Vango Mining Limited v Zuleika Gold Limited formerly known as Dampier Gold Ltd - [2024] WASCA 54

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT :   THE COURT OF APPEAL (WA)
CITATION:   VANGO MINING LIMITED -v- ZULEIKA GOLD LIMITED formerly known as DAMPIER GOLD LTD [2024] WASCA 54
CORAM:   BUSS P
VAUGHAN JA
SEAWARD J

HEARD:   6 NOVEMBER 2023
DELIVERED          :   16 MAY 2024
FILE NO/S:   CACV 112 of 2022
CACV 23 of 2023
(Consolidated by orders of 21 March 2023)

BETWEEN: VANGO MINING LIMITED
First Appellant
DAMPIER (PLUTONIC) PTY LTD
Second Appellant
AND
ZULEIKA GOLD LIMITED formerly known as DAMPIER GOLD LTD
Respondent

ON APPEAL FROM:
Jurisdiction              :   SUPREME COURT OF WESTERN AUSTRALIA
Coram:   SMITH J
Citation: ZULEIKA GOLD LIMITED formerly known as DAMPIER GOLD LTD v VANGO MINING LIMITED [2022] WASC 357
File Number            :   CIV 1609 of 2020

Catchwords:

Contract - Proper construction - Agreement for the acquisition of an interest in mining property - Whether primary judge erred in construing the agreement

Legislation:

Mining Act 1978 (WA), s 82(1)(c), s 98, s 102

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

First Appellant	:	G D Cobby SC & D Chandler
Second Appellant	:	G D Cobby SC & D Chandler
Respondent	:	S Penglis SC & B Tariq

Solicitors:

First Appellant	:	Tottle Partners
Second Appellant	:	Tottle Partners
Respondent	:	Bennett

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

Adams v Lambert [2006] HCA 10; (2006) 228 CLR 409
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Charterbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] AC 1101
Cherry v Steele‑Park [2017] NSWCA 295; (2017) 96 NSWLR 548
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420
Halford v Price [1960] HCA 38; (1960) 105 CLR 23
Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216
Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd [2023] HCA 6; (2023) 97 ALJR 194
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 267 CLR 514
Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2019] NSWCA 11; (2019) 99 NSWLR 317
Simic v New South Wales Land and Housing Corp [2016] HCA 47; (2016) 260 CLR 85
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 90 ALJR 392
Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530
Zuleika Gold Ltd v Vango Mining Ltd [2022] WASC 357

BUSS P & SEAWARD J:

This consolidated appeal, comprising CACV 112 of 2022 and CACV 23 of 2023, is concerned with the proper construction of a document headed 'binding terms sheet' dated 12 May 2017 (the BTS Agreement) and made between the first appellant (Vango), the second appellant (Dampier Plutonic) and the respondent (Zuleika).[1]
[1] When the BTS Agreement was executed Zuleika's name was Dampier Gold Ltd.
It is necessary to construe the BTS Agreement for the purpose of determining whether Zuleika acquired an interest in mining property pursuant to the BTS Agreement.
In the primary proceedings, Smith J held that:
(a)Zuleika had acquired an interest in the mining property pursuant to the BTS Agreement;
(b)the extent of Zuleika's interest was a 4.1% beneficial interest in the mining property; and
(c)Vango and Dampier Plutonic had breached and repudiated the BTS Agreement.
The primary judge:
(a)declared that Zuleika had a 4.1% beneficial interest in the mining property and that Vango and Dampier Plutonic held 4.1% of their total legal interest in the mining property on trust for Zuleika; and
(b)ordered that Vango and Dampier Plutonic do all things necessary to transfer 4.1% of their total legal interest in the mining property to Zuleika.

We are satisfied, for the following reasons, that her Honour was correct in making the declaration and the order referred to at [4] above and that the appeal should be dismissed.

The sole issue in the appeal

The sole issue in the appeal is whether, on the proper construction of the BTS Agreement, Zuleika acquired an interest in the mining property.
It is not in dispute in the appeal that if Zuleika acquired an interest in the mining property then:
(a)the extent of Zuleika's interest is a 4.1% beneficial interest in the mining property; and
(b)Vango and Dampier Plutonic breached and repudiated the BTS Agreement.

