Willmott & Anor v Ilmenite Pty Ltd

[1993] HCATrans 254

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P30 of 1992

B e t w e e n -

JAMES ROBERT WILLMOTT and

ISOBEL IDA WILLMOTT

Applicants

and

ILMENITE PTY LTD

First Respondent

and

REGISTRAR OF TITLES

Second Respondent

Application for special leave

to appeal

Willmott 1 27/8/93

MASON CJ
DEANE J

GAUDRON J

TRANSCRIPT OF PROCEEDINGS

FROM PERTH BY VIDEO LINK TO CANBERRA

ON FRIDAY, 27 AUGUST 1993, AT 12.20 PM

Copyright in the High Court of Australia

MR D.H. SOLOMON:  May it please the Court, I appear for the

applicant. (instructed by Solomon Brothers)

MR F.H. CALLAWAY, QC:  May it please the Court I appear with

my friend, MR J.C. CURTHOYS, for the first

respondent. (instructed by Slee Anderson &

Pidgeon)

MR SOLOMON:  The second respondent, the Registrar of Titles

is really only a nominal party and has never

actually appeared in the proceedings.

MASON CJ: Yes.

MR SOLOMON:  Your Honours, this application raises two

points, separate points, but each of which it is

respectfully submitted is a point of general

importance. I have lodged outline submissions; I

hope Your Honours have received them.

MASON CJ: Yes, and we have had the opportunity of reading

them.

MR SOLOMON:  Thank you, Your Honour. The case arises out of

a deed made in 1968 - quite a short deed - the

material passages of which are at pages 41 up to 44

of the book in the leading judgment in the

Full Court. The only really relevant things to

refer to is that in recital (b) on page 41, next to

line 55, one sees that it recited a request of a

grant of a right:

to search for, dig, dredge, mine, excavate

work, win and remove -

When one went over to paragraph l(a) in the

operative part of the document, the word "search"

did not appear. It simply said to:

dig, dredge, mine, excavate, work, win and

remove -

the same list, but without the word "search".

There has been considerable controversy as to the

proper construction of the deed, whether it, in

fact, should have been construed as conferring a

right to search and, thereafter, to carry on mining

operations. That has been resolved by the now on the basis that, although the recital

referred to searching, the operative part did not

refer to searching and the word "mining operations"

where it appears in clause l(b), at about line 130, and that term "mining operations" which appeared in

other places in the deed, was the sole extent of

the grant of rights.

Willmott 2 27/8/93

The alternative argument was that clause 1

could be - the powers in clause 1 "to dig, dredge,

mine" et cetera, could be exercised for different

purposes; one for searching and one for carrying on

mining operations. The Full Court did not accept

that and held that, in fact, there is an implied

right to search and that the operative part of the

deed conferred a right to carry on mining

operations.

In that regard the deed granted a right for

30 years, which appears in the third line of clause 1 at line 15 on page 42. It also had

clause 2(d) on page 43, which was a covenant by the

grantee to:

give to the owner at least ninety days prior

notice in writing of its intention to commence

mining operations on the claim.

And there was then an agreement in the nature of a

proviso in clause 4(f) on page 44, which provided:

that the company will complete its mining

operations on the claim within five years of the commencement of such operations and this licence shall be determined at the expiration

of such period.

So what one then has is a grant as construed

of a right to carry on mining operations. The

grant is made for 30 years, there is a requirement

to give 90 days notice before commencing them and

there is a proviso that once it commences, they

will finish within five years and the licence shall

be determined at the expiration of the period. The

way that was worked out is at 2.1 in the submission

in the leading judgment - this appear at page 54 of

the appeal book, lines 26 to 51. His Honour

Mr Justice Anderson said there:

There is an immediate grant of a licence to

use and occupy, limited to a period of five

years, ambulatory within a period of 30 years.

With respect to the matter of searching,

His Honour's reasons are as set out at 2.2 of the

submission at page 49, lines 11 to 21, where

His Honour said:

It is true that nowhere in the operative part

of the deed (as distinct from the recitals) is

there expressly conferred a right to prospect

or search for ilmenite on the claim. In my opinion, however, there is no difficulty in

implying into such an agreement as this a

right to search for the subject minerals.

Willmott 27/8/93

There is no need to consider whether the implied right to search is to be enjoyed contemporaneously with the right to conduct

mining operations -

In His Honour the Chief Justice's reasons, where

His Honour agreed with Mr Justice Anderson and

added a few comments of his own - his comments are

at page 34, line 58, to page 35, line 31. At

page 34, the last two lines:

The Deed contains no express substantive

provision conferring a right to search or

prospect for ilmenite on the land.	I agree
that such a right is to be implied.

