Drem Pty Limited v LRL

The joint venture agreements

1. Giralia and Hunter entered into two separate mining joint venture agreements in 1990 and 1991. The first related to certain tenements at Mount Harris, Western Australia, and was known as the Mount Harris Joint Venture. The second, being the Kathleen Valley Joint Venture to which I have already referred, related to a number of tenements at Kathleen Valley, including the Kathleen Valley tenements now owned by LRL. In both cases, Giralia was the registered holder of the tenements to which the joint venture agreements related.
2. The terms of those joint ventures were contained in separate letter agreements, in each case entitled "Heads of Agreement". Each joint venture agreement contemplated that Hunter could "earn in" to obtain an "ownership interest" in the underlying tenements by meeting certain expenditure obligations in respect of exploration and development during a so-called earning phase. Thus, in the case of the Kathleen Valley Joint Venture, Hunter was entitled to earn a 51% ownership interest by expending $500,000 on exploration and development, subject to certain conditions. It was entitled to earn an additional 19% ownership interest by expending an additional $800,000. Thereafter, the parties were required to contribute to expenditure in accordance with their ownership interests. The parties proceeded on the basis that participation in the joint ventures on these terms was effective to give rise to an "ownership interest" in the tenements themselves.
3. The joint venture agreements also contemplated that a party's interest would become diluted if it elected to "cease expenditure". The agreements contained formulae for determining the effect on the parties' respective ownership interests where that occurred.
4. In the case of the Mount Harris Joint Venture, Hunter was entitled to withdraw after completion of the earning phase, subject to meeting its expenditure commitments.
5. In the case of the Kathleen Valley Joint Venture, either party could withdraw after completion of the earning phase. If that occurred, the withdrawing party was required to assign the whole of its interest in the tenements and the joint venture to the other party, subject to making good its share of liabilities in respect of each.
6. In each case, a party was free to assign its interests under the joint venture, subject to a 30 day right of first refusal to the other party.

Hunter assigns its interests in return for a royalty

1. By a letter dated 26 March 1993 from Hunter to SSM, which was signed by both parties, Hunter agreed to "assign its rights and obligations under its joint venture agreements with [Giralia] to SSM" on the terms set out in the letter. It defined the "Joint Venture Area" to be: "All of the land covered by the tenements listed in Schedule 1 and successor or substitute titles (the 'Tenements')".
2. Schedule 1 set out the various tenements relevant to both joint ventures, which included the Kathleen Valley tenements later acquired by LRL, as well as one additional tenement, being PL 36/1142. That tenement related to the Violet Range project which was not described in the evidence before me. PL 36/1142 had been held by Hunter and was described in Schedule 1 as being "not part of either J/V".
3. The 26 March 1993 letter agreement provided that the consideration for the assignment of Hunter's rights and obligations in the joint ventures was twofold, being (a) the reimbursement of some relatively minor payments which Hunter had made to the Department of Minerals and Energy in respect of the tenements and (b) the granting of a royalty by SSM to Hunter, expressed as follows: "The granting by SSM to Hunter of a 2.0% Gross Production Royalty ('GPR') on SSM's interest from time to time in the Project, provided that if SSM bona fide withdraws from the Project (as distinct from its assigning its interest) it shall have no further liability to pay the GPR. Any assignee of SSM's interest in the Project must covenant, as a condition of the assignment, to pay Hunter the GPR. The GPR is to be calculated as 2.0% of gross proceeds on the sale of all minerals from the project, calculated by reference to the Perth Mint's spot buying price for gold and silver, without any deduction or allowance of any kind and shall be payable to Hunter quarterly in arrears from commencement of production."
4. On 28 March 1994 Giralia, Hunter, SSM and Jubilee Gold Mines NL (the parent company of SSM) (Jubilee) entered into a comprehensive Deed of Assignment and Assumption to give effect to the transaction set out in the letter agreement to which I have just referred. The effective date of the deed was 26 March 1993, being the date of the letter agreement. Recitals I, J and K to the deed were as follows: "I. Hunter has agreed to assign the benefit of all of its rights in the Mount Harris Joint Venture and in the Kathleen Valley Joint Venture to SSM and SSM has agreed to assume all of Hunter's rights and obligations under the Joint Venture Agreements upon certain terms and conditions. J. Giralia has waived its first right of refusal under clause 6 of the Kathleen Valley Joint Venture and under clause 6 of the Mount Harris Joint Venture in respect of the assignment to SSM and Giralia now wishes to record its agreement to the assignment by Hunter and the assumption by SSM. K. Hunter has also agreed to assign to SSM PL36 / 1142 at Violet Range upon certain terms and conditions."
5. By clause 3.1, Hunter assigned all of its rights and obligations "under the Joint Venture Agreements" to SSM with effect from the effective date. In context, this involved both an assignment of rights in and an assumption of liabilities under those agreements. The consideration for that assignment was specified in clause 3.2 which broadly reflected the consideration specified in the 26 March 1993 letter agreement. So far as the royalty was concerned, the Deed of Assignment and Assumption provided that SSM: "covenants to execute upon the signing hereof the [Gross Production Royalty Deed] in order to grant to Hunter a gross production royalty of 2%...upon the interest of SSM from time to time in the Project".
6. The expression "Project" was defined to mean "exploitation of the Tenements". "Tenements", in turn, was defined to include the tenements previously held subject to the terms of the two joint ventures together with PL 36/1142 at Violet Range, which was not held subject to the terms of either joint venture.