The relevant provisions of the BTS Agreement

The relevant provisions of the BTS Agreement are as follows.
The BTS Agreement referred to the document which recorded the agreement as 'this Terms Sheet'.
The BTS Agreement recited that:
(a)Vango and Dampier Plutonic 'are the holders of a 100% legal and beneficial interest in the Tenement'; and
(b)Vango and Dampier Plutonic 'have agreed that [Zuleika] will acquire an interest in the Tenement and form a joint venture in respect of the Tenement'.
In cl 26 of the BTS Agreement:
(a)The term 'Tenement' was defined to mean:
(a)Mining Lease 52/183;
(b)any mining interest created in substitution for that mining tenement or effecting any amendment, substitution or variation to that mining tenement; and
(c)any other mining interest acquired for the purposes of the Joint Venture.
(b)The term 'DDPL Parties' was defined to mean, relevantly, Vango and Dampier Plutonic.
(c)The term 'Party' was defined to mean 'a party to this Terms Sheet'.
(d)The term 'Joint Venture Interest' was defined to mean a Party's undivided interest (expressed as a percentage) in:
(a)the obligation, subject to the terms of this Terms Sheet, to contribute to all Expenditure;
(b)the ownership of and the right and obligation to receive in kind and to dispose of products produced by the Joint Venture;
(c)the beneficial ownership as a tenant in common of the Tenement, and if applicable, the K2 Area; and
(d)all other rights, benefits, liabilities and obligations accruing to or incurred by or on behalf of the Parties in, under or arising out of this Terms Sheet.
(e)The term 'CAPEX' was defined to mean 'the capital cost estimate for the development of the mine on the Tenement, being, as at the Commencement Date $6,000,000, or such other amount as agreed in writing by the Parties'.
Clause 1(a) and (b) provided:
(a)[Zuleika] and the DPPL Parties agree to form an unincorporated joint venture on signing this Term[s] Sheet (Commencement Date) for the purpose of exploration and production from the Tenement on the commercial terms set out in this Terms Sheet and otherwise on terms and conditions acceptable to both parties (Joint Venture).
(b)On the Commencement Date:
(i)the initial Joint Venture Interests of the Parties will be:
(A)[Zuleika] - 0%; and
(B)DPPL Parties - 100%.
Clause 2(a), (b), (c) and (d) provided:
(a)[Zuleika] agrees to contribute up to the lesser of 50% of the CAPEX or $3,000,000 to the:
(i)development of a mine on the Tenement;
(ii)the exploration for and mining of gold ore and its processing for the extraction of gold; and
(iii)any other item, as agreed by the Joint Venture Committee,
(Expenditure).
(b)The Expenditure is to be made in tranches approved by the Joint Venture Committee with funds provided within 5 business days of the Joint Venture Committee's approval.
(c)In consideration for the Expenditure, [Zuleika] will earn a Joint Venture Interest equal to the lesser of:
(i)the Expenditure as a percentage of the CAPEX; or
(ii)50%,
within the period that is two (2) years from the Commencement Date (Earn-in Period).
(d)Following [Zuleika] satisfying the Expenditure during the Earn-in Period, [Zuleika] will be deemed to have earned the Joint Venture Interest and the DPPL Parties agree to the transfer of the Joint Venture Interest to [Zuleika], free from encumbrances, other than any Disclosed Encumbrance. To this end, the DPPL Parties agrees [sic] that it will provide [Zuleika] with a duly executed transfer in respect of the Joint Venture Interest in the Tenement and such other documents as may be reasonably required by [Zuleika] to enable [Zuleika] to be registered as the legal and beneficial holder of the Joint Venture Interest in the Tenement. Until such time as [Zuleika] becomes the holder of the Joint Venture Interest, the DPPL Parties will hold the Joint Venture Interest on trust for [Zuleika].
Without limiting the rights of [Zuleika] under this clause 2, and subject to clause 2(c) [Zuleika] may give a notice to the DPPL Parties at any time during the period which is 12 months from the Commencement Date requiring that the DPPL Parties transfer to [Zuleika] a Joint Venture Interest within 7 days after the receipt of that notice. The DPPL Parties must then transfer a Joint Venture Interest to [Zuleika] equal to the amount determined by dividing the amount then contributed by [Zuleika] as Expenditure by the total CAPEX, expressed as a percentage. As an example, if [Zuleika] has contributed $3,000,000 to Expenditure to that date and the total CAPEX to that date is $4,000,000, [Zuleika] will be entitled to a maximum initial 50% Joint Venture Interest, with such Joint Venture Interest increasing if the DPPL Parties dilute under clause 3(c).
Clause 3(a), (b) and (c) provided:
(a)The Parties acknowledge and agree that the DPPL Parties owe [Zuleika] the sum of $245,239.78 for monies expended in relation to the Tenements. The DPPL Parties agree that this amount is deemed to form part of [Zuleika's] contribution of $3,000,000 to Expenditure and this deemed contribution is in satisfaction of amounts owing by the DPPL Parties to [Zuleika].
(b)Upon expiry of the Earn-in Period or the issue of the notice by [Zuleika] to the DPPL Parties under clause 2(d), whichever occurs first, each party must contribute to expenditure made or incurred in respect of the Joint Venture in proportion to their then Joint Venture Interest, which expenditure must be authorised by the Joint Venture Committee.
(c)If a party does not contribute to expenditure in accordance with its Joint Venture Interest, their Joint Venture Interest (Diluting Joint Venturer) will dilute in accordance with the following formula, with the Joint Venture Interest of the other Joint Venturer (Non Diluting Joint Venturer) increasing in proportion to the Diluting Joint Venturer …
Clause 4 provided:
(a)On the Commencement Date, the parties will form a Joint Venture committee (Joint Venture Committee) which shall comprise:
(i)two representatives from [Zuleika]; and
(ii)two representatives from the DPPL Parties.
(b)Voting on any issue requiring a decision by the Joint Venture Committee will be by a simple majority with the vote of each Party being 1 vote each, regardless of the number of representatives.
(c)The Joint Venture Committee shall be responsible for:
(i)determining and approving the CAPEX;
(ii)determining and approving the Expenditure tranches of the CAPEX;
(iii)the preparation of mine plans and exploration programs;
(iv)procuring management and operating personnel and contractors;
(v)obtaining government approvals; and
(vi)preparing budgets and project management (including maintaining the tenements in good standing).
(d)The Joint Venture Committee will meet at least every 3 months.
Clause 5 provided:
(a)[Zuleika] will be the exploration manager of the Joint Venture and will (by itself or through its employees, agents or contractors) have the conduct of all the exploration operations of the Joint Venture on behalf of the Parties, subject at all times to the reasonable directions of the Joint Venture Committee established under clause 4.
(b)The DPPL Parties will be the development manager of the Joint Venture and will (by itself or through its employees, agents or contractors) have the conduct of all the development operations of the Joint Venture on behalf of the Parties, subject at all times to the reasonable directions of the Joint Venture Committee established under clause 4.
(c)Both the DPPL Parties and [Zuleika] shall conduct Joint Venture operations in accordance with:
(ii)programs, budgets and decisions made by the Joint Venture Committee; and
(ii)in accordance with accepted mining and exploration methods and practices.
Clause 9 provided:
The Parties are responsible for ensuring that the Tenement is maintained in good standing in accordance with any applicable laws and in proportion with their equitable interest in the Tenement.

The relevant facts

At the trial there was no dispute in relation to the following facts:
(a)On 12 May 2017, the parties executed the BTS Agreement.
(b)The Commencement Date, as defined in cl 26 of the BTS Agreement, was 12 May 2017.
(c)By cl 2(c) of the BTS Agreement, the Earn‑in Period was to expire on 12 May 2019. However, the expiration date was extended, by agreement of the parties, to 12 November 2019.
(d)At all material times, CAPEX, as defined in cl 26 of the BTS Agreement, was $6,000,000 in that no other amount was agreed in writing by the parties.
(e)By cl 3(a) of the BTS Agreement, the sum of $245,239.78 was agreed by the parties to be owing by Vango and Dampier Plutonic to Zuleika and was deemed by cl 3(a) to form part of Zuleika's contribution of $3,000,000 to Expenditure under the BTS Agreement.
(f)Zuleika did not otherwise contribute to Expenditure during the Earn-in Period.

