to mining of EKJV Ore or stockpiling of EKJV Ore that is in excess of usual levels.
Clause 5.6 further provides that:
If the R&T Group elects pursuant to cl 5.2 (other than the circumstances in clause 5.2(a)) to cease having the EKJV Ore owned by R&T Group treated through the Mill, the R&T Group will make their own arrangements in relation to the treatment of their respective shares of EKJV Ore. Nothing in this Agreement prevents GEM from continuing to process GEM's share of the EKJV Ore with Kanowna.
By cl 5.8, Kanowna is not obliged to process EKJV Ore if the stockpiled ore is less than 35,000 tonnes:
Kanowna will not be required to process EKJV Ore in a calendar quarter if the stockpiled EKJV Ore at the Mill at the time of scheduled commencement of the Batch Campaign, together with a conservative allowance for additional EKJV Ore that could be mined and hauled during that Batch Campaign (determined by the Technical Committee) is less than [35,000 tonnes] (except for the last Batch Campaign for EKJV Ore following cessation of mining).
The parties to the OTA may, acting reasonably, agree to vary the frequency of the Batch Campaigns and/or Batch Size.[81]
[81] OTA cl 5.9.
In the event of an unscheduled shutdown of the KB Mill, the mill schedule 'shall be revised by Kanowna, acting reasonably provided that [it does not] limit the operation of cl 5.2'.[82]
[82] OTA cl 5.10.
Clause 5.11 provides:
Subject to the terms of this Agreement, Kanowna will have no liability to [R&T Group and GEM] in relation to the cessation of the treatment of EKJV Ore or the reduction in the amounts of EKJV Ore treated.
However, in treating the EKJV Ore and performing its obligations under the OTA, Kanowna is to act in accordance with the Technical Procedures and good mining industry practice for toll processing. Subject to the terms of the OTA, Kanowna is solely responsible for the management and control of the KB Mill at all times.[83]
[83] OTA cl 5.12.
By cl 5.13, if treatment of the EKJV Ore through the KB Mill ceases or is suspended due to the operation of cl 5.2(a), R&T Group and GEM will seek to have EKJV Ore processed using alternative third party treatment options (referred to as a 'Third Party Alternative') as detailed below:
(a)the Third Party Alternative will involve batch treatment (and possibly blending) at a third party processing facility on arm's length commercial terms;
(b)the offer for the Third Party Alternative will include maximum or minimum tonnages to be treated over relevant periods, options for batching or blending, toll treatment charges (including any sliding scales and penalties), and assumptions on reagent consumption, work index and throughput and payment terms; and
(c)the Manager must obtain comprehensive ore haulage quotations that include provision for road maintenance, dust suppression, loading and handling, lighting plant hire, administrative/overheads and fuel price assumptions.
Clause 5.14 sets out the rights of the parties where no Third Party Alternative is agreed to:
If no Third Party Alternative has been agreed to and entered to process the EKJV Ore of both GEM and the R&T Group within 6 months of the notice referred to in clause 5.2(a) being issued then either GEM or the R&T Group may elect to recommence the operation of the Raleigh Ore Division Agreement and/or the Rubicon Ore Division Agreement (as the case may be) and GEM and the R&T Group will each make their own arrangements in relation to the treatment of their respective shares of EKJV Ore. The timing of the recommencement of the Raleigh Ore Division Agreement and/or the Rubicon Ore Division Agreement (as the case may be) will be such as to avoid any disruption to mining of EKJV Ore or stockpiling of EKJV Ore that is in excess of usual levels.

Warranties

By cl 7.1:
Kanowna warrants and represent to [R&T Group and GEM]:
(a)its Personnel will exercise all reasonable skill and care in handling and processing the EKJV Ore; and
(b)its Personnel will exercise all reasonable skill and care in monitoring, weighing and testing the EKJV Ore.
By cl 7.2, R&T Group and GEM:
warrant and represent to Kanowna as at the date of this Agreement and at all times during the term of this Agreement, the [R&T Group and GEM] are the owners of the EKJV Ore.

Whole agreement

Clause 24.1 provides that the OTA and the Technical Procedures represent the entire agreement between the parties 'with respect to the subject matter of' the OTA and 'supersedes all negotiations and prior agreements in relation to that subject matter.'