The 1994 Royalty Deed

1. On the same day that the parties entered into the Deed of Assignment and Assumption just described, SSM, Jubilee and Hunter entered into a Deed for Bullion Royalty and Non-Bullion Royalty, being the "Gross Production Royalty Deed" to which the other deed referred. This was the 1994 Royalty Deed. It is convenient to set some of its terms out in full.
2. Recitals B and C were as follows: "B. The Holder has assigned to the Payer its interest under the Joint Venture Agreements and in PL 36/1142 at Violet Range in consideration of the Payer agreeing to enter into this deed for payment of a 2% gross royalty on production from the Payer's proportionate share or interest (as varied from time to time) in the Tenements (in the form of a Bullion Royalty applying to gold or silver and a Non-Bullion Royalty applying to all other Minerals.) C. Giralia is or is entitled to be the registered holder of the Kathleen Valley Tenements and the Mt. Harris Tenements."
3. The operative provisions contained a bullion royalty and a non-bullion royalty. These proceedings are concerned only with the latter, presumably because what is now being produced from the Kathleen Valley tenements is lithium ore, not gold or silver. The non-bullion royalty obligation was contained in clause 6.1. It provided as follows: "6.1 Non-Bullion Royalty Grant With effect from the Effective Date, the Payer shall pay to the Holder a royalty (the 'Non-Bullion Royalty') equal to the Royalty Percentage of Gross Proceeds of Saleable Product without any deduction or allowance of any kind, whether for costs of sales, production, exploration, evaluation, development, restoration, depreciation of plant, amortisation or anything else whatever."
4. The "Royalty Percentage" was 2%. "Gross Proceeds" meant: "(a) if Saleable Product is sold for cash by or on behalf of the Payer at arms length on normal commercial terms - the gross proceeds receivable by the Payer from the sale without any deduction or allowance of any kind; and (b) for any other utilisation or disposal of Saleable Product by or on behalf of the Payer - the gross proceeds without any deduction or allowance of any kind which would have been receivable if the Saleable Product had been sold for cash at arm's length on normal commercial terms in due course on the open market".
5. "Saleable Product" meant: "…Product which has been treated or processed and rendered into a substance or state for which there is a commercially significant market, either within or outside Australia, or arm's length sales or purchases between unrelated parties."
6. "Product", in turn, had the definition set out at paragraph [6] above. Thus, the amount of the royalty was relevantly worked out by reference to the extent to which ore was "attributable to" SSM's "proportionate share or interest (as varied from time to time) in any Tenement or in the Project".
7. Like in the deed of assignment executed on the same date, the expression "Tenements" was defined to include both those tenements relating to the two joint ventures, as well as the Violet Range tenement PL 36/1142. "Project" was likewise defined to be the "exploitation of the Tenements". Thus, the non-bullion royalty was payable on the Gross Proceeds of Saleable Product attributable to SSM's interest in PL 36/1142, just as it was payable on the Gross Proceeds of Saleable Product attributable to SSM's interests in the tenements that had been subject to the two joint ventures assigned to it by Hunter.
8. Clause 9 of the 1994 Royalty Deed dealt with assignment. Clause 9.1 provided: "(a) The Payer must not assign the whole or any part of its interest in the Tenements without the prior written consent of the Holder. (b) the Holder will not withhold consent if at the time of assignment: (i) the assignee enters into a deed with the Holder securing to the Holder performance by the assignee of the obligations of the Payer under this deed; (ii) the assignee executes any document reasonably required by the Holder to obtain registration of a caveat affecting the interest of the assignee; (iii) those deeds and other documents (if required by the Holder) include an express consent by any other persons with an interest in a Tenement; (iv) in the case of a partial assignment, the assignee assumes responsibility for payment of the Bullion Royalty and Non-Bullion Royalty to the extent of the assigned interest; and (v) the Payer indemnifies the Holder from and pays all stamp duty costs and expenses (including reasonable legal costs of the Holder) in connection with the assignment. (c) Upon an assignment in conformity with this clause, the Payer will be released (or in the case of a partial assignment, released to the extent of the interest assigned) from any obligation to pay the Bullion Royalty or Non-Bullion Royalty in respect of any quarter commencing after the date of the assignment."
9. Clause 9.3 provided that the holder of the royalty, Hunter, was entitled to assign its interest under the deed either in whole or in part. As it happens, on 15 December 1993, Hunter had assigned its rights under the 26 March 1993 letter agreement to Technomin Australia NL (which by at least 2014 was Technomin Australia Pty Ltd) (Technomin). No separate assignment appears to have been executed by those parties in respect of Hunter's rights under the 1994 Royalty Deed. Nevertheless, the parties have proceeded on the basis that there was a valid and effective assignment of Hunter's rights under the 1994 Royalty Deed to Technomin.
10. In or around July 2008, SSM changed its name to Xstrata Nickel Australasia Operations Pty Ltd (XNAO).

