Western Metals Resources Ltd v Murrin Murrin East Pty Ltd - [1999] WASC 257

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: WESTERN METALS RESOURCES LTD -v- MURRIN MURRIN EAST PTY LTD [1999] WASC 257

CORAM: TEMPLEMAN J

HEARD: 7 & 8 DECEMBER 1999

DELIVERED : 8 DECEMBER 1999

FILE NO/S: CIV 2090 of 1999

BETWEEN: WESTERN METALS RESOURCES LTD (ACN 004 164 108)
Plaintiff
AND
MURRIN MURRIN EAST PTY LTD (ACN 070 150 453)
Defendant

Catchwords:

Deeds - Interpretation - General rules of construction of instruments - Whether an implied term of an option deed that consent to assignment should not be withheld unreasonably - Alternatively, if consent could be withheld unreasonably, whether prohibitation against assignment constituted an unlawful restraint on alienation

Legislation:

Nil

Result:

Declaration made that consent to the assignment of the option deed could not be withheld unreasonably

Representation:

Counsel:

Plaintiff: Mr C L Zelestis QC & Mr G H Murphy
Defendant: Mr R L Le Miere QC & Mr K J Green

Solicitors:

Plaintiff: Fearis Salter Power Shervington
Defendant: Huston Partners

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

Arena Properties Pty Ltd v Bernard Hastie Australia Pty Ltd (1979) 1 NSWLR 480
Australian Mutual Provident Society v 400 St Kilda Road Pty Ltd (1991) 2 VR 417
Bocardo SA v S and M Hotels Ltd [1980] 1 WLR 17
Bridgestone Australia Ltd v GAH Engineering Pty Ltd (1997) 2 Qd R 145
Butt v McDonald (1896) 7 QLJ 68
Caboche v Bond (1993) 110 ALR 215
Elton v Cavill (No 1) (1994) NSW ConvR 55-701
Elton v Cavill (No 2) (1993) 34 NSWLR 289
Hall v Busst (1960) 104 CLR 206
Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85
Re Archos (1994) 1 Qd R 223
Secured Income Real Estate (Australia) Pty Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596

Case(s) also cited:

Braunstein v Accidental Death Insurance Co (1861) B & S 782; 121 ER 904
Cukeric v David Jones (Australia) Pty Ltd (1996) 70 IR 26
Gardiner v Orchard (1911) 10 CLR 722
Godfrey constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529
Grayson v Grayson [1922] St R Qd 155
Hilton v Tipper (1868) 18 LT 626
Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1
In re Ridley; Buckton v Hay (1874) 11 Ch D 645
In the estate of Leahy (1975) 1 NSWLR 246
Johnston & Halliday v Halliday (1984) ANZ Conv R 652
Meehan v Jone (1981) 149 CLR 571
Nullagine Investments Pty Ltd v The Western Australian Club Inc (1993) 177 CLR 635
Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575
Renard Constructions (ME) Ltd v Minister for Public Works (1992) 26 NSWLR 234
Reuthlinger v MacDonald (1976) 1 NSWLR 88
Sandhu v Ferizis (1994) NSW Conv R 55-698
Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 117 ALR 393
Shuttleworth v Cox Brothers & Co (Maidenhead) [1927] 2 KB 9
Specialised Transport Pty Ltd v Dominiak (1989) 16 NSWLR 657
Stocks & Holdings (Constructors) Pty Ltd v Arrowsmith (1964) 112 CLR 646
Viscount Tredegar v Harwood [1929] AC 72
WMC Resources Ltd v Leighton Contractors Pty Ltd [1999] WASCA 10
Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551

