Avanti Mining and Contracting Pty Ltd v McKelvey [2020] QLC 20

Land Court Act 2000 s 7(2)(a)

Mineral and Energy Resources (Common Provisions) Act 2014 s 16(a)

Mineral and Energy Resources (Common Provisions) Regulation 2016 reg 4(1)(f)

Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

McKelvey v Chant & Anor [2016] QLC 81

[1] This matter concerns the ownership of a gold mine known as City of London near Croydon, in the southern Gulf country (the mine). The relevant tenement is ML 30234. The mine is not yet in production. Progress on developing the mine is stalled while this dispute remains unresolved.

[2] Issues concerning the ownership of the mine were first before the Land Court in late 2016 when Ms McKelvey, the respondent in this application, was successful in seeking a declaration to be the sole applicant and holder for ML 30234.[1] In summarising Ms McKelvey's statement in that application, Kingham P said:

"In 2012 she agreed with the respondents that they would receive a 50% interest in ML30234 if they met all the costs in getting the application to granted status and attended to the initial set up of the mining operation."[2]

[3] The respondent in that application, Mr Chant, filed no material to contradict Ms McKelvey's statement. It was evident that he had not progressed the tenement or fulfilled his duties as Authorised Holder Representative. The Court found it appropriate to declare Ms McKelvey the sole applicant and holder.

[4] I begin these reasons referring to that matter because the application now before the Court also relates to arrangements with Ms McKelvey for a transfer of a 50% interest in ML 30234, if certain preconditions were met.

[5] The applicant, Avanti Mining & Contracting Pty Ltd (Avanti), is a registered Australian proprietary company limited by shares. Mr Lyle Palmer was the sole director and secretary of Avanti between 31 December 1994 and 15 January 2018, when a second director was appointed. Avanti is represented in all its dealings with Ms McKelvey and before the Court by Mr Lyle Palmer. In the originating application Mr Palmer made a declaration on behalf of Avanti as sole director.[3]

[6] The applicant is asking the Court to order the transfer of a 50% interest in ML 30234 to it, as the preconditions have been met. The respondent is arguing the agreement was not with the applicant (Avanti Mining and Contracting Pty Ltd), but with Mr Lyle Palmer, with whom she made the arrangement personally.

[7] Avanti made an application to this Court on 28 November 2019 pursuant to s 363 (2)(a) and s 363(3)(b) of the Mineral Resources Act 1989 (MRA) seeking a direction from the Court requiring the respondent to lodge a transfer of 50% of the ML to the applicant or a fully owned subsidiary of the applicant, or alternatively, order that the respondent pay the applicant for all work done assisting with the grant of ML 30234 and rehabilitation of the mine, to mid-December 2018.

[8] I am satisfied the Court has the jurisdiction and power to make orders of the kind sought. The Court may hear and determine proceedings with respect to the right to possession of or interest in a mining lease[4] and any matter arising between applicants in relation to mining.[5] There is a direct connection between the action and mining in respect of ML 30234. The Court has the power to declare the rights of parties to a proceeding.[6]

[9] The applicant and respondent, in response to Court orders, provided statements of facts, matters and contentions, and the applicant provided material in reply. At a review hearing on 27 April 2020 arrangements for the conduct of the proceeding were discussed with the parties. Being satisfied that it was appropriate to decide the proceedings without an oral hearing, and no objection having been raised by the parties, I vacated the order for oral hearing.[7]

[10] The parties' accounts of the events and timing concerning their business relationship vary in places, but those differences in most part do not have a significant bearing on the outcome. They are set out in the applicant's material in support of its application,[8] respondent's material in reply[9] and the applicant's further reply.[10]

[11] Prior to the decision of the Land Court in December 2016, which declared Ms McKelvey the sole applicant and holder for ML 30234, Mr Palmer and Ms McKelvey had been in discussion about the future of the mine. They agreed that if Ms McKelvey was successful in removing her former business partner, Mr Palmer would ensure all that was necessary to bring the mine "back into production" would be done and Ms McKelvey would not be required to contribute. In return, Mr Palmer's interests would be entitled to the transfer of 50% ownership in ML 30234.

[12] The decision of the Land Court in December 2016 delivered ownership to Ms McKelvey and thereby cleared some hurdles to the grant of ML 30234 in August 2017.

[13] The parties agreed to two key stages in the life of the mine: evaluation and production. The oral agreement was initially to get the mine back into production for a transfer of 50% ownership in ML 30234, however it is agreed that the agreement was "wound back" to get the mine to the stage of evaluation as the trigger for the transfer of 50% ownership in ML 30234.