The Kathleen Valley Joint Venture comes to an end

1. In 2014, XNAO and Giralia entered into a "Deed of Termination - JV agreements" by which they agreed to put an end to the two joint ventures. That deed was made in contemplation of the execution of a Sale and Purchase Agreement to be entered into between XNAO, Giralia and Ramelius. That agreement was executed on 9 June 2014 (the 2014 SPA). By the 2014 SPA, each of XNAO and Giralia sold their relevant "Seller Percentages" of the assets that had been held subject to the Kathleen Valley Joint Venture and the Mount Harris Joint Venture (along with certain "XNAO Assets") to Ramelius. For XNAO, its Seller Percentage of "Kathleen Valley JV Assets" (which included the Kathleen Valley tenements) was 87.15%.
2. Clauses 4.1 and 4.2 of the 2014 SPA provided as follows: "4.1 Sale and purchase of Assets On Completion, the Sellers must sell the Assets (to the extent of their respective interests) and the Buyer must buy the Assets free from all Encumbrances other than the Permitted Encumbrances. 4.2 Assumption of liabilities On and from Completion the Buyer: (a) must assume, pay, perform and discharge all Assumed Liabilities; and (b) indemnifies the Sellers against, and must pay to the Sellers on demand the amount of, any Indemnified Loss suffered or incurred by any Seller Group Member in connection with the Assumed Liabilities."
3. "Assumed Liabilities" was defined to include, among other things, any "Contractual Liabilities". That expression was further defined to include liabilities arising out of those "Contracts" set out in Schedule 5. The 1994 Royalty Deed was one such Contract.
4. Clause 9.1 of the 2014 SPA referred to the transfer of the benefits and obligations under the Contracts. It imposed a best endeavours requirement on XNAO and Ramelius to transfer the benefits and "have [Ramelius] assume the obligations of XNAO under the Contracts".
5. On 25 August 2014, Ramelius, XNAO and Xstrata Nickel Australasia Pty Ltd, as Jubilee was by then known, executed a deed poll in favour Technomin. Clause 3 of that deed poll was as follows: "3. Covenant On and from the Effective Date, the Covenantor undertakes and agrees, in favour of the Continuing Party: (a) to observe, be bound by and perform the obligations imposed on the Retiring Parties under the Contract Interest, whether arising before, on or after the Effective date; and (b) that it will be liable for any breach of the Contract Interest committed by it or by the Retiring Parties as its predecessor, whether committed before, on or after the Effective Date."
6. The "Effective Date" was the date of completion of the 2014 SPA.