The evidence

At trial, counsel for R&T Group tendered the following evidence:
(a)witness statement of Rodney William Johns filed 25 September 2020;[84] and
(b)substance of expert evidence of Dr Geoffrey Lyman dated 26 September 2020.[85]
[84] Exhibit 1.
[85] Exhibit 2.
Counsel for Northern Star Group tendered the following evidence:
(a)witness statement of Victor George Simpson filed 25 September 2020;[86]
(b) supplementary witness statement of Victor George Simpson filed 2 October 2020;[87]
(c)report of Dr Bill Shaw dated 25 September 2020;
(d)supplementary report of Dr Bill Shaw dated 2 October 2020; and
(e) joint expert report filed 8 October 2020.[88]
[86] Exhibit 4A.
[87] Exhibit 4B.
[88] Exhibit 3.
Each of the above pieces of evidence was tendered through the witness who also gave oral evidence.
The oral evidence relates primarily to the ODP and the OTA.
R&T Group primarily relied on the evidence of Mr Johns and Dr Lyman in support of its case.

Rodney Johns

Mr Johns is an experienced extractive metallurgist with more than 35 years' experience working in the gold mining industry, primarily in the goldfields region, including as Processing Manager at the KB Mill and for Placer Dome's Kalgoorlie Operations West, which included the Kundana Mill and the Paddington Mill at the time of the OTA and the Paddington OTA.
R&T Group submitted:[89]
[89] Plaintiffs' Consolidated Submissions [28].
Mr Johns gave evidence concerning:
(a)common industry knowledge of the means of recovering gold from gold-bearing ore;
(b)common industry knowledge of and metallurgical accounting and reconciliation procedures for gold;
(c)toll milling and batch campaigns;
(d)the agreements and arrangements the parties to the [ProJVA] had in place, from time to time, in relation to the treatment and refining of the gold-bearing ore to produce gold bullion or for the division of gold-bearing ore between the parties;
(e)the division of ore by [EKJVM] and GEM in July 2019;
(f)the purported … Mill Schedules issued by Kanowna to the R&T Group under the [OTA] from July 2019;
(g)alternative ore treatment arrangements he has negotiated for Rand and Tribune to mitigate the R&T Group's potential losses resulting from [EKJVM's] and GEM's conduct in dividing and taking ore mined under the ProJVA, and which Kanowna has represented it can no longer process at the KB Mill;
(h)the shortfall in contracted milling capacity for the R&T Group to treat ore that [EKJVM] has purported to allocate to the R&T Group and which Kanowna has represented it cannot process at the KB Mill; and
(i)use of the [ODP] by [EKJVM] from 1 January 2020.
R&T Group submitted that the evidence of Mr Johns should be accepted.[90]

Dr Geoffrey Lyman

[90] Plaintiffs' Consolidated Submissions [29].

Dr Lyman is a metallurgical engineer and materials sampling consultant with 40 years' experience in the field of mathematical modelling and statistical analysis of sampling of metals and other commodities, including experience as a consultant to the mining industry in particulate sampling.
R&T Group submitted:[91]
[91] Plaintiffs' Consolidated Submissions [32] - [36].
Dr Lyman gave expert evidence concerning:
(a)methodologies used to determine the amount of gold, silver or other valuable minerals contained in gold bearing ore;
(b)methodologies that can be used to ensure co-owners of gold-bearing ore receive the gold, silver or other valuable minerals contained in that ore in exact proportion to each co-owner's interest in those valuable minerals as and when they each take part of what is produced; and
(c)whether the [ODP] is a methodology that:
(i)determines the amount of gold, silver or other valuable minerals contained in the EKJV Ore; or
(ii)ensures that, as and when taken from a stockpile constructed in accordance with section 6.1 of the [ODP]:
(A)the R&T Group receive 49%; and
(B)GEM receives 51%,
of the gold, silver or other valuable minerals contained in the ore in that stockpile.
The key aspects of Dr Lyman's evidence were unaffected by the report or his cross-examination. Dr Lyman's evidence is directed to the facts pleaded in paragraphs 44 to 46 of the statement of claim.
The effect of his evidence is that the only way to determine the amount of gold that can be recovered from a given amount of gold-bearing ore is to process that ore and refine it to gold bullion. There are other methods that may estimate the amount of gold contained in gold-bearing ore, but these are estimates. Further, the only way to ensure the recoverable gold is divided in proportion to each co-owner's interest in it is to process the ore to gold bullion. Dr Shaw accepted in cross-examination that processing a given body or ore through a particular facility will result in recovery of all the gold that can be recovered in that process after certain inevitable losses resulting from that process.
The other aspect of Dr Lyman's evidence is an opinion that he expresses to the effect that the [ODP] is a procedure for the division of ore. It is not a methodology that divides the contained gold within the ore in proportion to the co-owners interests in that gold. Dr Shaw accepted that the [ODP] does not divide contained gold in proportion to the co-owners' interests in that gold.
The [ODP] merely provides for a chance that the co-owners will obtain the contained gold in proportion to their interests. Dr Shaw accepted that it was like rolling a dice.

