Supreme Court of WA|2002-09-18|Before: Owen J, Anderson J, Kechnie J

Hancock Prospecting Pty Ltd & Ors v BHP Minerals Pty Ltd & Ors [2002] WASC 224 (18 September 2002)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : HANCOCK PROSPECTING PTY LTD & ORS -v- BHP MINERALS PTY LTD & ORS [2002] WASC 224

BETWEEN : HANCOCK PROSPECTING PTY LTD (ACN 008 676 417)

HOPE DOWNS MANAGEMENT SERVICES PTY LTD (ACN 081 380 930)

Contracts and agreements - Agreement between State and private entity - Whether terms ambiguous - Whether public interest relevant - Principles of construction - Use of definitions

First Defendants : Mr C M Scerri QC & Mr G R Donaldson

Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 21 WAR 425

Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604

Casinos Austria International (Christmas Island) Pty Ltd v Christmas Island Resort Pty Ltd, unreported; SCt of WA (Owen J); Library No 980726; 16 December 1998

City of Belmont v Link Interiors Pty Ltd [2001] WASC 64

Conlan (as Liquidator of Oakleigh Acquisitions Pty Ltd) & Ors v Registrar of Titles & Ors [2001] WASC 201; (2001) 24 WAR 299

Hamersley Iron Pty Ltd v Hancock, unreported; SCt of WA; Library No 5195; 23 December 1983

Kingsview Nominees Pty Ltd v De Crespigny, unreported; SCt of WA; Library No 7090; 13 April 1988

Moshirian v UNSW [2002] FCA 179

Permanent Building Society v Wheeler (1992) 10 WAR 109

Spotless Catering Services v Commonwealth of Australia, unreported; SCt of WA (Owen J); Library No 980102; 6 March 1998

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; (1988) 165 CLR 107

Trident v McNiece (1987) 8 NSWLR 270

Westgold Resources NL v St George Bank Ltd, unreported; SCt of WA (Anderson J); Library No 980666; 16 November 1998

1 By minute of proposed amended originating summons of 21 March 2002, the plaintiffs claim declarations that:

"1. (a) The Mount Newman Agreement (being the agreement approved by the Iron Ore (Mount Newman) Agreement Act 1964 as varied by

(b) the agreement between the first and second defendants made 27 January 1987 (Rail Transport Agreement) and the Schedule thereto,

create rights and obligations in relation to the carriage of certain iron ore products over the first defendant's Mount Newman railway system which may be enforced at law as against the first defendants by a person who is not a party thereto.

2. On the proper construction of the Mount Newman Agreement as varied by the Rail Transport Agreement, the first defendants are obliged to carry, and for that purpose to negotiate and enter into a contract to carry, the iron ore products of a person who at the time of carriage is operating a mine producing iron ore products, when requested by a person seeking such carriage.

3. Upon request by the plaintiffs the first defendants are obliged, under and in accordance with the Mount Newman Agreement, as varied by the Rail Transport Agreement, to negotiate and enter into a contract with the plaintiffs, to carry the iron ore products produced by the plaintiffs operating a mine."

2 The issue between the parties is about the proper construction of the Rail Transport Agreement made between the defendants in 1987 whereby access to a railway line between Newman and Port Hedland was to be granted to competitors of the first defendant.

3 The plaintiffs are companies which together have an interest in a group of mining tenements approximately 386 square kms in area in the Pilbara. I will refer to the plaintiffs collectively hereafter as "Hope Downs". The Hope Downs project is the subject of an agreement with the State of Western Australia, ratified pursuant to the Iron Ore (Hope Downs) Agreement Act 1992 (WA). The first defendants are companies which have formed a joint venture to mine and export iron ore from Mount Newman via a railway to Port Hedland. Over the years the parties to the joint venture have changed in ways which are not significant to this action so, for convenience, I will refer hereafter to the first defendants as the "Mount Newman Participants" to encompass past and present members of the joint venture. The State of Western Australia, the second defendant, has elected to present no argument and to abide the decision of the Court. In these circumstances the Court is deprived of any assistance which one party to the agreement might have given as to the proper construction of the Rail Transport Agreement 1987.