Technomin assigns to Drem; Ramelius sells to LRL

1. On 22 September 2014, Technomin gave notice of assignment of its interest under the Royalty Deed to Drem.
2. On 12 September 2016, Ramelius sold its interests in the tenements which it had acquired under the 2014 SPA, save for some minor exceptions which do not presently matter. The tenements sold to LRL included the Kathleen Valley tenements. The sale agreement by which that transaction took place was conditional upon obtaining the consent of "Technomin" (as noted in Schedule 1) to the assignment or novation by Ramelius of its obligations under, among other things, the 1994 Royalty Deed. This consent could be waived on the basis that Ramelius and LRL enter into an appropriate deed poll.
3. As alluded to above, the fact that the right to receive the royalty was by that point held by Drem, not Technomin, was not appreciated by the parties to the 2016 SPA. Thus, on 7 December 2016, Ramelius and LRL entered into a deed poll in favour of Technomin (as opposed to Drem) in relation to the 1994 Royalty Deed. Clause 2 of that deed poll provided as follows: "2. Assignment and assumption (a) Subject to the reservation set out in clause 2(b), with effect on and from the Effective Date: (i) the Assignor assigns to the New Party the Assigned Interest and the New Party confirms its acceptance of that assignment; and (ii) the New Party covenants in favour of the Continuing Party that it will assume and be bound by, to the extent of the Assigned Interest, the Obligations that accrue or have been incurred on or after the Effective Date. (b) Whilst the Assignor holds the Reserved Rights, the Assignor will continue to be bound by its obligations to the Continuing Party under the Royalty Agreement to the extent of any material it mines in accordance with its Reserved Rights."
4. Apparently to remedy the fact that the December 2016 deed poll (among other agreements) had been executed in favour of Technomin and not Drem, on 18 November 2020 LRL and Drem entered into the 2020 Deed. Clause 2 provided as follows: "2. Acknowledgement Tenement transfer and Assigned Interest (a) The Tenement Holder and the Royalty Holder each acknowledges and agrees that the Tenements, and the corresponding obligation to pay the royalty under the Royalty Deed in respect of the Tenements, were assigned to the Tenement Holder with effect on and from the Effective Date. (b) With effect on and from the Effective Date: (i) the Tenement Holder covenants in favour of the Royalty Holder to assume and be bound, to the extent of the Assigned Interest, by the liabilities and obligations under the Royalty Deed that accrue or are incurred after the Effective Date; and (ii) the Royalty Holder covenants in favour of the Tenement Holder to observe the terms and conditions of the Royalty Deed which are on its part required to be observed."
5. "Assigned Interest" was defined as: "…all of the rights, interest, obligations and liabilities in and under the Royalty Deed, to the extent that they relate to the Tenements."
6. It is also relevant to note the first five recitals to that deed, set out under the heading "Background", as follows. "1. XNAO, XNA and Hunter were parties to the original Royalty Deed. 2. Hunter assigned its rights under the Royalty Deed to Technomin. 3. The Royalty Deed Tenements were registered in the name of XNAO (formerly named Sir Samuel Mines NL) and [Giralia]. 4. XNAO, and Giralia entered into a sale and purchase agreement with [Ramelius] dated 9 June 2014 in respect of the Royalty Deed Tenements. 5. XNA, XNAO and Ramelius executed a Deed Poll in favour of Technomin dated 25 August 2014 in respect of the corresponding obligations under the Royalty Deed."
7. LRL was not a party to the 1994 Royalty Deed. It submitted, correctly in my view, that the immediate source of its obligation to be bound by the provisions of that deed was to be found in the 2020 Deed.