R&T Group resiles in part from that broad submission to 'Kanowna must do all things reasonably necessary to process all ore'.
As Northern Star Group submits, the word 'physically' does not appear. Again, it is an attempt by R&T Group to insert a word that does not appear in the OTA to support its argument.
It is also difficult to accept R&T Group's submission that the obligation is to process all EKJV Ore when on at least one scenario put forward by R&T Group, namely, if Kanowna required all its KB capacity off its Kanowna Bell site, there would be no obligation to process EKJV Ore.
It follows that I accept Northern Star Group's submissions as set out above and reject R&T Group's submissions that it was Kanowna's obligation to process all ore that could be physically processed.

Clause 4.1, cl 4.2 and cl 5.7

In respect of cl 4.1 of the OTA, R&T Group submitted:[153]
Clause 4.1 of the [OTA] provides for the parties to the [ProJVA] to advise Kanowna on a rolling quarterly basis of the projected [ProJVA] that is expected to be available to be sent to the KB Mill for processing (tonnage and source of ore). The details are to be provided for the upcoming quarter and for the next three quarters (i.e., a rolling quarterly projection of annual production). That is, a quarterly projection of all EKJV Ore expected to be mined within the following 12 months in accordance with the provisions of the [ProJVA].
[153] Plaintiff's Consolidated Submissions [243].
As to cl 4.2 of the OTA, R&T Group submitted:[154]
[154] Plaintiffs' Consolidated Submissions [244] - [249].
Clause 4.2 provides:
During the term of this Agreement, Kanowna must provide to the R&T Group at least two months in advance of the start of each quarter a calendar quarterly milling schedule which is consistent with the requirements of clause 5.7 and which details the estimated EKJV Ore tonnes and sources that can be processed in the upcoming calendar quarter and the timing of that processing, and the estimated EKJV Ore tonnes and ore source that can be processed in the following three calendar quarters … [(the Mill Schedule)]
There are two requirements of the … Mill Schedule.
First, there must be a calendar quarterly milling schedule which is consistent with the requirements of cl 5.7. (The requirements of cl 5.7 are addressed below.) This aspect of the milling schedule deals with EKJV Ore that Kanowna, consistently with its obligation to process EKJV Ore, intends to process in the next quarter.
Second, there must be estimates of the EKJV Ore tonnes and sources that can be processed. This aspect of the milling schedule deals with Kanowna's estimated capacity to process EKJV Ore over the following year. The milling schedule for the next quarter and the capacity to process may not be the same.
It is also significant that the … Mill Schedule is to be provided to the R&T Group alone. That is, it is not provided to all parties to the {ProJVA].
Thus, the … Mill Schedule is informative, it is not an instrument that sets any limit on the EKJV Ore Kanowna is required to process in any quarter or year. It is an instrument for informing the R&T Group (given that, Kanowna, GEM and [EKJVM] were all related and members of the Barrick Group) of the amount of EKJV Ore that will be processed in the next quarter and an estimate of what Kanowna can physically process in the next quarter and next year. It also informs the R&T Group of the timing of that processing so that the R&T Group can exercise its audit rights under clauses 14.1 and 14.2 and to attend the KB Mill before, during and after a Batch Campaign.
As to cl 5.2 of the OTA, R&T Group submitted:[155]
[155] Plaintiffs' Consolidated Submissions [250] - [258].
Clause 5.2 provides that during the term of the [OTA] 'Kanowna will process EKJV Ore through the KB Mill (as advised by it in the EKJV Mill Schedule)'. As the … Mill Schedule is merely informative, the obligation to process EKJV Ore through the KB Mill is not limited to what is identified in the … Mill Schedule. The … Mill Schedule is merely an estimate given to the R&T Group. There is no obligation to provide the … Mill Schedule to GEM or [EKJVM].
Thus, Kanowna's primary obligation is found in cl 5.2 and that is to process EKJV Ore through the KB Mill. Kanowna must process all EKJV Ore that can be physically processed in the KB Mill as and when sent to the KB Mill for processing.
Kanowna must process the EKJV Ore unless one of the conditions in clause 5.2(a) to 5.2(g) is satisfied or the EKJV Ore available for processing exceeds the tonnes for that quarter set out in the most recent notice under cl 4.1. That is a firm indication that Kanowna is obliged to process EKJV Ore sent to it in accordance with a notice given under cl 4.1 unless one of clauses 5.2(a) - 5.2(g) apply or the amount available exceeds the notice.
