Court of Appeal (WA)|2003-11-06|Before: Murray J, Templeman J, Hasluck J

Hancock Prospecting Pty Ltd & Ors v BHP Minerals Pty Ltd & Ors [2003] WASCA 259 (6 November 2003)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : HANCOCK PROSPECTING PTY LTD & ORS -v- BHP MINERALS PTY LTD & ORS [2003] WASCA 259

MATTER : Iron Ore (Mount Newman) Agreement Act 1964 as amended, and a Rail Transport Agreement dated 27 January 1987 between the State of Western Australia and various companies

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 - Interpretation of terms concerning access to rail system - Effect of provisions effecting variation - Nature of rights conferred upon third parties - Use of definitions - Availability of declaratory relief - Justiciable issue held to exist as to meaning of contractual terms

Iron Ore (Mount Newman) Agreement Act 1964, cl 3(2), cl 9(2)(a), cl 20

Rules of the Supreme Court 1971, O 58 r 10, O 18 r 16

First Respondents (First Defendants) : Mr C M Scerri QC &

Second Respondent (Second Defendant) : Mr R M Mitchell

First Respondents (First Defendants) : Blake Dawson Waldron

Second Respondent (Second Defendant) : State Crown Solicitor

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

Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101

Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104

Axelsen v O'Brien [1949] HCA 18; (1949) 80 CLR 219

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266

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

Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1

Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337

Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389

Commissioner for Railways (NSW) v Agalianos [1955] HCA 27; (1955) 92 CLR 390

Conlan v Registrar of Titles [2001] WASC 201; (2001) 24 WAR 299

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

Hamersley Iron Pty Ltd v National Competition Council [1999] FCA 867; (1999) 164 ALR 203

Hope Downs Management Services Pty Ltd v Hamersley Iron Pty Ltd [1999] FCA 1652; (2000) ATPR 41-733

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

Metcalf & Kerr v Permanent Building Society (In Liq) (1993) 10 WAR 145

Moshirian v University of New South Wales [2002] FCA 179

Permanent Building Society (In Liq) v Wheeler (1992) 10 WAR 109

Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 186 ALR 289

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596

Spotless Catering Services Ltd & Anor v Commonwealth of Australia, unreported; SCt of WA; Library No 980102; 6 March 1998

Stevens v Colonial Sugar Refining Co Ltd [1920] HCA 74; (1920) 28 CLR 330

Westgold Resources NL v St George Bank Ltd & Ors, unreported; SCt of WA; Library No 980717; 9 December 1998

Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc [1986] WAR 253

1 MURRAY J: I am much obliged to have read in draft, the reasons now published by Templeman and Hasluck JJ. I agree with them and have nothing to add.

2 The appeal should be allowed and the declaration sought in the third paragraph of the amended originating summons should be made.

3 The essential question in this appeal is whether an agreement ("the Rail Transport Agreement") made in 1987 between the Premier of Western Australia on behalf of the State and a group of mining companies, relating to the carriage of iron ore over a railway system constructed and operated by those companies, creates rights which may be enforced against them by third parties who wish to have their ore carried over the railway.

4 The learned primary Judge held that no such rights arose until the third parties were actually operating a mine producing iron ore. The third parties, who are the present appellants, contend that on the true construction of the agreement, the respondent companies are obliged to negotiate and enter into a contract for the carriage of the appellants' iron ore in anticipation of their becoming producers.

5 It is necessary to put the Rail Transport Agreement into a legislative context, commencing with the Iron Ore (Mount Newman) Agreement Act 1964 ("the 1964 Act").

6 The schedule to the 1964 Act contains the Mount Newman Agreement itself. The Agreement was made between the then Premier of Western Australia on behalf of the State and a single company, the Mount Newman Iron Ore Co Ltd. I adopt the Judge's summary of the Agreement, as set out in par 11 to 13 of his reasons: Hancock Prospecting Pty Ltd & Ors v BHP Minerals Pty Ltd & Ors [2002] WASC 224. The respondents are the successors in title to the Mount Newman Participants there referred to.