Applicable principles

1. There was no dispute as to the principles to be applied in the interpretation of contracts. The principles of contractual construction also apply to deeds, see: Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45; [2002] HCA 5 at [9]-[10]. The role of the Court is to discern the intention of the parties by reference to the language of the agreement and, where necessary, the surrounding circumstances. In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, French CJ, Nettle and Gordon JJ said at [47]: "In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract."
2. Consideration should be given to the document as a whole and "preference is given to a construction supplying a congruent operation to the various components of the whole": Wilkie v Gordon Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [16] (Gleeson CJ, McHugh, Gummow and Kirby JJ). Evidence of surrounding circumstances can be referred to as part of the process of interpretation: see generally Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295.
3. I was referred by the defendant to Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24 ('Codelfa') at 350-351, where Mason J quoted Lord Wilberforce in Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 996 on the purpose or object of the particular transaction in question: "…when one is speaking of aim, or object, or commercial purpose, one is speaking objectively of what reasonable persons would have in mind in the situation of the parties."
4. The defendant also referred me to the decision of McColl JA (with Ward JA and Sackville AJA agreeing) in Zhang v BM Sydney Building Materials Pty Ltd [2016] NSWCA 166 at [45]: "Where a commercial transaction is implemented by several contracts or documents, all of the contracts or documents may be read together for the purpose of ascertaining their proper construction and legal effect, at least where the contracts or documents are executed contemporaneously or within a short period. As Lewison and Hughes observe, the rationale for this proposition as explained in Manks v Whiteley is that '[e]ach [deed] is executed on the faith of all the others being executed also and is intended to speak only as part of the one transaction, and if one is seeking to make equities apply to the parties they must be equities arising out of the transaction as a whole'."

The parties' contentions

1. Drem's position was straightforward. It pointed to the fact that LRL has a 100% ownership interest in the Kathleen Valley tenements from which it has produced and expects to continue to produce and sell lithium ore. It submitted that LRL's proportionate share or interest in the Kathleen Valley tenements was now 100% and that there was nothing in the 1994 Royalty Deed that required its share or interest in those tenements to be worked out by reference only to a joint venture interest. It submitted that the broad language of the definition of "Product" had the result that the payer under that deed was required to pay a royalty in respect of Product attributable to any interest in or exploitation of the relevant tenements, regardless of whether its interest was one that related to the Kathleen Valley joint venture or otherwise.
2. Drem further submitted that the position was put beyond doubt by the 2020 Deed which was entered into long after the Kathleen Valley Joint Venture had been terminated and which otherwise made no reference to it. By that Deed, LRL covenanted to assume the obligations "under" the 1994 Royalty Deed. Drem submitted that there was no agreement in 2020 that LRL was only required to assume the "Payer's" liabilities under the 1994 Royalty Deed to the extent of XNAO's liabilities as at the termination of the joint venture in 2014.
3. LRL submitted that Drem's case involved a misconstruction of the royalty obligation. Its principal contentions concerned the construction of the payment obligation under the 1994 Royalty Deed itself. Its further and related contention concerned the construction of the obligation created by the 2020 Deed.
4. Insofar as the 1994 Royalty Deed was concerned, LRL first contended that the reference to the payer's "proportionate share or interest" in the Kathleen Valley tenements was a reference to the "proportionate" interest which the payer had vis a vis the other joint venturer by way of the 1991 joint venture agreement. It pointed to the ordinary and natural meaning of the word "proportionate", being a word that typically connotes the existence of a relationship: Southgate v Waterford (1990) 21 NSWLR 427 at 437-438.