Where the amount available exceeds the amount set out in the cl 4.1 notice, Kanowna has an election. In effect, it can elect to treat the excess for an additional charge referred to as an 'Opportunity Cost'.
The 'Opportunity Cost' is to be calculated according to the Technical Procedures. The Technical Procedures provide that an 'Opportunity Cost' only arises and Kanowna is only able to provide an 'Excess Treatment Notice' if there is limited 'Milling Capacity'. Milling Capacity is the budget or forecast mill throughput in tonnes at the time the Excess Treatment Notice is issued.
In substance, the Opportunity Cost is calculated on the basis of the 'Kanowna Ore' that is displaced by processing additional EKJV Ore. If the KB Mill is not operating with limited capacity there is no 'Opportunity Cost' associated with processing additional EKJV Ore because Kanowna is not displacing its own ore (ore from the Kanowna Belle Project).
The Opportunity Cost Technical Procedure refers only to and uses only 'Kanowna Ore sources' as part of the calculation of the 'Opportunity Cost'. The expression 'Kanowna Ore' and 'Kanowna Ore sources' is not defined. However, in context, it is submitted it means ore derived from a source (or mine) within the Kanowna Belle Project. The expression is obviously used to indicate that Kanowna is the beneficial owner of the ore in question and that ore comes from tenements within the Kanowna Belle Project.
By way of example, the Opportunity Cost Technical Procedure does not make any provision to include 'Barrick Group Ore', notwithstanding that 'Barrick Group' is defined in the [OTA]. The absence of any reference to a source other than 'Kanowna Ore' is a firm indication that the parties intended that Kanowna would, and is obliged to, process all EKJV Ore except to the extent in so doing it would displace 'Kanowna Ore'.
In this respect, it is significant that, if Kanowna ceases to be part of the Barrick Group, it may provide 6 months' notice in advance of it ceasing to be a member that it wishes to cease treating the EKJV Ore. In other words, if a new controller of Kanowna wanted to process ore from sources other than the Kanowna Belle Project, it may cause Kanowna to give the notice within 6 months of a change of control.
Northern Star Group submitted:[156]
[156] Defendants' Closing Submissions [108] - [115].
Kanowna's obligation to process EKJV Ore is contained in clause 5.2 of the OTA. That is a proposition that the plaintiffs accept in part (that is, that 'Kanowna's principal obligation is to be found in clause 5.2'). However, that obligation has an important limitation: it is to 'process EKJV Ore through the Mill (as advised by it in the … Mill Schedule) unless' (emphasis added) one of the circumstances in 5.2(a) to (g) exist. None of those circumstances exist and so, for present purposes, we are concerned with Kanowna's obligation to 'process EKJV Ore through the Mill (as advised by it in the EKJV Mill Schedule)'.
The … Mill Schedule is the document that Kanowna must provide to the plaintiffs at least two months in advance of the start of each quarter pursuant to clause 4.2. Clause 4.2 requires the … Mill Schedule to meet two criteria:
(a)it must be consistent with the requirements of clause 5.7; and
(b)it must detail the estimated EKJV Ore Tonnes and ore source that 'can be processed' in the upcoming calendar quarter and the timing of that processing, as well as estimates of those matters for the following three quarters.
As to the first criteria, clause 5.7 provides that there 'shall be a minimum of one Batch Campaign in each calendar quarter' and that the 'minimum batch size shall be 35,000 tonnes of EKJV Ore for a Batch Campaign'. Those two things combine to require there to be a minimum of 35,000 tonnes of EKJV Ore processed in each calendar quarter. To be consistent with that requirement, an … Mill Schedule must specify a minimum of 35,000 tonnes of EKJV Ore to be processed in the upcoming quarter.
As to the second criteria, the phrase 'can be processed' is not followed by any words of limitation. Accordingly, clause 4.2 requires Kanowna to make an estimate of what can be processed in the upcoming calendar quarter.
In making that estimate, it is accepted that Kanowna must comply with any relevant express or implied obligations upon it.
There are no express obligations.
The implied obligations are those admitted by Kanowna in its [Defence and Counterclaim] namely:
(a)to do all things reasonably necessary to enable the other parties to have the benefit of the agreement; and
(b)to act honestly.
In the circumstances, there is no reason to read down the expression 'can be processed' so as to exclude the processing of third party other ore through the Mill, or to insert a word which simply does not appear, namely the word 'physically' between the words 'can' and 'be processed'.
