Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 3]

[2015] WASC 231

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   WRIGHT PROSPECTING PTY LTD -v- HANCOCK PROSPECTING PTY LTD [No 3] [2015] WASC 231

CORAM:   LE MIERE J

HEARD:   5 FEBRUARY 2015

DELIVERED          :   30 JUNE 2015

FILE NO/S:   CIV 3041 of 2010

Consolidated by Orders dated 9 September 2014

BETWEEN:   WRIGHT PROSPECTING PTY LTD

Plaintiff

AND

HANCOCK PROSPECTING PTY LTD
First Defendant

HOPE DOWNS IRON ORE PTY LTD
Second Defendant

HAMERSLEY WA PTY LTD
Third Party

FILE NO/S              :CIV 2671 of 2012

BETWEEN              :WRIGHT PROSPECTING PTY LTD

Plaintiff

AND

HANCOCK PROSPECTING PTY LTD
First Defendant

HOPE DOWNS IRON ORE PTY LTD
Second Defendant

Catchwords:

Pleadings - Strike out application - Adequacy of pleadings - Non-statutory power of Crown to dispose of mineral interests

Legislation:

Mining Act 1978 (WA)

Result:

Defendants' strike out application successful

Category:    B

Representation:

CIV 3041 of 2010

Consolidated by Orders dated 9 September 2014

Counsel:

Plaintiff:     Mr A J Myers QC & Mr J Rowland QC

First Defendant             :     Mr P J Brereton SC & Mr C Bova

Second Defendant         :     Mr P J Brereton SC & Mr C Bova

Third Party                   :     Mr G R Donaldson SC & Mr J Garas

Solicitors:

Plaintiff:     Clayton Utz

First Defendant             :     Jackson McDonald

Second Defendant         :     Jackson McDonald

Third Party                   :     Allens

CIV 2671 of 2012

Counsel:

Plaintiff:     Mr A J Myers QC & Mr J Rowland QC

First Defendant             :     Mr P J Brereton SC & Mr C Bova

Second Defendant         :     Mr P J Brereton SC & Mr C Bova

Solicitors:

Plaintiff:     Clayton Utz

First Defendant             :     Jackson McDonald

Second Defendant         :     Jackson McDonald

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

Australian Anglo American Prospecting Ltd v CRA Exploration Pty Ltd [1981] WAR 97

Commonwealth of Australia v State of Western Australia [1995] HCA 5; (1999) 196 CLR 392

Cudgen Rutile (No 2) Pty Ltd v Chalk [1975] 49 ALJR 22

Nicholas v Western Australia [1972] WAR 168

O'Keefe v Williams [1907] HCA 64; (1907) 5 CLR 217

Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [2013] WASC 248

Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161; (2006) 33 WAR 1

1. LE MIERE J:  The plaintiff, Wright Prospecting Pty Ltd (WPPL), and the first defendant, Hancock Prospecting Pty Ltd (HPPL), who I will refer to collectively as the Partners, carried on business in partnership under the firm name Hancock and Wright (Partnership).  The Partnership was sometimes described as Hanwright.  This consolidated action is concerned with WPPL's claim to entitlements in relation to mining tenements acquired by HPPL or its subsidiaries and now known as Hope Downs and East Angelas.

2. HPPL and the second defendant, Hope Downs Iron Ore Pty Ltd (HDIO), have applied to strike out parts of the Substituted Statement of Claim dated and filed 11 August 2014 (SSOC) and the reply dated and filed 11 November 2014 (Reply).  Before addressing the issues in this application it is convenient to refer to some aspects of the history of the proceedings.

Some procedural history

1. WPPL commenced two actions against HPPL and HDIO.  The first action ‑ CIV 3041 of 2010 ‑ concerned tenements now known as Hope Downs.  The second action ‑ CIV 2617 of 2012 ‑ concerned tenements now known as East Angelas.