The primary judge's reasons

The primary judge said that it was clear from the text and purpose of the BTS Agreement that, when the BTS Agreement was executed [119]:
(a)Zuleika knew (and a reasonable business person standing in its shoes would know) that it would need to spend $3,000,000 to earn a 50% Joint Venture Interest (unless it was agreed in writing that the CAPEX of $6,000,000 should be reduced to a lesser amount); and
(b)Vango and Dampier Plutonic knew (and a reasonable business person standing in their shoes would know) that during the Earn‑in Period $3,000,000 was intended to be expended by Zuleika on the mining property for which they would be transferred a 50% Joint Venture Interest.
However, her Honour held that, on a proper construction of the BTS Agreement, Zuleika could acquire a Joint Venture Interest that was less than a 50% Joint Venture Interest by spending less than $3,000,000 as Expenditure (without Zuleika having given a notice under the second paragraph of cl 2(d) of the BTS Agreement) [120], [137].
The primary judge held that Zuleika's deemed contribution to Expenditure of $245,239.78, pursuant to cl 3(a) of the BTS Agreement, took effect upon the parties executing the BTS Agreement [122]. Her Honour also held that, on a proper construction of cl 2(a) and cl 2(c) of the BTS Agreement, Zuleika earned a 4.1% Joint Venture Interest during the Earn‑in Period, that percentage representing the proportion that the Expenditure (namely, $245,239.78) bore to the lesser of 50% of the CAPEX or $3,000,000 (namely $3,000,000) during the Earn‑in Period [122] ‑ [124].

The sole ground of appeal

The sole ground of appeal alleges, in essence, that the primary judge erred in law in holding that, pursuant to the BTS Agreement, Zuleika earned a 4.1% Joint Venture Interest during the Earn‑in Period as a result of Zuleika's deemed contribution to Expenditure of $245,239.78. The ground further alleges, in essence, that her Honour should have held that, on a proper construction of the BTS Agreement, Zuleika had not earned a Joint Venture Interest in that it had not contributed $3,000,000 to Expenditure during the Earn‑in Period.

Counsel for Vango and Dampier Plutonic's submissions

Counsel for Vango and Dampier Plutonic who appeared at the hearing of the appeal were not the counsel who settled Vango and Dampier Plutonic's written submissions. Some of the oral submissions were different from some of the written submissions. At the hearing the submissions made or relied upon were in substance as follows.
Counsel submitted that cl 2(a), read with cl 2(b), cl 2(c) and cl 2(d), of the BTS Agreement conferred on Zuleika a right or option, but not an obligation, to contribute the lesser of 50% of the CAPEX or $3,000,000 to Expenditure.
Counsel argued that the BTS Agreement provided for a 'primary scheme' of fixing Zuleika's Joint Venture Interest and an 'alternative scheme'.
The 'primary scheme' was that Zuleika had a period of two years after the Commencement Date (that is, the Earn‑in Period) to earn a Joint Venture Interest. On the Commencement Date, Zuleika's Joint Venture Interest was 0%. By cl 2(a) of the BTS Agreement, Zuleika had the right or option to contribute a minimum amount to earn a Joint Venture Interest. The minimum amount was the lesser of the two sums specified in cl 2(c). No other amount was agreed in writing by the parties as contemplated by the definition of CAPEX in cl 26 and, consequently, the minimum amount to be contributed by Zuleika was $3,000,000. Counsel accepted that the sum of $245,239.78 owing by Vango and Dampier Plutonic to Zuleika 'counted towards' Zuleika's right or option to contribute $3,000,000 to Expenditure during the Earn‑in Period. However, it was submitted that the 'primary scheme' was 'an all or nothing agreement': Zuleika would earn a 50% Joint Venture Interest if it contributed $3,000,000 and a 0% Joint Venture Interest if it did not.
The 'alternative scheme' was that if Zuleika wanted to earn its Joint Venture Interest before the expiry of the Earn‑in Period or by contributing less than $3,000,000, then Zuleika could give a notice to Vango and Dampier Plutonic, pursuant to the second paragraph of cl 2(d) of the BTS Agreement, within a period of 12 months after the Commencement Date. After giving a notice in accordance with the second paragraph of cl 2(d), Zuleika could continue to make contributions under cl 2(a). No such notice was given. Consequently, on the facts, only the 'primary scheme' of fixing Zuleika's Joint Venture Interest was applicable.
Counsel acknowledged that the words 'up to the lesser of' in cl 2(a) may be viewed as an obstacle to the acceptance of Vango and Dampier Plutonic's preferred construction that Zuleika had a right or option to contribute $3,000,000. Nevertheless, it was submitted that the words 'up to' in cl 2(a) ought not be construed as enabling Zuleika to earn a Joint Venture Interest despite Zuleika contributing a lower total amount than the lesser of 50% of the CAPEX or $3,000,000.
According to counsel:
(a)The words 'up to' in cl 2(a) 'denominate that there could be a range of sums … [by] which Zuleika could [obtain] a corresponding range of Joint Venture Interests depending upon its election to follow the primary or alternative scheme'.
(b)The use of 'up to' could also be understood 'as allowing for the Parties to agree a change in CAPEX'. If the CAPEX was reduced then under cl 2(a) Zuleika's right or option would be limited to expending only 50% of the reduced CAPEX (less than $3,000,000) to earn a 50% Joint Venture Interest under cl 2(c). If the CAPEX was increased then Zuleika's right or option would be limited to expending only $3,000,000 (less than 50% of the CAPEX) to earn a Joint Venture Interest proportionate to the increased CAPEX that had been agreed.
Counsel argued that the BTS Agreement, in making provision for the primary scheme, did not contemplate that, at the end of the Earn‑in Period, Zuleika would acquire 'some differently calculated Joint Venture Interest' if Zuleika did not contribute the lesser of the two amounts specified in cl 2(a) (those two amounts being, in the events which happened, identical, namely $3,000,000).

It was submitted that the fact that under cl 3(a) Zuleika was deemed to have contributed $245,239.78 towards Expenditure and that, on the construction advanced by Vango and Dampier Plutonic, this could result in no Joint Venture Interest does not, of itself, result in a commercial absurdity. The overall bargain between the parties required that under the primary scheme Zuleika would not earn a Joint Venture Interest unless it contributed not less than an amount calculated in accordance with cl 2(a). Zuleika agreed to 'convert' the $245,239.78 owing to it by Vango and Dampier Plutonic into a 'credit' towards its Expenditure under the primary or alternative scheme. This 'conversion' did not result in Zuleika 'losing or giving away the money owed to it'. What ultimately led to that result was Zuleika's subsequent decisions not to give a notice under the alternative scheme, and not to contribute the balance of $3,000,000 under the primary scheme.

