Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd; Wright Prospecting Pty Ltd v Mount Bruce Mining Pty Ltd

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: French CJ,Nettle,Gordon JJ.,Kiefel,Keane JJ.,Bell,Gageler JJ.
• Judgment Date: 14 October 2015
• Neutral Citation: [2015] HCA 37
• Docket Number: Matter No S99/2015
• Date: 14 October 2015

[2015] HCA 37

HIGH COURT OF AUSTRALIA

French CJ, Kiefel, Bell, Keane, Nettle and Gordon JJ

Matter No S99/2015

Matter No S102/2015

Mount Bruce Mining Pty Limited

Appellant

and

Wright Prospecting Pty Limited & Anor

Respondents

Wright Prospecting Pty Limited

Appellant

and

Mount Bruce Mining Pty Limited & Anor

Respondents

Representation

A J Myers QC with K A Stern SC and R J Hardcastle for the appellant in S102/2015 and the first respondent in S99/2015 (instructed by Clayton Utz Lawyers)

N J Young QC with M J Darke SC and M A Izzo for the appellant in S99/2015 and the first respondent in S102/2015 (instructed by Allens)

N C Hutley SC with J C Giles for the second respondent in both matters (instructed by Horton Rhodes)

Intervener

A C Archibald QC with M P Costello for Perron Iron Ore Pty Ltd, intervening (instructed by King & Wood Mallesons)

Mining Act 1904 (WA), ss 48, 50, 53, 276, 277.

Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited

Wright Prospecting Pty Limited v Mount Bruce Mining Pty Limited

Contract — Construction of terms — Where contract concerned acquisition of rights in relation to temporary reserves and payment of royalties in respect of iron ore mined — Where royalty payable in respect of iron ore mined from ‘MBM area’ — Whether ‘MBM area’ refers to physical area of land or rights in relation to that land — Meaning of phrase ‘deriving title through or under’.

Contract — Construction of terms — Recourse to background or surrounding circumstances.

High Court — Appellate jurisdiction of High Court — Precedential value of special leave reasons.

Words and phrases — ‘commercial purpose’, ‘deriving title through or under’, ‘MBM area’, ‘surrounding circumstances’, ‘temporary reserves’.

ORDER

Matter No S99/2015

Appeal dismissed with costs.

Matter No S102/2015

1. Appeal and cross-appeal allowed.

2. Set aside paragraphs 1-6 of the order of the Court of Appeal of the Supreme Court of New South Wales made on 9 December 2014 and, in their place, order that the appeal to that Court be dismissed with costs.

3. The first respondent pay the appellant's and the second respondent's costs in this Court.

French CJ, Nettle and Gordon JJ.

Introduction

1 Wright Prospecting Pty Limited (‘WPPL’), Hancock Prospecting Pty Limited (‘HPPL’) (together ‘Hanwright’), Hamersley Iron Pty Limited (‘Hamersley Iron’) and Mount Bruce Mining Pty Limited (‘MBM’) entered into an agreement dated 5 May 1970 (‘the 1970 Agreement’). These appeals arise out of a dispute about the construction of a provision of the 1970 Agreement concerning the payment of royalties by MBM in relation to ore mined from areas of land the subject of the Agreement.

2 Under cl 2.2 of the 1970 Agreement, MBM acquired from Hanwright the entire rights in relation to the ‘MBM area’, a term defined by reference to ‘temporary reserves’ granted under the Mining Act 1904 (WA) (‘the Mining Act’). Under cl 3.1 of the 1970 Agreement, royalties were payable to Hanwright on ‘[o]re won by MBM from the MBM area’. The obligation to pay royalties extended to ‘all persons or corporations deriving title through or under’ MBM to the MBM area.

3 Hanwright commenced proceedings against Hamersley Iron and MBM in the Supreme Court of New South Wales, claiming that royalties were payable by MBM in respect of iron ore won from two areas known as ‘Eastern Range’ and ‘Channar’. The trial judge upheld Hanwright's claim against MBM 1 and entered judgment for Hanwright against MBM in the amount of $130,816,256.83 2.

4 The Court of Appeal of the Supreme Court of New South Wales allowed the appeal, in part 3. Relevantly, the Court of Appeal agreed with the trial judge that ‘MBM area’ referred to an area of land to which rights of occupancy had been transferred to MBM (rather than to the rights themselves) and that all of Eastern Range and part of Channar, referred to as ‘Channar A’, are in the MBM area. However, the Court of Appeal also held that Hanwright was not entitled to royalties in respect of ore being won from Channar A because the ore was not being won or mined in that area by entities deriving title to that land ‘through or under’ MBM.