TEMPLEMAN J: On 28 June 1996 Crest Resources Australia NL and Capella Holdings Pty Ltd granted an option in respect of certain mining tenements to Aberfoyle Resources Ltd. The option deed is a legally drawn document which contains detailed provisions relating to the grant and exercise of the option and matters subsequent thereto.
It is not necessary to set out the terms of the option agreement in any detail, except in certain respects. It is sufficient to explain the broad structure of the agreement. The subject of the agreement is described as tenements, included are a number of prospecting licences, exploration licences, a mining lease and an application for a mining lease situated in the Mount Margaret mineral field of Western Australia.
The agreement provided for payments by Aberfoyle to Crest and to Capella. It provided for an extension of the option period to a total period of three years. The option could be exercised at any time during the option period by Aberfoyle serving a written notice on the optionors. If Aberfoyle exercised the option and commenced mining operations on any part of the tenements, it was required to pay certain royalties to Crest. There are complicated provisions by which royalties are calculated but essentially there was to be a minimum annual payment of $200,000 less any amount of royalties that were paid in the relevant year.
There were then royalties which were calculated as a percentage of net profits and net smelter returns, as those terms were defined in the agreement. Essentially those are profits from the exploitation of the mining lease.
There was no obligation on Aberfoyle to carry out mining or exploitation activities. If it did not do so, then, as I have said, it would simply pay the annual sum of $200,000. There is also a provision for the payment of royalties direct to Capella by Aberfoyle in place of those payments being made by Crest.
Various warranties were given by the optionors and an indemnity was given by them also. Various covenants then required the optionors to permit Aberfoyle to enter onto the tenements to enable it to carry out exploration and related works and activities.
There were then covenants given by Aberfoyle about complying with the directions of the Department of Mines; doing things reasonably necessary to leave the tenements in the condition in which they were initially if the option lapsed, and keeping the tenements in good standing by paying such matters as rents, royalties, rates and outgoings.
There was a reporting obligation on Aberfoyle; and a provision for termination. There was no provision for any kind of forfeiture by the optionors if Aberfoyle defaulted in its obligations.
There is then the clause on which attention was focused in this action, that is cl 9, under the heading "Assignment". It is in the following terms:
"The rights, liabilities and obligations of the Parties set out in this Deed (including their interest in the Tenements) shall not be assigned, novated, transferred, mortgaged, charged or otherwise disposed of except with the prior written consent of the respective other Parties."
The clause does not contain any provision which sets out the basis on which consent may be withheld. It is said by Aberfoyle, which has now changed its name to Western Metals Resources Ltd, that there is to be implied in that cl 9 a term that consent should not be withheld unreasonably.
The dispute is not, however, between Aberfoyle, Crest and Capella, but between Aberfoyle and a company now known as Murrin Murrin East Pty Ltd, formerly Yundamindra Nickel Pty Ltd. That is because on 6 February 1998 Aberfoyle, Capella, Crest and Yundamindra, as it then was known, entered into a deed of covenant by which the optionors, Capella and Crest, were replaced by Yundamindra. Clause 2 of that deed under the heading "Consent by Aberfoyle" was in the following terms:
"Aberfoyle hereby:
(a)pursuant to clause 9 of the Option Deed and notwithstanding clause 5.1(b) of the Option Deed (the benefit of which Aberfoyle hereby waives in respect of this assignment) consents to the assignment by the Optionors to Yundamindra of the whole of their interest in the Tenements (subject to Aberfoyle's rights) and the whole of the benefit of the Option Deed including the rights of Crest and Capella to payments and royalties; and
(b)as from the Effective Date accepts Yundamindra as a party to the Option Deed in substitution for the Optionors, Capella and Crest and agrees that the Option Deed shall take effect in all respects as if Yundamindra were a party thereto in substitution for the Optionors, Capella and Crest."
There is then a provision whereby Aberfoyle agreed to pay to Yundamindra all payments, including royalties, which it would have been required to make to the original optionors. Clause 4 of the deed is in the following terms under the heading Assignment:
"Neither Aberfoyle nor Yundamindra may assign the Tenements or any interest in the tenements unless the assignment is made expressly subject to this Deed and the Option Deed. The assignee must, on or before the effective date of the assignment covenant by Deed (in a form and substance satisfactory to the non-assigning party acting reasonably) to assume and be bound by and to perform and discharge all the assignor's obligations and liabilities under this Deed."