Between lines 25 and 31 His Honour went on to say:

In this case because the right to search is no

more than an implied right, there is no reason

to imply more than a bare licence to search

for ilmenite and other minerals.

Further down, just after line 45:

it is apparent that there was a distinction to

be drawn between the search for ilmenite and

other minerals, on the one hand, and the

carrying out of mining operations -

Then at the bottom of the page:

assuming that the respondent's right to search

could be exercised, during any period prior to

the commencement of mining operations and

could also be exercised during such

operations, it would not constitute a "licence

to use or occupy land" - - -

MASON CJ:  Mr Solomon, I can understand that you have an

argument on the construction of the deed in the two

respects to which your outline refers, but what

question of general principle does this argument

raise?

MR SOLOMON:  I do not seek to challenge the construction of

the deed. The point is that accepting the

construction is that there is an implied right to

search, the implied right of course, as any implied

term is, is part of the deed. The question of

general principle is whether an implied right or a

right - take out the word "implied" - to search for

minerals for a term in excess of 10 years is in fact a licence to use or occupy land within the meaning of section 20(l)(a) of the Town Planning

and Development Act. That is the point of general

importance.

Willmott 27/8/93

Whether the deed, properly construed,

conferred an express right to search, or whether it

conferred an implied right to search is not

·important.	The point is, is a right to search for
minerals a licence to use or occupy land.	The

reasons given for that are referred to in point 5

of the submission, at 49, 36 to 55. His Honour

there said:

Even if the right to search is for 30 years, I

do not think it affects the matter because I
am not persuaded that the grant of such a

right would be the grant of "a licence to use
or occupy land". It is not to be supposed

that it is necessary to occupy land in order

to prospect for minerals on it. Neither do I

consider it to be a natural use of language to

say that an examination of land to see what

minerals it might contain is a "use" of the
land within the meaning of an expression such

as "licence to use or occupy land".

MASON CJ: But can I put my question to you another way?

The question is whether this document satisfies a

statutory description in two respects. But does

the resolution of that question involve any

question of general principle?

MR SOLOMON: Well, by answering the question, Your Honour,

it will answer the question of what does the

statute mean? What is a licence to use or occupy

land within the meaning of the statute, and that is

the point of general principle. The answer to the

question of whether this deed satisfies the

statutory test will, itself, answer the question of

what do the words mean?

We have only had the one previous authority,

which is referred to point 4 in NLS v Hughes, which
was a vastly different situation. That was a mere

right conferred on a lessee for seven days prior to the commencement of a ten day lease to enter a shop for the purpose of doing some fitting out. The

then Chief Justice held, with whom Mr Justice

McTiernan agreed, that that did not even confer an

interest in land, and nobody would quibble with

that.

But to suggest that a licence to enter land

and search for minerals in it is not to occupy and,

even more, to suggest that it is not to use the

land is to read down the section to an

extraordinarily dangerous degree. So that the

answer to the question of whether this deed

conferred a right to use or occupy land will, as a

matter of general importance, answer the question

Willmott 27/8/93

of what is a licence to use or occupy land within

the meaning of the section?

The way the section is drawn, of course - it

is a section which is common to most jurisdictions
in the sense that it really prevents de facto

in the section as well as "lease", otherwise very easy for conveyancers to draft things as licences, perhaps merely not conferring exclusive rights of possession, and thereby completely get around the intent of the

subdivisions, and it deems things to be de facto included
subdivisions. These are all to do with leases and
licences and grants other than as a lot, without

the approval of the relevant planning authority.

legislature.

So this case raises, for the first time, a

serious question of what do these words "licensed

to use or occupy land" mean in this section? The

fact that they are disjunctive, obviously use is

not necessarily to require occupation as such.	One
may say: what is one doing with the land in
prospecting if one is not using it? The second

point, Your Honours, if I can move on to the second

point, is entirely separate.

MASON CJ: Yes.

MR SOLOMON:  This relates to the provision which is in

section 110 of the Western Australian Property Law Act, as I have referred to in the materials, there

is a virtually identical section in Queensland in

section 218 of the Property Law Act. I have

described section 15 of the Perpetuities and

Accumulations Act 1968 Victoria as being similar.