5 There are two questions on appeal to this Court. The first question is whether Eastern Range and Channar A are within the MBM area. The answer to that question turns on whether the term ‘MBM area’ as defined in the 1970 Agreement refers to an area of land to which rights of occupancy had been transferred to MBM, or whether it refers to the rights themselves. That question is raised in S99 of 2015. If the answer to the first question is yes, the second question arises: whether the ore that has been mined in those parts of the MBM area was mined by entities ‘deriving title through or under’ MBM. That question is raised in S102 of 2015. The appeal by WPPL in that matter is supported by the cross-appeal by HPPL in the same matter.

6 It was accepted at trial, and was common ground before this Court, that if Eastern Range is within the MBM area then a royalty is payable because it is not disputed that ore is being won there by entities deriving title ‘through or under’ MBM. The second question therefore relates only to Channar A. It is for this reason that the factual analysis at times focuses on Channar A.

7 For the reasons that follow, the ‘MBM area’ in cll 2.2 and 3.1 of the 1970 Agreement is the physical area indicated on the map attached to the 1970 Agreement as numbered blocks 4937H to 4946H and 4963H to 4967H. Ore has been mined in the MBM area (which includes Eastern Range and Channar A) by entities deriving title through or under MBM. MBM is therefore obliged, under cl 3.1 of the 1970 Agreement, to pay Hanwright a royalty on the ore being won from the MBM area.

8 These reasons will address the relevant provisions of the Mining Act and the factual history including the sequence of private and State Agreements of which the 1970 Agreement is part. They will also refer to the relevant principles of construction and the two constructional questions raised by these appeals.

The Mining Act — temporary reserves and mining leases

9 Section 276 of the Mining Act permitted the relevant Minister to temporarily reserve any Crown land from occupation and to authorise any person to temporarily occupy it on such terms as the Minister thought fit. The marginal note in the Mining Act referred to these reserves as ‘[t]emporary reserves’. The authorisation of temporary occupancy of Crown land was granted in respect of areas or blocks of land identified by numbers and described as temporary reserves. Often, for ease of reference, a temporary reserve was referred to by the prefix ‘ TR’ followed by the block number. The terms and conditions of any right of occupancy that exceeded 12 months and the terms and conditions of any renewal of that right of occupancy had to be tabled in Parliament 4.

10 Relevantly, s 48 of the Mining Act authorised the Governor to grant a lease of any Crown land for purposes including mining and all purposes necessary to effectively carry on mining operations for any mineral other than gold 5. The area of land comprising the mining lease was to be ‘such as may be prescribed’ but could not exceed 300 acres 6. The term could not exceed 21 years from 1 January preceding the approval with a right to renew for 21 years 7. There was no connection made in the Mining Act between the grant of a temporary reserve and the grant of a mining lease. Relevantly for present purposes, however, the grant of a mining lease over an area covered by a temporary reserve was only made following expiry or surrender of the temporary reserve 8.

11 The grants of temporary reserves and mining leases relevant to these appeals take their place within the framework of agreements made between the State and the grantees. Each agreement was approved or ratified by an Act of Parliament enacted for that purpose. The factual history, including reference to relevant State Agreements, follows.

The 1962 Agreement and the 1963 Hamersley State Agreement

12 During the 1950s and the 1960s, Hanwright identified bodies of iron ore in the Pilbara in Western Australia.

13 In October 1962, Hamersley Holdings Pty Ltd (‘Hamersley Holdings’) and Hamersley Iron were formed. Hamersley Iron and MBM are both wholly owned subsidiaries of Hamersley Holdings. Hamersley Holdings is a subsidiary of Rio Tinto Ltd (‘Rio Tinto’). Hamersley Iron was the operative company for what became known, within the Rio Tinto group, as the Hamersley project.

14 Prior to December 1962, Hanwright was granted rights of occupancy over certain temporary reserves (‘the 1962 Hanwright TRs’). These reserves became the subject of an agreement on 12 December 1962 between Lang Hancock (owner of HPPL), Ernest Wright (owner of WPPL) and Hanwright (as Vendors) and Hamersley Iron (as Purchaser) (‘the 1962 Agreement’) whereby the Vendors sold to Hamersley Iron all their right, title and interest in and to certain temporary reserves, the land comprised therein and all rights to prospect or mine granted thereby or flowing therefrom. The 1962 Hanwright TRs are unrelated to the temporary reserves the subject of these appeals.

15 The 1962 Agreement provided for a royalty to be payable to Hanwright if ore was won from the area of the 1962 Hanwright TRs or from additional identified areas of land over which, at that time, Hanwright did not hold any rights of occupancy. Clause 24(iii) provided that, except where the context otherwise required:

‘The expression “the Purchaser” shall … include its successors and assigns and all persons or corporations deriving title through or under the Purchaser to any areas of land in respect of which an obligation to pay any amount has arisen or may arise’. (emphasis added)

16 That clause is at the heart of the...