5. LRL submitted that the reference to that interest, as it might be "varied from time to time", reflected the terms of the Kathleen Valley Joint Venture to which I referred at paragraphs [11]-[16] above, because the proportionate interest might "vary" over time depending on the exercise of rights under the 1991 agreement itself. Thus, if Giralia's interest were to have become entirely diluted or if Giralia had withdrawn from the project, SSM's interest in the underlying tenements could be said to have been "varied" to become 100% within the meaning of the 1994 Royalty Deed.
6. Secondly, LRL submitted that the scope of the royalty obligation must be worked out by reference to the other transaction in which it was an integral part, namely the assignment by Hunter of its joint venture interests by way of the 1994 Deed of Assignment and Assumption: see Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd (2014) 48 WAR 261; [2014] WASCA 164 at [46]. In that respect, LRL submitted that the 1994 Royalty Deed was a key part of the consideration for the novation of the joint venture agreements in favour of SSM. It submitted that, in "commercial terms, the benefit acquired by SSM was a proportionate share in the potential benefit of the Relevant Tenements". I will return to what LRL meant by this reference to "Relevant Tenements" in due course. In light of the relationship between the 1994 Royalty Deed and the assignment under the Deed of Assignment and Assumption, LRL submitted that clause 6.1 of the 1994 Royalty Deed is "best read as referring to variations to the proportionate shares or interests of the parties to the joint ventures" pursuant to the joint venture agreements.
7. Thirdly, LRL contended that its approach was consistent with the commercial purpose of the 1994 Royalty Deed. It submitted that Drem's construction involves a windfall gain because, if correct, it will receive a royalty on the Gross Proceeds of Saleable Product attributable to 100% of the Kathleen Valley tenements, even though the original holder of the royalty, Hunter, only ever had a proportionate joint venture interest in those tenements. It accepted that if SSM had increased its joint venture interest to 100% by exercising the rights which Hunter bargained away in return for (among other forms of consideration) the royalty, then Hunter (and any later holder of the royalty) would be entitled to a royalty calculated by reference to 100% of Gross Proceeds of Saleable Product. That, however, is not what occurred. Ramelius acquired the interests of both parties to the joint venture in the underlying tenements, namely the interests originally held by Hunter and the interests held by Giralia. Only the former were relevant to the calculation of the royalty. Yet, on Drem's construction of the agreements, LRL is liable to pay a royalty on Gross Proceeds of Saleable Product from both sets of interests. This, it submitted, does not make commercial sense.
8. In relation to the 2020 Deed, LRL first pointed to the fact that the deed itself recited the history of the royalty holding and, in particular, to the fact that only the rights and obligations under the 1994 Royalty Deed had been "transferred" to Ramelius under the 2014 SPA by XNAO only. In the language of paragraph 5 of the Background to the 2020 Deed (see paragraph [44] above), the obligation which Ramelius assumed pursuant to the 2014 deed poll was an obligation which "corresponded" to the interests which it acquired from XNAO.
9. LRL submitted that, properly construed, the obligation assumed by Ramelius under the 2014 deed poll was to perform the "obligations imposed on [XNAO] under" the 1994 Royalty Deed. There was, it submitted, no suggestion in the 2020 Deed that LRL intended to assume obligations under the 1994 Royalty Deed that exceeded those which Ramelius had assumed in 2014, or that it intended to assume obligations under that deed that related to the interests which Ramelius acquired from Giralia. As XNAO's interest in the Kathleen Valley tenements pursuant to the joint venture was 87.15% as at the date Ramelius assumed obligations under the 1994 Royalty Deed, LRL submitted that 87.15% is the relevant proportion of the Gross Proceeds of Saleable Product on which it should pay the royalty.