2. In CIV 2617 of 2012 WPPL filed and served an amended statement of claim dated 12 November 2012 (ASOC).  The ASOC referred to a letter from the Premier of Western Australia to LG Hancock dated 20 February 1984 (the Premier's letter) in which the Premier said to HPPL that access to Ministerial Reserves TR5072 and TR6446 would be provided for exploration on the understanding that once a firm proposal was received for the development of a mining operation the reserves would be granted to HPPL for inclusion in any development area.  The ASOC also referred to a letter dated 3 April 1985 from the Minister for Minerals and Energy to LG Hancock (the Minister's letter) in which the Minister said that should the East Angelas Tenements become necessary for any firm development proposal access to those Temporary Reserves would be granted to HPPL.  In [30] of the ASOC WPPL pleaded that by the Minister's letter the Minister conferred on HPPL, for and on behalf of the Partnership, a future right to exploit the area of land formerly comprising the East Angelas Reserves which included the right to apply for and obtain exploration licences over that area of land.  WPPL described the right so conferred as the Exploitation Right.

3. HPPL applied for summary judgment or alternatively to strike out the whole or parts of the ASOC on the grounds that it disclosed no reasonable cause of action, was vexatious, or was otherwise an abuse of the process of the court.  HPPL's central argument was that the Exploitation Right never arose for two reasons.  First, the Minister's letter did not grant, or purport to grant, the pleaded Exploitation Right.  Secondly, the Minister had no power to confer such a right.  I ordered that [30] of the ASOC be struck out because it pleaded that the Minister's letter gave rise to rights which were not capable of arising from that letter:  Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [2013] WASC 248 (the first strike out judgment). I held that the pleaded Exploitation Right was the conferral by the Minister of the future right to exploit the area, including the right to apply for and obtain exploration licences over the land. WPPL did not claim that the Minister had any statutory power to confer such a right. The grant of such a right could only be the exercise by the Minister of an executive power. However, the Minister had no such executive power: Commonwealth of Australia v State of Western Australia [1995] HCA 5; (1999) 196 CLR 392, 114 (Gummow J); Nicholas v Western Australia [1972] WAR 168, 172 (Jackson CJ), 174 (Burt J); Australian Anglo American Prospecting Ltd v CRA Exploration Pty Ltd [1981] WAR 97, 102 (Brinsden J).

The Substituted Statement of Claim

1. The two actions were subsequently consolidated and WPPL filed the SSOC.  Paragraphs 40, 41 and 42 of the SSOC are of central importance to this application.  Paragraph 40 pleads that by the Premier's letter and the Minister's letter the Premier and the Minister, for and on behalf of the State of Western Australia, granted the Partnership, or HPPL for and on behalf of the Partnership, access to Ministerial Reserves TR5072 and TR6446 for the purpose of exploration and promised to hold the Hope Downs and East Angelas Reserves for the Partnership, or for HPPL for and on behalf of the Partnership, on the understanding that once a firm proposal was received for a mining operation the Ministerial Reserves would be granted to the Partnership should such reserves be necessary for such development and to provide continuity of supply.

2. Paragraph 41 pleads that following the receipt of the Premier's letter and the Minister's letter, HPPL represented to WPPL, and acknowledged, that the interest, alternatively opportunity, in the Hope Downs and East Angelas Reserves that had been promised by the Premier and Minister was an interest, alternatively an opportunity, belonging to the Partnership to explore for minerals on Hope Downs 1 and 2 Reserves and to acquire mining tenements covering the Hope Downs and East Angelas Areas for future development (the Partnership interest in Hope Downs and East Angelas).

3. Paragraph 42 pleads that at all times from at least 3 April 1985, that is the date of the Minister's letter, the Partnership interest in Hope Downs and East Angelas was an existing commercial interest, alternatively opportunity, promised to the Partnership pursuant to the Premier's letter and the Minister's letter and was obtained by reason of the Partnership's prior exploration and expenditure on the Hope Downs and East Angelas Reserves, the knowledge that the Partnership had acquired as to the commercial potential of the Hope Downs Reserves and East Angelas Reserves and the Partnership's longstanding and continuing desire to exploit for the Partnership's benefit the Hope Downs and East Angelas Reserves.

HPPL's argument on this application

1. In support of the defendants' strike out application senior counsel for the defendants, Mr Brereton SC, made two principal submissions.  The first is that in correspondence and in its outline of submissions dated 1 December 2014 WPPL advances a case that the Premier's letter and/or the Minister's letter give rise to a contract between the State and the Partnership but that case is not properly pleaded.  The second is that WPPL's case propounded in correspondence and its outline of submissions is hopeless because there was no power on the part of the Premier or the Minister to enter into the contract that WPPL asserts.