Northern Star Group further submitted:[157]
The Excess Treatment Notice regime provided for in clauses 5.3 to 5.6 and the Associated Opportunity Cost Technical Procedure are not determinative of the issues in question and does not assist the plaintiffs in any event. First, Kanowna can elect to issue an Excess Treatment Notice - a matter that is entirely within its unfettered discretion. GEM and the plaintiffs may then separately accept that Excess Treatment Notice and have their ore treated pursuant to it.[158]
[157] Defendants' Closing Submissions [124] - [127].
[158] Northern Star Group Submissions [124].
Northern Star Group submitted:[159]
If [R&T Group] do not accept it but GEM does, the Ore Division Agreements recommence pursuant to clause 5.5. [R&T Group places] some emphasis on this clause to support their contention that ore division could only occur in those specific circumstances, which is an issue that arises on the proper construction of the [ProJVA]. The defendants do not accept that the provisions of the OTA have any bearing on that issue. However, in any event, clause 5.5 does not deal with the situation where neither GEM nor the [R&T Group] agree to have their ore treated pursuant to an Excess Treatment Notice or, indeed, the situation where there is excess ore that is not the subject of a clause 4.2 notice issued by Kanowna. That is not surprising given that the OTA is not a document that governs [ProJVA] operations. It governs the relationship between the [R&T Group and GEM], on the one hand, and Kanowna, on the other hand, relating to the processing of EKJV Ore by Kanowna in accordance with its terms. It cannot be the case that the [R&T Group and GEM] intended, by agreeing to this arrangement with Kanowna, that they could not otherwise pursue joint processing of the excess ore or divide the excess ore for individual processing outside of the arrangements provided for in the OTA.
As to the Opportunity Cost calculator, that is a calculator provided to calculate the additional charges by Kanowna in the specific circumstance of issuing an Excess Treatment Notice. It is a means of calculating the charge, which the defendants accept may be referrable to the costs of displacing Kanowna Ore - a term used but not defined in the Opportunity Cost Technical Procedure - and Kanowna would no doubt rely on that calculation in determining whether to issue an Excess Treatment Notice or use the capacity in question for other ore. However, that method of calculating a charge in a discretionary processing scenario, and its basis, does not impact on the interpretation of the clear provisions in clauses 5.2, 4.2 and 5.7 as set out above. Further, the basis for the calculation is entirely consistent with the commercial reality that, when deciding whether to issue an Excess Treatment Notice, Kanowna would not be in a position to offer additional capacity to the [R&T Group and GEM] in priority to another third party to whom Kanowna had committed that capacity. It could only ever offer capacity in those circumstances that would have otherwise been taken up by processing its own ore.
…
(a)The plaintiffs made an observation concerning the Metallurgical Accounting Technical Procedure which is Annexure 3 to the OTA. The plaintiffs sought to make something of the fact that 'you end up with dore¢ and submitted that 'end[ing] up with dore¢ was what was to 'happen under this joint venture'. That submission does not advance the plaintiffs' construction under either the [ProJVA] or the OTA for two reasons. First, it is entirely conventional in an agreement dealing with the processing of gold bearing ore into dore¢ that the parties to that agreement would include provisions dealing with the parties taking that dorѐ following the conclusion of processing. Secondly, this is not what was to occur 'under this joint venture'. The OTA is not entered into pursuant to the [ProJVA] or in furtherance of its purposes - otherwise it would be expressed to be entered into as such. It is a separate contractual arrangement with a third party (Kanowna) for processing to occur outside the meets and bounds of the [ProJVA].
[159] Defendant's Closing Submissions [125] - [127]
I do not understand the significance that R&T Group attached to the fact that the Mill Schedule is to be provided to the R&T Group alone.
R&T Group's submission that Kanowna's primary obligation is to process all EKJV Ore that can be physically processed is not sustainable.
A simple reading of the clauses concerning 'Opportunity Cost' and 'Excess Treatment Cost' shows that they are simply technical clauses. They do not assist in determining Kanowna's obligation to process ore.
I accept Northern Stars Group's submissions.