"In broad terms, the ... 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.

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.

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 ... Mount Newman Agreement assumes importance when construing the Rail Transport Agreement 1987."

7 Clause 9(2)(a) of the Mount Newman Agreement provided as follows:

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

(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;" (my italics)

8 Thus, the Agreement contemplated that third parties would use the railway, although, as the Judge pointed out, the term "third party" was not defined in the Agreement.

9 In due course, the railway was constructed. It runs for some 425 kilometres through the Pilbara, from Mount Newman in the south to Port Hedland on the northwest coast of Western Australia. Just to the north of Mount Newman is an area known as Hope Downs.

10 On 30 November 1992, a company known as Hope Downs Ltd entered into an agreement with the then Premier of Western Australia, on behalf of the State, for the purpose of exploiting iron ore deposits in the Hope Downs region by mining up to 15 million tonnes of iron ore per annum, transporting the iron ore by rail and/or conveyor and loading it in ships for export. The agreement was ratified by the Iron Ore (Hope Downs) Agreement Act 1992.

11 The present appellants have formed a joint venture for the purpose of progressing the Hope Downs project.

12 The uncontested evidence before the Judge was that by the end of 1999, a resource of some 489 million tonnes of iron ore had been identified in one of the Hope Downs ore bodies and that the "combined proved and probable reserves" amounted to some 402 million tonnes.

13 The Judge noted that over $50 million had been spent on the project, which had received environmental approval from Environment Australia (a Commonwealth instrumentality) and from the Environmental Protection Authority of Western Australia.

14 In the meantime, on 27 January 1987, the Mount Newman Agreement was varied by the Rail Transport Agreement. That Agreement was made between the Premier of Western Australia on behalf of the State and by the Mount Newman Iron Ore Co Ltd and certain other companies which, by various assignments, had acquired rights under the Mount Newman Agreement.

15 The object of the Agreement is set out in recitals (i) and (j) which provide as follows:

"(i) clause 9(2)(a) of the Mount Newman Agreement makes provision inter alia for the carriage of the freight of third parties on the railway constructed pursuant to the Mount Newman Agreement; and

(j) the parties hereto desire to enter into this agreement pursuant to clause 20(1) of the Mount Newman Agreement to set forth the principles on which iron ore products of third parties shall be carried on the railway."

16 Pausing there, it is instructive to consider the scope of the variation power contained in cl 20(1) of the Mount Newman Agreement. It provides as follows (set out in a way which facilitates comprehension):

"20. (1) The parties hereto may from time to time by mutual agreement in writing add to cancel or vary all or any of the provisions of this Agreement

or of any lease license easement or right granted hereunder or pursuant hereto

for the purpose of

implementing or facilitating the carrying out of such provisions

or for the purpose of

facilitating the carrying out of some separate part or parts of the Company's operations hereunder by an associated company as a separate and distinct operation

or for the establishment or development of

any industry making use of the minerals within the mineral lease or such of the Company's works installations services or facilities the subject of this Agreement as shall have been provided by the Company in the course of work done hereunder."

17 It will be noted that the clause identifies two specific purposes. The second purpose includes:

" ... the establishment or development of any industry making use of ... such of the Company's works, installations, services or facilities the subject of this Agreement as shall have been provided by the Company in the course of work done hereunder."

Those installations, services or facilities include the railway. The clause therefore contemplates the amendment of the Mount Newman Agreement to facilitate the establishment of an industry which would make use of the Mount Newman railway.

18 Against that background, I turn to the operative parts of the Rail Transport Agreement. Clause 2(a) provides:

"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."

"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."

"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. ..." (my italics)

21 The term "third party railway system" is defined to mean:

"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."

22 This definition includes the term "common railway system", which is itself defined to mean:

"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 products and includes additions thereto in accordance with Clause 12(a)."