[14] When exactly those terms changed is not agreed. The applicant says it happened prior to 29 August 2017, as evidenced in an email from Mr Palmer to Ms McKelvey attaching "some clauses suggested for inclusion in written basic agreement".[11] Ms McKelvey says it occurred around mid-2018.

[15] The attachment to Mr Palmer's 29 August 2017 email is expressed to be "draft clauses" indicating the responsibility of Avanti to bring the mine and shaft up to a standard capable of safely conducting an evaluation of the mine's prospects. The email then says:

"It has been understood that at this stage, Avanti will have earned a 50% interest in the venture."[12]

[16] There is no document in the material indicating a response by Ms McKelvey to Mr Palmer's email of 29 August 2017. An email from Mr Palmer to Ms McKelvey dated 29 March 2018 says:

"To repeat my understanding to this stage, is that to earn my 50% interest in the project I, (Avanti or an associated company) must advance development of the project (in a timely manner) to the stage where evaluation of the resource is able to be done/has been done."[13]

[17] Again, there is no document in the material indicating a response from Ms McKelvey.

[18] Ms McKelvey indicates in her material that at the time discussions occurred regarding "winding back" the agreement to evaluation stage (which she indicates was mid-2018 when site works commenced; Mr Palmer says it was in 2017) she "agreed, thinking both were acting as individuals and both had struggled along equally."[14] Ms McKelvey says that she did not understand that Mr Palmer was representing that Avanti was the party to the agreement until January 2019.

[19] The January 2019 email from Mr Palmer again attached a document referred to as "some clauses for inclusion in a written basic agreement between Rosemary McKelvey and Avanti Mining and Contracting Pty Ltd ...".[15]

[20] The dispute comes down to this: Ms McKelvey asserts that the agreement she made for a transfer of 50% ownership of ML 30234 was with Mr Palmer personally. Mr Palmer asserts the agreement was with Avanti. Ms McKelvey is unwilling to transfer 50% ownership to Avanti, although apparently willing to transfer the interest to Mr Palmer.

[21] Through her solicitor in correspondence to Mr Palmer, Ms McKelvey asserted that until early 2019 she understood the oral agreement to be between herself and Mr Palmer, and there had therefore been mutual mistake rendering the oral agreement void ab initio.[16] Solicitors for the applicant responded referring to correspondence they assert "clearly shows that is was [the applicant] and not Mr Lyle Palmer who was entering into the agreement."[17]

[22] It is clear that the applicant did not accept that there was mutual mistake. Nor did the applicant accept that it was aware of Ms McKelvey's misunderstanding (mistake as to the contracting party) or that it engaged in misleading behaviour.

[23] While the correspondence between the parties in 2017 and 2018 makes numerous references to Avanti as the party with whom Ms McKelvey had agreed and as the party to the joint venture, the documents were generated by Mr Palmer for the applicant. There is no evidence of written acknowledgement or acceptance of the information contained in them. However, the failure to respond or contest those aspects of the documents at the time does not assist Ms McKelvey in now challenging those assertions.

[24] In my view there is no basis upon which to conclude that there was mutual mistake such that any agreement with Avanti is void or voidable.

[25] Included with Ms McKelvey's material is a reply to the applicant's 10 January 2020 submission to the Court.[18] In reply to the assertion that the trigger to transfer the 50% interests was fulfilled or exceeded by mid-December 2018, Ms McKelvey says: "The applicant (Avanti) was a third party provided by Mr Palmer to carry out his obligations in earning his 50% share of the lease."[19]

[26] While it might be argued that it was not unreasonable for Ms McKelvey to think that she was in business with Mr Palmer (personally) and that Mr Palmer was contracting some or all of the work to another entity, I do not think that position can be maintained in light of the body of correspondence referring to Avanti as the contracting party and the party responsible for undertaking works. An example of this is the draft clauses attached to the email dated 29 August 2017. I note though that in some communication the status of Avanti is less specific, for example an email dated 29 March 2018 from Mr Palmer to Ms McKelvey again urging a written agreement says:

"To repeat my understanding to this stage, is that to earn my 50% interest in the project I, (Avanti or an associated company) must advance development of the project ..."[20]

[27] I have taken the view however that "I, (Avanti or an associate company)" is indicating that the "I," is a reference to Avanti, not Mr Palmer. Accordingly, in my view, Avanti was operating not as a contractor, but as principal.

[28] As sole director, Mr Palmer was agent for Avanti. In that capacity it was incumbent on him to be clear that actions taken and decisions made were on behalf of Avanti.