4 Hope Downs Mining Area 1 ("Hope 1") lies about 100 kms north-west of Mount Newman. Hope 1 has been the subject of a detailed program of drilling, geological interpretation and ore body modelling, and a plan has been developed to mine the iron ore deposit. Mr Tipper, who is the Project Director for Hope Downs iron ore project, deposes that:

"9. By the end of the fourth quarter of 1999, a resource of some 489 million tons of iron ore had been identified in the Hope One ore bodies, with combined proved and probable reserves of some 402 million tons. ..."

5 Over $50 Million has been spent on the project to date, which has received environmental approval from Environment Australia, a Commonwealth Government department, and from the Western Australian Environmental Protection Authority.

6 The Mount Newman railway line is approximately 425 kms in length and carries ore from mines in the Mount Newman area, as well as from Yandi, to Port Hedland where it is shipped overseas. The line is owned by the Mount Newman Participants.

7 The railway line passes to the east of Hope 1. Hope Downs wishes to enter into negotiations with the Mount Newman Participants so that it can secure access to the railway line at a time in the future when it is operating a mine producing iron ore.

8 Negotiations have not yet led to a satisfactory outcome so far as Hope Downs is concerned. Hope Downs therefore comes to this Court seeking a declaration as to the proper construction of the Rail Transport Agreement made 27 January 1987 between the State and the Mount Newman Participants.

Legislative history behind the Rail Transport Agreement 1987

9 It is unnecessary to do more than briefly sketch the legislative history which led to the Rail Transport Agreement 1987.

10 In 1964 Parliament enacted the Iron Ore (Mount Newman) Agreement Act. The First Schedule was the eponymous agreement. Clause 20 allowed for the parties, by mutual agreement, to vary the provisions of the Iron Ore (Mount Newman) Agreement, among other things, for the establishment or development of any industry making use of such of the Mount Newman Participants' works, installations, services or facilities.

11 In broad terms, the Iron Ore (Mount Newman) Agreement provided for the development of iron ore mining in the Pilbara. It set out obligations of the State and the Mount Newman Participants at various phases. It was at all times contemplated that there would have to be a railway line developed for the carriage of the iron ore between the mining areas near Mount Newman to the harbour and wharf installation near Port Hedland. To that end, in Phase 1, the Mount Newman Participants had obligations to investigate, carry out engineering investigations of the route for a railway and submit proposals for it. The proposals had to include a proposal for the layout and design of the railway. The proposals also had to provide satisfactory evidence of the making, or likelihood of making, of a suitable contract or contracts for sale and shipment of not less than 15 million tons of ore initially, and thereafter of increasing amounts. On acceptance by the Minister of the proposal, further obligations of State and the Mount Newman Participants came into existence in Phase 2. The State accepted the obligation of making available to the Mount Newman Participants special leases of Crown lands at peppercorn rental within the harbour area, the townsites and the railway.

12 In Phase 2 the Mount Newman Participants were to construct, install, provide and do all things necessary to enable them to mine from the mineral lease to transport by rail to the company's wharf and to commence shipment therefrom in commercial quantities at an annual rate of not less than 1 million tons of iron ore. This was to be done at a cost of not less than [sterling]30,000,000. The Mount Newman Participants had a specific obligation under cl 9(1)(c) to construct the railway.

13 All of this work was to be done at the Mount Newman Participants' expense before they would receive any return for their investment by way of sale of the iron ore. The phased approach and the obligations of both parties to the Iron Ore (Mount Newman) Agreement assumes importance when construing the Rail Transport Agreement 1987.

14 By the Iron Ore (Mount Newman) Agreement, cl 9(2)(a) the company assumed specific obligations in respect of the operation of the railway. These were as follows:

"(2) Throughout the continuance of this Agreement the Company shall -

Operation of railway

(a) operate its railway in a safe and proper manner and where and to the extent that it can do so without unduly prejudicing or interfering with its operations hereunder allow crossing places for roads stock and other railways and transport the passengers and carry the freight of the State and of third parties on the railway subject to and in accordance with by-laws (which shall include provision for reasonable charges) from time to time to be made altered and repealed as provided in subclause (3) of this clause and subject thereto or if no such by-laws are made or in force then upon reasonable terms and at reasonable charges (having regard to the cost of the railway to the Company) PROVIDED THAT in relation to its use of the said railway the Company shall not be deemed to be a common carrier at common law or otherwise;"

15 The term "third party" is not defined in the Iron Ore (Mount Newman) Agreement and is used throughout generically. On the other hand, the words "Third Party" and "Fourth Party" when capitalised do bear specific meanings.