23 In other words, the third party railway system includes the railway system operated by the respondents.

24 Clause 2 of the Schedule (so far as relevant) provides:

"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."

25 Clause 3 goes on to provide machinery for resolving disputes between the Mount Newman Participants and a third party if they are unable to reach agreement about the "detailed contractual arrangements". It is as follows:

"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."

26 The respondents, whose submissions were accepted by the Judge, contend that the construction of cl 2 turns on the definition of "third party". That definition speaks in the present tense:

"A person operating a mine producing iron ore products ..."

Thus, the respondents contend, a person not actually operating a mine is not within the definition of third party and has no right to enter into any negotiations with the Mount Newman Participants pursuant to cl 2.

27 The appellants (who are supported by the State of Western Australia) submit that such a construction would lead to a commercially nonsensical result. In substance, it is submitted that no person in his right mind, even if he could find investors foolish enough to support him, would go to the enormous expense of establishing a mine before being entitled to enter into any negotiations with the respondents to establish the cost of transporting the ore to the port.

28 Indeed, it seems to me that if the respondents' use of the defined terms is taken to its logical conclusion, it would be necessary for the third party to go further than establishing his mine and commencing operations. He would also be required to construct his own elements of the third party railway system before he could negotiate for the carriage of his ore over that system.

29 In answer, the respondents ask what they appear to regard as a rhetorical question: why should cl 2 necessarily contemplate prospective iron ore producers? The respondents contend that if the Rail Transport Agreement is confined to existing producers, it makes perfect sense. Furthermore, the respondents submit, a person who established a mine and went into production so as to qualify himself as "a third party" for present purposes, could sell his ore from the mine site pending the successful outcome of negotiations with the Mount Newman Participants or the resolution of any relevant dispute in accordance with cl 3 of the Rail Transport Agreement.

30 The respondents say that to enter into negotiations with a third party would be a costly and time consuming business. They accept that they are obliged to carry a third party's ore on the Mount Newman Railway but say they should not be required to negotiate with a prospective third party who has simply a gleam in his eye: a line must be drawn somewhere. It is submitted that the agreement draws the line at the point where a third party becomes a producer.

31 In my view, the respondents' construction of the Rail Transport Agreement is untenable. It would defeat the purpose of the agreement, which amended the Mount Newman Agreement for the purpose of facilitating the establishment of industry such as that proposed by the appellants, not of frustrating it. Furthermore, I accept the appellants' submissions that it makes no commercial sense to require a prospective mine operator to undertake the huge expense of establishing a mining operation without having the slightest idea how much he will have to pay to transport his iron ore to the port.

32 I have only slight sympathy for the respondents' unwillingness to deal with a prospective third party. While I accept that there are costs involved, I regard that burden as an incident of the respondents' privileged position under the Mount Newman Agreement.

33 In any event, I do not see how the "detailed contractual arrangements" contemplated by cl 2 of the schedule to the Rail Transport Agreement could be established except by a person whose plans for mining were well advanced. That is the case here. But whatever the practical impediment to entering into negotiations, I consider that the respondents' contention that only an ore producer can be a third party raises an unjustified legal impediment.

34 In my view, the flaw in the respondents' submissions lies in their use of the definition of "third party". Clearly, the respondents cannot carry iron ore products of a third party until that third party has produced the iron ore which is to be carried. Thus, a third party is a person who will be producing iron ore at some stage. However, the definition does not assist in determining or limiting the period within which the third party may be involved in negotiations with the respondents. That must be determined by adopting a construction which leads to a commercially sensible result, having regard to the objective of the agreement.

35 In their amended originating summons the appellants sought 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."

36 The Judge dismissed the summons. However, having reached the opposite conclusion from his Honour, I would allow the appeal and make an order in terms of par 3 above. I have some reservations about par 2 because there may be circumstances in which a request to negotiate is obviously premature. I would not make orders in terms of par 1 which I regard as too imprecise to be of any assistance.

