[at 34] "The giving of the s 430 statement may not be a procedure to be observed in the exercise of the power of decision, but unless the context otherwise indicates or requires, the expression "in connection with" naturally encompasses matters which, although occurring after the making of the decision, of consequential upon it or incidental to it."
44 Clearly there is a difficulty with the words "in making". The words would not appear to have been used to describe to the act of entering into the Guarantee or Indemnity. Not only would this seemingly be inconsistent with the heading of clause 7.7 "Costs of enforcement " [cf George v Cluning (1979) 28 ALR 57 at 62-63 per Barwick CJ] but clause 13.1 of the Royalty Agreement included specific provision for each party to bear its own legal and other costs in connection with the preparation, execution and completion of that agreement.
45 I accept that the word "making" in this context should probably be regarded as an elliptical expression intended to cover the costs of drawing a demand, service of the demand and the like. Possibly what was intended would have been better expressed using words such as "making a demand in respect of". If those precise words or similar had been used then the reference in its expanded form would have been: "… costs, charges and expenses in making a demand in respect of, enforcing and doing anything in connection with the Guarantee and Indemnity.."
46 Even an alternative analysis which saw the expression "in making, enforcing and doing anything in connection with" as a disjunctive one would not assist PMA in the present context. The words "doing anything in connection with", which, as has already been observed, are expressed in such wide terms, the real question would on such an analysis concern the extent, if at all, to which these words may be construed as extending beyond the otherwise reach of the word "enforcing". The question would then be whether it could be said that these additional words supply that which would be seen as missing from the natural meaning of the anterior word "enforcing", effectively now embracing the concept of "attempting to enforce"? It does not seem to me that this would follow.
The word "enforcing"
47 In my view the word "enforcing" [in the context of enforcing the Guarantee and Indemnity] cannot be stretched to mean " unsuccessfully attempting to enforce" or "making an invalid claim to enforce". The natural meaning of the enforcement of a legal right is just that. An attempt to make [and pursue in curial proceedings] a misconceived claim to what is in due course held not to be a legal right, cannot properly be described as "enforcing a legal right". To the contrary this will have been shown to have been an attempt to enforce something entirely different.
48 The word "enforcing" has a clarity about it. It fits naturally with the scheme of the provisions [where clauses 7.1 and 7.2 set out the terms of the Guarantee and Indemnity which may require to be enforced and where clause 7.7 is concerned with activities related to such enforcement]. But one does need to give content to the additional words "and doing anything in connection with the Guarantee and Indemnity". The above holding has made plain that because the expression "in making, enforcing and doing anything in connection with" is a composite expression, it may be seen as seeking to catch the various related and sequential ways in which PMA may find itself out of pocket in establishing a liability of Xstrata under clause 7.1 or 7.2.
49 It is not necessary and probably impossible to be exhaustive in seeking to identify what the content of the expression "in doing anything in connection with the Guarantee and Indemnity" may include. Xstrata submits and I accept that the expression is probably a catch all phrase designed inter alia to ensure that any other step closely related to making or enforcing a valid demand under those clauses, or consequential upon a valid demand, is also the subject of the costs indemnity.
50 The resultant holding is that:
· the parties have deliberately chosen that the subject matter of the clause 7.7(a) obligation will be the narrow and specific obligations under clauses 7.1 and 7.2;
· the parties have refrained from, either in addition or substitution, defining the subject matter of the clause by reference to obligations of Xwin under the Agreement, or indeed more broadly obligations of Xwin or Xstrata under the Agreement;
· the purpose of clause 7.7 (a) is to give PMA a costs , charges and expenses indemnity where Xstrata does have a liability under clause 7.1 or 7.2.
51 As Mr Gleeson submitted the construction of clause 7.7(a), confining it to costs incurred in respect to valid claims under clauses 7.1 and 7.2, is confirmed by the balance of the clause. Specifically:
· under clause 7.7(b) the indemnity for stamp duties, etc payable in connection with (to use those words again) the obligations under clauses 7.1 and 7.2 goes on to refer to "a payment, receipt or other transaction contemplated by it". This, by ordinary meaning, is referring to payments, receipts or other transactions which are called for pursuant to the correct operation of clauses 7.1 and 7.2, not matters invalidly claimed under them;
· the final 4 lines of clause 7.7 recognise that receipts from Xstrata in the hands of PMA are first applied to the costs under clause 7 and then against "other obligations under the Guarantee and Indemnity". This serves to confirm that the purpose of clause 7.7 is to facilitate and make effectual the rights of PMA secured by clauses 7.1 and 7.2. They are the drivers under the clause. Costs are a subsidiary but important protection. There is no intent to give costs protection for invalid claims;
· the heading of the clause (which may be taken into account) confirms this construction.
52 Xstrata drew attention to the fact that although there is discussion in O'Donovan and Phillips, The Modern Contract of Guarantee, 2003 at pages 277 - 278 of a number of cases concerning attempts by the creditor to hold the guarantor liable for costs incurred in pursuing the principal debtor, on analysis all of those cases are limited to the situation where the creditor has succeeded in establishing a liability of the principal debtor. I accept that none of them appear to provide any support for the proposition that a costs of enforcement clause in a guarantee permits the creditor to hold the guarantor liable for failed actions against either the principal debtor or the guarantor itself.
53 Returning to the principles earlier referred to, I accept that in construing written contracts it should be presumed that the parties did not intend their terms to operate unreasonably, and indeed the more unreasonable the result a party's construction would produce, the more unlikely it is that the parties would have intended it: Peppers Hotel Management Pty Ltd v Hotel Capital Partners Limited supra. As was noted in Peppers, if the parties did intend an unreasonable result it is essential that that intention be made 'abundantly clear': L Schuler AG v Wickman Machine Tool Sales Limited [1974] AC 235. It seems to me that had the parties to the agreement intended that clause 7.7 would require an invalid demand to be honoured, and for the defendant to pay for the costs of a wrongful claim to be made against it by the plaintiff, those matters would have been expressly stated.
54 Clearly if there be any doubt, the Guarantee and the Indemnity should be construed favourably to Xstrata: Andar Transport Pty Limited v Brambles Ltd [2004] HCA 28 at [21] - [23] and [29].
55 What follows is that if the outcome of the curial proceedings be such as to demonstrate that PMA had indeed sought to enforce what are shown to be its actual legal rights under the Guarantee and/or the Indemnity, then Xstrata will be liable to pay all costs, charges and expenses including legal costs and expenses incurred in connection with that enforcement. However it is important to note that because of the number of issues being litigated questions might arise as to the extent of costs of the proceedings which could be seen to have involved only enforcement of PMA's legal rights under the Guarantee and/or the Indemnity. Further questions not presently falling for consideration may arise in relation to merger of contractual obligations into judgment.
Other considerations
56 It should be noted that it has not been a necessary for the Court to consider whether or not the costs of pursuing Xwin in the contract proceedings may be properly described as "costs in connection with the Guarantee and Indemnity".
The separate question determination
57 For the above reasons each of the first and second separate questions is answered in the negative. Submissions will be taken on the need, if any, to answer the third of the separate questions.