Counsel for Zuleika's submissions

Counsel for Zuleika submitted that cl 2(a), having regard to the text of the BTS Agreement as a whole, did not merely confer a right or option on Zuleika to contribute to Expenditure. Rather, by cl 2(a), Zuleika agreed to contribute up to the lesser of 50% of the CAPEX or $3,000,000.
Counsel argued that the words 'up to', appearing before the phrase 'the lesser of 50% of the CAPEX or $3,000,000' in cl 2(a), were important. Those words signified that there was a maximum, but no minimum, amount that Zuleika was required to contribute. For the purposes of earning a Joint Venture Interest, the maximum amount of contribution which Zuleika agreed to make was the lesser of the two alternative amounts specified in cl 2(a), but there was no minimum amount required to be contributed. Accordingly, Zuleika's contribution to Expenditure may be less than or equal to the specified limit.
It was submitted that cl 2(d) specified how Zuleika was to obtain its Joint Venture Interest. In particular, Zuleika could earn its Joint Venture Interest at a set time (Assessment Date) being:
(a)at the end of the Earn‑in Period, pursuant to the first paragraph of cl 2(d); or
(b)upon Zuleika giving notice to Vango and Dampier Plutonic within 12 months after the Commencement Date, pursuant to the second paragraph of cl 2(d).
It was submitted that on the Assessment Date the calculation of the Joint Venture Interest earned by Zuleika was to be made.
Counsel argued that, regardless of whether the first paragraph or the second paragraph of cl 2(d) applied, the method of calculation of the Joint Venture Interest earned by Zuleika was identical. In each case, the Joint Venture Interest earned by Zuleika was to be determined by reference to the amount Zuleika had contributed to Expenditure as at the Assessment Date as a proportion of the CAPEX, subject to cl 2(c), which qualified the maximum Joint Venture Interest which may be earned.
It followed, so it was submitted, that Zuleika was not obliged to contribute a minimum amount of Expenditure in order to earn a Joint Venture Interest. If Zuleika had made some contribution to Expenditure, it was entitled to a Joint Venture Interest calculated in the manner set out in the BTS Agreement and having regard to the amount that Zuleika had in fact contributed.
It was submitted that, on the facts of the case, the Assessment Date was 12 November 2019, being the end of the Earn‑in Period as extended by the agreement of the parties. Zuleika earned a 4.1% Joint Venture Interest, being $245,239.78 as a percentage of the CAPEX amount of $6,000,000.