37 HASLUCK J: This matter came before the Supreme Court by way of an originating summons. The appellants, called "Hope Downs", sought declarations that certain agreements created rights and obligations in relation to the carriage of iron ore products over the first respondents' Mount Newman railway system. The rights in question were said to be enforceable by a person who was not a party to such agreements.

38 The application for relief was opposed by the first respondents, known as the Mount Newman Participants. A ruling in their favour was made by the learned primary Judge on 18 September 2002. The second respondent elected to present no argument at the hearing at first instance and agreed to abide the decision of the Court. However, now that the matter in issue has been taken on appeal, the second respondent contends that the appeal ought to be allowed.

39 The Mount Newman Participants acknowledged that an agreement known as the Rail Transport Agreement creates rights for third parties which are enforceable at law. The issue between the parties came down to the proper construction of the Rail Transport Agreement and the nature of the rights, if any, allowed to the appellants.

40 The Mount Newman railway line is approximately 425 kilometres in length and currently carries ore from the mines in the Mount Newman area, as well as from Yandi, to Port Hedland. The railway line is operated by BHP Iron Ore Pty Ltd on behalf of the Mount Newman Participants.

41 The Hope Downs iron ore project controlled by the appellants comprises a group of mining tenements totalling approximately 386 square kilometres in area which lie close to the railway line. The Hope Downs project is the subject of an Agreement known as the Iron Ore (Hope Downs) Agreement which has been ratified by the State of

Western Australia under and by virtue of the Iron Ore (Hope Downs) Agreement Act 1992.

42 The appellants wish to enter into negotiations with the Mount Newman Participants so that they can secure access to the railway line at a time in the future when the appellants are operating a mine producing iron ore. The difference of opinion between the parties as to the entitlement of the appellants in that regard has given rise to these proceedings.

43 At the hearing before the learned primary Judge the appellants relied principally upon the affidavit of Russell Gordon Tipper sworn 3 May 2002. The relevant agreements are exhibited to the affidavit.

44 The Tipper affidavit refers to a proposal for access to the subject railway line being submitted to the Mount Newman Participants. The deponent says that BHP took the position that provision to the appellants of third party access would cause undue prejudice and/or interfere with the operation of the Mount Newman Participants.

45 It emerges from these events that there is a live issue between the parties as to whether the appellants can enforce the right of carriage they contend for with respect to the railway line. The appellants undoubtedly have standing to submit to the Court an issue concerning the proper construction of the relevant agreements.

46 In 1964 a State Agreement was executed concerning the Mount Newman iron ore project and ratified by the Western Australian Government in the Iron Ore (Mount Newman) Agreement Act 1964. The Iron Ore (Mount Newman) Agreement and the 1964 Act provided for the development of iron ore mining in the Pilbara.

47 The Agreement sets out obligations of the State and the Mount Newman Participants at various stages. 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. The development of the rail facility was to be done at the expense of the Mount Newman Participants before they would receive any return for their investment by way of sale of the relevant iron ore.

48 By cl 3(2) of the Mount Newman Agreement certain clauses of the Agreement were said to operate and take effect notwithstanding the provisions of any Act or law. That clause was said to apply to cl 20 of the Mount Newman Agreement which provided for the Agreement to be varied by mutual agreement for the purpose of facilitating the company's operations or for the development of any industry making use of the company's works, installations, services or facilities.

49 Clause 9(2)(a) of the Iron Ore (Mount Newman) Agreement created specific obligations in respect of the operation of the railway. The Mount Newman Participants were required to operate the railway in a safe and proper manner and, to the extent that they could do so without unduly prejudicing or interfering with their operations, carry the freight of the State and of third parties on the railway, subject to and in accordance with by-laws to be made. If no by-laws were made, freight was to be carried upon reasonable terms and at reasonable charges. The term "third party" was not defined in the Agreement.