It is in fact identical to Queensland, when I look

at it again. It is in the materials. So this is

really a matter that is of importance beyond

Western Australia.	I know of no authority which
has determined, "What does this word "option"

mean?" I have provided to the Court the materials

which show the background to these provisions, and

in particular the report in England in 1956 with

respect to the rule against perpetuities generally.

That report was specifically referred to in the

relevant Hansard in Western Australia. The only

section of the report to refer to is in the

materials at paragraphs of that report, 35 to 38,

but in the material bundle it is page 30 and

commencing - an I have underlined some passages

from that part of the report.

What was first pointed out, and this is at

para 35 of the report, that the decision in Hutton

v Watling had put options in so far as the rule

Willmott 6 27/8/93

against perpetuities is concerned into a difficult

position where contractually they may be

enforceable between the parties without being

affected by the rule against perpetuity. But in so

far as they created an interest in land they were

affected by the rule against perpetuities which was

the result of Hutton v Watling and indeed earlier

cases that were referred to in that decision. In
the report it was split up, the analysis was split

up with respect to options which they included in

leases, and as referred to at the top of page 19 of

the report:

options to acquire an interest in land (which

we may call "options in gross".

Where marked on page 19:

Options in gross ..... tend to discourage rather

than foster the maintenance and development of the land in question. The control of the land

will normally rest not with the owner of the

option but with the landowner who granted it

(or his successors); but nevertheless the

landowner will be unwilling to spend money on

the land because of the risk of having the

fruits of his expenditure taken from him by

the exercise of the option.

So, that in 37 it was then concluded that

leasehold options should be dealt with differently

because they, in fact, benefit the land in the

sense that the lessee holding an option is more

likely to look after the land and improve it but,

with respect to options in gross, paragraph 38

noted that it is, of course, a completely different

position and the result which was recommended in
paragraph 38, at the foot of page 19 and over to

page 20, was that options in gross should be valid

pro tanto in the sense that really applying what

has become known as the wait and see rule, even

though the option may be conferred for a period in

excess of the perpetuity period of 21 years, it

should be valid during the wait and see period, and

it should be valid between the parties, and valid

in so far as it confers an interest in land, but

that at the end of the 21 years it should become

void, both inter partes and in so far as it

conferred an interest in land, and that is

precisely how the legislation was then drafted in

this State and other places.

The relevant section is at page 16 of the

materials, that is section 110 of the

Western Australian Act, and what it firstly does in

subsection (1) is to say:

Willmott 7 27/8/93

The rule against perpetuities does not

apply to -

(a) to an option granted to a lessee in

respect of the property demised, being an
option exercisable only during the currency of
the lease or within one year after the
expiration of thereof and enabling the lessee
or lessee for the time being to purchase the

freehold or other superior interest -

and in that regard I might pause to note

subsection (3) which says:

Nothing in this section affects an option for

renewal contained in a lease -

There is an old case law that an option for renewal

was never subject to the rule against perpetuities

in any event. So, by ll0(l)(a) options in leases

are excluded and also excluded from the rule

against perpetuities by subsection (b) is:

an option to acquire an interest in land, not

being an option to which paragraph (a) refers.

Then the new law which is then not actually part of the rule against perpetuities, which is

excluded, is then created by subsection (2) that:

An option to to which subsection (l)(b)

refers, and which according to its terms is,

or may be, exercisable at a date more than 21

years from the date of its grant, becomes
void, on the expiry of 21 years from the date
of its grant, as between the original parties

to that grant and all persons claiming through

them.

Now, what the submission is, is that as this

deed has now been construed as conferring an

ambulatory right to conduct mining operations for a

period of five years, such period of five years to
be determined at the option of the grantee, that it

did, indeed, confer an option within the meaning of

section ll0(l)(b). The deed was granted in

March 1968 so the case was run that it became void as it was common ground, agreed fact, that mining

operations had not commenced prior to 21 years

after that time.

The analysis of the Full Court, with respect,

is to construe the deed very closely in deciding

whether or not it conferred an option or not. The

references to the reasons are at paragraph 7 of the

submission, page 51 line 48 to page 53 line 15.

The last paragraph on page 51, the submission is

Willmott 27/8/93

set out. The section is then set out and what

His Honour then said is:

I do not see why this agreement is an

option. It is not so in form, and, as to its

substance, the parties obtained immediately

all of the rights they were ever to have under

the agreement and became bound immediately to

all of the obligations imposed by it. It is

true that the company remained at liberty not

to exercise some of the right, or any of them
for that matter. But that is a common feature

of licence arrangements.