The merits of the ground of appeal

The proper construction of a commercial contract is to be determined objectively having regard to its text, context and purpose or objects. The provisions of the contract are to be understood objectively by reference to what a reasonable businessperson would have understood them to mean. The hypothetical reasonable businessperson must be placed in the position of the parties. The court considers from that perspective the circumstances surrounding the contract and the commercial purpose or objects sought to be achieved by it. See Electricity Generation Corporation v Woodside Energy Ltd;[2] Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd;[3] Rinehart v Hancock Prospecting Pty Ltd;[4] Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd.[5]
[2] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35] (French CJ, Hayne, Crennan & Kiefel JJ).
[3] Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544 [16] (Kiefel, Bell & Gordon JJ).
[4] Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 267 CLR 514 [44] (Kiefel CJ, Gageler, Nettle & Gordon JJ).
[5] Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd [2023] HCA 6; (2023) 97 ALJR 194 [27] (Kiefel CJ, Gageler, Gordon, Gleeson & Jagot JJ).
In Electricity Generation Corporation [35], French CJ, Hayne, Crennan and Kiefel JJ made these observations in relation to ascertaining what the hypothetical reasonable businessperson would have understood by the terms of a commercial contract:
[I]t will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd [[2009] EWCA Civ 636 at [28]], unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties … intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'. (footnotes omitted)
See also Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd;[6] Simic v New South Wales Land and Housing Corp.[7]
[6] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46] ‑ [47] (French CJ, Nettle & Gordon JJ).
[7] Simic v New South Wales Land and Housing Corp [2016] HCA 47; (2016) 260 CLR 85 [78] (Gageler, Nettle & Gordon JJ).
A commercial contract must be construed as a whole. The words of a clause in the contract are to be given the most appropriate meaning which they can legitimately bear. A court must have regard to all of the provisions of the contract with a view to achieving harmony among them. If more than one construction of a clause is open having regard to the text, context and purpose or objects of the contract as a whole, the court will prefer a construction that will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust. See Australian Broadcasting Commission v Australasian Performing Right Association Ltd;[8] Zhu v Treasurer of the State of New South Wales;[9] Electricity Generation Corporation [35].
[8] Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J).
[9] Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530 [82] (Gleeson CJ, Gummow, Kirby, Callinan & Heydon JJ).
In Fitzgerald v Masters,[10] Dixon CJ and Fullagar J said, '[w]ords may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency'. See also Adams v Lambert;[11] Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq).[12]
[10] Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420, 426 ‑ 427 (Dixon CJ & Fullagar J).
[11] Adams v Lambert [2006] HCA 10; (2006) 228 CLR 409 [21] (Gleeson CJ, Gummow, Kirby, Hayne, Callinan, Heydon & Crennan JJ).
[12] Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2019] NSWCA 11; (2019) 99 NSWLR 317 [6] ‑ [10] (Leeming JA).
Where a word or an expression is defined in a commercial contract the court will give effect to the definition. The proper course is to read the text of the definition into the relevant clause and then to construe the relevant clause having regard to the contract as a whole. Ordinarily, the purpose of a definition in a commercial contract is to attribute the meaning agreed upon by the parties to the relevant word or expression and to avoid unnecessary and lengthy repetition of the text of the definition in the contract. See, generally, Halford v Price;[13] Kelly v The Queen.[14]
[13] Halford v Price [1960] HCA 38; (1960) 105 CLR 23, 26 ‑ 29 (Dixon CJ).
[14] Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216 [103] (McHugh J).
The surrounding circumstances known to the parties may be used in construing a commercial contract. However, the subjective intentions of the parties may not be used in construing the contract. See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd;[15] Victoria v Tatts Group Ltd;[16] Cherry v Steele‑Park.[17]
[15] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ).
[16] Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 90 ALJR 392 [51] (French CJ, Kiefel, Bell, Keane & Gordon JJ).
[17] Cherry v Steele‑Park [2017] NSWCA 295; (2017) 96 NSWLR 548 [57] ‑ [65] (Gleeson & Leeming JJA).
The proper construction of the BTS Agreement must be determined as at the date of its execution. Events that have happened subsequently are not relevant to the proper construction of the BTS Agreement.
The correctness standard of appellate review applies.
By cl 2(a), Zuleika 'agrees to contribute up to the lesser of 50% of the CAPEX or $3,000,000 … (Expenditure)'.
The $3,000,000 referred to in cl 2(a) was 50% of the CAPEX as at the Commencement Date (that is, the date the last of the parties executed the BTS Agreement), namely $6,000,000.
The definition of CAPEX contemplates that the parties may agree another amount for the CAPEX instead of $6,000,000. The other amount could be more or less than $6,000,000. No other amount was ever agreed between the parties.
In our opinion, when the text of cl 2(a) is read in the context of the BTS Agreement as a whole, it is apparent that cl 2(a) embodies an agreement by Zuleika to contribute up to the lesser of 50% of the CAPEX or $3,000,000 to Expenditure. Clause 2(a) does not merely confer a right or option on Zuleika. Clause 2(a) expressly states that Zuleika 'agrees to contribute'. That express statement is supported by the relevant contractual context, which includes the following:
(a)In the recitals, it is recorded that the parties 'have agreed' that Zuleika 'will acquire an interest in the Tenement'.
(b)By cl 1(a), the parties agree, in essence, that the Joint Venture will be formed on the Commencement Date (that is, upon the execution by the parties of the BTS Agreement).
(c)By cl 1(b), the parties expressly state that on the Commencement Date the initial Joint Venture Interests of the parties will be Zuleika: 0% and the DPPL Parties: 100%.
(d)By cl 2(b), 'Expenditure is to be made in tranches approved by the Joint Venture Committee'. Further, 'funds [are to be] provided within 5 business days of the Joint Venture Committee's approval'.
(e)By cl 3(a), the parties agreed that the sum of $245,239.78 owing by the DPPL Parties to Zuleika would be a deemed contribution by Zuleika to Expenditure and that the deemed contribution would take effect upon the execution of the BTS Agreement by Zuleika and the DPPL Parties.
(f)By cl 4, the parties agreed to form the Joint Venture Committee on the Commencement Date.
(g)Clause 5 provides for the immediate appointment of Zuleika as the exploration manager of the Joint Venture and the DPPL Parties as the development manager of the Joint Venture.
The contextual provisions to which we have referred indicate that on the Commencement Date the Joint Venture began pursuing the Joint Venture objects.
The pursuit of the Joint Venture objects would, no doubt, require money. In that context, cl 2(b) required that 'Expenditure' (that is, the amount that Zuleika had agreed to contribute under cl 2(a)) be made in tranches approved by the Joint Venture Committee and also required that funds be provided within 5 business days of the Joint Venture Committee's approval.
As we have mentioned, the term 'Tenement' was defined in cl 26 of the BTS Agreement to include, relevantly, Mining Lease 52/183. The Mining Act 1978 (WA) imposes on the holder of a mining lease expenditure obligations in respect of the mining lease. See s 82(1)(c) of the Act. If the requirements of the Mining Act in respect of the expenditure conditions applicable to a mining lease are not complied with, an application may be made for forfeiture of the mining lease. See s 98 of the Act. For completeness, we note that an application for exemption from the expenditure conditions may be made under s 102 of the Mining Act.
In our opinion, cl 9 of the BTS Agreement, which states that the parties are responsible for maintaining the Tenement in good standing 'in proportion with their equitable interest in the Tenement', does not, having regard to the text of the BTS Agreement as a whole (in particular, those provisions of cl 1, cl 2 and cl 3 that apply during the Earn‑in Period), indicate that cl 2(a) merely confers a right or option on Zuleika to contribute up to the lesser of 50% of the CAPEX or $3,000,000 to Expenditure.
The words 'up to' in cl 2(a) indicate that Zuleika was not entitled to contribute more than 'the lesser of 50% of the CAPEX or $3,000,000'. Zuleika was only entitled to contribute 'up to' the amount ascertained in accordance with cl 2(a).
The words 'up to' in cl 2(a) also indicate that Zuleika was not bound to contribute the amount ascertained in accordance with cl 2(a), but only any amount or amounts (not exceeding in total the amount ascertained in accordance with cl 2(a)) which Zuleika was required to contribute (in addition to its deemed contribution of the sum of $245,239.78) pursuant to cl 2(b).
By cl 2(c), in consideration for the amounts contributed by Zuleika, Zuleika would earn a Joint Venture Interest equal to the lesser of the Expenditure (that is, the total of the amounts contributed by Zuleika including its deemed contribution of the sum of $245,239.78) as a percentage of the CAPEX or 50% within the Earn‑in Period (that is, within the period that is two years from the Commencement Date).
By the first paragraph of cl 2(d), following Zuleika 'satisfying the Expenditure during the Earn‑in Period', Zuleika would be 'deemed to have earned the Joint Venture Interest' and the DPPL Parties agreed, relevantly, to transfer the Joint Venture Interest to Zuleika. The reference in the first paragraph of cl 2(d) to Zuleika 'satisfying the Expenditure during the Earn‑in Period' is to Zuleika contributing an amount or amounts 'up to' the amount ascertained in accordance with cl 2(a) (emphasis added). That is, Zuleika will satisfy the Expenditure during the Earn‑in Period by contributing an amount or amounts 'up to' the amount ascertained in accordance with cl 2(a). If Zuleika satisfies the Expenditure during the Earn‑in Period in that manner then, pursuant to the first paragraph of cl 2(d), Zuleika will be 'deemed to have earned the Joint Venture Interest'. The extent of the Joint Venture Interest that Zuleika will be deemed to have earned will be calculated in the manner specified in cl 2(c). Significantly, the extent of the Joint Venture Interest is not 50%, but is the lesser of the Expenditure as a percentage of the CAPEX or 50%.
The second paragraph of cl 2(d) begins by stating, in essence, that the provisions of the second paragraph do not limit 'the rights of [Zuleika] under this clause 2' and that the provisions of the second paragraph are 'subject to clause 2(c)'. The second paragraph then confers on Zuleika a right, by notice given to the DPPL Parties during the 12‑month period after the Commencement Date, to require the DPPL Parties to transfer to Zuleika a Joint Venture Interest within 7 days after receipt of that notice. Next, the second paragraph provides that the DPPL Parties must transfer to Zuleika a Joint Venture Interest equal to 'the amount determined by dividing the amount then contributed by [Zuleika] as Expenditure by the total CAPEX, expressed as a percentage' (emphasis added). The second paragraph then sets out an example as to how the extent of the Joint Venture Interest to be transferred to Zuleika is to be calculated. In particular, if Zuleika has contributed $3,000,000 to Expenditure at the relevant date and the total CAPEX as at that date is $4,000,000, Zuleika will be entitled to 'a maximum initial 50% Joint Venture Interest, with such Joint Venture Interest increasing if the DPPL Parties dilute under clause 3(c)'.
The means by which Zuleika may obtain a Joint Venture Interest under the second paragraph of cl 2(d) are an alternative to the means by which Zuleika may obtain a Joint Venture Interest under the first paragraph of cl 2(d). The second paragraph of cl 2(d) expressly states that the provisions of the second paragraph do not limit 'the rights of [Zuleika] under this clause 2'. The rights of Zuleika under cl 2 that are not 'limited' by the second paragraph of cl 2(d) include the rights of Zuleika under cl 2(a) and the first paragraph of cl 2(d). Zuleika may proceed under either the first paragraph of cl 2(d) or under the second paragraph of cl 2(d). The second paragraph of cl 2(d) also expressly states that the provisions of the second paragraph are subject to cl 2(c). Clause 2(c) provides, relevantly, that the extent of the Joint Venture Interest that Zuleika will earn, in consideration for the Expenditure, is equal to the lesser of the Expenditure as a percentage of the CAPEX or 50%.
The material difference between the means specified in the first paragraph of cl 2(d) and the means specified in the second paragraph of cl 2(d) is as follows:
(a)the second paragraph (read with cl 2(a) and cl 2(c)) enables Zuleika, at its election, to obtain a Joint Venture Interest within 12 months from the Commencement Date; whereas
(b)the first paragraph (read with cl 2(a) and cl 2(c)) does not enable Zuleika to obtain a Joint Venture Interest until two years from the Commencement Date.
It may have suited Zuleika's commercial convenience to obtain a Joint Venture Interest more slowly under the first paragraph of cl 2(d) if Zuleika had contributed only a modest amount as Expenditure within the first 12 months. Alternatively, it may have suited Zuleika's commercial convenience to obtain a Joint Venture Interest more quickly under the second paragraph of cl 2(d) if Zuleika had contributed a substantial amount as Expenditure within the first 12 months.
Zuleika's commercial convenience, in deciding whether to proceed under the first paragraph of cl 2(d) or the second paragraph of cl 2(d), may have been influenced by any agreement made by the parties after the Commencement Date that the amount of the CAPEX should be more or less than $6,000,000.
Significantly, whether Zuleika decided to proceed under the first paragraph of cl 2(d) or the second paragraph of cl 2(d), the method by which the extent of Zuleika's Joint Venture Interest would be calculated was unchanged. In each alternative scenario, the Joint Venture Interest earned by Zuleika was to be determined by reference to the lesser of the Expenditure (that is, the total of the amounts contributed by Zuleika) as a percentage of the CAPEX or 50%.
As we have indicated, Zuleika was not bound to contribute a minimum amount as Expenditure in order to earn a Joint Venture Interest. Subject to Zuleika having contributed an amount to Expenditure, Zuleika was entitled to a Joint Venture Interest, to be determined in the manner set out in cl 2(c) and cl 2(d) of the BTS Agreement, based on the amount that Zuleika in fact contributed.

