Australia: Mining royalties are payable for Mount Bruce Mining area, says High Court

Last Updated: 21 October 2015
Article by Douglas Bishop

Most Read Contributor in Australia, August 2016

Mining royalties are payable under a 1970 agreement following a decision by the High Court in a high-profile mining case, Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37 (Clayton Utz acted for the successful respondent, Wright Prospecting).

The agreement about mining royalties in the Mount Bruce Mining case

There had been a series of agreements between the parties in the 1960s and 1970s. Basically, the Western Australian Government had granted rights of occupancy over certain Temporary Reserves under the Mining Act 1904 (WA) over land in the Pilbara in favour of the respondents. These rights of occupancy permitted exploration on the reserved land, but did not permit mining.

The parties made an agreement in 1970 under which:

  • Mount Bruce Mining acquired from the respondents the "entire rights" to the "MBM area", which was defined by reference to the Temporary Reserves;
  • royalties were payable to the respondents on "[o]re won by MBM from the MBM area";
  • those royalties were payable by "all persons or corporations deriving title through or under" MBM to the "MBM area".

The main bone of contention between the parties was the meaning of the term "MBM area". Mount Bruce Mining said this was ambiguous did it mean an area of land, or the rights that were attached to the land (it said it meant the latter)? If Mount Bruce Mining was right, then no royalties were payable, because that land was not held pursuant to rights it originally received under the 1970 agreement (or rights derived from those original rights).

A second question was what was meant by "deriving title through or under" Mount Bruce Mining.

What was the "MBM area"?

The High Court found that this was defined by reference to the physical area of land that had been transferred to Mount Bruce Mining.

As Chief Justice French and Justices Nettle and Gordon explained, the parties' deal was that:

"MBM had the right to occupy and prospect over the whole of the MBM area through the division of the Mount Bruce Temporary Reserves. MBM obtained those rights to the MBM area from Hanwright under the 1970 Agreement. What MBM did with those rights and how it won ore from the MBM area was a matter for it. The commercial arrangement that was struck was that MBM would pay Hanwright a royalty based on the amount of ore won by it and all persons and corporations deriving title through or under it from any part of the MBM area, which had been held by Hanwright but transferred to MBM.

There is nothing in the text of the 1970 Agreement or the purpose or object of the transaction it was intended to secure to suggest that the parties intended that Hanwright's entitlement to a royalty was conditional upon ore being won from the exercise of rights which Hanwright held at the time of the 1970 Agreement."

Of course, it could not logically have been otherwise, since the rights held in 1970 did not permit mining.

"Deriving title through or under" Mount Bruce Mining

One of the areas within the MBM area, Channar, is being mined by a joint venture. Like Mount Bruce Mining, one of the joint venturers is a subsidiary of Hamersley Holdings. The State granted a mining lease to the joint venture on condition that both Hamersley Iron (another subsidiary) and Mount Bruce Mining surrendered certain sections of  mining leases each held, which covered the Channar area.

Does the joint venture have to pay royalties on ore mined from the area of Channar that was formerly held by Hamersley Iron? This depends upon whether the joint venture derived title through or under Mount Bruce Mining.

Does this term require a succession, assignment or conveyance of rights from Mount Bruce Mining to the joint venture? The High Court said no; this phrase is broad enough to cover a close practical or causal connection between the rights exercised by the Channar Joint Venturers and the rights which Mount Bruce Mining obtained from Hanwright under the 1970 Agreement.  The requirement for Mount Bruce Mining's surrender of the relevant sections of its mining lease to enable the Channar Joint Venturers to obtain their mining rights provided that close practical or causal connection.

What is yet to be resolved: ambiguity about ambiguity

The Court took the opportunity to restate the principles relevant to the construction of commercial contracts, making it clear there was no departure from the law as set out in Codelfa Construction. The devil in that observation is the live debate at the intermediate appellate level as to what precisely is the rule in Codelfa. A majority of the justices indicated that, although this case was not the vehicle for it, there is a need for the Court to resolve the debate over whether ambiguity within the body of the written contract must be demonstrated before background circumstances become relevant to construction. In doing so, the High Court reminded us that the reasons for refusing special leave in Western Export Services Inc v Jireh International Pty Ltd "create no precedent and are binding on no-one".  Indeed, the strident and unanimous denunciation of Jireh as having no precedent value perhaps indicates that at least some members of the Court hold the view that Codelfa did not set the bar as high as suggested in Jireh and, as such, ambiguity within the text is not necessary before a court may rely on certain extrinsic material when construing a commercial contract.  Whether this is a valid analysis of the dicta in Mount Bruce Mining will only be established once the right vehicle to address these issues reaches the High Court.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.