On 13 June 1999 Aberfoyle, then Western Metals Resources Ltd, duly exercised the option. On 16 August a director of Western Metals wrote to Murrin Murrin East Pty Ltd for the attention of Mr Michael Frayne, manager resource development, Anaconda Nickel, which is Murrin Murrin's parent company, saying that Western Metals was proposing to sell all of its interests at Eucalyptus. Eucalyptus is the name of the area in which the tenements are to be found. The letter went on to refer to cl 9 of the option deed. The letter continued:
"In our view clause 9 of the option deed includes an implied term that a party's consent will not be unreasonably withheld and could not be withheld other than honestly in the sense that the withholding of consent was truly related to concerns about the future performance of the remaining contractual obligations under the option deed."
The letter enclosed a draft deed of covenant and sought a confirmation that if Western Metals presented a financially sound and technically competent purchaser who was willing to purchase its interest in the option deed and related tenements, etcetera, consent would be granted under cl 9. On 31 August Mr Frayne replied, referring to the letter of 16 August. He said:
"We cannot confirm that our consent will be granted in the circumstances described in your letter. There is no implied term that consent must not be unreasonably withheld."
That correspondence raises the principal issue between the parties in this action in which Western Metals is the plaintiff and Murrin Murrin East Pty Ltd is the defendant. The matter has proceeded on the basis that the action raises a short point of construction arising under cl 9 of the option agreement. However, in the statement of claim it is alleged in par 8:
"It is a term of the option deed as binding on the defendant pursuant to the deed of covenant, on the proper construction thereof, and/or by implication in effect that the consent referred to in paragraph 4(a) above will not be withheld by a party unreasonably and/or other than by acting honestly and bona fide. (My emphasis)
The consent referred to is of course the consent under par 9 of the option deed. In other words, the plaintiff contends that the option agreement cannot be construed in isolation but must be construed having regard to the deed of covenant of 6 February 1998. That contention requires attention to be focused on cl 4 of the deed of covenant, to which I have referred above.
I suggested to Mr Le Miere QC, who appears for the defendant, that perhaps cl 4 should be construed to mean that if the assignee agreed to be bound by the deed of covenant on terms which would be satisfactory to the non‑assigning party if it acted reasonably, then the non-assigning party, in this case the defendant, would be bound to consent to the assignment. In other words, however cl 9 should be construed, the plaintiff and the defendant have by the deed of covenant agreed that neither party should withhold its consent unreasonably to any proposed assignment.
Mr Le Miere submits that that is not the effect of the clause. He submits that the provisions about a proposed assignee agreeing to enter into a covenant in form and substance satisfactory to the non‑assigning party acting reasonably only come into play, as it were, after the non-assigning party has given its consent, which may be withheld entirely capriciously.
I think Mr Le Miere is right when he says that the clause must be regarded as having those two limbs. However, it seems to me that it would be a very odd result if the non-assigning party could act entirely capriciously in deciding whether or not to consent to an assignment, but if it consented, was then required to act reasonably in approving the form of deed. That is not, I think, to construe cl 9 of the option deed by reference to subsequent events but to recognise that cl 9 is, as it were, imported into the deed of covenant of 6 February 1998 and to construe it in that way.
It is to be noted that cl 4 of the deed of covenant is expressed only to apply to assignments: and not to the various other kinds of transactions which are contemplated by cl 9. However, that is probably sufficient for present purposes because what is proposed is in substance an assignment.
In any event it seems to me that since cl 9 of the option deed is headed "Assignment", even though it deals with a number of different kinds of potential transactions, the reference in cl 4 of the deed of covenant to assignments is probably intended to cover the same ground.
On that basis it seems to me that as a matter of construction the consent requirement in cl 9 imposes on the defendant in the present situation an obligation not to withhold consent unreasonably.
If I am wrong in that view, then I need to have regard to cl 9 standing alone, in the context of the option deed.
I have been referred to a number of authorities, it being accepted on all sides that when one is concerned with a construction question authorities are of only limited value. However, there are statements of principle in the cases, which are of assistance. In particular I derive assistance from the decision of the High Court in Secured Income Real Estate (Australia) Pty Ltd v St Martins Investments Pty Ltd(1979) 144 CLR 596 and in particular from the judgment of Mason J, as he then was, at page 607. His Honour referred to what Griffith CJ had said in Butt v McDonald (1896) 7 QLJ 68 which is in these terms:
"It is a general rule applicable to every contract that each party agrees by implication to do all such things as are necessary on his part to enable the other party to have the benefit of the contract."
Mason J then went on to say:
"It is easy to imply a duty to cooperate in the doing of acts which are necessary to the performance of the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to cooperate on the first party or whether it leaves him at liberty to decide for himself whether the act shall be done even if the consequence of his decision is to disentitle the other party to a benefit. In such a case the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself."
That then gives rise to the question in the present case: what was the intention of the parties in relation to cl 9 when they entered into the option agreement? It is clear that cl 9 applies equally before or after the exercise of the option and, as I have said, it includes a whole range of possible transactions. It seems to me, and indeed I think it common ground, that clause 9 was intended to protect the parties' respective positions, (because of course it applies to all parties equally) to protect them from transactions which they regarded as unsatisfactory or unacceptable for whatever reason. In short, it seems to me that the object of cl 9 was to protect the parties' commercial interest in the agreement.
Mr Zelestis QC, who appears for the plaintiff, submits that once it is established that the objective is the protection of commercial interests, the standard is set by which the question of consent must be judged. Because if the object of the clause is to protect commercial interests, then it is unlikely that the parties would have agreed that either or any of them should act capriciously.
Mr Zelestis submits, in effect, that if what is proposed by one party in relation to any of these kinds of transactions affords the same kind of protection to the other party as it has obtained under the option agreement, then that other party should be required to act reasonably in deciding whether or not to consent to it. In short, again, Mr Zelestis submits that a term that consent should not be withheld unreasonably should be implied into cl 9 because it is necessary to give business efficacy to the provision.
There is a further point made by Mr Zelestis: that after the exercise of the option, the plaintiff becomes the absolute owner of the tenements, subject only to its obligation to pay royalties in the manner I have described. The defendant, now standing in the shoes of the original grantors, has no residual interest in the tenements, there being, as I have said, no provision for forfeiture on breach.
Mr Zelestis submits that to say in those circumstances, as the defendant does, that it could arbitrarily refuse consent to an assignment, would be to impose an unreasonable fetter on the plaintiff's ownership of the relevant property: and that could never have been intended because it goes far beyond the purpose of the clause which is simply to protect legitimate commercial expectations.
By contrast, Mr Le Miere has referred me to authorities where he submits different views have prevailed. The case on which Mr Le Miere placed considerable reliance is Bridgestone Australia Ltd v GAH Engineering Pty Ltd(1997) 2 Qd R 145, a decision of Moynihan J in the Supreme Court of Queensland. The case is concerned with a franchise agreement between Bridgestone Australia, a well-known tyre manufacturer and distributor, and a franchisee. The agreement in question contained the provision:
"Except with the written consent of Bridgestone Australia first had and obtained, the dealer's rights under this agreement may not be assigned to any other person."
It was submitted that a term should be implied that consent to an assignment of a franchise agreement could not be withheld unreasonably. Moynihan J did not accept that submission. He said:
"The restriction on assignment reflects caution, perhaps in abundance, in respect of protecting the plaintiff's legitimate interest. The nature of the interest arising under the agreement is not a right of property in the conventional sense and involves a close relationship akin in some respects to a partnership, requiring cooperation and good faith to work effectively."
His Honour said a little later:
"The term that is sought to be implied here is not necessary for the business efficacy of the franchise agreement. Arguably it conflicts with the express terms canvassed earlier."
His Honour went on to decide on the facts, that in refusing consent to an assignment Bridgestone had not acted unreasonably.
There are two points of distinction, it seems to me, between the Bridgestone case and the present case. The first is that the nature of the property involved is quite different. There an interest under franchise agreements; here mining tenements now in the absolute ownership of the plaintiff. Secondly, the relationship between the parties was, as Moynihan J said, a close relationship; whereas in the present case it is provided in cl 12.4 of the option deed that, "Nothing in the deed shall constitute the optionors and Aberfoyle as partners or in partnership or as joint venturers in any way whatsoever."
So it seems to me that the Bridgestone case is one on the other side of what may be a difficult line to draw. But it is a case which is in my view quite distinguishable from the present case. I find it of assistance only insofar as it demonstrates the correct approach to a question of this kind: and that is to see whether the restriction said to be implied is necessary in the circumstances. It was in that case, but it does not follow that it is necessary in the present case.