Clause 5.7 - Batch Campaign

R&T Group submitted:[160]
[160] Plaintiffs' Consolidated Submissions [259] - [265].
The requirement in clause 5.7 for a minimum of one 'Batch Campaign' in each calendar quarter is not a provision which establishes a floor or minimum amount of EKJV Ore which Kanowna is obliged to process in any given quarter. It establishes a minimum amount that the parties to the [ProJVA] must send to Kanowna for processing.
…
Kanowna must process EKJV Ore except in the circumstances described in clauses 5.2 and 5.3 ‑ 5.5. Clause 5.8 creates another exception where Kanowna has not received sufficient EKJV Ore to make up a Batch Campaign (35,000 tonnes) in a calendar quarter. Thus, clauses 5.7 and 5.8 create a minimum amount that must be sent to Kanowna for processing, these clauses do not establish a minimum amount that must be taken by Kanowna for processing.
The reference in clause 4.2 to a milling schedule which is consistent with the requirements of clause 5.7 means, in effect, that the milling schedule (i.e., what is intended to be processed in the next quarter based on the notice given under clause 4.1) must include at least 35,000 tonnes of EKJV Ore. As submitted above, that is a separate and distinct requirement to providing an estimate of the EKJV Ore that 'can be processed'.
…
If the parties to the [OTA] had objectively intended that Kanowna, for any reason other than utilising capacity associated with processing ore produced from the Kanowna Belle Project, had a right to refuse to process EKJV Ore, then it is to be expected that the parties would have turned their minds to that possibility and made provision for dealing with processing or division of ore that could not be processed in the KB Mill in those circumstances. But they have not.
On the other hand, in circumstances where Kanowna has an express right to refuse to process EKJV Ore, the parties have expressly dealt with processing or division of ore that cannot be processed in the KB Mill. These circumstances are as follows.
(a)Excess quarterly production: Raleigh [ODA] and Rubicon [ODA] recommence for ore the subject of an Excess Treatment Notice where the R&T Group elect not to have that ore processed through the KB Mill.
(b)Various circumstances: Raleigh [ODA] and Rubicon [ODA] Ore Division Agreements recommence for all circumstances in which Kanowna does not have an obligation to process EKJV Ore described in clause 5.2 (other than clause 5.2(a), ceasing to operate the KB Mill).
(c)R&T Group election: If the R&T Group elect to cease having EKJV Ore owned by that group treated through the KB Mill in one of the circumstances described in clause 5.2 (other than clause 5.2(a)), the R&T Group is to make its own arrangements for treatment of that ore.
(d)Mill closure: If Kanowna ceases to operate the KB Mill, the parties to the [ProJVA] are to attempt to agree on having EKJV Ore processed using a third party and, failing agreement, GEM or the R&T Group may elect to recommence the Raleigh [ODA] and Rubicon [ODA].
(e)Unscheduled Mill shutdown: In the event of an unscheduled KB Mill shutdown, the … Mill Schedule will be revised.
(f)No minimum Batch Campaign: In the event that there is insufficient EKJV Ore to make up a Batch Campaign, Kanowna is not obliged to process the EKJV Ore.
No other provision is made for the parties to the [ProJVA] to make an alternative arrangement for processing or division of EKJV Ore that cannot be physically processed through the KB Mill. No other provision is made, because the parties did not objectively intend that Kanowna had any right to process the ore of any other party in preference to EKJV Ore and, thereby, displace processing of EKJV Ore such that the parties to the [ProJVA] may need to make an alternative arrangement for processing or division of that ore.
A reasonable business person would understand that the words 'can be processed' in clause 4.2 to mean 'can be physically processed' after taking into account the estimated processing requirements for ore produced from the KB Mine or other tenements within the Kanowna Belle Project.
Northern Star Group submitted:[161]
[161] Defendant's Closing Submissions [120] - [123].
In short, [R&T Group's] pleaded construction of clause 4.2 of the OTA seeks to rewrite the simple, broad and flexible phrase 'can be processed' into a detailed and prescriptive code for preparing the EKJV Mill Schedule. None of the matters that the plaintiffs allege that Kanowna may or may not 'take into account' in estimating what 'can be processed' at the KB Mill are referred to at all in clause 4.2 of the OTA or elsewhere in the OTA. The OTA does not refer to the 'Kanowna Belle Project' or the tenements comprising that project. Only in the course of the tendering of documents have the plaintiffs identified what specific tenements are said to comprise the 'Kanowna Belle Project', by reference to current tenement searches, which do not assist the Court in relation to question of construction of an agreement entered into in 2013.
[T]he Plaintiffs' Outline [raises] a misconceived contention that the … Mill Schedule is merely 'informative' and does not limit Kanowna's obligations under clause 5.2 of the OTA. From that starting point, the plaintiffs then contend that under clause 5.2 Kanowna must process 'all EKJV Ore that can be physically processed in the KB Mill as and when sent to the KB Mill for processing' unless one of clauses 5.2(a) to (g) applies or the amount available for processing exceeds the amount set out in the clause 4.1 notice. This contention was also put by the plaintiffs variously in opening, in which it was said that the obligation was to process 'all of the EKJV Ore' subject only to the exceptions in clause 5.2 of the OTA and to process 'all EKJV ore that can be physically processed'. This contention is also misconceived:
(a)contrary to its pleaded case, the plaintiffs' construction now contended for does not allow Kanowna to even process its own ore in preference to EKJV Ore. Clause 5.2(a) to (g) are the only exceptions identified to an absolute obligation to process EKJV Ore, but make no allowance for Kanowna processing ore from the KB Mine;
(b)despite its repeated use in the Plaintiffs' Outline, there is no reference whatsoever in the OTA to 'all EKJV Ore' and, had that been the intention of the parties, that would have been a reasonably simple addition to make to the drafting and its absence from the definition of 'EKJV Ore' in the OTA is telling; and
(c)processing of EKJV Ore does not occur on some rolling basis 'as and when' any EKJV Ore is available to be milled. EKJV Ore is processed in scheduled Batch Campaigns of a minimum of 35,000 tonnes (clause 5.7).
[R&T Group] relied in their oral opening on the term of the OTA to support their construction that it requires processing of 'all EKJV Ore' for the life of the EKJV. The defendants accept that the parties contemplated that the OTA would continue in operation until the EKJV completes mining EKJV Ore and any remaining stockpiled ore has been treated unless terminated earlier in accordance with its terms. That does not, as a matter of logic, lead to the conclusion that for the term of the OTA, 'all EKJV Ore' would be processed under it.
[R&T Group] also contended in opening that the requirements for the … Mill Schedule to be issued under clause 4.2 are not expressed in 5.7. [R&T Group] submitted that 'clause 4.2 does not provide that the requirements of [an] … Mill Schedule are to be found in clause 5.2 or 5.7'. However, that contention cannot be upheld in light of the clear wording in clause 4.2 which require Kanowna to issue [an] … Mill Schedule 'which is consistent with the requirements of clause 5.7', which [R&T Group itself] acknowledged in opening.