The extent of LRL's royalty obligation

1. In my view, Drem is correct in its contention that the obligation assumed by LRL under the 2020 Deed requires it to pay a royalty under the terms of the 1994 Royalty Deed on the footing that it has a 100% proportionate share or interest in the Kathleen Valley tenements. Its obligation is not, as LRL contended, limited to paying a royalty attributable only to a percentage interest in the Kathleen Valley tenements equal to the percentage held by XNAO at the time the joint venture was terminated in 2014. That is so for the following reasons.
2. First, the language of the 1994 Royalty Deed is about as wide as can be in identifying the relationship between Product, by reference to which royalty is paid, and the relevant tenements. Royalty is payable to the extent Product is "attributable to the Payer's proportionate share or interest (as varied from time to time) in any Tenement or in the Project." In this respect, I note the particularly broad terms in which the "Project" was defined, both in the 1994 Royalty Deed and in the Deed of Assignment and Assumption. The "Project" was defined to be "the exploitation of the Tenements".
3. It is true that when the 1994 Royalty Deed was entered into, the registered holder of the tenements relating to the two joint ventures was Giralia and that, as such, any "proportionate share or interest in" those tenements held by Hunter was only by reason of the joint venture agreements. But the tenements to which that deed related were not limited to the tenements deployed in those two joint ventures. They included PL 36/1142, a tenement held by Hunter outside the two joint ventures but assigned to SSM along with its interests in the joint venture tenements.
4. This circumstance has particular significance for the way in which the 1994 Royalty Deed is to be interpreted. The fact that it must be read as applying not only to those "interests" in tenements that related to the joint venture agreements but also to at least one "interest" in a tenement assigned outright to SSM, being PL 36/1142, makes it difficult to accept the proposition that the reference to a "proportionate share or interest" in a tenement necessarily connotes only a joint venture interest in a tenement. LRL submitted that the expression would apply differently to the tenement interests related to the joint ventures, on the one hand, and the interest in PL 36/1142, on the other. This is true, but that is rather the point: it is true because the language in question, namely "proportionate share or interest…in", is wide enough to contemplate both joint venture and non-joint venture interests.
5. This also means that the reference to such an interest being "varied from time to time" was not necessarily limited to those variations that might occur because of the payer exercising rights under one or other joint venture agreements. Of course, any variation in interest that occurred in that way would clearly be within the scope of the expression "varied from time to time". But variations in non-joint venture interests must also have been within the contemplation of that expression.
6. It is true, as LRL submits, that the 1994 Royalty Deed was a key part of the consideration for the novation of the joint venture agreements in favour of SSM under the Deed of Assignment and Assumption. I have already referred at [56] to its submission that, in "commercial terms, the benefit acquired by SSM was a proportionate share in the potential benefit of the Relevant Tenements". LRL's specific submission was that the royalty was part of the quid pro quo for SSM's acquisition of Hunter's interests in the tenements subject to the two joint venture agreements. However, as I have pointed out, SSM acquired more than just those interests. The "Project" to which the 1994 Deed of Assignment and Assumption referred was wider than just the project constituted by the two joint ventures. It included Violet Range, being the project (or an aspect of some wider project) associated with the exploitation of PL 36/1142. It also included, in my view, any other exploitation of the tenements otherwise than pursuant to the joint venture agreements.
7. I can accept that the reference to a "proportionate" share would commonly be understood as a relative notion connoting the existence of some other person who also holds a share. But it is equally capable of referring to a sole owner. As a matter of ordinary usage, a "proportionate" interest holder might move from having, say, a 50% interest in an asset to having a 100% interest.
8. It follows from what I have said that I do not accept that Drem's construction involves a windfall of a kind that would stand in the way of accepting its construction. It is true that Ramelius acquired an interest in the Kathleen Valley tenements that was greater than any interest held by XNAO and any "interest" in the tenements that had originally been held by Hunter. However, in 1994 Hunter bargained for a royalty that, in my view, was not strictly tied to the fortunes of the joint venture interests which it sold. Whether the resulting royalty is a windfall to Drem depends very much on one's view of the nature of the bargain which Hunter struck with SSM in 1994.
9. Finally, I am unable to read the 2020 Deed in a way that limits the scope of LRL's royalty obligation in the manner for which it contends. There is a slight inelegance about the way LRL's assumption of liability was expressed, because it said that LRL would covenant to "assume and be bound, to the extent of the Assigned Interest, by the liabilities and obligations under the Royalty Deed that accrue or are incurred after the Effective Date." It did not specifically say whose liabilities were being assumed, but there is no doubt that it was the "Payer's" liabilities under the 1994 Royalty Deed.