16 On 27 January 1987 the State and the Mount Newman Participants entered into an agreement, under seal, as a variation of the Iron Ore (Mount Newman) Agreement. This agreement was the Rail Transport Agreement 1987.

"1. Subject to the context the words and expressions used in this Agreement have the same meanings respectively as they have in and for the purpose of the Mount Newman Agreement and the definitions in the Schedule hereto shall apply to this Agreement.

2. (a) Notwithstanding the provisions of clause 9(2)(a) of the Mount Newman Agreement the provisions of the Schedule hereto and the principles set forth therein shall apply to the carriage of iron ore products of third parties over the Mount Newman railway system.

(b) Where the Mount Newman Participants are operating a mine producing iron ore (other than a mine operated pursuant to the Mount Newman Agreement) under an agreement with the State, the Minister may agree that in respect of those operations the Mount Newman Participants shall not be third parties for the purposes of the Schedule hereto and may approve those operations for the purpose of Clause 20 of the Schedule hereto."

3. All freight goods or products of a third party other than iron ore products shall be carried over the Mount Newman railway system pursuant to the provisions of clause 9(2)(a) of the Mount Newman Agreement."

18 I will come to the terms of The Schedule in due course because they are crucial to this decision but, in short, the Rail Transport Agreement substantially altered the arrangements that would apply "to the carriage of iron ore products of third parties over the Mount Newman railway system".

19 In particular, the original obligation to transport other freight "and where and to the extent that it can do so without unduly prejudicing or interfering with its [the Mount Newman Participants'] operations" was removed and replaced by a requirement to carry the iron ore products of a third party in accordance with detailed contractual arrangements as the parties may agree but if the parties are unable to reach agreement those contractual arrangements are to be determined by an independent expert.

20 The Rail Transport Agreement however, also defined "third party" so that any requirements for transport agreed to by the Mount Newman Participants were limited in the agreement to the defined "third party", not to a generic third party.

Rail Transport Agreement Act 1987 - The Schedule

21 Most of the operative terms of the Rail Transport Agreement are contained in The Schedule which largely replaced the original cl 9(2) of the Iron Ore (Mount Newman) Agreement at least insofar as that clause concerned the carriage of iron ore products. The Schedule by cl 1 provided the definition of "third party" referred to in the Rail Transport Agreement cl 2(a).

22 There are a number of relevant clauses commencing with some important definitions:

"'common railway system' means that part of the Mount Newman railway system including rolling stock and other equipment and facilities required for the transport of the third party's iron ore products and includes additions thereto in accordance with Clause 12(a); ...

'third party' means a person operating a mine producing iron ore products (other than a mine operated pursuant to the Mount Newman Agreement) and includes (except where otherwise agreed by the Minister) any person within the definition of the Mount Newman Participants where iron ore products of that person to be carried over the Mount Newman railway are obtained from areas outside the mineral lease granted under the Mount Newman Agreement;"

23 I interpose to note that in a subsequent agreement, the Rail Transport Agreement Variation made on 20 December 1990, by cl 3(1), cl 2 of the Rail Transport Agreement was varied by adding subcl (c) which provided:

"During any period when the Marillana Creek Participants are associated with the Mount Newman Participants, the Marillana Creek Participants shall not be third parties for the purposes of the Schedule hereto in respect of their operations under the Marillana Creek Agreement." (My emphasis)

24 To return to the definitions in The Schedule to the Rail Transport Agreement:

"'third party railway system' means those facilities and equipment used for the transportation of a third party's iron ore products from and including the third party's mine marshalling yards to and including the third party's port marshalling yards and includes the common railway system;"

"2. The Mount Newman Participants shall as and when required carry the iron ore products of a third party over the third party railway system in accordance with detailed contractual arrangements, consistent with the provisions of this Schedule and with such additional provisions as the parties may agree, to be negotiated between the Mount Newman Participants and the third party. The rights and obligations of the Mount Newman Participants with respect to a third party under the detailed contractual arrangements shall be expressed to be several in the same proportions which the interests of the Mount Newman Participants bear to each other.