I do not accept R&T Group's submission that the Batch Campaign supports a minimum amount that Kanowna must process. At best, from R&T Group's perspective, it is a maximum amount which Kanowna must process.
Equally, I do not accept that the Milling Schedule must include a minimum of 35,000 tonnes and that it is a separate and distinct requirement.
As Northern Star Group submitted, R&T Group's submissions seek to rewrite cl 4.2.
R&T Group's submission that the OTA should have made provision for dealing with the processing or division of ore that could not be processed proceeds on the incorrect premise that Kanowna was obliged to process all ore.
I do not accept R&T Group's submission that a reasonable business person would understand the words 'can be processed' as can be physically processed. No explanation is offered as to why that would be so. No evidence is offered as to why that would be so.
It was always open to R&T Group to process their ore through another mill. There is no obligation on R&T Group to process EKJV Ore through the KB Mill.
I accept Northern Star Group's submissions.

Is cl 5.11 consistent with Kanowna's obligation to process all EKJV Ore?

R&T Group submitted that its pleaded construction is not affected by cl 5.11 of the OTA, which provides:
Subject to the terms of this Agreement, Kanowna will have no liability to [R&T Group] in relation to the cessation of the treatment of EKJV Ore or the reduction in the amounts of EKJV Ore treated.
R&T Group submitted that cl 5.11:[162]
must be read in the context that it is a provision amongst a number of other provisions in clauses 5.1 ‑ 5.14. These provisions, as a whole, deal with the circumstances in which Kanowna is obliged to process EKJV Ore and the circumstances in which it is entitled to refuse to do so.
In that context, the words 'Subject to this Agreement' must be given meaning. Those words indicate that if Kanowna is not obliged to process EKJV Ore because one or more of the circumstances permitting it to refuse to process or reduce the amount processed referred to in clauses 5.2 ‑ 5.10 is present, then Kanowna is not liable for ceasing or reducing treatment. But that says nothing of the circumstances in which Kanowna is obliged to process EKJV Ore.
In circumstances in which Kanowna is obliged to process EKJV Ore (i.e., none of the circumstances in clauses 5.2 ‑ 5.10 is present), the words 'Subject to this Agreement' indicate that Kanowna is liable for failing to process or reducing the amount processed. Put another way, Kanowna is liable for breaching its obligation to do all things reasonably necessary to process all EKJV Ore.
It follows that clause 5.11 is consistent with a construction requiring Kanowna to do all things reasonably necessary to process all EKJV Ore. At most, clause 5.11 is neutral in that it does not provide a proper foundation for considering that Kanowna has an unfettered right to reduce processing to the minimum of one Batch Campaign in each calendar quarter.
[162] Plaintiffs' Consolidated Submissions [267] - [270].
R&T Group further submitted that irrespective of the contractual effect of an Mill Schedule, to meet the description of an Mill Schedule, it must be prepared in accordance with cl 4.2 of the OTA. Put another way, it must be a valid or genuine document.[163]
[163] Plaintiff's Consolidated Submissions [271].
R&T Group plead that there were implied terms of cooperation not to hinder or frustrate the performance of the OTA.[164] Northern Star Group admit that there was a term of cooperation but deny there was a non-hinderance term.[165]
[164] Statement of Claim [35(a)], [35(d)], [38(d)], [38(g)].
[165] Defence and Counterclaim [35(a)], [38].
R&T Group also plead that there was an implied term to the effect that Kanowna must act in good faith, alternatively, honestly and reasonably, in providing in the Mill Schedule its estimate of the EKJV Ore tonnes and source that can be processed in the KB Mill.[166] Northern Star Group admits only that there was an implied term to the effect that Kanowna was obliged to act honestly in providing its estimate.[167]
[166] Statement of Claim [35(b)], [35(c)], [38(e)], [38(f)].
[167] Defence and Counterclaim [35(b)], [38].
R&T Group submitted:[168]