50 On 27 January 1987 the second respondent and the Mount Newman Participants entered into an agreement under seal as a variation of the Iron Ore (Mount Newman) Agreement. The variation agreement was known as the Rail Transport Agreement of 1987.

51 The Railway Transport Agreement altered the arrangements that were to apply to the carriage of freight over the Mount Newman railway system. The original obligation to transport other freight where that could be done without unduly prejudicing or interfering with the operations of the Mount Newman Participants was replaced by a requirement to carry the iron ore products of a third party in accordance with detailed contractual arrangements to be negotiated. If the parties were unable to reach agreement the contractual arrangements were to be determined by an independent expert.

52 The appellants contend that this was a variation agreement of the kind allowed by cl 20 of the Mount Newman Agreement and s 2 of the Mount Newman Act with the result that the provisions of the Railway Transport Agreement have statutory force. This view of the matter is said to be reflected in sub-paragraphs (i) and (j) of the recital where it is said that the parties desire to enter into the Agreement pursuant to cl 20(1) of the Mount Newman Agreement "to set forth the principles on which iron ore products of third parties shall be carried on the railway."

53 The key provisions of the Rail Transport Agreement read as follows:

"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."

54 By cl 1 of the Schedule to the Rail Transport Agreement the term 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."

55 The term "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."

56 Importantly, for present purposes, the Schedule to the Rail Transport Agreement includes the following provision:

"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."

57 Clause 3 of the Schedule provides that 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 cl 2, the same shall be determined by an independent expert whose decision shall be final and binding. By cl 4, the detailed contractual arrangements referred to in cl 2 shall be structured so that the same do not unduly prejudice or interfere with the operations of the Mount Newman Participants provided that the Mount Newman Participants shall not be entitled to claim any undue prejudice or interference on the grounds of competition between them 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.

58 It is against this background that the issue between the appellants and the first respondents arises. The appellants contend that "third party" means a person operating a mine producing iron ore products at the time carriage is required. Thus, 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 can be activated prior to the commencement of mining operations. The second respondent supports this view of the matter.

59 On the other hand, the Mount Newman Participants say that until a mine is actually operating no obligation arises under cl 2 or cl 3 of the Rail Transport Agreement. They say that the appellants are therefore not entitled to declarations of the kind sought.

60 By their notice of appeal the appellants seeks orders that the judgment of the learned primary Judge dated 18 September 2002 be set aside. The appellants seek 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 respondents 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 respondents' Mount Newman railway system which may be enforced at law as against the first respondents 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 respondents 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 appellants, the first respondents 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 appellants, to carry the iron ore products produced by the appellants operating a mine."

61 By their first ground of appeal the appellants say that the learned Judge erred in law in failing to find that on the proper construction of the relevant agreements the first respondents 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. By their second ground of appeal they say, in effect, that the learned Judge failed to interpret the relevant agreements as a whole and gave an undue emphasis to the definition of "third party" (which speaks of a person "operating a mine producing iron ore products").

62 I pause here to say that the crucial passages of the learned primary Judge's reasons for decision are to this effect:

"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."

63 The grounds of appeal relied upon by the appellants also include the following:

"3. (a) The judge erred in law in holding that, in the absence of ambiguity, there was no need to refer to or determine the purpose and object of the Rail Transport Agreement.

(b) The judge should have found that the Mount Newman Agreement, as varied by the Rail Transport Agreement, were to be construed as a whole, having regard to their manifest purpose and object.

4. The judge erred in law in treating as relevant to construction the question whether in fact the appellants' attempts to develop a mining project would be frustrated by the construction of the Rail Transport Agreement adopted by the judge, when such an issue of fact is not legally relevant to construction.

5. The judge erred in law and in fact in treating the appellants as parties who wished 'to know the terms and conditions of carriage' before being able to use the railway, when the appellants were seeking to negotiate a contract for carriage."