The other decision on which Mr Le Miere placed reliance is Re Archos (1994) 1 Qd R 223, a short decision of Thomas J who was concerned with a covenant in a lease that a lessee would not carry on any business on the demised premises, other than that provided for in the lease, without the consent in writing of the lessor. Again it was submitted that that clause was subject to an implied term that consent not be withheld unreasonably.
His Honour decided that no such clause should be implied. In so doing he followed a decision of a New South Wales Court of Appeal, Arena Properties Pty Ltd v Bernard Hastie Australia Pty Ltd (1979) 1 NSWLR 480 in that case in which Reynolds J said (at 486‑487):
"If the proposed sublease were granted in the form submitted it would necessarily involve a consent to a change of use. The lessor was entitled to withhold its consent to a change of use, even if by doing so it acted unreasonably."
There is no detailed reasoning set out in that case as to why a lessor might be entitled to withhold consent unreasonably to a proposed change of use. But in my view it is not difficult to see why that may be so. In a relationship of landlord and tenant, the landlord owns the reversion on the property; he remains the freehold owner despite the fact that there is a lease. He will in due course get the property back.
It would be very difficult to judge the question whether or not a lessor was acting unreasonably in deciding whether to agree to a change of use. Who could say what might or might not be reasonably acceptable to a landlord any more than one could say whether, for example, a refusal to agree to a change of colour scheme might be unreasonable? How a property might be used during the term of a lease is very much a personal matter.
The underlying question in these cases is, I think, whether the restraint is reasonably required for the protection of the non-assigning party or the party who seeks to have some change imposed on the other party.
As I have said, the basis on which it is sought by the plaintiff to imply a term into cl 9 is that it is necessary to give business efficacy to the agreement. I do not think it necessary for the agreement to be unworkable before a term can be implied, which will give it business efficacy. It seems to me that a term would give a contract business efficacy if that term would ensure that the contract had the desired commercial effect.
In my view, given that this is a commercial agreement and given the plaintiff's absolute right to the subject property, the plaintiff's freedom to deal with the property should be restricted only to the extent necessary to protect the legitimate commercial interests of the other party. On that basis, I think it would be necessary, to give business efficacy to the agreement, if a term were to be implied which required the defendant not to withhold consent to an assignment unreasonably.
I am invited to approach the matter also from a somewhat different perspective. It is pointed out by Mr Zelestis that cl 9, applying as it does to transactions including novation, must involve consent being given in any event. So, it is said, the requirement for consent adds nothing unless it fixes the basis from which the question of consent must be approached.
Equally, the clause applies to a mortgage which, at least after the option has been exercised, could be effected without consent. In that case therefore the requirement for consent would restrict the plaintiff's freedom to enter into such a transaction. And yet it seems to me that because the clause applies equally to both parties and applies to a whole range of transactions, it should be subject to the same consent criteria in each case.
Mr Zelestis relies on a decision of the English Court of Appeal, Bocardo SA v S and M Hotels Ltd [1980] 1 WLR 17, a case concerned with a covenant in a lease. The relevant provision involved against assigning without licence or consent. Megaw LJ at page 22 said:
"Such a provision would, in strict law, be meaningless or ineffective, unless it were to have implied in it some such term as 'such … consent is not to be unreasonably withheld.' For if the landlord was entitled to refuse consent at his own entirely unrestricted discretion, the provision for assignment with consent would add nothing to, and subtract nothing from, the effect in law of the contract as it would be without those words being included. For a contracting party is entirely free to agree to a variation of the contract at the request of the other party. That applies equally where, as here, the variation of the contract would constitute a novation."
Mr Zelestis submits that is compelling reasoning. The passage was considered in Australia in the Supreme Court of Victoria, Appeal Division, in Australian Mutual Provident Society v 400 St Kilda Road Pty Ltd (1991) 2 VR 417. In a joint judgment O'Bryan and McDonald JJ held that the reasoning did not apply in the case then before the Court, because the implication was not open having regard to express provisions of the relevant lease. However, their Honours did not cast any doubt on the reasoning of Megaw LJ as it applied in the English case. I therefore accept the submission that the reasoning is compelling.