2. In opposition to the defendants' strike out application senior counsel for WPPL, Mr Myers QC, made four principal submissions. First, HPPL contends that [40] should be struck out but HPPL's chamber summons does not refer to [40] and WPPL did not come to meet that argument. Secondly, the strike out application is not conducive to the just and effective resolution of the proceeding, is likely to delay the final resolution of the proceeding and serves no useful purpose in terms of case management. Thirdly, WPPL's case that the Premier's letter and/or the Minister's letter gives rise to a contract is arguable and should be determined at trial. Fourthly, the facts necessary to give rise to the contract are sufficiently pleaded in [40]. I will first consider Mr Myers' contention that HPPL's application should be dismissed because its contentions about [40] of the SSOC were not raised prior to the hearing of the application.

Chamber summons amended to challenge paragraph 40

1. The defendants' chamber summons to strike out parts of the SSOC and Reply was filed on 22 August 2014 and amended on 19 November 2014.  The amended chamber summons applies to strike out the references in [41], [42] and [110.1] to [110.3] of the SSOC to the interest created or conveyed by the Premier's letter and/or the Minister's letter.

2. There was considerable correspondence between the solicitors about the pleading of the Premier's letter and the Minister's letter and the legal effect of those letters. On 12 August 2014 the defendants' solicitors referred to the distinction between an interest and an opportunity in, amongst others, [41] and [42] of the SSOC and asked WPPL's solicitors to explain the nature of the interest and the opportunity referred to in those paragraphs. WPPL's solicitors responded by letter of 18 August 2014 in which they said, in effect, that the interest pleaded in [41] arose from the legally binding promise pleaded in [40]. The solicitors stated that the letters created a legally binding obligation on the State in favour of the Partnership and was thus an interest of the Partnership and, in the alternative, if no binding obligation on the State arose, those same matters gave rise to an opportunity that belonged to the Partnership. WPPL's solicitors further stated that Mining Act 1978 (WA) s 19 empowered the Minister to grant mining tenements over the Hope Downs and East Angelas areas in his sole discretion and accordingly the letters gave rise to a binding and enforceable promise to the Partnership. The defendants' solicitors replied on 19 August 2014 stating that the alleged interest created or conveyed by the Minister's letter and/or the Premier's letter is inadequately pleaded and in any event for the reasons canvassed in the previous strike out application in CIV 2617 of 2012 does not give rise to any reasonable cause of action.

3. The two principal submissions made by the defendants in support of their present application are in substance the matters raised by the defendants' solicitors in correspondence with WPPL's solicitors.  WPPL cannot reasonably be taken by surprise by those arguments.  Furthermore, determination of the defendants' argument that the references in [41] and [42] of the SSOC should be struck out on the grounds that they disclose no reasonable cause of action, may prejudice, embarrass or delay the fair trial of the action or are otherwise an abuse of the process of the court cannot be determined without determining the defendants' contention that the matters pleaded in [40] cannot give rise to the agreement which WPPL says is pleaded in [40] and which gives rise to the interest pleaded in [41].  It follows that the defendants' contentions in relation to SSOC [40] are properly to be considered in determining this application.

4. Paragraph 3 of the amended chamber summons should be further amended to seek that [40] be struck out in addition to the matters there referred to.

Strike out application should be determined

1. The jurisdiction to strike out is used sparingly.  Interlocutory pleading disputes are actively discouraged because they consume substantial amounts of time and expense ‑ both of the parties and the court - which are often disproportionate to their significance:  Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161; (2006) 33 WAR 1 [2]. In considering an application to strike out parts of a statement of claim the court must have regard to the requirements of efficient case management and the proper allocation of judicial resources. Furthermore, it is only in cases where it can be seen that however the facts be found there is no basis for the legal conclusion contended for by the plaintiff that the pleading should be struck out on the ground that it discloses no reasonable cause of action. Further, a court at first instance should be careful not to risk stifling the development of the law by summarily rejecting a claim where there is reasonable possibility that, as the law develops, it will be found that a cause of action will lie.