3. Where the Mount Newman Participants and the third party are unable to reach agreement on any aspect of the detailed contractual arrangements referred to in Clause 2 the same shall be determined by an independent expert, qualified and expert in the areas in dispute, appointed by agreement between them or, in the absence of such agreement, appointed by the President of the Institution of Engineers, Australia upon the written request of either of them, it being the intent that all matters which have not been agreed between the Mount Newman Participants and the third party shall be referred to the expert at the same time. The detailed contractual arrangements shall likewise provide for reference of any dispute between the parties to an independent expert. The decision of the independent expert shall be final and binding on the Mount Newman Participants and the third party.

4. (a) The detailed contractual arrangements referred to in Clause 2 shall subject to this Schedule be structured so that the same do not unduly prejudice or interfere with the operations of the Mount Newman Participants under the Mount Newman Agreement.

(b) The Mount Newman Participants shall not be entitled to claim any undue prejudice or interference as aforesaid on the grounds of competition between the Mount Newman Participants and the third party for markets for iron ore products or otherwise in respect of any intended sales of iron ore products by the third party.

(c) Having entered into detailed contractual arrangements, the Mount Newman Participants shall not thereafter be entitled to claim prejudice or interference arising therefrom except as provided in Clause 5."

26 I have set out the definition and now return to it in more detail. The issue for resolution in this case is simply stated. Hope Downs argues that "third party" means a person operating a mine producing iron ore products at the time carriage is required. Therefore, the detailed contractual arrangements referred to in cl 2 of the Rail Transport Agreement may be negotiated prior to the time when the iron ore is to be carried. If negotiations are unsuccessful, the procedures in cl 3 may be used prior to mining operations commencing. If the Mount Newman Participants decline to negotiate, a declaration can be made requiring them to do so. This outcome, it is said, arises from a proper construction of the Rail Transport Agreement. Hence Hope Down is entitled to declarations (2) and (3) of the amended originating summons.

27 The Mount Newman Participants, on the other hand, submit that until a mine is actually operating no obligation under cl 2 or cl 3 of the Rail Transport Agreement arises.

28 One matter which seems to have been in issue until shortly prior to the hearing, is whether the Rail Transport Agreement creates rights for strangers to the agreement. However, the parties, specifically the Mount Newman Participants, now acknowledge that the Rail Transport Agreement creates rights for "third parties" which are enforceable at law.

29 The Mount Newman Participants argue though that Hope Downs is not presently a "third party", as defined, because Hope Downs does not presently operate a mine; it merely may do so in the future. Therefore, Hope Downs is not entitled to a declaration. The resolution of this narrow issue of standing is subsumed by the major issue on the construction of the Rail Transport Agreement.

30 Mr Zelestis, senior counsel for Hope Downs, ingeniously argued for a construction of the Rail Transport Agreement which necessarily ignores the definition of "third party". As he put it:

"The question of principle in relation to the construction that we urge upon your Honour here is that the definitions are not to be read and construed on their own, given then a fixed meaning which is transported into the operative provisions on which determines their construction; rather, in our submission, the definitions as an aid to the construction of the instrument really is a drafting aid simply to be treated as such and the substantive provisions are to be construed having regard to their own language, their own context and their manifest purpose."

31 With respect, this seems a novel proposition. One purpose of defining terms in an agreement is to reduce verbiage. In this sense a definition is a drafting aid. However, a definition may also fulfil a contractual function in setting the parameters of that which has been agreed. In analogous circumstances, definitions within statutes may prescribe the limits to which the statute is intended to operate, by inclusion or exclusion. Definitions are not simply "drafting aids".

32 The word "definition" can itself be defined. In the "Macquarie Dictionary":

"n. 1. the act of defining or making definite or clear. 2. the formal statement of the meaning or signification of a word, phrase, etc. ..."

33 In this case "third party" has a definite meaning under the Rail Transport Agreement.

34 In dealing with the question of definitions of "landlord" and "tenant" in 1891, Lord Esher MR, in Re Agricultural Holdings England Act (1883) Gough v Gough [1891] 2 QB 665 at 674 said:

"The definition says that 'landlord' means (it does not say 'includes') any person for the time being entitled to receive the rents and profits of any holding. I doubt whether the executors of a landlord would come within that definition. It is a hard and fast definition, and the result is that you cannot give any other meaning to the word 'landlord' in the Act than that which is mentioned in the definition. It is quite different in the case of a tenant. There the draftsman has dropped the word 'means', and has said that 'tenant' 'includes the executors, administrators, etc of a tenant' - that is, the word as used in the Act includes the ordinary meaning, and adds something to it. In the case of a landlord, on the contrary, the word can have no other meaning than that which is stated in the definition."

