Australia: High Court decision could render some WA mining leases invalid

Last Updated: 22 August 2017
Article by David Benson

What's happened?

Yesterday, the High Court, in Forrest & Forrest Pty Ltd v Wilson [2017] HCA 30, cast doubt on the validity of certain Western Australian mining leases.

The key issue in the case was whether the failure to lodge a mineralisation report, at the time of the application for a mining lease under the Mining Act 1978 (WA), deprived the Mining Warden of jurisdiction to make a recommendation to the Minister for Mines in relation to the grant of the mining lease. It was submitted by Forrest & Forrest that, if such jurisdiction was lacking, any mining lease subsequently granted would be invalid.

Relevant background

On 28 July 2011, Yarri Mining Pty Ltd and Onslow Resources Ltd lodged applications for two mining leases. No mineralisation report was lodged contemporaneously with these applications as required by section 74(1)(ca) of the Act. Several months after the applications were lodged (but prior to the Mining Warden's consideration of the applications), mineralisation reports were lodged.

The Mining Warden recommended to the Minister that the mining lease applications be granted, despite the fact that the mineralisation reports were lodged late. Forrest & Forrest subsequently lodged objections to the grant of the mining leases.

What you need to know

The High Court overturned the decision of the WA Court of Appeal, which had held that an application for a mining lease under the Mining Act was valid despite initial non-compliance with section 74(1)(ca) provided that the non-compliance was rectified prior to the Warden making his or her recommendation.

In overturning the earlier decision, the High Court held that a mineralisation report (and presumably the other documents required by section 74(1)(ca)) must by lodged at the same time as the application for a mining lease and that a failure to do so renders the subsequent grant of a mining lease invalid.

Relevantly, the Court determined that the requirement in section 74(1)(ca)(ii) that an application for a mining lease "shall be accompanied by... a mineralisation report" imposed a condition precedent to the exercise of the powers of the Mining Warden and Minister to progress the application through to grant.

In reaching its conclusion, the High Court dismissed the suggestion that upsetting titles to mining leases might cause "unintended hardship". This finding was founded in the view that the holders of tenements which were liable to be set aside as a result of any failure to comply with the requirements of the Mining Act were the "authors of their own misfortune".

The High Court also briefly considered what would happen where a mining lease that had been granted despite a failure to comply with section 74(1)(ca) had been transferred. The Court found that, in such a case, the transferee would be afforded protection under section 116. However, despite previous decisions which may have provided some protection in respect of retroactive attacks on the validity of a granted mining lease in reliance upon section 116, the High Court found that the protection afforded by that section did not extend to the original title holder in cases where there had been non-compliance with section 74(1)(ca).

What should you do?

Given the impact which this decision could have on the validity on mining leases, holders of such leases in Western Australia (or applications for mining leases) should check if the documents required by section 74(1)(ca) of the Mining Act were lodged with the relevant application (and not subsequently).

If the documents required by section 74(1)(ca) were lodged after a mining lease application was filed (rather than with it), then there is a risk that any mining lease granted in respect of that application is invalidly granted. Further, where contractual arrangements have been entered with respect to such leases, there is a risk that the High Court's decision may give rise to breach of warranty claims.

Accordingly, applicants for, and holders of, mining leases which have been sought or obtained despite a failure to comply with section 74(1)(ca) should seek urgent legal advice for the purposes of devising a strategy to minimise any adverse consequences that may flow from the High Court's decision.

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.

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