2. Often, an application to strike out a statement of claim, or parts of it, should not be entertained for the reasons I have referred to.  However, the pleading questions must necessarily be examined by reference to their context and the desirability of elucidating the issues and avoiding confusion at trial.  Furthermore, the court should exercise its power to strike out if to do so will save unnecessary arguments and therefore time and cost at trial.

3. In this case, HPPL submits that the legally binding promise or agreement which WPPL says is pleaded in SSOC [40] and forms the basis for the interest pleaded in [41] and [42] is inconsistent with the first strike out judgment and is hopeless.  In these circumstances, it is appropriate to consider the merits of HPPL's arguments in support of its strike out application.

The alleged agreement is not maintainable

1. One of the key disputes between the defendants and WPPL is the legal effect of the Premier's letter and the Minister's letter. WPPL contends that those letters give rise to a legally binding obligation of the State to abide by the terms of those letters. Section 19(6) of the Mining Act 1978 (WA) empowered the Minister to grant a mining tenement subject to such terms and conditions as he thinks fit in respect of any Crown land exempted under s 19(1). WPPL says that it is not its case that the Premier's letter and/or the Minister's letter were an exercise of the Minister's power under s 19. WPPL's case is that the letters evidence a binding agreement between the State and the Partnership. WPPL submitted that the agreement was made in exercise of the executive power of the Crown.

2. The defendants say that WPPL's case that the Premier's letter and/or the Minister's letter gave rise to a binding agreement between the State and the Partnership is hopeless for two reasons.  First, the Minister cannot enter into a contract that binds the exercise of his future discretion.  Secondly, neither the Premier nor the Minister has power to enter into a contract to grant a mining tenement.

3. WPPL says that the agreement constituted by, or evidenced by, the Premier's letter and/or the Minister's letter is the exercise of executive power.  However, neither the Premier nor the Minister has any such executive power.  In Nicholas v State of Western Australia the appellants, including HPPL and WPPL, had claimed a right to occupy the temporary reserves and to be offered mining tenements on the reserves based upon assurances and representations which they said that they had been given by the Minister and successive Premiers giving them a right in equity to a renewal or to some form of equitable title to the minerals on the temporary reserve.  In dismissing the claim the Full Court held that rights or interests in respect of minerals under the law of this State are created by statute and statute alone.  They cannot be founded on any alleged contract for there has to be authority of a statute by reason of s 3 of the Constitution Act 1890 (Imp).  Jackson CJ said:

   However, it is clear that there is no unfettered right in the Crown, or the Ministers of the Crown, to enter into contractual arrangements relating to the disposal of minerals on Crown land.  Before 1890, in accordance with regulations made under s 7 of the Imperial Act 18 & 19 Vict c 56 (1855), 'the management and control of Crown lands in Western Australia had been exercisable by the Colonial Office':  see Midland Railway Co of WA v State of Western Australia, [1956] 3 All ER 272, 276. Upon the establishment of responsible government in this State in 1890, it was provided by s 3 of the Imperial Act 53 & 54 Vict c 26 (the Western Australia Constitution Act 1890) that the 'entire management and control of the waste lands of the Crown in the colony of Western Australia, and of the proceeds of the sale, letting, and disposal thereof, including all royalties, mines, and minerals, shall be vested in the legislature of that colony'. From the time of this enactment dealings not only in Crown land but in mines and minerals thereon could only be authorised and supported by statutory authority. Hence rights of occupancy of Crown land for the purpose of prospecting for minerals could only be granted in accordance with an Act of Parliament, and since the Mining Act of 1904, in accordance with its provisions. It is clear from ss 276 and 277 of that Act that the right to occupy temporary reserves was jealously guarded by Parliament, which permitted the Minister to grant such a right only with the approval of the Governor in Council, and which retained for each House the right to disallow any original grant of a right of occupancy exceeding 12 months, and the renewal of a grant for any period. Hale, J, construed these sections as a code defining exclusively the manner in which a right to occupy a temporary reserve under s 276 can arise. His opinion with which I respectfully agree is confirmed by the restrictions imposed by s 3 of the Act of 1890. It follows, therefore, that the plaintiffs could acquire no rights of occupancy of the Angela reserves except in accordance with ss 276 and 277 of the Mining Act, and that no alleged statements or promises made to any of the plaintiffs by Ministers of the Crown could give rise to any cause of action such as is claimed in these proceedings.