35 This view that the word "means" is intended to be exhaustive, is of long-standing, and is generally accepted.

36 Although the Rail Transport Agreement gives enforceable rights to third parties, those third parties were not parties to the actual agreement. The Rail Transport Agreement is an agreement made between the State and private entities. It sets out the four corners of the arrangements. Undoubtedly, on the State's part, there is a public interest to be discerned, promoting the development and exploitation of iron ore resources. To that end, an agreement which allows joint use of an existing railway line is obviously for public benefit.

37 However, that is but one side. The Rail Transport Agreement also reflects the extent to which the Mount Newman Participants were prepared to allow access to the railway line they had developed, built and maintained. The agreement limited access to persons within the category enumerated, namely a defined "third party", not simply any person with an interest in developing a mine and gaining access to the railway line at some time in the future.

38 Mr Zelestis argues that to construe the Rail Transport Agreement as providing that only a person who was already producing iron ore could initiate negotiations would be to frustrate the purpose of the agreement and would attribute to the parties to the Rail Transport Agreement an intention that the agreement would be practically and commercially ineffectual.

39 Mr Scerri, senior counsel for the Mount Newman Participants, responds to that submission by drawing attention to the evidence. The only evidence available is that of Mr Tipper, who nowhere deposes that his company would be frustrated in its efforts to develop the Hope Downs mine and arrange contracts.

40 The closest the evidence comes to commercial frustration is par 10 of Mr Tipper's affidavit in which he says:

"In parallel with the above geological programme, HDMS has been in contact with potential customers throughout the world, and has secured letters of intent for up to 5 years' sales to buyers in China. However, uncertainty in infrastructure arrangements for the Hope Downs mining project has hindered HDMS in its attempts to secure letters of intent from further buyers."

41 This is a long way from commercial frustration and a long way from the impediment necessary to construe the Rail Transport Agreement in the manner contended for by Hope Downs.

42 There are in fact, some parallels between the position of Hope Downs at the moment and the position of the Mount Newman Participants back in 1964 when the Iron Ore (Mount Newman) Agreement was executed. When the Mount Newman Participants originally submitted proposals to the State Government, they had to provide satisfactory evidence, firstly, of the making, or likelihood of making, a suitable contract or suitable contracts for the sale by the company, and shipment from the company's wharf, of not less than 15 million tons of iron ore. This evidence had to be provided before, as it were, a single spade of earth was turned, either to dig a mine, build a railway, or dredge a port. Once Phase 2 had been achieved, the Mount Newman Participants were obliged within three years, and at the expenditure of not less than [sterling]30,000,000, to develop both the mine and the infrastructure and to commence exports of iron ore.

43 Under the Rail Transport Agreement, Hope Downs is in a substantially better position if it wishes to develop Hope 1, commence mining and sell the iron ore. Once its mine is operating, Hope Downs is guaranteed access to an existing railway. The Mount Newman Participants must carry the iron ore products. They cannot refuse. All that is to be settled is the terms upon which those products are to be carried. Whether the terms are ultimately either agreed or determined by an independent expert, nevertheless carriage is obligatory.

44 Plainly the purpose of the Rail Transport Agreement was to effect a considerable change from earlier arrangements. There is an obvious public interest in the development of other iron ore producing mines in the vicinity using the railway which is built on Crown land, provided that the Mount Newman Participants are properly compensated for that use. Also, it is necessary that third party property associated with the railway - rolling stock, signals, etc - are compatible with the Mount Newman Participants' railway. In order to achieve the purpose in the public interest however, it is not necessary to construe the agreement in the manner suggested by Hope Downs. Indeed, the public purposes of the State might well be said to be better served by the requirement that there is a mine operating before the provisions of the Rail Transport Agreement enure for the benefit of third parties.

45 Mr Zelestis urged me to construe the instrument as a whole to give effect to its manifest purpose and cited a number of authorities to that end.

46 In general terms, I accept the principles set out in the authorities. However, being general principles, they provide limited assistance in the construction of a particular agreement.

47 In Australian Broadcasting Commission v Australasian Performing Rights Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109, Gibbs J said:

"It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate'. ..."