Whenever the performance of a term of a contract turns on the formation of an opinion or a state of mind of one of the parties to the contract, it is to be inferred or implied that performance of that term requires the party to form the opinion or state of mind honestly and reasonably or, at least, honestly. To reach the opinion or state of mind honestly means not capriciously, arbitrarily or without reasonable cause. An obligation to act honestly and reasonably is more-or-less the same as an obligation to act in good faith.
[168] Plaintiff's Consolidated Submissions [274].
Northern Star Group submitted that R&T Group's' reliance upon cl 5.11 of the OTA is entirely misconceived. It contended that there is no relevant inconsistency between cl 5.11 (which deals with Kanowna's liability) and any other matters in cl 5 (which deal with the circumstances in which EKJV Ore will or may be processed) such that cl 5.11 is not required to be read 'subject to' those other clauses.[169]
[169] Northern Star Group Submissions [127].
Northern Star Group submitted that R&T Group's submissions as to the content of an implied term of good faith, and the cases cited therein, are inconsistent with the Court of Appeal's decision in Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd.[170]
[170] Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222; (2010) 41 WAR 318 [61] - [64] (Pullin JA, Newnes and Murphy JAA agreeing).
R&T Group submitted:[171]
[Cl]lause 4.2 is informative. In that context, as submitted above, the provision of an estimate of the EKJV Ore that can be processed does not have the effect of setting any limit on the amount of EKJV Ore which Kanowna is obliged to process; it is obliged to process all EKJV Ore subject only to the express exceptions in the [OTA].
If contrary to the preceding paragraph, Kanowna's estimate in an … Mill Schedule has the effect of setting a limit on the amount of EKJV Ore which Kanowna is obliged to process, then, a reasonable business person would understand clause 4.2 to mean that Kanowna would have to give honest and reasonable consideration to the extent to which EKJV Ore 'can be processed' in the KB Mill in the next quarter and following year. In the context of an [OTA] in which all EKJV Ore is to be processed through the KB Mill, a requirement that Kanowna perform its obligation under clause 4.2 subject to a requirements of reasonableness is necessary as a matter of business efficacy.
It follows that an estimate in an … Mill Schedule which is not founded on an honest and reasonable estimate is not a valid … Mill Schedule. It does not fulfil the requirements or meet the description of an … Mill Schedule in clause 4.2. As such, it is of no contractual effect.
[171] Plaintiff's Consolidated Submissions [275] - [277].
Northern Star Group submitted:[172]
As to the submission in the Plaintiffs' Outline at [248], it was not 'contrary to the estimate [that] Kanowna was able to process more than 35,000 tonnes of EKJV Ore'. Kanowna accepts it had the capacity, but it was allocated elsewhere and does not accept the premise of the 4.2 notice as being an estimate of physical capacity.
[172] Defendants' Closing Submissions [131].
There is no evidence that the Mill Schedule was not a valid or genuine document. The Mill Schedule was prepared in accordance with the contractual requirements. There was no requirement to make provision for the physical processing of all ore.
A party acts in good faith when it acts in accordance with its contractual obligations.

Conclusion

R&T Group's claimed breaches of cl 4 and cl 5 of the OTA are not made out. Northern Star Group are entitled to appropriate declarations.
As Justice Kenneth Martin noted in the Tribune Resources Ltd v EKJV Management Pty Ltd,[173] R&T Group seeks to 'winkle out' their construction from the other clauses and schedules of the OTA. Northern Star Group's construction should be preferred over R&T Group's construction.
[173] Tribune Resources Ltd v EKJV Management Pty Ltd [2020] WASC 47.

Outcome

For the above reasons, R&T Group's claim is dismissed.
There is judgment for Northern Star Group's counterclaim to the extent that the counterclaim is relevant to liability.
I propose that costs should follow the event.
The parties are to file a joint minute of orders to give effect to these reasons.
I certify that the preceding paragraphs comprise the reasons for decision of the Supreme Court of Western Australia.
SB
Associate to the Honourable Justice Curthoys
23 DECEMBER 2022