Australia: Validity of WA mining tenements conditioned by strict compliance with Mining Act, High Court says

Last Updated: 22 August 2017
Article by Michael Hunt

On 17 August 2017, the High Court upheld Forrest & Forrest Pty Ltd's (Forrest) appeal and overturned a decision of the WA Supreme Court, Court of Appeal by finding that providing a mineralisation report at the same time as lodging an application for a mining lease is a pre-condition to the warden having jurisdiction to make a recommendation to the Minister and the Minister subsequently granting the mining lease.

This decision has wide reaching implications for the WA mining industry and, potentially the grant of all mining tenements (including exploration licences). The High Court read down s75(6) of the Mining Act 1978 (WA) (Mining Act) and overturned the commonly held view that the Minister has a wide discretion to grant mining leases (and presumably exploration licences) regardless of any defect in an application. This has essentially taken away the ability of the Minister (and WA Government) to grant mining tenements for policy or public interest reasons, despite any irregularities or issues involved in the application process.

The High Court has also significantly limited the protection afforded to granted tenements by s116(2) of the Mining Act.

As a result of this decision, various mining tenements in WA (not just mining leases) are at risk of being challenged and held to be invalid. A holder of a granted tenement which was applied for in a manner not strictly compliant with the Mining Act and Mining Regulations 1981, may be conducting illegal mining. There is also a risk of third parties applying for tenements over the area of these invalid applications or granted tenements, asserting that the ground is now available for application.

The practical implications of the High Court's decision also goes beyond mining tenement applicants and holders whose applications and mining tenements are now invalid. The decision may also affect existing royalty agreements, native title and heritage agreements (and related negotiations), priority for access to an area and access agreements negotiated with other parties. The holder of an affected tenement may be in breach of these agreements and/or need to re-negotiate these agreements, which may lead to requests by counterparties for further compensation.

We consider there should be legislative intervention to confirm the validity of mining tenements which have been granted by the Minister and amend s75(6)(b) (and s59(6) in relation exploration licences and s70D(6) in relation to retention licences) to confirm that any and all non-compliance may be disregarded by the Minister when granting these mining tenements. Legislators should also consider amending s116(2) to resolve the absurd result of a tenement holder being afforded greater protection after a tenement has been transferred.

In the interim, we consider holders of granted mining tenements in WA should review their tenure to determine whether there has been a failure to strictly comply with the provisions of the Mining Act in applying for and being granted their mining tenements. If there is an error which does not fall within the very narrow protection afforded by s116(2) and 75(6), those tenements are likely to be invalid. A tenement holder in such a position should consider lodging new applications over its own tenements and object to any applications for mining tenements lodged by third parties over the area of their now invalidated tenements and applications.

Background

The appeal concerned applications for mining leases lodged by Yarri Mining Pty Ltd and Onslow Resources Ltd on 28 July 2011 over land in the Pilbara near Onslow, Western Australia.

Forrest lodged objections to those applications which are within the boundaries of Forrest's Minderoo pastoral lease on 1 September 2011. A few months after the applications were lodged, mineralisation reports were lodged for each application. No mining operations statements were lodged.

On 31 January 2014, purportedly pursuant to s75(4) of the Mining Act, the warden determined that he had jurisdiction to hear the contested applications, and proceeded to make a recommendation to the Minister that the leases be granted.

The main issue to be determined was whether the warden had jurisdiction to make a recommendation to the Minister in relation to the applications notwithstanding that they were not accompanied by a mineralisation report when the applications were made.

The primary judge in the judicial review proceedings concluded that the warden's hearing of the applications did not involve a jurisdictional error. The Court of Appeal unanimously dismissed an appeal by Forrest against that decision, holding that, although s74(1)(ca)(ii) did require a mineralisation report to be lodged contemporaneously with an application, that requirement was not a condition precedent to the hearing by, and recommendation of, the warden. The application could progress, provided that a mineralisation report was lodged at some later point in time.

High Court majority decision

A majority of the High Court has determined that provision of a mineralisation report at the time of lodging an application is a condition precedent to the warden exercising jurisdiction under s74 of the Mining Act and that the Minister's power to grant a mining lease is conditioned on receipt of a report under s75(2) or (5).

The majority said that a consideration of the language of the statute, its subject matter and objects, and the consequences for the parties of holding void acts done in breach of the Mining Act conveyed an intention not to countenance any degree of non-compliance with s74(1)(ca)(ii).

This interpretation was consistent with authority establishing that where a statutory regime confers power on the executive government of a State to grant exclusive rights to exploit the resources of the State, compliance with the requirements of the regime will ordinarily be regarded as essential to the making of a valid grant. The High Court's decision, reconfirming the application of this principle to WA mining tenements, may have a far-reaching effect on applications for and grants of mining tenements in WA.

Section 75(6) of the Mining Act provides that the Minister may grant a mining lease irrespective of whether an applicant has or has not complied in all respects with the Mining Act. The majority of the High Court read down s75(6) at [75] and held that it did not enable the Minister to disregard all non-compliance in relation to an application for a mining lease. This has overruled the commonly held understanding that the Minister could grant a mining tenement (including a mining lease) regardless of any non-compliance involved in the application process.

Section 116(2) provides that except in the case of fraud, granted mining tenements are not defeasible because of "any informality or irregularity in the application". The majority also held that non-compliance with ss74, 74A and 75 of the Mining Act does not attract the indefeasibility of title provided by s116(2).

The majority held that s116(2) was not cast in terms that were appropriate to confer indefeasibility of title in respect of any non-compliance with the requirements of the Mining Act. The majority considered the failure of the warden to observe s75(4a) was not an informality or irregularity. The majority observed that "informality" means a want of legal form as distinct from a want of legal substance and "irregularity" refers to a lack of regularity in the method or manner in which a power is exercised rather than an act beyond power. This has limited the protection afforded by s116(2) to granted tenements.

The majority of the High Court went on to say that any transferee would obtain the benefit of s116(2). This leads to a result (which we consider absurd) where a transferee would have more protection by virtue of s116(2) than the person to whom the mining tenement was originally granted.

The majority noted the Court of Appeal's efforts to focus upon the prejudice resulting from an interpretation that contemporaneous lodgement is a condition precedent to the warden making a recommendation. The majority observed that adverse consequences might also flow from their "relaxed view", for example:

  • ensuring that owners and occupiers of subject land were not troubled unnecessarily or prematurely by half-baked proposals (at [86]); and
  • land banking and disadvantaging miners in competition for access to the State's resources (at [89]).

Nettle J's dissenting judgment

In a dissenting judgment, Nettle J did not agree that a delay between lodgement of an application and lodgement of the mineralisation report vitiates the Minister's power to grant a mining lease. Nettle J noted that the Mining Act confers a broad-ranging discretion on the Minister to waive strict compliance by the applicant with any requirement of the Mining Act and noted the Court of Appeal's comment that s75(6) reflects a "flexible approach to non-compliance". Indeed, s75(6) confirms that the Minister may act notwithstanding the recommendations of the warden.

Further, s116(2) affords a mining lease with a level of protection against impeachment on account of informality or irregularity in the application. Nettle J considered that 'irregularity' has a potential wide connotation while 'informality' is confined to matters of form. Nettle J drew an analogy with a failure to comply with marking out requirements attracting the indefeasibility of title under s116(2) and noted that in all essential respects a failure to comply strictly with s74(1)(ca)(ii) is similar.

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