48 In Pan Foods Company Importers and Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd [2000] HCA 20; (2000) 170 ALR 579 Kirby J said at par [24]:

"In my view, such documents should be construed practically, so as to give effect to their presumed commercial purposes and so as not to defeat the achievement of such purposes by an excessively narrow and artificially restricted construction. The law facilitates and upholds commercial contractual obligations and the expectations that derive from them. Statute and equity may sometimes come to the aid of parties where various forms of unfairness or inequality can be shown. None was invoked in this appeal. But as between a commercial enterprise and a finance provider, such as a bank, the law should be the upholder of agreements. It should eschew artificialities and excessive technicalities for these will not be imputed to the ordinary businessperson. Business is entitled to look to the law to keep people to their commercial promises. In a world of global finances and transborder capital markets, those jurisdictions flourish which do so. Those jurisdictions which do not soon become known. They pay a price in terms of the availability and costs of capital necessary as a consequence of the uncertainties of the enforcement of agreements in their courts."

49 I have not had the benefit of significant argument on the point and in these circumstances would simply note that Kirby J's comments, if applied generally, would seem to be at odds with what Gibbs J concluded was "trite law". Having regard to what Kirby J said in Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 186 ALR 289, in any event it may be that his Honour's comments in Pan Foods Company Importers and Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd are confined to circumstances where an ambiguity may be detected in the instrument.

50 In The Commissioner for Railways (NSW) v Agalianos [1955] HCA 27; (1955) 92 CLR 390, Dixon CJ, with whom Williams and Webb JJ agreed, said at 397:

"... the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed."

51 Dixon CJ was then dealing with an illogical situation which might arise if words were construed in a particular way. Similar comments might be made in respect of Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389 per the Court at 401 where they say:

"Nevertheless, when construing a composite phrase which does not have a trade meaning, it will ordinarily make sense for a court or tribunal to take notice of the trade meaning of a word or words within that expression, provided such an interpretation does not lead to a result which is absurd [See Bennion, Statutory Interpretation, 2nd ed (1992), pp 679-710] in the sense that the result may be unworkable or impracticable (See R v Camphill Deputy Governor [1985] QB 735 at 751; Sheffield Council v Yorkshire Water Ltd [1991] 1 WLR 58 at 72; [1991] 2 All ER 280 at 292), inconvenient, anomalous or illogical, futile or pointless, or artificial. ..."

52 There is no trade meaning to be ascribed to particular words in the Rail Transport Agreement.

53 In the present case, I do not regard the construction I favour as illogical. There is nothing illogical about requiring a person who wishes to take the benefit of cl 2 of The Schedule to the Rail Transport Agreement to be operating a mine producing iron ore products as a qualification to take those benefits.

54 In Bourne (Inspector of Taxes) v Norwich Crematorium Ltd [1967] 1 WLR 691 at 696, Stamp J noted:

"... English words derive colour from those which surround them. Sentences are not mere collections of words to be taken out of the sentence, defined separately by reference to the dictionary or decided cases, and then put back again into the sentence with the meaning which one has assigned to them as separate words so as to give the sentence or phrase a meaning which as a sentence or phrase it cannot bear without distortion of the English language. That one must construe a word or phrase in a section of an Act of Parliament with all the assistance one can from decided cases and, if you will, from the dictionary, is not in doubt; but having obtained all that assistance, one must not at the end of the day distort that which has to be construed and give it a meaning which in its context one would not think it can possibly bear. ..."

55 Within the context of what he was deciding, those comments of Stamp J make perfect sense. However, I would hesitate to ascribe to the comments the properties of an over-riding principle of construction. In normal usage one will often seek to define a word or words within a sentence to elucidate the meaning of the sentence.

56 In the present case it is unnecessary to do so as the agreement itself provides the definition of "third party" and does so in a manner which is not illogical or pointless.

57 In Stevens v The Colonial Sugar Refining Company Ltd [1920] HCA 74; (1920) 28 CLR 330, in the judgment of the Court, delivered by Isaacs J, he noted at 340 in the course of the reasons:

"... The definition, which must, like every other part of the Act, be construed by the light of the Act as a whole, ..."

58 With respect, I agree, but find that principle of little assistance in the present case.

59 The latest, and therefore the most convenient authority, to which reference might be made is Royal Botanic Gardens and Domain Trust v South Sydney City Council. The case has some minor resonance with the present issues, because there was a statutory context underlying the particular lease in consideration and the primary purpose was to provide a public facility not a profit.