Against it, Mr Le Miere submits that cl 9 does advance the position which would otherwise exist at law because it requires at least the written consent of the other party. At law only an informal consent would be sufficient. That is true up to a point. But it seems to me that the submission does not deal with a situation in which no consent would have been required at all: in which case, as I have said, the requirement for consent imposes a fetter on the actions or freedom of the relevant party.
Mr Le Miere goes on to submit that the option agreement is professionally drawn (which it is), is comprehensive (which it appears to be), and that it contains a number of provisions importing reasonableness (which it does). One such provision is in cl 5.1(d) to which I have not made reference previously. It contains a covenant that the optionors will:
"not to incur any material liabilities in relation to the Tenements … otherwise than with the prior written consent of Aberfoyle (such consent not to be unreasonably withheld);…."
It is submitted that the parties to the agreement must have been alive to the question of unreasonable withholding of consent. They made express provision for it in cl 5.1(d) but made no provision for it in cl 9: and that must therefore be taken to have been their intention. That is to say, they acted deliberately in leaving out any provision which required consent not to be withheld unreasonably. In short, Mr Le Miere says, the parties have addressed this very issue, virtually expressly, and it is neither necessary nor appropriate to go behind that provision and seek to determine any further intention.
I accept that there is considerable force in those submissions: but experience teaches that there are often situations where professionally drawn and apparently comprehensive agreements nevertheless have terms implied into them. It seems to me that where one comes to the conclusion that a term should be implied, as I have done by two different routes, or possibly three, those considerations outweigh the submissions made by Mr Le Miere, although, as I have said, I accept the force of them.
That leads me to the proposed declaration. Before dealing with that I should refer to the basis on which it is said generally that the term should be implied. That is set out in the particulars at par 8 of the statement of claim which recites the now hallowed formula for the implication of terms. It is alleged:
"Insofar as the term is implied, it is reasonable and equitable, it was so obvious as not to require expression, it is necessary to give business efficacy, it is clear and it does not contradict the option deed or the deed of covenant."
I have already dealt with the business efficacy point. It seems to me that the term sought to be implied is reasonable and equitable. It is clear. It does not contradict the option agreement or the deed of covenant and it seems to me, having now heard substantial argument on the point, that the term is so obvious as not to require expression. That, I think, is why it was not expressed in the deed.
In my view, that is the answer to Mr Le Miere's further submission that the argument run by the plaintiff in this case is a circular one. Mr Le Miere submits that the argument depends for its success on that which it seeks to prove. In my view, however, that is not the case, for the reasons which I have endeavoured to set out.
I now come to the minute of proposed declaration. What is sought is a declaration in the following terms:
"It is a term of the option deed as binding on the parties herein pursuant to the deed of covenant that a party may not withhold consent to an assignment or other dealing within clause 9 unreasonably and other than by acting honestly and bona fide according to the object of clause 9, namely, to protect the parties' respective interests in the further performance of the remaining obligations of the proposed assignor, etcetera, by obtaining a covenant in that regard from the proposed assignee, etcetera."
That proposed declaration, it seems to me, is far too narrowly drawn insofar as it refers to the protection of the parties' interests in the further performance of the remaining obligations of the proposed assignor. As Mr Le Miere points out, quite rightly, cl 9 has or had application in a whole range of possible circumstances and applies equally, as I have said, both to the plaintiff and the defendant and both before and after exercise of the option.
I accept Mr Zelestis' submission that cl 9 is intended to protect the parties' respective commercial interests: but I do not think the clause is intended to protect any particular interest. It seems to me that a non‑assigning party who declines to consent to a proposed assignment, for example, may well act reasonably if it seeks to further its legitimate commercial interests by refusing consent. In other words, applying the clause to the present situation, it seems to me, without in any way seeking to prejudge the issue, that considerations about whether the proposed assignee would be able to perform outstanding obligations under the option deed may not be the sole criteria.