The critical submissions of counsel for Vango and Dampier Plutonic in relation to the proper construction of the BTS Agreement are not persuasive. In particular:
(a)Vango and Dampier Plutonic's submissions fail properly to recognise the significance of the words 'up to' in cl 2(a). The use of 'up to' should not be understood 'as allowing for the Parties to agree a change in CAPEX'. The definition of 'CAPEX' in cl 26 makes provision for the parties to agree in writing that the initial amount of the CAPEX (namely $6,000,000) be increased or reduced. If the parties did agree to increase or reduce the initial CAPEX then the initial amount of '50% of the CAPEX', within cl 2(a), would be changed. However, Zuleika's agreement under cl 2(a) 'to contribute up to the lesser of 50% of the CAPEX or $3,000,000' would be undisturbed.
(b)The BTS Agreement does not provide for a 'primary scheme' and an 'alternative scheme' of the kind asserted by Vango and Dampier Plutonic. The sole agreement of Zuleika in relation to the contribution of an amount or amounts as Expenditure is embodied in cl 2(a) and cl 2(b). By cl 3(a), the sum of $245,239.78 is deemed to be a contribution by Zuleika to Expenditure. Clause 2(c), read with the first paragraph of cl 2(d), provides for Zuleika to earn a Joint Venture Interest within the period that is two years from the Commencement Date (that is, during the Earn‑in Period). The second paragraph of cl 2(d) confers a right on Zuleika to elect to obtain a Joint Venture Interest within 12 months from the Commencement Date, instead of obtaining a Joint Venture Interest in accordance with cl 2(c), read with the first paragraph of cl 2(d).
(c)The construction advanced by Vango and Dampier Plutonic has the result that if, in the events which happen, Zuleika does not give a notice under the second paragraph of cl 2(d) and does not contribute as Expenditure the total amount calculated in accordance with cl 2(a), Zuleika will not earn any Joint Venture Interest, notwithstanding that if Zuleika had given a notice under the second paragraph of cl 2(d) it would have earned a Joint Venture Interest. In that scenario (which is what in fact occurred), Vango and Dampier Plutonic would obtain the benefit of the discharge of the debt of $245,239.78 (and, indeed, any and all contributions of Expenditure which are in total less than the lesser of 50% of the CAPEX or $3,000,000) without Zuleika receiving any corresponding benefit. Vango and Dampier Plutonic's construction is not open having regard to the text, context and commercial purpose or objects of the BTS Agreement as a whole. If, contrary to our opinion, their construction is open, it produces consequences that are unreasonable and unjust and their construction should therefore be rejected.
(d)The construction advanced by Vango and Dampier Plutonic does not reflect what a reasonable businessperson in the position of the parties would have understood the BTS Agreement to mean when it was executed by the parties.
By cl 3(a), the parties acknowledge and agree that the sum of $245,239.78 owing by the DPPL Parties to Zuleika 'is deemed to form part of [Zuleika's] contribution of $3,000,000 to Expenditure and this deemed contribution is in satisfaction of amounts owing by the DPPL Parties to [Zuleika]'.
Clause 3(a) embodies an express acknowledgment and agreement by the parties that the sum of $245,239.78 referred to in that provision is deemed to be a contribution by Zuleika to Expenditure. This deemed contribution took effect upon the execution of the BTS Agreement by Zuleika and the DPPL Parties. The deemed contribution of $245,239.78 was therefore made within the Earn‑in Period.
By cl 3(b), '[u]pon expiry of the Earn‑in Period or the issue of the notice by [Zuleika] to the DPPL Parties under [the second paragraph of] cl 2(d), whichever occurs first, each party must contribute to expenditure made or incurred in respect of the Joint Venture in proportion to their then Joint Venture Interest'.
If Zuleika does not give a notice under the second paragraph of cl 2(d) then, upon expiry of the Earn‑in Period, Zuleika will earn a Joint Venture Interest even though Zuleika has not contributed the lesser of 50% of the CAPEX or $3,000,000. The $245,239.78 referred to in cl 3(a) is taken into account in determining the extent of Zuleika's Joint Venture Interest. Thereafter, the parties contribute to Expenditure in accordance with cl 3(b) and Zuleika does not have any continuing right to contribute to Expenditure pursuant to cl 2(a).
If Zuleika does give a notice under the second paragraph of cl 2(d), then Zuleika will earn a Joint Venture Interest even though Zuleika has not contributed the lesser of 50% of the CAPEX or $3,000,000. The $245,239.78 referred to in cl 3(a) is taken into account in determining the extent of Zuleika's Joint Venture Interest. Thereafter, the parties contribute to Expenditure in accordance with cl 3(b) and Zuleika does not (contrary to Vango and Dampier Plutonic's submission) have any continuing right to contribute to Expenditure pursuant to cl 2(a).
In the events which happened, cl 3(b) took effect upon expiry of the Earn‑in Period (that is, on 12 November 2019, being the expiration date of the Earn‑in Period as extended by the agreement of the parties). On that date, Zuleika had a Joint Venture Interest of 4.1% (being $245,239.78 as a percentage of the CAPEX amount of $6,000,000). As and from 12 November 2019, each party was bound by cl 3(b) to