64 The appellants submit that an attempt should be made to define and give effect to the purpose of the relevant agreements. This line of argument is reflected in the passages from the learned primary Judge's reasons for decision quoted earlier. It was in this context that reference was made to s 3 of the Mount Newman Act and cl 3(2) and cl 20 of the Mount Newman Agreement whereby the agreement and any variations of the same such as the Rail Transport Agreement was said to operate and take effect notwithstanding the provisions of any statute or law and as though the same had been brought into force and had been enacted.

65 It was not entirely clear to me in what manner these provisions were intended to set the scene for a submission that the variation effected by the Rail Transport Agreement should be construed as if it were a statute. Since the enactment of s 15AA of the Acts Interpretation Act 1901 (Cth) and similar provisions in other jurisdictions, such as s 18 of the Interpretation Act 1984 in this State, there is an increasing tendency to construe statutory provisions in a manner that would promote the purpose or object underlying the relevant provisions. See Pearce: "Statutory Interpretation in Australia" (5th ed) at pars 2.4 to 2.15.

66 However, in my view, the relevant statutory provisions in the present case do not have the effect of requiring that the Rail Transport Agreement be regarded as a statutory enactment or as a "written law" within the meaning of s 18 of the Interpretation Act (WA). The relevant provisions go no further than to displace the effect of statutory provisions such as planning controls or otherwise in order to confer certain immunities upon the Mount Newman Participants in the manner allowed for by s 3 of the Government Agreements Act 1979.

67 It follows that, in my view, I am not required to embark upon a review of recently decided cases concerning the purposive approach to statutory interpretation save to the extent that such cases can be drawn upon for the purpose of reasoning by analogy as one seeks to discover the intention of the parties to an agreement by studying the whole of the instrument. I will approach the task of construction upon the basis that the Mount Newman Agreement and the subsequent variation effected by the Rail Transport Agreement should be regarded essentially as an agreement between two parties.

68 While dealing with certain preliminary issues, it will be useful to note in passing another matter that was touched on briefly at the hearing of the present appeal.

69 Section 11(2) of the Property Law Act 1969 (WA) provides that where a contract expressly in its terms purports to confer a benefit directly on a person who is not named as a party to the contract, the contract is enforceable by such a person in his own name. It seems that the appellants rely upon this provision in asserting that they have enforceable rights pursuant to the Rail Transport Agreement, notwithstanding that they are not parties to the same.

70 Again, at this stage, there is no need for me to review the decided cases or to explore in depth the implications of this provision. I noted earlier that the Mount Newman Participants acknowledged at the hearing below that the Rail Transport Agreement creates rights for third parties which are enforceable at law if (on the case put up by the Mount Newman Participants) the claimants fall within the definition of "third party" set out in cl 1 of the Schedule to the Rail Transport Agreement and can properly be described as persons operating a mine producing iron ore products.

71 This brings me to the proper construction of the Mount Newman Agreement and the Rail Transport Agreement.

72 In dealing with the issues of construction raised by the declarations sought by the appellants, I proceed from the premise 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 relevant instrument. The whole of the instrument has to be considered and the words of every clause must if possible by construed so as to render them all harmonious: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109. The instrument should be construed practically so as to give effect to its prescribed commercial purpose as the law seeks to uphold commercial contractual obligations and the expectations that derive from them: Pan Foods Co Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd [2000] HCA 20; (2000) 170 ALR 579 at par 24.

73 The Mount Newman Agreement reflected commercial arrangements whereby the Mount Newman Participants committed themselves, inter alia, to the provision of certain facilities including a railway line in order to obtain the benefits allowed to them by the State of Western Australia. The Agreement reflects a clear intention that a right of carriage will be allowed to third parties in respect of freight. By cl 20, provision was made for variation of the Agreement by mutual agreement.