Mr Le Miere poses an example. He points out that there is no obligation on the plaintiff to carry out any mining activities on the tenements. The plaintiff's obligations are discharged simply by paying $200,000 per annum by way of royalty. Suppose, Mr Le Miere says, an assignee is proposed which the defendant reasonably considers will be unlikely to carry out any mining operations and will be content to pay $200,000 per annum. Mr Le Miere submits that is might be a reasonable for the defendant to refuse consent in the hope that if the plaintiff persisted in its desire to assign, it might come up with an assignee who was prepared to undertaking mining operations.
It seems to me, and I emphasise without wishing in any way to prejudge the issue, that it might well be reasonable in those circumstances for the defendant to withhold consent.
In short, the kinds of situation which might arise when an assignment was proposed are so potentially wide and various that it would, I think, be wrong to imply a term beyond that which requires the defendant not to withhold consent unreasonably. If a dispute arises it will be necessary to determine whether on the particular facts the action of the defendant if it withheld consent was unreasonable.
I have considered whether the term should extend to unreasonable withholding of consent or to considerations of honesty and bona fide actions, which for present purposes I think come to the same thing. Clearly a party who acts reasonably must also act honestly. Equally clearly a party may act perfectly honestly, but quite unreasonably. It seems to me, given that this is a commercial document giving rise to commercial expectations, that the appropriate standard is reasonableness. I would therefore confine myself to making a declaration that it is a term of the option deed as binding on the parties herein pursuant to the deed of covenant that a party may not withhold consent to an assignment or other dealing within cl 9 unreasonably.
The remaining issue is whether, if I am wrong in the view I have taken, and consent may be withheld capriciously by the defendant, cl 9 imposes on the plaintiff a restraint on alienation which is unlawful, being void as contrary to public policy.
Having regard to the view I take, it is not necessary for me to deal with that question, but in case the matter goes further I will set out briefly my view which is that although a total restraint on alienation of land is probably void, as held in Hall v Busst (1960) 104 CLR 206, no such conclusion should be reached in relation to property other than land. In that regard I am of the view that the law is as stated by Lord Browne‑Wilkinson in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 at 107 as approved by the Full Court of the Federal Court in Caboche v Bond (1993) 110 ALR 215 at 231.
There is finally a point about whether a restraint on alienation of the kind that would be imposed here (if I am wrong in my view about cl 9) has some invalid collateral objective. It is common ground that a restraint which protects the legitimate interests of a party would not be void as being a restraint on alienation. Both parties have relied on the decision in Elton v Cavill (No 1) (1994) NSW ConvR 55-701, a decision of McLelland J, the Chief Judge in Equity.
However, the plaintiff goes on to submit that a restraint which exceeds those interests would be too restrictive as being wider than was reasonably necessary and would amount to an invalid restraint. Reliance is placed on Elton v Cavill (No 2) (1993) 34 NSWLR 289 at 309, a decision of Young J: and on Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 at 554D to E.
It is submitted by Mr Le Miere that in Elton v Cavill (No 2), Young J placed a gloss on the principle enunciated by McLelland J in the (No 1) case: namely that if a restraint protects a legitimate interest, it is void if it also protects some other object. Mr Le Miere points out that there may be any number of objects which a restraint would protect, some legitimate, some not legitimate: and that it would be wrong to strike down a restraint simply because it happened to protect illegitimate interests, as it were, when it had a perfectly proper rationale.
That I think is the effect of an article in the "Law Quarterly Review" of July 1917 by Mr Charles Sweet, which appears to form the basis from which the modern learning has developed. It is an article which is referred to in a number of the cases to which I have referred. I accept that submission. It seems to me, with respect, that I should not come to the view that the gloss placed by Young J is appropriately placed.
I would therefore come to the conclusion, if I was wrong about cl 9, that although it imposes a restraint on alienation, it would in those circumstances be a reasonable restraint as protecting a legitimate interest of the relevant party.
For all those reasons I have come to the conclusion that I should make the limited declaration in the terms which I have enunciated.