contribute to expenditure made or incurred in respect of the Joint Venture in proportion to their then Joint Venture Interest.

Conclusion

In our opinion, the primary judge was correct in:
(a)declaring that Zuleika had a 4.1% beneficial interest in the mining property and that Vango and Dampier Plutonic held 4.1% of their total legal interest in the mining property on trust for Zuleika; and
(b)ordering that Vango and Dampier Plutonic do all things necessary to transfer 4.1% of their total legal interest in the mining property to Zuleika.
The appeal should be dismissed.

VAUGHAN JA:

I have the considerable advantage of having read the joint reasons of Buss P & Seaward J in draft. While I wish to say something about the constructional issue the subject of the appeal, I agree with Buss P & Seaward J, generally for the reasons that their Honours give, that the appeal must be dismissed. The primary judge was correct to conclude that on the proper construction of the BTS Agreement Zuleika acquired a 4.1% Joint Venture Interest. The circumstance that Zuleika did not contribute $3,000,000 in Expenditure within the Earn-in-Period did not preclude Zuleika from being deemed under cl 2(d) par 1 of the BTS Agreement to have earned a Joint Venture Interest (calculated in accordance with cl 2(c)).
The appellants' contention to the contrary is unsustainable. It relies, in substance, on reading and construing cl 2(c) of the BTS Agreement as a right to earn a Joint Venture Interest by contributing Expenditure of the lesser of $3,000,000 or 50% of the CAPEX (in the events that happened an amount of $3,000,000) within the Earn-in-Period. The appellants contend that, properly construed, the right was an 'all or nothing' right - Zuleika would receive a 50%

Joint Venture Interest if it spent $3,000,000; or a 0% Joint Venture Interest if it did not spend $3,000,000.[18]
[18] Appellants' submissions par 38 WAB 15.