With that sentence, I take considerable issue,

because it is a common feature of leasehold that

one does not have to occupy and, indeed, it is a

common feature of fee simple that one does not have

to occupy or exercise rights. One may acquire the

fee simple and not enter into occupation at all,

that being one of the bundle of rights of

ownership. So, what is so dangerous about this

judgment is that it leads to a suggestion that no

licence or no option to confer a licence is subject

to section 110(2). That is a very dangerous

precedent, and it being the only Full Court

precedent that we have - indeed, the only precedent

in the country that we have - and then, what he

said at lines 45 and below after referring to

clause 2(d) that there was an obligation to give

notice, it is said:

But these provisions -

that is clause 2(d) -

do not amount to an option to acquire a right

to mine. The right to mine was obtained upon

execution of the deed and the obligation to

allow mining to take place was imposed at the

same time. Such rights and obligations as did

arise, arose once and for all when the deed

was executed.

Then, over the page on the top line:

That within the framework of a bargain a party

is given a choice in regard to the time and

manner of exercise of rights or performance of

obligations -

and one might add, "or whether to exercise them at

all" -

does not of itself have the consequence that

the arrangement is an option. Neither does a

requirement to give a prior notice before

Willmott 9 27/8/93

certain rights are exercised affect the

matter.

His Honour then quoted the reasons of the learned

trial judge with respect to this issue, that:

"Clause 2(d) does no more than commit the

company by way of its own covenant to give the

required notice before commencing to exercise

that right. The grant is not conditional upon

the giving of the notice and is not expressed

so to be. Indeed the covenant to give notice

is expressed as being part of the

consideration for the grant. No interest in

the land is acquired by the giving of the

notice. The effect of the notice is to

establish a date before which the rights

granted by sub-cl l(a) shall not be exercised.

It has no other relevant effect."

Then, having referred then to the submission,

His Honour then reached the conclusion that I read

a moment ago on page 54, line 26, that it:

is an immediate grant of a licence to use and

occupy, limited to a period of five years,

ambulatory within a period of 30 years.

As I submitted in the affidavit in support of

this application - this is at page 66 of the book,

para 4.2.3 of the affidavit - that the application of this decision would lead to a position that one could grant a deed for a:

1,000 years to grant a profit a prendre for

5 years during that term -

and it is still will not be subject to

section 110(2). That has to be a position that is

dangerous and worrying.

Really, all I can say further, Your Honour, is

what is set out at points 12 and 13 of the

submissions, and that is that the legislation shows

that the intention behind what is section 110 was

intended to be of wide and general ambit, having

application to all types of options, whatsoever, to

acquire all types of interests, and in

paragraph 13, that if one looks at this deed as it

has been construed, it confers a right for
30 years, to give notice under clause 2(d), and by

giving that notice one acquires the right to

conduct mining operations for five years, or until

the earlier expiry of the 30-year period. The

decision as to whether or not to carry out mining
operations, and if so when, is entirely at the

option of the company, and that is exercised by

Willmott 10 27/8/93

giving notice under clause (d). With respect,
those elements are the substance of what is

required for there to be an option.

The Full Court's analysis of this document is

really to allow form to triumph over substance.

Although there is a grant for 30 years, but it is entirely at the option of the company whether to exercise it at all, and if so when, and to ignore

the requirement to give notice before doing so and

to treat that as not triggering the exercise of the

right is really to completely prefer form over

substance. It is important, as a matter of

importance, to establish that the application of section 110 is intended to options of all types,

whatever their form, so long as in substance they

are options. That is the point of importance here:

what is an option within the meaning of

section 110?

This is a case which throws up an option in

perhaps unusual form, but it provides an

appropriate vehicle by which to test what it was

that the legislature had in mind when it referred

to options in section 110, that it should apply

with the widest ambit and of general application

and not be subject to close and technical analysis

of deeds to reach conclusions which are contrary to

the substance of what is conferred by them.	As
Your Honours please.

MASON CJ: Thank you, Mr Solomon. The Court need not

trouble you, Mr Calloway.

In the view of the Court, the proposed appeal does not enjoy sufficient prospects of success to

warrant the grant of special leave to appeal.	The
application is therefore refused.

MR CALLOWAY:	If the Court pleases, we ask for costs.
MASON CJ: That application is not opposed, Mr Solomon?
MR SOLOMON:	No, Your Honour.
MASON CJ:	The application is refused with costs.

AT 12.47 PM THE MATTER WAS ADJOURNED SINE DIE

Willmott 11 27/8/93