10. However, that is not the end of the matter. LRL submitted that the task of identifying the obligations assumed under the 2020 Deed was not a matter of simply reading "LRL" for "Payer" under the 1994 Royalty Deed. That is undoubtedly correct as a matter of contractual interpretation. The task of identifying the obligations assumed in 2020 requires the Court to identify the content of the obligations of the "Payer" under the 1994 Royalty Deed and to determine, by reference to the language of the 2020 Deed and having regard to the context in which that deed was entered into, which of (and to what extent) those obligations were being assumed. This is perhaps just another way of saying that the task involves a careful reading of both instruments, in the light of the circumstances in which each instrument was entered into.
11. Even so, that is a process that does not lead me to accept LRL's contention as to the scope of its royalty obligation. So far as the 1994 Royalty Deed is concerned, I have already indicated why I am inclined to read the royalty obligation as extending to a royalty on the Gross Proceeds of Saleable Product attributable to the whole of the payer's interests in the Kathleen Valley tenements, even the portion of those interests that are not so-called joint venture interests in those tenements (which from LRL's perspective was 12.85%).
12. A consideration of the language of the 2020 Deed and the circumstances in which it was entered into does not lead me to conclude that LRL and Drem intended LRL's obligation under the 1994 Royalty Deed was to be limited in that way either.
13. The aspects of the language of the 2020 Deed on which LRL particularly relied in this respect tend not to support the conclusion for which it contends. There is reference in both the Background and clause 2(a) to a "corresponding" obligation to pay the royalty. LRL submitted that the reference in paragraph 5 of the Background should be taken to be a reference to a limited royalty obligation assumed by Ramelius, namely to an assumption of XNAO's obligation but only as it stood prior to the termination of the joint venture. Clause 2(a) uses very similar language. It refers to LRL's acquisition of the Kathleen Valley tenements and says that LRL acknowledges "the corresponding obligation under" the 1994 Royalty Deed to pay the royalty "in respect of" those tenements.
14. In my view, these references to "corresponding" obligations do not resolve the present issue one way or the other. The question of how and to what extent the royalty obligation "corresponds" to interests in the tenements is the very question in issue. On any view, there is a royalty obligation that "corresponds" to an interest in the Kathleen Valley tenements.
15. Nor does the reference in clause 2(b)(i) to the fact that LRL's assumption of liability is "to the extent of the Assigned Interest" shed much light on the issue. The Assigned Interest here means "all of the rights, interest, obligations and liabilities in and under the [1994 Royalty Deed], to the extent that they relate to the Tenements." Again, this is language that just invites a consideration of the terms of that deed and how it relates to the Kathleen Valley tenements.
16. Drem submitted that LRL could have raised the present issue at the time of executing the 2020 Deed, but that it did not do so. That may be so, but it is not a matter that helps me interpret the deed. On the other hand, the commercial context in which that deed was executed does not incline me to conclude that "reasonable persons in the situation of the parties" (Codelfa at 351) as at 18 November 2020 would have understood the 2020 Deed to involve only a limited assumption by LRL of the royalty obligation spelled out in the 1994 Royalty Deed. By 2020, the transacting parties were the 100% holder of the Kathleen Valley tenements (LRL) and the assignee of the rights under the 1994 Royalty Deed (Drem). The parties by that point may well have had very different understandings of what it meant for the holder of 100% of those tenements to covenant to comply with the earlier deed. LRL's actual intention may well have been to assume the obligation only to the extent of XNAO's terminating joint venture interest, but that intention is not one that I can discern from the terms of the 2020 Deed understood in the light of the commercial context that existed in 2020.
17. In all of these circumstances, I am unable to accept LRL's submissions as to the scope of its royalty obligation. The obligation that LRL acknowledged in the 2020 Deed was the obligation to pay a 2% royalty on the Gross Proceeds of Saleable Product attributable to its proportionate share or interest in the Kathleen Valley tenements or the exploitation of those tenements. LRL has a 100% interest in the Kathleen Valley tenements. It follows that the royalty must be calculated by reference to Gross Proceeds of Saleable Product attributable to that 100% interest.

ORDERS

1. Neither party asked that I do anything other than apply the usual rule as to costs. The orders of the Court will therefore be: 1. Declare that the Defendant is the holder of a 100% share and interest in the mining tenements: M36/460, M36/459, M36/264 and M36/265 (being the tenement references as at 18 December 2023) issued under the Mining Act 1978 (WA) (Tenements). 2. Declare that pursuant to the terms of a Deed of Acknowledgement dated 18 November 2020 (2020 Deed) between the Plaintiff and the Defendant, the Defendant is obliged to pay to the Plaintiff a non-bullion royalty in respect of the Tenements now held by the Defendant, the quantum of such required royalty payments being calculated under the terms of a deed dated 28 March 1994 executed between Sir Samuel Mines NL, Jubilee Gold Mines NL and Hunter Resources Limited (as each company was previously known). 3. Declare that the quantum of the royalty which the Defendant is obliged to pay to the Plaintiff under the 2020 Deed is to be calculated as a 2% royalty on the Gross Proceeds of Saleable Product from the Defendant's 100% share or interest in the Tenements. 4. Order the defendant to pay the plaintiff's costs of the proceedings.

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