[29] The correspondence would suggest that that was the case. It might be understood then that use of the personal pronoun was and is a reference to Avanti, for example, in the context of "I, (Avanti or an associated company)" and in the context of the relationship with Ms McKelvey concerning the business of ML 30234.

[30] The apprehension Ms McKelvey holds is about going into business with a party for which she has concerns about solvency, evidenced in an email from Ms McKelvey to Mr Palmer dated 10 September 2019.[21] Ms McKelvey says she only "realised there was a problem" after receiving an email from Mr Palmer in January 2019. Of course, due diligence should be undertaken prior to entering into contractual arrangements.

[31] Due diligence is the investigation or exercise of care that a reasonable business or person is expected to take before entering into an agreement or contract with another party, or an act with a certain standard of care.

[32] There is no dispute between the parties as to the existence of an agreement or contract - despite there being no executed document. The fundamental terms were agreed and understood. The agreement is described at [11] above. Consideration consisted of the transfer of a 50% interest in ML 30234 in exchange for work to bring the project up to evaluation stage. Considerable work was undertaken and monies expended on the basis of the agreement. The dispute is as to the identity of one of the contracting parties.

[33] Because there is no written contract, I have only the correspondence which passed between the applicant and Ms McKelvey to determine, consistent with the objective theory of contract, who the parties are in fact. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations: "What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe."[22]

[34] In this case the purpose and object of the transaction was to get the mine to evaluation stage. The circumstances for that to occur was expressed in correspondence which in my view, made it objectively clear that the contracting party was Avanti Mining & Contracting Pty Ltd. In those circumstances, the subjective belief of Ms McKelvey as to the party with whom she was contracting becomes irrelevant.

[35] It is therefore appropriate to declare that Avanti Mining and Contracting Pty Ltd holds a 50% interest in ML 30234, and Ms McKelvey holds a 50% interest in ML 30234. The effect of the order is to effect a transfer of 50% of the respondent's interest in ML 30234 to Avanti Mining and Contracting Pty Ltd, which may be registered[23] as a transfer of share in a resource authority by operation of law.[24]

1. Rosemary McKelvey is declared to hold a 50% interest in ML 30234.

1. Avanti Mining & Contracting Pty Ltd is declared to hold a 50% interest in ML 30234.

[1] McKelvey v Chant & Anor [2016] QLC 81.

[3] I note an ASIC company extract for Avanti Mining & Contracting Pty Ltd dated 13 October 2019. also identifies Ian Rodney Kraemer was appointed a director of Avanti on 15 January 2018. There is nothing in the material to indicate whether Mr Kraemer was a director when the application was filed on 28 November 2019.

[4] Mineral Resources Act 1989 s 363(2)(a).

[5] Mineral Resources Act 1989 s 363(2)(e).

[6] Land Court Act 2000 s 7(2)(a).

[7] Land Court Rules 2000 r 36A.

[8] Applicant's letter to the Land Court dated 13 December 2019 with attachments filed 18 December 2019; Applicant's letter to the Land Court dated 10 January 2020 filed 14 January 2020.

[9] Respondent's letter to the Land Court dated 25 February 2020 with attachments filed 27 February 2020.

[10] Applicant's letter to the Land Court dated 27 March 2020 with attachments filed 1 April 2020.

[11] Document 3 of the Applicant's letter to the Land Court dated 13 December 2019 with attachments filed 18 December 2019.

[13] Document 4 of the Applicant's letter to the Land Court dated 13 December 2019 with attachments filed 18 December 2019.

[14] Respondent's letter to the Land Court dated 25 February 2020 with attachments filed 27 February 2020.

[15] Document 17 Applicant's letter to the Land Court dated 27 March 2020 with attachments filed 1 April 2020.

[16] Document 13 of the Applicant's letter to the Land Court dated 13 December 2019 with attachments filed 18 December 2019.

[17] Document 15 of the Applicant's letter to the Land Court dated 13 December 2019 with attachments filed 18 December 2019.

[18] Respondent's reply to the Applicant's letter dated 10 January 2020, Respondent's letter to the Land Court dated 25 February 2020 with attachments filed 27 February 2020.

[21] Document 11 of the Applicant's letter to the Land Court dated 13 December 2019 with attachments filed 18 December 2019.

[22] Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40].

[23] Mineral and Energy Resources (Common Provisions) Act 2014 s 17.

[24] Mineral and Energy Resources (Common Provisions) Regulation 2016 reg 4(1)(f); sch 3 "non-assessable transfer" (c).