74 The Rail Transport Agreement must obviously be regarded as a variation of the Mount Newman Agreement. The recital recognises that iron ore products of third parties shall be carried on the railway line. The substantive provisions of the Rail Transport Agreement are set out in cl 2 and cl 3 of the Agreement. These provisions not only affirm the previously established right of access to the railway line afforded to third parties but also expand the scope of the right by imposing upon the Mount Newman Participants an explicit obligation to carry the iron ore products of a third party over the third party railway system in accordance with detailed contractual arrangements "to be negotiated".

75 The structure of the Agreement indicates that the matters referred to in the Schedule should not be regarded as principles aimed at cutting down the basic right of access to the railway system established by the substantive provisions but rather as principles bearing upon the contractual arrangements to be negotiated in order to facilitate the exercise of the right by a third party. In other words, cl 2(a) of the Agreement creates a right of carriage. The Schedule provides the mechanism for concluding individual contracts of carriage, with allowance for an appropriate balancing of interests.

76 When the matter is looked at in this light, with a view to discovering a harmonious, rather than a discordant, relationship between the substantive provisions and the provisions in the Schedule, it becomes difficult to accept that there is a significant limitation on the basic right of access to be found in the definition of the term "third party", namely, that the person who seeks to assert the right must be actually operating a mine before the right arises. One would usually expect to find a significant eligibility requirement set out in clear language in the substantive provisions or, in a situation where principles are being enunciated, asserted as a discrete condition.

77 It is important to keep in mind, in seeking to construe the Rail Transport Agreement harmoniously, and as a whole, that the railway line cannot be regarded simply as a private facility owned by the Mount Newman Participants, albeit established at their expense, for, from the outset, it was envisaged that the railway was not for the exclusive use of the Mount Newman Participants. A right of access would be available to third parties. Clause 4 of the Schedule expressly allows for competition between the producers of iron ore products.

78 It emerges, then, bearing in mind that the Rail Transport Agreement is essentially a variation of the Mount Newman Agreement that the subject matter being dealt with by the substantive provisions of the former Agreement is a right of carriage made available to third parties in respect of a railway line which forms part of the infrastructure which might otherwise have to be provided by the government. The expanded right of carriage or, to put it another way, the expanded right of access to the rail system, so as to allow for the carriage of the iron ore products of third parties, is essentially defined by the corresponding duty upon the Mount Newman Participants to carry the iron ore products of such parties pursuant to contractual arrangements to be negotiated in accordance with principles prescribed by the Schedule.

79 In order to understand the nature of the right, and the characteristics of the corresponding duty, it becomes necessary to identify the point in time at which the detailed contractual arrangements are to be negotiated. To say that the contractual arrangements can only apply as a matter of logic at a time when iron ore products are being produced is not to deny that the detailed arrangements can be agreed or determined prior to that point in time.

80 The definition of a third party in the Schedule to the Rail Transport Agreement speaks of a third party as a person operating a mine producing iron ore products. However, this definition does not provide any express or specific guidance concerning the question I have just posed. Thus, to my mind, the definition of third party cannot be accorded the decisive influence that was attributed to it by the learned Judge at first instance. The logic of the situation, which appears to be reflected in the structure and language of the substantive provisions of the Rail Transport Agreement, suggests that the right of carriage is intended to be utilised at the time when the carriage is required. This pre-supposes, as appears from the words "to be negotiated", that the detailed contractual arrangements may be negotiated prior to the time when the iron ore products are to be carried. This means that the Mount Newman Participants may be required to negotiate transport arrangements with the third party before the third party's mine is in active production. Having regard to the definition of third party, the contractual arrangements to be negotiated will inevitably be conditional upon the third party (in this case the appellants) being the operator of a mine at the time the carriage is required. In that way proper weight is given to the definition of third party.

81 I am of the view that an interpretation of this kind reflects the structure of the Rail Transport Agreement, gives proper weight to the various provisions of the Agreement and appears to be consistent with the commercial realities of the matter. The nature of mining at remote locations is such that it is essential that carriage to a port is available as soon as production commences. It follows that as a practical commercial matter, the terms of carriage must be agreed, or determined by the independent expert, prior to commencement of production by the potential competitor. The contrary view, being the view upheld in the Court below, would oblige potential competitors to establish a mine and commence operations without knowing the terms upon which they could transport their products to the port.