60 The majority, Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ, in a joint judgment, referred to the well-known passages in the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 352. In par [10] they said:

"In Codelfa, Mason J (with whose judgment Stephen J and Wilson J agreed) referred to authorities ... which indicated that, even in respect of agreements under seal, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view. In particular, an appreciation of the commercial purpose of a contract (Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 995-6; [1976] 3 All ER 570 at 574):

... presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating."

61 In Royal Botanic Gardens and Domain Trust v South Sydney City Council there was some ambiguity in the lease, necessitating reference to the arrangements between the parties and the genesis and object of the contract. Kirby J dissented in the result. However, in the course of his judgment, he made some statements which I consider are not contrary the majority judgments, and in fact state the general principles. At par [71] Kirby J said:

"The same point of principle is applicable where the function in hand is to construe the terms of a written contract. The starting point must be the contract. Only later, if need be, may the decision-maker have resort to contextual materials and supplementary or extrinsic evidence in elaboration of the written text. This approach is equally applicable to a statute and a written contract because it is based on a principle informed by strong considerations of practicality. The text may be unarguably clear. In such a case, it will not be necessary, or ordinarily permissible, for the decision-maker to go beyond the written language from which the legal answer to the question in issue is to be found. If the text is so clear, that will normally be the end of the matter. A great deal of time and disputation may then be avoided."

62 Kirby J further emphasised the point at par [102].

63 Callinan J, who delivered a separate judgment agreeing with the majority judgment, also held there was an ambiguity in the lease and therefore made reference to external and extrinsic material.

64 Mr Scerri argues that the Rail Transport Agreement is quite clear and resort to genesis and purpose is unnecessary and wrong: Metcalf v Permanent Building Society (1993) 10 WAR 145 at 146. I agree.

65 The word "operating" in the definition of "third party" is a verb in the present tense, not the future tense.

66 The words "shall ... carry" is speaking in the future tense. It also denotes an imperative. The obligation on the Mount Newman Participants in cl 2 of the Rail Transport Agreement only arises in the future at a time when another party is operating a mine producing iron ore products.

67 Hope Downs cannot qualify as a "third party" under the Rail Transport Agreement until it is operating a mine producing iron ore products. When it is in such a position, the Mount Newman Participants shall carry its iron ore products in accordance with the contractual arrangements to be negotiated or determined. There is no ambiguity in the phrase giving rise to any need to refer to or determine the purpose and object of the Rail Transport Agreement.

68 However, if, contrary to my conclusion, there is such a need, in my opinion, for the reasons earlier expressed, the purpose and object is fulfilled by construing the definition of "third party" as applying only to persons who are actually operating a mine, not a person who may in the future operate a mine. Hope Downs is presently not a defined "third party" under the Rail Transport Agreement. If and when Hope Downs becomes a defined "third party", it will have enforceable rights against the Mount Newman Participants and I do not understand Mr Scerri to argue to the contrary. However, those rights have not yet accrued to Hope Downs and cannot accrue to it simply because it would like to negotiate with the Mount Newman Participants to know the terms and conditions of carriage before Hope Downs is able to use the railway. Not being so qualified, Hope Downs is unable to take the benefit of the provisions of cl 2 and cl 3 of the Rail Transport Agreement and, in particular, is unable to obtain a declaration in effect requiring the Mount Newman Participants to negotiate with them. To grant the declarations sought, and in particular, declarations 2 and 3, it would be necessary, in effect, to make a declaration that a person who does not come within the definition of "third party", that is, a person who is not operating a mine producing iron ore products, shall be treated as if they were a person operating a mine producing iron ore products. I decline to do so.

69 The originating summons of 21 March 2002 is dismissed.

Ore (Mount Newman) Agreement Act 1964

Ore (Hope Downs) Agreement Act 1992

Transport Agreement Act 1987

Hancock Prospecting Pty Ltd & Ors v BHP Minerals Pty Ltd & Ors [2002] WASC 224

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (115 paragraphs)

Hancock Prospecting Pty Ltd & Ors v BHP Minerals Pty Ltd & Ors [2002] WASC 224 (18 September 2002)

Parties

Legislation Cited (3)

Cases Cited (14)