There are two mechanisms under the BTS Agreement whereby the appellants must transfer a Joint Venture Interest to Zuleika. First in time is the mechanism in cl 2(d) par 2. This was to be triggered by Zuleika giving notice within 12 months after the Commencement Date. It is common ground that this did not occur. Had it occurred the appellants were required to transfer to Zuleika a Joint Venture Interest 'equal to the amount determined by dividing the amount then contributed by [Zuleika] as Expenditure by the total CAPEX, expressed as a percentage'.[19] Second in time is the mechanism in cl 2(d) par 1. Here, following Zuleika 'satisfying' the Expenditure during the Earn-in-Period (originally 2 years after the Commencement Date but on the facts extended by agreement), Zuleika was deemed to have earned a Joint Venture Interest. That Joint Venture Interest was to be determined conformably with cl 2(c). In consideration for the Expenditure, Zuleika would earn a Joint Venture Interest equal to the lesser of 50% or 'the Expenditure as a percentage of the CAPEX'.
[19] However, conformably with cl 2(c) of the BTS Agreement, the Joint Venture Interest could not exceed 50% - the mechanism in cl 2(d) par 2 being 'subject to cl 2(c)'.
In written submissions the appellants suggested that the defined term 'Expenditure'[20] meant $3,000,000.[21]
[20] Here referring to the defined term in cl 2(a). Confusingly, there is a different defined term for 'Expenditure' in cl 26 of the BTS Agreement. In context the cl 26 'Expenditure' defined term is not applicable to cl 2(a) -(d), cl 3(a) or cl 4(c)(ii). Here the BTS Agreement is using the cl 2(a) defined term of 'Expenditure'.
[21] Appellants' submissions par 50 WAB 17.
I do not accept that submission. Textually, the 'Expenditure' is what was in fact contributed to the objects mentioned in cl 2(a)(i) - (iii) rather than an amount being 'the lesser of 50% of the CAPEX or $3,000,000'. Two matters demonstrate that to be the case. First, the reference in cl 2(a) to 'contribute up to' (emphasis added). The Expenditure was the contribution to the relevant objects but was to be limited in amount. It was to be 'up to' the specified figure. So the Expenditure could be anything from nil (more correctly the $245,239.78 deemed Expenditure in cl 3(a)) to the amount being the lesser of 50% of the CAPEX or $3,000,000. Second, cl 2(d) par 2 refers to 'the amount then contributed … as Expenditure'. Self-evidently, the Expenditure is a thing - the contribution - rather than a number calculated as the lesser of 50% of the CAPEX or $3,000,000.
This understanding and construction of the defined term 'Expenditure' is supported by cl 3(a)'s reference to 'contribution … to Expenditure' (emphasis added).
I appreciate that there are contrary textual indicators in cl 2(d) (so far as it refers to Zuleika 'satisfying' the Expenditure) and cl 3(a) (so far as it refers to a contribution of $3,000,000 to Expenditure). The former, in my view, is explicable so far as the Expenditure is to be contributed and is to be made in tranches as approved by the Joint Venture Committee within 5 business days of the approval (see cl 2(a) and cl 2(b)). In any case the Expenditure is satisfied by Zuleika contributing an amount or amounts 'up to' the lesser of 50% of the CAPEX or $3,000,000. As to the latter, cl 2(a) is the primary provision. Clause 3(a) ought to be read and construed harmoniously with cl 2(a). In this respect, while it is true that cl 3(a) omits the words 'up to', it also omits the alternate to the $3,000,000 (ie cl 2(a)'s lesser of 50% of the CAPEX or $3,000,000). It can hardly be supposed, given the clear words of cl 2(a), that had the parties agreed to reduce the CAPEX below $6,000,000, the effect of cl 3(a) would be that there was a $3,000,000 contribution to Expenditure.
Although, textually, the two mechanisms arrange the relevant words in a different order - and the language used in cl 2(d) par 2 is more awkward than that used in cl 2(c) - it is plain that in describing the Joint Venture Interest to be transferred each mechanism is concerned with the same concept. A Joint Venture Interest based on 'the Expenditure as a percentage of the CAPEX' (cl 2(c) & cl 2(d) par 1) is the same as a Joint Venture Interest based on 'dividing … Expenditure by the total CAPEX, expressed as a percentage' (cl 2(d) par 2). That, at once, suggests that the same outcome is intended irrespective of which mechanism is employed.
The first mechanism simply provided a means whereby Zuleika could bring forward the earning of its Joint Venture Interest. Thereafter, rather than Zuleika continuing to fund any Expenditure as approved by the Joint Venture Committee (up to the limit in cl 2(a)), by cl 3(b) each party became liable to contribute to expenditure made or incurred in respect of the Joint Venture in proportion to its Joint Venture Interest. Failing contribution there was the prospect of dilution under cl 3(c). Of importance, however, is the circumstance that cl 2(d) par 2 contemplates the possibility that a Joint Venture Interest may be earned (up to a particular time) irrespective of whether or not the Expenditure in fact contributed amounted to the lesser of $3,000,000 or 50% of the CAPEX. I am unable to identify a reason having a foundation in the text, context or purpose of the BTS Agreement which would provide a proper rationale for distinguishing the second mechanism from the first mechanism in this respect.
That is all the more so when the text of cl 2(a) of the BTS Agreement is considered. The agreement to contribute 'up to' a certain amount to, among other things, the development of a mine, the exploration for and mining of gold ore and other items as agreed by the Joint Venture Committee is not, as the appellants would have it, a right whereby Zuleika might elect whether or not to contribute to Expenditure. The phrase 'agrees to contribute' uses the language of mandatory obligation rather than the language of permissive election. There was an obligation whereby Zuleika agreed to contribute 'up to' the lesser of $3,000,000 or 50% of the CAPEX. The amount in fact required, in the sense of the tranches in which the Expenditure was to be made, was to be determined by approval of the Joint Venture Committee in accordance with cl 2(b). It might have been less than $3,000,000 or 50% of the CAPEX depending on what was approved by the Joint Venture Committee.
For these reasons, which overlap in part with those of Buss P & Seaward J with which I am in general agreement, I do not accept the appellants' preferred 'all or nothing' construction. I am unable to see how the appellants' construction is tenable without reading down - essentially by ignoring altogether - the words 'up to' in cl 2(a). The appellants sought to explain their approach to the words 'up to' on the basis that the phrase was simply necessary to accommodate the mechanism in cl 2(d) par 2, or alternatively, the potential for a reduction in the CAPEX below $6,000,000 by agreement (otherwise having no operative effect). I disagree. The words 'up to' are a key qualifier introduced into the cl 2(a) obligation that apply whether or not Zuleika invokes the mechanism under cl 2(d) par 2 or the parties agree to reduce the CAPEX below $6,000,000. They cannot be ignored.
It should be observed that I have reached this view of the proper construction of the BTS Agreement without any resort to the notion of 'commercial absurdity'.
At first instance Zuleika contended that the appellants' preferred construction resulted in a commercial absurdity. The primary judge accepted that submission.[22] On appeal Zuleika pressed its contention that the appellants' preferred construction was commercially absurd.[23]
[22] Zuleika Gold Ltd v Vango Mining Ltd [2022] WASC 357 [81].
[23] Appeal ts 26 - 27.
Commercial absurdity sometimes provides a basis to supply, omit or correct words when construing a contractual provision. Nonetheless it may be accepted that, if a particular construction produces a commercially absurd result, that may be a reason to read and construe a contractual provision in a different way than its language may more ordinarily and naturally suggest (assuming that the alternate construction is open on the text of the provision). But commercial absurdity often lies in the eye of the beholder. What may seem commercially absurd to one party is not necessarily absurd from the perspective of the other party. As Lord Hoffman has observed:
It is, I am afraid, not unusual that an interpretation which does not strike one person as sufficiently irrational to justify a conclusion that there has been a linguistic mistake will seem commercially absurd to another …[24]
[24] Charterbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] AC 1101 [15].
His Lordship went on to state:
[T]he fact that a contract may appear to be unduly favourable to one of the parties is not a sufficient reason for supposing that it does not mean what it says. The [court] has not been privy to the negotiations and cannot tell whether a provision favourable to one side was not in exchange for some concession elsewhere or simply a bad bargain.[25]
[25] Charterbrook Ltd v Persimmon Homes Ltd [20].
In the present case it was said to be a commercially absurd result that Zuleika might not earn any Joint Venture Interest despite doing all that was required of it under the BTS Agreement were Zuleika only to pay, say, $2.5 million by way of Expenditure.
So stated Zuleika's argument was put at an unduly high level of abstraction without consideration of the overall purpose and structure of the BTS Agreement. I am unable to accept Zuleika's contention of commercial absurdity in the bald terms in which it was advanced. It is one thing to avoid a construction which is capricious, unreasonable, inconvenient or unjust where there is constructional choice. It is quite another to find commercial absurdity based on the suggested operation of a single aspect of an agreement taken in isolation from the operation of the agreement as a whole.
In this appeal, as is often the case, the surest guide to the meaning of cl 2 of the BTS Agreement is the text of the provision read and construed in context having due regard to the purpose and object of the provision and the BTS Agreement as a whole. There is no need to resort to supposed commercial absurdity. The appellants' preferred construction fails on the basis of text, context and purpose.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
WH
Research Associate to the Honourable President Buss
16 MAY 2024