4. In Australian Anglo American Prospecting Ltd v CRA Exploration Pty Ltd Brinsden J, with whom Wickham and Wallace JJ agreed, said that it was not possible to quarrel with the interpretation of Nicholas' case that I have set out.

5. In Cudgen Rutile (No 2) Pty Ltd v Chalk [1975] 49 ALJR 22 at 24 Lord Wilberforce, in delivering the judgment of the Privy Council in an appeal from the Supreme Court of Queensland said that it was 'fully established … that, in Queensland, as in other States of the Commonwealth of Australia, the Crown cannot contract for the disposal of any interest in Crown lands unless under and in accordance with power to that effect conferred by statute. His Lordship approved the statement of Griffith CJ in O'Keefe v Williams [1907] HCA 64; (1907) 5 CLR 217 at 225 that 'no Minister of the Crown has any authority to enter into any agreement for the disposition of an interest of the Crown in Crown lands which is not authorised by the law'. Lord Wilberforce said at 24 ‑ 25 that it follows that when a statute regulating the disposal of Crown lands or an interest in them prescribes a mode of exercise of the statutory power, that mode must be followed and observed and from this in turn it follows that if the Minister or officer purports to fetter his statutory powers by anticipatory action his action in doing so exceeds his statutory powers. His Lordship found that no purported agreement by the Minister to have a lease granted to the appellant could give rise to any contractual obligation enforceable in the courts.

1. In Commonwealth v Western Australia Gummow J in the course of considering the terms of the Mining Act 1978 (WA) said:

   The entire management of the waste lands in Western Australia has been vested by the Imperial Parliament in the Western Australian legislature by s 3 of the Western Australian Constitution Act 1890 (Imp). Thereafter, subject to the operation of the Constitution and laws of the Commonwealth, dealings in Crown land, including mines and minerals thereon and therein, could only be authorised and supported by the statute law of Western Australia.

2. The Minister's letter could not be the exercise of the power conferred on him by Mining Act s 19(6). The Minister can only grant a mining tenement to a person under s 19(6) after the Minister has exempted the land under s 19(1), the Minister has called for applications for the grant of such mining tenements in accordance with s 19(4) and the person has applied for the grant of a mining tenement in accordance with s 19(5). A contractual promise by the Minister to grant Ministerial Reserves to the Partnership was beyond the power of the Minister. Any purported contract to do so could not be enforced by the courts and was void.

3. The contract or legally binding promise asserted by WPPL in [40] of the SSOC which is the foundation for the pleas in [41] and [42] of the SSOC is not sustainable. WPPL says that the interest pleaded in [41] arose from the legally binding promise pleaded in [40]. However, as I have explained, the Premier's letter and/or the Minister's letter which are said to give rise to the legally binding promise could not do so. The appropriate course is to strike out [40], [41] and [42] of the substituted statement of claim.

Form of pleading

1. It is strictly unnecessary to consider whether or not [40] should be struck out on the grounds that it does not properly plead the agreement which WPPL says is the foundation for the pleas in [41] and [42] of the SSOC.  Nevertheless, I will state my opinion on that matter and brief reasons for that opinion.

2. The agreement or legally binding promise which WPPL submits is the foundation for its pleas in [41] and [42] is not adequately pleaded.  Paragraph 40 fails to plead the agreement or legally binding promise in a legal context, leaving the pleading uninformative.  The lack of specificity in the pleading of the claimed agreement impedes the ability of the pleadings to generate clearly defined issues.  First, [40] does not clearly plead an agreement.  Secondly, it is not clear whether it pleads one contract or two contracts arising from the Premier's letter and the Minister's letter.  Thirdly, the identity of the parties is not clear.  Fourthly, the terms of the agreement are ambiguous or not sufficiently certain.

Conclusion

1. Paragraph 40 of the SSOC should be struck out for the reasons I have stated.  Paragraphs 41 and 42 depend upon [40] and should be struck out.

2. Little attention was given to [110.1] to [110.3] of the SSOC and [4.2], [4.3], [4.4], [4.5] and [20] of the reply.  However, those pleas depend upon the Premier's letter and/or Minister's letter giving rise to the agreement or legally binding promise asserted by WPPL and should also be struck out.