82 Put shortly, then, I am of the view that the learned primary Judge failed to apply the rule that an agreement is to be construed as a whole and gave undue weight to the definition of "third party" in the Schedule to the Rail Transport Agreement. It follows that I am prepared to uphold grounds 1 and 2 of the appeal. This makes it unnecessary for me to give further consideration to the remaining grounds of appeal.

83 An issue arose at the hearing of the appeal as to whether it was open to the Full Court to make declarations of the kind sought by the appellants. I must therefore turn to this issue.

84 Section 24(7) of the Supreme Court Act 1935 provides that the Court in every cause or matter pending before it, shall have power to grant, and shall grant, either absolutely or on such reasonable terms and conditions as shall seem just, all such remedies whatsoever as any of the parties thereto may appear to be entitled to in respect of any and every legal or equitable claim properly brought forward by them in such cause or matter, so that, as far as possible, all matters so in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters avoided.

85 Order 18 rule 16 of the Rules of the Supreme Court provides that the Court may make binding declarations of right whether or not any consequential relief is or could be claimed.

86 I noted in earlier discussion that this matter came before the Court by way of an originating summons. Order 58 rule 10 provides that any person claiming to be interested under any written instrument may apply by originating summons for the determination of any question of construction arising under the instrument, and for a declaration of the rights of the persons interested.

87 The courts will generally not make a declaration on a theoretical question, or one in which no dispute exists or which is hypothetical. Further, in some circumstances, a declaration might not be made if the parties are not agreed as to its consequences: Neeta (Epping) Pty Ltd v Phillips [1974] HCA 18; (1974) 131 CLR 286.

88 I am satisfied that the dispute between the parties in the present case cannot be characterised simply as hypothetical. The Tipper affidavit established, and it does not appear to have been denied, that the appellants submitted a proposal for transport to the Mount Newman Participants but this was put to one side upon the basis that the Mount Newman Participants were not obliged to negotiate with a putative third party which was not yet operating a mine for iron ore products. From that time forward there has been a live issue between the parties as to the meaning of the term "third party" in the Rail Transport Agreement and as to whether the appellants have enforceable rights in respect of the same. It was against this background that the appellants initiated proceedings by way of originating summons for a construction of the relevant agreements. It follows that the ruling of the Court cannot be regarded simply as in the nature of an impermissible advisory opinion.

89 To this point, the objections raised by the Mount Newman Participants to the declaratory orders sought appear to have been disposed of. However, the Mount Newman Participants go further and submit that, in any event, the proposed declaratory orders are defective in that they do not seek explicitly to have the appellants described as the parties entitled to the rights in question. To that extent, it is said, that the declaratory orders are not sufficiently specific and should not be made. As to this aspect of the matter, I consider that against the background of an existing dispute, and the live issue I mentioned earlier, the declaratory order sought in par 3 of the originating summons is sufficiently specific, and should be made, that is to say, 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.

90 For the reasons given by Templeman J I would not make orders in terms of par 1 and par 2 of the proposed declaratory orders.

91 I consider that the appeal should be allowed and a declaratory order be made in terms of par 3 of the originating summons.

Ore (Mount Newman) Agreement Act 1964

Interpretation Act 1901

Ore (Hope Downs) Agreement Act 1992

Hancock Prospecting Pty Ltd & Ors v BHP Minerals Pty Ltd & Ors [2003] WASCA 259

At a glance

Court

Decision date

Before

Catchwords

Source

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Judgment (161 paragraphs)

Hancock Prospecting Pty Ltd & Ors v BHP Minerals Pty Ltd & Ors [2003] WASCA 259 (6 November 2003)

Parties

Legislation Cited (6)

Cases Cited (20)